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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1998
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Commission File No. 0-21570 Commission File No. 333-32259
CHANCELLOR MEDIA CORPORATION CHANCELLOR MEDIA CORPORATION
(Exact Name of Registrant OF LOS ANGELES
as Specified in its Charter) (Exact Name of Registrant
as Specified in its Charter)
DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
75-2247099 75-2451687
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
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433 EAST LAS COLINAS BOULEVARD, SUITE 1130, IRVING, TEXAS 75039
(Address of principal executive offices, including zip code)
(972) 869-9020
(Registrants' telephone number, including area code)
Indicate by check mark whether Chancellor Media Corporation and Chancellor
Media Corporation of Los Angeles (1) have 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 registrants were
required to file such reports), and (2) have been subject to such filing
requirements for the past 90 days.
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Chancellor Media Corporation Yes [X] No
[ ]
Chancellor Media Corporation of Los Angeles Yes [X] No
[ ]
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: As of July 31, 1998,
142,333,877 shares of Common Stock of Chancellor Media Corporation were
outstanding and 1,040 shares of Common Stock of Chancellor Media Corporation of
Los Angeles were outstanding.
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INDEX
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PAGE
NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 3
CHANCELLOR MEDIA CORPORATION
Consolidated Balance Sheets (unaudited)..................... 3
Consolidated Statements of Operations (unaudited)........... 4
Consolidated Statements of Cash Flows (unaudited)........... 5
Notes to Consolidated Financial Statements (unaudited)...... 6
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
Consolidated Balance Sheets (unaudited)..................... 16
Consolidated Statements of Operations (unaudited)........... 17
Consolidated Statements of Cash Flows (unaudited)........... 18
Notes to Consolidated Financial Statements (unaudited)...... 19
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 35
Item 4. Submission of Matters to a Vote of Security Holders......... 36
Item 5. Other Information........................................... 36
Item 6. Exhibits and Reports on Form 8-K............................ 37
</TABLE>
2
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PART I
ITEM 1. FINANCIAL STATEMENTS
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
ASSETS
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DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
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Current assets:
Cash and cash equivalents................................. $ 16,584 $ 14,257
Accounts receivable, less allowance for doubtful accounts
of $12,651 in 1997 and $12,775 in 1998................. 239,869 290,341
Other current assets...................................... 27,208 32,388
---------- ----------
Total current assets.............................. 283,661 336,986
Note receivable from affiliate.............................. -- 150,000
Property and equipment, net................................. 159,797 166,778
Intangible assets, net...................................... 4,404,443 4,503,891
Other assets, net........................................... 113,576 123,941
---------- ----------
$4,961,477 $5,281,596
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 171,017 $ 160,211
Long-term debt.............................................. 2,573,000 2,278,000
Deferred tax liabilities.................................... 361,640 320,959
Other liabilities........................................... 44,405 53,625
---------- ----------
Total liabilities................................. 3,150,062 2,812,795
---------- ----------
Redeemable preferred stock:
Redeemable senior cumulative exchangeable preferred stock
of subsidiary, par value $.01 per share; 1,000,000
shares authorized, issued and outstanding; liquidation
preference of $121,274 in 1997 and 1998................ 119,445 119,445
Redeemable cumulative exchangeable preferred stock of
subsidiary, par value $.01 per share; 3,600,000 shares
authorized and 2,117,629 shares issued and outstanding;
liquidation preference of $223,519 in 1997............. 211,763 --
Stockholders' equity:
Preferred stock, $.01 par value. 2,200,000 shares of 7%
convertible preferred stock authorized, issued and
outstanding............................................ 110,000 110,000
Preferred stock, $.01 par value. 6,000,000 shares
authorized; 5,990,000 shares of $3.00 convertible
exchangeable preferred stock issued and outstanding.... 299,500 299,500
Common stock, $.01 par value. Authorized 200,000,000
shares; issued and outstanding 119,921,814 shares in
1997 and 142,288,936 in 1998........................... 1,199 1,423
Paid-in capital............................................. 1,226,930 2,241,794
Accumulated deficit......................................... (157,422) (303,361)
---------- ----------
Total stockholders' equity........................ 1,480,207 2,349,356
---------- ----------
$4,961,477 $5,281,596
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
3
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CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
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THREE MONTHS ENDED SIX MONTHS ENDED
------------------- --------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1998 1997 1998
-------- -------- -------- ---------
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Gross revenues.................................... $122,365 $363,590 $216,177 $ 626,011
Less agency commissions......................... 16,001 41,880 27,916 70,744
-------- -------- -------- ---------
Net revenues............................ 106,364 321,710 188,261 555,267
Operating expenses:
Operating expenses, excluding depreciation and
amortization................................. 58,178 168,843 111,162 316,862
Depreciation and amortization................... 27,897 101,124 53,912 193,060
Corporate general and administrative............ 3,321 8,276 5,651 15,079
Executive severance charge...................... -- 59,475 -- 59,475
-------- -------- -------- ---------
Operating expenses...................... 89,396 337,718 170,725 584,476
-------- -------- -------- ---------
Operating income (loss)................. 16,968 (16,008) 17,536 (29,209)
-------- -------- -------- ---------
Other (income) expense:
Interest expense, net........................... 14,853 38,785 22,741 87,085
Gain on disposition of representation
contracts.................................... -- (11,270) -- (11,270)
Other income.................................... (13,323) (3,559) (13,323) (3,559)
-------- -------- -------- ---------
Other (income) expense.................. 1,530 23,956 9,418 72,256
-------- -------- -------- ---------
Income (loss) before income taxes and
extraordinary item.................... 15,438 (39,964) 8,118 (101,465)
Income tax expense (benefit)...................... 5,568 (13,987) 4,259 (16,928)
Dividends on preferred stock of subsidiary........ -- 6,691 -- 16,702
-------- -------- -------- ---------
Income (loss) before extraordinary
item.................................. 9,870 (32,668) 3,859 (101,239)
Extraordinary loss, net of income tax benefit..... 4,350 31,865 4,350 31,865
-------- -------- -------- ---------
Net income (loss)....................... 5,520 (64,533) (491) (133,104)
Preferred stock dividends......................... 699 6,418 699 12,835
-------- -------- -------- ---------
Net income (loss) attributable to common
stockholders.......................... $ 4,821 $(70,951) $ (1,190) $(145,939)
======== ======== ======== =========
Basic and diluted income (loss) per common share:
Before extraordinary item....................... $ 0.11 $ (0.28) $ 0.04 $ (0.85)
Extraordinary item.............................. (0.05) (0.22) (0.05) (0.24)
-------- -------- -------- ---------
Net income (loss)....................... $ 0.06 $ (0.50) $ (0.01) $ (1.09)
======== ======== ======== =========
Weighted average common shares outstanding........ 84,456 142,218 84,416 133,468
======== ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
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SIX MONTHS ENDED
----------------------
JUNE 30, JUNE 30,
1997 1998
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Cash flows from operating activities:
Net loss.................................................. $ (491) $ (133,104)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation........................................... 5,074 12,177
Amortization of goodwill, intangible assets and other
assets................................................ 48,838 180,883
Executive severance charge -- stock option
compensation.......................................... -- 16,000
Provisions for doubtful accounts....................... 2,388 2,194
Deferred income tax expense (benefit).................. 4,259 (16,928)
Gain on disposition of representation contracts........ -- (11,270)
Dividends on preferred stock of subsidiary............. -- 16,702
Gain on disposition of assets.......................... (13,323) --
Loss on extinguishment of debt......................... 4,350 31,865
Other.................................................. -- (4,275)
Changes in certain assets and liabilities, net of
effects of acquisitions:
Accounts receivable.................................. (14,893) (51,352)
Other current assets................................. (5,102) (7,432)
Accounts payable and accrued expenses................ 4,992 (4,032)
Other assets......................................... (29) (490)
Other liabilities.................................... 102 6,925
--------- ----------
Net cash provided by operating activities......... 36,165 37,863
--------- ----------
Cash flows from investing activities:
Acquisitions, net of cash acquired........................ (447,240) (266,328)
Assets held for sale...................................... (50,000) --
Escrow deposits on pending acquisitions................... (62,100) --
Payments made on purchases of representation contracts.... -- (15,880)
Proceeds from sale of representation contracts............ -- 9,822
Proceeds from sale of assets.............................. 99,750 --
Issuance of note receivable from affiliate................ -- (150,000)
Capital expenditures...................................... (3,547) (12,099)
Other..................................................... (15,270) (7,647)
--------- ----------
Net cash used by investing activities............. (478,407) (442,132)
--------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................. 584,250 445,000
Principal payments on long-term debt...................... (417,250) (740,000)
Proceeds from issuance of common stock and preferred
stock.................................................. 288,382 999,088
Repurchase of 12% Exchange Debentures..................... -- (260,519)
Dividends on preferred stock.............................. (699) (41,291)
Payments for debt issuance costs.......................... (10,430) (336)
Other..................................................... (185) --
--------- ----------
Net cash provided by financing activities......... 444,068 401,942
--------- ----------
Increase (decrease) in cash and cash equivalents............ 1,826 (2,327)
Cash and cash equivalents at beginning of period............ 3,060 16,584
--------- ----------
Cash and cash equivalents at end of period.................. $ 4,886 $ 14,257
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position, results of operations and
cash flows of Chancellor Media Corporation (formerly known as Evergreen Media
Corporation ("Evergreen")) and its subsidiaries (collectively, the "Company" or
"Chancellor Media") for the periods presented.
Interim periods are not necessarily indicative of results to be expected
for the year. It is suggested that these financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany balances and transactions have been eliminated in consolidation.
On December 18, 1997, the Company declared a two-for-one stock split
effected in the form of a stock dividend payable on January 12, 1998 to
shareholders of record at the close of business on December 29, 1997. All share
and per share data (other than authorized share data) contained in the
accompanying financial statements have been retroactively adjusted to give
effect to the stock dividend.
Loss per common share is based on the weighted average number of common
shares outstanding during the periods after giving retroactive effect to the
stock split. Stock options, the $3.00 Convertible Exchangeable Preferred Stock
(the "$3.00 Convertible Preferred Stock") and the 7% Convertible Preferred Stock
(the "7% Convertible Preferred Stock") are not included in the calculation as
their effect would be antidilutive.
The Company adopted SFAS No. 130, Reporting Comprehensive Income, effective
January 1, 1998. This statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. The Company has no items of comprehensive income for
any period presented and therefore is not required to report comprehensive
income.
2. ACQUISITIONS AND DISPOSITIONS
1997 Completed Transactions
On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit
from affiliates of Chancellor Broadcasting Company ("Chancellor") for $30,000 in
cash plus various other direct acquisition costs. The Company had previously
provided certain sales and promotional functions to WWWW-FM and WDFN-AM under a
joint sales agreement since February 14, 1996 and subsequently operated the
stations under a time brokerage agreement since April 1, 1996.
On January 31, 1997, the Company acquired KKSF-FM and KDFC-FM/AM in San
Francisco from affiliates of the Brown Organization for $115,000 in cash plus
various other direct acquisition costs. The Company had previously been
operating KKSF-FM and KDFC-FM/AM under a time brokerage agreement since November
1, 1996. On July 21, 1997, the Company sold KDFC-FM to Bonneville International
Corporation ("Bonneville") for $50,000 in cash. The assets of KDFC-FM were
classified as assets held for sale in connection with the purchase price
allocation of the acquisition of KKSF-FM and KDFC-FM/AM and no gain or loss was
recognized by the Company upon consummation of the sale.
On April 1, 1997, the Company acquired WJLB-FM and WMXD-FM in Detroit from
Secret Communications, L.P. ("Secret") for $168,000 in cash plus various other
direct acquisition costs. The
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CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Company had previously been operating WJLB-FM and WMXD-FM under time brokerage
agreements since September 1, 1996.
On April 3, 1997, the Company exchanged WQRS-FM in Detroit (which the
Company acquired on April 3, 1997 from Secret for $32,000 in cash plus various
other direct acquisition costs), to affiliates of Greater Media Radio, Inc.
("Greater Media") in return for WWRC-AM in Washington, D.C. (now known as
WTEM-AM) and $9,500 in cash. The exchange was accounted for as a like-kind
exchange and no gain or loss was recognized upon consummation of the
transaction. The net purchase price to the Company of WWRC-AM was therefore
$22,500. The Company had previously been operating WWRC-AM under a time
brokerage agreement since June 17, 1996.
On May 1, 1997, the Company acquired WDAS-FM/AM in Philadelphia from
affiliates of Beasley FM Acquisition Corporation for $103,000 in cash plus
various other direct acquisition costs.
On May 15, 1997, the Company exchanged five of its six stations in
Charlotte, North Carolina (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for two FM
stations in Philadelphia (WIOQ-FM and WUSL-FM) owned by EZ Communications, Inc.
("EZ") in Philadelphia (the "Charlotte Exchange"), and also sold the Company's
sixth radio station in Charlotte, WNKS-FM, to EZ for $10,000 in cash and
recognized a gain of $3,536. The Charlotte Exchange was accounted for as a
like-kind exchange and no gain or loss was recognized upon consummation of the
transaction.
On May 30, 1997, the Company acquired WPNT-FM in Chicago from affiliates of
Century Broadcasting Company for $75,740 in cash (including $1,990 for the
purchase of the station's accounts receivable) plus various other direct
acquisition costs. On June 19, 1997, the Company sold WPNT-FM in Chicago to
Bonneville for $75,000 in cash and recognized a gain of $529.
On June 3, 1997, the Company sold WEJM-FM in Chicago to affiliates of
Crawford Broadcasting for $14,750 in cash and recognized a gain of $9,258.
On July 2, 1997, the Company acquired WLTW-FM and WAXQ-FM in New York and
WMZQ-FM, WJZW-FM, WZHF-AM and WBZS-AM in Washington, D.C. from Viacom
International, Inc. ("Viacom") for approximately $612,388 in cash including
various other direct acquisition costs (the "Viacom Acquisition"). The Viacom
Acquisition was financed with (i) bank borrowings under the Senior Credit
Facility (as defined) of $552,559; (ii) $53,750 in escrow funds paid by the
Company on February 19, 1997 and (iii) $6,079 financed through working capital.
In June 1997, the Company issued 5,990,000 shares of $3.00 Convertible Preferred
Stock for net proceeds of $287,808 which were used to repay borrowings under the
Senior Credit Facility and subsequently were reborrowed on July 2, 1997 as part
of the financing of the Viacom Acquisition. On July 7, 1997, the Company sold
WJZW-FM in Washington, D.C. to affiliates of Capital Cities/ABC Radio for
$68,000 in cash. The assets of WJZW-FM, as well as the assets of WZHF-AM and
WBZS-AM, which were also sold on August 13, 1997, were accounted for as assets
held for sale in connection with the purchase price allocation of the Viacom
Acquisition and no gain or loss was recognized by the Company upon consummation
of the sales.
On July 7, 1997, the Company sold the Federal Communications Commission
("FCC") authorizations and certain transmission equipment previously used in the
operation of KYLD-FM in San Francisco to Susquehanna Radio Corporation
("Susquehanna") for $44,000 in cash and recognized a gain of $1,726.
Simultaneously therewith, Chancellor sold the call letters "KSAN-FM" (which
Chancellor previously used in San Francisco) to Susquehanna. On July 7, 1997,
the Company and Chancellor entered into a time brokerage agreement to enable the
Company to operate KYLD-FM on the frequency previously assigned to KSAN-FM, and
on July 7, 1997, Chancellor changed the call letters of KSAN-FM to KYLD-FM. Upon
the consummation of the Chancellor Merger (as defined herein), the Company
changed the format of the new KYLD-FM to the format previously operated on the
old KYLD-FM.
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CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
On July 14, 1997, the Company completed the disposition of WLUP-FM in
Chicago to Bonneville for net proceeds of $80,000 which were held by a qualified
intermediary pending the completion of the deferred exchange of WLUP-FM for
KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, the Company applied the net
proceeds from the disposition of WLUP-FM of $80,000 in cash, plus an additional
$3,500 and various other direct acquisition costs, in a deferred exchange of
WLUP-FM for KZPS-FM and KDGE-FM in Dallas. The exchange was accounted for as a
like-kind exchange and no gain or loss was recognized upon consummation of the
transaction. The Company had previously operated KZPS-FM and KDGE-FM under time
brokerage agreements effective August 1, 1997.
On July 21, 1997, the Company entered into a time brokerage agreement with
Chancellor whereby the Company began managing certain limited functions of
Chancellor's stations KBGG-FM, KNEW-AM and KABL-FM in San Francisco pending the
consummation of the Chancellor Merger (as defined herein), which occurred on
September 5, 1997.
On August 13, 1997, the Company sold WBZS-AM and WZHF-AM in Washington,
D.C. (acquired as part of the Viacom Acquisition) and KDFC-AM in San Francisco
to affiliates of Douglas Broadcasting ("Douglas") for $18,000 in the form of a
promissory note. The promissory note, as amended on May 1, 1998, bears interest
at 7 3/4% from the closing date through February 28, 1998 and at 10.0% from
March 1, 1998 through the remainder of the term of the note, with a balloon
principal payment due four years after closing. At closing, Douglas posted a
$1,000 letter of credit for the benefit of the Company that will remain
outstanding until all amounts due under the promissory note are paid.
On August 27, 1997, the Company sold WEJM-AM in Chicago to Douglas for
$7,500 in cash and recognized a gain of $3,331.
On September 5, 1997, pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of February 19, 1997 and amended and restated on July
31, 1997 (the "Chancellor Merger Agreement"), among Chancellor, Chancellor Radio
Broadcasting Company ("CRBC"), Evergreen, Evergreen Mezzanine Holdings
Corporation ("EMHC") and Evergreen Media Corporation of Los Angeles ("EMCLA"),
(i) Chancellor was merged (the "Parent Merger") with and into EMHC, a direct,
wholly-owned subsidiary of Evergreen, with EMHC remaining as the surviving
corporation and (ii) CRBC was merged (the "Subsidiary Merger") with and into
EMCLA, a direct, wholly-owned subsidiary of EMHC, with EMCLA remaining as the
surviving corporation (collectively, the "Chancellor Merger"). Upon consummation
of the Parent Merger, the Company was renamed Chancellor Media Corporation and
EMHC was renamed Chancellor Mezzanine Holdings Corporation ("CMHC"). Upon
consummation of the Subsidiary Merger, EMCLA was renamed Chancellor Media
Corporation of Los Angeles ("CMCLA"). Consummation of the Chancellor Merger
added 52 radio stations (36 FM and 16 AM) to the Company's portfolio of
stations, including 13 stations in markets in which the Company previously
operated. The total purchase price allocated to net assets acquired was
approximately $1,998,383 which included (i) the conversion of each outstanding
share of Chancellor Common Stock into 0.9091 shares of the Company's Common
Stock, resulting in the issuance of 34,617,460 shares of the Company's Common
Stock at $15.50 per share, (ii) the assumption of long-term debt of CRBC of
$949,000 which included $549,000 of borrowings outstanding under the CRBC senior
credit facility, $200,000 of CRBC's 9 3/8% Senior Subordinated Notes due 2004
and $200,000 of CRBC's 8 3/4% Senior Subordinated Notes due 2007, (iii) the
issuance of 2,117,629 shares of CMCLA's 12% Exchangeable Preferred Stock in
exchange for CRBC's substantially identical securities with a fair value of
$215,570 including accrued and unpaid dividends of $3,807, (iv) the issuance of
1,000,000 shares of CMCLA's 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock in exchange for CRBC's substantially identical securities with a
fair value of $120,217 including accrued and unpaid dividends of $772, (v) the
issuance of 2,200,000 shares of the Company's 7% Convertible Preferred Stock in
exchange for Chancellor's substantially identical securities with a fair value
of $111,048 including accrued and unpaid dividends of $1,048, (vi) the
8
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CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
assumption of stock options issued to Chancellor stock option holders with a
fair value of $34,977 and (vii) estimated acquisition costs of $31,000.
On October 28, 1997, the Company acquired Katz Media Group, Inc. ("KMG"), a
full-service media representation firm, in a tender offer transaction for a
total purchase price of approximately $379,101 (the "Katz Acquisition") which
included (i) the conversion of each outstanding share of KMG Common Stock into
the right to receive $11.00 in cash, resulting in total cash payments of
$149,601, (ii) the assumption of long-term debt of KMG and its subsidiaries of
$222,000 which included $122,000 of borrowings outstanding under the KMG senior
credit facility and $100,000 of 10 1/2% Senior Subordinated Notes due 2007 of
Katz Media Corporation (a subsidiary of KMG) and (iii) estimated acquisition
costs of $7,500.
On December 29, 1997, the Company acquired five radio stations from Pacific
and Southern Company, Inc., a subsidiary of Gannett Co., Inc., consisting of
WGCI-FM/AM in Chicago for $140,000, KKBQ-FM/ AM in Houston for $110,000 and
KHKS-FM in Dallas for $90,000, for an aggregate purchase price of $340,000 in
cash plus various other direct acquisition costs.
1998 Completed Transactions
On January 30, 1998, the Company acquired KXPK-FM in Denver from Ever Green
Wireless LLC (which is unrelated to the Company) for $26,000 in cash plus
various other direct acquisition costs, of which $1,650 was previously paid by
Chancellor as escrow funds and are classified as other assets at December 31,
1997. The Company had previously operated KXPK-FM under a time brokerage
agreement since September 1, 1997.
On April 3, 1998, the Company exchanged WTOP-AM in Washington, KZLA-FM in
Los Angeles and WGMS-FM in Washington plus $63,000 in cash (including $3,000
paid by the Company in escrow and classified as other assets at December 31,
1997) to Bonneville for WBIX-FM in New York, KLDE-FM in Houston and KBIG-FM in
Los Angeles (the "Bonneville Exchange"). The Company had previously operated
KLDE-FM and KBIG-FM under time brokerage agreements since October 1, 1997 and
WBIX-FM since October 10, 1997, and had sold substantially all of the broadcast
time of WTOP-AM, KZLA-FM and WGMS-FM to Bonneville since October 1, 1997.
On April 13, 1998, the Company and Secret entered into a settlement
agreement regarding WFLN-FM in Philadelphia. Previously in August 1996, the
Company and Secret had entered into an agreement under which the Company would
acquire WFLN-FM from Secret for $37,750 in cash. In April 1997, the Company
entered into an agreement to sell WFLN-FM to Greater Media for $41,800 in cash.
On July 16, 1997, Secret purported to terminate the sale of WFLN-FM to the
Company. The Company subsequently brought suit against Secret to enforce its
rights to acquire WFLN-FM. Pursuant to a court settlement entered in August 1997
and the settlement agreement between the Company and Secret entered on April 13,
1998, (i) Secret sold WFLN-FM directly to Greater Media for $37,750, (ii)
Greater Media deposited $4,050 (the difference between the Company's proposed
acquisition price for WFLN-FM from Secret and the Company's proposed sale price
for WFLN-FM to Greater Media) with the court and (iii) the Company received
$3,500 of such amount deposited by Greater Media with the court, plus interest
earned during the period which the court held such amounts (the "WFLN
Settlement"), and Secret received the balance of such amounts.
On May 29, 1998, as part of the Capstar Transaction (defined below), the
Company exchanged WAPE-FM and WFYV-FM in Jacksonville (valued for purposes of
the Capstar Transaction at $53,000) plus $90,250 in cash to Capstar Broadcasting
Corporation (together with its subsidiaries, "Capstar") in return for KODA-FM in
Houston (the "Houston Exchange"). Furthermore, on May 29, 1998, Capstar sold
KKPN-FM in Houston (acquired by Capstar as part of the SFX Acquisition) due to
the attributable ownership of Hicks, Muse, Tate & Furst, Incorporated ("Hicks
Muse") in both Capstar and the Company in order to comply with the FCC's
multiple ownership limits. In connection with Capstar's sale of KKPN-FM, the
Company received
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CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
a commission from Capstar of $1,730. On May 29, 1998, the Company also provided
a loan to Capstar in the principal amount of $150,000 (the "Capstar Loan") as
part of the Capstar Transaction. The Capstar Loan bears interest at the rate of
12% per annum (subject to increase in certain circumstances), and is secured by
a senior pledge of common stock of Capstar's direct subsidiary. A portion of the
Capstar Loan will be prepaid by Capstar in connection with the Company's
acquisition of, and the proceeds of such prepayment would be used by the Company
as a portion of the purchase price for, each Capstar Station. Hicks Muse, which
is a substantial shareholder of the Company, controls Capstar, and certain
officers and directors of the Company are directors and/or executive officers of
Capstar and/or Hicks Muse.
On June 1, 1998, the Company acquired WWDC-FM/AM in Washington, D.C. from
Capitol Broadcasting Company and its affiliates for $74,062 in cash (including
$2,062 for the purchase of the stations' accounts receivable) plus various other
direct acquisition costs, of which $4,000 was previously paid by the Company as
escrow funds and are classified as other assets at December 31, 1997 (the
"Capitol Broadcasting Acquisition").
On May 1, 1998, the Company formed a new division, the Chancellor Marketing
Group, in an effort to enhance the revenues the Company derives from its sales
promotion activities. On June 1, 1998, the Company acquired Global Sales
Development, Inc., a consulting firm based in Richmond, Virginia, for $675 in
cash plus various other direct acquisition costs to lead its marketing efforts
for this new division.
On June 15, 1998, the Company's national radio network, The AMFM Radio
Networks, acquired the syndicated programming shows of Global Satellite Network
for $14,000 in cash plus various other direct acquisition costs. The syndicated
programming shows acquired include "Rockline", "Modern Rock Live", "Reelin' in
the Years" and the concert series "Live from the Pit".
On July 31, 1998, the Company acquired Martin Media, L.P. and certain
affiliated companies ("Martin"), an outdoor advertising company with over 13,000
billboards and outdoor displays in 12 states serving 23 markets, for $610,000 in
cash plus working capital of $20,985 subject to certain adjustments and various
other direct acquisition costs. Additionally, the Company paid $13,559 to Martin
for properties acquired by Martin subsequent to the purchase agreement date of
June 22, 1998 and prior to the closing on July 31, 1998. The additional
properties acquired from Martin added approximately 1,500 billboards and outdoor
displays in four of Martin's 23 existing markets.
Pending Transactions
On February 20, 1998, the Company entered into an agreement to acquire from
Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in
Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM, WXDX-FM and
WDVE-FM in Pittsburgh (collectively, the "Capstar Stations") for an aggregate
purchase price of approximately $637,500 in a series of purchases and exchanges
over a period of three years (the "Capstar Transaction"). On May 29, 1998, the
Company completed the Houston Exchange (defined above) and began operating the
remaining ten Capstar Stations under time brokerage agreements. The Company will
pay approximately $494,250 for the remaining ten Capstar Stations.
On April 8, 1998, the Company entered into an agreement to acquire Petry
Media Corporation, a leading independent television representation firm, for
approximately $150,000 in cash (the "Petry Acquisition"). On June 3, 1998, the
Antitrust Division of the United States Department of Justice issued a second
request for additional information under the HSR Act in connection with the
Petry Acquisition. The Company is presently responding to this request for
additional information. Although there can be no assurance, the Company expects
that the Petry Acquisition will be consummated in the fourth quarter of 1998.
On June 15, 1998, the Company, Capstar, LIN Television Corporation and TSG
Capital Group, L.L.C. announced the formation of an alliance to capitalize on
investment opportunities in broadcasting entities
10
<PAGE> 11
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
across a broad spectrum of ethnic ownership. Accordingly, as the first
investment of the alliance, the Company entered into an agreement to acquire a
20% non-voting equity stake in Z-Spanish Media Corporation for approximately
$25,000 in cash (the "Z Spanish Acquisition"). Z Spanish Media, which is
headquartered in Sacramento, California, is the owner and operator of 22
Hispanic format radio stations in California, Texas, Arizona and Illinois.
Although there can be no assurance, the Company expects that the Z Spanish
Acquisition will be consummated in the third or fourth quarter of 1998.
On July 7, 1998, the Company entered into an agreement whereby the ultimate
parent of LIN Television Corporation ("LIN") will merge into the Company (the
"LIN Merger"). Pursuant to this agreement, the Company will acquire the stock of
LIN from affiliates of Hicks Muse in a stock-for-stock transaction. Upon
consummation of the LIN Merger, it is expected that LIN will own or operate 12
television stations in eight markets in the United States. Although there can be
no assurance, the Company expects that the LIN Merger will be consummated in the
first quarter of 1999.
On July 10, 1998, the Company entered into an agreement to acquire a 50%
economic interest in Grupo Radio Centro, S.A. de C.V. ("GRC") for approximately
$120,500 in cash and $116,500 in Common Stock for an aggregate purchase price of
$237,000 (the "GRC Acquisition"). The Chancellor Media shares issued to GRC will
be valued at the market price at closing, subject to a maximum price of $57.00
and a minimum price of $42.75. The purchase price is subject to upward or
downward revisions of up to $29,100, payable in Chancellor Media Common Stock,
based upon GRC's 1999 performance. GRC is Latin America's largest pure play
radio company with six FM and six AM radio stations in Mexico. Additionally, GRC
acts as the national sales representative and provides programming for a network
of more than 90 radio station affiliates in 57 cities throughout Mexico.
Although there can be no assurance, the Company expects that the GRC Acquisition
will be consummated in the fourth quarter of 1998.
On July 27, 1998, the Company entered into an agreement to acquire Primedia
Broadcast Group, Inc. and certain of its affiliates, which own and operate eight
FM stations in Puerto Rico, for approximately $75,000 in cash (the "Primedia
Acquisition"). Although there can be no assurance, the Company expects that the
Primedia Acquisition will be consummated in the fourth quarter of 1998.
On August 11, 1998, the Company entered into agreements to acquire four FM
and two AM radio stations in Cleveland for an aggregate purchase price of
approximately $275,000 in cash plus various other direct acquisition costs (the
"Ohio Acquisitions"). The Ohio Acquisitions consist of the purchase by the
Company of (i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership,
(ii) WZAK-FM from Zapis Communications, (iii) Zebra Broadcasting Corporation
which owns WZJM-FM and WJMO-AM and (v) Wincom Broadcasting Corporation which
owns WQAL-FM (the "Wincom Acquisition"). The consummation of each of the Ohio
Acquisitions (other than the Wincom Acquisition) is contingent upon the
consummation of each of the other Ohio Acquisitions (other than the Wincom
Acquisition). Although there can be no assurance, the Company expects that the
Ohio Acquisitions will be consummated in the first quarter of 1999.
Consummation of each of the transactions discussed above is subject to
various conditions, including approval from the FCC (except in the case of the
Petry Acquisition) and the expiration or early termination of any waiting period
required under the HSR Act. The Company believes that such conditions will be
satisfied in the ordinary course, but there can be no assurance that this will
be the case.
Escrow funds of $4,650 paid by the Company in connection with the
Bonneville Exchange and the Capitol Broadcasting Acquisition were classified as
other assets in the accompanying balance sheet at December 31, 1997.
11
<PAGE> 12
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Summary of Net Assets Acquired
The completed acquisitions discussed above were accounted for as purchases.
Accordingly, the accompanying consolidated financial statements include the
results of operations of the acquired entities from the dates of acquisition.
A summary of the net assets acquired follows:
<TABLE>
<CAPTION>
YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
<S> <C> <C>
Working capital, including cash of $9,724 in 1997........... $ 66,805 $ 1,991
Property and equipment...................................... 118,371 7,062
Assets held for sale........................................ 131,000 --
Intangible assets........................................... 3,823,746 259,631
Other assets................................................ 26,742 --
Deferred tax liability...................................... (279,371) --
Other liabilities........................................... (39,681) (697)
---------- --------
$3,847,612 $267,987
========== ========
</TABLE>
The pro forma consolidated condensed results of operations data for the six
months ended June 30, 1997 and 1998, as if the 1997 Completed Transactions and
the 1998 Completed Transactions discussed above, the 8 1/8% Notes Offering, the
amendment and restatement of the Senior Credit Facility and the 1998 Completed
Financing Transactions (as defined herein) occurred at January 1, 1997, follow:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JUNE 30, JUNE 30,
1997 1998
-------- ---------
<S> <C> <C>
Net revenues................................................ $506,102 $ 580,634
Net loss.................................................... (95,155) (114,579)
Basic and diluted loss per common share..................... $ (0.67) $ (0.81)
</TABLE>
The results of operations for the six months ended June 30, 1998 include a
one-time executive severance charge of $59,475.
The pro forma results are not necessarily indicative of what would have
occurred if the acquisitions had been in effect for the entire periods
presented.
3. FINANCING TRANSACTIONS
1998 Completed Financing Transactions
On March 13, 1998, the Company completed a secondary offering of 21,850,000
shares of its Common Stock (the "1998 Equity Offering"). The net proceeds from
the 1998 Equity Offering of approximately $994,642 were used to reduce bank
borrowings under the revolving credit portion of the Senior Credit Facility (as
defined) and the excess proceeds were initially invested in short-term
investment grade securities. The Company subsequently used the excess proceeds
for general corporate purposes, including the financing of the Bonneville
Exchange, the Capstar Loan and a portion of the Houston Exchange.
On May 8, 1998, CMCLA completed a consent solicitation (the "12% Consent
Solicitation") to modify certain timing restrictions on CMCLA's ability to
exchange all shares of its 12% Preferred Stock for its 12% Subordinated Exchange
Debentures due 2009 (the "12% Debentures"). Consenting holders of 12% Preferred
Stock received payments of $0.05 per share of 12% Preferred Stock. On May 13,
1998, CMCLA exchanged the shares of 12% Preferred Stock for 12% Debentures (the
"12% Exchange"). In connection with
12
<PAGE> 13
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
the 12% Consent Solicitation and 12% Exchange, CMCLA incurred approximately $270
in transaction costs which were recorded as deferred debt issuance costs.
On June 10, 1998, CMCLA completed a cash tender offer (the "12% Debentures
Tender Offer") for all of CMCLA's 12% Debentures for an aggregate repurchase
cost of $262,495 which included (i) the principal amount of the 12% Debentures
of $211,763, (ii) premiums on the repurchase of the 12% Debentures of $47,798,
(iii) accrued and unpaid interest on the 12% Debentures from May 14, 1998
through June 10, 1998 of $1,976 and (iv) estimated transaction costs of $958. In
connection with the 12% Debentures Tender Offer, the Company recorded an
extraordinary charge of $31,865 (net of a tax benefit of $17,158) consisting of
the premiums, estimated transaction costs and the write-off of the unamortized
balance of deferred debt issuance costs.
On July 20, 1998, CMCLA completed a consent solicitation (the "12 1/4%
Preferred Stock Consent Solicitation") to modify certain timing restrictions on
CMCLA's ability to exchange all shares of its 12 1/4% Preferred Stock for its
12 1/4% Subordinated Exchange Debentures due 2008 (the "12 1/4% Debentures"),
and on July 23, 1998 CMCLA exchanged the shares of 12 1/4% Preferred Stock for
12 1/4% Debentures. Consenting holders of 12 1/4% Preferred Stock received
payments of $0.05 per share of 12 1/4 Preferred Stock.
Pending Financing Transactions
On August 6, 1998, CMCLA commenced a cash tender offer (the "Tender Offer")
for CMCLA's 12 1/4% Debentures. The offer price for each $1,000 principal amount
of 12 1/4% Debentures is $1,189.90 plus accrued and unpaid interest through the
expiration date. The Tender Offer will expire at 11:59 p.m. on August 19, 1998,
unless extended. There can be no assurance that the Tender Offer will be
successful.
4. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and June 30,
1998:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
<S> <C> <C>
Senior Credit Facility(a)................................... $1,573,000 $1,278,000
9 3/8% Notes(b)............................................. 200,000 200,000
8 3/4% Notes(b)............................................. 200,000 200,000
10 1/2% Notes(b)............................................ 100,000 100,000
8 1/8% Notes(b)............................................. 500,000 500,000
---------- ----------
Total long-term debt.............................. $2,573,000 $2,278,000
========== ==========
</TABLE>
(a) Senior Credit Facility
On April 25, 1997, the Company entered into a loan agreement which amended
and restated its prior senior credit facility. Under the amended and restated
agreement, as amended on June 26, 1997, August 7, 1997, October 28, 1997,
February 10, 1998, May 1, 1998 and July 31, 1998 (as amended, the "Senior Credit
Facility"), the Company established a $1,250,000 revolving facility (the
"Revolving Loan Facility") and a $500,000 term loan facility (the "Term Loan
Facility"). Upon consummation of the Chancellor Merger, the aggregate
commitments under the Revolving Loan Facility and the Term Loan Facility were
increased to $1,600,000 and $900,000, respectively. In connection with the
amendment and restatement of the Senior Credit Facility, the Company wrote off
the unamortized balance of deferred debt issuance costs of $4,350 (net of a tax
benefit of $2,343) as an extraordinary charge.
Borrowings under the Senior Credit Facility bear interest at a rate based,
at the option of the Company, on the participating banks' prime rate or
Eurodollar rate, plus an incremental rate. Without giving effect to the interest
rate swap and cap agreements described below, the interest rate on the $900,000
outstanding under the Term Loan Facility at June 30, 1998 was 6.19% on a blended
basis, based on Eurodollar rates, and the interest rate on advances of $365,000
and $13,000 outstanding under the Revolving Loan Facility were 6.19%
13
<PAGE> 14
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
and 8.50%, respectively, at June 30, 1998, based on the Eurodollar and prime
rates, respectively. The Company pays fees ranging from 0.25% to 0.375% per
annum on the aggregate unused portion of the loan commitment based upon the
leverage ratio for the most recent quarter end, in addition to an annual agent's
fee. Pursuant to the Senior Credit Facility, the Company is required to enter
into interest hedging agreements that result in the fixing or placing a cap on
the Company's floating rate debt so that not less than 50% of the principal
amount of total debt outstanding has a fixed or capped rate.
The Term Loan Facility is payable in quarterly installments commencing on
September 30, 2000 and ending June 20, 2005. The Revolving Loan Facility
requires scheduled annual reductions of the commitment amount, payable in
quarterly installments commencing on September 30, 2000 and ending on June 30,
2005. At July 31, 1998, the Company had drawn $900,000 of the Term Loan Facility
and $980,000 of the Revolving Loan Facility. The capital stock of the Company's
subsidiaries is pledged to secure the performance of the Company's obligations
under the Senior Credit Facility, and each of the Company's subsidiaries have
guaranteed those obligations.
(b) Senior Subordinated Notes
Upon consummation of the Chancellor Merger, on September 5, 1997, the
Company assumed all of the obligations under CRBC's $200,000 aggregate principal
amount 9 3/8% Senior Subordinated Notes due 2004 (the "9 3/8% Notes") and the
indenture governing such securities, and assumed all of the obligations under
CRBC's $200,000 aggregate principal amount 8 3/4% Senior Subordinated Notes due
2007 (the "8 3/4% Notes") and the indenture governing such securities. Upon
consummation of the Katz Acquisition, on October 28, 1997, the Company assumed
all of the obligations under Katz Media Corporation's $100,000 aggregate
principal amount of 10 1/2% Senior Subordinated Notes due 2007 (the "10 1/2%
Notes") and the amended and restated indenture governing such securities. On
December 22, 1997, the Company issued $500,000 aggregate principal amount of
8 1/8% Senior Subordinated Notes due 2007 (the "8 1/8% Notes") for estimated net
proceeds of $485,000.
(c) Other
The 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes and the 8 1/8% Notes
(collectively, the "Notes") are unsecured obligations of the Company,
subordinated in right of payment to all existing and any future senior
indebtedness of the Company. The Notes are fully and unconditionally guaranteed,
on a joint and several basis, by all of the Company's direct and indirect
subsidiaries other than certain inconsequential subsidiaries (the "Subsidiary
Guarantors"). The Subsidiary Guarantors are wholly-owned subsidiaries of the
Company.
The Senior Credit Facility and the indentures governing the Notes contain
customary restrictive covenants, which, among other things and with certain
exceptions, limit the ability of the Company and its subsidiaries to incur
additional indebtedness and liens in connection therewith, enter into certain
transactions with affiliates, pay dividends, consolidate, merge or effect
certain asset sales, issue additional stock, effect an asset swap and make
acquisitions. The Company is required under the Senior Credit Facility to
maintain specified financial ratios, including leverage, cash flow and debt
service coverage ratios (as defined).
5. EXECUTIVE SEVERANCE CHARGE
On April 14, 1998, Scott K. Ginsburg resigned as President and Chief
Executive Officer of the Company. On April 20, 1998, Mr. Ginsburg resigned as
director of the Company and from all appointments and positions with its
respective subsidiaries. On April 20, 1998, Mr. Ginsburg and the Company entered
into a separation and consulting agreement. Following Mr. Ginsburg's
resignation, the Company entered into new employment agreements with Jimmy de
Castro, the Company's Chief Operating Officer, and Matthew E. Devine, the
Company's Chief Financial Officer, each effective April 17, 1998. On April 29,
1998, Jeffrey A. Marcus, was
14
<PAGE> 15
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
named President and Chief Executive Officer of the Company and the Company
entered into an employment agreement with Mr. Marcus effective June 1, 1998.
In connection with Mr. Ginsburg's resignation described above, the Company
incurred a one-time executive severance charge of $59,475 which consists of (i)
a lump sum severance payment of $20,000 to Mr. Ginsburg, (ii) compensation
expense of $16,000 related to the grant of 800,000 stock options to Mr. Ginsburg
at an exercise price of $23.25 per share, (iii) consulting fees of $12,500 to be
paid to Mr. Ginsburg over five years, (iv) one-time cash payments of $5,000 and
$2,000 to Mr. de Castro and Mr. Devine, respectively, (v) execution bonuses of
$1,000 paid to Mr. de Castro, Mr. Devine and Mr. Marcus and (vi) other costs
incurred in connection with Mr. Ginsburg's resignation of $975.
6. OTHER INCOME
Other income consists of the following for the six months ended June 30,
1997 and 1998:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------
JUNE 30, JUNE 30,
1997 1998
-------- --------
<S> <C> <C>
Gain on disposition of assets(a)............................ $13,323 $ --
WFLN Settlement(b).......................................... -- 3,559
------- ------
$13,323 $3,559
======= ======
</TABLE>
- ---------------
(a) For the six months ended June 30, 1997, the Company recorded a gain on
disposition of assets of $13,323 related to the dispositions of WNKS-FM in
Charlotte on May 15, 1997 ($3,536), WPNT-FM in Chicago on May 30, 1997
($529), and WEJM-FM in Chicago on June 3, 1997 ($9,258).
(b) For the six months ended June 30, 1998, the Company recorded a gain from the
WFLN Settlement (defined above) of $3,559.
7. CONTINGENCIES
The Company is involved in several lawsuits that are incidental to its
business. A discussion of certain of these lawsuits is contained in Part II,
Item 1, "Legal Proceedings", of this Form 10-Q. The Company believes that the
ultimate resolution of the lawsuits will not have a material effect on its
financial position or results of operations.
15
<PAGE> 16
PART I
ITEM 1. FINANCIAL STATEMENTS
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 16,584 $ 14,257
Accounts receivable, less allowance for doubtful accounts
of $12,651 in 1997 and $12,775 in 1998................. 239,869 290,341
Other current assets...................................... 27,208 32,388
---------- ----------
Total current assets.............................. 283,661 336,986
Note receivable from affiliate.............................. -- 150,000
Property and equipment, net................................. 159,797 166,778
Intangible assets, net...................................... 4,404,443 4,503,891
Other assets, net........................................... 113,576 123,941
---------- ----------
$4,961,477 $5,281,596
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 171,017 $ 160,211
Long-term debt.............................................. 2,573,000 2,278,000
Deferred tax liabilities.................................... 361,640 320,959
Other liabilities........................................... 44,405 53,625
---------- ----------
Total liabilities................................. 3,150,062 2,812,795
---------- ----------
Redeemable preferred stock:
Redeemable senior cumulative exchangeable preferred stock
of subsidiary, par value $.01 per share; 1,000,000
shares authorized, issued and outstanding; liquidation
preference of $121,274 in 1997 and 1998................ 119,445 119,445
Redeemable cumulative exchangeable preferred stock of
subsidiary, par value $.01 per share; 3,600,000 shares
authorized and 2,117,629 shares issued and outstanding;
liquidation preference of $223,519 in 1997............. 211,763 --
Stockholder's equity:
Common stock, $.01 par value. 1,040 shares authorized,
issued and outstanding................................. 1 1
Paid-in capital............................................. 1,637,628 2,581,765
Accumulated deficit......................................... (157,422) (232,410)
---------- ----------
Total stockholder's equity........................ 1,480,207 2,349,356
---------- ----------
$4,961,477 $5,281,596
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
16
<PAGE> 17
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- --------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1998 1997 1998
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Gross revenues.................................... $122,365 $363,590 $216,177 $ 626,011
Less agency commissions......................... 16,001 41,880 27,916 70,744
-------- -------- -------- ---------
Net revenues............................ 106,364 321,710 188,261 555,267
Operating expenses:
Operating expenses, excluding depreciation and
amortization................................. 58,178 168,843 111,162 316,862
Depreciation and amortization................... 27,897 101,124 53,912 193,060
Corporate general and administrative............ 3,321 8,276 5,651 15,079
Executive severance charge...................... -- 59,475 -- 59,475
-------- -------- -------- ---------
Operating expenses...................... 89,396 337,718 170,725 584,476
-------- -------- -------- ---------
Operating income (loss)................. 16,968 (16,008) 17,536 (29,209)
-------- -------- -------- ---------
Other (income) expense:
Interest expense, net........................... 14,853 38,785 22,741 87,085
Gain on disposition of representation
contracts.................................... -- (11,270) -- (11,270)
Other income.................................... (13,323) (3,559) (13,323) (3,559)
-------- -------- -------- ---------
Other (income) expense.................. 1,530 23,956 9,418 72,256
-------- -------- -------- ---------
Income (loss) before income taxes and
extraordinary item.................... 15,438 (39,964) 8,118 (101,465)
Income tax expense (benefit)...................... 5,568 (13,987) 4,259 (16,928)
-------- -------- -------- ---------
Income (loss) before extraordinary
item.................................. 9,870 (25,977) 3,859 (84,537)
Extraordinary loss, net of income tax benefit..... 4,350 31,865 4,350 31,865
-------- -------- -------- ---------
Net income (loss)....................... 5,520 (57,842) (491) (116,402)
Preferred stock dividends......................... -- 6,691 -- 16,702
-------- -------- -------- ---------
Net income (loss) attributable to common
stockholders.......................... $ 5,520 $(64,533) $ (491) $(133,104)
======== ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE> 18
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------
JUNE 30, JUNE 30,
1997 1998
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (491) $ (116,402)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation........................................... 5,074 12,177
Amortization of goodwill, intangible assets and other
assets................................................ 48,838 180,883
Executive severance charge -- stock option
compensation.......................................... -- 16,000
Provisions for doubtful accounts....................... 2,388 2,194
Deferred income tax expense (benefit).................. 4,259 (16,928)
Gain on disposition of representation contracts........ -- (11,270)
Gain on disposition of assets.......................... (13,323) --
Loss on extinguishment of debt......................... 4,350 31,865
Other.................................................. -- (4,275)
Changes in certain assets and liabilities, net of
effects of acquisitions:
Accounts receivable.................................. (14,893) (51,352)
Other current assets................................. (5,102) (7,432)
Accounts payable and accrued expenses................ 4,992 (4,032)
Other assets......................................... (29) (490)
Other liabilities.................................... 102 6,925
--------- ----------
Net cash provided by operating activities......... 36,165 37,863
--------- ----------
Cash flows from investing activities:
Acquisitions, net of cash acquired........................ (447,240) (266,328)
Assets held for sale...................................... (50,000) --
Escrow deposits on pending acquisitions................... (62,100) --
Payments made on purchases of representation contracts.... -- (15,880)
Proceeds from sale of representation contracts............ -- 9,822
Proceeds from sale of assets.............................. 99,750 --
Issuance of note receivable from affiliate................ -- (150,000)
Capital expenditures...................................... (3,547) (12,099)
Other..................................................... (15,270) (7,647)
--------- ----------
Net cash used by investing activities............. (478,407) (442,132)
--------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................. 584,250 445,000
Principal payments on long-term debt...................... (417,250) (740,000)
Cash contributed by parent................................ 288,382 999,088
Repurchase of 12% Exchange Debentures..................... -- (260,519)
Dividends on preferred stock.............................. -- (28,460)
Dividend to parent........................................ (699) (12,831)
Payments for debt issuance costs.......................... (10,430) (336)
Other..................................................... (185) --
--------- ----------
Net cash provided by financing activities......... 444,068 401,942
--------- ----------
Increase (decrease) in cash and cash equivalents............ 1,826 (2,327)
Cash and cash equivalents at beginning of period............ 3,060 16,584
--------- ----------
Cash and cash equivalents at end of period.................. $ 4,886 $ 14,257
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE> 19
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position, results of operations and
cash flows of Chancellor Media Corporation of Los Angeles (formerly known as
Evergreen Media Corporation of Los Angeles ("EMCLA")) and its subsidiaries
(collectively, "CMCLA") for the periods presented. Chancellor Media Corporation
of Los Angeles is an indirect, wholly owned subsidiary of Chancellor Media
Corporation ("Chancellor Media").
Interim periods are not necessarily indicative of results to be expected
for the year. It is suggested that these financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in CMCLA's Annual Report on Form 10-K for the year ended December 31,
1997.
The consolidated financial statements include the accounts of CMCLA and its
subsidiaries, all of which are wholly-owned. All significant intercompany
balances and transactions have been eliminated in consolidation.
CMCLA adopted SFAS No. 130, Reporting Comprehensive Income, effective
January 1, 1998. This statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. CMCLA has no items of comprehensive income for any
period presented and therefore is not required to report comprehensive income.
2. ACQUISITIONS AND DISPOSITIONS
1997 Completed Transactions
On January 31, 1997, CMCLA acquired WWWW-FM and WDFN-AM in Detroit from
affiliates of Chancellor Radio Broadcasting Company ("CRBC") for $30,000 in cash
plus various other direct acquisition costs. CMCLA had previously provided
certain sales and promotional functions to WWWW-FM and WDFN-AM under a joint
sales agreement since February 14, 1996 and subsequently operated the stations
under a time brokerage agreement since April 1, 1996.
On January 31, 1997, CMCLA acquired KKSF-FM and KDFC-FM/AM in San Francisco
from affiliates of the Brown Organization for $115,000 in cash plus various
other direct acquisition costs. CMCLA had previously been operating KKSF-FM and
KDFC-FM/AM under a time brokerage agreement since November 1, 1996. On July 21,
1997, CMCLA sold KDFC-FM to Bonneville International Corporation ("Bonneville")
for $50,000 in cash. The assets of KDFC-FM were classified as assets held for
sale in connection with the purchase price allocation of the acquisition of
KKSF-FM and KDFC-FM/AM and no gain or loss was recognized by CMCLA upon
consummation of the sale.
On April 1, 1997, CMCLA acquired WJLB-FM and WMXD-FM in Detroit from Secret
Communications, L.P. ("Secret") for $168,000 in cash plus various other direct
acquisition costs. CMCLA had previously been operating WJLB-FM and WMXD-FM under
time brokerage agreements since September 1, 1996.
On April 3, 1997, CMCLA exchanged WQRS-FM in Detroit (which CMCLA acquired
on April 3, 1997 from Secret for $32,000 in cash plus various other direct
acquisition costs), to affiliates of Greater Media Radio, Inc. ("Greater Media")
in return for WWRC-AM in Washington, D.C. (now known as WTEM-AM) and $9,500 in
cash. The exchange was accounted for as a like-kind exchange and no gain or loss
was recognized upon consummation of the transaction. The net purchase price to
CMCLA of WWRC-AM was therefore $22,500. CMCLA had previously been operating
WWRC-AM under a time brokerage agreement since June 17, 1996.
19
<PAGE> 20
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
On May 1, 1997, CMCLA acquired WDAS-FM/AM in Philadelphia from affiliates
of Beasley FM Acquisition Corporation for $103,000 in cash plus various other
direct acquisition costs.
On May 15, 1997, CMCLA exchanged five of its six stations in Charlotte,
North Carolina (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for two FM stations in
Philadelphia (WIOQ-FM and WUSL-FM) owned by EZ Communications, Inc. ("EZ") in
Philadelphia (the "Charlotte Exchange"), and also sold CMCLA's sixth radio
station in Charlotte, WNKS-FM, to EZ for $10,000 in cash and recognized a gain
of $3,536. The Charlotte Exchange was accounted for as a like-kind exchange and
no gain or loss was recognized upon consummation of the transaction.
On May 30, 1997, CMCLA acquired WPNT-FM in Chicago from affiliates of
Century Broadcasting Company for $75,740 in cash (including $1,990 for the
purchase of the station's accounts receivable) plus various other direct
acquisition costs. On June 19, 1997, CMCLA sold WPNT-FM in Chicago to Bonneville
for $75,000 in cash and recognized a gain of $529.
On June 3, 1997, CMCLA sold WEJM-FM in Chicago to affiliates of Crawford
Broadcasting for $14,750 in cash and recognized a gain of $9,258.
On July 2, 1997, CMCLA acquired WLTW-FM and WAXQ-FM in New York and
WMZQ-FM, WJZW-FM, WZHF-AM and WBZS-AM in Washington, D.C. from Viacom
International, Inc. ("Viacom") for approximately $612,388 in cash including
various other direct acquisition costs (the "Viacom Acquisition"). The Viacom
Acquisition was financed with (i) bank borrowings under the Senior Credit
Facility (as defined) of $552,559; (ii) $53,750 in escrow funds paid by CMCLA on
February 19, 1997 and (iii) $6,079 financed through working capital. In June
1997, Chancellor Media issued 5,990,000 shares of $3.00 Convertible Preferred
Stock for net proceeds of $287,808 which were contributed to CMCLA and used to
repay borrowings under the Senior Credit Facility and subsequently were
reborrowed on July 2, 1997 as part of the financing of the Viacom Acquisition.
On July 7, 1997, CMCLA sold WJZW-FM in Washington, D.C. to affiliates of Capital
Cities/ABC Radio for $68,000 in cash. The assets of WJZW-FM, as well as the
assets of WZHF-AM and WBZS-AM, which were also sold on August 13, 1997, were
accounted for as assets held for sale in connection with the purchase price
allocation of the Viacom Acquisition and no gain or loss was recognized by CMCLA
upon consummation of the sales.
On July 7, 1997, CMCLA sold the Federal Communications Commission ("FCC")
authorizations and certain transmission equipment previously used in the
operation of KYLD-FM in San Francisco to Susquehanna Radio Corporation
("Susquehanna") for $44,000 in cash and recognized a gain of $1,726.
Simultaneously therewith, CRBC sold the call letters "KSAN-FM" (which CRBC
previously used in San Francisco) to Susquehanna. On July 7, 1997, CMCLA and
CRBC entered into a time brokerage agreement to enable CMCLA to operate KYLD-FM
on the frequency previously assigned to KSAN-FM, and on July 7, 1997, CRBC
changed the call letters of KSAN-FM to KYLD-FM. Upon the consummation of the
Chancellor Merger (as defined herein), CMCLA changed the format of the new
KYLD-FM to the format previously operated on the old KYLD-FM.
On July 14, 1997, CMCLA completed the disposition of WLUP-FM in Chicago to
Bonneville for net proceeds of $80,000 which were held by a qualified
intermediary pending the completion of the deferred exchange of WLUP-FM for
KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, CMCLA applied the net
proceeds from the disposition of WLUP-FM of $80,000 in cash, plus an additional
$3,500 and various other direct acquisition costs, in a deferred exchange of
WLUP-FM for KZPS-FM and KDGE-FM in Dallas. The exchange was accounted for as a
like-kind exchange and no gain or loss was recognized upon consummation of the
transaction. CMCLA had previously operated KZPS-FM and KDGE-FM under time
brokerage agreements effective August 1, 1997.
On July 21, 1997, CMCLA entered into a time brokerage agreement with CRBC
whereby CMCLA began managing certain limited functions of CRBC's stations
KBGG-FM, KNEW-AM and KABL-FM in
20
<PAGE> 21
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
San Francisco pending the consummation of the Chancellor Merger (as defined
herein), which occurred on September 5, 1997.
On August 13, 1997, CMCLA sold WBZS-AM and WZHF-AM in Washington, D.C.
(acquired as part of the Viacom Acquisition) and KDFC-AM in San Francisco to
affiliates of Douglas Broadcasting ("Douglas") for $18,000 in the form of a
promissory note. The promissory note, as amended on May 1, 1998, bears interest
at 7 3/4% from the closing date through February 28, 1998 and at 10.0% from
March 1, 1998 through the remainder of the term of the note, with a balloon
principal payment due four years after closing. At closing, Douglas posted a
$1,000 letter of credit for the benefit of CMCLA that will remain outstanding
until all amounts due under the promissory note are paid.
On August 27, 1997, CMCLA sold WEJM-AM in Chicago to Douglas for $7,500 in
cash and recognized a gain of $3,331.
On September 5, 1997, pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of February 19, 1997 and amended and restated on July
31, 1997 (the "Chancellor Merger Agreement"), among Chancellor Broadcasting
Company ("Chancellor"), CRBC, Evergreen Media Corporation ("Evergreen"),
Evergreen Mezzanine Holdings Corporation ("EMHC") and EMCLA, (i) Chancellor was
merged (the "Parent Merger") with and into EMHC, a direct, wholly-owned
subsidiary of Evergreen, with EMHC remaining as the surviving corporation and
(ii) CRBC was merged (the "Subsidiary Merger") with and into EMCLA, a direct,
wholly-owned subsidiary of EMHC, with EMCLA remaining as the surviving
corporation (collectively, the "Chancellor Merger"). Upon consummation of the
Parent Merger, Evergreen was renamed Chancellor Media Corporation and EMHC was
renamed Chancellor Mezzanine Holdings Corporation ("CMHC"). Upon consummation of
the Subsidiary Merger, EMCLA was renamed Chancellor Media Corporation of Los
Angeles ("CMCLA"). Consummation of the Chancellor Merger added 52 radio stations
(36 FM and 16 AM) to CMCLA's portfolio of stations, including 13 stations in
markets in which CMCLA previously operated. The total purchase price allocated
to net assets acquired was approximately $1,998,383 which included (i) the
conversion of each outstanding share of Chancellor Common Stock into 0.9091
shares of Chancellor Media's Common Stock, resulting in the issuance of
34,617,460 shares of Chancellor Media's Common Stock at $15.50 per share, (ii)
the assumption of long-term debt of CRBC of $949,000 which included $549,000 of
borrowings outstanding under the CRBC senior credit facility, $200,000 of CRBC's
9 3/8% Senior Subordinated Notes due 2004 and $200,000 of CRBC's 8 3/4% Senior
Subordinated Notes due 2007, (iii) the issuance of 2,117,629 shares of CMCLA's
12% Exchangeable Preferred Stock in exchange for CRBC's substantially identical
securities with a fair value of $215,570 including accrued and unpaid dividends
of $3,807, (iv) the issuance of 1,000,000 shares of CMCLA's 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock in exchange for CRBC's
substantially identical securities with a fair value of $120,217 including
accrued and unpaid dividends of $772, (v) the issuance of 2,200,000 shares of
Chancellor Media's 7% Convertible Preferred Stock in exchange for Chancellor's
substantially identical securities with a fair value of $111,048 including
accrued and unpaid dividends of $1,048, (vi) the assumption of stock options
issued to Chancellor stock option holders with a fair value of $34,977 and (vii)
estimated acquisition costs of $31,000.
On October 28, 1997, Chancellor Media and CMCLA acquired Katz Media Group,
Inc. ("KMG"), a full-service media representation firm, in a tender offer
transaction for a total purchase price of approximately $379,101 (the "Katz
Acquisition") which included (i) the conversion of each outstanding share of KMG
Common Stock into the right to receive $11.00 in cash, resulting in total cash
payments of $149,601, (ii) the assumption of long-term debt of KMG and its
subsidiaries of $222,000 which included $122,000 of borrowings outstanding under
the KMG senior credit facility and $100,000 of 10 1/2% Senior Subordinated Notes
due 2007 of Katz Media Corporation (a subsidiary of KMG) and (iii) estimated
acquisition costs of $7,500.
On December 29, 1997, CMCLA acquired five radio stations from Pacific and
Southern Company, Inc., a subsidiary of Gannett Co., Inc., consisting of
WGCI-FM/AM in Chicago for $140,000, KKBQ-FM/AM in
21
<PAGE> 22
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Houston for $110,000 and KHKS-FM in Dallas for $90,000, for an aggregate
purchase price of $340,000 in cash plus various other direct acquisition costs.
1998 Completed Transactions
On January 30, 1998, CMCLA acquired KXPK-FM in Denver from Ever Green
Wireless LLC (which is unrelated to CMCLA) for $26,000 in cash plus various
other direct acquisition costs, of which $1,650 was previously paid by CRBC as
escrow funds and are classified as other assets at December 31, 1997. CMCLA had
previously operated KXPK-FM under a time brokerage agreement since September 1,
1997.
On April 3, 1998, CMCLA exchanged WTOP-AM in Washington, KZLA-FM in Los
Angeles and WGMS-FM in Washington plus $63,000 in cash (including $3,000 paid by
CMCLA in escrow and classified as other assets at December 31, 1997) to
Bonneville for WBIX-FM in New York, KLDE-FM in Houston and KBIG-FM in Los
Angeles (the "Bonneville Exchange"). CMCLA had previously operated KLDE-FM and
KBIG-FM under time brokerage agreements since October 1, 1997 and WBIX-FM since
October 10, 1997, and had sold substantially all of the broadcast time of
WTOP-AM, KZLA-FM and WGMS-FM to Bonneville since October 1, 1997.
On April 13, 1998, CMCLA and Secret entered into a settlement agreement
regarding WFLN-FM in Philadelphia. Previously in August 1996, CMCLA and Secret
had entered into an agreement under which CMCLA would acquire WFLN-FM from
Secret for $37,750 in cash. In April 1997, CMCLA entered into an agreement to
sell WFLN-FM to Greater Media for $41,800 in cash. On July 16, 1997, Secret
purported to terminate the sale of WFLN-FM to CMCLA. CMCLA subsequently brought
suit against Secret to enforce its rights to acquire WFLN-FM. Pursuant to a
court settlement entered in August 1997 and the settlement agreement between
CMCLA and Secret entered on April 13, 1998, (i) Secret sold WFLN-FM directly to
Greater Media for $37,750, (ii) Greater Media deposited $4,050 (the difference
between CMCLA's proposed acquisition price for WFLN-FM from Secret and CMCLA's
proposed sale price for WFLN-FM to Greater Media) with the court and (iii) CMCLA
received $3,500 of such amount deposited by Greater Media with the court, plus
interest earned during the period which the court held such amounts (the "WFLN
Settlement"), and Secret received the balance of such amounts.
On May 29, 1998, as part of the Capstar Transaction (defined below), CMCLA
exchanged WAPE-FM and WFYV-FM in Jacksonville (valued for purposes of the
Capstar Transaction at $53,000) plus $90,250 in cash to Capstar Broadcasting
Corporation (together with its subsidiaries, "Capstar") in return for KODA-FM in
Houston (the "Houston Exchange"). Furthermore, on May 29, 1998, Capstar sold
KKPN-FM in Houston (acquired by Capstar as part of the SFX Acquisition) due to
the attributable ownership of Hicks, Muse, Tate & Furst, Incorporated ("Hicks
Muse") in both Capstar and CMCLA in order to comply with the FCC's multiple
ownership limits. In connection with Capstar's sale of KKPN-FM, CMCLA received a
commission from Capstar of $1,730. On May 29, 1998, CMCLA also provided a loan
to Capstar in the principal amount of $150,000 (the "Capstar Loan") as part of
the Capstar Transaction. The Capstar Loan bears interest at the rate of 12% per
annum (subject to increase in certain circumstances), and is secured by a senior
pledge of common stock of Capstar's direct subsidiary. A portion of the Capstar
Loan will be prepaid by Capstar in connection with CMCLA's acquisition of, and
the proceeds of such prepayment would be used by CMCLA as a portion of the
purchase price for, each Capstar Station. Hicks Muse, which is a substantial
shareholder of CMCLA, controls Capstar, and certain officers and directors of
CMCLA are directors and/or executive officers of Capstar and/or Hicks Muse.
On June 1, 1998, CMCLA acquired WWDC-FM/AM in Washington, D.C. from Capitol
Broadcasting Company and its affiliates for $74,062 in cash (including $2,062
for the purchase of the stations' accounts receivable) plus various other direct
acquisition costs, of which $4,000 was previously paid by CMCLA as escrow funds
and are classified as other assets at December 31, 1997 (the "Capitol
Broadcasting Acquisition").
22
<PAGE> 23
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
On May 1, 1998, the Company formed a new division, Chancellor Marketing
Group, in an effort to enhance the revenues CMCLA derives from its sales
promotion activities. On June 1, 1998, CMCLA acquired Global Sales Development,
Inc., a consulting firm based in Richmond, Virginia, for $675 in cash plus
various other direct acquisition costs to lead its marketing efforts for this
new division.
On June 15, 1998, CMCLA's national radio network, The AMFM Radio Networks,
acquired the syndicated programming shows of Global Satellite Network for
$14,000 in cash plus various other direct acquisition costs. The syndicated
programming shows acquired include "Rockline", "Modern Rock Live", "Reelin' in
the Years" and the concert series "Live from the Pit".
On July 31, 1998, CMCLA acquired Martin Media, L.P. and certain affiliated
companies ("Martin"), an outdoor advertising company with over 13,000 billboards
and outdoor displays in 12 states serving 23 markets, for $610,000 in cash plus
working capital of $20,985 subject to certain adjustments and various other
direct acquisition costs. Additionally, CMCLA paid $13,559 to Martin for
properties acquired by Martin subsequent to the purchase agreement date of June
22, 1998 and prior to the closing on July 31, 1998. The additional properties
acquired from Martin added approximately 1,500 billboards and outdoor displays
in four of Martin's 23 existing markets.
Pending Transactions
On February 20, 1998, CMCLA entered into an agreement to acquire from
Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in
Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM, WXDX-FM and
WDVE-FM in Pittsburgh (collectively, the "Capstar Stations") for an aggregate
purchase price of approximately $637,500 in a series of purchases and exchanges
over a period of three years (the "Capstar Transaction"). On May 29, 1998, CMCLA
completed the Houston Exchange (defined above) and began operating the remaining
ten Capstar Stations under time brokerage agreements. CMCLA will pay
approximately $494,250 for the remaining ten Capstar Stations.
On April 8, 1998, CMCLA entered into an agreement to acquire Petry Media
Corporation, a leading independent television representation firm, for
approximately $150,000 in cash (the "Petry Acquisition"). On June 3, 1998, the
Antitrust Division of the United States Department of Justice issued a second
request for additional information under the HSR Act in connection with the
Petry Acquisition. The Company is presently responding to this request for
additional information. Although there can be no assurance, CMCLA expects that
the Petry Acquisition will be consummated in the fourth quarter of 1998.
On June 15, 1998, CMCLA, Capstar, LIN Television Corporation and TSG
Capital Group, L.L.C. announced the formation of an alliance to capitalize on
investment opportunities in broadcasting entities across a broad spectrum of
ethnic ownership. Accordingly, as the first investment of the alliance, CMCLA
entered into an agreement to acquire a 20% non-voting equity stake in Z-Spanish
Media Corporation for approximately $25,000 in cash (the "Z Spanish
Acquisition"). Z Spanish Media, which is headquartered in Sacramento,
California, is the owner and operator of 22 Hispanic format radio stations in
California, Texas, Arizona and Illinois. Although there can be no assurance,
CMCLA expects that the Z Spanish Acquisition will be consummated in the third or
fourth quarter of 1998.
On July 7, 1998, Chancellor Media entered into an agreement whereby the
ultimate parent of LIN Television Corporation ("LIN") will merge into Chancellor
Media (the "LIN Merger"). Pursuant to this agreement, Chancellor Media will
acquire the stock of LIN from affiliates of Hicks Muse in a stock-for-stock
transaction. Upon consummation of the LIN Merger, it is expected that LIN will
own or operate 12 television stations in eight markets in the United States.
Although there can be no assurance, Chancellor Media expects that the LIN Merger
will be consummated in the first quarter of 1999.
23
<PAGE> 24
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
On July 10, 1998, Chancellor Media and CMCLA entered into an agreement to
acquire a 50% economic interest in Grupo Radio Centro, S.A. de C.V. ("GRC") for
approximately $120,500 in cash and $116,500 in Common Stock for an aggregate
purchase price of $237,000 (the "GRC Acquisition"). The Chancellor Media shares
issued to GRC will be valued at the market price at closing, subject to a
maximum price of $57.00 and a minimum price of $42.75. The purchase price is
subject to upward or downward revisions of up to $29,100, payable in Chancellor
Media Common Stock, based upon GRC's 1999 performance. GRC is Latin America's
largest pure play radio company with six FM and six AM radio stations in Mexico.
Additionally, GRC acts as the national sales representative and provides
programming for a network of more than 90 radio station affiliates in 57 cities
throughout Mexico. Although there can be no assurance, CMCLA expects that the
GRC Acquisition will be consummated in the fourth quarter of 1998.
On July 27, 1998, CMCLA entered into an agreement to acquire Primedia
Broadcast Group, Inc. and certain of its affiliates, which own and operate eight
FM stations in Puerto Rico, for approximately $75,000 in cash (the "Primedia
Acquisition"). Although there can be no assurance, CMCLA expects that the
Primedia Acquisition will be consummated in the fourth quarter of 1998.
On August 11, 1998, CMCLA entered into agreements to acquire four FM and
two AM radio stations in Cleveland for an aggregate purchase price of
approximately $275,000 in cash plus various other direct acquisitions cost (the
"Ohio Acquisitions"). The Ohio Acquisitions consist of the purchase by CMCLA of
(i) WDOK-FM and WRMR-AM from Independent Group Limited Partnership, (ii) WZAK-FM
from Zapis Communications, (iii) Zebra Broadcasting Corporation which owns
WZJM-FM and WJMO-AM and (iv) Wincom Broadcasting Corporation which owns WQAL-FM
(the "Wincom Acquisition"). The consummation of each of the Ohio Acquisitions
(other than the Wincom Acquisition) is contingent upon the consummation of each
of the other Ohio Acquisitions (other than the Wincom Acquisition). Although
there can be no assurance, CMCLA expects that the Ohio Acquisitions will be
consummated in the first quarter of 1999.
Consummation of each of the transactions discussed above is subject to
various conditions, including approval from the FCC (except in the case of the
Petry Acquisition) and the expiration or early termination of any waiting period
required under the HSR Act. CMCLA believes that such conditions will be
satisfied in the ordinary course, but there can be no assurance that this will
be the case.
Escrow funds of $4,650 paid by CMCLA in connection with the Bonneville
Exchange and the Capitol Broadcasting Acquisition were classified as other
assets in the accompanying balance sheet at December 31, 1997.
Summary of Net Assets Acquired
The completed acquisitions discussed above were accounted for as purchases.
Accordingly, the accompanying consolidated financial statements include the
results of operations of the acquired entities from the dates of acquisition.
24
<PAGE> 25
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
A summary of the net assets acquired follows:
<TABLE>
<CAPTION>
YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
<S> <C> <C>
Working capital, including cash of $9,724 in 1997........... $ 66,805 $ 1,991
Property and equipment...................................... 118,371 7,062
Assets held for sale........................................ 131,000 --
Intangible assets........................................... 3,823,746 259,631
Other assets................................................ 26,742 --
Deferred tax liability...................................... (279,371) --
Other liabilities........................................... (39,681) (697)
---------- --------
$3,847,612 $267,987
========== ========
</TABLE>
The pro forma consolidated condensed results of operations data for the six
months ended June 30, 1997 and 1998, as if the 1997 Completed Transactions and
the 1998 Completed Transactions discussed above, the 8 1/8% Notes Offering, the
amendment and restatement of the Senior Credit Facility and the 1998 Completed
Financing Transactions (as defined herein) occurred at January 1, 1997, follow:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------
JUNE 30, JUNE 30,
1997 1998
-------- --------
<S> <C> <C>
Net revenues................................................ $506,102 $580,634
Net loss.................................................... (82,320) (101,744)
</TABLE>
The results of operations for the six months ended June 30, 1998 include a
one-time executive severance charge of $59,475.
The pro forma results are not necessarily indicative of what would have
occurred if the acquisitions had been in effect for the entire periods
presented.
3. FINANCING TRANSACTIONS
1998 Completed Financing Transactions
On March 13, 1998, Chancellor Media completed a secondary offering of
21,850,000 shares of its Common Stock (the "1998 Equity Offering"). The net
proceeds from the 1998 Equity Offering of approximately $994,642 were
contributed to CMCLA and were used to reduce bank borrowings under the revolving
credit portion of the Senior Credit Facility (as defined) and the excess
proceeds were initially invested in short-term investment grade securities. The
Company subsequently used the excess proceeds for general corporate purposes,
including the financing of the Bonneville Exchange, the Capstar Loan and a
portion of the Houston Exchange.
On May 8, 1998, CMCLA completed a consent solicitation (the "12% Consent
Solicitation") to modify certain timing restrictions on CMCLA's ability to
exchange all shares of its 12% Preferred Stock for its 12% Subordinated Exchange
Debentures due 2009 (the "12% Debentures"). Consenting holders of 12% Preferred
Stock received payments of $0.05 per share of 12% Preferred Stock. On May 13,
1998, CMCLA exchanged the shares of 12% Preferred Stock for 12% Debentures (the
"12% Exchange"). In connection with the 12% Consent Solicitation and 12%
Exchange, CMCLA incurred approximately $270 in transaction costs which were
recorded as deferred debt issuance costs.
On June 10, 1998, CMCLA completed a cash tender offer (the "12% Debentures
Tender Offer") for all of CMCLA's 12% Debentures for an aggregate repurchase
cost of $262,495 which included (i) the principal amount of the 12% Debentures
of $211,763, (ii) premiums on the repurchase of the 12% Debentures of
25
<PAGE> 26
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
$47,798, (iii) accrued and unpaid interest on the 12% Debentures from May 14,
1998 through June 10, 1998 of $1,976 and (iv) estimated transaction costs of
$958. In connection with the 12% Debentures Tender Offer, CMCLA recorded an
extraordinary charge of $31,865 (net of a tax benefit of $17,158) consisting of
the premiums, estimated transaction costs and the write-off of the unamortized
balance of deferred debt issuance costs.
On July 20, 1998, CMCLA completed a consent solicitation (the "12 1/4%
Preferred Stock Consent Solicitation") to modify certain timing restrictions on
CMCLA's ability to exchange all shares of its 12 1/4% Preferred Stock for its
12 1/4% Subordinated Exchange Debentures due 2008 (the "12 1/4% Debentures"),
and on July 23, 1998 CMCLA exchanged the shares of 12 1/4% Preferred Stock for
12 1/4% Debentures. Consenting holders of 12 1/4% Preferred Stock received
payments of $0.05 per share of 12 1/4 Preferred Stock.
Pending Financing Transactions
On August 6, 1998, CMCLA commenced a cash tender offer (the "Tender Offer")
for CMCLA's 12 1/4% Debentures. The offer price for each $1,000 principal amount
of 12 1/4% Debentures is $1,189.90 plus accrued and unpaid interest through the
expiration date. The Tender Offer will expire at 11:59 p.m. on August 19, 1998,
unless extended. There can be no assurance that the Tender Offer will be
successful.
4. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and June 30,
1998:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
<S> <C> <C>
Senior Credit Facility(a)................................... $1,573,000 $1,278,000
9 3/8% Notes(b)............................................. 200,000 200,000
8 3/4% Notes(b)............................................. 200,000 200,000
10 1/2% Notes(b)............................................ 100,000 100,000
8 1/8% Notes(b)............................................. 500,000 500,000
---------- ----------
Total long-term debt.............................. $2,573,000 $2,278,000
========== ==========
</TABLE>
(a) Senior Credit Facility
On April 25, 1997, CMCLA entered into a loan agreement which amended and
restated its prior senior credit facility. Under the amended and restated
agreement, as amended on June 26, 1997, August 7, 1997, October 28, 1997,
February 10, 1998, May 1, 1998 and July 31, 1998 (as amended, the "Senior Credit
Facility"), CMCLA established a $1,250,000 revolving facility (the "Revolving
Loan Facility") and a $500,000 term loan facility (the "Term Loan Facility").
Upon consummation of the Chancellor Merger, the aggregate commitments under the
Revolving Loan Facility and the Term Loan Facility were increased to $1,600,000
and $900,000, respectively. In connection with the amendment and restatement of
the Senior Credit Facility, CMCLA wrote off the unamortized balance of deferred
debt issuance costs of $4,350 (net of a tax benefit of $2,343) as an
extraordinary charge.
Borrowings under the Senior Credit Facility bear interest at a rate based,
at the option of CMCLA, on the participating banks' prime rate or Eurodollar
rate, plus an incremental rate. Without giving effect to the interest rate swap
and cap agreements described below, the interest rate on the $900,000
outstanding under the Term Loan Facility at June 30, 1998 was 6.19% on a blended
basis, based on Eurodollar rates, and the interest rate on advances of $365,000
and $13,000 outstanding under the Revolving Loan Facility were 6.19% and 8.50%,
respectively, at June 30, 1998, based on the Eurodollar and prime rates,
respectively. CMCLA pays fees ranging from 0.25% to 0.375% per annum on the
aggregate unused portion of the loan commitment based upon the leverage ratio
for the most recent quarter end, in addition to an annual agent's fee. Pursuant
to the Senior Credit Facility, CMCLA is required to enter into interest hedging
agreements that result in the fixing or placing a cap on CMCLA's floating rate
debt so that not less than 50% of the principal amount of total debt outstanding
has a fixed or capped rate.
26
<PAGE> 27
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
The Term Loan Facility is payable in quarterly installments commencing on
September 30, 2000 and ending June 20, 2005. The Revolving Loan Facility
requires scheduled annual reductions of the commitment amount, payable in
quarterly installments commencing on September 30, 2000 and ending on June 30,
2005. At July 31, 1998, CMCLA had drawn $900,000 of the Term Loan Facility and
$980,000 of the Revolving Loan Facility. The capital stock of CMCLA's
subsidiaries is pledged to secure the performance of CMCLA's obligations under
the Senior Credit Facility, and each of CMCLA's subsidiaries have guaranteed
those obligations.
(b) Senior Subordinated Notes
Upon consummation of the Chancellor Merger, on September 5, 1997, CMCLA
assumed all of the obligations under CRBC's $200,000 aggregate principal amount
9 3/8% Senior Subordinated Notes due 2004 (the "9 3/8% Notes") and the indenture
governing such securities, and assumed all of the obligations under CRBC's
$200,000 aggregate principal amount 8 3/4% Senior Subordinated Notes due 2007
(the "8 3/4% Notes") and the indenture governing such securities. Upon
consummation of the Katz Acquisition, on October 28, 1997, CMCLA assumed all of
the obligations under Katz Media Corporation's $100,000 aggregate principal
amount of 10 1/2% Senior Subordinated Notes due 2007 (the "10 1/2% Notes") and
the amended and restated indenture governing such securities. On December 22,
1997, CMCLA issued $500,000 aggregate principal amount of 8 1/8% Senior
Subordinated Notes due 2007 (the "8 1/8% Notes") for estimated net proceeds of
$485,000.
(c) Summarized Financial Information of Subsidiary Guarantors
The 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes and the 8 1/8% Notes
(collectively, the "Notes") are unsecured obligations of CMCLA, subordinated in
right of payment to all existing and any future senior indebtedness of CMCLA.
The Notes are fully and unconditionally guaranteed, on a joint and several
basis, by all of CMCLA's direct and indirect subsidiaries other than certain
inconsequential subsidiaries (the "Subsidiary Guarantors"). The Subsidiary
Guarantors are wholly-owned subsidiaries of CMCLA. Summarized financial
information of the Subsidiary Guarantors as of December 31, 1997 and June 30,
1998 and for the six months ended June 30, 1998 is presented below. Separate
financial statements and other disclosures concerning the Subsidiary Guarantors
are not presented because management has determined that they are not material
to investors. There are no significant restrictions on distributions from each
of the Subsidiary Guarantors to CMCLA.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
<S> <C> <C>
Current assets............................................ $ 223,913 $ 275,671
Noncurrent assets......................................... 987,028 916,846
Current liabilities....................................... 89,362 100,418
Noncurrent liabilities.................................... 1,130,105 1,126,345
SIX MONTHS
ENDED
----------
JUNE 30,
1998
----------
Net revenues.............................................. $ 452,427
Operating income.......................................... 32,717
Net loss.................................................. (30,934)
</TABLE>
(d) Other
The Senior Credit Facility and the indentures governing the Notes contain
customary restrictive covenants, which, among other things and with certain
exceptions, limit the ability of CMCLA and its
27
<PAGE> 28
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
subsidiaries to incur additional indebtedness and liens in connection therewith,
enter into certain transactions with affiliates, pay dividends, consolidate,
merge or effect certain asset sales, issue additional stock, effect an asset
swap and make acquisitions. CMCLA is required under the Senior Credit Facility
to maintain specified financial rations, including leverage, cash flow and debt
service coverage ratios (as defined).
5. EXECUTIVE SEVERANCE CHARGE
On April 14, 1998, Scott K. Ginsburg resigned as President and Chief
Executive Officer of Chancellor Media, CMHC and CMCLA. On April 20, 1998, Mr.
Ginsburg resigned as director of Chancellor Media, CMHC and CMCLA and from all
appointments and positions with its respective subsidiaries. On April 20, 1998,
Mr. Ginsburg and Chancellor Media and CMCLA entered into a separation and
consulting agreement. Following Mr. Ginsburg's resignation, Chancellor Media and
CMCLA entered into new employment agreements with Jimmy de Castro, Chancellor
Media's and CMCLA's Chief Operating Officer, and Matthew E. Devine, Chancellor
Media's and CMCLA's Chief Financial Officer, each effective April 17, 1998. On
April 29, 1998, Jeffrey A. Marcus, was named President and Chief Executive
Officer of Chancellor Media, CMHC and CMCLA and Chancellor Media and CMCLA
entered into an employment agreement with Mr. Marcus effective June 1, 1998.
In connection with Mr. Ginsburg's resignation described above, CMCLA
incurred a one-time executive severance charge of $59,475 which consists of (i)
a lump sum severance payment of $20,000 to Mr. Ginsburg, (ii) compensation
expense of $16,000 related to the grant of 800,000 stock options to Mr. Ginsburg
at an exercise price of $23.25 per share, (iii) consulting fees of $12,500 to be
paid to Mr. Ginsburg over five years, (iv) one-time cash payments of $5,000 and
$2,000 to Mr. de Castro and Mr. Devine, respectively, (v) execution bonuses of
$1,000 paid to Mr. de Castro, Mr. Devine and Mr. Marcus and (vi) other costs
incurred in connection with Mr. Ginsburg's resignation of $975.
6. OTHER INCOME
Other income consists of the following for the six months ended June 30,
1997 and 1998:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------
JUNE 30, JUNE 30,
1997 1998
-------- --------
<S> <C> <C>
Gain on disposition of assets(a)............................ $13,323 $ --
WFLN Settlement(b).......................................... -- 3,559
------- ------
$13,323 $3,559
======= ======
</TABLE>
- ---------------
(a) For the six months ended June 30, 1997, CMCLA recorded a gain on disposition
of assets of $13,323 related to the dispositions of WNKS-FM in Charlotte on
May 15, 1997 ($3,536), WPNT-FM in Chicago on May 30, 1997 ($529), and
WEJM-FM in Chicago on June 3, 1997 ($9,258).
(b) For the six months ended June 30, 1998, CMCLA recorded a gain from the WFLN
Settlement (defined above) of $3,559.
7. CONTINGENCIES
CMCLA is involved in several lawsuits that are incidental to its business.
A discussion of certain of these lawsuits is contained in Part II, Item 1,
"Legal Proceedings", of this Form 10-Q. CMCLA believes that the ultimate
resolution of the lawsuits will not have a material effect on its financial
position or results of operations.
28
<PAGE> 29
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Since 1995, Chancellor Media Corporation ("Chancellor Media"), Chancellor
Media Corporation of Los Angeles ("CMCLA"), an indirect, wholly-owned subsidiary
of Chancellor Media, and their respective subsidiaries (collectively, the
"Company") have engaged in an acquisition strategy concentrating on expanding
the Company's presence in the nation's largest radio markets. At August 1, 1998,
the Company's radio station portfolio consisted of 98 radio stations (70 FM and
28 AM), including a total of 11 radio station clusters of four or five FM
stations ("superduopolies") in nine of the nation's 15 largest radio
markets -- Los Angeles, New York, Chicago, San Francisco, Philadelphia,
Washington, D.C., Detroit, Denver and Minneapolis-St. Paul -- and in two other
large markets -- Phoenix and Orlando. Consummation of the pending transactions
will result in a net increase of 13 FM stations and three AM stations and will
add the San Diego and Cleveland markets to the Company's portfolio. In addition,
consummation of the pending transactions will increase the number of
superduopolies in the Company's station portfolio to 15, including two new
superduopolies in the nation's 10 largest radio markets -- Dallas/Ft. Worth and
Houston -- and two other large markets -- Cleveland and Pittsburgh.
In 1998, the Company broadened its acquisition strategy to focus on
creating a leading multi-media company, with a significant presence in large-
and middle-market radio, television, outdoor advertising and international
media. In this regard, during 1998, the Company has (i) completed the
acquisition of three radio stations and the exchange of five radio stations for
four radio stations, began operating 10 radio stations under time brokerage
agreements and entered into an agreement to acquire six radio stations in
Cleveland; (ii) entered into an agreement to purchase LIN Television which, upon
completion of pending transactions, will own or operate 12 television stations
in eight markets in the United States; (iii) acquired Martin Media, an outdoor
advertising company with over 14,500 billboards and outdoor displays in 12
states serving 23 markets; and (iv) entered into an agreement to acquire
Primedia Broadcast Group, Inc. and certain of its affiliates which own and
operate eight FM stations in Puerto Rico and entered into an agreement to
acquire a 50% economic interest in Grupo Radio Centro which owns and operates
six FM and six AM radio stations in Mexico. The Company has also leveraged its
radio expertise and expand into industries related to the operation of radio
stations including (i) the formation of a national radio network, The AMFM Radio
Network, in September 1997 which has expanded in 1998 through the acquisition of
syndicated programming shows including American Top 40 with Casey Kasem,
Rockline, Modern Rock Live, Reelin' in the Years and Live from the Pit; (ii) the
acquisition of Katz, a full service media representation firm in October 1997 as
well as the pending acquisition of Petry, a television representation firm,
which will be combined with Katz to provide expanded services and operating
efficiencies and (iii) the formation of a new division, Chancellor Marketing
Group, to enhance revenues derived from radio sales promotion activities. For a
discussion of the various transactions completed and agreements entered into
since January 1, 1997 as part of the Company's acquisition strategy, see the
Notes to the Consolidated Financial Statements of Chancellor Media and CMCLA and
their respective subsidiaries contained in this Quarterly Report on Form 10-Q.
The Company's results of operations from period to period have not
historically been comparable because of the impact of the various acquisitions
and dispositions that the Company has completed. For a description of the
transactions completed by the Company during 1997 and to date in 1998, see the
Notes to the Consolidated Financial Statements contained in this Quarterly
Report on Form 10-Q.
In the following analysis, management discusses the Company's broadcast
cash flow. The performance of a radio station group is customarily measured by
its ability to generate broadcast cash flow. The two components of broadcast
cash flow are gross revenues (net of agency commissions) and operating expenses
(excluding depreciation and amortization, corporate general and administrative
expense and non-cash and non-recurring charges). The primary source of revenues
is the sale of broadcasting time for advertising. The Company's most significant
operating expenses for purposes of the computation of broadcast cash flow are
employee salaries and commissions, programming expenses, and advertising and
promotion expenses. The Company strives to control these expenses by working
closely with local station management. The Company's revenues vary throughout
the year. As is typical in the radio broadcasting industry, the Company's first
29
<PAGE> 30
calendar quarter generally produces the lowest revenues, and the fourth quarter
generally produces the highest revenues.
Although broadcast cash flow is not calculated in accordance with generally
accepted accounting principles, the Company believes that it is widely used as a
measure of operating performance. Nevertheless, this measure should not be
considered in isolation or as a substitute for operating income, cash flows from
operating activities or any other measure for determining the Company's
operating performance or liquidity that is calculated in accordance with
generally accepted accounting principles. Broadcast cash flow does not take into
account the Company's debt service requirements and other commitments and,
accordingly, broadcast cash flow is not necessarily indicative of amounts that
may be available for dividends, reinvestment in the Company's business or other
discretionary uses.
Three Months Ended June 30, 1998 Compared To Three Months Ended June 30, 1997
The Company's results of operations for the three months ended June 30,
1998 are not comparable to the results of operations for the three months ended
June 30, 1997 due to the impact of the Chancellor Merger, the Viacom
Acquisition, the Katz Acquisition and various other acquisitions and
dispositions discussed in the Notes to the Consolidated Financial Statements
contained in this Quarterly Report on Form 10-Q.
Net revenues for the three months ended June 30, 1998 increased 202.5% to
$321.7 million compared to $106.4 million for the second quarter of 1997.
Operating expenses excluding depreciation and amortization for the three months
ended June 30, 1998 increased 190.2% to $168.8 million compared to $58.2 million
for the three months ended June 30, 1997. Operating income excluding
depreciation and amortization, corporate general and administrative expense and
other non-cash and non-recurring charges (broadcast cash flow) for the three
months ended June 30, 1998 increased 217.2% to $152.9 million compared to $48.2
million for the second quarter of 1997. The increase in net revenues, operating
expenses, and broadcast cash flow for the three months ended June 30, 1998 was
primarily attributable to the net impact of the Chancellor Merger, the Viacom
Acquisition, the Katz Acquisition and the various acquisitions and dispositions
discussed elsewhere herein, in addition to the overall net operational
improvements realized by the Company.
Depreciation and amortization for the three months ended June 30, 1998
increased 262.5% to $101.1 million compared to $27.9 million for the second
quarter of 1997. The increase is primarily due to the impact of the Viacom
Acquisition, the Chancellor Merger and the Katz Acquisition, as well as other
acquisitions completed during 1997 and to date in 1998.
Corporate general and administrative expenses for the three months ended
June 30, 1998 increased 149.2% to $8.3 million compared to $3.3 million for the
second quarter of 1997. The increase is due to the growth of the Company, and
the related increase in properties and staff, primarily due to recent
acquisitions.
The executive severance charge of $59.5 million for the three months ended
June 30, 1998 represents a one-time charge incurred in connection with the
resignation of Scott K. Ginsburg as President and Chief Executive Officer of the
Company.
As a result of the above factors, the Company realized an operating loss of
$16.0 million for the three months ended June 30, 1998 compared to $17.0 million
of operating income for the second quarter of 1997.
Interest expense, net for the three months ended June 30, 1998 increased
161.1% to $38.8 million compared to $14.9 million for the same period in 1997.
The net increase in interest expense was primarily due to (i) additional bank
borrowings under the Senior Credit Facility required to finance the various
acquisitions discussed elsewhere herein offset by repayment of borrowings from
the net proceeds of the Company's various radio station dispositions and the
1998 Equity Offering, (ii) the assumption of CRBC's 9 3/8% Notes and 8 3/4%
Notes upon consummation of the Chancellor Merger on September 5, 1997, (iii) the
assumption of Katz' 10 1/2% Notes upon consummation of the Katz Acquisition on
October 28, 1997 and (iv) the issuance of the 8 1/8% Notes by the Company on
December 22, 1997.
For the three months ended June 30, 1997, other income of $13.3 million
represents a gain on the disposition of assets related to the dispositions of
WNKS-FM in Charlotte ($3.5 million), WPNT-FM in
30
<PAGE> 31
Chicago ($0.5 million), and WEJM-FM in Chicago ($9.3 million). For the three
months ended June 30, 1998, other income represents a gain from the WFLN
Settlement of $3.6 million.
The income tax benefit for the three months ended June 30, 1998 is
comprised of current state tax expense and a deferred federal income tax
benefit.
Dividends on preferred stock of CMCLA were $6.7 million for the three
months ended June 30, 1998, representing dividends on CMCLA's 12% Exchangeable
Preferred Stock (the "12% Preferred Stock") for the period from April 1, 1998
through May 13, 1998 and on CMCLA's 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") for the entire
period, each issued in September 1997 as part of the Chancellor Merger. On May
13, 1998, CMCLA exchanged all shares of the 12% Preferred Stock for its 12%
Subordinated Exchange Debentures due 2009 (the "12% Debentures"). The 12%
Debentures were subsequently repurchased by CMCLA.
For the three months ended June 30, 1997, the Company recorded an
extraordinary charge of $4.4 million (net of a tax benefit of $2.3 million)
consisting of the write-off of the unamortized balance of deferred debt issuance
costs related to the amendment and restatement of the Company's Senior Credit
Facility on April 25, 1997. For the three months ended June 30, 1998, the
Company recorded an extraordinary charge of $31.9 million (net of a tax benefit
of $17.2 million) consisting of premiums, estimated transaction costs and the
unamortized balance of deferred debt issuance costs related to the 12%
Debentures Tender Offer.
Dividends on Chancellor Media's preferred stock were $6.4 million for the
three months ended June 30, 1998 compared to $0.7 million for the same period in
1997. The increase is due to dividends on Chancellor Media's $3.00 Convertible
Exchangeable Preferred Stock (the "$3.00 Convertible Preferred Stock") issued in
June 1997 and dividends on Chancellor Media's 7% Convertible Preferred Stock
(the "7% Convertible Preferred Stock") issued in September 1997 as part of the
Chancellor Merger.
As a result of the above factors, the Company incurred a $71.0 million net
loss attributable to common stockholders for the three months ended June 30,
1998 compared to net income attributable to common stockholders of $4.8 million
for the second quarter of 1997.
The basic and diluted loss per common share for the three months ended June
30, 1998 was $0.50 compared to a $0.06 basic and diluted income per common share
for the second quarter of 1997.
Six Months Ended June 30, 1998 Compared To Six Months Ended June 30, 1997
The Company's results of operations for the six months ended June 30, 1998
are not comparable to the results of operations for the six months ended June
30, 1997 due to the impact of the Chancellor Merger, the Viacom Acquisition, the
Katz Acquisition and various other acquisitions and dispositions discussed in
the Notes to the Consolidated Financial Statements contained in this Quarterly
Report on Form 10-Q.
Net revenues for the six months ended June 30, 1998 increased 194.9% to
$555.3 million compared to $188.3 million for the six months ended June 30,
1997. Operating expenses excluding depreciation and amortization for the six
months ended June 30, 1998 increased 185.0% to $316.9 million compared to $111.2
million for the six months ended June 30, 1997. Operating income excluding
depreciation and amortization, corporate general and administrative expense and
other non-cash and non-recurring charges (broadcast cash flow) for the six
months ended June 30, 1998 increased 209.2% to $238.4 million compared to $77.1
million for the six months ended June 30, 1997. The increase in net revenues,
operating expenses, and broadcast cash flow for the six months ended June 30,
1998 was primarily attributable to the net impact of the Chancellor Merger, the
Viacom Acquisition, the Katz Acquisition and the various acquisitions and
dispositions discussed elsewhere herein, in addition to the overall net
operational improvements realized by the Company.
Depreciation and amortization for the six months ended June 30, 1998
increased 258.1% to $193.1 million compared to $53.9 million for the six months
ended June 30, 1997. The increase is primarily due to the
31
<PAGE> 32
impact of the Viacom Acquisition, the Chancellor Merger and the Katz
Acquisition, as well as other acquisitions completed during 1997 and to date in
1998.
Corporate general and administrative expenses for the six months ended June
30, 1998 increased 166.8% to $15.1 million compared to $5.7 million for the six
months ended June 30, 1997. The increase is due to the growth of the Company,
and the related increase in properties and staff, primarily due to recent
acquisitions.
The executive severance charge of $59.5 million for the six months ended
June 30, 1998 represents a one-time charge incurred in connection with the
resignation of Scott K. Ginsburg as President and Chief Executive Officer of the
Company.
As a result of the above factors, the Company realized an operating loss of
$29.2 million for the six months ended June 30, 1998 compared to $17.5 million
of operating income for the six months ended June 30, 1997.
Interest expense, net for the six months ended June 30, 1998 increased
282.9% to $87.1 million compared to $22.7 million for the same period in 1997.
The net increase in interest expense was primarily due to (i) additional bank
borrowings under the Senior Credit Facility required to finance the various
acquisitions discussed elsewhere herein offset by repayment of borrowings from
the net proceeds of the Company's various radio station dispositions and the
1998 Equity Offering, (ii) the assumption of CRBC's 9 3/8% Notes and 8 3/4%
Notes upon consummation of the Chancellor Merger on September 5, 1997, (iii) the
assumption of Katz' 10 1/2% Notes upon consummation of the Katz Acquisition on
October 28, 1997 and (iv) the issuance of the 8 1/8% Notes by the Company on
December 22, 1997.
For the six months ended June 30, 1997, other income of $13.3 million
represents a gain on the disposition of assets related to the dispositions of
WNKS-FM in Charlotte ($3.5 million), WPNT-FM in Chicago ($0.5 million), and
WEJM-FM in Chicago ($9.3 million). For the six months ended June 30, 1998, other
income represents a gain from the WFLN Settlement of $3.6 million.
The income tax benefit for the six months ended June 30, 1998 is comprised
of current state tax expense and a deferred federal income tax benefit.
Dividends on preferred stock of CMCLA were $16.7 million for the six months
ended June 30, 1998, representing dividends on CMCLA's 12% Exchangeable
Preferred Stock (the "12% Preferred Stock") for the period from January 1, 1998
through May 13, 1998 and on CMCLA's 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") for the entire
period, each issued in September 1997 as part of the Chancellor Merger. On May
13, 1998, CMCLA exchanged all shares of the 12% Preferred Stock for its 12%
Debentures. The 12% Debentures were subsequently repurchased by CMCLA.
For the six months ended June 30, 1997, the Company recorded an
extraordinary charge of $4.4 million (net of a tax benefit of $2.3 million)
consisting of the write-off of the unamortized balance of deferred debt issuance
costs related to the amendment and restatement of the Company's Senior Credit
Facility on April 25, 1997. For the six months ended June 30, 1998, the Company
recorded an extraordinary charge of $31.9 million (net of a tax benefit of $17.2
million) consisting of premiums, estimated transaction costs and the unamortized
balance of deferred debt issuance costs related to the 12% Debentures Tender
Offer.
Dividends on Chancellor Media's preferred stock were $12.8 million for the
six months ended June 30, 1998 compared to $0.7 million for the same period in
1997. The increase is due to dividends on the $3.00 Convertible Preferred Stock
issued in June 1997 and dividends on the 7% Convertible Preferred Stock issued
in September 1997 as part of the Chancellor Merger.
As a result of the above factors, the Company incurred a $145.9 million net
loss attributable to common stockholders for the six months ended June 30, 1998
compared to a net loss attributable to common stockholders of $1.2 million for
the six months ended June 30, 1997.
The basic and diluted loss per common share for the six months ended June
30, 1998 was $1.09 compared to a $0.01 basic and diluted loss per common share
for the six months ended June 30, 1997.
32
<PAGE> 33
LIQUIDITY AND CAPITAL RESOURCES
Overview. The Company historically has generated sufficient cash flow from
operations to finance its existing operational requirements and debt service
requirements, and the Company anticipates that this will continue to be the
case. The Company historically has used the proceeds of bank debt and private
and public debt and equity offerings, supplemented by cash flow from operations
not required to fund operational requirements and debt service, to fund
implementation of the Company's acquisition strategy.
On March 13, 1998, Chancellor Media completed a secondary public offering
of 21,850,000 shares of its Common Stock (the "1998 Equity Offering"). The net
proceeds from the 1998 Equity Offering of approximately $994.6 million were
contributed by Chancellor Media to CMCLA, of which $696.0 million was used to
repay all amounts outstanding under the Revolving Loan Facility at March 13,
1998 and the remaining $298.6 million was used for general corporate purposes,
including $60.0 million to finance the Bonneville Exchange, $150.0 million to
finance the Capstar Loan and $72.0 million to finance a portion of the Houston
Exchange.
The total cash financing required to consummate the Pending Transactions is
expected to be $989.8 million. Although there can be no assurance, the Company
expects that $370.5 million of such amount will be required to be borrowed
during the third and fourth quarters of 1998, $275.0 million will be required to
be borrowed during the first quarter of 1999 and the remaining $344.3 million
will be required to be borrowed for the Capstar Transaction over the three year
period in which the Capstar Stations will be acquired. In addition, the total
cash financing required to consummate the 12 1/4% Tender Offer is expected to be
approximately $142.1 million. The Company anticipates that it will obtain any
additional financing needed to complete the Pending Transactions and the 12 1/4%
Tender Offer from borrowings under the Senior Credit Facility and from the net
proceeds from the issuance of public or private debt, common equity or preferred
equity securities.
In addition to debt service requirements under the Senior Credit Facility,
the Company is required to pay interest on the Notes. Interest payment
requirements of the Company on the Notes are $87.4 million per year. The 12 1/4%
Debentures of CMCLA do not require the payment of cash interest through February
14, 2001 although CMCLA may issue additional 12 1/4% Debentures in lieu of cash
interest until such time. Cash dividend requirements of Chancellor Media on its
$3.00 Convertible Preferred Stock and its 7% Convertible Preferred Stock are
$25.7 million per year. Because Chancellor Media is a holding company with no
significant assets other than the common stock of CMHC, Chancellor Media will
rely solely on dividends from CMHC, which in turn is expected to distribute
dividends paid to it by CMCLA and KMG to Chancellor Media, to permit Chancellor
Media to pay cash dividends on the $3.00 Convertible Preferred Stock and the 7%
Convertible Preferred Stock. The Senior Credit Facility and the indentures
governing the Notes and the 12 1/4% Debentures limit, but do not prohibit, CMCLA
from paying such dividends to CMHC.
FORWARD LOOKING STATEMENTS
When used in the preceding and following discussion, the words "believes,"
"expects," "anticipates," "intends" and similar expressions are intended to
identify forward looking statements. Such statements are subject to a number of
known and unknown risks and uncertainties. Actual results in the future could
differ materially from those described in the forward looking statements. Such
risks and uncertainties include, but are not limited to, industry-wide market
factors and regulatory developments affecting the Company's operations and the
acquisitions and dispositions described elsewhere herein.
RECENTLY ISSUED ACCOUNTING PRINCIPLES
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information. This
Statement establishes standards for reporting information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997. Management does
not anticipate that this Statement will have a significant effect on the
Company's consolidated financial statements.
33
<PAGE> 34
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, Employers' Disclosure about Pensions and Other Postretirement Benefits.
This Statement revises employers' disclosures about pensions and other
postretirement benefit plans. It does not change the measurement or recognition
of those plans. SFAS No. 132 is effective for fiscal years beginning after
December 15, 1997. Management does not anticipate that this Statement will have
a significant effect on the Company's consolidated financial statements.
In April 1998, Accounting Standards Executive Committee ("ACSEC") issued
Statement of Position ("SOP") No. 98-5, "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") effective for fiscal years beginning after December 15,
1998. This SOP provides guidance on the financial reporting of start-up costs
and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. Initial application of SOP 98-5
should be reported as the cumulative effect of a change in accounting principle,
as described in Accounting Principles Board (APB) Opinion No. 20, "Accounting
Changes." When adopting this SOP, entities are not required to report the pro
forma effects of retroactive application. Management does not believe the
implementation of SOP 98-5 will have a material impact on the Company's
consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. SFAS No.
133 is effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999. Management does not anticipate that this Statement will have a
material impact on the Company's consolidated financial statements.
YEAR 2000 ISSUE
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue (as defined)
and has developed an implementation plan. The "Year 2000 Issue" is whether the
Company's computer systems will properly recognize date sensitive information
when the year changes to 2000, or "00." Systems that do not properly recognize
such information could generate erroneous data or cause a system to fail. The
Company uses purchased software programs for a variety of functions, including
general ledger, accounts payable and accounts receivable accounting packages.
The companies providing these software programs are Year 2000 compliant, and the
Company has received Year 2000 compliance certificates from these software
vendors. The Company's Year 2000 implementation plan also includes ensuring that
all individual work stations are Year 2000 compliant. Costs associated with
ensuring the Company's systems are Year 2000 compliant are expected to be
minimal. The Company believes that the Year 2000 Issue will not pose significant
operational problems for the Company's computer systems and, therefore will not
have an impact on the operations of the Company.
34
<PAGE> 35
PART II
ITEM 1. LEGAL PROCEEDINGS
In August 1993, the Company terminated an agreement with Sagittarius
Broadcasting Company (an affiliate of Infinity Broadcasting Corporation) and One
Twelve, Inc. (collectively, the "Claimants" or the "Plaintiffs") pursuant to
which programming featuring radio personality Howard Stern was broadcast on
radio station WLUP-AM (now WMVP-AM) in Chicago. The Claimants allege that
termination of the agreement was wrongful and have sued the Company in the
Supreme Court of the State of New York, County of New York (the "Court"). The
agreement required payments to the Claimants in the amount of $2.6 million plus
five percent of advertising revenues generated by the programming over the
three-year term of the agreement. A total of approximately $680,000 was paid to
the Claimants pursuant to the agreement prior to termination. Claimants'
complaint alleged claims for breach of contract, indemnification, breach of
fiduciary duty and fraud. Plaintiffs' aggregate prayer for relief totaled $45.0
million. On July 12, 1994, the Court granted motion to dismiss Plaintiffs'
claims for fraud and breach of fiduciary duty. On June 6, 1995, the Court denied
the Plaintiff's motion for summary judgment on their contract and
indemnification claims and this order has been affirmed on appeal. On May 17,
1996, after the close of discovery, the Company filed a motion for summary
judgment, seeking the dismissal of the remaining claims in the original
complaint. On July 1, 1996, Plaintiffs moved for leave to amend their complaint
in order to add claims for breach of the covenant of good faith and fair
dealing, tortious interference with business advantage and prima facia tort. In
the proposed amended complaint, Plaintiffs seek compensatory and punitive
damages in excess of $25.0 million. On March 13, 1997, the Court denied the
Company's motion for summary judgment, allowed Plaintiffs' request to amend the
complaint to add a claim for breach of the covenant of good faith and fair
dealing and denied Plaintiffs' request to amend the complaint to add claims for
tortious interference with business advantage and prima facia tort. On April 25,
1997, the Company filed a notice of appeal of the denial of the motion for
summary judgment. In October 1997, the N.Y. State Supreme Court, Appellate
Division, granted a portion of the appeal seeking to strike certain damages
sought, but otherwise affirmed the denial of the motion for summary judgment and
sent the case back to the trial court for trial. Trial on the case is presently
scheduled for September 8, 1998. The Company believes that it acted within its
rights in terminating the agreement.
In July 1998, a stockholder derivative action was commenced in the Delaware
Court of Chancery by a stockholder purporting to act on behalf of the Company.
The defendants in the case include Hicks, Muse, Tate & Furst, Inc. ("Hicks
Muse"), LIN Television Corporation and certain of the Company's directors. The
plaintiff alleges that the Company has agreed to acquire LIN at too high of a
price and that the transaction therefore constitutes a breach of fiduciary duty
and a waste of corporate assets by Hicks Muse (which is alleged to control the
Company) and the directors of the Company named as defendants. The plaintiff
seeks to enjoin consummation or rescission of the transaction, compensatory
damages, an order requiring that the directors named as defendants "carry out
their fiduciary duties," and attorneys' fees and other costs.
The Company is also involved in various other claims and lawsuits which are
generally incidental to its business. The Company is vigorously contesting all
such matters and believes that their ultimate resolution will not have a
material adverse effect on its consolidated financial position or results of
operations.
35
<PAGE> 36
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Chancellor Media held its Annual Meeting of Stockholders on May 19,
1998, in Dallas, Texas. At the Annual Meeting, the following actions of the
Stockholders of Chancellor Media were taken:
(i) The stockholders of Chancellor Media voted to reelect three Class
I directors of Chancellor Media as follows:
<TABLE>
<CAPTION>
VOTES
-----------------------
DIRECTORS FOR WITHHELD
- --------- ----------- ---------
<S> <C> <C>
Vernon E. Jordan, Jr......................... 124,365,167 1,078,982
Perry J. Lewis............................... 124,476,464 967,685
Eric C. Neuman............................... 124,693,348 750,801
</TABLE>
On May 19, 1998, Eric C. Neuman resigned as a director of Chancellor Media,
and Michael Levitt was elected by the remaining members of the Board of
Directors to fill the vacancy created by Mr. Neuman's resignation. Following the
Annual Meeting of Stockholders, (a) the following individuals continued as Class
II directors of Chancellor Media, with a term expiring at the 1999 annual
meeting of stockholders of Chancellor Media: Lawrence D. Stuart, Jr., Steven
Dinetz, Jeffrey A. Marcus and James E. de Castro, and (b) the following
individuals continued as Class III directors of Chancellor Media, with a term
expiring at the 2000 annual meeting of stockholders of Chancellor Media: Thomas
O. Hicks, John H. Massey and Thomas J. Hodson. In addition, after the Annual
Meeting of Stockholders, the Board of Directors elected Otis Winters as a Class
III director, with a term expiring at the 2000 annual meeting of stockholders of
Chancellor Media, to fill the vacancy on the Board of Directors created by the
resignation of Scott K. Ginsburg.
(ii) The stockholders of Chancellor Media voted to adopt the 1998
Chancellor Media Corporation Stock Option Plan as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS BROKER NON-VOTES
- ---------- ---------- ------- ----------
<S> <C> <C> <C>
83,499,544 30,589,966 160,379 11,194,260
</TABLE>
(iii) The stockholders of Chancellor Media voted to amend and restate
Chancellor Media's existing Non-Employee Director Stock Option Plan as
follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS BROKER NON-VOTES
- ----------- --------- ----------- ----------------
<S> <C> <C> <C>
105,923,495 8,155,001 171,393 11,194,260
</TABLE>
ITEM 5. OTHER INFORMATION
CHANGES IN EXECUTIVE MANAGEMENT
On April 14, 1998, Scott K. Ginsburg resigned as President and Chief
Executive Officer of the Company. On April 20, 1998, Mr. Ginsburg resigned as
director of the Company and from all appointments and positions with its
respective subsidiaries. On April 20, 1998, Mr. Ginsburg and the Company entered
into a separation and consulting agreement. Following Mr. Ginsburg's
resignation, the Company entered into new employment agreements with Jimmy de
Castro, the Company's Chief Operating Officer, and Matthew E. Devine, the
Company's Chief Financial Officer, each effective April 17, 1998. On April 29,
1998, Jeffrey A. Marcus, was named President and Chief Executive Officer of the
Company and the Company entered into an employment agreement with Mr. Marcus
effective June 1, 1998. For further discussion of the changes in executive
management, see Note 5 to the Consolidated Financial Statements of Chancellor
Media and CMCLA and their respective subsidiaries contained in this Quarterly
Report on Form 10-Q.
36
<PAGE> 37
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.11(h) -- Agreement and Plan of Merger by and among Pyramid
Communications, Inc., Evergreen Media Corporation and
Evergreen Media/Pyramid Corporation dated as of July 14,
1995 (see table of contents for list of omitted exhibits
and schedules).
2.11A(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/Pyramid Corporation dated September
7, 1995.
2.11B(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/Pyramid Corporation dated January 11,
1996.
2.12(j) -- Purchase Agreement between Fairbanks Communications, Inc.
and Evergreen Media Corporation dated October 12, 1995
(see table of contents for list of omitted exhibits and
schedules).
2.13(n) -- Option Agreement dated as of January 9, 1996 between
Chancellor Broadcasting Company and Evergreen Media
Corporation (including Form of Advertising Brokerage
Agreement and Form of Asset Purchase Agreement).
2.14(o) -- Asset Purchase Agreement dated April 4, 1996 between
American Radio Systems Corporation and Evergreen Media
Corporation of Buffalo (see table of contents for list of
omitted exhibits and schedules).
2.15(o) -- Asset Purchase Agreement dated April 11, 1996 between
Mercury Radio Communications, L.P. and Evergreen Media
Corporation of Los Angeles, Evergreen Media/Pyramid
Holdings Corporation, WHTT (AM) License Corp. and WHTT
(FM) License Corp. (see table of contents for list of
omitted exhibits and schedules).
2.16(o) -- Asset Purchase Agreement dated April 19, 1996 between
Crescent Communications L.P. and Evergreen Media
Corporation of Los Angeles (see table of contents for
list of omitted exhibits and schedules).
2.17(p) -- Asset Purchase Agreement dated June 13, 1996 between
Evergreen Media Corporation of Los Angeles and Greater
Washington Radio, Inc. (see table of contents for list of
omitted exhibits and schedules).
2.18(p) -- Asset Exchange Agreement dated June 13, 1996 among
Evergreen Media Corporation of Los Angeles, Evergreen
Media Corporation of the Bay State, WKLB License Corp.,
Greater Media Radio, Inc. and Greater Washington Radio,
Inc. (see table of contents for list of omitted exhibits
and schedules).
2.19(p) -- Purchase Agreement dated June 27, 1996 between WEDR,
Inc., and Evergreen Media Corporation of Los Angeles.
(See table of contents for list of omitted schedules)
2.20(p) -- Time Brokerage Agreement dated July 10, 1996 by and
between Evergreen Media Corporation of Detroit, as
Licensee, and Kidstar Interactive Media Incorporated, as
Time Broker.
2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among
Century Chicago Broadcasting L.P., Century Broadcasting
Corporation, Evergreen Media Corporation of Los Angeles,
and Evergreen Media Corporation of Chicago.
2.22(p) -- Asset Purchase Agreement dated August 12, 1996 by and
among Chancellor Broadcasting Company, Shamrock
Broadcasting, Inc. and Evergreen Media Corporation of the
Great Lakes.
</TABLE>
37
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.23(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles (WQRS-FM).
(See table of contents for list of omitted exhibits and
schedules)
2.24(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles. (See table of
contents for list of omitted schedules)
2.25(q) -- Letter of intent dated August 27, 1996 between EZ
Communications, Inc. and Evergreen Media Corporation.
2.26(q) -- Asset Purchase Agreement dated September 19, 1996 between
Beasley-FM Acquisition Corp., WDAS License Limited
Partnership and Evergreen Media Corporation of Los
Angeles.
2.27(q) -- Asset Purchase Agreement dated September 19, 1996 between
The Brown Organization and Evergreen Media Corporation of
Los Angeles.
2.28(r) -- Stock Purchase Agreement by and between Viacom
International Inc. and Evergreen Media Corporation of Los
Angeles, dated February 16, 1997 (See table of contents
for omitted schedules and exhibits).
2.29(r) -- Agreement and Plan of Merger, by and among Evergreen
Media Corporation, Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company, dated as of
February 19, 1997.
2.30(r) -- Stockholders Agreement, by and among Chancellor
Broadcasting Company, Evergreen Media Corporation, Scott
K. Ginsburg (individually and as custodian for certain
shares held by his children), HM2/Chancellor, L.P.,
Hicks, Muse, Tate & First Equity Fund II, L.P., HM2/HMW,
L.P., The Chancellor Business Trust, HM2/HMD Sacramento
GP, L.P., Thomas O. Hicks, as Trustee of the William Cree
Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as Trustee
of the Catherine Forgave Hicks 1993 Irrevocable Trust,
Thomas O. Hicks, as Trustee of the John Alexander Hicks
1984 Trust, Thomas O. Hicks, as Trustee of the Mack
Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of
Robert Bradley Hicks 1984 Trust, Thomas O. Hicks, as
Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O.
Hicks and H. Rand Reynolds, as Trustees for the Muse
Children's GS Trust, and Thomas O. Hicks, dated as of
February 19, 1997.
2.31(r) -- Joint Purchase Agreement, by and among Chancellor Radio
Broadcasting Company, Chancellor Broadcasting Company,
Evergreen Media Corporation of Los Angeles, and Evergreen
Media Corporation, dated as of February 19, 1997.
2.32(s) -- Asset Exchange Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Philadelphia, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of Charlotte,
Evergreen Media Corporation of the East, Evergreen Media
Corporation of Carolinaland, WBAV/WBAV-FM/WPEG License
Corp. and WRFX License Corp., dated as of December 5,
1996 (See table of contents for list of omitted
schedules).
2.33(s) -- Asset Purchase Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Charlotte, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of the East and
Evergreen Media Corporation of Carolinaland, dated as of
December 5, 1996 (See table of contents for list of
omitted schedules).
2.34(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: WGCI-AM and WGCI-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits).
</TABLE>
38
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.35(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KKBQ-AM and KKBQ-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits)
2.36(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KHKS-FM), dated as of April 4, 1997 (see
table of contents for list of omitted schedules and
exhibits).
2.41(y) -- Amended and Restated Agreement and Plan of Merger among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company, Evergreen Media Corporation,
Evergreen Mezzanine Holdings Corporation and Evergreen
Media Corporation of Los Angeles, dated as of February
19, 1997, amended and restated as of July 31, 1997.
2.42(gg) -- Option Agreement, by and among Evergreen Media
Corporation, Chancellor Broadcasting Company, Bonneville
International Corporation and Bonneville Holding Company,
dated as of August 6, 1997.
2.43(ss) -- Letter Agreement, dated February 20, 1998, between CMCLA
and Capstar Broadcasting Corporation.
2.44+ -- Amendment No. 1, dated May 19, 1998, to Letter Agreement
dated February 20, 1998, between CMCLA and Capstar
Broadcasting Corporation.
2.45+ -- Unit and Stock Purchase Agreement by and among CMCLA,
Martin Media, L.P., Martin & MacFarlane, Inc., Nevada
Outdoor Systems, Inc., MW Sign Corp. and certain sellers
named therein, dated as of June 19, 1998 (see table of
contents for list of omitted schedules and exhibits)
2.46+ -- Agreement and Plan of Merger between Chancellor Media
Corporation and Ranger Equity Holdings Corporation dated
as of July 7, 1998.
2.47+ -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and
Independent Group Limited Partnership.
2.48+ -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and Zapis
Communications Corporation.
2.49+ -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, Young Ones,
Inc., Zebra Broadcasting Corporation and the Sellers
named therein.
2.50+ -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, ML Media
Partners LP., Wincom Broadcasting Corporation and WIN
Communications, Inc.
2.51+ -- Stock Purchase and Merger Agreement, dated July 9, 1998,
by and among Chancellor Media Corporation, Chancellor
Mexico LLC, Grupo Radio Centro, SA. De C.V., and the
Selling Shareholders.
3.1C(ss) -- Amended and Restated Certificate of Incorporation of
Chancellor Media.
3.2B(ss) -- Amended and Restated Bylaws of Chancellor Media.
3.3(ff) -- Certificate of Incorporation of Chancellor Media
Corporation of Los Angeles formerly known as Evergreen
Media Corporation of Los Angeles.
3.3A(pp) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed September 5,
1997.
3.3B(uu) -- Amendment to the Certificate of Incorporation of
Chancellor Media Corporation of Los Angeles, filed
October 28, 1997.
3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles.
</TABLE>
39
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.10(t) -- Second Amended and Restated Loan Agreement dated as of
April 25 1997 among Evergreen Media Corporation of Los
Angeles, the financial institutions whose names appear as
Lenders on the signature pages thereof (the "Lenders"),
Toronto Dominion Securities, Inc., as Arranging Agent,
The Bank of New York and Bankers Trust Company, as
Co-Syndication Agents, NationsBank of Texas, N.A. and
Union Bank of California, as Co-Documentation Agents, and
Toronto Dominion (Texas), Inc., as Administrative Agent
for the Lenders, together with certain collateral
documents attached thereto as exhibits, including
Assignment of Partnership Interests, Assignment of Trust
Interests, Borrower's Pledge Agreement, Parent Company
Guaranty, Stock Pledge Agreement, Subsidiary Guaranty and
Subsidiary Pledge Agreement (see table of contents for
list of omitted schedules and exhibits).
4.11(z) -- First Amendment to Second Amended and Restated Loan
Agreement, dated June 26, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.12(y) -- Specimen Common Stock Certificate of Chancellor Media.
4.13(y) -- Specimen 7% Convertible Preferred Stock Certificate of
Chancellor Media.
4.14(y) -- Form of Certificate of Designation for 7% Convertible
Preferred Stock of Chancellor Media.
4.15(aa) -- Indenture, dated as of February 14, 1996, governing the
9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.16(bb) -- First Supplemental Indenture, dated as of February 14,
1996, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.17(cc) -- Indenture, dated as of February 26, 1996, governing the
12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
4.18(dd) -- Indenture, dated as of January 23, 1997, governing the
12% Subordinated Exchange Debentures due 2009 of CMCLA.
4.19(ee) -- Indenture, dated as of June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
4.21(ff) -- Specimen of the 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock Certificate of CMCLA.
4.22(ff) -- Specimen of the 12% Exchangeable Preferred Stock
Certificate of CMCLA.
4.23(ff) -- Form of Certificate of Designation for the 12 1/4% Series
A Senior Cumulative Exchangeable Preferred Stock of
CMCLA.
4.24(ff) -- Form of Certificate of Designation for the 12%
Exchangeable Preferred Stock of CMCLA.
4.25(pp) -- Second Amendment to Second Amended and Restated Loan
Agreement, dated August 7, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.26(hh) -- Second Supplemental Indenture, dated as of April 15,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.27(pp) -- Third Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.28(pp) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
</TABLE>
40
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.29(pp) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 26, 1997, governing
the 12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
4.30(pp) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated January 23, 1997, governing
the 12% Subordinated Exchange Debentures due 2009 of
CMCLA.
4.31(qq) -- Specimen $3.00 Convertible Exchangeable Preferred Stock
Certificate of Chancellor Media.
4.32(qq) -- Certificate of Designation for $3.00 Convertible
Exchangeable Preferred Stock of Chancellor Media.
4.33(qq) -- Convertible Subordinated Exchange Indenture (including
form of 6% Convertible Subordinated Exchange Debentures
attached thereto), dated June 16, 1997, between Evergreen
Media Corporation and The Bank of New York.
4.34(uu) -- Amended and Restated Indenture, dated as of October 28,
1997, governing the 10 1/2% Senior Subordinated Notes due
2007 of CMCLA.
4.35(uu) -- Second Supplemental Indenture, dated as of October 28,
1997, to the Amended and Restated Indenture dated October
28, 1997 governing the 10 1/2% Senior Subordinated Notes
due 2007 of CMCLA.
4.36(uu) -- Third Amendment to Second Amended and Restated Loan
Agreement dated October 28, 1997, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.37(uu) -- Fourth Amendment to Second Amended and Restated Loan
Agreement, dated February 10, 1998, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.38(vv) -- Indenture, dated as of December 22, 1997, governing the
8 1/8% Senior Subordinated Notes due 2007 of CMCLA.
4.39(ww) -- Fifth Amendment to Second Amended and Restated Loan
Agreement, dated May 1, 1998, among CMCLA, the Lenders,
the Agents and the Administrative Agent.
4.40+ -- Sixth Amendment to Second Amended and Restated Loan
Agreement, dated July 31, 1998, among CMCLA, the Lenders,
the Agents and the Administrative Agent.
10.23(xx) -- Amended and Restated Chancellor Media Corporation Stock
Option Plan for Non-employee Directors.
10.26(n)** -- Employment Agreement dated February 9, 1996 by and
between Evergreen Media Corporation and Kenneth J.
O'Keefe.
10.28(o) -- 1995 Stock Option Plan for executive officers and key
employees of Evergreen Media Corporation.
10.30(pp)** -- First Amendment to Employment Agreement dated March 1,
1997 by and between Evergreen Media Corporation and
Kenneth J. O'Keefe.
10.31(pp)** -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Scott K. Ginsburg.
10.32(pp)** -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and James de Castro.
10.33(pp)** -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Matthew E. Devine.
10.34(pp)** -- Second Amendment to Employment Agreement dated September
4, 1997 by and among Evergreen Media Corporation,
Evergreen Media Corporation of Los Angeles and Kenneth J.
O'Keefe.
</TABLE>
41
<PAGE> 42
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.35(ii)** -- Employment Agreement dated February 14, 1996 by and among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company and Steven Dinetz.
10.36(jj) -- Chancellor Broadcasting Company 1996 Stock Award Plan.
10.37(kk) -- Chancellor Holdings Corp. 1994 Director Stock Option
Plan.
10.38(ll) -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Steven Dinetz.
10.39(mm) -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Eric W. Neumann.
10.40(nn) -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Marvin Dinetz.
10.41(oo) -- Stock Option Grant Letter dated February 14, 1997 from
Chancellor Broadcasting Company to Carl M. Hirsch.
10.44(vv)** -- Agreement dated April 20, 1998 by and among Chancellor
Media Corporation, Chancellor Media Corporation of Los
Angeles and Scott K. Ginsburg.
10.45(vv)** -- Employment Agreement dated April 29, 1998 by and among
Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Jeffrey A. Marcus.
10.46(yy) -- Chancellor Media Corporation 1998 Stock Option Plan.
10.47+ -- Voting Agreement, among Chancellor Media Corporation and
Rangers Equity Partners, L.P. dated as of July 7, 1998.
27.1+ -- Financial Data Schedule of Chancellor Media Corporation.
27.2+ -- Financial Data Schedule of Chancellor Media Corporation
of Los Angeles.
</TABLE>
- ---------------
+ Filed herewith.
** Management contract or compensatory agreement.
(a) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-60036).
(f) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-4, as amended (Reg. No.
33-89838).
(h) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 14, 1995.
(i) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated January 17, 1996.
(j) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
September 30, 1995.
(k) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-69752).
(n) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
(o) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
March 31, 1996.
(p) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996.
(q) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-3, as amended (Reg. No.
333-12453).
(r) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated February 16, 1997 and filed
March 9, 1997.
(s) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1996.
42
<PAGE> 43
(t) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated April 1, 1997 and filed May
9, 1997.
(y) Incorporated by reference to the identically numbered exhibit of
Evergreen's Registration Statement on Form S-4, filed August 1, 1997.
(z) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 7, 1997 and filed July
31, 1997.
(aa) Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
(bb) Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K
of Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company
and Chancellor Broadcasting Licensee Company for the fiscal year ended
December 31, 1995.
(cc) Incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
(dd) Incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K
of Chancellor Radio Broadcasting Company, as filed on February 6, 1997.
(ee) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company as filed on July 17, 1997.
(ff) Incorporated by reference to the identically-numbered exhibit to EMCLA's
Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29,
1997, as amended.
(gg) Incorporated by reference to the identically-numbered exhibit to the
Quarterly Report on Form 10-Q of Evergreen and EMCLA for the quarterly
period ending June 30, 1997.
(hh) Incorporated by reference to Exhibit 4.8 to the Quarterly Report on Form
10-Q of Chancellor and CRBC for the quarterly period ending March 31,
1997.
(ii) Incorporated by reference to Exhibit 10.6 to Chancellor's Registration
Statement on Form S-1 (Reg. No. 333-02782) filed February 9, 1996.
(jj) Incorporated by reference to Exhibit 4.22 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(kk) Incorporated by reference to Exhibit 4.23 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(ll) Incorporated by reference to Exhibit 4.24 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(mm) Incorporated by reference to Exhibit 4.25 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(nn) Incorporated by reference to Exhibit 4.26 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(oo) Incorporated by reference to Exhibit 4.27 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(pp) Incorporated by reference to the identically numbered exhibit to CMCLA's
Registration Statement on Form S-4 (Reg. No. 333-36451), dated September
26, 1997, as amended.
(ss) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the fiscal
quarter ended September 30, 1997.
(tt) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media and CMCLA, dated as of
February 23, 1998 and filed as of February 27, 1998.
(uu) Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor Media and CMCLA for the fiscal
year ended December 31, 1997.
(vv) Incorporated by reference to the identically numbered exhibit to CMCLA's
Registration Statement on Form S-4 (Reg. No. 333-50739), dated April 22,
1998, as amended.
(ww) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the fiscal
quarter ended March 31, 1998.
(xx) Incorporated by reference to Exhibit 4.41 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-53179), dated May 20,
1998.
43
<PAGE> 44
(yy) Incorporated by reference to Exhibit 4.40 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-53179), dated May 20,
1998.
(b) Current Reports on Form 8-K
1. Current Report on Form 8-K, dated July 7, 1998 and filed July 7, 1998,
of Chancellor Media and CMCLA, providing the press release regarding
the LIN Merger.
44
<PAGE> 45
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
<TABLE>
<S> <C>
Chancellor Media Corporation Chancellor Media Corporation
of Los Angeles
By: /s/ MATTHEW E. DEVINE By: /s/ MATTHEW E. DEVINE
------------------------------------------------ ------------------------------------------------
Matthew E. Devine Matthew E. Devine
Senior Vice-President and Senior Vice-President and
Chief Financial Officer Chief Financial Officer
</TABLE>
Date: August 13, 1998
45
<PAGE> 46
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.11(h) -- Agreement and Plan of Merger by and among Pyramid
Communications, Inc., Evergreen Media Corporation and
Evergreen Media/Pyramid Corporation dated as of July 14,
1995 (see table of contents for list of omitted exhibits
and schedules).
2.11A(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/Pyramid Corporation dated September
7, 1995.
2.11B(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/Pyramid Corporation dated January 11,
1996.
2.12(j) -- Purchase Agreement between Fairbanks Communications, Inc.
and Evergreen Media Corporation dated October 12, 1995
(see table of contents for list of omitted exhibits and
schedules).
2.13(n) -- Option Agreement dated as of January 9, 1996 between
Chancellor Broadcasting Company and Evergreen Media
Corporation (including Form of Advertising Brokerage
Agreement and Form of Asset Purchase Agreement).
2.14(o) -- Asset Purchase Agreement dated April 4, 1996 between
American Radio Systems Corporation and Evergreen Media
Corporation of Buffalo (see table of contents for list of
omitted exhibits and schedules).
2.15(o) -- Asset Purchase Agreement dated April 11, 1996 between
Mercury Radio Communications, L.P. and Evergreen Media
Corporation of Los Angeles, Evergreen Media/Pyramid
Holdings Corporation, WHTT (AM) License Corp. and WHTT
(FM) License Corp. (see table of contents for list of
omitted exhibits and schedules).
2.16(o) -- Asset Purchase Agreement dated April 19, 1996 between
Crescent Communications L.P. and Evergreen Media
Corporation of Los Angeles (see table of contents for
list of omitted exhibits and schedules).
2.17(p) -- Asset Purchase Agreement dated June 13, 1996 between
Evergreen Media Corporation of Los Angeles and Greater
Washington Radio, Inc. (see table of contents for list of
omitted exhibits and schedules).
2.18(p) -- Asset Exchange Agreement dated June 13, 1996 among
Evergreen Media Corporation of Los Angeles, Evergreen
Media Corporation of the Bay State, WKLB License Corp.,
Greater Media Radio, Inc. and Greater Washington Radio,
Inc. (see table of contents for list of omitted exhibits
and schedules).
2.19(p) -- Purchase Agreement dated June 27, 1996 between WEDR,
Inc., and Evergreen Media Corporation of Los Angeles.
(See table of contents for list of omitted schedules)
2.20(p) -- Time Brokerage Agreement dated July 10, 1996 by and
between Evergreen Media Corporation of Detroit, as
Licensee, and Kidstar Interactive Media Incorporated, as
Time Broker.
2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among
Century Chicago Broadcasting L.P., Century Broadcasting
Corporation, Evergreen Media Corporation of Los Angeles,
and Evergreen Media Corporation of Chicago.
2.22(p) -- Asset Purchase Agreement dated August 12, 1996 by and
among Chancellor Broadcasting Company, Shamrock
Broadcasting, Inc. and Evergreen Media Corporation of the
Great Lakes.
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.23(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles (WQRS-FM).
(See table of contents for list of omitted exhibits and
schedules)
2.24(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles. (See table of
contents for list of omitted schedules)
2.25(q) -- Letter of intent dated August 27, 1996 between EZ
Communications, Inc. and Evergreen Media Corporation.
2.26(q) -- Asset Purchase Agreement dated September 19, 1996 between
Beasley-FM Acquisition Corp., WDAS License Limited
Partnership and Evergreen Media Corporation of Los
Angeles.
2.27(q) -- Asset Purchase Agreement dated September 19, 1996 between
The Brown Organization and Evergreen Media Corporation of
Los Angeles.
2.28(r) -- Stock Purchase Agreement by and between Viacom
International Inc. and Evergreen Media Corporation of Los
Angeles, dated February 16, 1997 (See table of contents
for omitted schedules and exhibits).
2.29(r) -- Agreement and Plan of Merger, by and among Evergreen
Media Corporation, Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company, dated as of
February 19, 1997.
2.30(r) -- Stockholders Agreement, by and among Chancellor
Broadcasting Company, Evergreen Media Corporation, Scott
K. Ginsburg (individually and as custodian for certain
shares held by his children), HM2/Chancellor, L.P.,
Hicks, Muse, Tate & First Equity Fund II, L.P., HM2/HMW,
L.P., The Chancellor Business Trust, HM2/HMD Sacramento
GP, L.P., Thomas O. Hicks, as Trustee of the William Cree
Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as Trustee
of the Catherine Forgave Hicks 1993 Irrevocable Trust,
Thomas O. Hicks, as Trustee of the John Alexander Hicks
1984 Trust, Thomas O. Hicks, as Trustee of the Mack
Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of
Robert Bradley Hicks 1984 Trust, Thomas O. Hicks, as
Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O.
Hicks and H. Rand Reynolds, as Trustees for the Muse
Children's GS Trust, and Thomas O. Hicks, dated as of
February 19, 1997.
2.31(r) -- Joint Purchase Agreement, by and among Chancellor Radio
Broadcasting Company, Chancellor Broadcasting Company,
Evergreen Media Corporation of Los Angeles, and Evergreen
Media Corporation, dated as of February 19, 1997.
2.32(s) -- Asset Exchange Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Philadelphia, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of Charlotte,
Evergreen Media Corporation of the East, Evergreen Media
Corporation of Carolinaland, WBAV/WBAV-FM/WPEG License
Corp. and WRFX License Corp., dated as of December 5,
1996 (See table of contents for list of omitted
schedules).
2.33(s) -- Asset Purchase Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Charlotte, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of the East and
Evergreen Media Corporation of Carolinaland, dated as of
December 5, 1996 (See table of contents for list of
omitted schedules).
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.34(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: WGCI-AM and WGCI-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits).
2.35(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KKBQ-AM and KKBQ-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits)
2.36(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KHKS-FM), dated as of April 4, 1997 (see
table of contents for list of omitted schedules and
exhibits).
2.41(y) -- Amended and Restated Agreement and Plan of Merger among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company, Evergreen Media Corporation,
Evergreen Mezzanine Holdings Corporation and Evergreen
Media Corporation of Los Angeles, dated as of February
19, 1997, amended and restated as of July 31, 1997.
2.42(gg) -- Option Agreement, by and among Evergreen Media
Corporation, Chancellor Broadcasting Company, Bonneville
International Corporation and Bonneville Holding Company,
dated as of August 6, 1997.
2.43(ss) -- Letter Agreement, dated February 20, 1998, between CMCLA
and Capstar Broadcasting Corporation.
2.44+ -- Amendment No. 1, dated May 19, 1998, to Letter Agreement
dated February 20, 1998, between CMCLA and Capstar
Broadcasting Corporation.
2.45+ -- Unit and Stock Purchase Agreement by and among CMCLA,
Martin Media, L.P., Martin & MacFarlane, Inc., Nevada
Outdoor Systems, Inc., MW Sign Corp. and certain sellers
named therein, dated as of June 19, 1998 (see table of
contents for list of omitted schedules and exhibits)
2.46+ -- Agreement and Plan of Merger between Chancellor Media
Corporation and Ranger Equity Holdings Corporation dated
as of July 7, 1998.
2.47+ -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and
Independent Group Limited Partnership.
2.48+ -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and Zapis
Communications Corporation.
2.49+ -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, Young Ones,
Inc., Zebra Broadcasting Corporation and the Sellers
named therein.
2.50+ -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, ML Media
Partners LP., Wincom Broadcasting Corporation and WIN
Communications, Inc.
2.51+ -- Stock Purchase and Merger Agreement, dated July 9, 1998,
by and among Chancellor Media Corporation, Chancellor
Mexico LLC, Grupo Radio Centro, SA. De C.V., and the
Selling Shareholders.
3.1C(ss) -- Amended and Restated Certificate of Incorporation of
Chancellor Media.
3.2B(ss) -- Amended and Restated Bylaws of Chancellor Media.
3.3(ff) -- Certificate of Incorporation of Chancellor Media
Corporation of Los Angeles formerly known as Evergreen
Media Corporation of Los Angeles.
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.3A(pp) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles, filed September 5,
1997.
3.3B(uu) -- Amendment to the Certificate of Incorporation of
Chancellor Media Corporation of Los Angeles, filed
October 28, 1997.
3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles.
4.10(t) -- Second Amended and Restated Loan Agreement dated as of
April 25 1997 among Evergreen Media Corporation of Los
Angeles, the financial institutions whose names appear as
Lenders on the signature pages thereof (the "Lenders"),
Toronto Dominion Securities, Inc., as Arranging Agent,
The Bank of New York and Bankers Trust Company, as
Co-Syndication Agents, NationsBank of Texas, N.A. and
Union Bank of California, as Co-Documentation Agents, and
Toronto Dominion (Texas), Inc., as Administrative Agent
for the Lenders, together with certain collateral
documents attached thereto as exhibits, including
Assignment of Partnership Interests, Assignment of Trust
Interests, Borrower's Pledge Agreement, Parent Company
Guaranty, Stock Pledge Agreement, Subsidiary Guaranty and
Subsidiary Pledge Agreement (see table of contents for
list of omitted schedules and exhibits).
4.11(z) -- First Amendment to Second Amended and Restated Loan
Agreement, dated June 26, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.12(y) -- Specimen Common Stock Certificate of Chancellor Media.
4.13(y) -- Specimen 7% Convertible Preferred Stock Certificate of
Chancellor Media.
4.14(y) -- Form of Certificate of Designation for 7% Convertible
Preferred Stock of Chancellor Media.
4.15(aa) -- Indenture, dated as of February 14, 1996, governing the
9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.16(bb) -- First Supplemental Indenture, dated as of February 14,
1996, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.17(cc) -- Indenture, dated as of February 26, 1996, governing the
12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
4.18(dd) -- Indenture, dated as of January 23, 1997, governing the
12% Subordinated Exchange Debentures due 2009 of CMCLA.
4.19(ee) -- Indenture, dated as of June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
4.21(ff) -- Specimen of the 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock Certificate of CMCLA.
4.22(ff) -- Specimen of the 12% Exchangeable Preferred Stock
Certificate of CMCLA.
4.23(ff) -- Form of Certificate of Designation for the 12 1/4% Series
A Senior Cumulative Exchangeable Preferred Stock of
CMCLA.
4.24(ff) -- Form of Certificate of Designation for the 12%
Exchangeable Preferred Stock of CMCLA.
4.25(pp) -- Second Amendment to Second Amended and Restated Loan
Agreement, dated August 7, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.26(hh) -- Second Supplemental Indenture, dated as of April 15,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.27(pp) -- Third Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.28(pp) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
4.29(pp) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 26, 1997, governing
the 12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
4.30(pp) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated January 23, 1997, governing
the 12% Subordinated Exchange Debentures due 2009 of
CMCLA.
4.31(qq) -- Specimen $3.00 Convertible Exchangeable Preferred Stock
Certificate of Chancellor Media.
4.32(qq) -- Certificate of Designation for $3.00 Convertible
Exchangeable Preferred Stock of Chancellor Media.
4.33(qq) -- Convertible Subordinated Exchange Indenture (including
form of 6% Convertible Subordinated Exchange Debentures
attached thereto), dated June 16, 1997, between Evergreen
Media Corporation and The Bank of New York.
4.34(uu) -- Amended and Restated Indenture, dated as of October 28,
1997, governing the 10 1/2% Senior Subordinated Notes due
2007 of CMCLA.
4.35(uu) -- Second Supplemental Indenture, dated as of October 28,
1997, to the Amended and Restated Indenture dated October
28, 1997 governing the 10 1/2% Senior Subordinated Notes
due 2007 of CMCLA.
4.36(uu) -- Third Amendment to Second Amended and Restated Loan
Agreement dated October 28, 1997, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.37(uu) -- Fourth Amendment to Second Amended and Restated Loan
Agreement, dated February 10, 1998, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.38(vv) -- Indenture, dated as of December 22, 1997, governing the
8 1/8% Senior Subordinated Notes due 2007 of CMCLA.
4.39(ww) -- Fifth Amendment to Second Amended and Restated Loan
Agreement, dated May 1, 1998, among CMCLA, the Lenders,
the Agents and the Administrative Agent.
4.40+ -- Sixth Amendment to Second Amended and Restated Loan
Agreement, dated July 31, 1998, among CMCLA, the Lenders,
the Agents and the Administrative Agent.
10.23(xx) -- Amended and Restated Chancellor Media Corporation Stock
Option Plan for Non-employee Directors.
10.26(n)** -- Employment Agreement dated February 9, 1996 by and
between Evergreen Media Corporation and Kenneth J.
O'Keefe.
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.28(o) -- 1995 Stock Option Plan for executive officers and key
employees of Evergreen Media Corporation.
10.30(pp)** -- First Amendment to Employment Agreement dated March 1,
1997 by and between Evergreen Media Corporation and
Kenneth J. O'Keefe.
10.31(pp)** -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Scott K. Ginsburg.
10.32(pp)** -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and James de Castro.
10.33(pp)** -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Matthew E. Devine.
10.34(pp)** -- Second Amendment to Employment Agreement dated September
4, 1997 by and among Evergreen Media Corporation,
Evergreen Media Corporation of Los Angeles and Kenneth J.
O'Keefe.
10.35(ii)** -- Employment Agreement dated February 14, 1996 by and among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company and Steven Dinetz.
10.36(jj) -- Chancellor Broadcasting Company 1996 Stock Award Plan.
10.37(kk) -- Chancellor Holdings Corp. 1994 Director Stock Option
Plan.
10.38(ll) -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Steven Dinetz.
10.39(mm) -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Eric W. Neumann.
10.40(nn) -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Marvin Dinetz.
10.41(oo) -- Stock Option Grant Letter dated February 14, 1997 from
Chancellor Broadcasting Company to Carl M. Hirsch.
10.44(vv)** -- Agreement dated April 20, 1998 by and among Chancellor
Media Corporation, Chancellor Media Corporation of Los
Angeles and Scott K. Ginsburg.
10.45(vv)** -- Employment Agreement dated April 29, 1998 by and among
Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Jeffrey A. Marcus.
10.46(yy) -- Chancellor Media Corporation 1998 Stock Option Plan.
10.47+ -- Voting Agreement, among Chancellor Media Corporation and
Rangers Equity Partners, L.P. dated as of July 7, 1998.
27.1+ -- Financial Data Schedule of Chancellor Media Corporation.
27.2+ -- Financial Data Schedule of Chancellor Media Corporation
of Los Angeles.
</TABLE>
- ---------------
+ Filed herewith.
** Management contract or compensatory agreement.
(a) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-60036).
(f) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-4, as amended (Reg. No.
33-89838).
(h) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 14, 1995.
<PAGE> 52
(i) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated January 17, 1996.
(j) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
September 30, 1995.
(k) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-69752).
(n) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
(o) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
March 31, 1996.
(p) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996.
(q) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-3, as amended (Reg. No.
333-12453).
(r) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated February 16, 1997 and filed
March 9, 1997.
(s) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1996.
(t) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated April 1, 1997 and filed May
9, 1997.
(y) Incorporated by reference to the identically numbered exhibit of
Evergreen's Registration Statement on Form S-4, filed August 1, 1997.
(z) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 7, 1997 and filed July
31, 1997.
(aa) Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
(bb) Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K
of Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company
and Chancellor Broadcasting Licensee Company for the fiscal year ended
December 31, 1995.
(cc) Incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
(dd) Incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K
of Chancellor Radio Broadcasting Company, as filed on February 6, 1997.
(ee) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company as filed on July 17, 1997.
(ff) Incorporated by reference to the identically-numbered exhibit to EMCLA's
Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29,
1997, as amended.
(gg) Incorporated by reference to the identically-numbered exhibit to the
Quarterly Report on Form 10-Q of Evergreen and EMCLA for the quarterly
period ending June 30, 1997.
(hh) Incorporated by reference to Exhibit 4.8 to the Quarterly Report on Form
10-Q of Chancellor and CRBC for the quarterly period ending March 31,
1997.
(ii) Incorporated by reference to Exhibit 10.6 to Chancellor's Registration
Statement on Form S-1 (Reg. No. 333-02782) filed February 9, 1996.
(jj) Incorporated by reference to Exhibit 4.22 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(kk) Incorporated by reference to Exhibit 4.23 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
<PAGE> 53
(ll) Incorporated by reference to Exhibit 4.24 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(mm) Incorporated by reference to Exhibit 4.25 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(nn) Incorporated by reference to Exhibit 4.26 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(oo) Incorporated by reference to Exhibit 4.27 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.
(pp) Incorporated by reference to the identically numbered exhibit to CMCLA's
Registration Statement on Form S-4 (Reg. No. 333-36451), dated September
26, 1997, as amended.
(ss) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the fiscal
quarter ended September 30, 1997.
(tt) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media and CMCLA, dated as of
February 23, 1998 and filed as of February 27, 1998.
(uu) Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor Media and CMCLA for the fiscal
year ended December 31, 1997.
(vv) Incorporated by reference to the identically numbered exhibit to CMCLA's
Registration Statement on Form S-4 (Reg. No. 333-50739), dated April 22,
1998, as amended.
(ww) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the fiscal
quarter ended March 31, 1998.
(xx) Incorporated by reference to Exhibit 4.41 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-53179), dated May 20,
1998.
(yy) Incorporated by reference to Exhibit 4.40 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-53179), dated May 20,
1998.
<PAGE> 1
EXHIBIT 2.44
AMENDMENT NO. 1
TO
AGREEMENT DATED FEBRUARY 20, 1998
This Amendment No. 1 (the "Amendment") to the Agreement, dated
February 20, 1998 (the "Agreement"), between Chancellor Media Corporation of Los
Angeles ("Chancellor") and Capstar Broadcasting Corporation ("Capstar"), is
entered into this 19th day of May, 1998. Capitalized terms used herein without
definition shall have the meanings given such terms in the Agreement.
1. Section 2 of the Agreement, Purchase and Sale of KKPN(FM), is
modified and amended by adding the following sentence to the end of Section
2(c):
Any amount of the sale price for KKPN-FM in excess of the KKPN
Capstar Price (after deducting any brokerage commission payable
with respect to the sale of KKPN-FM) shall be divided equally
between Chancellor and Capstar, with Chancellor's portion
representing a commission payable by Capstar to Chancellor.
2. Section 3 of the Agreement, Long Island, is modified and amended
by modifying the first sentence of Section 3 to read as follows:
Chancellor and Capstar agree that the Asset Exchange Agreement
between SFX and Chancellor dated July 1, 1996 (the
"Chancellor-SFX AEA"), providing for the exchange of SFX's Long
Island radio stations (WBLI-FM, WBAB-FM, WGBB(AM) and WHFM-FM)
(the "SFX Long Island Stations"), and the related Time Brokerage
Agreement between SFX and Chancellor, dated July 1, 1996, as
amended (the "Chancellor-SFX TBA"), providing for the sale to
Chancellor of substantially all of the programming time
available on the SFX Long Island Stations, shall each be
terminated at the closing of the Capstar-SFX Merger.
3. Section 10 of the Agreement, Note, is modified and amended in
its entirety to read as follows:
In connection with the Transaction, Chancellor will, upon the
occurrence of the conditions set forth in the term sheet
attached hereto and by this reference made a part hereof (the
"Loan Term Sheet"), provide a loan to Capstar of up to $250
million immediately prior to the closing of the Capstar-SFX
Merger (which loan may be reduced to $200 million if certain
conditions specified in the Loan Term Sheet are satisfied). The
obligations of Capstar under such loan will be evidenced by a
note (the "Note"), which will have the essential terms set forth
in the Loan Term Sheet.
<PAGE> 2
4. Section 1 of the Loan Term Sheet, Security, is modified and
amended in its entirety to read as follows:
12% Senior Secured Term Note (the "Note").
5. Section 4 of the Loan Term Sheet attached to the Agreement,
Interest, is modified and amended by adding the following new paragraph
immediately after the second paragraph in such Section and immediately prior to
the third paragraph in such Section:
If Capstar shall not have completed acquisitions during the
Exchange Period (excluding the Jacksonville Exchange and the
acquisition of the Austin Stations) (x) with an aggregate
purchase price of $100 million by the first anniversary of the
issue date of the Note, (y) with an aggregate purchase price of
$200 million by the end of the second anniversary of the issue
date of the Note, and (z) with an aggregate purchase price of
$300 million by the end of the third anniversary of the issue
date of the Note, in each case, that are subject to the
procedures described in Section 1 of this Letter Agreement
(each, an "Annual Acquisition Shortfall"), the interest rate on
the Note for the 365 day period in which such Annual Acquisition
Shortfall occurs shall increase to the Increased Rate, of which
6/7 shall be payable in cash and 1/7 shall, at Capstar's option,
either be payable in cash or added to the principal amount of
the Note. To the extent that any amount not paid in cash is so
added to the principal amount, such amount shall bear interest
at the rate otherwise applicable to the principal amount. The
Increased Rate shall apply from the beginning of the 365 day
period in which such Annual Acquisition Shortfall occurs through
the end of such period.
6. Section 5 of the Loan Term Sheet attached to the Agreement,
Amount at Initial Issuance, is modified and amended in its entirety to read as
follows:
Aggregate commitment at initial issuance of $250 million;
provided, that if (i) the actual initial public offering price
per share of Capstar's common stock sold in Capstar's initial
public offering (the "Capstar IPO") is greater than or within
the offering price range specified in the final "red herring"
prospectus for the Capstar IPO and (ii) Capstar's sales (with
any contribution to a back-up trust not being deemed to be a
sale hereunder) of KKPN-FM and the SFX Long Island Stations are
consummated at or prior to the consummation of the Capstar-SFX
Merger (together, the "Loan Decrease Conditions"), then the
aggregate commitment at initial issuance shall be up to a
maximum amount of $200 million (such commitment to be determined
at Capstar's discretion, provided, that Capstar provide
Chancellor two (2) business days prior written notice of such
commitment prior to the consummation of the Capstar-SFX Merger).
If the Loan Decrease Conditions are satisfied, Capstar agrees
that it will use any and
2
<PAGE> 3
all net proceeds ("Green Shoe Proceeds") resulting from the
exercise of the overallotment option that is granted by Capstar
to the underwriters for the Capstar IPO to prepay amounts
outstanding under the Note; provided, that Capstar shall only be
required to prepay amounts outstanding under the Note with Green
Shoe Proceeds so that, immediately following such prepayment,
$150 million principal amount of the Note remains outstanding
(it being understood that if such Green Shoe Proceeds are not
adequate to prepay the Note so that $150 million principal
amount of the Note remains outstanding, Capstar shall use all
Green Shoe Proceeds to prepay the Note). Such prepayment shall
be made within thirty (30) days of the date that the Capstar-SFX
Merger is consummated.
7. Section 7 of the Loan Term Sheet attached to the Agreement,
Ranking, is modified and amended in its entirety to read as follows:
Pari passu with the guarantee to be issued by Capstar of the
obligations under the senior credit agreement of Capstar Radio
Broadcasting Partners, Inc. (the "Capstar Senior Credit
Agreement"), provided, that in lieu of subordination of the Note
to the guarantee by Capstar of the obligations under the Capstar
Senior Credit Agreement, Chancellor shall agree to provide
reasonable prior written notice to Capstar and to the
administrative agent under the Capstar Senior Credit Agreement
if a default under the Note exists as a result of which
Chancellor intends to accelerate the obligations under the Note.
8. Section 9 of the Loan Term Sheet attached to the Agreement,
Capstar Prepayment Obligations, is modified and amended in order to add a new
paragraph at the end of such section, to read as follows:
In the event that the Loan Decrease Conditions are not
satisfied, Capstar agrees that it will not, and Capstar shall
cause its subsidiaries not to, enter into or consummate any
transactions (other than transactions pending as of May 4, 1998
and transactions pursuant to Exchange Station Agreements) until
such time as Capstar has prepaid amounts outstanding under the
Note so that, following such prepayments, $150 million principal
amount of the Note remains outstanding (such amount not to
include any prepayments that may be required to be made by
Capstar as a result of any other provision of the Loan Term
Sheet).
9. Section 10 of the Loan Term Sheet attached to the Agreement,
Security for Capstar's Prepayment Obligations; Guarantee, is modified and
amended in its entirety to read as follows:
Senior perfected pledge by Capstar of common stock of Capstar
Broadcasting Partners, Inc. (100%). Chancellor acknowledges that
3
<PAGE> 4
Capstar will provide a subordinated pledge of common stock of
Capstar Broadcasting Partners, Inc. to the lenders under the
Capstar Senior Credit Agreement in support of the obligations of
Capstar Radio Broadcasting Partners, Inc. thereunder.
10. The first paragraph of Section 11 of the Loan Term Sheet
attached to the Agreement, Covenants, is modified and amended to read as
follows:
Debt Incurrence. Capstar and its subsidiaries will not be
permitted, directly or indirectly, to incur create, assume,
guarantee, acquire or become liable for indebtedness except in
compliance with a 9.0:1 consolidated indebtedness to trailing
four-quarter EBITDA ratio. The aggregate liquidation preference
of all preferred stock of Capstar and its consolidated
subsidiaries shall be counted as indebtedness. The debt
incurrence calculations will be made in a manner consistent with
leverage ratio calculations (including pro forma adjustments)
under the Capstar Senior Credit Agreement, provided, that for
purposes of calculating leverage ratios hereunder, Capstar shall
be entitled during 1998 to include in its EBITDA calculations at
least $10 million in net revenues from The AMFM Network (whether
or not such amounts are actually received), or such higher
amount if the net revenues actually received by Capstar from The
AMFM Network exceed such amounts. Borrowings under working
capital lines of credit of Capstar and its subsidiaries shall
not count as debt, except to the extent that the aggregate
borrowings under such lines of credit exceed $50 million.
11. As contemplated by the Letter Agreement, Capstar and Chancellor
will complete a series of asset exchanges and/or purchases in which Capstar will
exchange certain SFX broadcast properties to be acquired or paid for by
Chancellor. As purchaser of substantially all of the assets used by SFX in its
ownership and operation of radio stations in the Houston and Pittsburgh markets
(other than KKPN-FM in Houston and WTAE-AM in Pittsburgh), Chancellor agrees to
be bound by the provisions of the Final Judgment in United States of America v.
Hicks, Muse, Tate & Furst Incorporated, Capstar Broadcasting, Inc. and SFX
Broadcasting, Inc. (the "Final Judgment") as required by paragraph III(B) of
that Final Judgment. Chancellor also agrees to provide sufficient prior notice
to HMTF concerning any transactions that it may enter into regarding radio
stations in the Greenville Area, the Houston Area, the Jackson Area, the
Pittsburgh Area or the Nassau-Suffolk Area (as such terms are defined in the
Final Judgment) that are not presently owned, operated or controlled by
Chancellor, Capstar, SFX or HMTF, as will allow HMTF to satisfy its notice
obligations to the United States Department of Justice under paragraph X(E) of
the Final Judgment.
12. The amendments set forth in Sections 1, 2, 5 and 11 above shall
become effective immediately upon execution by both parties hereto. The
amendments set forth in Sections 3, 4, 6, 7, 8, 9 and 10 above shall be
conditioned on the consummation of the Capstar IPO simultaneously with or prior
to the Capstar-SFX Merger. If the Capstar IPO is not
4
<PAGE> 5
consummated simultaneously with or prior to the consummation of the Capstar-SFX
Merger, then the amendments set forth in Sections 3, 4, 6, 7, 8, 9 and 10 above
shall be void and have no force and effect.
13. Except for the amendments set forth above, the text of the
Agreement shall remain unchanged.
14. This Amendment may be executed in one or more counterparts,
each of which shall be deemed to be an original and all of which, taken
together, shall constitute one and the same instrument.
5
<PAGE> 6
In witness whereof, the parties have duly executed and delivered
this Amendment as of the date first written above.
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
/s/ MATTHEW E. DEVINE
-------------------------------------
By: Matthew E. Devine
Its: Chief Financial Officer
CAPSTAR BROADCASTING CORPORATION
/s/ WILLIAM BANOWSKY
-------------------------------------
By: William Banowsky
Its: Vice President
6
<PAGE> 1
EXHIBIT 2.45
================================================================================
UNIT AND STOCK
PURCHASE AND SALE AGREEMENT
BY AND AMONG
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES,
MARTIN MEDIA, L.P.,
MARTIN & MACFARLANE, INC.,
NEVADA OUTDOOR SYSTEMS, INC.,
MW SIGN CORP.
AND
THE SELLERS NAMED ON
SCHEDULES I, II, III AND IV
DATED AS OF JUNE 19, 1998
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE I. PURCHASE OF UNITS AND SHARES; DEPOSIT.................................................................7
SECTION 1.1. Purchase and Sale of Units and Shares.........................................7
SECTION 1.2. Adjustments to Purchase Price.................................................7
SECTION 1.3. Closing.......................................................................9
SECTION 1.4. Deposit......................................................................11
ARTICLE II. REPRESENTATIONS AND WARRANTIES CONCERNING MEDIA, M&M, NEVADA AND MWS................................11
SECTION 2.1. Organization, Qualification, Etc.............................................11
SECTION 2.2. Units, Capital Stock.........................................................12
SECTION 2.3. Partnership or Corporate Authority Relative to this
Agreement..............................................................13
SECTION 2.4. No Conflict..................................................................13
SECTION 2.5. Finders or Brokers...........................................................14
SECTION 2.6. Subsidiaries.................................................................14
SECTION 2.7. Reports and Financial Statements.............................................14
SECTION 2.8. No Undisclosed Liabilities...................................................15
SECTION 2.9. No Violation of Law..........................................................15
SECTION 2.10. Environmental Laws and Regulations...........................................15
SECTION 2.11. No Undisclosed Employee Benefit Plan Liabilities or
Severance Arrangements.................................................16
SECTION 2.12. Events Subsequent to December 31, 1997.......................................18
SECTION 2.13. Investigations; Litigation...................................................20
SECTION 2.14. Tax Matters..................................................................20
SECTION 2.15. Insurance....................................................................22
SECTION 2.16. Real Property; Title.........................................................22
SECTION 2.17. Permits and Licenses.........................................................23
SECTION 2.18. Collective Bargaining Agreements and Labor...................................23
SECTION 2.19. Intangible Assets............................................................24
SECTION 2.20. Personal Property; Information Systems.......................................24
SECTION 2.21. Material Contracts...........................................................24
SECTION 2.22. Excluded Assets and Liabilities..............................................26
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 2.23. Recent Acquisitions...........................................................26
SECTION 2.24. Disclosure....................................................................26
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLERS...........................................................27
SECTION 3.1. Authority Relative to this Agreement..........................................27
SECTION 3.2. Title to Units and Capital Stock..............................................27
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................27
SECTION 4.1. Organization, Qualification, Etc..............................................27
SECTION 4.2. Corporate Authority Relative to this Agreement; No Violation..................28
SECTION 4.3. Investigations; Litigation....................................................28
SECTION 4.4. Financial Ability.............................................................29
SECTION 4.5. Brokers' Fees.................................................................29
ARTICLE V. COVENANTS..............................................................................................29
SECTION 5.1. Conduct of Business by the Companies..........................................29
SECTION 5.2. Access to Information; Confidentiality........................................31
SECTION 5.3. Filings; Other Action.........................................................31
SECTION 5.4. No Solicitation...............................................................32
SECTION 5.5. Public Announcements..........................................................32
SECTION 5.6. Employee Matters..............................................................32
SECTION 5.7. Excluded Assets and Liabilities...............................................33
SECTION 5.8. Supplements to Disclosure Schedules...........................................33
SECTION 5.9. Phase I Environmental Audit...................................................34
SECTION 5.10. Broker's Fees................................................................34
SECTION 5.11. Western Poster Services, Inc.................................................34
SECTION 5.12. Notification of Indemnification Claim........................................35
SECTION 5.13. Indemnification Agreements...................................................35
SECTION 5.14. Stockholder Agreements.......................................................36
SECTION 5.15. Redemption of Preferred Units................................................36
SECTION 5.16. Execution of Agreement by Sellers............................................36
SECTION 5.17. Tax Covenants and Related Matters............................................36
SECTION 5.18. Conveyance Taxes.............................................................38
</TABLE>
ii
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<TABLE>
<S> <C> <C>
ARTICLE VI. CONDITIONS TO THE CLOSING...........................................................................38
SECTION 6.1. Conditions to the Obligations of Each Party..................................38
SECTION 6.2. Conditions to the Obligations of Buyer.......................................39
SECTION 6.3. Conditions to the Obligations of the Sellers.................................40
ARTICLE VII. TERMINATION, AMENDMENT AND WAIVER..................................................................41
SECTION 7.1. Termination or Abandonment...................................................41
SECTION 7.2. Effect of Termination........................................................42
SECTION 7.3. Extension; Waiver............................................................42
ARTICLE VIII. SURVIVAL; INDEMNIFICATION; REMEDIES...............................................................42
SECTION 8.1. Survival of Representations and Warranties...................................42
SECTION 8.2. Indemnification by Sellers...................................................43
SECTION 8.3. Indemnification by Buyer.....................................................44
SECTION 8.4. Indemnification Procedure for Third Party Claims.............................45
SECTION 8.5. Direct Claims................................................................46
SECTION 8.6. Failure to Give Timely Notice................................................46
SECTION 8.7. Reduction of Loss............................................................46
SECTION 8.8. Subrogation..................................................................47
SECTION 8.9. Sellers' Representative......................................................47
SECTION 8.10. Exclusive Remedy.............................................................47
SECTION 8.11. Treatment of Payments........................................................47
SECTION 8.12. Right to Contribution........................................................47
SECTION 8.13. Release......................................................................48
ARTICLE IX. GENERAL PROVISIONS..................................................................................49
SECTION 9.1. Notices......................................................................49
SECTION 9.2. Definitions..................................................................50
SECTION 9.3. Counterparts.................................................................52
SECTION 9.4. Entire Agreement; No Third-Party Beneficiaries...............................52
SECTION 9.5. Assignment...................................................................52
SECTION 9.6. Amendment....................................................................52
SECTION 9.7. Governing Law; Jurisdiction..................................................52
SECTION 9.8. Specific Performance.........................................................53
</TABLE>
iii
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<TABLE>
<S> <C> <C>
SECTION 9.9. Severability.................................................................53
SECTION 9.10. Headings.....................................................................53
SECTION 9.11. Special Power of Attorney....................................................53
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS AND SCHEDULES
- ----------------------
<S> <C>
EXHIBIT A NONCOMPETITION AGREEMENT
EXHIBIT B ASSIGNMENT OF PARTNERSHIP INTEREST
EXHIBIT C ESCROW AGREEMENT
EXHIBIT D WINERY TRANSFER AGREEMENT
EXHIBIT E WPS AGREEMENT
EXHIBIT F POST CLOSING ESCROW AGREEMENT
SCHEDULE I MEDIA SELLERS
SCHEDULE II M&M SELLERS
SCHEDULE III NEVADA SELLERS
SCHEDULE IV MWS SELLERS
SCHEDULE 2.4 VIOLATIONS
SCHEDULE 2.10 ENVIRONMENTAL
SCHEDULE 2.11 EMPLOYEE BENEFIT PLANS
SCHEDULE 2.12 EVENTS SUBSEQUENT TO DECEMBER 31, 1997
SCHEDULE 2.13 LITIGATION
SCHEDULE 2.14 TAX MATTERS
SCHEDULE 2.16 REAL PROPERTY
SCHEDULE 2.16(e) SUBLEASED BILLBOARDS
SCHEDULE 2.17 LICENSES
SCHEDULE 2.19 INTELLECTUAL PROPERTY
SCHEDULE 2.20 PERSONAL PROPERTY AND INFORMATION SYSTEMS
SCHEDULE 2.21(a) MATERIAL CONTRACTS
SCHEDULE 2.21(b) CUSTOMER AGREEMENTS
SCHEDULE 2.22(a) WINERY ASSETS
SCHEDULE 2.22(b) MARTIN HEADQUARTERS ASSETS
</TABLE>
iv
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<TABLE>
<S> <C>
SCHEDULE 5.1(d) AMENDMENTS TO EMPLOYMENT AGREEMENTS
SCHEDULE 5.1(k) AMENDMENTS TO EMPLOYEE BENEFIT PLANS
SCHEDULE 8.2 ALLOCATION OF SELLERS INDEMNIFICATION OBLIGATIONS
</TABLE>
v
<PAGE> 7
This UNIT AND STOCK PURCHASE AND SALE AGREEMENT ("Agreement") is
entered into by and among Chancellor Media Corporation of Los Angeles, a
Delaware corporation ("Buyer"), Martin Media, L.P., a California limited
partnership ("Media"), Martin & MacFarlane, Inc., a California corporation
("M&M"), Nevada Outdoor Systems, Inc., a Nevada corporation ("Nevada"), MW Sign
Corp., a California corporation ("MWS"), all of the general partners and limited
partners of Media (except for MWS and Nevada), each of which is named on
Schedule I (the "Media Sellers"), the stockholders of M&M, each of which is
named on Schedule II (the "M&M Sellers"), the stockholders of Nevada, each of
which is named on Schedule III (the "Nevada Sellers"), and the stockholders of
MWS, each of which is named on Schedule IV, (the "MWS Sellers"). The Media
Sellers, M&M Sellers, Nevada Sellers, and MWS Sellers are herein collectively
referred to as the "Sellers." Media, M&M, Nevada and MWS are herein referred to
individually as a "Company" and collectively as the "Companies." For the
purposes of all of the representations, warranties and covenants of the
Companies and the Sellers contained herein, except for those contained in
Sections 2.1, 2.2, 2.6 and 3.2, any reference to Media or the Companies shall be
deemed to include Dowling (as defined below).
WITNESSETH:
WHEREAS, Media and M&M own and operate an outdoor advertising business
and related assets that are managed by MWS (the businesses of the Companies are
referred to collectively herein as the "Business");
WHEREAS, the Media Sellers together with MWS and Nevada own all of the
limited partnership units and general partnership units of Media (the "Units"),
the M&M Sellers own all the issued and outstanding shares of common stock, no
par value, of M&M (the "M&M Stock"), the Nevada Sellers own all the issued and
outstanding shares of common stock, par value $1.00 per share, of Nevada (the
"Nevada Stock"), the MWS Sellers own all the issued and outstanding shares of
common stock, no par value, of MWS (the "MWS Stock" and collectively with the
M&M Stock, the Nevada Stock and the MWS Stock, the "Capital Stock");
WHEREAS, E. Thomas Martin ("Martin"), David B. Weyrich ("Weyrich") and
Buyer desire to enter into a stock purchase agreement (the "WPS Stock Purchase
Agreement") whereby Buyer will purchase from Martin and Weyrich 73% of the
outstanding capital stock of Western Poster Service, Inc. ("WPS"), a Texas
corporation which owns and operates a poster printing business that provides
printing services to Media and M&M, among others;
WHEREAS, concurrently with and as a condition to the closing of the
transactions contemplated herein, Martin and Weyrich will each enter into a
consultation and noncompetition agreement in substantially the form set forth in
Exhibit A attached hereto with Buyer (each, a "Noncompetition Agreement")
WHEREAS, the Sellers desire to sell all their Units and Capital Stock
to Buyer; and
<PAGE> 8
WHEREAS, Buyer desires to acquire the Business through the purchase of
all the Units and Capital Stock, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties, hereby agree as follows:
ARTICLE I
PURCHASE OF UNITS AND SHARES; DEPOSIT
SECTION 1.1. Purchase and Sale of Units and Shares. Upon the terms and
subject to the conditions set forth in this Agreement the Sellers shall sell to
Buyer, for a total consideration of Six Hundred and Ten Million Dollars
($610,000,000), as adjusted pursuant to Sections 1.2 and 5.19 (as so adjusted,
the "Purchase Price"), which Purchase Price shall include the consideration
payable (the "Consultation Consideration") pursuant to the Noncompetition
Agreements, the Units and Capital Stock as follows:
(a) The Media Sellers will sell all the Units to Buyer, and Buyer will
purchase the Units from the Media Sellers for a purchase price per Unit and an
aggregate purchase price as described on Schedule I (the "Media Purchase
Price");
(b) The M&M Sellers will sell all of the M&M Stock to Buyer, and Buyer
will purchase the M&M Stock from the M&M Sellers for a purchase price per share
and an aggregate purchase price as described on Schedule II (the "M&M Purchase
Price");
(c) The Nevada Sellers will sell all the Nevada Stock to Buyer, and
Buyer will purchase the Nevada Stock from the Nevada Sellers for a purchase
price per share and an aggregate purchase price as described on Schedule III
(the "Nevada Purchase Price" ); and
(d) The MWS Sellers will sell all the MWS Stock to Buyer, and Buyer
will purchase the MWS Stock from the MWS Sellers for a purchase price per share
and an aggregate purchase price as described on Schedule IV (the "MWS Purchase
Price").
The Buyer and Seller hereby agree that they shall, and shall cause
their respective Affiliates to, prepare all reports and returns with respect to
Taxes (as defined herein) on a basis consistent with the allocation of the
Purchase Price to the Media Purchase Price, the M&M Purchase Price, the Nevada
Purchase Price, and the MWS Purchase Price, as set forth in Schedules I, II, III
and IV hereof and as may be adjusted pursuant to Section 1.2 hereof and the
Noncompetition Agreements as indicated therein.
SECTION 1.2. Adjustments to Purchase Price.
(a) The Media Purchase Price, M&M Purchase Price, Nevada Purchase
Price, and MWS Purchase Price are each subject to adjustment as provided in
Section 1.2(b) if as of 11:59 p.m. on the Closing Date (as defined below) (the
"Adjustment Time") (i) the Working Capital (as defined
7
<PAGE> 9
below), for any of the Companies differs from the Base Amount (as defined below)
by more than $50,000 or (ii) there is any outstanding Debt (as defined below) of
any of the Companies. "Working Capital" shall mean the sum of (i) cash, cash
equivalents, trade accounts receivable, notes receivable from employees and
prepaid expenses (other than Deal Expenses (as defined below), less (ii)(A)
trade accounts payable, which shall include all expenses for goods and services
incurred but not paid before the Adjustment Time, (B) any amounts payable
related to expenses incurred in connection with the purchase and sale of Units
and Capital Stock hereunder ("Deal Expenses") including, without limitation,
legal fees and investment banking fees payable other than Deal Expenses included
in Debt and (C) Taxes and assessments, power and utilities charges, and rents
and similar deferred items imposed against any of the Companies in respect of
any period of time up to the Adjustment Time. "Base Amount" shall mean $0.
"Debt" shall mean (i) all debt properly includable in a balance sheet of any
Company prepared in accordance with generally accepted accounting principles in
the United States ("GAAP"), other than debt included in Working Capital or debt
incurred in connection with any Additional Acquisition (as defined below) for
which an adjustment to the Purchase Price has been made in accordance with
Section 1.2(f), (ii) the aggregate redemption price of, together with accrued
and unpaid dividends on, any outstanding Preferred Units and (iii) any amounts
attributable to the unexercised portion of the option (the "Kunz Option")
granted to certain of the Companies by Kunz & Company and Gregory Kunz
(collectively, "Kunz") to purchase certain assets held by Kunz pursuant to that
certain Option Agreement, dated as of June 17, 1997, between Kunz and M&M which
the Parties acknowledge is Thirty Million Dollars ($30,000,000) as of the date
hereof.
(b) If the Working Capital of any Company as of the Adjustment Time
differs from the Base Amount by more than $50,000, then the Media Purchase
Price, M&M Purchase Price, Nevada Purchase Price, or MWS Purchase Price, as
applicable, shall (i) be increased by the amount of Working Capital of such
Company as of the Adjustment Time in excess of the Base Amount, or (ii)
decreased by the excess of the Base Amount over the amount of Working Capital of
such Company as of the Adjustment Time. In addition, the Media Purchase Price,
M&M Purchase Price, Nevada Purchase Price and MWS Purchase Price, as applicable,
shall be reduced by (i) the amount of Debt of such Company as of the Adjustment
Time and (ii) the applicable Sellers' share of any Conveyance Taxes.
(c) Within three (3) business days prior to the Closing Date, each
Company shall deliver to Buyer a statement (together with appropriate schedules
and other support, the "Settlement Statement") that provides Buyer with a good
faith estimate of its Working Capital and Debt as of the Adjustment Time, as
adjusted, for any collections, payments or distributions to be made prior to the
Adjustment Time, including the transfer of the Winery (as hereinafter defined),
and its share of Conveyance Taxes.
(d) If the Settlement Statements require any adjustment in the Media
Purchase Price, M&M Purchase Price, Nevada Purchase Price, or MWS Purchase
Price, as described in Section 1.2(b), then such adjustment shall be reflected
in the payment to be made by Buyer on the Closing Date pursuant to Section
1.3(c).
(e) If Buyer elects to challenge the amount of Working Capital, Debt or
Conveyance Taxes contained in any Settlement Statement, then it shall so notify
the Media
8
<PAGE> 10
Sellers, M&M Sellers, Nevada Sellers, or MWS Sellers, as applicable, in writing
no later than ten (10) business days following the Closing Date. Buyer shall
engage Arthur Anderson LLP who shall conduct such tests and procedures as it
deems reasonable to finally determine the amount of Working Capital, Debt or
Conveyance Taxes, as applicable, on the Closing Date no later than sixty (60)
days following the Closing Date. If Arthur Anderson LLP determines that an
adjustment to the Media Purchase Price, M&M Purchase Price, Nevada Purchase
Price or MWS Purchase Price should have been made in accordance with Section
1.2(c), it shall so notify the appropriate Sellers and the Buyer of the
adjustment amount and such Sellers, or the Buyer, as applicable, shall pay to
the other party (or parties) the amount of such adjustment amount within ten
(10) days of receipt of such written notice. All costs of engaging Arthur
Anderson LLP hereunder shall be paid by (i) the Sellers of the affected
Company(ies) on a pro rata basis if Arthur Anderson LLP determines that a
downward adjustment of $100,000 or more in the Purchase Price is appropriate,
and (ii) by Buyer if Arthur Anderson LLP determines that an upward, or a
downward adjustment of less than $100,000, adjustment of the Purchase Price is
appropriate.
(f) The Media Purchase Price, M&M Purchase Price, Nevada Purchase Price
and MWS Purchase price shall also be appropriately adjusted as described below
to reflect the closing, prior to the Closing Date, of any of the proposed
acquisitions described in Schedule 2.12 and any acquisitions not listed on
Schedule 2.12 which have been entered into after the date of this Agreement in
accordance with the provisions of Section 5.1(e) (collectively, "Additional
Acquisitions"). The purchase price of the Company making such Additional
Acquisition shall be increased by (i) (A) an amount equal to the cash
consideration paid by such Company for the Additional Acquisition (B) a fee
equal to four percent (4%) of such cash consideration, and (C) if the cash
consideration is less than ten times the earnings before interest, taxes,
depreciation and amortization as determined in accordance with industry
standards ("EBITDA") of the acquired company for the latest twelve (12) months
prior to the month in which such closing occurs (ten times such EBITDA being
referred to as the "LTM EBITDA Ratio"), an addition fee equal to ten percent
(10%) of the amount by which the LTM EBITDA Ratio exceeds the purchase price,
less (ii) any debt assumed or incurred by such Company in connection with such
Additional Acquisition. For purposes of this Section 1.2(f), the cash
consideration paid by a Company for any Additional Acquisition listed in Part B
of Schedule 2.12 shall equal the purchase price set forth in Part B of Schedule
2.12 with respect to such Additional Acquisition unless otherwise agreed by
Buyer.
SECTION 1.3. Closing. The closing ("Closing") of the purchase and sale
of the Units and the Capital Stock shall take place at 10:00 a.m. on a date to
be specified by the Parties which shall be no later than the tenth business day
after the satisfaction or waiver of the conditions set forth in Article VI (the
"Closing Date") at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 300
S. Grand Ave., Los Angeles, CA 90071, unless another date or place is agreed to
in writing by the parties hereto. At the Closing:
(a) Closing Deliveries of Sellers.
(i) Each Media Seller shall deliver an Assignment of Partnership
Interest substantially in the form attached hereto as Exhibit B, duly executed,
assigning to Buyer all the Units set forth beside its name on Schedule I, which
Units, together with the Units held by
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MWS and Nevada, shall constitute all of the issued and outstanding Units and
subscription rights, options, warrants, purchase rights, conversion rights or
other instruments that could require Media to issue any Units or other
partnership interests;
(ii) Each of the M&M Sellers, Nevada Sellers and MWS Sellers shall
deliver to Buyer, one or more certificates representing the number of shares of
M&M Stock, Nevada Stock or MWS Stock set forth beside its name on Schedule II,
III or IV, as applicable, in negotiable form and duly endorsed in blank or
accompanied by stock powers or other instruments of transfer duly executed in
blank, which shares of Capital Stock shall constitute all of the issued and
outstanding capital stock of the Companies and any subscription rights, options,
warrants, purchase rights, conversion rights or other instruments that could
require any of the Companies to issue any shares of stock;
(iii) Each of M&M, Nevada and MWS shall deliver the written
resignation of each of its officers and directors.
(iv) Each of Weyrich and Martin shall deliver an executed
Noncompetition Agreement.
(v) The Sellers shall deliver or cause to be delivered an opinion
of Sellers' counsel in form customary for transactions of the nature
contemplated hereby and reasonably acceptable to Buyer.
(vi) The Sellers shall deliver or cause to be delivered the
certificates and other documents required to be delivered pursuant to Section
6.2.
(b) Closing Deliveries of Buyer.
(i) Buyer shall deliver the Purchase Price by wire transfer of
immediately available funds to (A) each Media Seller its respective portion of
the Media Purchase Price, as described on Schedule I (reduced by his or her
portion of the Post-Closing Escrow Deposit (as defined below)), (B) each M&M
Seller its respective portion of the M&M Purchase Price, as described on
Schedule II (reduced by his or her portion of the Post-Closing Escrow Deposit),
(C) each Nevada Seller its respective portion of the Nevada Purchase Price, as
described on Schedule III (reduced by his or her portion of the Post Closing
Escrow Deposit), (D) each MWS Seller its respective portion of the MWS Purchase
Price, as described on Schedule IV (reduced by his or her portion of the
Post-Closing Escrow Deposit), (E) each of Weyrich and Martin, his respective
portion of the Consultation Consideration, and (F) the Post-Closing Escrow Agent
the Post-Closing Escrow Deposit;
(ii) Buyer shall deliver or cause to be delivered an opinion of
Buyer's counsel in form customary for transactions of the nature contemplated
hereby and reasonably acceptable to Sellers.
(iii) Buyer shall deliver or cause to be delivered the certificates
and other documents required to be delivered pursuant to Section 6.3.
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(iv) Buyer shall deliver executed Noncompetition Agreements.
SECTION 1.4. Deposit. Within two (2) business days of the execution of
this Agreement, Buyer shall deliver to Chase Manhattan Bank (the "Escrow Agent")
an irrevocable letter of credit in the amount of $30 million (the "Letter of
Credit") to be held by Escrow Agent pursuant to an escrow agreement
substantially in the form of Exhibit C (the "Escrow Agreement"), which is being
executed concurrently with the execution of this Agreement. Pursuant to the
Escrow Agreement, if this Agreement is terminated by Sellers pursuant to Section
7.1(e), then Sellers shall be entitled, subject to the terms and conditions of
the Escrow Agreement, to cause the Escrow Agent to draw upon the Letter of
Credit and to deliver to the Company, in accordance with the Escrow Agreement,
the proceeds thereof as liquidated damages for a material breach of this
Agreement by Buyer in full settlement of any damages of any nature or kind that
Sellers or the Companies may suffer or allege to have suffered as a result of
any such breach by Buyer. Such receipt by the Companies of the proceeds of the
Letter of Credit shall be the Sellers' and the Companies' sole and exclusive
remedy in the event of any such breach by Buyer. The Companies, the Sellers and
Buyer hereby agree in advance that actual damages resulting from a breach of
Buyer's obligations hereunder would be difficult to ascertain and that the
amount to be paid pursuant to this Section 1.4 is a fair and equitable amount to
reimburse the Sellers and the Companies for damages sustained from the
termination of this Agreement pursuant to Section 7.1(e). Upon the Closing or
promptly after termination of this Agreement other than pursuant to Section
7.1(e), the Letter of Credit shall be returned by the Escrow Agent to Buyer as
provided in the Escrow Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES CONCERNING MEDIA,
M&M, NEVADA AND MWS
Each Media Seller jointly and severally represents and warrants as to
Media, each M&M Seller jointly and severally represents and warrants as to M&M,
each Nevada Seller jointly and severally represents and warrants as to Nevada,
and each MWS Seller jointly and severally represents and warrants as to MWS, to
Buyer as follows:
SECTION 2.1. Organization, Qualification, Etc. Media is a limited
partnership duly formed, validly existing and in good standing under the laws of
the State of California, M&M and MWS are each corporations duly organized,
validly existing and in good standing under the laws of the State of California,
and Nevada is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, and each has the limited
partnership or corporate power and authority, as applicable, to own its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not in the aggregate
have a Material Adverse Effect on the Companies. The copies of the Third Amended
and Restated Limited Partnership Agreement of Media (the "Media Partnership
Agreement") and the copies of the articles of incorporation and by-laws of M&M,
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Nevada and MWS which have previously been delivered to Buyer are each complete
and correct and in full force and effect on the date hereof.
SECTION 2.2. Units, Capital Stock.
(a) As of the date hereof, (i) 97.0999 Units are issued and outstanding
and all of such Units were held by the Media Sellers, MWS and Nevada, as
described on Schedule I, consisting of (A) 96.0999 limited partnership units,
and (B) 1.0 general partnership unit, and (ii) 25,000 Preferred Units (as
defined in the Media Partnership Agreement) and no Warrants (as defined below)
are issued and outstanding. The Preferred Units are redeemable by Media in
accordance with the applicable provisions of the Media Partnership Agreement.
(b) The authorized stock of M&M consists of 150,000 shares of M&M
Stock. As of the date hereof, 82,443 shares of M&M Stock are issued and
outstanding, all of which are held by the M&M Sellers, as described on Schedule
II.
(c) The authorized stock of Nevada consists of 100,000 shares of Nevada
Stock. As of the date hereof, 2,500 shares of Nevada stock are issued and
outstanding, all of which are held by the Nevada Sellers, as described on
Schedule III.
(d) The authorized stock of MWS consists of 100,000 shares of MWS
Stock. As of the date hereof, 2,000 shares of MWS Stock are issued and
outstanding, all of which are held by the MWS Sellers, as described on Schedule
IV.
(e) All of the outstanding Units and shares of Capital Stock have been
duly authorized, are validly issued, fully paid and nonassessable.
(f) As of the date hereof, there are no outstanding or authorized
subscription rights, options, warrants, purchase rights, conversion rights,
exchange rights or other arrangements or commitments that could require Media to
issue any Units or other partnership interests or that could require M&M,
Nevada, or MWS to issue any shares of stock, except for the Warrants (as defined
in the Media Partnership Agreement) to be issued to holders of Preferred Units
as more particularly described in Section 6.10 of the Media Partnership
Agreement and the Purchase Agreement, dated as of December 23, 1997, by and
among Media and the Purchasers named therein, and the Warrant Agreement attached
as Exhibit 3 thereto. Other than the Administrative Services Agreement between
MWS and each of Media and M&M (the "Administrative Services Agreement"), there
are no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to M&M, Nevada or MWS. There are no
voting trusts, proxies or other agreements or understandings with respect to the
voting of the capital stock of M&M, Nevada or MWS.
SECTION 2.3. Partnership or Corporate Authority Relative to this
Agreement. Each Company has the partnership or corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
general partner of Media and the Boards of Directors of M&M, Nevada
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and MWS and no other partnership, corporate or other proceedings on the part of
any Company are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each Company and, assuming this Agreement has been duly and validly
executed and delivered by Buyer, this Agreement constitutes a valid and binding
agreement of each Company, enforceable against each Company in accordance with
its terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, or by principles governing the availability of
equitable remedies). Other than in connection with or in compliance with the
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), no authorization, consent or approval of, or filing
with, any Governmental Entity (as defined below) is necessary for the
consummation by each Company of the transactions contemplated by this Agreement,
except for such authorizations, consents, approvals or filings, the failure to
obtain or make which would not, in the aggregate, constitute a Material Adverse
Effect on the Companies; provided that none of the Sellers makes any
representation with respect to such of the foregoing as are required by reason
of the regulatory status of Buyer or any of its respective Subsidiaries or facts
specifically pertaining to any of them.
SECTION 2.4. No Conflict. Except as set forth in Schedule 2.4, and
except for, with respect to clause (d), those conflicts, breaches, defaults and
exercise of rights, that would not in the aggregate constitute a Material
Adverse Effect on the Companies, neither the execution and delivery of this
Agreement nor the consummation by the Companies and the Sellers of the
transactions contemplated hereby will (a) violate, conflict with or result in
any breach of any provision of the respective organizational documents of any
Company, (b) violate any order, decree, injunction, judgment, ruling, law,
statute, regulation, rule or other determination of any Governmental Entity
applicable to any Company, (c) require the giving of notice to, or the consent
of, any party to a Material Contract or accord any such party the right to
modify a Material Contract, or (d) (i) materially conflict with or result in a
material breach of any provision of, or (ii) constitute a material default (or
an event which, with notice or lapse of time or both, would constitute a
material default) under or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or (iii) result in any
Lien on the Units or shares of Capital Stock or the properties or assets of any
Company pursuant to (A) any Material Contract, (B) any License held by any
Company; or (C) any other contract to which any Company is a party or to which
its assets are subject.
SECTION 2.5. Finders or Brokers. Except for CIBC Oppenheimer Corp. and
MWS, a copy of whose engagement agreements or other agreements have provided to
Buyer, neither the Sellers nor the Companies nor any of their respective
Subsidiaries or Affiliates has employed any investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might
be entitled to any fee or any commission in connection therewith.
SECTION 2.6. Subsidiaries. The only Subsidiary of the Companies is
Dowling Company, Incorporated ("Dowling"). Dowling is incorporated in the
Commonwealth of Virginia. The authorized capital stock of Dowling consists of
500 shares of common stock, of which 280 shares are issued and outstanding and
no shares of common stock are held in treasury. All of the issued and
outstanding shares of common stock of Dowling have been duly authorized
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and are validly issued, fully paid, and nonassessable. Media holds of record and
owns beneficially all of the outstanding shares of common stock Dowling, free
and clear of any restrictions on transfer (other than restrictions under the
Securities Act of 1933, as amended, (the "Securities Act") and state securities
laws), Taxes, Liens, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights or other contracts or commitments that could require Media to sell,
transfer or otherwise dispose of any capital stock of Dowling or that could
require Dowling to issue, sell or otherwise cause to become outstanding any of
its own capital stock. There are no outstanding stock appreciation, phantom
stock, profit participation or similar rights with respect to Dowling. There are
no voting trusts, proxies or other agreements or understanding with respect to
the voting of any of the capital stock of Dowling. None of the Companies
controls, directly or indirectly, or has any direct or indirect equity
participation in any corporation, partnership, trust, or other business
association other than Dowling.
SECTION 2.7. Reports and Financial Statements.
(a) Media and M&M have previously furnished to Buyer true and complete
copies of (i) their respective balance sheets as of December 31, 1997 and
December 31, 1996, statements of operations, changes in financial position and
cash flows for the fiscal years ended on said date, each accompanied by a report
thereon containing an opinion of Arthur Anderson LLP, certified public accounts,
and (ii) their respective unaudited balance sheets as of April 30, 1998,
statements of operations, changes in financial position and cash flows for the
two months ended on said date.
(b) Nevada has previously furnished to Buyer its Form K-1 received from
Media for the year ended December 31, 1996 together with its unaudited balance
sheet as of December 31, 1997.
(c) MWS has previously furnished to Buyer true and complete copies of
unaudited balance sheets as of December 31, 1997 and December 31, 1996,
statements of operations, changes in financial position and cash flows for the
fiscal years ended on said dates.
The audited financial statements and unaudited financial statements
described above (including any related notes and schedules) (the "Financial
Statements") fairly present the financial position of each Company as of the
dates thereof and the results of operations and cash flows for the applicable
periods (subject, where appropriate, to normal year-end adjustments), in each
case in accordance with past practice and GAAP consistently applied during the
periods involved (except as otherwise disclosed in the notes thereto and except
that the unaudited financial statements therein do not contain all of the
footnote disclosures required by GAAP).
SECTION 2.8. No Undisclosed Liabilities. To the Knowledge of Sellers,
none of the Companies has any liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, of a type required by GAAP to be
reflected on a balance sheet except (a) liabilities or obligations reflected in
any of the Financial Statements and (b) liabilities or obligations which would
not in the aggregate constitute a Material Adverse Effect on the Companies.
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SECTION 2.9. No Violation of Law. To the Knowledge of Sellers, the
Business is not being conducted in violation of any law, ordinance or regulation
of any governmental body or authority (provided that no representation or
warranty is made in this Section 2.9 with respect to Licenses (as defined and
covered by Section 2.17 below) or Environmental Laws (as defined in and covered
by Section 2.10 below)), including but not limited to, any laws relating to
occupational health or safety, except for violations or possible violations
which would not in the aggregate constitute a Material Adverse Effect on the
Companies, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced or, to the
Knowledge of Sellers, threatened against any of the Companies alleging any such
violation, except for such actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands or notices which would not
in the aggregate constitute a Material Adverse Effect on the Companies.
SECTION 2.10. Environmental Laws and Regulations.
(a) Except as set forth on Schedule 2.10, to the Knowledge of Sellers
and except as would not in the aggregate constitute a Material Adverse Effect on
the Companies, (i) each Company is in compliance with all applicable federal,
state and local laws and regulations 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) (collectively,
"Environmental Laws"), which compliance includes, but is not limited to, the
possession by each Company of all permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof, (ii) no Company has received written notice of, or is the
subject of, any actions, causes of action, claims, demands, notices, judgments,
orders, hearings or proceedings by any person, or, investigations by any
Governmental Entity alleging liability under or non-compliance with any
Environmental Law, and (iii) there are no circumstances, based on currently
available information that are reasonably likely to prevent or interfere with
such compliance or give rise to such liability in the future.
(b) Except as set forth on Schedule 2.10, to the Knowledge of Sellers
and except as would not in the aggregate constitute a Material Adverse Effect on
the Companies (i) no underground storage tanks, polychlorinated biphenyls (PCBs)
or asbestos-containing materials are located on, in or under any property owned
or leased by any Company in violation of any applicable Environmental Law, and
(ii) no Company has caused or permitted Hazardous Materials to be stored,
released, treated, recycled or disposed of on, under or at any property owned or
leased by any Company in violation of any applicable Environmental Law or in a
manner that would reasonably be expected to require remediation by any Company
under applicable Environmental Laws.
(c) Except as set forth on Schedule 2.10 and except as would not in the
aggregate constitute a Material Adverse Effect on the Companies, none of the
Companies has released by written contract or agreement any other person from
any claim under any Environmental Law or, to the Knowledge of Sellers, waived
any rights or defenses concerning any environmental conditions at any property
currently or formerly owned, leased or operated by any Company.
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(d) To the Knowledge of the Sellers, there is no environmental
assessment, investigation, study or audit report prepared by or for any Company
in relation to the Business of such Company that has not been made available to
Buyer.
SECTION 2.11. No Undisclosed Employee Benefit Plan Liabilities or
Severance Arrangements.
(a) Schedule 2.11 contains a complete list of each employment,
consulting, severance or other similar contract, arrangement or policy and each
plan, arrangement (written or oral), program, agreement or commitment providing
for insurance coverage (including without limitation any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health or
accident benefits (including without limitation any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the Code providing
for the same or other benefits) or for deferred compensation, profit-sharing
bonuses, stock options, stock appreciation rights, stock purchases or other
forms of incentive compensation or post-retirement insurance, compensation or
benefits (whether or not subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), which any Company maintains,
administers, contributes to, or in the last six (6) years was required to
contribute to, or under which any Company may incur any liability (each, a
"Benefit Plan"). True and complete copies of each of the following documents
have been delivered or made available by Seller to Buyer: (i) each Benefit Plan
and all amendments thereto, all written descriptions thereof which have been
distributed to Seller's employees and all annuity contracts or other funding
instruments, and a complete description of any Benefit Plan which is not in
writing, (ii) the most recent determination or opinion letter issued by the
Internal Revenue Service with respect to each Benefit Plan (other than a
"multiemployer plan", as defined in Section 3(37) or 4001(a) of ERISA, a
"Multiemployer Plan"), (iii) for the three most recent plan years, Annual
Reports on Form 5500 Series required to be filed with any governmental agency
for each Benefit Plan, (iv) all actuarial reports prepared for the last three
plan years for each Benefit Plan, (v) a description of complete age, salary,
service and related data as of the last day of the last plan year for employees
of the Companies (other than employees of the Winery), and (vi) a description
setting forth the amount of any liability of any Company as of the Closing Date
for payments more than thirty (30) calendar days past due with respect to each
Benefit Plan.
(b) No Benefit Plan (other than a Multiemployer Plan) is subject to the
minimum funding requirements of Section 302 of ERISA or Section 412 of the
Internal Revenue Code of 1986, as amended (the "Code"). No Benefit Plan is an
"employee pension benefit plan" as defined in Section 3(2) of ERISA other than a
Multiemployer Plan. Neither any Company nor any Benefit Plan (other than a
Multiemployer Plan) holds as an asset of any Benefit Plan any interest in any
annuity contract, guaranteed investment contract or any other investment or
insurance contract issued by an insurance company that is the subject of
bankruptcy, conservatorship or rehabilitation proceedings.
(c) Each Benefit Plan and each related trust agreement, annuity
contract or other funding instrument presently is in material compliance and has
been maintained in material compliance with its terms and, both as to form and
in operation, with the requirements prescribed
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by any and all statutes, orders, rules and regulations which are applicable to
such plans, including without limitation ERISA and the Code, except where such
instances of non-compliance would not in the aggregate have a Material Adverse
Effect on the Companies.
(d) No Company has engaged in, or to the Knowledge of Sellers, is a
successor or parent corporation to an entity that has engaged in, a transaction
described in Section 4212(c) of ERISA. All contributions required to be made by
any Company to each Multiemployer Plan have been made when due. If, as of the
Closing Date, each Company were to withdraw from all Multiemployer Plans to
which any Company has contributed or been obligated to contribute, it (and they)
would incur no liabilities to such plans under Title IV of ERISA.
(e) To Sellers' Knowledge, with respect to each Multiemployer Plan: (1)
no such Multiemployer Plan has been terminated or has been in reorganization
under ERISA so as to result, directly or indirectly, in any liability,
contingent or otherwise, of any Company under Title IV of ERISA; (2) no
proceeding has been initiated by any person (including the Pension Benefit
Guaranty Corporation) to terminate any Multiemployer Plan; (3) Seller has no
reason to believe that any Multiemployer Plan will be terminated or will be
reorganized under ERISA; and (4) no Company expects to withdraw from any
Multiemployer Plan.
(f) None of the Companies or any Benefit Plan has any present or future
obligation to make any payment to, or with respect to any present or former
employee of any Company pursuant to, any retiree medical benefit plan, or other
retiree Benefit Plan, and no condition exists which would prevent any Company
from amending or terminating any such Benefit Plan.
(g) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Companies that is an "excess parachute
payment" pursuant to Section 280G of the Code.
(h) Neither Seller, any Company nor any ERISA Affiliate has any
announced plan or legally binding commitment to create any additional Benefit
Plans which are intended to cover employees or former employees of the Companies
or to amend or modify any existing Benefit Plan.
(i) Except as would not in the aggregate have a Material Adverse Effect
on the Companies, no event has occurred in connection with which any Company or
any Benefit Plan, directly or indirectly, could be subject to any material
liability (A) under any statute, regulation or governmental order relating to
any Employee Plans; (B) pursuant to any obligation of any Company to indemnify
any person against liability incurred under any such statute, regulation or
order as they relate to the Employee Plans or (C) pursuant to any benefit plan,
program or arrangement of any entity which is (or at any relevant time was) a
member of a "controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with, any Company as set
forth in Section 414(b), (c), (m) or (o) of the Code.
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(j) Neither the execution and delivery of this Agreement by Seller nor
the consummation of the transactions contemplated hereby will result in the
acceleration or creation of any rights of any person to benefits under any
Benefit Plan (including, without limitation, the acceleration of the vesting or
exercisability of any stock options, the acceleration of the vesting or the
acceleration or creation of any rights under any severance, parachute or change
in control agreement).
SECTION 2.12. Events Subsequent to December 31, 1997. Except as set
forth on Schedule 2.12, since December 31, 1997, the Business has been conducted
in the ordinary course and there has not been in the aggregate any Material
Adverse Effect on the Companies. Without limiting the generality of the
foregoing, since that date:
(a) no Company has sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than for a fair consideration in the
ordinary course of business;
(b) other than new and pending acquisitions set forth in the
Confidential Information Memorandum dated February, 1998 provided to Buyer by
Sellers (the "Offering Memo") or on Schedule 2.12, no Company has entered into
any transaction or contract material to any such Company outside the ordinary
course of business or has made any material changes in the customary method of
operations of such Company, including, without limitation, practices relating to
marketing, selling and pricing;
(c) no party (including any Company) has accelerated, terminated,
modified, or canceled any Material Contract;
(d) no Company has imposed any Lien upon any of its assets, tangible or
intangible, except for any Liens that are related to a liability included in
Debt or Working Capital;
(e) except for new builds planned for 1998 and set forth in the
Offering Memo, no Company has made any capital expenditure (or series of related
capital expenditures) either involving more than $5,000,000 or outside the
ordinary course of business;
(f) other than new and pending acquisitions set forth in the Offering
Memo or on Schedule 2.12, no Company has made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either involving
more than $1,000,000 or outside the ordinary course of business;
(g) no Company has issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation that is not prepayable without penalty and, if not
prepaid prior to Closing, included in Debt;
(h) no Company has canceled, compromised, waived, or released any right
or claim (or series of related rights and claims) outside the ordinary course of
business;
(i) there has been no change made or authorized in the charter,
partnership agreement or bylaws of any Company;
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(j) no Company has (i) issued, sold, or otherwise disposed of any of
its partnership units or capital stock, or granted any options, warrants, or
other rights to purchase or obtain (including upon conversion, exchange or
exercise) any of its partnership units or capital stock, as applicable, nor (ii)
declared, set aside, or paid any non-cash dividend or made any distribution with
respect to or redeemed, purchased, or otherwise acquired any of, its partnership
units or capital stock;
(k) no Company has experienced any damage, destruction or loss (whether
or not covered by insurance) to any property, which properties individually or
in the aggregate are material;
(l) (i) no Company has made any loan to, or entered into any other
material transaction with, any of its directors, officers, or employees other
than in the ordinary course of business consistent with past practice in
connection with their employment, (ii) no Company has entered into any
employment contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement, (iii) no Company
has granted any increase in the base compensation of any of its directors,
officers, or employees other than in the ordinary course of business and
consistent with past practices, and (iv) no Company has adopted, amended,
modified or terminated any bonus, profit-sharing, incentive, severance or other
plan, contract or commitment for the benefit of any of its directors, officers,
or employees (or taken any such action with respect to any other employee
benefit plan).
(m) there has not been any change by any Company in its accounting
methods, principles or practices, other than such changes required by GAAP;
(n) except as reflected in Working Capital, (i) there has not been any
writing down, other than in accordance with GAAP and consistent with past
practice, of the value of any accounts or other receivables or any revaluation
by any Company of any of its assets or (ii) any cancellation or writing off as
worthless and uncollectable of any debt, note or account or other receivable by
any Company, or (iii) any waiver by any Company of a right of substantial value;
(o) except as reflected in Working Capital or in the case of any items
arising in the ordinary course of business, there has not been any payment or
incurring of liability to pay any material Taxes, assessments, fees, penalties,
interest or other governmental charges;
(p) there has not been any other material occurrence, event, incident,
action, failure to act or transaction outside the ordinary course of business
involving any Company; and
(q) no Company has committed to any of the foregoing.
SECTION 2.13. Investigations; Litigation. Except as described in any of
the Financial Statements or as disclosed on Schedule 2.13:
(a) no investigation or review by any Governmental Entity with respect
to any Company which would in the aggregate constitute a Material Adverse Effect
on the Companies is pending nor has any Governmental Entity notified any Company
of an intention to conduct such an investigation or review;
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(b) there are no actions, suits or proceedings pending (or, to the
Knowledge of the Sellers, threatened) against or affecting any of the Companies,
or any of their respective properties at law or in equity, or before any
Governmental Entity, which, in the aggregate, would constitute a Material
Adverse Effect on the Companies; and
(c) No Company is subject to any outstanding injunction, judgment,
order, decree, ruling or charge.
SECTION 2.14. Tax Matters. Except to the extent disclosed on Schedule
2.14:
(a) each Company (Media, M&M, Nevada and MWS and each Subsidiary of
Media, M&M, Nevada or MWS are hereinafter sometimes referred to collectively as
the "Taxpayers" or individually as a "Taxpayer") has (i) duly filed (or there
have been filed on its behalf) with the appropriate Tax authorities all Tax
Returns required to be filed by it on or prior to the date hereof, and such Tax
Returns are true, complete, and correct in all material respects, except to the
extent that any failure to file any Tax Return or any inaccuracies in filed Tax
Returns would not, individually or in the aggregate, have a Material Adverse
Effect and (ii) duly paid in full (or there has been paid on each of their
behalf), or has established (or there has been established on each of their
behalf) an adequate accrual or reserve for Taxes as reflected in the calculation
of Working Capital for, all Taxes that accrue or are payable by such Taxpayer
(x) in respect of any taxable periods that end on or before the Closing Date and
(y) for any taxable period that begins before the Closing Date and ends
thereafter, to the extent that such Taxes are attributable to the portion of
such period ending on the Closing Date under the terms of Section 5.15 (d),
except to the extent that any failure to pay or reserve for would not,
individually or in the aggregate, have a Material Adverse Effect. There is no
audit or other matter in controversy with respect to any Taxes due and owing by
any Taxpayer, and there is no Tax deficiency or claim assessed or, to the best
of the Taxpayers' Knowledge, proposed or threatened (whether orally or in
writing) against any Taxpayer, other than (x) in respect of any such audits,
controversies, deficiencies, assessments, or proposed assessments that are being
contested in good faith, for which adequate reserves have been established in
accordance with GAAP or (y) would not, individually or in the aggregate, have a
Material Adverse Effect. Schedule 2.14 sets forth any contested liability in
respect of which the amount being contested exceeds $250,000.
(b) none of the Taxpayers (i) has waived any statutory period of
limitations for the assessment of any Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency other than in the case of any
such waivers or extensions in respect of an assessment or deficiency of Tax the
liability of which has been satisfied or settled, (ii) has filed a consent under
Code Section 341(f) concerning collapsible corporations, or (iii) has any
liability for the Taxes of any other person as defined in Section 7701(a)(1) of
the Code under Treas. Reg. Sections 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee, successor or by contract (other than
liability for Taxes imposed by contract entered into in the ordinary course of
business for the acquisition by a Taxpayer of assets used in the Business or
stock of any entity holding any such assets used in the Business), except to the
extent that any such waiver, consent, or liability referred to in clauses (i),
(ii) and (iii), respectively, of this Section 2.14(b) would not, individually or
in the aggregate, have a Material Adverse Effect;
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(c) to the Knowledge of the Taxpayers, no claim has been made since
January 1, 1994 by an authority in a jurisdiction where a Taxpayer does not file
Tax Returns that such Taxpayer is or may be subject to taxation by that
jurisdiction, other than in the case of any such claims the liability of which
has been satisfied or settled or, except to the extent that any such claims
would not, individually or in the aggregate, have a Material Adverse Effect;
(d) none of the assets of the Taxpayers (i) are required to be treated
as being owned by any other person pursuant to the so-called safe harbor lease
provisions of former Section 168(f)(8) of the Code, (ii) secures any debt the
interest on which is tax-exempt under Code Section 103(a), or (iii) is
tax-exempt use property within the meaning of Code Section 168(h), except to the
extent that any such treatment or condition under this Section 2.14(d) would
not, individually or in the aggregate, have a Material Adverse Effect;
(e) none of the Taxpayers has agreed to or is required to make any
adjustment pursuant to Code Section 481(a) by reason of a change in accounting
method initiated by such Taxpayer and none of the Taxpayers have Knowledge that
the Internal Revenue Service (the "IRS") has proposed any such adjustment or
change in accounting method, except to the extent that any such adjustment or
proposed adjustment would not have a Material Adverse Effect;
(f) for Federal income Tax purposes, M&M and MWS are each an "S
Corporation" as defined in Section 1361(a) of the Code and M&M has been an S
Corporation for each taxable year since July 1, 1995 and MWS has been an S
Corporation for each taxable year since August 14, 1991.
(g) Media is treated, and has been treated since its formation, as a
partnership for U.S. federal income tax purposes, and is not, and has never
been, treated as an association taxable as a corporation for U.S. federal income
tax purposes;
(h) none of the Taxpayers has requested an extension of the time within
which to file any Federal or state Tax Return for which such Tax Return has not
been filed;
(i) none of the Taxpayers has any obligation under any Tax allocation
or sharing agreement among or between the Taxpayers and the Sellers or any
Affiliates thereof, and after the Closing Date, no Taxpayer shall be a party to,
bound by or have any obligation under any Tax allocation or sharing agreement or
have any liability thereunder among or between the Taxpayers and the Sellers or
any Affiliates thereof for amounts due in respect of periods prior to the
Closing Date, except to the extent that any such obligation referred to in this
Section 2.14(i) would not, individually or in the aggregate, have a Material
Adverse Effect; and
(j) Schedule 2.14 set forth the states in which each of M&M and MWS
filed state income Tax Returns for the 1997 taxable year and their respective
filing status for such taxable year and each of M&M and MWS have taken all
required steps to be treated as an S Corporation under applicable state income
tax law in each state in which M&M and MWS filed state income Tax Returns for
the 1997 taxable year in which M&M or MWS status on Schedule 2.14 is listed as
"S Corporation."
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SECTION 2.15. Insurance. Each Company has insurance policies, including
without limitation, policies of life, health and liability insurance, that are
customary and appropriate for the industry and the locales in which it operates
and such policies are in full force and effect, except for the failure to have
or maintain in full force and effect such policies as would not in the aggregate
constitute a Material Adverse Effect on the Companies. Copies of all such
policies, including the related certificates of insurance, have been provided to
or made available to Buyer.
SECTION 2.16. Real Property; Title. Schedule 2.16 lists all real
property used in the conduct of the Business and indicates whether such property
is leased or owned by the Companies. With respect to each such parcel of real
property:
(a) the identified owner has good and marketable title to the real
property, free and clear of any Liens, easements, covenants, or other
restrictions, except for installments of special assessments not yet delinquent
and recorded easements, covenants, and other restrictions which do not
materially impair the current use, occupancy, or value, or the marketability of
title, of the property subject thereto;
(b) except as disclosed on Schedule 2.13, there are no pending or, to
the Knowledge of Sellers, threatened condemnation proceedings, lawsuits, or
administrative actions relating to the real property or other matters affecting
adversely the current use, occupancy, or the material value to the Companies
thereof;
(c) to the Knowledge of Sellers, with respect to each parcel of owned
real property, (i) there are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of the parcel of real property; (ii) there are
no outstanding options or rights of first refusal to purchase the parcel of real
property, or any portion thereof or interest therein; and (iii) there are no
parties (other than the Companies) in possession of the parcel of real property,
other than tenants under any leases disclosed in Schedule 2.16 who are in
possession of space to which they are entitled.
(d) The Sellers have delivered or made available to the Buyer correct
and complete copies of the leases and subleases listed in Schedule 2.16 (as
amended to date) of real property held by the Companies (the "Leases"). With
respect to each, Lease: each Company party to the respective Leases (i) has a
valid and subsisting leasehold interest in each Lease, (ii) has not subleased or
assigned any interest in any such Lease, except in connection with such
Company's financing activities, and (iii) has not received any written notice of
material default under any such Lease which is still in effect, except for such
defaults that would not in the aggregate constitute a Material Adverse Effect.
(e) Section 2.16(e) is a list of all of the material structures used to
display billboards, posters and "faces" that are subleased by any of the
Companies.
SECTION 2.17. Permits and Licenses. Each Company holds and is in
material compliance with all permits and licenses necessary to operate the
Business as currently operated, each of which is listed in Schedule 2.17 (the
"Licenses"). Except as set forth in Schedule 2.17, no
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governmental qualifications, registrations, filings, privileges, franchises,
licenses, permits, approvals or authorizations other than the Licenses are
required to operate the Business in substantially the same manner as the
Business is being operated as of the date hereof, other than those that the
failure to hold or obtain would not in the aggregate constitute a Material
Adverse Effect on the Companies. No application, action or proceeding is pending
for the renewal or modification of any of the Licenses, except for matters in
the ordinary course of business for each of the Companies, and, except for
actions or proceedings affecting outdoor advertising companies generally and the
actions described in Schedule 2.13, no application, complaint, action or
proceeding is pending, or threatened in writing, that would reasonably be
expected to result in (i) the denial of an application for renewal of any of the
Licenses, (ii) the revocation, modification, nonrenewal or suspension of any of
the Licenses, (iii) the issuance of a cease-and-desist order with respect to any
of the Licenses or (iv) the imposition of any material administrative or
judicial sanction with respect to any Company, except as, with respect to (i),
(ii), (iii) and (iv), would not in the aggregate result in a Material Adverse
Effect on the Companies.
SECTION 2.18. Collective Bargaining Agreements and Labor. The Companies
have previously provided to Buyer all labor or collective bargaining agreements
which pertain to any of the employees of any of the Companies. To the Knowledge
of the Sellers, there are no pending complaints, charges or claims against any
Company filed with any public or governmental authority, arbitrator or court
based upon the employment or termination by any Company of any individual,
except for such complaints, charges or claims which if adversely determined
would not in the aggregate constitute a Material Adverse Effect on the
Companies.
SECTION 2.19. Intangible Assets. Other than as set forth in Schedule
2.19, there are no material patents, patent applications, trademarks, trade
names, service marks, copyright registrations or copyright applications licensed
or used by or registered in the name of any Company which are used in the
conduct of the Business.
SECTION 2.20. Personal Property; Information Systems.
(a) The Companies collectively own, have a valid leasehold interest in,
or have legal right to use, all of the tangible personal property necessary to
carry on the Business of the Companies as presently conducted, free and clear of
all Liens except for (i) Liens for inchoate mechanics' and materialmens' liens
for construction in progress and workmens', repairmens', warehousemens' and
carriers' liens arising in the ordinary course of business, (ii) Liens for Taxes
not yet payable, (iii) Liens arising out of, under, or in connection with, this
Agreement and (iv) Liens set forth in Schedule 2.20.
(b) The operating and applications computer programs and data bases
("Software") which the Companies currently use or have available for use are
adequate and sufficient to service their existing customers on the date hereof
through the end of the current term of the contracts with such customers. All
such Software is owned outright by a Company or, if not owned by a Company, a
Company has the right to use the same pursuant to valid licenses therefor,
except where the absence of such licenses would not cause significant disruption
to the Companies' operations as presently conducted or result in significant
expense if use of the related Software were required to be terminated or the
related Software were required to be
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replaced. To the Sellers' Knowledge, none of the Software owned by a Company and
none of the Software licensed by a Company, infringes upon or violates any
intellectual property right of any other Person.
SECTION 2.21. Material Contracts.
(a) Schedule 2.21(a) sets forth (grouped by each clause of this Section
2.21(a)) the following contracts (collectively, along with each Lease and each
Customer Agreement, the "Material Contracts") in effect as of the date of this
Agreement to which any Company is a party or to which it or its assets is
subject:
(i) any contract (excluding any employment contract,
Customer Agreement and Lease) that the Sellers reasonably anticipate will, in
accordance with its terms, involve aggregate annual payments after the date
hereof by any Company of more than $100,000 and that is not cancelable without
liability within sixty (60) days;
(ii) any employment or consulting contracts
(including without limitation any arrangements or obligations with respect to
severance, change in control or termination pay) with any director, officer or
employee of any Company;
(iii) all partnership or joint venture agreements of
any Company;
(iv) any note, loan, letter of credit, contract
relating to indebtedness for borrowed money or capitalized leases, or other
contract in respect of which any Company is obligated in any way to provide
funds in respect of, or to guarantee or assume, any debt, obligation or dividend
of any person or entity involving aggregate obligations of the Companies of more
than $100,000;
(v) any indemnity arrangement arising in connection
with any sale or disposition of assets (other than sales of assets in the
ordinary course of business);
(vi) any royalty arrangement arising in connection
with any sale or disposition of assets;
(vii) any acquisition or disposition contracts of any
Company under which a party thereto remains obliged to pay moneys or perform in
any material manner;
(viii) all contracts, other than Licenses or Leases,
with any Governmental Entity or with any labor union;
(ix) contracts for capital expenditures requiring
payments by any Company after the date hereof, individually or in the aggregate,
in excess of $100,000 per year or $500,000 per project;
(x) each contract to which any Company is a party (i)
limiting the right of any Company prior to or after the Closing Date, (A) to
engage in, or to compete with any person in, any business, including each
contract or agreement containing exclusivity provisions
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restricting the geographical area in which, or the method by which, any business
may be conducted by any Company prior to or after the Closing Date, or (B) to
solicit any vendor, customer or client, or (ii) containing "most favored
nations" or similar provisions affecting the pricing terms of contracts to which
it is a party; and
(xi) each other contract which is material to any
Company or the conduct of its business and the absence of which would constitute
a Material Adverse Effect on such Company.
(b) Schedule 2.21(b) is true and correct and sets forth a
complete and accurate listing of all Customer Agreements to which any Company is
a party as of the date hereof. At Closing, the Sellers will provide a true,
correct and complete listing of all Customer Agreements to which any Company is
a party at the time of Closing. "Customer Agreement" means any contract, letter
agreement or other agreement entered into by a Company for the provision of
outdoor advertising services, which agreement generates revenues in excess of
$250,000 per year, as such agreements may be amended from time to time.
(c) Sellers have made available to Buyer true and complete
copies of all Material Contracts (including all amendments thereto).
(d) Each Material Contract and each other contract of any
Company which would have been required to be disclosed Schedule 2.21(a) or
2.21(b) had such contract been entered into prior to the date of this Agreement,
is in full force and effect and is a legal, valid and binding obligation of such
Company, and there is not (i) any material default or breach of a material
provision (or any event which, with the giving of notice or lapse of time or
both, would be a material default) by any Company or, to the Knowledge of the
Sellers, any other party, in the timely performance of any obligation to be
performed or paid under any such Material Contract or any such other contract or
(ii) to the Sellers' Knowledge, any threat of cancellation or termination of any
such Material Contract or other such contract, except with respect to clauses
(i) and (ii), for such defaults, cancellations or terminations that would not in
the aggregate constitute a Material Adverse Effect on the Companies.
(e) As used herein, "contract" means any legally binding
agreement, commitment or arrangement.
SECTION 2.22. Excluded Assets and Liabilities.
(a) Winery. Schedule 2.22(a) sets forth a true, complete and
correct list of all assets, liabilities and employees of the Companies relating
principally to the Winery, including a separate list of liabilities to be
reflected in Working Capital or Debt as of the Adjustment Time ("Excluded Winery
Liabilities") located in Paso Robles, California and currently owned by M&M (the
"Winery").
(b) Martin Headquarters. Schedule 2.22(b) sets forth a true,
complete and correct list of certain assets and liabilities related primarily
to, and employees housed at, the headquarters offices of the Business located in
Paso Robles, California ("Martin Headquarters"),
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including a separate list of liabilities to be reflected in Working Capital or
Debt as of the Adjustment Time ("Excluded Headquarters Liabilities").
SECTION 2.23. Recent Acquisitions. Each of the acquisitions
listed in Part A of Schedule 2.12 have been consummated by one or more of the
Companies for the purchase price and with the cashflows listed in Part A of
Schedule 2.12. True, correct and complete copies of each of the agreements
pursuant to which such acquisitions were made have been provided or made
available to Buyer.
SECTION 2.24. Disclosure. None of the representations,
warranties or statements by the Sellers in this Agreement or the Schedules, and
no information provided by any Company or Seller to another Seller in connection
with the sale and purchase contemplated by this Agreement, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary to make the statements or facts contained herein not
misleading. To the Sellers' Knowledge, there is no fact or circumstance in
existence which constitutes, or is reasonably likely to constitute, a Material
Adverse Effect on any Company or the due performance by any Company of its
obligations hereunder, which has not been expressly set forth in this Agreement
or the Schedules.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller severally represents and warrants to Buyer to the
extent pertaining to such Seller as follows:
SECTION 3.1. Authority Relative to this Agreement. Such Seller
has the corporate, partnership, trust or other power and authority, as
applicable, to enter into this Agreement and to carry out its obligations
hereunder. With respect to any Seller not an individual, the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by any boards of directors,
shareholders, partners or trustees and no other corporate, stockholder,
partnership, trust or other approvals are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by such Seller and, assuming this Agreement has
been duly and validly executed and delivered by Buyer, this Agreement
constitutes a valid and binding agreement of such Seller, enforceable against
such Seller in accordance with its terms (except insofar as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies).
SECTION 3.2. Title to Units and Capital Stock. Except as set
forth in Schedules I, II, III and IV, such Seller owns the number of Units
and/or shares of Capital Stock, as applicable, set forth opposite such Seller's
name on Schedules I, II, III and/or IV, as applicable, free and clear of all
Liens, and upon delivery and payment for such Units and/or shares of Capital
Stock at the Closing as provided for in this Agreement, Buyer will acquire good
and valid title to
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all such Units and/or shares of Capital Stock, as applicable, being sold to it
by such Seller, free and clear of all Liens.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
SECTION 4.1. Organization, Qualification, Etc. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not in the aggregate
have a Material Adverse Effect on Buyer.
SECTION 4.2. Corporate Authority Relative to this Agreement;
No Violation. Buyer has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of Buyer and no
other corporate or stockholder proceedings on the part of Buyer is necessary to
authorize this Agreement and the other transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Buyer and,
assuming this Agreement has been duly and validly executed and delivered by the
other parties hereto, this Agreement constitutes a valid and binding agreement
of Buyer, enforceable against it in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
Buyer is not subject to or obligated under any charter, by-law or contract
provision or any license, franchise or permit, or subject to any order or
decree, which would be breached or violated by its executing or carrying out
this Agreement. Other than in connection with or in compliance with the HSR Act,
no authorization, consent or approval of, or filing with, any governmental body
or authority is necessary for the consummation by Buyer of the transactions
contemplated by this Agreement, except for such authorizations, consents,
approvals or filings, the failure to obtain or make which would not, in the
aggregate, have a material adverse effect on Buyer; provided that Buyer makes no
representation with respect to such of the foregoing as are required by reason
of the regulatory status of the Companies or facts specifically pertaining to
the Companies.
SECTION 4.3. Investigations; Litigation. Except as previously
disclosed in writing to the Companies:
(a) no investigation or review by any Governmental Entity with
respect to Buyer or any of its Subsidiaries which would in the aggregate have or
be reasonably likely to have a material adverse effect on Buyer's ability to
consummate the transactions contemplated by this
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Agreement is pending nor has any Governmental Entity notified Buyer of an
intention to conduct such an investigation or review; and
(b) there are no actions, suits or proceedings pending (or, to
Buyer's Knowledge, threatened) against or affecting Buyer or its Subsidiaries,
or any of their respective properties at law or in equity, or before any
Governmental Entity which in the aggregate is reasonably likely to have a
material adverse effect on Buyer's ability to consummate the transactions
contemplated by this Agreement.
SECTION 4.4. Financial Ability. Buyer has the funds necessary
to pay the Purchase Price and consummate the transactions contemplated by this
Agreement.
SECTION 4.5. Brokers' Fees. The Buyer has no liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which any Seller
could become liable or obligated.
ARTICLE V
COVENANTS
SECTION 5.1. Conduct of Business by the Companies. From the
date of this Agreement to the Closing or the date, if any, on which this
Agreement is earlier terminated pursuant to Section 7.1, and except as may be
agreed to by the other parties hereto or as may be permitted pursuant to this
Agreement, each Company shall:
(a) conduct its operations and maintain its accounting
methods, principles, or practices according to its ordinary and usual course of
business consistent with past practice and GAAP;
(b) use its reasonable efforts to (i) preserve intact its
business organizations and goodwill in all material respects, (ii) keep
available the services of its officers and employees as a group, subject to
changes in the ordinary course, and (iii) maintain satisfactory relationships
with suppliers, distributors, customers and others having business relationships
with them;
(c) notify Buyer of any emergency or other change in the
normal course of its businesses or in the operation of its properties and of any
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) of any governmental body or authority other than
nonmaterial complaints, investigations or hearings arising in the ordinary
course of business;
(d) except as otherwise provided in this Agreement or as
disclosed on Schedule 5.1(d), not enter into or amend any employment, severance
or similar agreements or arrangements with any of their respective directors or
executive officers, except general salary increases in amounts consistent with
past practices including without limitation the annual salary increases
scheduled for July 1998 as previously disclosed to Buyer;
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(e) except as (i) described in Schedule 2.12, (ii) as
previously disclosed to Buyer in the Offering Memo, and (iii) in connection with
the Kunz Option, not (A) authorize, propose or enter into an agreement with
respect to, any merger, consolidation or business combination, or any
acquisition of assets or securities except to the extent that such mergers,
consolidations or business combinations or any acquisitions of assets or
securities, taken in the aggregate, do not exceed $500,000, (B) dispose of a
material amount of assets or securities, (C) release or relinquish of any
material contract rights not in the ordinary course of business and consistent
with past practice or (D) exceed the amount of capital expenditures for new
builds contained in its 1998 budget, as previously provided to Buyer;
(f) not propose or adopt any amendments to its partnership
agreement or corporate charter or by-laws, as applicable;
(g) not issue any partnership interests or shares of its
capital stock, as applicable, or otherwise change its capitalization as it
existed on the date hereof, except for the issuance or incurrence of
nonconvertible debt in connection with acquisitions permitted pursuant to
Section 5.1(e), which debt is either prepaid prior to the Closing or included in
Debt or Working Capital as of the Adjustment Time, and as otherwise contemplated
herein;
(h) not grant, confer or award any options, warrants,
conversion rights or other rights, not existing on the date hereof, to acquire
any partnership interests or shares of its capital stock, as applicable;
(i) except for required distributions with respect to
Preferred Units, not authorize or pay any stock dividends or make any non-cash
distribution with respect to its Units or outstanding shares of stock, as
applicable; provided, however, cash distributions shall be permitted in the sole
and absolute discretion of the general partner or board of directors, as
applicable;
(j) not purchase or redeem any partnership interest or shares
of its capital stock, except for the redemption of all outstanding Preferred
Units as contemplated by this Agreement;
(k) except as described on Schedule 5.1(k), not amend the
terms of its respective employee benefit plans, programs or arrangements or any
severance or similar agreements or arrangements in existence on the date hereof
except as required by law, or adopt any new employee benefit plans, programs or
arrangements or any severance or similar agreements or arrangements;
(l) not enter into any loan agreement, refinance any existing
loan, incur any indebtedness for borrowed money or purchase money indebtedness
that is not prepayable without penalty and either paid prior to the Closing or
included as Working Capital or Debt as of the Adjustment Time or, other than in
the ordinary course of business and consistent with past practice and, if
outstanding at the Closing, included in Working Capital or Debt as of the
Adjustment Time, assume, guarantee, endorse or otherwise become responsible for
indebtedness of any other person, or make any loans or advances to any person;
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(m) not (i) terminate, modify or amend any Material Contract,
License, or any confidentiality agreement, except in the ordinary course of
business and not involving a material increase in liability that is not
reflected in Working Capital, or reduction in revenue, (ii) settle or otherwise
resolve any financial issue, claim or adjustment under any such Material
Contract, Lease, License, or other contract or commitment, except by payment of
cash or the incurrence of a liability reflected in Working Capital, or (iii)
effect any modification to any Material Contract, Lease or License in connection
with obtaining any consent or approval necessitated by the transactions
contemplated hereby;
(n) not settle or compromise any action or proceeding (i) for
any amount in excess of $200,000, except by payment of cash or the incurrence of
a liability reflected in Working Capital, or (ii) that involves any commitment
or arrangement which in the aggregate constitutes a Material Adverse Effect on
the Companies;
(o) not enter into any contracts other than in the ordinary
course of business consistent with general past practice;
(p) not make any material election with respect to Taxes or
settle or compromise any material liability with respect to Taxes, except by
payment of cash or the incurrence of a liability reflected in Working Capital;
and
(q) not agree, in writing or otherwise, to take any of the
foregoing actions or take any action which would make any representation or
warranty in Articles II or III hereof untrue or incorrect.
SECTION 5.2. Access to Information; Confidentiality. The
Companies shall afford to Buyer, and to Buyer's officers, employees,
accountants, counsel, financial advisors and other representatives, reasonable
access during normal business hours during the period prior to the Closing Date
to all the respective properties, books, contracts, commitments and records of
the Companies, and during such period, the Companies shall furnish promptly to
Buyer all information concerning the Business as Buyer shall reasonably request.
The Buyer will keep all such information provided to it, directly or indirectly,
by the Companies confidential in accordance with the terms of the
Confidentiality Agreement, dated ___________, 1998, among the Buyer, Media and
M&M (the "Confidentiality Agreement").
SECTION 5.3. Filings; Other Action. Subject to the terms and
conditions herein provided, each appropriate Party shall (i) promptly, and in
any event not later than fifteen (15) business days after the date hereof, make
or cause to be made their respective filings and thereafter promptly make any
other required submissions under the HSR Act, (ii) use reasonable efforts to
cooperate with one another in (A) determining whether any filings are required
to be made with, or consents, permits, authorizations or approvals are required
to be obtained from, any third party or Governmental Entity in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (B) timely making all such filings and
timely seeking all such consents, permits, authorizations or approvals, and
(iii)
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use reasonable efforts to take, or cause to be taken, all other such actions and
do, or cause to be done, all other things as the Parties may agree are
necessary, proper or advisable to consummate and make effective the transactions
contemplated hereby. Each of (i) Buyer and (ii) the Companies will provide to
the other copies of all correspondence between it (or its advisors) and any
Governmental Entities with regulatory jurisdiction over enforcement of any
applicable antitrust laws ("Government Antitrust Entity") relating to this
Agreement or any of the matters described in this Section 5.3 and will consult
with the other Parties with respect to any communications by it or its advisors
with any Government Antitrust Entity regarding the transactions contemplated
hereby or any of the matters described in this Section 5.3. Notwithstanding any
of the foregoing, no failure to obtain termination of the waiting period under
the HSR Act shall be deemed to be a breach hereunder by the Companies, the
Sellers or Buyer.
SECTION 5.4. No Solicitation. From the date hereof until the
termination of this Agreement, the Companies shall not (whether directly or
indirectly through advisors, agents or other intermediaries), and each Company
shall use its reasonable efforts to ensure that its respective officers,
directors, employees, advisors, representatives or other agents will not,
directly or indirectly, (a) solicit, initiate, encourage or take any other
action to knowingly facilitate, any Acquisition Proposal or (b) engage or
participate in negotiations or substantive discussions with, or disclose any
non-public information relating to any of the Companies or afford access to the
properties, books or records of any of the Companies to, any Person that has
made, or has indicated its interest in making or considering or intending to
make, an Acquisition Proposal. The Companies will immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
other Person that have been conducted heretofore with respect to a potential
Acquisition Proposal.
SECTION 5.5. Public Announcements. Unless otherwise required
by applicable law or the requirements of any listing agreement with any
applicable stock exchange, Buyer and the Companies shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to this Agreement or any transaction contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation.
SECTION 5.6. Employee Matters.
(a) For a period of one year immediately following the
Closing, Buyer agrees to cause each Company to provide to all active employees
of such Company as of the Closing who continue to be employed by such Company
coverage under group medical, dental, 401(k) savings, disability insurance, life
insurance, accidental death and disability, and vacation plans or arrangements
which are, in the aggregate, substantially similar to the plans providing such
benefits to the employees immediately prior to the Closing Date; provided that
in no event shall any employee of the Winery or located at Martin Headquarters
be covered hereby.
(b) For a period of one year immediately following the Closing
Date, Buyer agrees to cause each Company to provide to all active employees of
such Company as of the Closing Date which may be affected by any reduction in
force subsequent to the Closing Date reasonable severance benefits in accordance
with Buyer's severance plans and policies in effect for
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similarly situated employees of Buyer; provided that in no event shall any
employee of the Winery or located at Martin Headquarters be covered hereby.
SECTION 5.7. Excluded Assets and Liabilities.
(a) Winery. The Parties hereby agree and acknowledge that the
Winery and any assets, liabilities or employees of M&M related primarily to the
Winery (except for the Excluded Winery liabilities are not intended to be
transferred to Buyer under this Agreement. Accordingly, prior to the Closing,
M&M shall enter into and consummate an agreement substantially in the form
attached hereto as Exhibit D (the "Winery Transfer Agreement") providing for the
transfer of the assets owned and employees employed by M&M and used solely in
the operation of the Winery and the liabilities relating to the Winery, each of
which assets, employees and liabilities are listed on Schedule 2.22(a), to a
newly formed entity controlled by one or more of the Sellers. The Winery
Transfer Agreement shall provide for the indemnification of M&M from and against
any and all liabilities and claims relating to the Winery, except for the
Excluded Winery liabilities.
(b) Martin Headquarters. The Parties hereby agree and
acknowledge that Martin Headquarters and certain assets and liabilities of the
Companies related primarily thereto and any employees of any of the Companies
housed therein are not intended to be transferred to Buyer under this Agreement
or employed by any of the Companies following the Closing. Accordingly, on or
prior to the Closing Date, Sellers shall cause the Companies to (i) transfer
such assets and liabilities (except for the Excluded Headquarters liabilities)
related primarily to Martin Headquarters to a newly formed entity controlled by
one or more of the Sellers pursuant to the Winery Transfer Agreement and (ii)
terminate the employment by the Companies of the employees housed at Martin
Headquarters which assets, liabilities and employees are listed on Schedule
2.22(b). The Sellers shall be responsible for the payment of any accrued but
unpaid vacation, holidays, benefits or other compensation as well as any
severance payment due to such employees upon termination and shall indemnify
Buyer from and against any and all liabilities and claims relating to such
assets, liabilities and employees, except for the Excluded Headquarters
liabilities.
SECTION 5.8. Supplements to Disclosure Schedules. No more than
five (5) business days after the date hereof, Sellers and the Companies may
supplement in writing the following schedules hereto only to the extent and for
the purposes provided in this Section 5.8: (a) Schedule 2.4 for the purpose of
adding other Material Contracts for which consent to the consummation of the
transactions contemplated hereby of a party thereto is required, (b) Schedule
2.16(e), (c) Schedule 2.21(a); provided, however, that to the extent that
Sellers and the Companies propose to add to such Schedule Material Contracts
which have not previously been disclosed to Buyer in connection with its due
diligence on the Companies, Sellers and the Companies may not add such Material
Contract to Schedule 2.21(a) without Buyer's consent which shall not be
unreasonably withheld and (d) Schedules I, II, III, IV and 8.2 with respect to
the allocation of the Purchase Price and indemnification obligations among the
Sellers so long as such allocation does not affect the allocation of the
aggregate Purchase Price among the Companies previously provided to Buyer in the
Martin Sign Companies Analysis of Allocation of Consideration & Related
Adjustments.
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SECTION 5.9. Phase I Environmental Audit. Buyer may obtain, at
its own expense, as soon as practicable, but in any event within thirty (30)
days of the date of this Agreement, Phase I reports pursuant to ASTM Standard E
1527-97 or other standard environmental assessments (the "Environmental
Reports") with respect to any properties owned or leased by any Company from an
environmental engineering firm selected by Buyer and approved by MWS (which
approval shall not be unreasonably withheld). If Buyer elects to obtain such
Environmental Reports, Buyer shall, promptly (but in no event later than two
business days) after receipt thereof, provide a copy of such Environmental
Reports to Sellers. If any such Environmental Report indicates that remediation
of an environmental condition on any property owned or leased by any Company is
required under any Environmental Law or that any other action is required under
any Environmental Law (collectively, the "Remedial Actions"), other than any
matters identified in Schedule 2.10 or the reports listed therein, Sellers
shall, at Buyer's request, take and complete such Remedial Actions in accordance
with applicable Environmental Law; provided, that in the event that the cost of
completing such Remedial Actions is, in the aggregate, (i) less than $500,000,
then Buyer shall pay costs to complete such Remedial Actions up to $500,000,
(ii) at least $500,000 but less than $5,000,000, then Sellers shall pay eighty
percent (80%) and Buyer shall pay twenty percent (20%) of the cost to complete
such Remedial Actions in excess of $500,000, or (iii) $5,000,000 or more, then
Sellers may elect either (A) to pay the cost to complete such Remedial Actions
in excess of $5,000,000 or (B) to terminate this Agreement by written notice to
Buyer within five (5) business days after Buyer notifies Sellers of the cost of
such Remedial Actions and, provided, further, that in the event that such
Remedial Actions are not completed prior to the Closing Date, the Parties shall
take steps necessary to ensure the payment of such costs, which steps may
include the placement of a portion of the Purchase Price equal to any unpaid
amounts required to be paid by Sellers pursuant to this Section 5.9 in escrow at
Closing.
SECTION 5.10. Broker's Fees. Any fees due to CIBC Oppenheimer
shall be paid by the Companies on or prior to the Closing Date and the resulting
reduction in cash or increase in debt, as applicable, shall be reflected in
Working Capital or Debt as of the Adjustment Time.
SECTION 5.11. Western Poster Services, Inc. Buyer, Weyrich and
Martin shall enter into the WPS Stock Purchase Agreement substantially in the
form of Exhibit E relating to the sale to Buyer of 33,000 shares (the "WPS
Shares") of the common stock, no par value and stated value of $1.00 per share,
of WPS held by Weyrich and Martin. Concurrently with the Closing the parties to
the WPS Stock Purchase Agreement shall consummate the purchase and sale of the
WPS Shares.
SECTION 5.12. Notification of Indemnification Claim. If on or
prior to the Closing Date, Buyer has, or has Knowledge of, a claim for
indemnification against any Seller pursuant to Section 8.2, it shall promptly,
and prior to the Closing, notify the Sellers' Representative of such claim;
provided, however, that failure to provide such notification shall not affect
Buyer's rights pursuant to Article VIII.
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SECTION 5.13. Indemnification Agreements.
(a) Following the Closing, Buyer shall cause each of the
Companies to continue in full force and effect for at least six years from the
Closing Date all rights to indemnification and all limitations on liability
existing in favor of any of the individuals who prior to the Closing were
partners, officers, directors, employees or shareholders of any of the Companies
and the heirs, executors, trustees, fiduciaries and administrators of such
partners, officers, directors, employees or shareholders (collectively, the
"Company Indemnitees") as provided in the Media Partnership Agreement or the
Articles of Incorporation of By-laws of M&M, Nevada or MWS, as applicable, or
any Indemnity Agreement (as defined below); provided, however, that, no Seller
or any partners, officers, directors, employees or shareholders of any Seller,
or any heirs, executors, trustees, fiduciaries and administrators of such
partners, officers, directors, employees or shareholders, shall have or be
deemed to have any such rights with respect to any Losses arising out of or
related to any matter with respect to which such Seller has agreed to indemnify
the Buyer Indemnified Parties pursuant to Section 8.2(a) or (b) (without
reference to the Buyer Deductible, Cap or Individual Cap, as such terms are
defined in Section 8.2(a)). To the extent permitted by (i) California or Nevada
law, as applicable, (ii) the Media Partnership Agreement or the Articles of
Incorporation and the By-laws of M&M, Nevada or MWS, as applicable, or (iii) the
Administrative Services Agreement (each, an "Indemnity Agreement"), and subject
to the proviso in the preceding sentence, if any Company Indemnitee notifies any
Company of any claim for indemnification then Buyer shall cause such Company to
indemnify the Company Indemnitee, and advancement of expenses (which term shall
include all out of pocket costs, charges and expenses, including reasonable
attorneys fees, incurred in connection with investigating, defending, being a
witness in or participating (including on appeal), or preparing to defend, be a
witness or participate in any action, suit or proceeding for which
indemnification is being sought), upon receipt of reasonably detailed statements
therefor, shall be mandatory rather than permissive, subject to appropriate
undertakings to repay if indemnification is determined not to be available. If a
claim for indemnification is asserted or made within such six year period, all
rights to indemnification and advancement of expenses in respect of any such
claim shall continue until such claim is disposed of or all judgments, orders,
decrees or other rulings in connection with such claim are fully satisfied;
provided, however, that no Company shall be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld or
delayed). Except as otherwise may be provided pursuant to any Indemnity
Agreement, the Company Indemnitees as a group may retain only one law firm with
respect to each related matter except to the extent there is, in the opinion of
counsel to a Company Indemnitee, under applicable standards of professional
conduct, a conflict on any significant issue between positions of any two or
more Company Indemnitees.
(b) Notwithstanding any other provisions hereof, the
obligations of the Companies and Buyer contained in this Section 5.13 shall be
binding upon the successors and assigns of Buyer and the Companies. In the event
any Company or any of its successors or assigns (i) consolidates with or merges
into any other Person or (ii) transfers all or substantially all of its
properties or assets to any Person, then, and in each case, proper provision
shall be made so that successors and assigns of such Company honor the
indemnification obligations set forth in this Section 5.13(b).
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SECTION 5.14. Stockholder Agreements. By execution of this
Agreement, each of the Media Sellers, M&M Sellers, Nevada Sellers and MWS
Sellers who is a party to any agreements set forth on Schedule 2.4 relating to
the Units or Capital Stock consents to the sales of Units and Capital Stock as
contemplated by this Agreement, waives any rights of first refusal which such
Seller may have with respect to any of such Units or Capital Stock and waives
the effect of any other provision of any such agreement that would otherwise
prohibit the sale and purchase of the Units and Capital Stock as contemplated by
this Agreement, which consents and waivers shall be deemed to be both of such
Seller and the Company in which such Seller holds Units or Capital Stock,
including, without limitation, in the case of the MWS Sellers and Nevada
Sellers, the consent and waiver of MWS and Nevada as holders of Units.
SECTION 5.15. Redemption of Preferred Units. Media shall
redeem all issued and outstanding Preferred Units on or prior to the Closing
Date.
SECTION 5.16. Execution of Agreement by Sellers. This
Agreement shall be effective as of the execution hereof by Buyer, the Companies,
Martin and Weyrich. Upon the effectiveness hereof, each of Martin and Weyrich
shall use his best efforts to secure the execution hereof by each other Seller
as promptly as practicable; provided, however, that neither shall be required to
pay any additional consideration to any Seller by the provisions of this Section
5.16 for the purpose of inducing such Seller to execute this Agreement.
SECTION 5.17. Tax Covenants and Related Matters.
(a) Returns. Sellers shall cause to be prepared and filed all
income Tax Returns of each Taxpayer for taxable years or periods ending on or
before the Closing Date but which are due to be filed after the Closing Date
(taking into account all applicable extensions of time for filing).
(b) Refunds. Sellers shall be entitled to retain, or receive
payment from Buyer within fifteen (15) days of the receipt of any Tax refunds or
credits relating to a Taxpayer that were paid with respect to (i) all taxable
periods ending on or prior to the Closing Date and (ii) Pre-Closing Partial
Periods, for that portion of such taxable period up to and including the Closing
Date except in each case to the extent such refund or credit arises as the
result of a carryback of a loss, credit other tax benefit arising after the
Closing Date. Buyer shall, if Sellers' Representative so requests and at
Sellers' Representative's expense, cause a Taxpayer to file for and obtain any
refund to which Sellers is entitled to under this Section 5.17(b), provided that
Sellers' Representative shall not file, and Buyer shall not be obligated to
file, to obtain any refund that would have the effect of (x) increasing any Tax
liability of a Taxpayer or (y) otherwise materially and adversely affect any
item or Tax attribute of a Taxpayer, in each case for any taxable period ending
after the Closing Date, without Sellers' Representative first obtaining Buyer's
consent, which consent shall not be unreasonably withheld. Buyer shall permit
Sellers' Representative to control (at the Sellers' Representative's expense)
the prosecution of such refund claim, and shall cause powers of attorney
authorizing Sellers' Representative to represent a Taxpayer before the relevant
taxing authority with respect to such refund to be executed, provided that
Sellers' Representative (i) shall keep Buyer informed regarding the progress and
substantive aspect of any such refund and (ii) shall not compromise or settle
any such refund
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without obtaining Buyer's consent, which consent shall not be unreasonably
withheld, if such compromise or settlement would have the effect of (x)
increasing any Tax liability of a Taxpayer or (y) otherwise materially and
adversely affect any item or Tax attribute of a Taxpayer, in each case for any
taxable period ending after the Closing Date. In the event that any refund or
credit of Taxes for which a payment has been made pursuant to this section
5.17(b) is subsequently reduced or disallowed, the Sellers shall indemnify and
hold Buyer harmless for any Taxes assessed against Buyer or a Taxpayer by reason
of the reduction or disallowance.
(c) Cooperation. Buyer and the Sellers shall cooperate fully,
as and to the extent reasonably requested by the other party, in connection with
the filing of any Tax Returns for a Taxpayer, the filing and prosecution of any
Tax claims and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder.
(d) Allocation of Taxes. For purposes of Section 2.14, this
Section 5.17 and Article VIII, in the case of Taxes that are payable with
respect to a taxable period that begins before the Closing Date and ends after
the Closing Date, the portion of such Taxes payable for the period ending on the
Closing Date shall be (a) in the case of any Tax based upon or measured by
income, and in the case of sale or use tax, the amount which would be payable if
the taxable year ended as of the end of the Closing Date and (b) in the case of
any other Tax, such as property, the amount of such tax for the entire period
multiplied by a fraction, the numerator of which is the number of days in the
period ending on the Closing Date and the denominator of which is the number of
days in the entire period. In the case of the close of the taxable year for a
Taxpayer subject to tax as an S Corporation pursuant to section 1361 et seq. (or
a comparable state law provision) of the Code, the tax books and records of such
Taxpayer shall be closed and the Federal (or comparable state) income tax return
of such Taxpayer shall be prepared, on a basis consistent with Treasury
Regulation section 1.1362-3 (or a comparable state law provision). In the case
of the close of the taxable year for a Taxpayer subject to tax as a partnership
pursuant to section 701 et. seq. of the Code (or a comparable state law
provision), the tax books and records of such Taxpayer shall be closed, and the
Federal (or comparable state) income tax return of such Taxpayer shall be
prepared, on a basis consistent with Treasury Regulation section 1.706-1(c) (or
a comparable state law provision).
(e) Net Operating Loss of Nevada.
(i) Within three (3) business days prior to the Closing
Date, Nevada shall deliver to Buyer a statement (together with appropriate
schedules and other support, the "NOL Statement") that provides Buyer with a
good faith estimate of the amount of Nevada's net operating loss (the "NOL
Amount") as of the Closing Date.
(ii) If Buyer elects to challenge the NOL Amount
contained in the NOL Statement, then it shall so notify the Nevada Sellers in
writing no later than ten (10) business days following the Closing Date. Buyer
shall engage Arthur Anderson LLP who shall finally determine
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the NOL Amount on the Closing Date no later than sixty (60) days following the
Closing Date. If Arthur Anderson LLP determines that an adjustment to the NOL
Amount in the NOL Statement should be made, it shall so notify the Nevada
Sellers and the Buyer of the adjustment amount. All costs of engaging Arthur
Anderson LLP hereunder shall be paid by (i) the Nevada Sellers on a pro rata
basis if Arthur Anderson LLP determines that a downward adjustment of $50,000 or
more in the NOL Amount is appropriate, and (ii) by Buyer if Arthur Anderson LLP
determines that an upward adjustment or a downward adjustment of less than
$50,000 is appropriate.
SECTION 5.18. Conveyance Taxes. Any transfer, documentary,
stamp and other similar Taxes ("Conveyance Taxes") incurred solely as a result
of a change of control of any Company occurring upon consummation of this
Agreement shall be borne 50% by Buyer and 50% by Sellers of such Company (pro
rata based on their relative equity ownership). Sellers' share of Conveyance
Taxes shall be treated as an adjustment to the Purchase Price as described in
Section 1.2.
ARTICLE VI
CONDITIONS TO THE CLOSING
SECTION 6.1. Conditions to the Obligations of Each Party. The
obligations of the Sellers and Buyer to consummate the Closing are subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) All consents and approvals of Governmental Entities or any
Person necessary for consummation of the transactions contemplated hereby shall
have been obtained, other than those which, if not obtained, would not in the
aggregate constitute a Material Adverse Effect.
(b) Any waiting period (and any extension thereof) under the
HSR Act applicable to the consummation of the transactions contemplated herein
shall have expired or been terminated;
(c) The closing of the purchase and sale of the WPS shares
shall have been consummated concurrently with the Closing in accordance with the
WPS Stock Purchase Agreement; and
(d) the Winery Transfer Agreement shall have been executed and
the transactions contemplated thereby shall have been consummated.
SECTION 6.2. Conditions to the Obligations of Buyer. The
obligations of Buyer to consummate the Closing are subject to the satisfaction
or waiver by Buyer on or prior to the Closing Date of the following further
conditions:
(a) no statute, rule, regulation, executive order, decree,
preliminary or permanent injunction or restraining order shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits the consummation of the transactions contemplated hereby. No action or
proceeding shall be pending, or, to the Knowledge of the
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parties hereto, threatened, against the Companies, Sellers or Buyer or any of
their respective affiliates, partners, associates, officers or directors, or any
officers or directors of such partners, before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction or
before any arbitrator (i) seeking to prevent or delay the transactions
contemplated hereby or challenging any of the terms of provisions of this
Agreement or seeking material damages in connection therewith, or (ii) wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (B) materially and adversely affect the right of the
Buyer to own the Units and Capital Stock and to control the Companies, or (C)
materially and adversely affect the right of any of the Companies to own its
assets and to operate its businesses;
(b) the representations and warranties of the Sellers
contained herein that are qualified as to materiality shall be true and correct,
and that are not qualified as to materiality shall be true and correct in all
material respects as of the Closing Date with the same effect as though made as
of the Closing Date except (i) for changes specifically permitted by the terms
of this Agreement and (ii) that the accuracy of representations and warranties
that by their terms speak as of the date of this Agreement or some other date
will be determined as of such date;
(c) the obligations, agreements and covenants of each Seller
and each Company contained in this Agreement to be performed or complied with on
or prior to the Closing Date that are qualified as to materiality shall have
been performed or complied with, and that are not qualified as to materiality
shall have been performed or complied with in all material respects, in each
case on or prior to the Closing Date;
(d) the Sellers shall have delivered to Buyer a certificate,
dated the Closing Date, to the effect that each of the conditions specified
above in Section 6.2(b) and (c) is satisfied in all respects;
(e) Each of the Sellers shall deliver, or cause to be
delivered, to Buyer an executed affidavit, dated not more than thirty (30) days
prior to the Closing Date, in accordance with Code Section 1445(b)(2) and
Treasury Regulation section 1.1445-2(b), which statement certifies that the
Seller is not a foreign person and sets forth the Seller's name, identifying
number and address (a "FIRPTA Affidavit").
(f) all actions to be taken by the Sellers in connection with
the consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
Buyer; and
(g) each of the Sellers shall have executed this Agreement.
SECTION 6.3. Conditions to the Obligations of the Sellers. The
obligations of the Sellers to consummate the Closing are subject to the
satisfaction or waiver by the Sellers on or prior to the Closing Date of the
following further conditions:
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(a) no statute, rule, regulation, executive order, decree,
preliminary or permanent injunction or restraining order shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits the consummation of the transactions contemplated hereby. No action or
proceeding shall be pending, or, to the Knowledge of the parties hereto,
threatened, against the Companies, Sellers or Buyer or any of their respective
affiliates, partners, associates, officers or directors, or any officers or
directors of such partners, before any court or quasi-judicial or administrative
agency of any federal, state, local or foreign jurisdiction or before any
arbitrator (i) seeking to prevent or delay the transactions contemplated hereby
or challenging any of the terms of provisions of this Agreement or seeking
material damages in connection therewith, or (ii) wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation;
(b) the representations and warranties of Buyer contained
herein that are qualified as to materiality shall be true and correct, and that
are not qualified as to materiality shall be true and correct in all respects as
of the Closing Date with the same effect as though made as of the Closing Date
except (i) for changes specifically permitted by the terms of this Agreement and
(ii) that the accuracy of representations and warranties that by their terms
speak as of the date of this Agreement or some other date will be determined as
of such date;
(c) the obligations, agreements and covenants of Buyer
contained in this Agreement to be performed or complied with on or prior to the
Closing Date that are qualified as to materiality shall have been performed or
complied with, and that are not qualified as to materiality shall have been
performed or complied with in all material respects, in each case as of the
Closing Date;
(d) Buyer shall have delivered to the Company a certificate,
dated the Closing Date and signed by its Chief Executive Officer, Chief
Financial Officer or a Senior Vice President, certifying to the effect that each
of the conditions specified above in Section 6.2(b) and (c) is satisfied in all
respects; and
(e) all actions to be taken by the Buyer in connection with
the consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
Sellers.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination or Abandonment. Notwithstanding
anything contained in this Agreement to the contrary, this Agreement may be
terminated and abandoned at any time prior to the Closing Date:
(a) by the mutual written consent of MWS and Buyer;
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(b) by either MWS or Buyer if the Closing Date shall not have
occurred on or before September 30, 1998; provided, that, the party seeking to
terminate this Agreement pursuant to this clause 7.1(b) shall not have breached
in any material respect its obligations under this Agreement in any manner that
shall have proximately contributed to the failure to consummate the Closing on
or before such date;
(c) by either MWS or Buyer if (i) a statute, rule, regulation
or executive order shall have been enacted, entered or promulgated prohibiting
the consummation of the Closing substantially on the terms contemplated hereby
or (ii) an order, decree, ruling or injunction shall have been entered
permanently restraining, enjoining or otherwise prohibiting the consummation of
the Closing substantially on the terms contemplated hereby and such order,
decree, ruling or injunction shall have become final and non-appealable;
(d) by Buyer at any time prior to the Closing in the event any
of the Sellers or any of the Companies has breached any representation,
warranty, or covenant contained in this Agreement in any material respect, the
Buyer has notified MWS of the breach, and the breach has continued without cure
for a period of 30 days after the notice of breach; provided that Buyer shall
not have breached in any material respect any representation, warranty or
covenant contained in this Agreement; and
(e) MWS may terminate this Agreement on behalf of the Sellers
and the Companies by giving written notice to the Buyer at any time prior to the
Closing in the event the Buyer has breached any material representation,
warranty, or covenant contained in this Agreement in any material respect, MWS
has notified the Buyer of the breach, and the breach has continued without cure
for a period of 30 days after the notice of breach; provided that no Seller and
no Company shall have breached in any material respect any material
representation, warranty or covenant contained in this Agreement.
(f) MWS may terminate this Agreement on behalf of the Sellers
and the Companies in accordance with the provisions of Section 5.9.
The party desiring to terminate this Agreement pursuant to
this Section 7.1 shall give written notice of such termination to the other
party.
SECTION 7.2. Effect of Termination. In the event of
termination of this Agreement by either MWS or Buyer as provided in Section 7.1,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Buyer, the Company or Sellers, other than
the provisions of Section 1.4, the last sentence of Section 5.2, this Section
7.2 and Article IX, and except to the extent that such termination results from
the willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 7.3. Extension; Waiver. At any time prior to the
Closing Date, the parties may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) waive compliance
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with any of the agreements or conditions of the other party contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in any instrument in writing signed on behalf
of such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights. Notwithstanding the foregoing, no failure or delay by the Sellers, the
Companies or Buyer in exercising any right hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise of any other right hereunder.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION; REMEDIES
SECTION 8.1. Survival of Representations and Warranties. All
of the representations and warranties of the Sellers contained in this Agreement
shall survive the Closing and continue in full force and effect for a period of
one (1) year thereafter, except for those contained in Section 2.14 and Article
III which shall survive the Closing and continue in full force and effect until
thirty (30) days after the expiration of the applicable statutory period of
limitations. Notwithstanding any right of Buyer to fully investigate the affairs
of the Companies and notwithstanding any knowledge of facts determined or
determinable by Buyer pursuant to such investigation or right of investigation,
Buyer has the right fully to rely upon the representations, warranties and
covenants of the Companies and Sellers contained in this Agreement.
SECTION 8.2. Indemnification by Sellers.
(a) Subject to the limitations set forth herein, each of the
Sellers shall, severally, in proportion to the Purchase Price allocable to them
as described on Schedule 8.2 indemnify, defend and save Buyer and each Company
(following the Closing) and their respective Affiliates and each of their
respective officers, directors, employees, agents, and other than any Seller
(each, a "Buyer Indemnified Party"), harmless from and against, and to promptly
pay to a Buyer Indemnified Party or reimburse a Buyer Indemnified Party for, any
and all liabilities (whether contingent, fixed or unfixed, liquidated or
unliquidated, or otherwise), obligations, deficiencies, demands, claims, suits,
actions, or causes of action, assessments, losses, costs, expenses, interest,
fines, penalties, actual or punitive damages or costs or expenses of any and all
investigations, proceedings, judgments, environmental remediations, settlements
and compromises (including reasonable fees and expenses of attorneys,
accountants and other experts) (individually and collectively, "Losses")
sustained or incurred by any Buyer Indemnified Party relating to, resulting
from, arising out of or otherwise by virtue of any (i) misrepresentation or
breach of a warranty by any Seller made in Article II or (ii) non-compliance
with or breach by any Seller or any Company (until the Closing) of any of the
covenants or agreements contained in this Agreement.
(b) Each Seller severally agrees to indemnify, defend and save
each Buyer Indemnified Party, harmless from and against, and to promptly pay to
a Buyer Indemnified Party or reimburse a Buyer Indemnified Party for, any and
all Losses sustained or incurred by any Buyer
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Indemnified Party relating to, resulting from, arising out of or otherwise by
virtue of misrepresentation or breach of a warranty made in Article III by such
Seller.
(c) For purposes of calculating the amount of Losses subject
to indemnification pursuant to this Section 8.2, it is understood and agreed
between the Parties that to determine if there has been an inaccuracy or breach
of a representation or warranty (i) which is qualified as to materiality by the
Party making such representation or warranty or contains an exception for
matters that would not constitute a Material Adverse Effect (except for a
Material Adverse Effect resulting solely from an Advertiser Effect), then such
representation or warranty shall be read as if it were not so qualified or
contained no such exception, or (ii) which is qualified as to Knowledge by the
Seller (except those representations and warranties made in Sections 2.9, 2.13
and 2.16 as to threatened litigation or proceedings) shall be read as if it were
not so qualified.
(d) At Closing, Buyer shall place a portion of the Purchase
Price equal to two and one-half percent (2 1/2%) of the Purchase Price (the
"Post-Closing Escrow Deposit") in an escrow account with Chase Manhattan Bank
(the "Post-Closing Escrow Agent") in accordance with a Post-Closing Escrow
Agreement among Buyer, Sellers and the Escrow Agent (the "Post-Closing Escrow
Agreement") substantially in the form attached hereto as Exhibit F. Any claim
for indemnification by a Buyer Indemnified Party pursuant to Section 8.2(a)
shall, and any claim for indemnification pursuant to Section 8.2(b) against the
breaching Seller(s) may, at Buyer's sole discretion, first be satisfied from the
Post-Closing Escrow Deposit pursuant to the terms and conditions of the
Post-Closing Escrow Agreement. Buyer may only seek satisfaction of an
indemnification claim pursuant to Section 8.2(a) directly from the Sellers at
such time as the amount of the Post-Closing Escrow Deposit is fully exhausted.
On the first day of the thirteenth month after the Closing Date, the Escrow
Agent shall release as much of the Post-Closing Escrow Deposit as is not subject
to a claim by Buyer, plus accrued interest on such amount as provided in the
Post-Closing Escrow Agreement, to Sellers.
(e) The Buyer Indemnified Parties or Seller Indemnified
Parties shall be entitled to indemnification pursuant to Section 8.2(a) or
Section 8.4, as applicable, only if and to the extent that the aggregate amount
of Losses with respect to which all claims for indemnification made pursuant to
Section 8.2(a) or Section 8.4 (except for claims (i) brought by a Seller in
connection with actions of any Company (prior to the Closing) or any other
Seller related to the transactions contemplated by this Agreement and (ii)
relating to the Winery or Martin Headquarters), as applicable, exceed, in the
case of the Buyer Indemnified Parties Six Million Dollars ($6,000,000) plus 20%
of the NOL Amount (the "Buyer Deductible"), and in the case of the Seller
Indemnified Parties Six Million Dollars ($6,000,000) (the "Seller Deductible"),
whereupon the Sellers or Buyer, as applicable, shall be obligated to pay in full
all such Losses, but only to the extent such Losses are in excess of the Buyer
Deductible or Seller Deductible, as the case may be, and provided that the Buyer
Indemnified Parties or Seller Indemnified Parties, shall not be entitled to
aggregate indemnification payments pursuant to Section 8.2(a) or Section 8.4, as
applicable, in excess of five percent (5%) of the Purchase Price (the "Cap").
Notwithstanding any other provision of this Agreement, the aggregate amount
payable by any Seller under this Article VIII shall not exceed the portion of
the Purchase Price paid or payable to such Seller under this Agreement (the
"Individual Cap"). Indemnification claims made pursuant to Section
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8.2(b) shall not be subject to the Buyer Deductible or limited by the Cap, but
shall only be limited by the Individual Cap.
SECTION 8.3. Indemnification by Buyer. From and after the
Closing, Buyer agrees to indemnify, defend and save each Seller and its, his or
her respective officers, directors, employees and partners and such Person's
respective heirs, executors, trustees, fiduciaries and administrators (each, a
Seller Indemnified Party), harmless from and against, and to promptly pay to a
Seller Indemnified Party or reimburse a Seller Indemnified Party for, any and
all Losses sustained or incurred by such Seller Indemnified Party relating to,
resulting from, arising out of or otherwise by virtue of any non-compliance with
or breach by Buyer of any of the covenant or agreements contained in this
Agreement to be performed by Buyer.
SECTION 8.4. Indemnification Procedure for Third Party Claims.
In the event that subsequent to the Closing any person or entity entitled to
indemnification under this Agreement (an "Indemnified Party") asserts a claim
for indemnification or receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity who is not a party to
this Agreement or an Affiliate of such a party (including, but not limited to
any Governmental Entity (a "Third Party Claim") against such Indemnified Party,
against which a Party is required to provide indemnification under this
Agreement (an "Indemnifying Party"), the Indemnified Party shall give written
notice together with a statement of any available information regarding such
claim to the Indemnifying Party within thirty (30) days (or fifteen (15) days in
the case of any third party claims relating to Taxes) after learning of such
claim (or within such shorter time as may be necessary to give the Indemnifying
Party a reasonable opportunity to respond to such claim). The Indemnifying Party
shall have the right, upon written notice to the Indemnified Party (the "Defense
Notice") within thirty (30) days after receipt from the Indemnified Party of
notice of such claim, (which notice by the Indemnifying Party shall specify the
counsel it will appoint at its own expense and in its sole discretion to defend
such claim ("Defense Counsel")), to conduct at its expense the defense against
such claim in its own name, or if necessary in the name of the Indemnified
Party.
(a) In the event that the Indemnifying Party shall fail to
give such notice, it shall be deemed to have elected not to conduct the defense
of the subject claim, and in such event the Indemnified Party shall have the
right to conduct such defense in good faith and to compromise and settle the
claim in its reasonable discretion, provided, however that any settlement of a
Third Party Claim shall require the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed and the Indemnifying Party
will be liable for all costs, expenses, settlement amounts or other Losses paid
or incurred in connection therewith.
(b) In the event that the Indemnifying Party does elect to
conduct the defense of the subject claim, the Indemnified Party will cooperate
with and make available to the Indemnifying Party such assistance and materials
as may be reasonably requested by it, all at the expense of the Indemnifying
Party, and the Indemnified Party shall have the right at its expense to
participate in the defense assisted by counsel of its own choosing. The
Indemnifying Party shall not enter into any settlement of any Third Party Claim
or consent to any entry of judgment without the consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed, except (i) a
settlement that includes as an unconditional term thereof the giving by the
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person or persons asserting such Third Party Claim to all Indemnified Parties an
unconditional release from liability or (ii) a settlement or judgment providing
solely for a monetary award in the full amount of the item in controversy which
is indemnified in full hereunder and such settlement is paid directly out of the
Post-Closing Escrow Deposit by the Escrow Agent or paid or otherwise provided
for by one or more Sellers, as applicable, in accordance with Section 8.2.
Without the prior written consent of the Indemnified Party, the Indemnifying
Party will not enter into any settlement of any Third Party Claim or cease to
defend against such claim, if pursuant to or as a result of such settlement or
cessation, (x) injunctive or other equitable relief would be imposed against the
Indemnified Party or its Affiliates, (y) such settlement or cessation would lead
to liability or create any financial or other obligation on the part of the
Indemnified Party or its Affiliates for which the Indemnified Party is not
entitled to indemnification hereunder or (z) such settlement or cessation would,
individually or taken together with any other settlement or cessation made
pursuant to this Section 8.4(b)(z), reduce the aggregate adjusted tax basis, as
determined for Federal income tax purposes, and determined as of immediately
prior to the Closing, of the assets of M&M, MWS, Nevada and any Subsidiaries of
M&M, MWS and Nevada, for any taxable period ending after the Closing Date by One
Million Dollars ($1,000,000) or more. If a firm offer is made to settle a Third
Party Claim, which offer the Indemnifying Party is permitted to settle pursuant
to the preceding sentence, and the Indemnifying Party desires to accept and
agree to such offer, the Indemnifying Party will give written notice to the
Indemnified Party to that effect. To the extent that the acceptance by the
Indemnifying Party of such offer would require the consent of the Indemnified
Party, if the Indemnified Party notifies the Indemnifying Party that it does not
wish such offer to be accepted within twenty (20) calendar days after its
receipt of such notice, the Indemnified Party may elect by such notice to the
Indemnifying Party to continue to contest or defend such Third Party Claim and,
in such event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will not exceed the amount of such settlement offer, plus costs and
expenses paid or incurred by the Indemnified Party through the end of such
twenty (20) day period.
(c) Any judgment entered or settlement agreed upon in the
manner provided herein shall be binding upon the Indemnifying Party, and shall
conclusively be deemed to be an obligation with respect to which the Indemnified
Party is entitled to prompt indemnification hereunder.
SECTION 8.5. Direct Claims. It is the intent of the parties
hereto that all direct claims by an Indemnified Party against a party hereto not
arising out of Third Party Claims shall be subject to and benefit from the terms
of this Article VIII. Any claim under this Article VIII by an Indemnified Party
for indemnification other than indemnification against a Third Party Claim (a
"Direct Claim") will be asserted by giving the Indemnifying Party written notice
thereof.
SECTION 8.6. Failure to Give Timely Notice. A failure by an
Indemnified Party to give timely, complete or accurate notice as provided in
Section 8.4 or 8.5 will not affect the rights or obligations of any party
hereunder except and only to the extent that, as a result of such failure, any
party entitled to receive such notice was deprived of its right to recover any
payment under any applicable insurance coverage of which the Indemnified Party
has been given notice prior to the Closing or to the extent that it was
otherwise damaged as a result of such failure to give timely notice.
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SECTION 8.7. Reduction of Loss. The amount of Losses payable
with respect to any indemnification claim hereunder shall be determined on an
after-tax basis, provided, however, that the NOL Amount shall not be taken into
account in determining the amount of Losses which are the subject of any
indemnification claim, and reduced by receipt of payment (i) under insurance
policies which are not subject to retroactive adjustment or other reimbursement
to the insurer in respect of such payment, or (ii) from third parties not
Affiliated with the Indemnified Party, such payments (net of the expenses of the
recovery thereof) (collectively, "Reimbursements") shall be credited against
such Loss; provided, however, (A) the pendency of such payments shall not delay
or reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and (y) the Indemnified Party's only
obligation, hereunder or otherwise, to pursue payment under or from any insurer
or third party in respect of such Loss shall be to undertake reasonable efforts.
If any Reimbursement is obtained subsequent to payment by an Indemnifying party
in respect of a Loss, such Reimbursement shall be promptly paid over to the
Indemnifying Party. No Indemnified Party shall take any action the sole purpose
and intent of which is to prejudice the defense of any claim subject to
indemnification hereunder or to induce a third party to assert a claim subject
to indemnification hereunder.
SECTION 8.8. Subrogation. The Indemnifying Party shall be
subrogated to the Indemnified Party's rights of recovery to the extent of any
Loss satisfied by the Indemnifying Party. The Indemnified Party shall execute
and deliver such instruments and papers as are necessary to assign such rights
and assist in the exercise thereof, including access to books and records of the
Companies.
SECTION 8.9. Sellers' Representative. Notwithstanding anything
to the contrary contained in this Article VIII, to the extent that any Third
Party Claim or Direct Claim is asserted by any Buyer Indemnitee against more
than one Seller, with respect to provisions providing for notice to the
"Indemnifying Party" and the rights of the "Indemnifying Party" to conduct or
control the defense of any claim and to consent to any settlement of a claim,
"Indemnifying Party" shall refer to Sellers' Representative, as the
representative of each Seller in connection therewith, and each Seller by its
execution of this Agreement hereby appoints Sellers' Representative as its
representative to receive notice, and to act with respect to such matter, on its
behalf.
SECTION 8.10. Exclusive Remedy. Notwithstanding anything
contained herein, the indemnity provided in this Article VIII shall be the
exclusive remedy for any Losses resulting from the matters described in Section
8.2 or Section 8.3; provided, however, that nothing contained herein shall
preclude a party from seeking specific performance of a covenant made by another
Party as provided by this Agreement.
SECTION 8.11. Treatment of Payments. All payments made
pursuant to this Article VIII in satisfaction of a claim for indemnification,
including, without limitation, any payments made from the Post-Closing Escrow
Deposit, shall be treated as an adjustment in the Purchase Price.
SECTION 8.12. Right to Contribution. If any Media Seller, M&M
Seller, Nevada Seller or MWS Seller is required hereunder to pay money to a
Buyer Indemnified Party to satisfy an indemnification claim (a "Satisfied
Claim") in an amount in excess of the amount (the
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"Proportionate Amount") such Seller would have had to pay with respect to such
Satisfied Claim if all Media Sellers, M&M Sellers, Nevada Sellers or MWS
Sellers, as applicable, had paid money to satisfy such Satisfied Claim based on
the proportionate amount of the aggregate Media Purchase Price, M&M Purchase
Price, Nevada Purchase Price and/or MWS Purchase Price, as applicable, allocable
to such Seller, then such Seller may make a claim for and seek contribution from
one or more Sellers to recover from such Sellers their respective Proportionate
Amounts or such other appropriate amounts, which after recovery, will cause the
Seller seeking Contribution not to have paid in excess of its Proportionate
Amount. Notwithstanding the foregoing, when determining the Proportionate
Amount, any Satisfied Claim pursuant to Section 8.2(b) shall be allocated solely
to the breaching Seller.
SECTION 8.13. Release. Effective as of the Closing Date,
except as described below, each Seller hereby releases (this "Release") and
forever discharges the Companies and the other Sellers and their respective past
and present agents, representatives, employees, officers, directors, affiliates,
controlling persons, subsidiaries, successors and assigns (collectively, the
"Releasees") from any and all claims, demands, actions, causes of action,
judgments, obligations, contracts, agreements, debts and liabilities whatsoever,
whether known or unknown, suspected or unsuspected, both at law and in equity
which such Seller (or its heir, executors, administrators, successors and
assigns) now have, have ever had or may hereafter have against the respective
Releasees arising contemporaneously with or prior to the Closing Date or on
account of or arising out of any matter, cause or event occurring
contemporaneously with or prior to the Closing Date in connection with its
capacity as a partner of Media or as a shareholder of M&M, MWS or Nevada.
Notwithstanding the above, this Release shall not apply to any claims of a
Seller (i) pursuant to Section 1.2(f), Section 5.13 or Section 8.3 of this
Agreement or (ii) made pursuant to the Post Closing Escrow Agreement or a
Noncompetition Agreement.
In order to provide a full and complete release, with respect
to any matter whatsoever released hereby, each Seller understands and agrees
that this Release is intended to include all claims, if any, which such Seller
may have and which such Seller does not now know or suspect to exist in his or
her favor against the Releasees and that this Release extinguishes those claims.
Each Seller expressly waives all rights under California Civil Code Section 1542
("Section 1542") or any statute or common law principle of similar effect in any
jurisdiction. Section 1542 states as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such address
for a party as shall be specified by like notice):
(a) if to Media, M&M, Nevada, MWS, WPS Sellers to:
MW SIGN Corp.
1245 Vine Street
Paso Robes, CA
Attention: E. Thomas Martin
David B. Weyrich
Facsimile No.: (805) 239-1723
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 S. Grand Avenue
Los Angeles, California 90071
Attention: Brian J. McCarthy, Esq.
Facsimile No.: (213) 687-5600
(b) if to Buyer, to:
Chancellor Media Corporation of Los Angeles
433 E. Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention:
Facsimile No.:
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Attention: Eric L. Bernthal, Esq.
Facsimile No.: (202) 637-2201
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SECTION 9.2. Definitions. For purposes of this Agreement:
(a) "Acquisition Proposal" means any offer or proposal for a
merger, consolidation, recapitalization, liquidation, business combination or
similar transaction involving any one or more of the Companies or the
acquisition or purchase of any equity securities or other equivalent interests
of any one or more of the Companies, or any tender offer (including
self-tenders) or exchange offer of equity securities or other equivalent
interests of any one or more of the Companies or any sale of assets of any one
or more of the Companies outside of the ordinary course of business, other than
the transactions contemplated by this Agreement.
(b) "Advertiser Effect" means any and all legal, financial, or
other effect, on or to this Agreement, the Closing, the Business, or the
Company, Buyer, or any of their stockholders, partners or Affiliates, that may
arise from or are in any way related to: any public discussion, announcement,
development, action or potential action, settlement, negotiation, legislation,
proposed or enacted, judicial decision, order, judgment or change in status of
any nature or type, which relates to, concerns, proposes, threatens or results
in any voluntary or non-voluntary cessation of or a legal ban or restrictions on
the use of the outdoor advertising services by Persons seeking to advertise
tobacco products or products containing alcohol.
(c) "Affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person.
(d) "Antitrust Laws" mean and include the Sherman Act, as
amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission
Act, as amended, and all other federal, state or foreign statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines and other
laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.
(e) "Control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise.
(f) "Governmental Entity" means any government or any agency,
bureau, board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or
local, domestic or foreign.
(g) "Hazardous Material" means any pollutant, chemical,
contaminant or waste, and any other carcinogenic, ignitable, corrosive,
reactive, toxic or otherwise hazardous substance or material, including but not
limited to any petroleum or petroleum product, urea formaldehyde, PCBs, and
asbestos, and similar substances, materials or wastes regulated, controlled or
required to be remediated under any Environmental Law.
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(h) "Knowledge" or "Known" means, with respect to the matter
in question, if any of the executive officers of any of the Companies or Buyer,
as the case may be, has actual knowledge of such matter without any duty of
independent investigation.
(i) "Lien" means any encumbrance, hypothecation, infringement,
lien, mortgage, pledge, restriction, security interest, title retention or other
security arrangement, or any adverse right or interest, charge or claim of any
nature whatsoever of, on, or with respect to any asset, property or property
interest; provided, however, that the term "Lien" shall not include (i) liens
for water and sewer charges and current Taxes not yet due and payable or being
contested in good faith, (ii) mechanics', carriers', workers', repairers',
materialmen's, warehousemen's and other similar liens arising or incurred in the
ordinary course of business (iii) all liens approved in writing by the other
party hereto or (iv) restrictions on transfer imposed by federal or state
securities laws.
(j) "Material Adverse Effect" means, when used in connection
with the Companies or Buyer, any change or effect that (i) has had, or is
reasonably likely to have a material adverse impact on the business, operations,
or results of operations, assets or condition (financial or otherwise) of such
Party and its Subsidiaries, taken as a whole, or (ii) substantially impairs or
delays the consummation of the transactions contemplated hereby, but, in either
such event, shall not include any change or effect that results from (A) an
Advertiser Effect, (B) conditions, events or circumstances generally affecting
the industries in which the Companies or Buyer operate, including any proposed
or actual ban or restriction, voluntary or involuntary, on the use of outdoor
advertising services for the advertisement of tobacco products or beverages
containing alcohol, or the economy in general or (C) any action or change
specifically contemplated by the provisions of this Agreement.
(k) "Party" or "Parties" means the Sellers and the Companies,
on the one hand, and Buyer on the other hand.
(l) "Person" means any natural person, firm, individual,
business trust, trust, association, corporation, partnership, joint venture,
company, unincorporated entity or Governmental Entity.
(m) "Sellers' Representative" means Weyrich and Martin,
collectively.
(n) "Subsidiary" or "Subsidiaries" of any Person means another
Person, an amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority of its
board of directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly or
indirectly by such first Person.
(o) "Taxes" means all Federal, state, local, and foreign
taxes, net or gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, personal property, real property, capital stock, profits,
social security, (or similar) unemployment, disability, registration, value
added, estimated, alternative or add-on minimum taxes, customs duties or other
assessments of a
49
<PAGE> 51
similar nature (whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto, imposed by an Tax
authority.
(p) "Tax Returns" mean all Federal, state, local and foreign
tax returns, declarations, statements, reports, schedules, forms, and
information returns and any amendments thereto.
SECTION 9.3. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
SECTION 9.4. Entire Agreement; No Third-Party Beneficiaries.
This Agreement constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement (provided, however, that the
provisions of the Confidentiality Agreement shall remain valid and in effect)
and, except for the provisions of Section 5.13 and Article VIII, is not intended
to confer upon any Person other than the Parties any rights or remedies
hereunder.
SECTION 9.5. Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other parties, except that Buyer may
assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to any direct or indirect wholly owned
subsidiary of Buyer, but no such assignment shall relieve Buyer of any of its
obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the Parties and their respective successors and assigns, heirs, executors, and
administrators.
SECTION 9.6. Amendment. Neither this Agreement nor any
provision hereof may be waived, modified or amended, except by an instrument in
writing signed by the Party against which the enforcement of such writing is
sought, and only then to the extent set forth in such writing.
SECTION 9.7. Governing Law; Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York, without regard to any applicable conflicts of law. Any suit, action or
proceeding by a Party with respect to this Agreement, or any judgment entered by
any court in respect of any thereof, may be brought in any state or federal
court of competent jurisdiction in the County of Los Angeles, State of
California, and each party hereto hereby submits to the exclusive jurisdiction
of such courts for the purpose of any such suit, action, proceeding or judgment.
By the execution and delivery of this Agreement, Buyer and each Company
(following the Closing) appoints Latham & Watkins, at its office at 1001
Pennsylvania Avenue, Suite 1300, Washington, D.C. 20004, as its agent upon which
process may be served in any such suit, action or proceeding. By execution and
delivery of this Agreement, each Seller and each Company (prior to the Closing)
appoints Sellers' Representative, at their office at 1245 Vine Street, Paso
Robles, CA 93447, as his, her or its
50
<PAGE> 52
agent upon which process may be served in any such suit, action or proceeding.
Nothing herein shall in any way be deemed to limit the ability of a party hereto
to serve any such writs, process or summonses in any other manner permitted by
applicable law.
SECTION 9.8. Specific Performance. The parties recognize that
if any of the Sellers refuse to close as and when required under the provisions
of this Agreement, monetary damages will not be adequate to compensate Buyer for
its injury. Buyer shall therefore be entitled, in addition to the right to
collect money damages, to obtain specific performance of the terms of this
Agreement. If any action is brought by Buyer to enforce this Agreement, each
Seller shall waive the defense that there is an adequate remedy at law. Buyer
shall have the right to obtain specific performance of the terms of this
Agreement without being required to prove actual damages, post bond or furnish
other security.
SECTION 9.9. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
SECTION 9.10. Headings. Headings of the Articles and Sections
of this Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
SECTION 9.11. Special Power of Attorney. Each Seller grants
Martin and, in the event of his death or disability, Weyrich (individually, the
"Attorney"), jointly, a special power of attorney irrevocably making,
constituting, and appointing the Attorney as such Seller's attorney in fact,
with all power to act in the Seller's name and on the Seller's behalf to (a)
execute, acknowledge and deliver and swear to in the execution, acknowledgment
and delivery of any and all documents necessary or related to effecting the
Closing including, without limitation, all documents required to be delivered by
such Seller at the Closing, any amendments to this Agreement or any waivers of
conditions or covenants contained herein, and (b) to take such other actions on
behalf of such Seller as the Attorney determines is necessary or advisable under
this Agreement or to effect the Closing; provided, however, that such documents
or actions included in (a) or (b) do not amend the definition of Purchase Price
in a manner which would reduce the consideration payable to any Seller hereunder
or otherwise adversely affect any Seller in a manner not applicable to all
Sellers similarly situated. The special power granted in this Section 9.11: (i)
is irrevocable, (ii) is coupled with an interest and (iii) shall survive such
Seller's death, incapacity or dissolution. The Attorney may exercise its special
power of attorney granted in this Section 9.11 by facsimile signatures.
51
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IN WITNESS WHEREOF, Buyer, the Companies and the Sellers have
caused this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
CHANCELLOR MEDIA CORPORATION OF LOS
ANGELES
By: /s/ ERIC C. NEUMAN
---------------------------------
Name: Eric C. Neuman
----------------------------
Title: SVP-Strategic Development
---------------------------
MARTIN MEDIA, L.P.
By: /s/ E. THOMAS MARTIN
---------------------------------
Name: E. Thomas Martin
---------------------------
Title: President/CEO
--------------------------
MARTIN & MacFARLANE, INC.
By: /s/ E. THOMAS MARTIN
---------------------------------
Name: E. Thomas Martin
---------------------------
Title: President/CEO
--------------------------
NEVADA OUTDOOR SYSTEMS, INC.
By: /s/ E. THOMAS MARTIN
---------------------------------
Name: E. Thomas Martin
---------------------------
Title: President/CEO
--------------------------
MW SIGN CORP.
By: /s/ E. THOMAS MARTIN
---------------------------------
Name: E. Thomas Martin
---------------------------
Title: President/CEO
--------------------------
/s/ E. THOMAS MARTIN
------------------------------------
E. Thomas Martin
/s/ DAVID B. WEYRICH
------------------------------------
David B. Weyrich
<PAGE> 1
EXHIBIT 2.46
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BETWEEN
CHANCELLOR MEDIA CORPORATION
AND
RANGER EQUITY HOLDINGS CORPORATION
DATED AS OF JULY 7, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
THE MERGER
1.1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 CERTIFICATE OF INCORPORATION . . . . . . . . . . . . . . . . 2
1.5 BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 EFFECT ON LIN CAPITAL STOCK . . . . . . . . . . . . . . . . 3
(a) Outstanding LIN Common Stock . . . . . . . . . . . . . 3
(b) Treasury Shares . . . . . . . . . . . . . . . . . . . 4
(c) Impact of Stock Splits, etc . . . . . . . . . . . . . 4
1.9 EFFECT ON CHANCELLOR CAPITAL STOCK . . . . . . . . . . . . . 4
1.10 EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . . . . 4
(a) Paying Agent . . . . . . . . . . . . . . . . . . . . 4
(b) Exchange Procedures . . . . . . . . . . . . . . . . . 4
(c) Letter of Transmittal . . . . . . . . . . . . . . . . 5
(d) Distributions with Respect to Unexchanged Shares . . 6
(e) No Further Ownership Rights in LIN Common Stock . . . 6
(f) No Fractional Shares . . . . . . . . . . . . . . . . 6
(g) Termination of Payment Fund . . . . . . . . . . . . . 7
(h) No Liability . . . . . . . . . . . . . . . . . . . . 7
(i) Withholding of Tax . . . . . . . . . . . . . . . . . 8
1.11 DISSENTING SHARES . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LIN
2.1 ORGANIZATION, STANDING AND CORPORATE POWER . . . . . . . . . 9
2.2 CAPITAL STRUCTURE . . . . . . . . . . . . . . . . . . . . . 10
2.3 AUTHORITY; NONCONTRAVENTION . . . . . . . . . . . . . . . . 11
2.4 LIN SEC DOCUMENT; FINANCIAL STATEMENTS . . . . . . . . . . . 13
2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . 14
2.6 NO EXTRAORDINARY PAYMENTS OR CHANGE IN BENEFITS . . . . . . 14
2.7 VOTING REQUIREMENTS . . . . . . . . . . . . . . . . . . . . 15
2.8 STATE TAKEOVER STATUTES . . . . . . . . . . . . . . . . . . 15
2.9 LIN FCC LICENSES; OPERATIONS OF LIN LICENSED FACILITIES . . 15
2.10 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.11 FCC QUALIFICATION . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
2.12 COMPLIANCE WITH APPLICABLE LAWS . . . . . . . . . . . . . . 17
2.13 ABSENCE OF UNDISCLOSED LIABILITIES . . . . . . . . . . . . . 18
2.14 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.15 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . 18
2.16 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . 18
2.17 EMPLOYEE ARRANGEMENTS AND BENEFIT PLANS . . . . . . . . . . 19
2.18 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 20
2.19 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . 21
2.20 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . 22
2.21 MATERIAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . 23
2.22 TANGIBLE PROPERTY . . . . . . . . . . . . . . . . . . . . . 25
2.23 NBC STATION VENTURE . . . . . . . . . . . . . . . . . . . . 25
2.24 NO OTHER REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 25
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CHANCELLOR
3.1 ORGANIZATION, STANDING AND CORPORATE POWER . . . . . . . . . 25
3.2 CAPITAL STRUCTURE . . . . . . . . . . . . . . . . . . . . . 26
3.3 AUTHORITY; NONCONTRAVENTION . . . . . . . . . . . . . . . . 27
3.4 CHANCELLOR SEC DOCUMENTS . . . . . . . . . . . . . . . . . . 29
3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . 30
3.6 NO EXTRAORDINARY PAYMENTS OR CHANGE IN BENEFITS . . . . . . 31
3.7 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.8 OPINION OF FINANCIAL ADVISOR . . . . . . . . . . . . . . . . 32
3.9 ABSENCE OF UNDISCLOSED LIABILITIES . . . . . . . . . . . . . 32
3.10 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.11 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . 32
3.12 CHANCELLOR COMMON STOCK
3.13 VOTING REQUIREMENTS . . . . . . . . . . . . . . . . . . . . 33
3.14 FCC QUALIFICATION . . . . . . . . . . . . . . . . . . . . . 33
3.15 EMPLOYEE ARRANGEMENTS AND BENEFIT PLANS . . . . . . . . . . 33
3.16 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 34
3.17 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . 35
3.18 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . 36
3.19 NO OTHER REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 36
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 PREPARATION OF FORM S-4 AND PROXY STATEMENT/PROSPECTUS;
INFORMATION SUPPLIED . . . . . . . . . . . . . . . . . . . . 37
4.2 STOCKHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . . 38
4.3 ACCESS TO INFORMATION; CONFIDENTIALITY . . . . . . . . . . . 39
4.4 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . 40
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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<TABLE>
<S> <C> <C>
4.6 CONSENTS, APPROVALS AND FILINGS . . . . . . . . . . . . . . 41
4.7 AFFILIATES LETTERS . . . . . . . . . . . . . . . . . . . . . 41
4.8 NASDAQ LISTING . . . . . . . . . . . . . . . . . . . . . . . 42
4.9 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 42
4.10 LETTER OF CHANCELLOR'S ACCOUNTANTS . . . . . . . . . . . . . 42
4.11 LETTER OF LIN'S ACCOUNTANTS . . . . . . . . . . . . . . . . 43
4.12 EMPLOYEE BENEFIT MATTERS . . . . . . . . . . . . . . . . . . 43
4.13 TERMINATION OF STOCKHOLDERS AGREEMENT . . . . . . . . . . . 43
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
5.1 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . 44
5.2 STOCK OPTIONS; PHANTOM STOCK PLAN . . . . . . . . . . . . . 47
5.3 OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER . 49
(a) Stockholder Approval . . . . . . . . . . . . . . . . 49
(b) FCC Order . . . . . . . . . . . . . . . . . . . . . . 49
(c) Governmental and Regulatory Consents . . . . . . . . 49
(d) HSR Act . . . . . . . . . . . . . . . . . . . . . . . 50
(e) No Injunctions or Restraints . . . . . . . . . . . . 50
(f) Nasdaq Listing . . . . . . . . . . . . . . . . . . . 50
(g) Form S-4 . . . . . . . . . . . . . . . . . . . . . . 50
6.2 CONDITIONS TO OBLIGATIONS OF LIN . . . . . . . . . . . . . . 50
(a) Representations and Warranties . . . . . . . . . . . 50
(b) Performance of Obligations of Chancellor . . . . . . 51
(c) Tax Opinion . . . . . . . . . . . . . . . . . . . . . 51
(d) Chancellor Stockholders Agreement . . . . . . . . . . 51
6.3 CONDITIONS TO OBLIGATIONS OF CHANCELLOR . . . . . . . . . . 52
(a) Representations and Warranties . . . . . . . . . . . 52
(b) Performance of Obligations of LIN. . . . . . . . . 52
(c) Tax Opinion . . . . . . . . . . . . . . . . . . . . . 53
(d) KXTX Transaction . . . . . . . . . . . . . . . . . . 53
(e) Network Affiliation Agreements . . . . . . . . . . . 53
(f) Financial Services Agreements . . . . . . . . . . . . 53
(g) Dissenting Shares . . . . . . . . . . . . . . . . . . 54
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 54
7.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . 55
7.3 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
7.4 EXTENSION; CONSENT; WAIVER . . . . . . . . . . . . . . . . . 56
7.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION, CONSENT OR
WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE VIII
SURVIVAL OF PROVISIONS
8.1 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE IX
NOTICES
9.1 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE X
MISCELLANEOUS
10.1 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 58
10.2 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.3 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . 59
10.4 NO THIRD PARTY BENEFICIARY . . . . . . . . . . . . . . . . . 59
10.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 59
10.6 ASSIGNMENT; BINDING EFFECT . . . . . . . . . . . . . . . . . 59
10.7 HEADINGS, GENDER, ETC. . . . . . . . . . . . . . . . . . . . 59
10.8 INVALID PROVISIONS . . . . . . . . . . . . . . . . . . . . . 60
10.9 NO RECOURSE AGAINST OTHERS . . . . . . . . . . . . . . . . . 60
</TABLE>
Exhibits
Exhibit A Form of Affiliate Letter
iv
<PAGE> 6
LIST OF DEFINED TERMS
<TABLE>
<S> <C>
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Assumed Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
breaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Chancellor Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . 31
Chancellor SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . 29
Chancellor Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Chancellor Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . 39
Chancellor 7% Convertible Preferred Stock . . . . . . . . . . . . . . . . . 4
Chancellor $3.00 Convertible Preferred Stock . . . . . . . . . . . . . . . 4
Chancellor Convertible Preferred Stock . . . . . . . . . . . . . . . . . . 4
Chancellor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Chancellor Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . 30
Chancellor Stockholders Agreement . . . . . . . . . . . . . . . . . . . . . 51
Chancellor Operating Subsidiary . . . . . . . . . . . . . . . . . . . . . . 27
Chancellor Material Adverse Effect . . . . . . . . . . . . . . . . . . . . 26
Chancellor Significant Subsidiary . . . . . . . . . . . . . . . . . . . . . 26
Chancellor Stockholders Approval . . . . . . . . . . . . . . . . . . . . . 27
Chancellor Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . 26
Chancellor Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . 26
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
D&O Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Delaware Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Delaware Secretary of State . . . . . . . . . . . . . . . . . . . . . . . . 2
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
DSHC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Employment Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Environmental Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 23
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Equity Holdings A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Equity Holdings B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FCC Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Financial Advisory Agreement . . . . . . . . . . . . . . . . . . . . . . . 53
Form S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Form S-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
GECC Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<TABLE>
<S> <C>
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Greenhill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Hicks Muse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
KXTX Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
KXTX Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
KXTX-Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
LIN Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
LIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
LIN SEC Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
LIN Licensed Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . 15
LIN Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
LIN Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
LIN Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
LIN Stockholders Approval . . . . . . . . . . . . . . . . . . . . . . . . . 11
LIN Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
LIN Operating Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . 9
LIN LMA Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
LIN Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
LIN Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
LIN FCC Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
LIN Significant Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . 9
LIN/Ranger Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . 43
LIN Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
LIN Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . 9
LMA Facility FCC Licenses . . . . . . . . . . . . . . . . . . . . . . . . . 16
LMA Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
M&O Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Material Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Morgan Stanley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Network Affiliation Agreement . . . . . . . . . . . . . . . . . . . . . . . 24
New LIN Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Payment Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Phantom Stock Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Phantom Stock Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . . . . . . . 29
Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
vi
<PAGE> 8
<TABLE>
<S> <C>
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
significant subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Sports Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Stockholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 10
subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Substitute LIN Stock Options . . . . . . . . . . . . . . . . . . . . . . . 10
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Wasserstein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
vii
<PAGE> 9
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of July 7, 1998, by and between CHANCELLOR MEDIA CORPORATION, a
Delaware corporation ("Chancellor") and RANGER EQUITY HOLDINGS CORPORATION, a
Delaware corporation ("LIN").
RECITALS
WHEREAS, Chancellor and LIN and their respective subsidiaries are
engaged in the radio and television broadcasting businesses, respectively;
WHEREAS, Chancellor and LIN believe it is in the best interests of their
respective stockholders to combine their respective broadcast businesses;
WHEREAS, subject to the terms and conditions set forth herein, (i) the
Board of Directors of Chancellor, upon the recommendation of a duly authorized
special committee thereof (consisting of independent directors), has approved
the merger of LIN with Chancellor and the issuance of shares of the Common
Stock, $0.01 par value (the "Chancellor Common Stock"), of Chancellor in
connection therewith, and (ii) the Board of Directors of LIN has approved the
foregoing merger;
WHEREAS, it is the intention of Chancellor and LIN that such merger will
qualify as a tax-free reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, Chancellor and LIN desire to make certain representations,
warranties, covenants and agreements in connection with such merger and also to
prescribe various conditions to such merger;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
<PAGE> 10
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), LIN shall merge
with and into Chancellor (the "Merger") in accordance with the General
Corporation Law of the State of Delaware (the "Delaware Code"). At the
Effective Time, the separate corporate existence of LIN shall cease and
Chancellor shall continue as the surviving corporation of the Merger (the
"Surviving Corporation") under the laws of the State of Delaware and with all
the rights, privileges, immunities and powers, and subject to all the duties
and liabilities, of a corporation organized under the Delaware Code. The
Merger shall have the effects set forth in the Delaware Code.
1.2 CLOSING. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 7.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the closing of the Merger (the "Closing") will take place
at 10:00 a.m., Dallas, Texas time, on the second business day following the
date on which the last to be fulfilled or waived of the conditions set forth in
Article VI shall be fulfilled or waived in accordance with this Agreement (the
"Closing Date"), at the offices of Weil, Gotshal & Manges LLP, 100 Crescent
Court, Suite 1300, Dallas, Texas 75201, unless another date, time or place is
agreed to in writing by the parties hereto.
1.3 EFFECTIVE TIME. The parties hereto will file with the Secretary
of State of the State of Delaware (the "Delaware Secretary of State") on the
Closing Date (or on such other date as the parties may agree) a certificate of
merger or other appropriate documents, executed in accordance with the relevant
provisions of the Delaware Code, and make all other filings or recordings
required under the Delaware Code in connection with the Merger. The Merger
shall become effective upon the filing of the certificate of merger with the
Delaware Secretary of State, or at such later time specified in such
certificate of merger (the "Effective Time").
1.4 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
of Chancellor shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended in accordance with its terms and as
provided by the Delaware Code.
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<PAGE> 11
1.5 BYLAWS. The Bylaws of Chancellor in effect immediately prior to
the Merger shall be the bylaws of the Surviving Corporation until thereafter
amended in accordance with their terms and as provided by applicable law.
1.6 DIRECTORS. The directors of Chancellor immediately prior to the
Effective Time and Gary R. Chapman shall, from and after the Effective Time, be
the directors of the Surviving Corporation (with respect to Chancellor
directors, in the same class and term expiration as such director currently
serves on the Chancellor Board of Directors and, with respect to Gary R.
Chapman, in such class and term expiration as determined by the Board of
Directors of Chancellor prior to Closing), until their successors shall have
been duly elected or appointed or qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
1.7 OFFICERS. The officers of Chancellor immediately prior to the
Effective Time shall, from and after the Effective Time, be the officers of
the Surviving Corporation until their successors shall have been duly elected
or appointed or qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws.
1.8 EFFECT ON LIN CAPITAL STOCK.
(a) Outstanding LIN Common Stock. Each share of common stock,
$0.01 par value, of LIN ("LIN Common Stock"), issued and outstanding
immediately prior to the Effective Time (other than shares of LIN Common Stock
held as treasury shares by LIN and other than Dissenting Shares, as defined in
Section 1.11) shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive 0.0300 validly
issued, fully paid and nonassessable shares of Chancellor Common Stock. The
ratio of the shares of Chancellor Common Stock to be issued in exchange for
each whole share of LIN Common Stock is referred to as the "Exchange Ratio."
The shares of Chancellor Common Stock to be issued to holders of LIN Common
Stock in accordance with this Section 1.8(a), and any cash to be paid in
accordance with Section 1.10(f) in lieu of fractional shares of Chancellor
Common Stock, are referred to as the "Merger Consideration."
3
<PAGE> 12
(b) Treasury Shares. Each share of LIN Common Stock which is
held as a treasury share by LIN at the Effective Time shall, by virtue of the
Merger and without any action on the part of LIN, be cancelled and retired and
cease to exist, without any conversion thereof.
(c) Impact of Stock Splits, etc. In the event of any change
in Chancellor Common Stock and/or LIN Common Stock between the date of this
Agreement and the Effective Time of the Merger in accordance with the terms of
this Agreement by reason of any stock split, stock dividend, subdivision,
reclassification, recapitalization, combination, exchange of shares or the
like, the number and class of shares of Chancellor Common Stock to be issued
and delivered in the Merger in exchange for each outstanding share of LIN
Common Stock as provided in this Agreement shall be appropriately adjusted so
as to maintain the relative proportionate interests of the holders of LIN
Common Stock and Chancellor Common Stock.
1.9 EFFECT ON CHANCELLOR CAPITAL STOCK. Each share of Chancellor
Common Stock, 7% Convertible Preferred Stock, $0.01 par value ("Chancellor 7%
Convertible Preferred Stock"), and $3.00 Convertible Exchangeable Preferred,
$0.01 par value ("Chancellor $3.00 Convertible Preferred Stock" and,
collectively with the Chancellor 7% Convertible Preferred Stock, the
"Chancellor Convertible Preferred Stock"), of Chancellor issued and outstanding
immediately prior to the Effective Time shall remain outstanding and shall be
unaffected by the Merger.
1.10 EXCHANGE OF CERTIFICATES.
(a) Paying Agent. Immediately following the Effective Time,
Chancellor shall deposit with its transfer agent and registrar (the "Paying
Agent"), for the benefit of the holders of LIN Common Stock (other than
treasury shares and Dissenting Shares), certificates representing the shares of
Chancellor Common Stock to be issued to such holders pursuant to Section 1.8
(such certificates, together with any dividends or distributions with respect
to the shares represented by such certificates and any cash paid in lieu of
fractional shares of Chancellor Common Stock pursuant to Section 1.10(f), being
hereinafter referred to as the "Payment Fund").
(b) Exchange Procedures. As soon as practicable after the
Effective Time, each holder of an outstanding certificate or certificates which
prior thereto represented shares of LIN Common Stock shall, upon surrender to
the Paying Agent of such certificate or certificates and acceptance thereof by
the Paying Agent, be entitled to a certificate representing
4
<PAGE> 13
that number of whole shares of Chancellor Common Stock which the aggregate
number of shares of LIN Common Stock previously represented by such certificate
or certificates surrendered shall have been converted into the right to receive
pursuant to Section 1.8 of this Agreement, as the case may be, plus any cash to
be received in lieu of fractional shares, as provided in Section 1.10(f) below.
The Paying Agent shall accept such certificates upon compliance with such
reasonable terms and conditions as the Paying Agent may impose to effect an
orderly exchange thereof in accordance with its normal exchange practices. If
the Merger Consideration (or any portion thereof) is to be delivered to any
person other than the person in whose name the certificate or certificates
representing the shares of LIN Common Stock surrendered in exchange therefor is
registered, it shall be a condition to such exchange that the certificate or
certificates so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the person requesting such exchange shall pay
to the Paying Agent any transfer or other Taxes (as defined in Section 2.18)
required by reason of the payment of such consideration to a person other than
the registered holder of the certificate(s) surrendered, or shall establish to
the satisfaction of the Paying Agent that such Tax has been paid or is not
applicable. After the Effective Time, there shall be no further transfer on
the records of LIN or its transfer agent of certificates representing shares of
LIN Common Stock, and if such certificates are presented to the Surviving
Corporation, they shall be cancelled against delivery of the Merger
Consideration as hereinabove provided. Until surrendered as contemplated by
this Section 1.10(b), each certificate representing shares of LIN Common Stock
(other than certificates representing treasury shares to be cancelled in
accordance with the terms of this Agreement), shall be deemed at any time after
the Effective Time to represent only the right to receive upon such surrender
the Merger Consideration without any interest thereon, as contemplated by
Section 1.8.
(c) Letter of Transmittal. Promptly after the Effective
Time (but in no event more than five business days thereafter), Chancellor
shall require the Paying Agent to mail to each record holder of certificates
that immediately prior to the Effective Time represented shares of LIN Common
Stock which have been converted pursuant to Section 1.8, a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title shall pass, only upon proper delivery of certificates
representing shares of LIN Common Stock to the Paying Agent, and which shall be
in such form and have such provisions as Chancellor reasonably may specify) and
instructions for use in surrendering such certificates and receiving the
5
<PAGE> 14
Merger Consideration to which such holder shall be entitled therefor pursuant
to Section 1.8.
(d) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Chancellor Common Stock with a
record date after the Effective Time shall be paid to the holder of any
certificate that immediately prior to the Effective Time represented shares of
LIN Common Stock which have been converted pursuant to Section 1.8, until the
surrender for exchange of such certificate in accordance with this Article I.
Following surrender for exchange of any such certificate, there shall be paid
to the holder of such certificate, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to the number of whole
shares of Chancellor Common Stock into which the shares of LIN Common Stock
represented by such certificate immediately prior to the Effective Time were
converted pursuant to Section 1.8, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time, but prior to such surrender, and with a payment date subsequent
to such surrender, payable with respect to such whole shares of Chancellor
Common Stock.
(e) No Further Ownership Rights in LIN Common Stock. The
Merger Consideration (or, in the case of Dissenting Shares, the cash payment
therefor) paid upon the surrender for exchange of certificates representing
shares of LIN Common Stock in accordance with the terms of this Article I shall
be deemed to have been issued and paid in full satisfaction of all rights
pertaining to the shares of LIN Common Stock theretofore represented by such
certificates, subject, however, to Chancellor's obligation (if any) to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared by LIN on the shares of LIN Common
Stock in accordance with the terms of this Agreement or prior to the date of
this Agreement and which remain unpaid at the Effective Time.
(f) No Fractional Shares. No certificates or scrip
representing fractional shares of Chancellor Common Stock shall be issued upon
the surrender for exchange of certificates that immediately prior to the
Effective Time represented shares of LIN Common Stock which have been converted
pursuant to Section 1.8, and such fractional share interests will not entitle
the owner thereof to vote or any rights of a stockholder of Chancellor. In
lieu of any such fractional shares, the Paying Agent shall, on behalf of all
holders of fractional shares of Chancellor Common
6
<PAGE> 15
Stock, aggregate all such fractional interests (collectively, the "Fractional
Shares") and such Fractional Shares shall be sold by the Paying Agent as agent
for the holders of such Fractional Shares at the then prevailing price on the
Nasdaq Stock Market, all in the manner provided hereinafter. Until the net
proceeds of such sale or sales have been distributed to the holders of
Fractional Shares, the Paying Agent shall retain such proceeds in trust for the
benefit of such holders as part of the Payment Fund. All commissions, transfer
taxes and other out-of-pocket transaction costs, including reasonable expenses
and compensation of the Paying Agent shall be charged against the proceeds from
the sale of the Fractional Shares. The sale of the Fractional Shares shall be
executed on the Nasdaq Stock Market or through one or more member firms of the
Nasdaq Stock Market and will be executed in round lots, to the extent
practicable. The Paying Agent will determine the portion, if any, of the net
proceeds of such sale or sales to which each holder of Fractional Shares is
entitled, by multiplying the amount of the aggregate net proceeds of the sale
of the Fractional Shares by a fraction, the numerator of which is the amount of
Fractional Shares to which such holder is entitled and the denominator of which
is the aggregate amount of Fractional Shares to which all holders of Fractional
Shares are entitled; provided, however, that in lieu of the foregoing, at the
sole option of Chancellor, Chancellor may instead satisfy payment with respect
to such Fractional Shares by delivering to the Paying Agent reasonably promptly
following the Effective Time cash (without interest) in an amount equal to the
aggregate amount of all such Fractional Shares multiplied by the closing price
per share of Chancellor Common Stock on the Nasdaq Stock Market on the trading
day immediately prior to the Effective Time.
(g) Termination of Payment Fund. Any portion of the Payment
Fund which remains undistributed to the holders of certificates representing
shares of LIN Common Stock for 120 days after the Effective Time shall be
delivered to Chancellor, upon demand, and any holders of shares of LIN Common
Stock who have not theretofore complied with this Article I shall thereafter
look only to Chancellor and only as general creditors thereof for payment of
their claims for any Merger Consideration and any dividends or distributions
with respect to Chancellor Common Stock to which they are entitled pursuant to
this Article I.
(h) No Liability. Neither the Surviving Corporation nor the
Paying Agent shall be liable to any person in respect of any cash, shares,
dividends or distributions payable from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any certificates representing shares of LIN Common Stock shall not
7
<PAGE> 16
have been surrendered prior to five years after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration in
respect of such certificate would otherwise escheat to or become the property
of any Governmental Entity (as defined in Section 2.3)), any such cash, shares,
dividends or distributions payable in respect of such certificate shall, to the
extent permitted by applicable law, become the property of Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(i) Withholding of Tax. Chancellor shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any former holder of LIN Common Stock such amount as
Chancellor (or any affiliate thereof) or the Paying Agent is required to deduct
and withhold with respect to the making of such payment under the Code or
state, local or foreign Tax law. To the extent that amounts are so withheld by
Chancellor, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the former holder of LIN Common Stock in
respect of which such deduction and withholding was made by Chancellor.
1.11 DISSENTING SHARES. Notwithstanding anything herein to the
contrary in this Agreement, shares of LIN Common Stock outstanding immediately
prior to the Effective Time and held by a holder who has not voted in favor of
the Merger or consented thereto and who properly demands in writing appraisal
of such shares of LIN Common Stock in accordance with Section 262 of the
Delaware Code and who shall not have withdrawn such demand or otherwise have
forfeited appraisal rights, shall not be converted into or represent the right
to receive the Merger Consideration therefor ("Dissenting Shares"). Such
stockholders shall be entitled to receive payment of the appraised value of
such shares of LIN Common Stock held by them in accordance with the provisions
of Section 262 of the Delaware Code, except that all Dissenting Shares held by
stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such securities under Section
262 shall thereupon be deemed to have been converted into, as of the Effective
Time, the right to receive, without any interest thereon, the Merger
Consideration, upon surrender, in the manner provided in this Article I, of the
certificate or certificates that formerly represented such securities. LIN
shall take all actions required to be taken by it in accordance with Section
262(d) of the Delaware Code with respect to the holders of LIN Common Stock.
LIN shall give to Chancellor prompt written notice of any demands for appraisal
received by it, withdrawals of such demands, and any other instruments served
pursuant to Delaware law and received by it, and Chancellor shall have the
right to
8
<PAGE> 17
participate in all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, LIN shall not, except with the prior written
consent of Chancellor, make any payments with respect to any demands for
appraisal, or settle or offer to settle, any such demands.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LIN
LIN hereby represents and warrants to Chancellor as follows:
2.1 ORGANIZATION, STANDING AND CORPORATE POWER. Each of LIN and the
LIN Significant Subsidiaries (as defined below) is a corporation, limited
partnership or limited liability company duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is organized
and has the requisite corporate, partnership or limited liability company power
and authority to carry on its business as now being conducted. Each of LIN and
the LIN Significant Subsidiaries is duly qualified to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so qualified could not reasonably be expected to
have a material adverse effect on the business, properties, results of
operations, or condition (financial or otherwise) of LIN and its subsidiaries,
considered as a whole (other than as a result of changes in general economic
conditions or in economic conditions generally affecting the television
broadcasting industry) (a "LIN Material Adverse Effect"). LIN has delivered to
Chancellor complete and correct copies of its Certificate of Incorporation and
Bylaws, as amended to the date of this Agreement. For purposes of this
Agreement, a "LIN Significant Subsidiary" means (i) Ranger Equity Holdings A
Corp., a Delaware corporation ("Equity Holdings A"), (ii) Ranger Equity
Holdings B Corp., a Delaware corporation ("Equity Holdings B"), (iii) LIN
Holdings Corp., a Delaware corporation ("LIN Holdings"), (iv) LIN Television
Corporation, a Delaware corporation (the "LIN Operating Subsidiary"), and (v)
any other subsidiary of LIN that operates, or holds an FCC license to operate,
a LIN Licensed Facility (as defined in Section 2.9) or a LIN LMA Facility (as
defined in Section 2.9) or is a party to a Material Agreement (as defined in
Section 2.21). For purposes of this Agreement, a "subsidiary" of any person
shall mean any other entity at least a majority of the equity interests in
which is beneficially owned, directly or indirectly, by the specified person.
9
<PAGE> 18
2.2 CAPITAL STRUCTURE. (a) The authorized capital stock of LIN
consists of (i) 1,000,000,000 shares of LIN Common Stock and (ii) 5,000,000
shares of preferred stock, $0.01 par value, none of which shares of preferred
stock are issued and outstanding. At the close of business on July 6, 1998,
539,321,532 shares of LIN Common Stock were issued and outstanding, 30,100,000
shares of LIN Common Stock were reserved for issuance pursuant to options to
purchase LIN Common Stock which have been, or will be prior to the Effective
Time, granted to directors, officers or employees of LIN or others ("New LIN
Stock Options") pursuant to the LIN 1998 Stock Option Plan (the "LIN Stock
Option Plan"), 5,594,086 shares of LIN Common Stock were reserved for issuance
pursuant to certain additional options to purchase LIN Common Stock that have
been granted to directors, officers or employees of LIN or others (the
"Substitute LIN Stock Options" and, collectively with the New LIN Stock
Options, the "LIN Stock Options"), and no shares of LIN Common Stock were held
as treasury shares by LIN or any subsidiary of LIN. At the close of business
on July 6, 1998, 14,152,290 Phantom Stock Units ("Phantom Stock Units") were
outstanding under LIN's Phantom Stock Plan (the "Phantom Stock Plan"). Except
as set forth above, at the close of business on July 6, 1998, no shares of
capital stock or other equity securities of LIN were authorized, issued,
reserved for issuance or outstanding. All outstanding shares of LIN Common
Stock are, and all shares which may be issued pursuant to the LIN Stock Option
Plan, or upon the exercise of outstanding LIN Stock Options will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. No bonds, debentures, notes or other
indebtedness of LIN or any subsidiary of LIN having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which the stockholders of LIN or any subsidiary of LIN may vote
are issued or outstanding. All the outstanding shares of capital stock or
other equity interests of each subsidiary of LIN have been validly issued and
are fully paid and nonassessable and are owned by LIN, by one or more wholly-
owned subsidiaries of LIN or by LIN and one or more such wholly-owned
subsidiaries, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"), except for (i) Liens arising out of the senior credit
facility of the LIN Operating Subsidiary, and (ii) Liens arising out of the
guarantee by Equity Holdings B of certain obligations of Station Venture
Holdings, LLC to General Electric Capital Corporation (the "GECC Guarantee").
Except as set forth above and except as set forth in that certain Stockholders
Agreement, dated as of March 3, 1998 (the "Stockholders Agreement"), among LIN
and the holders of LIN Common Stock parties thereto (which provides for
preemptive rights and restrictions on transfer),
10
<PAGE> 19
neither LIN nor any subsidiary of LIN has any outstanding option, warrant,
subscription or other right, agreement or commitment that either (i) obligates
LIN or any subsidiary of LIN to issue, sell or transfer, repurchase, redeem or
otherwise acquire or vote any shares of the capital stock of LIN or any LIN
Significant Subsidiary or (ii) restricts the transfer of LIN Common Stock.
Since the close of business on July 6, 1998 to the date hereof, neither LIN nor
any subsidiary of LIN has issued any capital stock or securities or other
rights convertible into or exercisable or exchangeable for shares of such
capital stock.
(b) LIN owns and has good and marketable title to all of the
issued and outstanding shares of capital stock of each of Equity Holdings A and
Equity Holdings B, in each case free and clear of all Liens, and LIN has no
independent assets, operations or liabilities other than the ownership of the
capital stock of Equity Holdings A and Equity Holdings B. Equity Holdings A
and Equity Holdings B collectively own and have good and marketable title to
all of the outstanding capital stock of LIN Holdings, free and clear of all
Liens other than with respect to Equity Holdings B, the GECC Guarantee, and
neither Equity Holdings A nor Equity Holdings B has any independent assets,
operations or liabilities other than the ownership of the capital stock of LIN
Holdings.
2.3 AUTHORITY; NONCONTRAVENTION. LIN has the requisite corporate
power and authority to enter into this Agreement and, subject to the approval
of its stockholders as set forth in Section 4.2(a) with respect to the approval
of this Agreement and the consummation of the Merger (the "LIN Stockholders
Approval"), to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by LIN and the consummation by LIN of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of LIN, subject, in the case of the Merger, to the
LIN Stockholders Approval. This Agreement has been duly executed and delivered
by LIN and, assuming this Agreement constitutes the valid and binding agreement
of each of the other parties hereto, constitutes a valid and binding obligation
of LIN, enforceable against it in accordance with its terms except that the
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditor's rights generally and (b) general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity).
Except as disclosed in writing by LIN to Chancellor in a disclosure letter (the
"LIN Disclosure Letter") delivered prior to the execution and delivery of the
Agreement, the execution and delivery of this Agreement do not, and the
consummation of the transactions
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contemplated by this Agreement and compliance with the provisions hereof will
not, (i) conflict with any of the provisions of the Certificate of
Incorporation or Bylaws of LIN or the comparable documents of any LIN
Significant Subsidiary, (ii) subject to the governmental filings and other
matters referred to in the following sentence, conflict with, result in a
breach of or default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or loss of a material benefit under, or require the consent of any
person under, any indenture or other agreement, permit, concession, franchise,
license or similar instrument or undertaking to which LIN or any of the LIN
Significant Subsidiaries is a party or by which LIN or any of the LIN
Significant Subsidiaries or any of their assets is bound or affected, (iii)
result in an obligation by LIN, the Surviving Corporation, Chancellor, or any
of their respective subsidiaries to redeem, repurchase or retire (or offer to
redeem, repurchase or retire) any indebtedness of LIN or any of its
subsidiaries outstanding as of the date hereof or equity security of LIN or any
of its subsidiaries outstanding as of the date hereof, or (iv) subject to the
governmental filings and other matters referred to in the following sentence,
contravene any law, rule or regulation of any state or of the United States or
any political subdivision thereof or therein, or any order, writ, judgment,
injunction, decree, determination or award currently in effect, except, in the
cases of the foregoing clauses (ii) through (iv), for conflicts, breaches,
defaults or other consequences (collectively, "breaches") that, individually or
in the aggregate, could not reasonably be expected to have a LIN Material
Adverse Effect or to materially hinder LIN's ability to consummate the
transactions contemplated by this Agreement. No consent, approval or
authorization of, or declaration or filing with, or notice to, any governmental
agency or regulatory authority (a "Governmental Entity") which has not been
received or made, is required by or with respect to LIN or any of the LIN
Significant Subsidiaries in connection with the execution and delivery of this
Agreement by LIN or the consummation by LIN of the transactions contemplated
hereby, except for (i) the filing of premerger notification and report forms
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), with respect to the Merger and the termination or earlier
expiration of the applicable waiting period thereunder, (ii) such filings with
and approvals required by the Federal Communications Commission or any
successor entity (the "FCC") under the Communications Act of 1934, as amended,
and the rules, regulations and policies of the FCC promulgated thereunder
(collectively, the "Communications Act") including those required in connection
with the transfer of control of LIN FCC Licenses (as defined in Section 2.9)
for the operation of the LIN Licensed
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Facilities, (iii) the filing of the certificate of merger with the Delaware
Secretary of State and appropriate documents with the relevant authorities of
other states in which LIN is qualified to do business, (iv) such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or the other transactions contemplated by this
Agreement, and (v) such filings as may be required in connection with statutory
provisions and regulations relating to real property transfer gains taxes and
real property transfer taxes.
2.4 LIN SEC DOCUMENT; FINANCIAL STATEMENTS. (i) LIN Holdings and the
LIN Operating Subsidiary (together with certain subsidiary guarantors thereof)
have filed with the Securities and Exchange Commission (the "SEC") a
Registration Statement on Form S-1 (the "LIN SEC Document"), filed on May 29,
1998, with respect to the registration of certain senior discount notes of LIN
Holdings and senior subordinated notes of the LIN Operating Subsidiary; (ii) as
of the date of such filing, the LIN SEC Document complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations of the SEC promulgated
thereunder applicable to such LIN SEC Document, and such LIN SEC Document as of
such date did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading (provided, however, it is acknowledged and agreed by
Chancellor that the Merger and the transactions contemplated by this Agreement
and further developments since the date of such filing with respect to the
matters described in Section 5.1(b)(i) were not disclosed or required to be
disclosed in the LIN SEC Document on the date of such filing); and (iii) as of
their respective dates, the consolidated financial statements of LIN Holdings
and its predecessors included in the LIN SEC Document complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Rule
10-01 of Regulation S-X) and fairly present, in all material respects, the
consolidated financial position of LIN Holdings and its consolidated
subsidiaries (or its predecessors and their respective consolidated
subsidiaries) as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (on the basis stated
therein and subject, in
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the case of unaudited quarterly statements, to normal year-end audit
adjustments).
2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
LIN SEC Document or the LIN Disclosure Letter, or as otherwise agreed to in
writing after the date hereof by Chancellor, or as expressly permitted by this
Agreement, since the date of the most recent audited financial statements of
LIN Holdings contained in the LIN SEC Document, LIN and its subsidiaries have
conducted their business only in the ordinary course, and there has not been
(i) any change which could reasonably be expected to have a LIN Material
Adverse Effect (including as a result of the consummation of the transactions
contemplated by this Agreement), (ii) any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property) with
respect to any of LIN's outstanding capital stock, (iii) any split, combination
or reclassification of any of its outstanding capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of its outstanding capital stock, (iv)
(x) any granting by LIN or any of its subsidiaries to any director, officer or
other employee or independent contractor of LIN or any of its subsidiaries of
any increase in compensation or acceleration of benefits, except in the
ordinary course of business consistent with prior practice or as was required
under employment agreements in effect as of the date of the most recent audited
financial statements of LIN Holdings contained in the LIN SEC Document, (y) any
granting by LIN or any of its subsidiaries to any director, officer or other
employee or independent contractor of any increase in, or acceleration of
benefits in respect of, severance or termination pay, or pay in connection with
any change of control of LIN, except in the ordinary course of business
consistent with prior practice or as was required under any employment,
severance or termination agreements in effect as of the date of the most recent
audited financial statements of LIN Holdings contained in the LIN SEC Document,
or (z) any entry by LIN or any of its subsidiaries into any employment,
severance, change of control, or termination or similar agreement with any
director, executive officer or other employee or independent contractor other
than in the ordinary course of business consistent with past practices, or (v)
any change in accounting methods, principles or practices by LIN or any of its
subsidiaries materially affecting its assets, liability or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
2.6 NO EXTRAORDINARY PAYMENTS OR CHANGE IN BENEFITS. Except as
disclosed in the LIN Disclosure Letter, no current or
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former director, officer, employee or independent contractor of LIN or any of
its subsidiaries is entitled to receive any payment under any agreement,
arrangement or policy (written or oral) relating to employment, severance,
change of control, termination, stock options, stock purchases, compensation,
deferred compensation, fringe benefits or other employee benefits currently in
effect (collectively, the "LIN Benefit Plans"), nor will any benefit received
or to be received by any current or former director, officer, employee or
independent contractor of LIN or any of its subsidiaries under any LIN Benefit
Plan be accelerated or modified, as a result of or in connection with the
execution and delivery of, or the consummation of the transactions contemplated
by, this Agreement.
2.7 VOTING REQUIREMENTS. The affirmative vote of a majority of the
outstanding shares of LIN Common Stock entitled to vote with respect to the
approval of the Merger is the only vote of the holders of any class or series
of LIN's capital stock necessary to approve this Agreement and the transactions
contemplated by this Agreement.
2.8 STATE TAKEOVER STATUTES. The Board of Directors of LIN has
approved the terms of this Agreement and the consummation of the transactions
contemplated by this Agreement, and such approval is sufficient to render
inapplicable to the Merger and the other transactions contemplated by this
Agreement the provisions of Section 203 of the Delaware Code. To LIN's
knowledge, no other state takeover statute or similar statute or regulation
applies or purports to apply to the Merger, this Agreement or any of the
transactions contemplated by this Agreement and no provision of the Certificate
of Incorporation, Bylaws or other governing instrument of LIN or any of its
subsidiaries would, directly or indirectly, restrict or impair the ability of
LIN to consummate the transactions contemplated by this Agreement.
2.9 LIN FCC LICENSES; OPERATIONS OF LIN LICENSED FACILITIES. LIN and
its subsidiaries have operated the television stations for which LIN and any of
its subsidiaries holds licenses from the FCC, in each case which are owned or
operated by LIN and its subsidiaries (each a "LIN Licensed Facility" and
collectively the "LIN Licensed Facilities"), in material compliance with the
terms of the licenses issued by the FCC to LIN and its subsidiaries (the "LIN
FCC Licenses") (complete and correct copies of each of which have been made
available to Chancellor), and in material compliance with the Communications
Act, except where the failure to do so could not, individually or in the
aggregate, reasonably be expected to have a LIN Material Adverse Effect. To
the knowledge of LIN, each
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broadcast television station for which LIN or any of its subsidiaries provides
programming and advertising services pursuant to a local marketing agreement
(each a "LIN LMA Facility" and collectively the "LIN LMA Facilities") has been
operated in material compliance with the terms of the licenses issued by the
FCC to the owner of such LIN LMA Facility (each an "LMA Facility FCC License"
and collectively the "LMA Facility FCC Licenses"). LIN has, and its
subsidiaries have, timely filed or made all applications, reports and other
disclosures required by the FCC to be made with respect to the LIN Licensed
Facilities and have timely paid all FCC regulatory fees with respect thereto,
except where the failure to do so could not, individually or in the aggregate,
reasonably be expected to have a LIN Material Adverse Effect. LIN and each of
its subsidiaries have, and are the authorized legal holders of, all the LIN FCC
Licenses necessary or used in the operation of the businesses of the LIN
Licensed Facilities as presently operated. To the knowledge of LIN, the third-
parties with which LIN or its subsidiaries have entered into local marketing
agreements with respect to the LIN LMA Facilities have, and are the authorized
legal holders of, the LMA Facility FCC License necessary or used in the
operation of the business of the respective LIN LMA Facility to which such
local marketing agreement relates. All LIN FCC Licenses and, to the knowledge
of LIN, LMA Facility FCC Licenses are validly held and are in full force and
effect, unimpaired by any act or omission of LIN, each of its subsidiaries (or,
to LIN's knowledge, their respective predecessors) or their respective
officers, employees or agents, except where such impairments could not,
individually or in the aggregate, reasonably be expected to have a LIN Material
Adverse Effect. As of the date hereof, except as set forth in the LIN
Disclosure Letter, no application, action or proceeding is pending for the
renewal of any LIN FCC License or, to the knowledge of LIN, LMA Facility FCC
License as to which any petition to deny has been filed and, to LIN's
knowledge, there is not now before the FCC any material investigation,
proceeding, notice of violation or order of forfeiture relating to any LIN
Licensed Facility or LIN LMA Facility that, if adversely determined, could
reasonably be expected to have a LIN Material Adverse Effect, and LIN is not
aware of any basis that could reasonably be expected to cause the FCC not to
renew any of the LIN FCC Licenses or the LMA Facility FCC Licenses (other than
proceedings to amend FCC rules or the Communications Act of general
applicability to the television or broadcast industry). There is not now
pending and, to LIN's knowledge, there is not threatened, any action by or
before the FCC to revoke, suspend, cancel, rescind or modify in any material
respect any of the LIN FCC Licenses or, to the knowledge of LIN, any of the LMA
Facility FCC Licenses that, if adversely determined, could reasonably be
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expected to have a LIN Material Adverse Effect (other than proceedings to amend
FCC rules or the Communications Act of general applicability to the television
or broadcast industry).
2.10 BROKERS. Except with respect to Hicks, Muse & Co. Partners, L.P.
("Hicks Muse") and Greenhill & Co., LLC ("Greenhill"), all negotiations
relating to this Agreement and the transactions contemplated hereby have been
carried out by LIN directly with Chancellor without the intervention of any
person on behalf of LIN in such a manner as to give rise to any valid claim by
any person against LIN, Chancellor, the Surviving Corporation or any subsidiary
of any of them for a finder's fee, brokerage commission, or similar payment.
The LIN Disclosure Letter sets forth a written summary of the terms of its
agreement relating to the transactions contemplated by this Agreement with
Greenhill and Section 6.3(f) of this Agreement sets forth a summary of the
terms of its agreement relating to the transactions contemplated by this
Agreement with Hicks Muse, and LIN has no other agreements or understandings
(written or oral) with respect to such services.
2.11 FCC QUALIFICATION. LIN and its subsidiaries are fully qualified
under the Communications Act to be the transferors of control of the LIN FCC
Licenses. Except as disclosed in the LIN Disclosure Letter, LIN is not aware
of any facts or circumstances relating to the FCC qualifications of LIN or any
of its subsidiaries that would prevent the FCC's granting the FCC Form 315
Transfer of Control Application to be filed with respect to the Merger.
2.12 COMPLIANCE WITH APPLICABLE LAWS. Each of LIN and its
subsidiaries has in effect all federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses,
notices, permits and rights (collectively, "Permits") necessary for it to own,
lease or operate its properties and assets and to carry on its business as now
conducted, other than such Permits the absence of which could not, individually
or in the aggregate, reasonably be expected to have a LIN Material Adverse
Effect, and there has occurred no default under any such Permit other than such
defaults which, individually or in the aggregate, could not reasonably be
expected to have a LIN Material Adverse Effect. Except as disclosed in the LIN
Disclosure Letter, LIN and its subsidiaries are in compliance with all
applicable statutes, laws, ordinances, rules orders and regulations of any
Governmental Entity, except for such noncompliance which individually or in the
aggregate could not reasonably be expected to have a LIN Material Adverse
Effect.
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2.13 ABSENCE OF UNDISCLOSED LIABILITIES. Except for (x)
liabilities disclosed in the LIN SEC Document, (y) current liabilities incurred
by LIN Holdings and its subsidiaries in the ordinary course of business
consistent with past practices since the date of the most recent consolidated
balance sheet of LIN Holdings set forth in the LIN SEC Document and (z)
liabilities contemplated by this Agreement or disclosed in the LIN Disclosure
Letter, LIN and its subsidiaries do not have any material indebtedness,
obligations or liabilities of any kind (whether accrued, absolute, contingent
or otherwise) (i) required by GAAP to be reflected on a consolidated balance
sheet of LIN and its consolidated subsidiaries or in the notes, exhibits or
schedules thereto or (ii) which reasonably could be expected to have a LIN
Material Adverse Effect.
2.14 LITIGATION. Except as disclosed in the LIN SEC Document or the
LIN Disclosure Letter, to the date of this Agreement, there is no litigation,
administrative action, arbitration or other proceeding pending against LIN or
any of its subsidiaries or, to the knowledge of LIN, threatened that,
individually or in the aggregate, could reasonably be expected to (i) have a
LIN Material Adverse Effect or (ii) prevent, or significantly delay the
consummation of the transactions contemplated by this Agreement. Except as set
forth in the LIN Disclosure Letter, to the date of this Agreement, there is no
judgment, order, injunction or decree of any Governmental Entity outstanding
against LIN or any of its subsidiaries that, individually or in the aggregate,
could reasonably be expected to have any effect referred to in the foregoing
clauses (i) and (ii) of this Section 2.14.
2.15 TRANSACTIONS WITH AFFILIATES. Other than the transactions
contemplated by this Agreement, or except to the extent disclosed in the LIN
SEC Document or in the LIN Disclosure Letter, there have been no transactions,
agreements, arrangements or understandings between LIN or its subsidiaries, on
the one hand, and LIN's affiliates (other than subsidiaries of LIN) or any
other person, on the other hand, that would be required to be disclosed under
Item 404 of Regulation S-K under the Securities Act.
2.16 LABOR MATTERS. Except as set forth in the LIN Disclosure Letter
or in the LIN SEC Document, (i) neither LIN nor any of its subsidiaries is a
party to any labor or collective bargaining agreement, and no employees of LIN
or any of its subsidiaries are represented by any labor organization, (ii) to
the knowledge of LIN, there are no material representation or certification
proceedings, or petitions seeking a representation proceeding, pending or
threatened to be brought or filed with the
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National Labor Relations Board or any other labor relations tribunal or
authority and (iii) to the knowledge of LIN, there are no material organizing
activities involving LIN or any of its subsidiaries with respect to any group
of employees of LIN or its subsidiaries.
2.17 EMPLOYEE ARRANGEMENTS AND BENEFIT PLANS. (a) The LIN Disclosure
Letter sets forth a complete and correct list of (i) all LIN Benefit Plans,
including all employee benefit plans within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and (ii)
all written employment, severance, termination, change-in-control, or
indemnification agreements (collectively, the "Employment Arrangements"), in
each case under which LIN or any of its subsidiaries has any obligation or
liability (contingent or otherwise), except for on-air agreements entered into
in the ordinary course of business consistent with past practices and any
Employment Arrangement which provides for annual compensation (excluding
benefits) of $150,000 or less or has an unexpired term of and can be terminated
(before, on or after a change in control) in less than one year from the date
hereof without additional cost or penalty. Except as set forth in the LIN SEC
Document or in the LIN Disclosure Letter and except as could not, individually
or in the aggregate, reasonably be expected to have a LIN Material Adverse
Effect: (A) each LIN Benefit Plan has been administered and is in compliance
with the terms of such plan and all applicable laws, rules and regulations, (B)
no "reportable event" (as such term is used in section 4043 of ERISA) (other
than those events for which the 30 day notice has been waived pursuant to the
regulations), "prohibited transaction" (as such term is used in section 406 of
ERISA or section 4975 of the Code) or "accumulated funding deficiency" (as such
term is used in section 412 or 4971 of the Code) has heretofore occurred with
respect to any LIN Benefit Plan and (C) each LIN Benefit Plan intended to
qualify under Section 401(a) of the Code has received a favorable determination
from the United States Internal Revenue Service ("IRS") regarding its qualified
status and no notice has been received from the IRS with respect to the
revocation of such qualification.
(b) To the date of this Agreement, there is no litigation or
administrative or other proceeding involving any LIN Benefit Plan or Employment
Arrangement nor has LIN or any of its subsidiaries received written notice that
any such proceeding is threatened, in each case where an adverse determination
could reasonably be expected to have a LIN Material Adverse Effect. Except as
set forth in the LIN Disclosure Letter, neither LIN nor any of its subsidiaries
has contributed to any "multiemployer plan" (within the meaning of section
3(37) of ERISA) and neither
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LIN nor any of its subsidiaries has incurred, nor, to the best of LIN's
knowledge, is reasonably likely to incur any withdrawal liability which remains
unsatisfied in an amount which could reasonably be expected to have a LIN
Material Adverse Effect. The termination of, or withdrawal from, any LIN
Benefit Plan or multiemployer plan to which LIN or its subsidiaries
contributes, on or prior to the Closing Date, will not subject LIN or any of
its subsidiaries to any liability under Title IV of ERISA that could reasonably
be expected to have a LIN Material Adverse Effect.
2.18 TAX MATTERS. Except as set forth in the LIN Disclosure Letter,
(A) LIN and each of its subsidiaries have timely filed with the appropriate
taxing authorities all material Tax Returns (as defined below) required to be
filed through the date hereof and will timely file any such material Tax
Returns required to be filed on or prior to the Closing Date (except those
under valid extension) and all such Tax Returns are and will be true and
correct in all material respects, (B) all Taxes (as defined below) of LIN and
each of its subsidiaries shown to be due on the Tax Returns described in (A)
above have been or will be timely paid or adequately reserved for in accordance
with GAAP (except to the extent that such Taxes are being contested in good
faith), (C) no material deficiencies for any Taxes have been proposed, asserted
or assessed against LIN or any of its subsidiaries that have not been fully
paid or adequately provided for in the appropriate financial statements of LIN
and its subsidiaries, and no power of attorney with respect to any Taxes has
been executed or filed with any taxing authority and no material issues
relating to Taxes have been raised in writing by any governmental authority
during any presently pending audit or examination, (D) LIN and its subsidiaries
are not now subject to audit by any taxing authority and no waivers of statutes
of limitation with respect to the Tax Returns have been given by or requested
in writing from LIN or any of its subsidiaries, (E) there are no material liens
for Taxes (other than for Taxes not yet due and payable) on any assets of LIN
or any of its subsidiaries, (F) neither LIN nor any of its subsidiaries is a
party to or bound by (nor will any of them become a party to or bound by) any
tax indemnity, tax sharing, tax allocation agreement, or similar agreement,
arrangement or practice with respect to Taxes, (G) neither LIN nor any of its
subsidiaries has ever been a member of an affiliated group of corporations
within the meaning of Section 1504 of the Code, other than the affiliated group
of which LIN is the common parent, (H) neither LIN nor any of its subsidiaries
has filed a consent pursuant to the collapsible corporation provisions of
Section 341(f) of the Code (or any corresponding provision of state or local
law) or agreed to have Section 341(f)(2) of the Code (or any
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corresponding provisions of state or local law) apply to any disposition of any
asset owned by LIN or any of its subsidiaries, as the case may be, (I) neither
LIN nor any of its subsidiaries has agreed to make, nor is any required to
make, any adjustment under Section 481(a) of the Code or any similar provision
of state, local or foreign law by reason of a change in accounting method or
otherwise, (J) LIN and its subsidiaries have complied in all material respects
with all applicable laws, rules and regulations relating to withholding of
Taxes and (K) no property owned by LIN or any of its subsidiaries (i) is
property required to be treated as being owned by another person pursuant to
the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986; (ii) constitutes "tax exempt use property" within the meaning of
Section 168(h)(l) of the Code; or (iii) is tax exempt bond financed property
within the meaning of Section 168(g) of the Code.
As used in this Agreement, "Tax Return" shall mean any return, report,
claim for refund, estimate, information return or statement or other similar
document relating to or required to be filed with any governmental authority
with respect to Taxes, including any schedule or attachment thereto, and
including any amendment thereof. As used in this Agreement, "Taxes" shall mean
taxes of any kind, including but not limited to those measured by or referred
to as income, gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, property or windfall profits taxes, customs,
duties or similar fees, assessments or charges of any kind whatsoever, together
with any interest and any penalties, additions to tax or additional amounts
imposed by any governmental authority, domestic or foreign.
2.19 INTELLECTUAL PROPERTY. Except as set forth in the LIN Disclosure
Letter and except to the extent that the inaccuracy of any of the following (or
the circumstances giving rise to such inaccuracy), individually or in the
aggregate, could not reasonably be expected to have a LIN Material Adverse
Effect: (a) LIN and each of its subsidiaries owns, or is licensed to use (in
each case, free and clear of any Liens), all Intellectual Property (as defined
below) used in or necessary for the conduct of its business as currently
conducted; (b) the use of any Intellectual Property by LIN and its subsidiaries
does not infringe on or otherwise violate the rights of any person and is in
accordance with any applicable license pursuant to which LIN or any subsidiary
acquired the right to use any Intellectual Property; (c) to the knowledge of
LIN, no person is challenging, infringing on or otherwise violating any right
of LIN or any of
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its subsidiaries with respect to any Intellectual Property owned by and/or
licensed to LIN or its subsidiaries; and (d) neither LIN nor any of its
subsidiaries has received any written notice of any pending claim with respect
to any Intellectual Property used by LIN and its subsidiaries and to its
knowledge no Intellectual Property owned and/or licensed by LIN or its
subsidiaries is being used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of such Intellectual Property.
For purposes of this Agreement, "Intellectual Property" shall mean
trademarks, service marks, brand names and other indications of origin, the
goodwill associated with the foregoing and registrations in any jurisdiction
of, and applications in any jurisdiction to register, the foregoing, including
any extension, modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not, in any
jurisdiction; patents, applications for patents (including, without limitation,
divisions, continuations, continuations in part and renewal applications), and
any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any person; writings and
other works, whether copyrightable or not, in any jurisdiction; registrations
or applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; any similar intellectual property or
proprietary rights; and any claims or causes of action arising out of or
relating to any infringement or misappropriation of any of the foregoing.
2.20 ENVIRONMENTAL MATTERS. Except as disclosed in the LIN SEC
Document or in the LIN Disclosure Letter and except as could not reasonably be
expected to have a LIN Material Adverse Effect: (i) the operations of LIN and
its subsidiaries have been and are in compliance with all Environmental Laws
(as defined below) and with all Permits required by Environmental Laws, (ii) to
the date of this Agreement, there are no pending or, to the knowledge of LIN,
threatened, actions, suits, claims, investigations or other proceedings
(collectively, "Actions") under or pursuant to Environmental Laws against LIN
or its subsidiaries or involving any real property currently or, to the
knowledge of LIN, formerly owned, operated or leased by LIN or its
subsidiaries, (iii) LIN and its subsidiaries are not subject to any
Environmental Liabilities (as defined below), and, to the knowledge of LIN, no
facts, circumstances or conditions relating to, arising from, associated with
or attributable to any real property currently or, to the knowledge of LIN,
formerly owned, operated or leased by LIN or its subsidiaries or operations
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thereon that could reasonably be expected to result in Environmental
Liabilities, (iv) all real property owned and to the knowledge of LIN all real
property operated or leased by LIN or its subsidiaries is free of contamination
from Hazardous Material (as defined below) and (v) there is not now, nor, to
the knowledge of LIN, has there been in the past, on, in or under any real
property owned, leased or operated by LIN or any of its predecessors (a) any
underground storage tanks, above-ground storage tanks, dikes or impoundments
containing Hazardous Materials, (b) any asbestos-containing materials, (c) any
polychlorinated biphenyls, or (d) any radioactive substances.
As used in this Agreement, "Environmental Laws" means any and all
federal, state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decisions, injunctions, orders, decrees, requirements of any
Governmental Entity, any and all common law requirements, rules and bases of
liability regulating, relating to or imposing liability or standards of conduct
concerning pollution, Hazardous Materials or protection of human health or the
environment, as currently in effect and includes, but is not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et seq., the Hazardous Materials
Transportation Act 49 U.S.C. Section 1801 et seq., the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq., the Clean Water
Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 33 U.S.C. Section 2601
et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C., Section 136 et
seq., and the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq., as
such laws have been amended or supplemented, and the regulations promulgated
pursuant thereto, and all analogous state or local statutes. As used in this
Agreement, "Environmental Liabilities" with respect to any person means any and
all liabilities of or relating to such person or any of its subsidiaries
(including any entity which is, in whole or in part, a predecessor of such
person or any of such subsidiaries), whether vested or unvested, contingent or
fixed, actual or potential, known or unknown, which (i) arise under or relate
to matters covered by Environmental Laws and (ii) relate to actions occurring
or conditions existing on or prior to the Closing Date. As used in this
Agreement, "Hazardous Materials" means any hazardous or toxic substances,
materials or wastes, defined, listed, classified or regulated as such in or
under any Environmental Laws which includes, but is not limited to, petroleum,
petroleum products, friable asbestos, urea formaldehyde and polychlorinated
biphenyls.
2.21 MATERIAL AGREEMENTS. (a) Except as disclosed in the LIN
Disclosure Letter, from and after the date of filing of the
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LIN SEC Document, to the date of this Agreement, neither LIN nor any of its
subsidiaries has entered into any contract, agreement or other document or
instrument (other than this Agreement) that would be required to be filed with
the SEC or any material amendment, modification or waiver under any contract,
agreement or other document or instrument (other than any such amendments,
modifications or waivers entered into following the date of this Agreement in
connection with the transactions contemplated hereby) that was previously filed
with the SEC or would be required to be so filed.
(b) Except as filed as an exhibit to the LIN SEC Document or
as set forth in the LIN Disclosure Letter, to the date of this Agreement,
neither LIN nor any of its subsidiaries is a party to or has entered into or
made any material amendment or modification to or granted any material waiver
under the following (collectively, the "Material Agreements"): (A) any network
affiliation agreement for any LIN Licensed Facility or LIN LMA Facility (a
"Network Affiliation Agreement"), (B) any material sports broadcasting
agreement (a "Sports Agreement"), (C) any main transmitter site or main studio
lease for any LIN Licensed Facility or LIN LMA Facility, (D) any agreement
pursuant to which LIN agrees to provide programming to a LIN LMA Facility, or
pursuant to which LIN has either a contingent programming obligation or the
right to purchase the assets of a LIN LMA Facility or any shares of capital
stock of any corporation holding any assets relating to a LIN LMA Facility (an
"LMA Agreement"), or (E) any partnership or joint venture agreement obligating
LIN to contribute cash in excess of $200,000 per year.
(c) Each of the Material Agreements is valid and enforceable
against LIN in accordance with its terms, and there is no default under any
Material Agreements either by LIN or any of its subsidiaries which is a party
to such Material Agreements or, to the knowledge of LIN, by any other party
thereto, and no event has occurred that with the lapse of time or the giving of
notice or both would constitute a default thereunder by LIN or, to the
knowledge of LIN, any other party thereto, in any such case in which such
default or event could reasonably be expected to have a LIN Material Adverse
Effect. In addition, neither LIN nor any subsidiary of LIN is in material
breach of any Network Affiliation Agreement, Sports Agreement or LMA Agreement
(including any breach which would give rise to a right to terminate any such
agreement). To the date of this Agreement, neither LIN nor any subsidiary of
LIN has received any written notice (or to the knowledge of LIN any other
notice) of default or termination under any Material Agreement, and to the
knowledge of LIN, there exists no basis for any assertion of a right of default
or termination under such agreements. To the date of
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this Agreement, neither LIN nor any subsidiary of LIN has received any written
notice (or to the knowledge of LIN any other notice) of the exercise of a put
option or other right pursuant to which LIN or any of its subsidiaries would be
obligated to purchase capital stock or assets relating to any LIN LMA Facility.
2.22 TANGIBLE PROPERTY. All of the assets of LIN and its Significant
Subsidiaries are in good operating condition, reasonable wear and tear
excepted, and usable in the ordinary course of business, except where the
failure to be in such condition or so usable could not, individually or in the
aggregate, reasonably be expected to have a LIN Material Adverse Effect.
2.23 NBC STATION VENTURE. To the knowledge of LIN, except as
disclosed in the LIN SEC Document, since the date of the most recent financial
statements of LIN Holdings contained in the LIN SEC Document, there has been no
material adverse change in the business, properties, results of operations, or
condition (financial or otherwise) of Station Venture Holdings, LLC (a minority
equity investment of one of LIN's subsidiaries) and its subsidiaries, taken as
a whole, that could reasonably be expected to have a LIN Material Adverse
Effect.
2.24 NO OTHER REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties made by LIN as expressly set forth in this
Agreement or in any certificate or document delivered pursuant this Agreement,
neither LIN nor any of its affiliates has made and shall not be construed as
having made to Chancellor or to any affiliate thereof any representation or
warranty of any kind.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CHANCELLOR
Chancellor represents and warrants to LIN as follows:
3.1 ORGANIZATION, STANDING AND CORPORATE POWER. Each of Chancellor
and the Chancellor Significant Subsidiaries (as defined below) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted. Each of
Chancellor and the Chancellor Significant Subsidiaries is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of
its business or the ownership
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or leasing of its properties makes such qualification necessary, except where
the failure to be so qualified could not reasonably be expected to have a
material adverse effect on the business, properties, results of operations, or
condition (financial or otherwise) of Chancellor and its subsidiaries,
considered as a whole (other than as a result of changes in general economic
conditions or in economic conditions generally affecting the radio broadcasting
industry) (a "Chancellor Material Adverse Effect"). Chancellor has delivered
to LIN complete and correct copies of its Certificate of Incorporation and
Bylaws, as amended to the date of this Agreement. For purposes of this
Agreement, a "Chancellor Significant Subsidiary" means any subsidiary of
Chancellor that would constitute a "significant subsidiary" within the meaning
of Rule 1-02 of Regulation S-X of the SEC.
3.2 CAPITAL STRUCTURE. The authorized capital stock of Chancellor
consists of (i) 75,000,000 shares of Chancellor Class A Common Stock, none of
which are issued and outstanding, (ii) 200,000,000 shares of Chancellor Common
Stock and (iii) 50,000,000 shares of preferred stock, $0.01 par value, of which
(x) 2,200,000 shares have been designated as 7% Convertible Preferred Stock and
(y) 6,000,000 shares have been designated as $3.00 Convertible Exchangeable
Preferred Stock. At the close of business on July 6, 1998: (i) 142,288,959
shares of Chancellor Common Stock were issued and outstanding, 14,160,810
shares of Chancellor Common Stock were reserved for issuance pursuant to
outstanding options or warrants to purchase Chancellor Common Stock which have
been granted to directors, officers or employees of Chancellor or others
("Chancellor Stock Options"), 18,059,088 shares of Chancellor Common Stock were
reserved for issuance upon the conversion of the Chancellor Convertible
Preferred Stock, and no shares of Chancellor Common Stock were held as treasury
shares by Chancellor or any subsidiary of Chancellor; (ii) 2,200,000 shares of
Chancellor 7% Convertible Preferred Stock were issued and outstanding; (iii)
6,000,000 shares of Chancellor $3.00 Convertible Preferred Stock were issued
and outstanding; and (iv) no shares of Chancellor Convertible Preferred Stock
were held as treasury shares by Chancellor or any subsidiary of Chancellor.
Except as set forth above, at the close of business on July 6, 1998, no shares
of capital stock or other equity securities of Chancellor were authorized,
issued, reserved for issuance or outstanding. All outstanding shares of
capital stock of Chancellor are, and all shares which may be issued pursuant to
Chancellor's stock option plans, as amended to the date hereof (the "Chancellor
Stock Option Plans"), or upon the exercise of outstanding Chancellor Stock
Options or upon the conversion of outstanding shares of Chancellor Convertible
Preferred Stock will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. No bonds,
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debentures, notes or other indebtedness of Chancellor or any subsidiary of
Chancellor having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which the stockholders
of Chancellor or any subsidiary of Chancellor may vote are issued or
outstanding. All the outstanding shares of capital stock of each subsidiary of
Chancellor have been validly issued and are fully paid and nonassessable and
(except for the shares of 12-1/4% Series A Senior Cumulative Exchangeable
Preferred Stock, $0.01 par value, of Chancellor Media Corporation of Los
Angeles, a Delaware corporation (the "Chancellor Operating Subsidiary")), are
owned by Chancellor, by one or more wholly-owned subsidiaries of Chancellor or
by Chancellor and one or more such wholly-owned subsidiaries, free and clear of
all Liens, except for Liens arising out of the senior credit facility of
Chancellor Operating Subsidiary and those that, individually or in the
aggregate, could not reasonably be expected to have a Chancellor Material
Adverse Effect. Except as set forth above and in the Chancellor Stockholders
Agreement (as defined in Section 6.2(d)) (which restricts the transfer of
shares of Chancellor Common Stock by the parties to the Chancellor Stockholders
Agreement in certain circumstances), and except for certain provisions of the
Certificate of Incorporation of Chancellor relating to "alien ownership" of the
Chancellor Common Stock, neither Chancellor nor any subsidiary of Chancellor
has any outstanding option, warrant, subscription or other right, agreement or
commitment that either (i) obligates Chancellor or any subsidiary of Chancellor
to issue, sell or transfer, repurchase, redeem or otherwise acquire or vote any
shares of the capital stock of Chancellor or any Chancellor Significant
Subsidiary or (ii) restricts the transfer of Chancellor Common Stock. Since
the close of business on July 6, 1998 to the date hereof, neither Chancellor
nor any subsidiary of Chancellor has issued any capital stock or securities or
other rights convertible into or exercisable or exchangeable for shares of such
capital stock, other than shares of Chancellor Common Stock issued upon the
exercise of Chancellor Stock Options outstanding on July 6, 1998 or upon the
conversion of shares of Chancellor Convertible Preferred Stock outstanding on
July 6, 1998.
3.3 AUTHORITY; NONCONTRAVENTION. Chancellor has the requisite
corporate power and authority to enter into this Agreement and, subject to the
approval of its stockholders as set forth in Section 4.2(b) with respect to the
approval of this Agreement and the consummation of the Merger and the issuance
of shares of Chancellor Common Stock therein (the "Chancellor Stockholders
Approval"), to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by Chancellor and the consummation by
Chancellor
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of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Chancellor, subject, in the case of
the Merger and the issuance of shares of Chancellor Common Stock therein, the
Chancellor Stockholders Approval. This Agreement has been duly executed and
delivered by Chancellor and, assuming this Agreement constitutes the valid and
binding agreement of each of the other parties hereto, constitutes a valid and
binding obligation of Chancellor, enforceable against it in accordance with its
terms except that the enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditor's rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity). The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions hereof will not, (i) conflict with any of the provisions of
the Certificate of Incorporation or Bylaws of Chancellor or the comparable
documents of any subsidiary of Chancellor, (ii) subject to the governmental
filings and other matters referred to in the following sentence, conflict with,
result in a breach of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or require
the consent of any person under, any indenture or other agreement, permit,
concession, franchise, license or similar instrument or undertaking to which
Chancellor or any of its subsidiaries is a party or by which Chancellor or any
of its subsidiaries or any of their assets is bound or affected, (iii) result
in an obligation by Chancellor or any of its subsidiaries to redeem, repurchase
or retire (or offer to redeem, repurchase or retire) any indebtedness of
Chancellor or any of its subsidiaries outstanding as of the date hereof or
equity security of Chancellor or any of its subsidiaries outstanding as of the
date hereof, or (iv) subject to the governmental filings and other matters
referred to in the following sentence, contravene any law, rule or regulation
of any state or of the United States or any political subdivision thereof or
therein, or any order, writ, judgment, injunction, decree, determination or
award currently in effect, except, in the cases of the foregoing clauses (ii)
through (iv), for breaches that, individually or in the aggregate, could not
reasonably be expected to have a Chancellor Material Adverse Effect or to
materially hinder Chancellor's ability to consummate the transactions
contemplated by this Agreement. No consent, approval or authorization of, or
declaration or filing with, or notice to, any Governmental Entity which has not
been received or made, is required by or with respect to Chancellor or any of
its subsidiaries in connection with the execution and delivery of
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this Agreement by Chancellor or the consummation by Chancellor of the
transactions contemplated hereby, except for (i) the filing of premerger
notification and report forms under the HSR Act with respect to the Merger and
the termination or earlier expiration of the applicable waiting period
thereunder, (ii) such filings with and approvals required by the FCC under the
Communications Act, including those required in connection with the acquisition
of control of the LIN FCC Licenses for the operation of the LIN Licensed
Facilities, (iii) the filing of a registration statement under the Securities
Act with respect to the issuance of shares of Chancellor Common Stock in the
Merger, (iv) a proxy statement to be filed with the SEC by Chancellor relating
to the Chancellor Stockholders Approval (such proxy statement, as amended or
supplemented from time to time, the "Proxy Statement/Prospectus"), (v) any
filing required by the Nasdaq Stock Market with respect to the issuance of
shares of Chancellor Common Stock in the Merger and upon exercise of Assumed
Stock Options (as defined in Section 5.2(a)), (vi) the filing of such reports
under the Exchange Act as may be required in connection with this Agreement and
the transactions contemplated by this Agreement, (vii) such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or the other transactions contemplated by this
Agreement, and (viii) such filings as may be required in connection with
statutory provisions and regulations relating to real property transfer gains
taxes and real property transfer taxes.
3.4 CHANCELLOR SEC DOCUMENTS. (i) Chancellor and its predecessors
have filed all required reports, schedules, forms, statements and other
documents with the SEC since January 1, 1995 (such reports, schedules, forms,
statements and other documents and any other documents filed with the SEC and
publicly available prior to the date of this Agreement are hereinafter referred
to as the "Chancellor SEC Documents"); (ii) as of their respective dates, the
Chancellor SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
Chancellor SEC Documents, and none of the Chancellor SEC Documents as of such
dates contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and (iii) as of their respective dates, the consolidated
financial statements of Chancellor and its predecessors included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and
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regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited statements, as permitted by Rule 10-01 of
Regulation S-X) and fairly present, in all material respects, the consolidated
financial position of Chancellor and its consolidated subsidiaries (or its
predecessors and their respective consolidated subsidiaries) as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (on the basis stated therein and subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments).
3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Chancellor SEC Documents or except as disclosed in writing by Chancellor to LIN
in a disclosure letter (the "Chancellor Disclosure Letter") prior to the
execution and delivery of the Agreement, or as otherwise agreed to in writing
after the date hereof by LIN, or as expressly permitted by this Agreement,
since the date of the most recent audited financial statements included in the
Chancellor SEC Documents, Chancellor and its subsidiaries have conducted their
business only in the ordinary course, and there has not been (i) any change
which could reasonably be expected to have a Chancellor Material Adverse Effect
(including as a result of the consummation of the transactions contemplated by
this Agreement), (ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to any
of Chancellor's currently outstanding capital stock (other than the payment of
regular cash dividends on the Chancellor 7% Convertible Preferred Stock and
Chancellor $3.00 Convertible Preferred Stock, and other than the payment of
dividends (including accrued dividends) on the 12% Exchangeable Preferred
Stock, $0.01 par value, and 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock, $0.01 par value, of Chancellor Operating Subsidiary, in each
case in accordance with usual record and payment dates (other than accrued and
unpaid dividends paid on the 12% Exchangeable Preferred Stock)), (iii) any
split, combination or reclassification of any of its outstanding capital stock
or any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its outstanding capital
stock, (iv) (x) any granting by Chancellor or any of its subsidiaries to any
director, officer or other employee or independent contractor of Chancellor or
any of its subsidiaries of any increase in compensation or acceleration of
benefits, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the
date of the most recent audited
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financial statements included in the Chancellor SEC Documents, (y) any granting
by Chancellor or any of its subsidiaries to any director, officer or other
employee or independent contractor of any increase in, or acceleration of
benefits in respect of, severance or termination pay, or pay in connection with
any change of control of Chancellor, except in the ordinary course of business
consistent with prior practice or as was required under any employment,
severance or termination agreements in effect as of the date of the most recent
audited financial statements included in the Chancellor SEC Documents or (z)
any entry by Chancellor or any of its subsidiaries into any employment,
severance, change of control, or termination or similar agreement with any
director, executive officer or other employee or independent contractor other
than in the ordinary course of business consistent with past practices, or (v)
any change in accounting methods, principles or practices by Chancellor or any
of its subsidiaries materially affecting its assets, liability or business,
except insofar as may have been required by a change in generally accepted
accounting principles.
3.6 NO EXTRAORDINARY PAYMENTS OR CHANGE IN BENEFITS. Except as
disclosed in the Chancellor Disclosure Letter, no current or former director,
officer, employee or independent contractor of Chancellor or any of its
subsidiaries is entitled to receive any payment under any agreement,
arrangement or policy (written or oral) relating to employment, severance,
change of control, termination, stock options, stock purchases, compensation,
deferred compensation, fringe benefits or other employee benefits currently in
effect (collectively, the "Chancellor Benefit Plans"), nor will any benefit
received or to be received by any current or former director, officer, employee
or independent contractor of Chancellor or any of its subsidiaries under any
Chancellor Benefit Plan be accelerated or modified, as a result of or in
connection with the execution and delivery of, or the consummation of the
transactions contemplated by, this Agreement.
3.7 BROKERS. Except with respect to Morgan Stanley & Co.
Incorporated ("Morgan Stanley") and Wasserstein Perella & Co. ("Wasserstein"),
all negotiations relating to this Agreement and the transactions contemplated
hereby have been carried out by Chancellor directly with LIN without the
intervention of any person on behalf of Chancellor in such a manner as to give
rise to any valid claim by any person against Chancellor, LIN, the Surviving
Corporation or any subsidiary of any of them for a finder's fee, brokerage
commission, or similar payment. The Chancellor Disclosure Letter sets forth a
written summary of the terms of its agreements relating to the transactions
contemplated by this Agreement with Morgan Stanley and Wasserstein, and
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Chancellor has no other agreements or understandings (written or oral) with
respect to such services.
3.8 OPINION OF FINANCIAL ADVISOR. Chancellor has received the
opinion of Wasserstein, dated the date hereof, to the effect that, as of such
date, the Exchange Ratio is fair, from a financial point of view, to Chancellor
and the holders of Chancellor Common Stock.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
the Chancellor SEC Documents and except for liabilities contemplated by this
Agreement or disclosed in the Chancellor Disclosure Letter, Chancellor and its
subsidiaries do not have any material indebtedness, obligations or liabilities
of any kind (whether accrued, absolute, contingent or otherwise) (i) required
by GAAP to be reflected on a consolidated balance sheet of Chancellor and its
consolidated subsidiaries or in the notes, exhibits or schedules thereto or
(ii) which reasonably could be expected to have a Chancellor Material Adverse
Effect.
3.10 LITIGATION. Except as disclosed in the Chancellor SEC Documents,
to the date of this Agreement, there is no litigation, administrative action,
arbitration or other proceeding pending against Chancellor or any of its
subsidiaries or, to the knowledge of Chancellor, threatened that, individually
or in the aggregate, could reasonably be expected to (i) have a Chancellor
Material Adverse Effect or (ii) prevent, or significantly delay the
consummation of the transactions contemplated by this Agreement. Except as set
forth in the Chancellor SEC Documents, to the date of this Agreement, there is
no judgment, order, injunction or decree of any Governmental Entity outstanding
against Chancellor or any of its subsidiaries that, individually or in the
aggregate, could reasonably be expected to have any effect referred to in the
foregoing clauses (i) and (ii) of this Section 3.10.
3.11 TRANSACTIONS WITH AFFILIATES. Other than the transactions
contemplated by this Agreement or except to the extent disclosed in the
Chancellor SEC Documents or in the Chancellor Disclosure Letter, there have
been no transactions, agreements, arrangements or understandings between
Chancellor or its subsidiaries, on the one hand, and Chancellor's affiliates
(other than subsidiaries of Chancellor) or any other person, on the other hand,
that would be required to be disclosed under Item 404 of Regulation S-K under
the Securities Act.
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3.12 CHANCELLOR COMMON STOCK. The shares of Chancellor Common Stock
to be issued in the Merger will be, upon delivery against receipt of the shares
of LIN Common Stock for which such shares will be issued in accordance with
Section 1.8 of this Agreement, duly authorized, validly issued, fully paid and
nonassessable. The shares of Chancellor Common Stock to be issued upon
exercise of the Assumed Stock Options (as defined in Section 5.2(a)) will be,
upon delivery of the exercise price therefor in accordance with the terms of
the LIN Stock Option Plan and agreements pursuant to which such Assumed Stock
Options were issued, duly authorized, validly issued, fully paid and
nonassessable.
3.13 VOTING REQUIREMENTS. The affirmative vote of a majority of the
outstanding shares of Chancellor Common Stock entitled to vote with respect to
the approval of the Merger and the issuance of shares of Chancellor Common
Stock therein is the only vote of the holders of any class or series of
Chancellor's capital stock necessary to approve this Agreement and the
transactions contemplated by this Agreement.
3.14 FCC QUALIFICATION. Chancellor and its subsidiaries are fully
qualified under the Communications Act to be the transferees of control of the
LIN FCC Licenses. Except as disclosed in the Chancellor Disclosure Letter,
Chancellor is not aware of any facts or circumstances relating to the FCC
qualifications of Chancellor or any of its subsidiaries that would prevent the
FCC's granting the FCC Form 315 Transfer of Control Application to be filed
with respect to the Merger.
3.15 EMPLOYEE ARRANGEMENTS AND BENEFIT PLANS. (a) Except as set
forth in the Chancellor SEC Documents or in the Chancellor Disclosure Letter
and except as could not, individually or in the aggregate, reasonably be
expected to have a Chancellor Material Adverse Effect: (A) each Chancellor
Benefit Plan has been administered and is in compliance with the terms of such
plan and all applicable laws, rules and regulations, (B) no "reportable event"
(as such term is used in section 4043 of ERISA) (other than those events for
which the 30 day notice has been waived pursuant to the regulations),
"prohibited transaction" (as such term is used in section 406 of ERISA or
section 4975 of the Code) or "accumulated funding deficiency" (as such term is
used in section 412 or 4971 of the Code) has heretofore occurred with respect
to any Chancellor Benefit Plan and (C) each Chancellor Benefit Plan intended to
qualify under Section 401(a) of the Code has received a favorable determination
from the IRS regarding its qualified status and no notice has been received
from the IRS with respect to the revocation of such qualification.
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(b) To the date of this Agreement, there is no litigation or
administrative or other proceeding involving any Chancellor Benefit Plan nor
has Chancellor or its subsidiaries received written notice that any such
proceeding is threatened, in each case where an adverse determination could
reasonably be expected to have a Chancellor Material Adverse Effect. Neither
Chancellor nor any of its subsidiaries has incurred, nor, to the best of
Chancellor's knowledge, is reasonably likely to incur any withdrawal liability
with respect to any "multiemployer plan" (within the meaning of section 3(37)
of ERISA) which remains unsatisfied in an amount which could reasonably be
expected to have a Chancellor Material Adverse Effect. The termination of, or
withdrawal from, any Chancellor Benefit Plan or multiemployer plan to which
Chancellor or its subsidiaries contributes, on or prior to the Closing Date,
will not subject Chancellor or any of its subsidiaries to any liability under
Title IV of ERISA that could reasonably be expected to have a Chancellor
Material Adverse Effect.
3.16 TAX MATTERS. Except as set forth in the Chancellor Disclosure
Letter, (A) Chancellor and each of its subsidiaries have timely filed with the
appropriate taxing authorities all material Tax Returns required to be filed
through the date hereof and will timely file any such material Tax Returns
required to be filed on or prior to the Closing Date (except those under valid
extension) and all such Tax Returns are and will be true and correct in all
material respects, (B) all Taxes of Chancellor and each of its subsidiaries
shown to be due on the Tax Returns described in (A) above have been or will be
timely paid or adequately reserved for in accordance with GAAP (except to the
extent that such Taxes are being contested in good faith), (C) no material
deficiencies for any Taxes have been proposed, asserted or assessed against
Chancellor or any of its subsidiaries that have not been fully paid or
adequately provided for in the appropriate financial statements of Chancellor
and its subsidiaries, and no power of attorney with respect to any Taxes has
been executed or filed with any taxing authority and no material issues
relating to Taxes have been raised in writing by any governmental authority
during any presently pending audit or examination, (D) Chancellor and its
subsidiaries are not now subject to audit by any taxing authority and no
waivers of statutes of limitation with respect to the Tax Returns have been
given by or requested in writing from Chancellor or any of its subsidiaries,
(E) there are no material liens for Taxes (other than for Taxes not yet due and
payable) on any assets of Chancellor or any of its subsidiaries, (F) neither
Chancellor nor any of its subsidiaries is a party to or bound by (nor will any
of them become a party to or bound by) any tax indemnity, tax sharing, tax
allocation agreement, or similar agreement,
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arrangement or practice with respect to Taxes, (G) neither Chancellor nor any
of its subsidiaries has ever been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code, other than the
affiliated group of which Chancellor is the common parent, (H) neither
Chancellor nor any of its subsidiaries has filed a consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state or local law) or agreed to have Section
341(f)(2) of the Code (or any corresponding provisions of state or local law)
apply to any disposition of any asset owned by Chancellor or any of its
subsidiaries, as the case may be, (I) neither Chancellor nor any of its
subsidiaries has agreed to make, nor is any required to make, any adjustment
under Section 481(a) of the Code or any similar provision of state, local or
foreign law by reason of a change in accounting method or otherwise, (J)
Chancellor and its subsidiaries have complied in all material respects with all
applicable laws, rules and regulations relating to withholding of Taxes and (K)
no property owned by Chancellor or any of its subsidiaries (i) is property
required to be treated as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986; (ii) constitutes "tax exempt use property" within the meaning of
Section 168(h)(l) of the Code; or (iii) is tax exempt bond financed property
within the meaning of Section 168(g) of the Code.
3.17 INTELLECTUAL PROPERTY. Except as set forth in the Chancellor
Disclosure Letter and except to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy), individually
or in the aggregate, could not reasonably be expected to have a Chancellor
Material Adverse Effect: (a) Chancellor and each of its subsidiaries owns, or
is licensed to use (in each case, free and clear of any Liens), all
Intellectual Property used in or necessary for the conduct of its business as
currently conducted; (b) the use of any Intellectual Property by Chancellor and
its subsidiaries does not infringe on or otherwise violate the rights of any
person and is in accordance with any applicable license pursuant to which
Chancellor or any subsidiary acquired the right to use any Intellectual
Property; and (c) to the knowledge of Chancellor, no person is challenging,
infringing on or otherwise violating any right of Chancellor or any of its
subsidiaries with respect to any Intellectual Property owned by and/or licensed
to Chancellor or its subsidiaries; and (d) neither Chancellor nor any of its
subsidiaries has received any written notice of any pending claim with respect
to any Intellectual Property used by Chancellor and its subsidiaries and to its
knowledge no Intellectual Property owned and/or licensed by Chancellor or its
subsidiaries is being
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used or enforced in a manner that would result in the abandonment, cancellation
or unenforceability of such Intellectual Property.
3.18 ENVIRONMENTAL MATTERS. Except as disclosed in the Chancellor SEC
Documents or in the Chancellor Disclosure Letter and except as could not
reasonably be expected to have a Chancellor Material Adverse Effect (i) the
operations of Chancellor and its subsidiaries have been and are in compliance
with all Environmental Laws and with all Permits required by Environmental
Laws, (ii) to the date of this Agreement, there are no pending or, to the
knowledge of Chancellor, threatened, Actions under or pursuant to Environmental
Laws against Chancellor or its subsidiaries or involving any real property
currently or, to the knowledge of Chancellor, formerly owned, operated or
leased by Chancellor or its subsidiaries, (iii) Chancellor and its subsidiaries
are not subject to any Environmental Liabilities, and, to the knowledge of
Chancellor, no facts, circumstances or conditions relating to, arising from,
associated with or attributable to any real property currently or, to the
knowledge of Chancellor, formerly owned, operated or leased by Chancellor or
its subsidiaries or operations thereon that could reasonably be expected to
result in Environmental Liabilities, (iv) all real property owned and to the
knowledge of Chancellor all real property operated or leased by Chancellor or
its subsidiaries is free of contamination from Hazardous Material and (v) there
is not now, nor, to the knowledge of Chancellor, has there been in the past,
on, in or under any real property owned, leased or operated by Chancellor or
any of its predecessors (a) any underground storage tanks, above-ground storage
tanks, dikes or impoundments containing Hazardous Materials, (b) any
asbestos-containing materials, (c) any polychlorinated biphenyls, or (d) any
radioactive substances.
3.19 NO OTHER REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties made by Chancellor as expressly set forth in
this Agreement or in any certificate or document delivered pursuant this
Agreement, neither Chancellor nor any of its affiliates has made and shall not
be construed as having made to LIN or to any affiliate thereof any
representation or warranty of any kind.
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ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 PREPARATION OF FORM S-4 AND PROXY STATEMENT/PROSPECTUS;
INFORMATION SUPPLIED.
(a) As soon as practicable following the date of this
Agreement, Chancellor shall prepare and file with the SEC (i) a preliminary
Proxy Statement/Prospectus and (ii) a Registration Statement on Form S-4 (the
"Form S-4") with respect to the registration of the issuance of shares of
Chancellor Common Stock in the Merger, of which the Proxy Statement/Prospectus
will form a part. Chancellor shall use its reasonable best efforts to have the
Form S-4 declared effective under the Securities Act as promptly as practicable
after such filing. Chancellor shall use its best efforts to cause the Proxy
Statement/Prospectus to be mailed to Chancellor's stockholders and LIN's
stockholders as promptly as practicable after the Form S-4 is declared
effective under the Securities Act. Chancellor shall also take any action
(other than qualifying to do business in any jurisdiction in which it is not
now so qualified or take any action that would subject it to the service of
process in suits, other than as to matters and transactions relating to the
Form S-4, in any jurisdiction where it is not so subject) required to be taken
under any applicable state securities laws in connection with the issuance of
the Chancellor Common Stock in the Merger and LIN shall furnish all information
concerning itself and the holders of shares of LIN Common Stock as may be
reasonably requested in connection with any such action.
(b) LIN agrees and represents and warrants that the
information supplied or to be supplied by it specifically for inclusion or
incorporation by reference in the (i) Form S-4 will not, at the time the Form
S-4 is filed with the SEC, at any time it is amended or supplemented or at the
time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading, or (ii) the
Proxy Statement/Prospectus will not, at the date it is first mailed to
Chancellor's stockholders or at the time of the Chancellor Stockholders Meeting
(as defined in Section 4.2), contain any statement which, at the time and in
light of the circumstances under which it is made, is false or misleading with
respect to any material fact, or omits to state any material fact necessary in
order to make the statements therein not false or misleading or necessary to
correct any statement in any earlier communication with respect to the
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solicitation of a proxy for the same meeting or subject matter thereof which
has become false or misleading.
(c) Chancellor agrees and represents and warrants that the
information supplied or to be supplied by it specifically for inclusion or
incorporation by reference in (i) the Form S-4 will not, at the time the Form
S-4 is filed with the SEC, at any time it is amended or supplemented or at the
time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading, or (ii) the
Proxy Statement/Prospectus will not, at the date it is first mailed to
Chancellor's stockholders or at the time of the Chancellor Stockholders
Meeting, contain any statement which, at the time and in light of the
circumstances under which it is made, is false or misleading with respect to
any material fact, or omits to state any material fact necessary in order to
make the statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of a
proxy for the same meeting or subject matter thereof which has become false or
misleading. Chancellor agrees that the Form S-4 will comply as to form in all
material respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder and Chancellor agrees that the Proxy
Statement/Prospectus will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder, except in each case with respect to statements made or incorporated
by reference in the Form S-4 or the Proxy Statement/Prospectus supplied by LIN
specifically for inclusion or incorporation by reference therein as to which
Chancellor assumes no responsibility.
4.2 STOCKHOLDER APPROVAL. (a) LIN agrees that it will take
all action necessary in accordance with applicable law and its Certificate of
Incorporation and Bylaws to convene a meeting of its common stockholders or
obtain the written consent of its common stockholders for the approval of this
Agreement and the Merger. LIN will use its best efforts to obtain the LIN
Stockholders Approval as soon as practicable after the date hereof. Without
limiting the generality of the foregoing, LIN agrees that its obligations
pursuant to the first two sentences of this Section 4.2(a) shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to Chancellor of any Acquisition Proposal (as defined in Section
4.5(a) below) or (ii) the withdrawal or modification by the Board of Directors
of LIN of its approval or recommendation of this
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Agreement or the Merger. The Board of Directors of LIN shall recommend to its
stockholders that they vote in favor of the adoption of this Agreement and the
Merger.
(b) Chancellor agrees that it will take all action necessary in
accordance with applicable law and its Certificate of Incorporation and Bylaws
to convene a meeting of its stockholders (the "Chancellor Stockholders
Meeting") to submit this Agreement, together with the affirmative
recommendation of Chancellor's Board of Directors, to the Chancellor's
stockholders so that they may consider and vote upon the approval of this
Agreement, the Merger and the issuance of shares of Chancellor Common Stock
therein. Chancellor will use its best efforts to hold the Chancellor
Stockholders Meeting as soon as practicable after the date hereof and to obtain
the favorable votes of its stockholders. The Board of Directors of Chancellor
shall recommend to its stockholders that they vote in favor of the adoption of
this Agreement and the Merger.
4.3 ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable notice,
each of Chancellor and LIN shall, and shall cause each of its respective
subsidiaries to, afford to the other parties hereto and to their respective
officers, employees, counsel, financial advisors and other representatives
reasonable access during normal business hours during the period prior to the
Effective Time to all its properties, books, contracts, commitments, personnel
and records and, during such period, each of Chancellor and LIN shall, and
shall cause each of its respective subsidiaries to, furnish as promptly as
practicable to the other parties hereto such information concerning its
business, properties, financial condition, operations and personnel as such
parties may from time to time reasonably request. Except as required by law or
the rules of regulations of the Nasdaq Stock Market or any national stock
exchange, each of Chancellor and LIN agree that, until the earlier of (i) two
years from the date of this Agreement and (ii) the Effective Time, each of
Chancellor and LIN and their respective subsidiaries will not, and will cause
its respective directors, officers, partners, employees, agents, accountants,
counsel, financial advisors and other representatives and affiliates
(collectively, "Representatives") not to, disclose any nonpublic information
obtained from Chancellor or LIN, as the case may be, to any other person, in
whole or in part, other than to its Representatives in connection with an
evaluation of the transactions contemplated by this Agreement, and each of
Chancellor and LIN and their respective subsidiaries will not, and will cause
its respective Representatives not to, use any of such nonpublic information to
directly or indirectly divert or
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attempt to divert any business, customer or employee of the other.
4.4 PUBLIC ANNOUNCEMENTS. Chancellor and LIN agree that each of them
will consult with each of the others before issuing, and will provide each
other the opportunity to review and comment upon, any press release or other
public statements with respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable law, court process or by obligations pursuant to rules
of any national securities exchange or The Nasdaq Stock Market (to the extent
applicable to them).
4.5 ACQUISITION PROPOSALS. (a) From and after the date hereof,
without the prior written consent of Chancellor, LIN shall not, and shall not
authorize or permit any of its subsidiaries to, and shall direct and use its
best efforts to cause its and its subsidiaries' Representatives not to, (i)
directly or indirectly, solicit, initiate or encourage (including by way of
furnishing information or assistance) or take any other action to facilitate
any inquiries or the making of any proposal which constitutes or may reasonably
be expected to lead to an Acquisition Proposal (as defined below) or (ii) enter
into or participate in any discussions or negotiations regarding any
Acquisition Proposal. LIN shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any persons conducted heretofore by it or its Representatives with respect
to the foregoing. LIN agrees not to release any third party from, or waive any
provision of, any standstill agreement to which it is a party or any
confidentiality agreement between it and another person who has made, or who
may reasonably be considered likely to make, an Acquisition Proposal. LIN
agrees that it will notify Chancellor orally and in writing, of any such
inquiries, offers or proposals (including, without limitation, the terms and
conditions of any such proposal).
(b) Neither the Board of Directors of LIN nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Chancellor, the approval or recommendation by such Board of
Directors or committee thereof of this Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or
(iii) cause LIN to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Acquisition
Proposal.
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(c) For purposes of this Agreement, an "Acquisition Proposal"
means any proposal or offer from any person (other than Chancellor or any of
its subsidiaries) for a tender or exchange offer, merger, consolidation, other
business combination, recapitalization, liquidation, dissolution or similar
transaction involving LIN or any LIN Significant Subsidiary, or any proposal to
acquire in any manner a substantial equity interest in, or an substantial
portion of the assets of, LIN or a LIN Significant Subsidiary; provided that an
Acquisition Proposal shall not include any direct or indirect acquisition or
disposition of television broadcast stations (or the assets thereof) disclosed
in the LIN Disclosure Letter.
4.6 CONSENTS, APPROVALS AND FILINGS. Chancellor and LIN will make
and cause their respective subsidiaries and, to the extent necessary, their
other affiliates to make all necessary filings, including, without limitation,
those required under the HSR Act, the Securities Act, the Exchange Act, and the
Communications Act (including filing an application with the FCC for the
transfer of control of the LIN FCC Licenses, which the parties shall file as
soon as practicable (and in any event not more than 20 business days) after the
date of this Agreement), in order to facilitate the prompt consummation of the
Merger and the other transactions contemplated by this Agreement. In addition,
Chancellor and LIN will each use its best efforts, and will cooperate fully and
in good faith with each other, (i) to comply as promptly as practicable with
all governmental requirements applicable to the Merger and the other
transactions contemplated by this Agreement, and (ii) to obtain as promptly as
practicable all necessary permits, orders or other consents of Governmental
Entities and consents of all third parties necessary for the consummation of
the Merger and the other transactions contemplated by this Agreement, including
without limitation, the consent of the FCC to the transfer of control of the
LIN FCC Licenses. Each of Chancellor and LIN shall use its best efforts to
promptly provide such information and communications to Governmental Entities
as such Governmental Entities may reasonably request. Each of the parties
hereto shall provide to the other parties copies of all applications in advance
of filing or submission of such applications to Governmental Entities in
connection with this Agreement and shall make such revisions thereto as
reasonably requested by each other party hereto. Each of the parties hereto
shall provide to the other parties the opportunity to participate in all
meetings and material conversations with Governmental Entities with respect to
the matters contemplated by this Agreement.
4.7 AFFILIATES LETTERS. Prior to the Closing Date, LIN shall deliver
to Chancellor a letter identifying all persons who,
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at the time the Merger is submitted for approval to the stockholders, may be
deemed to be an "affiliate" of such party for purposes of Rule 145 under the
Securities Act. LIN shall use its best efforts to cause each such person to
deliver to Chancellor on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit A hereto.
4.8 NASDAQ LISTING. Chancellor shall use its best efforts to cause
the shares of Chancellor Common Stock to be issued in the Merger and upon the
exercise of the Assumed Stock Options (as defined in Section 6.2(a)) to be
approved for quotation in the Nasdaq Stock Market.
4.9 INDEMNIFICATION. The Certificate of Incorporation of the
Surviving Corporation shall contain the provisions with respect to
indemnification contained in the certificate of incorporation of LIN, as in
effect on the date hereof, and none of such provisions shall be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who at any time prior to the Effective Time were directors or
officers of LIN, or any of its respective subsidiaries (the "Indemnified
Parties") in respect of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement), unless such modification is required by law. Chancellor will
cause to be maintained for a period of not less than six years from the
Effective Time LIN's current directors' and officers' insurance and
indemnification policies to the extent that they provide coverage for events
occurring prior to the Effective Time (the "D&O Insurance") for all persons who
are directors and executive officers of LIN on the date of this Agreement, so
long as the annual premium therefor would not be in excess of 250% of the last
annual premium paid prior to the date of this Agreement; provided, however,
that Chancellor or its subsidiaries may, in lieu of maintaining such existing
D&O Insurance as provided above, cause coverage to be provided under any policy
maintained for the benefit of Chancellor and its subsidiaries so long as the
terms thereof are not less advantageous to the beneficiaries thereof than the
existing D&O Insurance. The provisions of this Section 4.9 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, his
heirs and his personal representatives and shall be binding on all successors
and assigns of Chancellor, the Surviving Corporation and LIN.
4.10 LETTER OF CHANCELLOR'S ACCOUNTANTS. Chancellor shall use its
reasonable best efforts to cause to be delivered to LIN a letter of
PricewaterhouseCoopers, LLP, Chancellor's independent
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public accountants, and any other independent public accountants whose report
would be required to be included in the Form S-4 pursuant to the rules and
regulations under the Securities Act, each dated a date within two business
days before the date on which the Form S-4 shall become effective and an
additional letter from each of them dated a date within two business days
before the Closing Date, each addressed to such party, in form and substance
reasonably satisfactory to LIN and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4.
4.11 LETTER OF LIN'S ACCOUNTANTS. LIN shall use its reasonable best
efforts to cause to be delivered to Chancellor, a letter of
PricewaterhouseCoopers, LLP, LIN's independent public accountants, and any
other independent public accountants whose report would be required to be
included in the Form S-4 pursuant to the rules and regulations under the
Securities Act, each dated a date within two business days before the date on
which the Form S-4 shall become effective and an additional letter from each of
them dated a date within two business days before the Closing Date, each
addressed to such party, in form and substance reasonably satisfactory to
Chancellor and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4.
4.12 EMPLOYEE BENEFIT MATTERS. Chancellor acknowledges and agrees
that the LIN Operating Subsidiary is bound by the terms of Section 5.4 of that
certain Merger Agreement, dated as of August 12, 1997, among LIN Holdings
(formerly known as Ranger Holdings Corp.) and the LIN Operating Subsidiary
(successor by merger to each of Ranger Acquisition Company and LIN Television
Corporation) (as amended, the "LIN/Ranger Merger Agreement"), with respect to
employee benefit matters set forth therein in effect at the time of the
consummation of the transactions contemplated by the LIN/Ranger Merger
Agreement, and Chancellor agrees that it shall take all such action as is
necessary or desirable to cause the LIN Operating Subsidiary to satisfy such
obligations thereunder.
4.13 TERMINATION OF STOCKHOLDERS AGREEMENT. Prior to Closing, LIN
shall use its reasonable best efforts to obtain the consent of all parties to
the Stockholders Agreement to terminate such Stockholders Agreement at the
Effective Time. At any special meeting of LIN stockholders (or written consent
in lieu thereof) called for the purpose of obtaining the LIN Stockholders
Approval, LIN agrees that the vote on the Merger will be structured so that a
vote in favor of the Merger by a LIN
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stockholder will constitute a waiver of each LIN stockholder of rights with
respect to the Stockholders Agreement following the Effective Time.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
5.1 CONDUCT OF BUSINESS.
(a) Except as expressly contemplated by this Agreement, during
the period from the date of this Agreement to the Effective Time, LIN shall,
and shall cause its subsidiaries to, act and carry on their respective
businesses in the ordinary course of business and, to the extent consistent
therewith, use reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve the goodwill of those engaged in material business
relationships with them. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the Effective Time and
except as set forth in the LIN SEC Document or the LIN Disclosure Letter, LIN
shall not, and shall not permit any of its subsidiaries to, without the prior
consent of Chancellor (which shall not be unreasonably delayed or withheld):
(i) (w) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, stock or property) in respect
of, any of its or its subsidiaries' outstanding capital stock (except dividends
and distributions by a direct or indirect wholly owned subsidiary of LIN to its
parent), (x) split, combine or reclassify any of its outstanding capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its outstanding capital stock, (y)
except in connection with the termination of the employment of any employees,
purchase, redeem or otherwise acquire any shares of outstanding capital stock
or any rights, warrants or options to acquire any such shares, or (z) issue,
sell, grant, pledge or otherwise encumber any shares of its capital stock, any
other equity securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, equity securities or
convertible securities (other than (A) upon the exercise of LIN Stock Options
outstanding on the date of this Agreement or issued under clause (C) below, (B)
pursuant to employment agreements or other contractual arrangements in effect
on the date of this Agreement, (C) LIN Stock Options granted after the date of
this Agreement to purchase up to an aggregate
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amount of (1) 31,100,000 shares of LIN Common Stock, minus (2) that number of
shares of LIN Common Stock for which LIN Stock Options have been granted on or
prior to the date of this Agreement, at an exercise per share of at least
$1.00, which are to be issued to existing or future employees and (D) issuances
of stock of any direct or indirect wholly owned Subsidiary of LIN to its
parent);
(ii) amend its Certificate of Incorporation, Bylaws or
other comparable charter or organizational documents;
(iii) acquire any business (including the assets thereof)
or any corporation, partnership, joint venture, association or other business
organization or division thereof;
(iv) sell, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets that are
material to LIN and its subsidiaries, taken as whole;
(v) (x) other than working capital borrowings in the
ordinary course of business and consistent with past practices, incur any
indebtedness for borrowed money or guarantee any such indebtedness of another
person, other than indebtedness owing to or guarantees of indebtedness owing to
LIN or any of its direct or indirect wholly-owned subsidiaries or (y) make any
material loans or advances to any other person, other than to LIN or any of its
direct or indirect wholly-owned subsidiaries and other than routine advances to
employees consistent with past practices;
(vi) make any Tax election or settle or compromise any
Tax liability that could reasonably be expected to be material to LIN and its
subsidiaries, taken as a whole or change its Tax or accounting methods,
policies, practice or procedures, except as required by GAAP;
(vii) pay, discharge, settle or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of LIN (for this purpose meaning LIN Holdings) included in the
LIN SEC Document or incurred since the date of such financial statements in the
ordinary course of business consistent with past practice;
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(viii) make any material commitments or agreements for
capital expenditures or capital additions or betterments except as materially
consistent with the budget for capital expenditures as of the date of this
Agreement, in the ordinary course of business consistent with past practices;
(ix) except as may be required by law:
(A) other than in the ordinary course of business
and consistent with past practices, make any representation or promise,
oral or written, to any employee or former director, officer or employee
of LIN or any of its subsidiaries which is inconsistent with the terms
of any LIN Benefit Plan;
(B) other than in the ordinary course of
business, make any change to, or amend in any way, the contracts,
salaries, wages, or other compensation of any director, employee or any
agent or consultant of LIN or any of its subsidiaries other than routine
changes or amendments that are required under existing contracts;
(C) except for renewals in the ordinary course
of business consistent with past practices, adopt, enter into, amend,
alter or terminate, partially or completely, any LIN Benefit Plan, or
any election made pursuant to the provisions of any LIN Benefit Plan, to
accelerate any payments, obligations or vesting schedules under any LIN
Benefit Plan; or
(D) other than in the ordinary course of
business consistent with past practices, approve any general or
company-wide pay increases for employees;
(x) except in the ordinary course of business, modify,
amend or terminate any material agreement, permit, concession, franchise,
license or similar instrument to which LIN or any of its subsidiaries is a
party or waive, release or assign any material rights or claims thereunder; or
(xi) authorize any of, or commit or agree to take any
of, the foregoing actions.
(b) Notwithstanding the foregoing, nothing in this Section 5.1
shall prohibit (i) LIN Television of Texas, L.P. ("LIN Texas") from entering
into an agreement with Dallas Sports Holding Company ("DSHC") relating to the
assets used or useful in the operation of television station KXTX-TV (Dallas,
TX) (the "KXTX Transaction"), including without limitation, in a federal
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income tax-free transaction, (A) the assignment by LIN Texas to DSHC of its
rights under that certain Option and Put Agreement, dated as of May 31, 1994,
as amended on December 24, 1997, among the LIN Operating Subsidiary, LIN Texas,
KXTX of Texas, Inc. ("KXTX-Texas"), and KXTX, Inc. (the "KXTX Option"), and the
assignment of its rights under the local marketing agreement relating thereto,
or (B) the exercise of the KXTX Option by LIN and subsequent sale of the
capital stock of KXTX-Texas to DSHC, in exchange for (Y) $50 million
liquidation preference of DSHC convertible preferred stock, the terms of which
shall include a 6% annual paid-in-kind dividend, payable semiannually, and
permit LIN Texas to convert such shares of convertible preferred stock into
common stock of DSHC upon the consummation of a firm commitment underwritten
initial public offering of the shares of common stock of DSHC at a conversion
price per share equal to the public offering price of such common stock, or (Z)
such other consideration that is mutually agreed by each of Chancellor and LIN
to be of comparable or superior value or (ii) any amendments to the M&O
Agreement and Financial Advisory Agreement (each as defined in Section 6.3(f))
upon the terms set forth in Section 6.3(f) or any amendment under the LIN Stock
Option Plan to include the LIN Substitute Stock Options.
5.2 STOCK OPTIONS; PHANTOM STOCK PLAN. (a) At the Effective Time,
each outstanding LIN Stock Option that is outstanding and unexercised
immediately prior to the Effective Time shall be deemed to have been assumed by
Chancellor, without further action by Chancellor, the Surviving Corporation or
the holders of such options, and shall thereafter be deemed to be an option to
acquire shares of Chancellor Common Stock in such amount and at the exercise
price provided below and otherwise having the same terms and conditions as are
in effect immediately prior to the Effective Time (except to the extent that
such terms and conditions may be altered in accordance with their terms as a
result of the transactions contemplated hereby) (such LIN Stock Options assumed
by Chancellor being the "Assumed Stock Options"):
(i) the number of shares of Chancellor Common Stock to
be subject to the new option shall be equal to the product of (x) the number of
shares of LIN Common Stock subject to the original option and (y) the Exchange
Ratio (rounded to the nearest 1/100 of a share);
(ii) the exercise price per share of Chancellor Common
Stock under the new option shall be equal to (x) the exercise price per share
of LIN Common Stock under the original option divided by (y) the Exchange Ratio
(rounded to the nearest $0.01); and
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(iii) in accordance with the terms of the LIN Stock
Option Plan under which the LIN Stock Options were issued, fractional shares of
any Assumed Stock Options resulting from the adjustments set forth in this
Section 5.2(a) shall be eliminated.
The adjustments provided herein to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with Section 424(a) of the Code.
(b) LIN shall take all actions reasonably necessary
(including, if appropriate, by way of obtaining the written consent of
optionholders) to ensure that the consummation of the Merger is not deemed to
constitute a "change of control" (or transaction of similar import) with
respect to such stock options or otherwise result, in and of itself, in the
acceleration of any LIN Stock Option outstanding immediately prior to the
Effective Time, and to ensure that all such options shall be exercisable after
the Merger solely for shares of Chancellor Common Stock.
(c) At the Effective Time, Chancellor shall assume the LIN
Stock Option Plan, with such changes thereto as may be necessary to reflect the
consummation of the transactions contemplated hereby. Nothing in this Section
5.2(c) shall be construed to prevent Chancellor in any way from terminating or
freezing the benefits under any such plans (subject to the rights of the
holders of the Assumed Stock Options thereunder) and adopting one or more new
stock option plans, as approved by the Board of Directors of Chancellor
following the Effective Time.
(d) Promptly following the Effective Time, Chancellor shall
use its reasonable best efforts to file with the SEC a Registration Statement
on Form S-8 (or an amendment to any such form of Chancellor currently on file
with the SEC that is available therefor) (the "Form S-8") for the purpose of
registering the shares of Chancellor Common Stock issuable upon the exercise of
the Assumed Stock Options, and Chancellor shall use its reasonable best efforts
to have the Form S-8 (or any post-effective amendment thereto) declared
effective under the Securities Act as soon as practicable after such filing.
(e) At the Effective Time, Chancellor shall assume the Phantom
Stock Plan. Each Phantom Stock Unit outstanding under the Phantom Stock Plan
that is outstanding immediately prior to the Effective Time shall be
appropriately adjusted to reflect the Exchange Ratio as if each such Phantom
Stock Unit was one share of LIN Common Stock immediately prior to the Effective
Time and was converted into the appropriate fraction of a share of Chancellor
Common Stock pursuant to Section 1.8 of this
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Agreement. To the extent shares of Chancellor Common Stock are issued in
satisfaction of Phantom Stock Units, Chancellor shall use its reasonable best
efforts to register such shares on Form S-8.
5.3 OTHER ACTIONS. Neither Chancellor nor LIN shall, and neither of
them shall permit any of their respective subsidiaries to, take any action that
would, or that could reasonably be expected to, result in any of the conditions
of the Merger set forth in Article VI not being satisfied.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The LIN Stockholders Approval and
Chancellor Stockholders Approval shall have been obtained.
(b) FCC Order. The FCC shall have issued an order (the "FCC
Order") approving the transfers of control pursuant to the Merger of the
LIN FCC Licenses for the operation of the LIN Licensed Facilities
without the imposition of any conditions or restrictions that could
reasonably be expected to have a LIN Material Adverse Effect, and which
FCC Order has not been reversed, stayed, enjoined, set aside or
suspended and with respect to which no timely request for stay, petition
for reconsideration or appeal has been filed and as to which the time
period for filing of any such appeal or request for reconsideration or
for any sua sponte action by the FCC with respect to the FCC Order has
expired, or, in the event that such a filing or review sua sponte has
occurred, as to which such filing or review shall have been disposed of
favorably to the grant of the FCC Order and the time period for seeking
further relief with respect thereto shall have expired without any
request for such further relief having been filed or review initiated.
(c) Governmental and Regulatory Consents. All required
consents, approvals, permits and authorizations to the consummation of
the Merger shall be obtained from any Governmental Entity (other than
the FCC) whose consent,
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approval, permission or authorization is required by reason of a change
in law after the date of this Agreement, unless the failure to obtain
such consent, approval, permission or authorization could not reasonably
be expected to have a LIN Material Adverse Effect, or to materially and
adversely affect the validity or enforceability of this Agreement or the
Merger.
(d) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have otherwise expired.
(e) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided,
however, that the party invoking this condition shall use its reasonable
best efforts to have any such order or injunction vacated.
(f) Nasdaq Listing. The shares of Chancellor Common Stock
issuable pursuant to the Merger shall have been approved for quotation
in the Nasdaq Stock Market.
(g) Form S-4. The Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
6.2 CONDITIONS TO OBLIGATIONS OF LIN. The obligation of LIN to
effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of Chancellor contained in this Agreement shall have been
true and correct on the date of this Agreement and shall be true and
correct at and as of the Closing Date as though made at and as of such
time (except to the extent that any such representations and warranties
expressly relate only to an earlier time, in which case they shall have
been true and correct at such earlier time); provided, however, that
this condition shall be deemed to have been satisfied unless the
individual or aggregate impact of all inaccuracies of such
representations and warranties (without regard to any materiality or
Chancellor Material Adverse Effect qualifier(s) contained therein) could
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise) of
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Chancellor and its subsidiaries, considered as a whole, and except to
the extent that any inaccuracies of such representations and warranties
are a result of changes in the United States financial markets generally
or in national, regional or local economic conditions generally, or are
a result of matters arising after the date hereof that affect the
broadcast industry generally. Chancellor shall have delivered to LIN a
certificate dated as of the Closing Date, signed by a senior executive
officer of Chancellor, to the effect set forth in this Section 6.2(a).
(b) Performance of Obligations of Chancellor. Chancellor
shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing
Date, and LIN shall have received a certificate signed on behalf of
Chancellor by a senior executive officer to such effect.
(c) Tax Opinion. LIN shall have received an opinion of Vinson
& Elkins L.L.P., dated as of the Closing Date, to the effect that (i)
the Merger will constitute a reorganization under Section 368(a) of the
Code, (ii) Chancellor and LIN will each be a party to the reorganization
under Section 368(b) of the Code, and (iii) no gain or loss will be
recognized by the stockholders of LIN upon the receipt of Chancellor
Common Stock in exchange for LIN Common Stock pursuant to the Merger
except with respect to any cash received in lieu of Fractional Shares or
any cash received in respect of Dissenting Shares. In rendering such
opinion, Vinson & Elkins L.L.P. shall receive and may rely upon
representations contained in certificates of Chancellor, LIN and certain
stockholders of LIN.
(d) Chancellor Stockholders Agreement. Chancellor shall have
amended or caused to be amended the terms of that certain Amended and
Restated Stockholders Agreement, dated as of February 14, 1996, as
amended by the First Amendment to Amended and Restated Stockholders
Agreement dated as of September 4, 1997, among Chancellor and the
stockholders parties thereto (the "Chancellor Stockholders Agreement"),
in order that (A) in the event that the holders of LIN Common Stock
receive shares of Chancellor Common Stock which are deemed to be
"restricted securities" (within the meaning of Rule 144 under the
Securities Act) in the Merger, all holders of LIN Common Stock at the
Effective Time shall be deemed "Holders" thereunder and the shares of
Chancellor Common Stock received by them in the Merger shall be
"Registrable Shares" thereunder, or (B) in the event that holders of LIN
Common Stock receive shares of Chancellor
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Common Stock which are not deemed to be "restricted securities" (within
the meaning of Rule 144 under the Securities Act) in the Merger, the
holders of LIN Common Stock at the Effective Time that, after giving
effect to the Merger and the issuance of shares of Chancellor Common
Stock therein, will own at least 1% of the outstanding shares of
Chancellor Common Stock immediately following the Effective Time, shall
be (and their transferees shall be) deemed "Holders" thereunder and
shares of Chancellor Common Stock received in the Merger shall be
"Registrable Shares" thereunder.
6.3 CONDITIONS TO OBLIGATIONS OF CHANCELLOR. The obligations of
Chancellor to effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of LIN contained in this Agreement shall have been true and
correct on the date of this Agreement and shall be true and correct at
and as of the Closing Date as though made at and as of such time (except
to the extent that any such representations and warranties expressly
relate only to an earlier time, in which case they shall have been true
and correct at such earlier time); provided, however, that this
condition shall be deemed to have been satisfied unless the individual
or aggregate impact of all inaccuracies of such representations and
warranties (without regard to any materiality or LIN Material Adverse
Effect qualifier(s) contained therein) could reasonably be expected to
have a material adverse effect on the condition (financial or otherwise)
of LIN (or, following the Effective Time, the Surviving Corporation) and
its subsidiaries, considered as a whole, and except to the extent that
any inaccuracies of such representations and warranties are a result of
changes in the United States financial markets generally or in national,
regional or local economic conditions generally, or are a result of
matters arising after the date hereof that affect the broadcast industry
generally. LIN shall have delivered to Chancellor a certificate dated
as of the Closing Date, signed by a senior executive officer of LIN, to
the effect set forth in this Section 6.3(a).
(b) Performance of Obligations of LIN. LIN shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date,
and Chancellor shall have received a certificate signed on behalf of LIN
by a senior executive officer of LIN to such effect.
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(c) Tax Opinion. Chancellor shall have received an opinion of
Weil, Gotshal & Manges LLP, dated as of the Closing Date, to the effect
that (i) the Merger will constitute a reorganization under Section
368(a) of the Code, (ii) Chancellor and LIN will each be a party to the
reorganization under Section 368(b) of the Code, and (iii) no gain or
loss will be recognized by Chancellor or LIN by reason of the Merger.
In rendering such opinion, Weil, Gotshal & Manges LLP shall receive and
may rely upon representations contained in certificates of Chancellor,
LIN and certain stockholders of LIN.
(d) KXTX Transaction. In the event that LIN Texas shall have
consummated the KXTX Transaction, LIN Texas, LIN or one of its other
subsidiaries shall have received the convertible preferred stock of DSHC
on substantially the terms set forth in Section 5.1(b)(i) or such other
consideration that is deemed by the Board of Directors of Chancellor to
be of comparable or superior value.
(e) Network Affiliation Agreements. LIN and its subsidiaries
shall have received any necessary consents required as a result of the
Merger and transactions contemplated by this Agreement with respect to
each Network Affiliation Agreement relating to a LIN Licensed Facility,
a true and correct list of which is set forth in the LIN Disclosure
Letter.
(f) Financial Services Agreements. LIN and certain of its
subsidiaries and Hicks Muse shall have entered into an amendment to each
of the Monitoring and Oversight Agreement (the "M&O Agreement") and the
Financial Advisory Agreement (the "Financial Advisory Agreement") that
provides (i) the M&O Agreement will terminate at the Effective Time and,
in consideration therefor, LIN shall deliver to Hicks Muse at Closing a
one-time cash payment of $11,000,000, (ii) Hicks Muse will receive a fee
from LIN of $11,000,000 in cash, payable at Closing, in satisfaction of
its services performed under the Financial Advisory Agreement in
connection with the Merger, and (iii) the Financial Advisory Agreement
would terminate with respect to LIN (and as successor in the Merger,
Chancellor) but not its subsidiaries (the "LIN Entities") and would be
amended to provide that following the Closing Date (A) Hicks Muse will
be the exclusive financial advisor to the LIN Entities and (B) Hicks
Muse will receive a "market fee" for the services it provides, provided
that (1) Hicks Muse would not receive a fee in a transaction in which
the Chief Executive Officer of Chancellor does not elect to retain an
outside financial
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advisor to any the LIN Entities, and (2) if the Chief Executive Officer
of Chancellor and Hicks Muse mutually agree that an additional financial
advisor to any of the LIN Entities would be appropriate in a given
transaction, Hicks Muse will split its fee equally with such co-advisor
unless otherwise agreed to between the Chief Executive Officer of
Chancellor and Hicks Muse.
(g) Dissenting Shares. Holders of not more than 5% of the
outstanding shares of LIN Common Stock shall have properly demanded
appraisal rights for their shares under the Delaware Code.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated and the Merger
abandoned as follows:
(a) at any time prior to the Effective Time, whether before or
after approval of this Agreement and the Merger by the stockholders of
LIN or Chancellor, by mutual written consent of Chancellor and LIN;
(b) at any time prior to the Effective Time, whether before or
after approval of this Agreement and the Merger by the stockholders of
LIN or Chancellor:
(i) by Chancellor if the LIN Stockholders Approval
shall not have been obtained after submission by the Board of
Directors of LIN of this Agreement and the Merger for approval by
the common stockholders of LIN at a special meeting called for
such purpose or by written consent of such stockholders in
accordance with Section 4.2(a);
(ii) by LIN if the Chancellor Stockholders Approval
shall not have been obtained after submission by the Board of
Directors of Chancellor of this Agreement and the Merger for
approval by the common stockholders of Chancellor at a special
meeting called for such purpose in accordance with Section
4.2(b);
(iii) by Chancellor or LIN if the Merger shall not have
been consummated on or before June 30, 1999, unless the failure
to consummate the Merger is the
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result of a willful and material breach of this Agreement by the
party seeking to terminate this Agreement;
(iv) by Chancellor or LIN if any Governmental Entity
shall have issued an order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable;
(v) by Chancellor or LIN in the event of a breach by
the other party of any representation, warranty, covenant or
other agreement contained in this Agreement which (A) would give
rise to the failure of a condition set forth in Section 6.2(a) or
(b) or Section 6.3(a) or (b), as applicable, and (B) cannot be or
has not been cured within 30 days after the giving of written
notice to the breaching party of such breach (a "Material
Breach"), provided that the terminating party is not then in
Material Breach of any representation, warranty, covenant or
other agreement contained in this Agreement; or
(vi) by Chancellor if LIN shall have breached the
requirements of Section 4.5 hereof, unless Chancellor shall at
such time be in Material Breach of any representation, warranty,
covenant or other agreement contained in this Agreement.
7.2 EFFECT OF TERMINATION. (a) In the event that Chancellor or
LIN terminates this Agreement as provided in Section 7.1(a), 7.1(b)(iii) or
7.1(b)(iv), this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Chancellor or LIN, other
than the last sentence of Section 4.3 and Sections 2.10, 3.7, 7.2 and 10.2.
(b) In the event that this Agreement is terminated by
Chancellor pursuant to Section 7.1(b)(i), 7.1(b)(vi) or 7.1(b)(v), LIN shall
promptly reimburse Chancellor for all substantiated out-of-pocket costs and
expenses incurred by them in connection with this Agreement and the
transactions contemplated hereby, including, without limitation, costs and
expenses of accountants, attorneys and financial advisors. In the event that
this Agreement is terminated by LIN pursuant to Section 7.1(b)(ii) or
7.1(b)(v), Chancellor shall promptly reimburse LIN for all substantiated out-
of-pocket costs and expenses incurred by it in connection with this Agreement
and the
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transactions contemplated hereby, including, without limitation, costs and
expenses of accountants, attorneys and financial advisors. This Agreement
shall not be deemed to have been validly terminated until all payments
contemplated by this Section 7.2(b) shall have been made in full. In the event
of a termination pursuant to Sections 7.1(b)(v) or 7.1(b)(vi), the
reimbursement of expenses by the breaching party pursuant to this Section
7.2(b) shall be the parties sole remedy unless the termination resulted from a
willful material breach of the representations, warranties, covenants or other
agreements in this Agreement, in which case the non-breaching party may seek
damages or any other appropriate remedy at law or in equity.
7.3 AMENDMENT. Subject to the applicable provisions of the Delaware
Code, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
the LIN Stockholders Approval has been obtained, no amendment shall be made
which reduces the consideration payable in the Merger or adversely affects the
rights of LIN's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
7.4 EXTENSION; CONSENT; WAIVER. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c)
subject to Section 7.3, waive compliance with any of the agreements or
conditions of the other parties contained in this Agreement or consent to any
action requiring consent pursuant to this Agreement. Any agreement on the part
of a party to any such extension, waiver or consent shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure
of any party to this Agreement to assert any of its rights under this Agreement
or otherwise shall not constitute a waiver of such rights.
7.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION, CONSENT OR
WAIVER. A termination of this Agreement pursuant to Section 7.1, an amendment
of this Agreement pursuant to Section 7.3 or an extension, consent or waiver
pursuant to Section 7.4 shall, in order to be effective, require in the case of
Chancellor or LIN, action by its Board of Directors or a duly authorized
committee of its Board of Directors.
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ARTICLE VIII
SURVIVAL OF PROVISIONS
8.1 SURVIVAL. The representations and warranties of Chancellor and
LIN made in this Agreement, or in any certificate, respectively, delivered by
any of them pursuant to this Agreement, will not survive the Closing.
ARTICLE IX
NOTICES
9.1 NOTICES. All notices and other communications under this
Agreement must be in writing and will be deemed to have been duly given if
delivered, telecopied or mailed, by certified mail, return receipt requested,
first-class postage prepaid, to the parties at the following addresses:
If to Chancellor, to:
Chancellor Media Corporation
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention: Jeffrey A. Marcus
Facsimile: (972) 879-3671
with copies to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Michael A. Saslaw
Facsimile: (214) 746-7777
and
Thompson & Knight, P.C.
1700 Pacific Avenue
Suite 3300
Dallas, Texas 75201
Attention: Sam P. Burford, Jr.
Facsimile: (214) 969-1751
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If to LIN, to:
LIN Television Corporation
4 Richmond Square
Suite 200
Providence, Rhode Island 02906
Attention: Gary R. Chapman
Facsimile: (401) 454-2817
and
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Facsimile: (214) 740-7313
with copies to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Michael D. Wortley
Facsimile: (214) 999-7732
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Article IX will, if delivered
personally, be deemed given upon delivery, will, if delivered by telecopy, be
deemed delivered when confirmed and will, if delivered by mail in the manner
described above, be deemed given on the third business day after the day it is
deposited in a regular depository of the United States mail. Any party from
time to time may change its address for the purpose of notices to that party by
giving a similar notice specifying a new address, but no such notice will be
deemed to have been given until it is actually received by the party sought to
be charged with the contents thereof.
ARTICLE X
MISCELLANEOUS
10.1 ENTIRE AGREEMENT. Except for the documents executed by
Chancellor and LIN pursuant hereto, this Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter of this Agreement, and this
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Agreement (including the exhibits hereto and other documents delivered in
connection herewith) contains the sole and entire agreement between the parties
hereto with respect to the subject matter hereof.
10.2 EXPENSES. Except as provided in Section 7.2, whether or not the
Merger is consummated, each of Chancellor and LIN will pay its own costs and
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby. In the
event of any lawsuit or other judicial proceeding brought by either party to
enforce any of the provisions of this Agreement, the losing party in such
proceeding shall reimburse the prevailing party's fees and expenses incurred in
connection therewith, including the fees and expenses of its attorneys.
10.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
10.4 NO THIRD PARTY BENEFICIARY. Except for Sections 4.9 and 4.12,
the terms and provisions of this Agreement are intended solely for the benefit
of the parties hereto, and their respective successors or assigns, and it is
not the intention of the parties to confer third-party beneficiary rights upon
any other person.
10.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
10.6 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties
without the prior written consent of the other parties, and any such assignment
that is not consented to shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by, the parties and their respective successors and assigns.
10.7 HEADINGS, GENDER, ETC. The headings used in this Agreement have
been inserted for convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (a) words of any gender are deemed to include
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each other gender; (b) words using the singular or plural number also include
the plural or singular number, respectively; (c) the terms "hereof," "herein,"
"hereby," "hereto," and derivative or similar words refer to this entire
Agreement; (d) the terms "Article" or "Section" refer to the specified Article
or Section of this Agreement; (e) all references to "dollars" or "$" refer to
currency of the United States of America; (f) the term "person" shall include
any natural person, corporation, limited liability company, general
partnership, limited partnership, or other entity, enterprise, authority or
business organization; and (g) the term "or" is not exclusive.
10.8 INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under any present or future law, and
if the rights or obligations of LIN or Chancellor under this Agreement will not
be materially and adversely affected thereby, (a) such provision will be fully
severable; (b) this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part hereof;
and (c) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid, or unenforceable
provision or by its severance herefrom.
10.9 NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, stockholder, incorporator or partner, as such, of
Chancellor, LIN or the Surviving Corporation shall have any liability for any
obligations of Chancellor, LIN or the Surviving Corporation under this
Agreement or for any claim based on, in respect of or by reason of such
obligations or their creation.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of Chancellor and LIN effective as of the date
first written above.
CHANCELLOR MEDIA CORPORATION
By: /s/ JEFFREY A. MARCUS
----------------------------
Name:
Title:
RANGER EQUITY HOLDINGS CORPORATION
By: /s/ MICHAEL J. LEVITT
----------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 2.47
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
INDEPENDENT GROUP LIMITED PARTNERSHIP
AND
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
AS OF AUGUST 11, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1
PURCHASE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
ASSUMPTION OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 4
2.1 Assumption of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 3
CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Delivery of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Allocation of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Allocations and Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 4
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 5
GOVERNMENTAL CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9
5.1 FCC Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 FCC Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . 9
6.1 Representations and Warranties of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1.1 Organization, Good Standing, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1.4 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1.5 Compliance with Applicable Laws, FCC Matters . . . . . . . . . . . . . . . . . . . 11
6.1.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1.8 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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6.1.9 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1.10 Liens and Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1.13 Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1.14 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1.15 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1.16 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1.17 Patents, Trademarks, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1.18 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . 20
6.1.19 Commission or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1.20 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1.21 Seller's Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1.22 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1.23 Barter Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1.24 Interest in Competitors, Suppliers and Customers . . . . . . . . . . . . . . . . . 21
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . 22
7.1 Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1.2 Authorization and Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . 22
7.1.3 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1.4 Absence of Conflicting Agreements or Required Consents . . . . . . . . . . . . . . 22
7.1.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1.6 Commission or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1.7 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 8
COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . 24
8.1 Seller Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1.1 Conduct Prior to the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1.3 Satisfaction of Conditions; Closing . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1.4 Sale of Acquired Assets; Negotiations . . . . . . . . . . . . . . . . . . . . . . . 26
8.1.5 No Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1.6 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1.7 FCC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1.8 Updating of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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8.1.9 Response to Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1.10 Barter and Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1.11 Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1.12 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1.13 Management Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 9
COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . 29
9.1 Buyer Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1.1 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1.2 No Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1.3 Post-Closing Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1.4 Satisfaction of Conditions; Closing . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1.5 Response to Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1.6 Accrued Vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1.7 Other Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 10
JOINT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 30
10.1 FCC Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.4 Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.5 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.6 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.7 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.8 Condition of Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.9 Warn Act Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 11
CONDITIONS OF CLOSING BY BUYER . . . . . . . . . . . . . . . . . . . . 33
11.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.2 Compliance with Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.3 Third Party Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.4 Closing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.5 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.6 Adverse Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.7 Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.9 Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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11.10 Indemnification and Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.11 Release of Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.12 Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.13 Earnest Money Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.14 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.15 1445 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.16 Other Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.17 STA Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.18 Tower Space License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.19 Studio Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.20 WRMR Site Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.21 Termination of Management Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 12
CONDITIONS OF CLOSING BY SELLER . . . . . . . . . . . . . . . . . . . . 37
12.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.2 Compliance with Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.3 Certifications, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.4 Governmental Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.5 Adverse Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.6 Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.7 Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.8 Indemnification and Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 13
TRANSFER TAXES; FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . 38
13.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.2 Transfer Taxes and Similar Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.3 Governmental Filing or Grant Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 14
LIQUIDATED DAMAGES, SPECIFIC PERFORMANCE, LETTER OF CREDIT . . . . . . . . . . . . . 38
14.1 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.2 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14.3 Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 15
TERMINATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . 40
15.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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ARTICLE 16
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.1 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 17
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 43
17.1 Survival of Representations and Warranties; Remedy for Breach . . . . . . . . . . . . . . . . . 43
17.2 Certain Interpretive Matters and Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.3 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.6 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17.10 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.14 No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.15 Equitable Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.16 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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SCHEDULES
- ---------
Schedule 1.1.1 - Stations Licenses
Schedule 1.1.2 - Personal Property
Schedule 1.1.3 - Contracts
Schedule 1.1.4 - Intellectual Property
Schedule 1.1.7 - Owned Real Estate
Schedule 1.1.8 - Leased Real Estate
Schedule 1.2.8 - Excluded Assets
Schedule 6.1.3 - Financial Statements
Schedule 6.1.4 - Undisclosed Liabilities
Schedule 6.1.5 - Noncompliance with Communications Act and the FCC
Schedule 6.1.6 - Litigation (Seller)
Schedule 6.1.7 - Insurance
Schedule 6.1.10 - Permitted Liens
Schedule 6.1.11 - Environmental Matters
Schedule 6.1.12 - Tax Matters
Schedule 6.1.13 - Personnel
Schedule 6.1.14 - Necessary Contracts
Schedule 6.1.15 - ERISA Matters
Schedule 6.1.16 - Labor Matters
Schedule 6.1.23 - Barter Arrangements
Schedule 6.1.24 - Interest in Competitors, Suppliers and Customers
Schedule 7.1.4 - Consents
Schedule 9.1.5 - Certain Actions
EXHIBITS
- --------
Exhibit A - Indemnification and Escrow Agreement
Exhibit B - Noncompetition Agreement
Exhibit C-1 - Opinion of Benesch, Friedlander, Coplan & Aronoff LLP
Exhibit C-2 - Opinion of David Tillotson
Exhibit D - Opinion of Weil, Gotshal & Manges LLP
Exhibit E - Earnest Money Escrow Agreement
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DEFINED TERMS
<TABLE>
<CAPTION>
Defined Terms Section
- ------------- -------
<S> <C>
Account Receivable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.2
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Cash Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2
Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.5
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.3
Earnest Money Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3
Earnest Money Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.15
Employee List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.7
Environmental Costs and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.11(f)
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.11(f)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.15
ERISA Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.15
Excepted Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.1
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.4
Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
FAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.5(b)
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.1
FCC Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
FCC Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
Final Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
FTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.6
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.3
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.2
Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.11(d)
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.2
Indemnification and Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Independent Auditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.2
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.4
</TABLE>
vii
<PAGE> 9
<TABLE>
<CAPTION>
Defined Terms Section
- ------------- -------
<S> <C>
Leased Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.8
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.10
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.1
May 1998 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.4
Other Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Owned Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.7
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.10
Predecessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.11(a)
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.8
Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.4
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Seller's Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.3
Site Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.20
Specified Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.1(b)
Station Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.13
Stations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Stations Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Stations Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.1
Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.8
Studio Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.19
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.12(g)
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.12(g)
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.12(g)
Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.3
Wincom Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Zapis Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Zebra Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
</TABLE>
viii
<PAGE> 10
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), made as of August
11, 1998, is by and between Independent Group Limited Partnership, an Ohio
limited partnership ("Seller"); and Chancellor Media Corporation of Los
Angeles, a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller owns certain assets, which are used in connection with
the operation of radio stations WDOK 102.1 FM and WRMR 850 AM in Cleveland,
Ohio (collectively, the "Stations"); and
WHEREAS, contemporaneously herewith, Buyer shall enter into (a) a
Stock Purchase Agreement with ML Media Partners L.P. to purchase all of the
stock of Wincom Broadcasting Corporation which (through a wholly-owned
subsidiary) operates radio station WQAL 104.1 FM in Cleveland, Ohio (the
"Wincom Acquisition"), (b) an Asset Purchase Agreement with Zapis
Communications Corporation to purchase substantially all of the assets used in
connection with the operation of radio station WZAK 93.1 FM in Cleveland, Ohio
(the "Zapis Acquisition") and (c) a Stock Purchase Agreement with the other
signatories thereto to purchase all of the stock of Young Ones, Inc. and Zebra
Broadcasting Corporation which operates radio stations WZJM 92.3 FM and WJMO
1490 AM in Cleveland Heights, Ohio (the "Zebra Acquisition," and together with
the Wincom Acquisition and the Zapis Acquisition, the "Other Acquisitions");
and
WHEREAS, Seller desires to sell the Stations, and Buyer desires to
purchase substantially all of the assets of Seller used in connection with the
operation of the Stations in accordance with the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound hereby agree as follows:
ARTICLE 1
PURCHASE OF ASSETS
1.1 Transfer of Assets. On the terms and subject to the
conditions hereof and subject to Section 1.2, as of the Closing (as defined in
Section 4.1), Seller shall assign,
<PAGE> 11
transfer, convey and deliver to Buyer and Buyer shall acquire and assume from
Seller, all of the right, title and interest of Seller in and to all of the
following assets, properties, interests and rights of Seller (collectively the
"Stations Assets") free and clear of all Liens (as defined in Section 6.1.10)
other than Permitted Liens (as defined in Section 6.1.10):
1.1.1 All of Seller's rights in and to the licenses,
permits and other authorizations issued to Seller by any governmental
authority, including those issued by the Federal Communications Commission (the
"FCC") (hereafter referred to as the "Stations Licenses"), used in connection
with the operation of the Stations, along with renewals or modifications of
such items between the date hereof and the Closing, including but not limited
to those listed in Schedule 1.1.1 hereto;
1.1.2 All equipment, office furniture and fixtures, office
materials and supplies, inventory, spare parts and all other tangible personal
property of every kind and description, and Seller's rights therein, owned,
leased or held by Seller and used in connection with the operations of the
Stations, including but not limited to those items described or listed in
Schedule 1.1.2 hereto, together with any replacements thereof, improvements or
additions thereto made between the date hereof and the Closing, and less any
retirements or dispositions thereof made between the date hereof and the
Closing in the ordinary course of business of Seller consistent with past
practices;
1.1.3 All of Seller's rights in and under those contracts,
agreements, leases and legally binding contractual rights of any kind, written
or oral, relating to the operation of the Stations listed in Schedule 1.1.3
hereto and (i) those contracts entered into by Seller between the date hereof
and the Closing in the ordinary course of business of Seller consistent with
past practices, subject to Section 1.2.4 and Section 8.1.1 hereto; (ii) all
contracts for the sale of advertising time for cash, subject to Section 8.1.1
hereto; and (iii) all contracts for consideration other than cash, such as
merchandise, services or promotional consideration ("Trade Agreements"),
subject to Section 8.1.1 hereto consistent with past practices (collectively,
"Contracts");
1.1.4 All of Seller's rights in and to all call letters,
trademarks, trade names, service marks, franchises, copyrights, Internet domain
names, including registrations and applications for registration of any of
them, computer software programs and programming material of whatever form or
nature, jingles, slogans, the Stations' logos and all other logos or licenses
to use same and all other intangible property rights of Seller, which are used
in connection with the operation of the Stations, including but not limited to
those listed in Schedule 1.1.4 hereto (collectively, the "Intellectual
Property") together with any associated goodwill and any additions thereto
between the date hereof and the Closing;
2
<PAGE> 12
1.1.5 All of Seller's rights in and to all the files,
documents, records, and books of account relating to the operation of the
Stations or to the Stations Assets, including, without limitation, each
Station's public files, programming information and studies, technical
information and engineering data, news and advertising studies or consulting
reports, marketing and demographic data, sales correspondence, lists of
advertisers, promotional materials, credit and sales reports and filings with
the FCC, originals of all written Contracts to be assigned hereunder, logs,
software programs and books and records relating to personnel, financial,
accounting, operation and technical matters;
1.1.6 All of Seller's rights under manufacturers' and
vendors' warranties relating to items included in the Stations Assets and all
similar rights against third parties relating to items included in the Stations
Assets;
1.1.7 All real property owned by Seller together with all
appurtenant easements thereunto and all structures, fixtures and improvements
located thereon used in connection with the Stations operations as more fully
described in Schedule 1.1.7 hereto, together with any additions thereto between
the date hereof and the Closing ("Owned Real Estate");
1.1.8 All rights and interests of Seller under any and all
of the leases of real property used in connection with the Stations operations
(the "Leased Real Estate," and together with the Owned Real Estate, the "Real
Estate") which Leased Real Estate is identified and described in Schedule
1.1.8;
1.1.9 All accounts receivable of Seller;
1.1.10 All such other assets, properties, interests and
rights owned by Seller that are used in connection with the business and
operation of the Stations or that are located as of the Closing on the Real
Estate, except Excluded Assets (as defined in Section 1.2); and
1.1.11 All of Seller's rights in and to all causes of
action, including, without limitation, for any past infringement of any of the
Intellectual Property.
1.2 Excluded Assets. Notwithstanding anything to the contrary
contained herein, it is expressly understood and agreed that the Stations
Assets shall not include the following assets or any right, title or interest
therein (the "Excluded Assets"):
1.2.1 All cash, marketable securities, and cash
equivalents of Seller on hand and/or in banks;
3
<PAGE> 13
1.2.2 All notes receivable of Seller;
1.2.3 All tangible and intangible personal property of
Seller disposed of or consumed in the ordinary course of business of Seller
consistent with past practices between the date hereof and the Closing Date, as
permitted hereunder;
1.2.4 All Contracts that have terminated or expired on or
prior to the Closing in the ordinary course of business of Seller;
1.2.5 Seller's corporate seals, minute books, charter
documents, corporate stock record books and such other books and records as
pertain to the organization, existence, share capitalization of Seller and
duplicate copies of such financial records as are necessary to enable Seller to
file their Tax Returns (as defined in Section 6.1.12(g))and reports as well as
any other records or materials relating to Seller generally;
1.2.6 Contracts of insurance and all insurance proceeds
arising or related to the Stations Assets to the extent such proceeds (a)
relate to expenditures which were made by Seller prior to the Closing or (b)
relate to expenditures which Seller remains obligated to make after the
Closing;
1.2.7 The Employee Benefit Plans (as defined in Section
6.1.15) and the assets thereof;
1.2.8 Those specific assets identified on the Excluded
Assets Schedule attached to this Agreement as Schedule 1.2.8; and
1.2.9 All Tax (as defined in Section 6.1.12(g)) refunds
relating to all periods prior to the Closing.
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
2.1 Assumption of Obligations. Subject to the provisions of
this Section 2.1 and Section 2.2, on the Closing Date (as defined in Section
4.1), Buyer shall assume the obligations of Seller arising or to be performed
after the Closing under the Contracts referred to in Section 1.1.3 hereto in
effect as of the Closing and all other liabilities and obligations that arise
from the ownership or operation of the Stations Assets after the Closing. All
of the foregoing liabilities and obligations shall be referred to herein
collectively as the "Assumed Liabilities."
4
<PAGE> 14
2.2 Retained Liabilities. Notwithstanding anything contained
in this Agreement to the contrary, Buyer does not assume or agree to pay,
satisfy, discharge or perform, and will not be deemed by virtue of the
execution and delivery of this Agreement or any document delivered at the
execution of this Agreement, or as a result of the consummation of the
transactions contemplated by this Agreement, to have assumed, or to have agreed
to pay, satisfy, discharge or perform, any liability or obligation of the
Seller other than the Assumed Liabilities, including, without limitation, any
of the following liabilities or obligations of the Seller (the "Retained
Liabilities"):
(a) all obligations or liabilities of Seller or any
predecessor or Affiliate (as defined in Section 17.2) of Seller which
in any way relate to or arise out of any of the Excluded Assets;
(b) other than Taxes expressly allocated pursuant to
other provisions of this Agreement, Tax liabilities of any and all
kinds (federal, state, local, and foreign) of Seller including,
without limitation, any liabilities for Taxes on or measured by
income, liabilities for withheld federal and state income Taxes and
employee F.I.C.A. (Federal Insurance Contribution Act) or employer
F.I.C.A., and liabilities for income Taxes arising as a result of the
transfer of the Stations Assets or otherwise by virtue of the
consummation of the transactions contemplated hereby;
(c) except for the leases listed on Schedule 1.1.8, all
liabilities or obligations of Seller owed to Seller's Affiliates;
(d) all liabilities or obligations of Seller for borrowed
money or for interest on such borrowed money;
(e) all liabilities or obligations arising out of any
breach by Seller or any predecessor or Affiliate of any of the terms
or conditions of any provision of any Contract;
(f) all liabilities and obligations of Seller or any
predecessor or Affiliate of Seller resulting from, caused by or
arising out of, any violation of law;
(g) any claims, liabilities, and obligations of Seller as
an employer, including, without limitation, liabilities for wages,
supplemental unemployment benefits, vacation benefits (except as
otherwise provided in Section 9.1.6), severance benefits, retirement
benefits, COBRA benefits, FMLA benefits, WARN obligations and
liabilities, or any other employee benefits, withholding Tax
liabilities, workers'
5
<PAGE> 15
compensation, or unemployment compensation benefits or premiums,
hospitalization or medical claims, occupational disease or disability
claims, or other claims attributable in whole or in part to employment
or termination by Seller or arising out of any labor matter involving
Seller as an employer, and any claims, liabilities and obligations
arising from or relating to the Employee Benefit Plans;
(h) any claims, liabilities, losses, damages, or expenses
relating to any litigation, proceeding, or investigation of any nature
arising out of the operations of the Stations prior to or as of the
Closing including, without limitation, any claims against or any
liabilities for injury to or death of persons or damage to or
destruction of property, any workers' compensation claims, and any
warranty claims;
(i) except as provided in Section 3.3, any accounts
payable, other indebtedness, obligations or accrued liabilities of
Seller;
(j) any claims, liabilities, losses, damages, expenses or
obligations resulting from the failure to comply with or imposed
pursuant to any Environmental Law (as defined in Section 6.1.11(f)) or
resulting from the use, presence, generation, storage, treatment,
transportation, handling, disposal, emission or release of Hazardous
Substances (as hereinafter defined in Section 6.1.11 hereof), solid
wastes, and gaseous matters by Seller and by any other person in
relation to Seller or the Stations to the extent related to, arising
from or otherwise attributable to acts or omissions prior to or
conditions existing as of the Closing, including, without limitation,
any liability or obligation for cleaning up waste disposal sites from
or related to acts or omissions prior to or as of the Closing;
(k) any fees and expenses incurred by Seller in
connection with negotiating, preparing, closing, and carrying out this
Agreement and the transactions contemplated by this Agreement,
including, without limitation, the fees and expenses of Seller's
attorneys, accountants, consultants and brokers; and
(l) all liabilities and obligations of Seller under any
of the Management Agreements (as defined in Section 8.1.13) and as a
guarantor of indebtedness of the shareholders of the general partner
of Seller as described in Note 7 to the Seller's Year-End Financial
Statements (as defined in Section 6.1.3).
6
<PAGE> 16
ARTICLE 3
CONSIDERATION
3.1 Delivery of Consideration. In exchange for the Stations
Assets, in addition to the assumption of the Assumed Liabilities, Buyer shall,
subject to Articles 11 and 12 hereof, at the Closing (as defined in Section
4.1) deliver to Seller the sum of (a) Ninety-Five Million Dollars
($95,000,000), plus (b) an amount (the "Account Receivable Amount") equal to
the accounts receivable of Seller as of 12:01 a.m. of the Closing Date (the
"Effective Time"), net of an allowance for uncollectible accounts established
in accordance with GAAP (as defined in Section 6.1.3 hereof) determined as of
the Effective Time (subject to adjustment as set forth in this Agreement, the
"Purchase Price") by wire transfer of immediately available funds; provided
that a portion of the Purchase Price equal to $2,763,640 will be paid by Buyer
into escrow pursuant to the terms of the Indemnification and Escrow Agreement
among Buyer, Seller and Key Trust Company of Ohio, N.A., as escrow agent,
attached hereto as Exhibit A (the "Indemnification and Escrow Agreement"). The
Accounts Receivable Amount paid at Closing shall be based on a good faith
estimate which is mutually agreed upon by Buyer and Seller and shall be
adjusted post-Closing, if necessary, in conjunction with the final allocation
and proration provided for in Section 3.3.2.
3.2 Allocation of Consideration. Buyer and Seller agree that
the Purchase Price (including the amount of the Assumed Liabilities) will be
allocated among the Stations Assets prior to the Closing Date by mutual
agreement between Buyer and Seller, and Buyer and Seller agree to be bound by
such allocation. Such allocation may be adjusted if necessary as a result of
an adjustment pursuant to Section 3.3.2. Such allocation shall comply with
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and
Treasury Regulations promulgated thereunder. Subject to the requirements of
applicable Tax law, all Tax Returns and reports including, without limitation,
Form 8594, filed by Buyer and Seller shall be prepared consistently with such
allocation and neither Buyer nor Seller shall take a position contrary thereto.
Any disputes regarding the allocation of the Purchase Price (including the
amount of the Assumed Liabilities) shall be referred for resolution to BIA, and
the fees and expenses of BIA shall be borne equally by Buyer and Seller.
3.3 Allocations and Prorations.
3.3.1 The operation of the Stations and the income and
expenses attributable thereto through the Effective Time shall be for the
account of Seller and thereafter shall be for the account of Buyer. Expenses
for goods and services received both before and after the Effective Time,
utilities charges, ad valorem, real estate, property and other Taxes (other
than income Taxes, which shall be Seller's sole responsibility for all taxable
periods ending
7
<PAGE> 17
prior to and including the Effective Time, and those Taxes arising from the
sale and transfer of the Stations Assets, which, in the case of transfer and
other similar Taxes, shall be paid as set forth in Section 13.2), income and
expenses under the Contracts (other than Trade Agreements), prepaid expenses,
music and other license fees (including any retroactive adjustments thereof),
and rents and similar prepaid and deferred items shall be prorated between
Seller and Buyer in accordance with the foregoing. Notwithstanding the
foregoing, no proration shall be made with respect to any prepaid expense or
other deferred item unless Buyer will receive a benefit in respect of such
prepayment or deferral after the Effective Time. For purposes of this Section
3.3.1, ad valorem and other real estate Taxes shall be apportioned on the basis
of the Taxes assessed for the most recently-completed calendar year, with a
reapportionment as promptly as practicable after the Tax rates and real
property valuations for the calendar year in which the Closing occurs can be
ascertained. In addition, Buyer shall be entitled to a credit in this
proration process for the amount of any Taxes (or other governmental charges)
that are due and payable by Seller, but are being contested by Seller in good
faith in appropriate proceedings and are secured by Liens on the Stations
Assets that have not been removed as of or before the Closing (but once such
amounts are finally determined, Buyer shall use such credit to remove such
liens and return to Seller the excess of (i) the amount of such credit minus
(ii) the amount of such Taxes or other governmental charges as finally
determined, or Seller shall pay to Buyer the deficiency, as appropriate).
3.3.2 Allocation and proration of the items set forth in
Subsection 3.3.1 above shall be made by Buyer and a statement thereof given to
Seller within thirty (30) days after the Closing Date. Seller shall give
written notice of any objection thereto within twenty (20) business days after
receipt of such statement, detailing the reason for such objection and stating
the amount of the proposed final allocation and proration and/or Account
Receivable Amount, as applicable. If a timely objection is made and the
parties cannot reach agreement within thirty (30) days after receipt of the
objection as to the amount of the final allocation and proration and/or Account
Receivable Amount, as applicable, the matter shall be referred to Ernst & Young
LLP (the "Independent Auditor") to resolve the matter, whose decision will be
final and binding on the parties, and whose fees and expenses shall be borne by
Buyer and Seller in accordance with the following: each party shall pay an
amount equal to the sum of all fees and expenses of the Independent Auditor on
a proportional basis taking into account the amount of the net allocation and
proration proposed by each of Buyer and Seller and the amount of the final
allocation and proration determined by the Independent Auditor (for example, if
Buyer proposed a payment of $10 to Seller, Seller proposed a payment of $100,
and the Independent Auditor proposed a payment of $30, Buyer would pay 20/90ths
of the Independent Auditor's fees and Seller would pay 70/90ths of those fees
based on the $90 in dispute between the parties).
8
<PAGE> 18
ARTICLE 4
CLOSING
4.1 Closing. The consummation of the transactions contemplated
herein (the "Closing") shall occur, except as otherwise mutually agreed upon by
Buyer and Seller (a) within ten (10) business days after the FCC Consents (as
hereinafter defined) to the assignment of the Stations Licenses have become
Final Orders (as hereinafter defined) or (b) at such later date that all other
terms and conditions as set forth in Articles 11 and 12 have been satisfied, or
such other date as may be mutually agreed to by the parties ("Closing Date");
provided, however, that in no event shall the Closing occur prior to January 4,
1999. For purposes of the Agreement, "Final Order" means action by the FCC
consenting to the assignments contemplated by this Agreement which is not
reversed, stayed, enjoined, set aside, annulled or suspended, and with respect
to which action no timely request for stay, petition for rehearing, or
reconsideration, application for review or appeal is pending, and as to which
the time for filing any such request, petition or appeal or reconsideration by
the FCC on its own motion has expired. The Closing shall be held in the
offices of Benesch, Friedlander, Coplan & Aronoff, LLP, 2300 BP America
Building, Cleveland, Ohio, or at such place as the parties hereto may agree.
ARTICLE 5
GOVERNMENTAL CONSENTS
5.1 FCC Consent. It is specifically understood and agreed by
Buyer and Seller that the Closing and the assignments of the Stations Licenses
and the transfer of the Stations Assets are expressly conditioned on and are
subject to the prior consent and approval of the FCC ("FCC Consents").
5.2 FCC Applications. Within ten (10) business days after the
execution of this Agreement or such earlier time as shall be agreed to by all
of the parties hereto, Buyer and Seller shall file application with the FCC for
the FCC Consents ("FCC Applications").
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER
6.1 Representations and Warranties of Seller. Seller
represents and warrants to the Buyer the following:
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<PAGE> 19
6.1.1 Organization, Good Standing, Etc. (a)
Seller is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Ohio, has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted and is duly qualified to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, other than in such
jurisdictions where the failure to so qualify has not had and would not
reasonably be expected to have a material adverse effect on the Stations
Assets, the Assumed Liabilities or the business of any of the Stations, or on
Seller's ability to consummate the transactions contemplated by this Agreement
(a "Material Adverse Effect").
(b) Seller has all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Seller and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary action on the part of Seller. This Agreement has been duly
executed and delivered by Seller and constitutes the legal, valid and binding
obligation of Seller, enforceable against it in accordance with its terms.
6.1.2 Authority. Assuming the consents identified
by this Section 6.1.2 and Section 6.1.14 are obtained, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby by Seller (i) violate, conflict with or result in any
breach of any provision of the certificate of limited partnership and the
limited partnership agreement of Seller, (ii) violate, conflict with or will
result in a violation or breach of, or constitute a default (with or without
due notice or lapse of time or both) under, or permit the termination of, or
will result in the acceleration of, or entitle any party to accelerate (whether
as a result of the sale of the Stations Assets or otherwise) any obligation, or
result in the loss of any benefit, or give rise to the creation of any lien,
charge, security interest or encumbrance upon any of the properties or assets
of Seller or any of its subsidiaries under any of the terms, conditions or
provisions of any loan or credit agreement, note, bond, mortgage, indenture or
deed of trust, or any license, lease, agreement or other instrument or
obligation to which any of them are a party or by which they or any of their
properties or assets may be bound or affected, or (iii) violate any order,
writ, judgment, injunction, decree, statute, rule or regulation, of any court,
administrative agency or commission or other governmental authority or
instrumentality (a "Governmental Entity") applicable to Seller or any of its
respective properties or assets, except for those violations that individually
or in the aggregate could not reasonably be expected to have a Material Adverse
Effect. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Seller in connection with the execution, and delivery of this
Agreement by Seller or the consummation by Seller
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of the transactions contemplated hereby, except for (i) the filing of a
premerger notification report under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the expiration of the
applicable waiting period thereunder, and (ii) the FCC Consents.
6.1.3 Financial Statements. Attached as Schedule
6.1.3 are copies of the Stations' (a) balance sheets at December 31, 1996 and
1997 and the related statements of income and cash flow for the fiscal years
then ended, which have been reviewed by Cohen & Company (the "Seller's Year-End
Financial Statements"), and (b) internally prepared balance sheets at May 31,
1997 and 1998, and the related statement of income for the periods then ended
(such financial statements collectively being referred to as the "Seller's
Financial Statements"). Except as set forth on Schedule 6.1.3, the Seller's
Financial Statements were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered thereby ("GAAP") and present fairly, in all material respects, the
financial position, results of operations and changes in cash flows of the
Stations as of such dates and for the periods then ended (subject to the
absence of notes and to normal, recurring adjustments that would not be
material in the aggregate), other than Trade Agreements.
6.1.4 Absence of Undisclosed Liabilities. Except
as set forth on Schedule 6.1.4 hereto, there are no material liabilities of
Seller of any kind whatsoever with respect to the Stations (whether absolute,
accrued, contingent or otherwise, and whether due or to become due) that are
required to be reflected on, or disclosed in the notes to, a consolidated
balance sheet of Seller prepared in accordance with GAAP, other than
liabilities and obligations (a) provided for or reserved against in the
Seller's internally prepared balance sheet at May 31, 1998 described in Section
6.1.3 (the "May 1998 Balance Sheet") or reflected in the notes thereto or (b)
arising after May 31, 1998, in the ordinary course of business and consistent
with past practices and which individually or in the aggregate have not had and
could not reasonably be expected to have a Material Adverse Effect.
6.1.5 Compliance with Applicable Laws, FCC Matters.
(a) Except as permitted or contemplated hereby, the operations of the Stations
have been and now are being conducted in compliance in all material respects
with the Stations Licenses, each law, ordinance, regulation, judgment, decree,
injunction, rule or order of the FCC or any other Governmental Entity binding
on Seller, the Stations or their respective properties or assets. No
investigation or review by any Governmental Entity with respect to Seller or
the Stations is pending or, to the Seller's knowledge, is threatened. Without
limiting the generality of the foregoing, Seller has complied in all material
respects with the Communications Act of 1934, as amended (the "Communications
Act"), all rules, regulations and written policies of the
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FCC thereunder, all obligations with respect to equal opportunity under
applicable law and the FCC's policy on exposure to radio frequency radiation
applicable to the Stations. No renewal of any Stations License would
constitute a major environmental action under the rules of the FCC. Access to
the Stations' transmission facilities are restricted in accordance with the
policies of the FCC. In addition, Seller has duly and timely filed, or caused
to be filed, with the appropriate Governmental Entities all reports,
statements, documents, registrations, filings or submissions with respect to
the operations of the Stations and the ownership thereof, including, without
limitation, applications for renewal of authority required by applicable law to
be filed. All such filings complied in all material respects with applicable
laws when made and, to the Seller's knowledge, no deficiencies have been
asserted with respect to any such filings. All of the material required by 47
C.F.R. Section 73.3526 to be kept in the public inspection files of the
Stations is in such files. Except as disclosed on Schedule 6.1.5, Seller has
no knowledge of any fact or circumstance relating to Seller or the Stations
arising from noncompliance with the Communications Act, or the rules,
regulations or written policies of the FCC in effect on the date of this
Agreement that could reasonably be expected to (i) disqualify the Seller from
assigning the Stations Licenses to the Buyer or (ii) prevent or delay the
consummation by them of the transactions contemplated by this Agreement. The
ground system of the AM Station is as specified in the current license or
applicable construction permit for the AM Station (including with respect to
the number, length and burial depth or radials).
(b) Schedule 1.1.1 lists (i) all licenses, permits and
other authorizations (including all STL licenses and construction permits)
issued to Seller by the FCC relating to the Stations and held by them as of the
date of this Agreement and (ii) all licenses, permits, or authorizations issued
to Seller by any other Governmental Entities which are material to the
operations of the Stations and held by them as of the date of this Agreement.
Such licenses, permits and authorizations, and all applications for
modification, extension or renewal thereof or for new licenses, permits,
permissions or authorizations that would be material to the operations of the
Stations, are collectively referred to herein as the Stations Licenses (as
further defined in Section 1.1.1), each of which is in full force and effect.
All towers and other structures used in the operation of the Stations or
located on the Real Property are obstruction marked and lighted to the extent
required by, and in accordance with the rules and regulations of the Federal
Aviation Administration (the "FAA"), the Commission and other federal, state
and local authorities. Appropriate notifications to the FAA and registrations
with the FCC have been filed for such towers where required. Except for
proceedings affecting the radio broadcast industry generally, there are no
proceedings pending or, to Seller's knowledge, threatened with respect to
Seller's ownership or operation of the Stations which reasonably may be
expected to result in the revocation, material adverse modification,
non-renewal or suspension of any of the Stations Licenses, the denial
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of any pending applications for Stations Licenses, the issuance against Seller
of any cease and desist order, or the imposition of any administrative actions
by the FCC or any other Governmental Entity with respect to the Stations
Licenses, or which reasonably may be expected to adversely affect the Stations'
ability to operate as currently operated or Buyer's ability to obtain
assignment of the Stations Licenses. With the exception of operations pursuant
to the existing STAs set out in Section 1.1.1 hereto, and with the further
exception of such temporary reduced power operations as are necessary for
routine maintenance, the Stations operate (i) in conformity with Stations
Licenses; and (ii) within the operating power tolerances specified in 47 C.F.R.
Section 73.1560(b). No other broadcast station or radio communications
facility is causing interference to the Stations' transmissions beyond that
which is allowed by FCC rules and regulations. Seller has all necessary
authority to use the call signs set forth on Schedule 1.1.1.
6.1.6 Litigation. Except as disclosed on Schedule
6.1.6, there are no actions, suits, inquiries, judicial or administrative
proceedings, or arbitrations pending or, to the knowledge of Seller, threatened
against Seller or any of its respective properties or assets by or before any
arbitrator or Governmental Entity nor are there any investigations relating to
Seller or any of its respective properties or assets pending or, to the
knowledge of Seller, threatened by or before any arbitrator or Governmental
Entity that has had or that reasonably could be expected to have a Material
Adverse Effect. There are no material judgments, decrees, injunctions, or
orders of any Governmental Entity or arbitrator outstanding against Seller or
any of its respective properties or assets. There is no action, suit, inquiry,
judicial or administrative proceeding pending or, to the knowledge of Seller,
threatened against Seller by a third party relating to the transactions
contemplated by this Agreement.
6.1.7 Insurance. Schedule 6.1.7 sets forth a list
of all fire, liability and other forms of insurance and all fidelity bonds held
by or applicable to the Stations setting forth in respect of each such policy
the policy name, policy number, carrier, term, type of coverage and annual
premium, each of which is in full force and effect on the date hereof, valid
and enforceable in accordance with its terms and in amounts which are adequate
in relation to the business and assets of Seller and the Stations. To Seller's
knowledge, no event has occurred, including, without limitation, the failure by
Seller to give any notice or information, or the delivery of any inaccurate or
erroneous notice or information, which limits or impairs the rights of Seller
under any such insurance policies. Seller shall keep comparable policies of
insurance in effect for acts, omissions and events occurring on or prior to the
Closing Date.
6.1.8 Real Estate. (a) Seller has, and upon
Closing, Buyer will have, good and marketable title to the Owned Real Estate
and, except as set forth on Schedule 1.1.8, valid leaseholds in the Leased Real
Estate, free and clear of any Liens except for the
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Permitted Liens. The buildings (or portions thereof), improvements and
fixtures that are included in the Real Estate are suitable for their intended
use. Seller owns, or has a valid right to use adequate routes of ingress and
egress to, from and over all of the Real Estate necessary to operate the
Stations. The Real Estate has adequate water supply, sewage and waste disposal
facilities, is connected to and served by telephone, gas, electricity and other
utility equipment facilities and services necessary for the operation or use of
the Real Estate. Such facilities and services are adequate for the present use
and operation of the Real Estate on a fully occupied basis, and are installed
and connected pursuant to valid material permits and are in material compliance
with all material governmental regulations. To Seller's knowledge, no fact or
condition exists which would result in the termination or impairment of the
furnishing of utility services to the Real Estate. Schedule 1.1.7 lists the
street address and/or legal descriptions of the Owned Real Estate and Schedule
1.1.8 lists the street addresses and/or legal descriptions of the Leased Real
Estate. All real estate Taxes, assessments and use charges pertaining to the
Owned Real Estate that have become due have been paid in full.
(b) The Real Estate, any improvements thereon, and the
use by Seller thereof, conform in all material respects, to (i) all applicable
laws, including but not limited to zoning requirements and the Americans With
Disabilities Act, and (ii) all restrictive covenants, if any. There are no
eminent domain proceedings pending, or to Seller's knowledge, threatened
against the Real Estate. All material improvements (i) have been constructed
in a good and workmanlike manner, free, in all material respects, from defects
in workmanship and material, and (ii) have been constructed, occupied,
maintained and operated in material compliance with all applicable laws,
insurance requirements, contracts, leases, permits, licenses, ordinances,
restrictions, building set-back lines, covenants, reservations, and easements,
and Seller has received no notice, written or verbal, claiming any material
violation of any of the same or requesting or requiring the performance of any
material repairs, alterations or other work in order to so comply. Other than
Permitted Liens, no improvement on any of the Real Estate encroaches upon any
adjacent real property of any other person or entity. The heating, air
conditioning, plumbing, ventilating, utility, sprinkler and other mechanical
and electrical systems, apparatus and appliances located on the Real Estate or
in the improvements are in good operating condition (normal wear and tear
excepted), free from material defects in workmanship and material.
6.1.9 Personal Property. Schedule 1.1.2 hereto
contains a list of all material tangible personal property and assets owned or
held by Seller and used in the conduct of the business and operations of the
Stations (other than Real Estate, which is addressed in the foregoing Section
6.1.8). Except as disclosed in Schedule 1.1.2, Seller owns and will have on
the Closing Date, and upon Closing Buyer will own and will have, good and
marketable
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title to all property referred to in the immediately preceding sentence and
none of such property is, or at the Closing will be, subject to any Liens other
than Permitted Liens. The tangible personal property and fixtures owned or
used by Seller necessary for the operation of the Stations, are, in all
material respects, in good operating condition (subject to normal wear and
tear) and are sufficient to permit the conduct of the business of the Stations
in material compliance with FCC rules and regulations. Seller owns or holds
under valid leases, all of the tangible personal property and fixtures
necessary to conduct the business of the Stations as presently conducted. The
Stations Assets to be transferred hereunder constitute all of the assets,
rights and properties that are required for the operation of the Stations as
they are now conducted.
6.1.10 Liens and Encumbrances. All of the Stations Assets
are free and clear of all liens, pledges, claims, security interests,
restrictions, mortgages, tenancies and other possessory interests, conditional
sale or other title retention agreements, assessments, easements, rights of
way, covenants, restrictions, rights of first refusal, defects in title,
encroachments and other burdens, options or encumbrances of any kind
(collectively, "Liens") except (a) statutory Liens securing payments not yet
delinquent or the validity of which are being contested in good faith by
appropriate actions, (b) purchase money Liens arising in the ordinary course,
(c) Liens for Taxes not yet delinquent, (d) Liens securing indebtedness, all of
which Liens will be discharged at the Closing upon repayment by Seller of all
amounts due and owing, (e) Liens which in the aggregate do not materially
detract from the value or materially impair the present and continued use of
the properties or assets subject thereto in the usual and normal conduct of the
business of the Stations, (f) Liens on leases arising from the provisions of
such leases, (g) zoning ordinances and (h) any other permitted exceptions
listed on Schedule 6.1.10 hereto (the Liens referred to in clauses (a) through
(h) being "Permitted Liens").
6.1.11 Environmental Matters.
On the date of this Agreement, except as disclosed on Schedule 6.1.11:
(a) The Stations and any and all Real Estate is, and to
Seller's actual knowledge with respect to any predecessor or prior
owner, operator or lessee (each a "Predecessor") has been, in
compliance, in all material respects, with all Environmental Laws
(defined in Section 6.1.11(f));
(b) No judicial or administrative proceedings are pending
or, to the knowledge of Seller threatened against Seller, relating to
any of the Real Estate, alleging the violation of or seeking to impose
liability on Seller pursuant to any
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Environmental Law. Seller has not received any written notice or
claim or other written communication from any Governmental Entity or
other person alleging the violation of or liability under any
Environmental Laws in connection with any of the Real Estate or
operations thereon;
(c) There are no facts, circumstances or conditions
associated with the Real Estate or the operations thereon known to
Seller that could reasonably be expected to give rise to a material
environmental claim against the Stations or the owner or operator
thereof or result in the Stations or the owners or operators thereof
incurring material Environmental Costs and Liabilities (as defined in
subsection (f) below);
(d) All substances, materials or waste that are regulated
by federal, state or local government under the Environmental Laws as
hazardous, toxic or a pollutant or contaminant as well as any
petroleum or petroleum derived product (collectively, "Hazardous
Substances"), used or generated by Seller or to Seller's actual
knowledge, by any Predecessor in connection with the Real Estate, have
been stored, used, treated, and disposed of by such persons or on
their behalf in such manner as not to result in any material
Environmental Costs or Liabilities;
(e) There are not now, nor have there been in the past,
on, in or under any Real Estate when owned, leased or operated by
Seller or, to Seller's knowledge, when owned, leased or operated by
any Predecessor, any of the following: (i) underground storage tanks,
above-ground storage tanks, dikes or impoundments containing Hazardous
Substances, (ii) asbestos containing materials, (iii) polychlorinated
biphenyls or related compounds (other than those labeled and
maintained in accordance with applicable Environmental Laws) in
amounts or concentrations regulated under the Environmental Laws or
(iv) radioactive substances in amounts or concentrations regulated
under the Environmental Laws; and
(f) For purposes of this section, the following terms
have the following meanings: "Environmental Laws" shall mean all
applicable federal, state and local laws, statutes, codes, rules,
regulations, common law or other legal requirements relating to the
environment, natural resources, and public or employee health and
safety; "Environmental Costs and Liabilities" means any losses,
including environmental remediation costs, liabilities, obligations,
damages, fines, penalties or judgments, arising from or under any
Environmental Law or order of or agreement with any Governmental
Entity or other person.
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6.1.12 Taxes. (a) All Tax Returns (as defined in
subsection (g) below) that are required to be filed on or before the execution
of this Agreement by Seller have been duly filed on a timely basis under the
statutes, rules and regulations of each jurisdiction in which such Tax Returns
are required to be filed and Seller will file or will cause to be duly filed,
all Tax Returns required to be filed by Seller as of the Closing Date and with
respect to any taxable period prior to or which includes the Closing Date. All
such Tax Returns are (or will be) complete and accurate in all respects.
Except as set forth on Schedule 6.1.12, all Taxes, whether or not reflected on
the Tax Returns, which are due with respect to Seller and any Affiliates have
been timely paid by Seller, and/or any such Affiliates, whether or not such
Taxes are disputed.
(b) No claim for assessment or collection of Taxes has
been asserted against Seller or any Affiliates. Neither Seller nor its
Affiliates are a party to any pending audit, action, proceeding or
investigation by any Governmental Entity for the assessment or collection of
Taxes nor do Seller or any of its Affiliates have knowledge of any threatened
audit, action, proceeding or investigation.
(c) Neither Seller nor its Affiliates have waived or
extended any statutes of limitation for the assessment or collection of Taxes.
No claim has ever been made by a Governmental Entity in a jurisdiction where
Seller or any of its Affiliates do not currently file Tax Returns that it is or
may be subject to taxation by that jurisdiction nor is Seller or any of its
Affiliates aware that any such assertion of jurisdiction is pending or
threatened. No Liens, other than Permitted Liens (whether filed or arising by
operation of law), have been imposed upon or asserted against any of the
Stations Assets as a result of or in connection with any failure, or alleged
failure to pay any Tax.
(d) Seller has withheld and paid all Taxes required to be
withheld in connection with any amounts paid or owing to any employee,
creditor, independent contractor or other third party.
(e) Seller is not a foreign person within the meaning of
Section 1445 of the Code.
(f) None of the Stations Assets is (i) "tax-exempt use"
property within the meaning of Section 168(h) of the Code, (ii) required to be
treated as owned by another person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, (iii) "tax
exempt bond financed property" within the meaning of Section 168(g) of the Code
or (iv) "limited use property" (as that term is used in Rev. Proc. 76-30).
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(g) For purposes of this Agreement, the terms "Tax" and
"Taxes" shall mean all federal, state, local, or foreign taxes, assessments,
duties, levies or similar charges of any kind including, without limitation,
all income, payroll, Medicare, withholding, unemployment insurance, social
security, sales, use, service, service use, leasing, leasing use, excise,
franchise, gross receipts, value added, alternative or add-on minimum,
estimated, occupation, real and personal property, stamp, duty, transfer,
workers' compensation, severance, windfall profits, environmental (including
Taxes under Section 59A of the Code), other Tax, charge, fee, levy or
assessment of the same or of a similar nature, including any interest, penalty,
or addition thereto' whether disputed or not. The term "Tax Return" means any
return, declaration, report, claim for refund, or information return or
statement relating to Taxes or any amendment thereto, and including any
schedule or attachment thereto.
(h) Alternative Procedure. Buyer and Seller agree that,
pursuant to the "Alternative Procedure" provided in section 5 of Revenue
Procedure 96-60, 1996-2 C.B. 399, (i) Buyer and Seller will report on a
predecessor/successor basis as set forth therein, (ii) Seller will be relieved
from filing a Form W-2 with respect to any employee of Seller who accepts
employment with Buyer and (iii) Buyer will undertake to file (or cause to be
filed) a Form W-2 for each such employee for the year that includes the Closing
Date (including the portion of such year that such employee was employed by
Seller). Seller agrees to provide Buyer with all payroll and
employment-related information with respect to each employee of Seller who
accepts employment with Buyer.
6.1.13 Personnel. Attached as Schedule 6.1.13 is a
complete and correct list as of the date of this Agreement of the names,
positions, and location of all employees or other station and broadcast
personnel (whether employees or independent contractors) of the Stations, which
sets forth the current salaries of all such employees and the other
compensation arrangements with all General Managers, Station Managers, General
Sales Managers, Local Sales Managers, National Sales Managers, Program
Directors, Business Managers and Traffic Managers (collectively, "Station
Management") and all on-the-air broadcast personnel of the Stations and
indicates which of those employees, Station Management or on-the-air broadcast
personnel is a party to an employment or consulting or similar contract with
Seller that is not terminable upon not more than 60 days notice without
additional cost to Seller.
6.1.14 Certain Agreements. Except as set forth on
Schedule 6.1.14, the Contracts are the only contractual agreements necessary to
carry out the business and operations of the Stations as currently conducted.
Each Contract (as identified on Schedule 1.1.3) is a valid and binding
obligation of Seller and is in full force and effect and, to the
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knowledge of Seller, each other party to such Contract with respect to the
Stations, has performed in all material respects the obligations required to be
performed by it and is not (with or without lapse of time or the giving of
notice, or both) in material breach or default thereunder. Schedule 1.1.3
identifies, as to each Contract, whether the consent of the other party thereto
is required in order for such Contract to continue in full force and effect
upon the consummation of the transactions contemplated hereby. There has not
been (i) any threatened cancellation of any material Contracts, (ii) any
outstanding disputes, of a material nature under any material Contracts or
(iii) to the Seller's knowledge, any bases for any claim of breach or default
thereunder. Seller has no knowledge that any of the material Contracts that
are renewable will not be renewed by the other party on commercially reasonable
terms.
6.1.15 ERISA Compliance. Neither Seller nor any other
trades or businesses under common control, or which is treated as a single
employer with Seller under Sections 414(b),(c),(m) or (o) of the Code
(collectively, the "ERISA Group") has contributed or been obligated to
contribute to any "multi employer plan" as such term is defined in Section
3(37) or Section 4001(a)(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") except as disclosed on Schedule 6.1.15. Schedule
6.1.15 lists all "employee benefit plans" within the meaning of Section 3(3) of
ERISA and bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
salary continuation, educational assistance, club memberships, company car
(other than those provided to employees pursuant to employment agreements
listed on Schedule 1.1.3 hereto), insurance or other plan or arrangement or
understanding providing benefits to any present or former employee or
contractor of the Stations maintained by Seller or as to which Seller (with
respect to such individuals) has any liability or obligation (collectively,
"Employee Benefit Plans").
6.1.16 Labor. Seller has not 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 its employees.
Except as disclosed on Schedule 6.1.16, since June 30, 1995, Seller (a) is and
has been in compliance, in all material respects, with all applicable laws
regarding employment and employment practices, terms and conditions of
employment, wages and hours, and plant closing, occupational safety and health
and workers' compensation and is not engaged, nor has it engaged, in any unfair
labor practices, (b) has no, and has not had any unfair labor practice charges
or complaints pending or, to the Seller's knowledge, threatened against it
before the National Labor Relations Board, (c) has no and has not had any
grievances pending or, to Seller's knowledge, threatened against it and (d) has
no, and has not had any charges pending or, to Seller's knowledge, threatened
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against it before the Equal Employment Opportunity Commission or any state or
local agency responsible for the prevention of unlawful employment practices.
There is no labor strike, slowdown, work stoppage or lockout actually pending
or, to the knowledge of Seller, threatened against or affecting the Stations.
To Seller's knowledge, no union organizational campaign or representation
petition is currently pending with respect to the employees of Seller.
6.1.17 Patents, Trademarks, Etc. Schedule 1.1.4 sets
forth all call letters, patents, patent applications, trademarks, trade names,
Internet domain names, service marks, trade secrets, applied for, issued, owned
or used, copyrights and other proprietary Intellectual Property used in the
operation of the Stations (whether owned, leased or licensed by Seller).
Seller has, and upon the Closing Buyer will have, good and marketable title to
the material Intellectual Property owned by it, free and clear of any Liens
except for Permitted Liens and except for any infringement claims by third
parties of which Seller is not aware. Seller has not received any notice of
any claimed conflict, violation or infringement of such Intellectual Property
rights, and to the Seller's knowledge, none of such Intellectual Property
rights are being infringed by any third party. To Seller's knowledge, the
operation of Seller's business does not infringe on the intellectual property
rights of any other person.
6.1.18 Absence of Certain Changes or Events. Except as
contemplated or expressly permitted by this Agreement, since December 31, 1997
there has not been (a) any material damage, destruction or loss of any kind
with respect to the Stations not covered by valid and collectible insurance,
nor, to Seller's knowledge, has there been any event or circumstance which has
had or reasonably could be expected to have a Material Adverse Effect; (b) the
execution of any agreement with any Station Management or broadcast personnel
(whether an employee or independent contractor) providing for his/her
employment, or any increase in compensation or severance or termination of
benefits payable or to become payable by Seller to any officer, Station
Management, or broadcast personnel (whether an employee or independent
contractor), or any increase in benefits under any collective bargaining
agreement, except as to all of the foregoing in this clause (b), in the
ordinary course of business consistent with prior practices and except as
permitted by Section 8.1.1 or (c) any change by Seller in its financial or Tax
accounting principles or methods, except insofar as required by GAAP,
applicable law or circumstances which did not exist as of the date of the
December 31, 1997 balance sheet included in the Seller's Financial Statements.
6.1.19 Commission or Finder's Fees. Neither Seller nor
any entity acting on behalf of Seller has agreed to pay a commission, finder's
fee or similar payment to any person or entity in connection with this
Agreement or any matter related hereto.
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6.1.20 Full Disclosure. No representation or warranty by
Seller contained in this Agreement (including the Schedules hereto) or in any
certificate furnished pursuant to this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
6.1.21 Seller's Financial Condition. No insolvency
proceedings of any character, including, without limitation, bankruptcy,
receivership, reorganization, composition or arrangement with creditors,
voluntary or involuntary, affecting Seller or any of its respective assets or
properties are pending, or to the 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 a basis for, the institution of any such
insolvency proceedings. Seller shall use the proceeds received under this
Agreement to pay or to make appropriate provision for the payment of any and
all creditors of Seller prior to making any distribution to its partners.
6.1.22 Books and Records. The books, records and accounts
of Seller maintained with respect to the Stations, accurately and fairly
reflect, in reasonable detail, in all material respects, the transactions and
the assets and liabilities of Seller. Seller has not engaged in any
transaction, maintained any bank account or used any of the funds of Seller
except for transactions, bank accounts and funds which have been and are
reflected, in all material respects, in the normally maintained books and
records of the Stations.
6.1.23 Barter Arrangements. Schedule 6.1.23 accurately
describes all barter, trade or similar arrangements for the sale of advertising
for other than cash and all Trade Agreements relating to the operation of the
Stations which are outstanding as of the date hereof. With respect to the
Stations, all such advertising time sold under barter, trade or similar
arrangements for other than cash or under Trade Agreements may be, preempted by
advertising time that is sold for cash. All such barter, trade or similar
arrangements for the sale of advertising time for other than cash and all Trade
Agreements have been entered into in the ordinary course consistent with past
practices.
6.1.24 Interest in Competitors, Suppliers and Customers.
Except as set forth on Schedule 6.1.24 hereto, neither Seller nor any partner
or Affiliate of Seller has any ownership interest in any competitor, supplier,
customer or other service provider of Seller or any property used in the
operation of the business of Seller.
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BUYER
7.1 Representations and Warranties of Buyer. Buyer represents
and warrants to Seller the following:
7.1.1 Organization and Standing. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted and is duly qualified to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, other than in such
jurisdictions where the failure to so qualify has not had and would not
reasonably be expected to have a material adverse effect on the assets, or the
business of Buyer, or on Buyer's ability to consummate the transactions
contemplated by this Agreement.
7.1.2 Authorization and Binding Obligation. Buyer
has all requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. Buyer's execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Buyer and constitutes the legal, valid and
binding obligation of Buyer, enforceable against it in accordance with its
terms.
7.1.3 Qualification. To Buyer's knowledge, there
is no fact, allegation, condition, or circumstance that could reasonably be
expected to prevent the prompt grant of the FCC Consents. Buyer knows of no
fact that would, under the Communications Act, or the rules, regulations and
policies of the FCC, disqualify Buyer from becoming the licensee of the
Stations or, as of the date hereof, otherwise require Buyer to obtain a waiver
of any FCC rule, regulation or policy in order to obtain the FCC Consents.
There are no proceedings, complaints, notices of forfeiture, claims, or
investigations pending or, to the knowledge of Buyer, threatened against any or
in respect of any of the broadcast stations licensed to Buyer or its Affiliates
that would materially impair the qualifications of Buyer to become a licensee
of the Stations or delay the FCC's processing of the FCC Applications.
7.1.4 Absence of Conflicting Agreements or Required
Consents. Except as set forth in Schedule 7.1.4 hereof, the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby by Buyer: (a) do not violate, conflict with or result in
any breach of any provision of the charter or bylaws of Buyer; (b) violate,
conflict with or will result in a violation or breach of, or constitute a
default (with or without
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due notice or lapse of time or both) under, or permit the termination of, or
will result in the acceleration of, or entitle any party to accelerate (whether
as a result of the sale of the Stations Assets or otherwise) any obligation, or
result in the loss of any benefit, or give rise to the creation of any lien,
charge, security interest or encumbrance upon any of the properties or assets
of Buyer or any its subsidiaries under any of the terms, conditions or
provisions of any loan or credit agreement, note, bond, mortgage, indenture or
deed of trust, or any license, lease, agreement or other instrument or
obligation to which any of them are a party or by which they or any of their
properties or assets may be bound or affected, or (c) violate any order, writ,
judgment, injunction, decree, statute, rule or regulation of any Governmental
Entity applicable to Buyer or any of its respective properties or assets,
except for those violations that individually or in the aggregate could not
reasonably be expected to have a material adverse effect on Buyer's ability to
consummate the transactions contemplated by this Agreement.
7.1.5 Litigation. There are no actions, suits,
inquiries, judicial or administrative proceedings, or arbitrations pending or,
to the knowledge of Buyer, threatened against Buyer or any of its respective
properties or assets by or before any arbitrator or Governmental Entity nor are
there any investigations relating to Buyer or any of its respective properties
or assets pending or, to the knowledge of Buyer, threatened by or before any
arbitrator or Governmental Entity that has had or that reasonably could be
expected to have a material adverse effect on Buyer's ability to consummate the
transactions contemplated by this Agreement. There are no material judgments,
decrees, injunctions, or orders of any Governmental Entity or arbitrator
outstanding against Buyer or any of its respective properties or assets that
has had or that reasonably could be expected to have a material adverse effect
on Buyer's ability to consummate the transactions contemplated by this
Agreement. There is no action, suit, inquiry, judicial or administrative
proceeding pending or, to the knowledge of Buyer, threatened against Buyer by a
third party relating to the transactions contemplated by this Agreement.
7.1.6 Commission or Finder's Fees. Neither Buyer
nor any entity acting on behalf of Buyer has agreed to pay a commission,
finder's fee or similar payment to any person or entity in connection with this
Agreement or any matter related hereto.
7.1.7 Full Disclosure. No representation or
warranty by Buyer contained in this Agreement (including the Disclosure
Schedules hereto) or in any certificate furnished pursuant to this Agreement
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading.
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ARTICLE 8
COVENANTS OF SELLER
8.1 Seller Covenants. Seller covenants and agrees with Buyer
that, pending Closing and except as otherwise agreed to in writing by Buyer:
8.1.1 Conduct Prior to the Closing. Seller shall:
(a) use commercially reasonable efforts to maintain its
present business organization, keep available the services of its
present employees and independent contractors, preserve its
relationships with its customers and others having business
relationships with it, and refrain from materially and adversely
changing any of its business policies (including but not limited to
advertising (including substantially the same amount of cash
expenditure), marketing, pricing, purchasing, personnel, sales, and
budget policies);
(b) maintain its books of account and records in the
usual and ordinary manner and in accordance with GAAP except as
otherwise provided in Section 6.1.3;
(c) notify Buyer if the regular broadcast transmission of
any of the Stations from its main transmitting facilities at full
authorized effective radiated power is interrupted for a period of
more than five consecutive hours or for an aggregate of 10 or more
hours in any continuous three-day period; provided that no such
notification is required in connection with the operation of WRMR
pursuant to the STA referred to in Schedule 1.1.1 hereto;
(d) operate in the usual and ordinary course of business
in accordance with past practices and conduct its business in all
material respects in compliance with the terms of the Stations
Licenses and all applicable laws, rules, and regulations, including,
without limitation, the applicable rules and regulations of the FCC
through the Closing Date;
(e) use, repair, and, if necessary, replace any Stations'
studio and transmission assets in a reasonable manner consistent with
historical practice and maintain its assets in substantially their
current condition, ordinary wear and tear excepted;
(f) maintain insurance in conformity with Section 6.1.7
through the Closing Date;
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(g) not knowingly incur any debts, obligations, or
liabilities (absolute, accrued, contingent, or otherwise) that include
obligations (monetary or otherwise) to be performed by Buyer after the
Closing that exceeds $50,000 individually or $150,000 in the
aggregate;
(h) not lease, mortgage, pledge, or subject to a lien,
claim, or encumbrance (other than Permitted Liens) any of the Stations
Assets or sell or transfer any of the Stations Assets without
replacing such Stations Assets with an asset of substantially the same
value and utility;
(i) without the prior consent of Buyer, which consent
shall not be unreasonably withheld or delayed, (i) not modify or
extend any Contracts, other than contracts for the sale of advertising
time for cash, or (ii) enter into any new Contract, other than
Contracts for the sale of advertising time for cash, or other than
non-advertising Contracts obligating the Companies to provide payments
or benefits of less than $50,000 each over the life of the Contract
and $150,000 in the aggregate;
(j) except for stay bonuses paid or payable by Seller,
not make or grant any general wage or salary increase or generally
materially modify the employees' terms and conditions of employment,
other than in the ordinary course of business, consistent with past
practices, and with respect to any Station Management and on-air
personnel, Seller shall not make or grant any wage or salary increase
or modify any terms and conditions of employment without the prior
consent of Buyer;
(k) not make (i) any change in the accounting principles,
methods, or practices followed by it or depreciation or amortization
policies or rates or (ii) any change in any Tax election or settle any
Tax audit or controversy relating to the Stations Assets;
(l) not make any loans or make any dividends or
distributions other than of Excluded Assets;
(m) other than in the ordinary course of business, not
cancel or compromise any debt or claim, or waive or release any right,
of material value;
(n) not disclose to any person (other than Buyer and its
representatives) any confidential or proprietary information;
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(o) use its commercially reasonable efforts to maintain
the present format of the Stations and with programming consistent
with past practices;
(p) other than in the ordinary course of business, not
increase the number of regularly scheduled commercial units run during
the day-parts on the Stations (other than changes in the number of
commercial units run during any day-part as a result of operating
difficulties that require commercial units to be broadcast at times
other than as scheduled); and
(q) agree to do any of the foregoing.
8.1.2 Access. Seller shall, or shall cause the
Stations, to (a) give Buyer and Buyer's counsel, accountants, engineers and
other representatives, including environmental consultants, reasonable access
during normal business hours to all of Seller's properties, books, Contracts,
Trade Agreements, reports and records including financial information and Tax
Returns relating to the Stations, and to all real estate, buildings and
equipment relating to the Stations, in order that Buyer may have full
opportunity to make such investigation, including but not limited to,
environmental assessments, as it desires of the affairs of the Stations and (b)
furnish Buyer with information, and copies of all documents and agreements
including but not limited to financial and operating data and other information
concerning the financial condition, results of operations and business of the
Stations, that Buyer may reasonably request. The rights of Buyer under this
Section shall not be exercised in such a manner as to interfere unreasonably
with the business of the Stations.
8.1.3 Satisfaction of Conditions; Closing. Seller
shall use all commercially reasonable efforts to conduct the business of the
Stations in such a manner that on the Closing Date the representations and
warranties of Seller contained in this Agreement shall be true in all material
respects as though such representations and warranties were made on and as of
such date. Furthermore, Seller shall cooperate with Buyer and use all
commercially reasonable efforts to satisfy promptly all conditions required
hereby to be satisfied by Seller in order to expedite the consummation of the
transactions contemplated hereby.
8.1.4 Sale of Acquired Assets; Negotiations.
Seller shall not, and Seller shall cause its respective Affiliates, directors,
officers, employees, agents, representatives, legal counsel, and financial
advisors not to, (a) solicit, initiate, accept, consider, entertain or
encourage the submission of proposals or offers from any person or entity with
respect to the acquisition contemplated by this Agreement or any similar
transaction wherein such person or entity would directly or indirectly acquire
all or any portion of the Stations Assets or
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ownership interests in Seller, or any merger, consolidation, or business
combination, directly or indirectly, with or for Seller or all or substantially
all of the Seller's business, or (b) participate in any negotiations regarding,
or, except as required by legal process (including pursuant to discovery or
agreements existing on the date hereof), furnish to any person or entity (other
than Buyer) to do or seek any of the foregoing. Seller shall not enter into
any agreement or consummate any transactions that would interfere with the
consummation of the transactions contemplated by this Agreement. Seller shall
promptly notify Buyer if it receives any written inquiry, proposal or offer
described in this Section 8.1.4 or any verbal inquiry, proposal or offer
described in this Section 8.1.4 that is competitive with the terms of the
transactions contemplated by this Agreement, and Seller shall inform such
inquiring person or entity of the existence of this Agreement and make such
inquiring person or entity aware of Seller's obligations under this Section
8.1.4. The notification under this Section 8.1.4 shall include the identity of
the person or entity making such inquiry, offer, or other proposal, the terms
thereof, and any other information with respect thereto as Buyer may reasonably
request. Seller shall not provide any confidential information concerning its
business or its properties or assets to any third party other than in the
ordinary course of the business and consistent with prior practice. Seller has
ceased and caused to be terminated any existing activities, discussions or
negotiations with any person or entity conducted heretofore with respect to any
of the foregoing.
8.1.5 No Inconsistent Action. Seller shall not
take any action which is materially inconsistent with its obligations under
this Agreement.
8.1.6 Notification. Seller shall promptly notify
Buyer in writing of (a) the failure of Seller or, to Seller's knowledge, any
employee or agent of Seller to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with hereunder; (b) the
occurrence of any event that would entitle Buyer to terminate this Agreement
pursuant to Section 15.1; or (c) of any overt threat or actual resignation or
termination of any Station Management or over-the-air personnel at any of the
Stations prior to the Closing.
8.1.7 FCC Reports. Seller shall file on a current
basis through the Closing Date all reports and documents required to be filed
with the FCC with respect to the Stations Licenses. Copies of each such report
and document filed between the date hereof and the Closing Date shall be
furnished to Buyer promptly after its filing.
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8.1.8 Updating of Information. Between the date of
this Agreement and the Closing Date, Seller will deliver to Buyer, on a monthly
basis within 30 days of the end of each month, information relating to the
operation of the Stations, including weekly sales reports and such other
financial information that may be reasonably requested.
8.1.9 Response to Certain Actions. Seller agrees
to cooperate and use its commercially reasonable efforts to contest and resist
any action, including administrative or judicial action, and make reasonable
attempts to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent, that is
in effect and that restricts, prevents or prohibits the consummation of the
transactions contemplated by this Agreement.
8.1.10 Barter and Trade. Seller shall use its
commercially reasonable efforts to (a) reduce the total amount of advertising
time owed for other than cash and (b) if the value of Seller's obligations to
provide goods or services other than for cash (all of which obligations are
Assumed Liabilities) are greater than the value of goods or services
contemplated to be received by Seller other than for cash that are to be
assigned to Buyer under this Agreement, reduce such excess amount prior to the
Closing; provided, however, that in no event shall the Purchase Price be
decreased as a result of such remaining excess value existing as of the
Closing. Any Trade Agreements entered into after the date hereof shall be
entered into only in the ordinary course of Seller's business and consistent
with past practices.
8.1.11 Interim Financial Statements. Seller shall
promptly deliver to Buyer copies of any monthly, quarterly or annual financial
statements relating to the Stations' operations that may be prepared by it
during the period from the date hereof through the Closing Date. Such
financial statements shall fairly present, in all material respects, the
financial position and results of operations of the Stations as at the dates
and for the periods indicated, and shall be prepared on a basis consistent and
in accordance with the basis upon which the financial statements in Section
6.1.3 were prepared.
8.1.12 Estoppel Certificates. If requested by Buyer
within 30 days of the date of this Agreement, Seller shall use commercially
reasonable efforts to obtain from third parties the estoppel certificates,
nondisturbance agreements, and/or written clarifications of the rights of Buyer
thereunder, all in form and substance reasonably satisfactory to Buyer.
8.1.13 Management Agreements. Seller shall cause the
agreements described under the heading "Management Agreements" in Note 7 to the
Seller's Year-End Financial Statements and under the heading "Management
Agreement" in Note 10 to the Seller's Year-End Financial Statements
(collectively, the "Management Agreements") to be terminated and of no further
force and effect as of the Closing. Seller agrees that Buyer shall have no
obligations or liabilities arising from or related to the Management
Agreements.
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ARTICLE 9
COVENANTS OF BUYER
9.1 Buyer Covenants. Buyer covenants and agrees that, pending
the Closing and except as otherwise agreed to in writing by Seller:
9.1.1 Notification. Buyer shall promptly notify
Seller in writing of (a) any litigation, arbitration or administrative
proceeding pending or, to its knowledge, threatened against Buyer which
challenges the transactions contemplated hereby or (b) the failure of Buyer,
or, to Buyer's knowledge, any employee or agent of Buyer to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it hereunder and (c) the occurrence of any event
that would entitle Seller to terminate this Agreement pursuant to Sections
15.1.
9.1.2 No Inconsistent Action. Buyer shall not take
any action which is materially inconsistent with its obligations under this
Agreement.
9.1.3 Post-Closing Access. Buyer, for a period of
seven years following the Closing Date, shall make available during normal
business hours for audit and inspection by Seller and its representatives, for
any reasonable purpose and upon reasonable notice, all records, files,
documents and correspondence transferred to it hereunder relating to the
pre-closing period. During such seven-year period, Buyer shall at no time
dispose of or destroy any such records, files, documents and correspondence
without giving 30 days prior notice to Seller to permit Seller, at its expense,
to examine, duplicate or take possession of and title to such records, files,
documents and correspondence. All information, records, files, documents and
correspondence made available or disclosed under this Section 9.1.3 shall be
kept confidential.
9.1.4 Satisfaction of Conditions; Closing. Buyer
shall use all commercially reasonable efforts to conduct its business in such a
manner that on the Closing Date the representations and warranties of Buyer
contained in the Agreement shall be true in all material respects as though
such representations and warranties were made on and as of such date.
Furthermore, Buyer shall cooperate with Seller and use all commercially
reasonable efforts to satisfy promptly all conditions required hereby to be
satisfied by Buyer in order to expedite the consummation of the transactions
contemplated hereby.
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9.1.5 Response to Certain Actions. Buyer agrees to
cooperate and use its commercially reasonable efforts to contest and resist any
action, including administrative or judicial action, and make reasonable
attempts to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent, that is
in effect and that restricts, prevents or prohibits the consummation of the
transactions contemplated by this Agreement and Buyer agrees to take the
actions described (under the circumstances so described) on Schedule 9.1.5.
9.1.6 Accrued Vacation. If an employee of Seller
is hired by Buyer as of the Closing and such employee has earned or accrued
vacation time since January 1, 1998 that is not subject to statutory payout by
Seller, Buyer shall recognize such accrued vacation time and credit such
employee with such earned or accrued vacation time which shall be deemed an
Assumed Liability; provided, however, that Buyer is not obligated and shall not
recognize or credit employee with any vacation time earned or accrued by such
employee prior to January 1, 1998.
9.1.7 Other Acquisitions. Buyer agrees to close
the Zebra Acquisition and Zapis Acquisition unless Seller is in breach of this
Agreement or any of the applicable sellers is in breach of the Zebra
Acquisition or the Zapis Acquisition agreements or Buyer is otherwise not
obligated to close with Seller under this Agreement or with any of the
applicable sellers under the Zebra Acquisition or the Zapis Acquisition
agreements, in which case Buyer is not obligated to close any of the Other
Acquisitions or consummate the transactions contemplated under this Agreement.
ARTICLE 10
JOINT COVENANTS
Buyer and Seller covenant and agree that, pending the Closing and
except as otherwise agreed to in writing, they shall act in accordance with the
following:
10.1 FCC Applications. Buyer and Seller shall prosecute the FCC
Applications with all reasonable diligence and otherwise use their commercially
reasonable efforts to obtain the FCC Consents as expeditiously as practicable,
but neither Buyer nor Seller shall have any obligation to satisfy complainants
or the FCC by taking any steps which would have a material adverse effect upon
Buyer or Seller (other than Buyer's obligations under Section 9.1.5).
Notwithstanding anything to the contrary contained herein, either party may
terminate this Agreement upon notice to the other, if, for any reason, other
than Buyer's failure to comply with Section 9.1.5 (in which case only Seller
can terminate), the FCC Applications are designated for hearing by the FCC;
provided, however, that notice of
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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 10.1, the parties shall be released and
discharged from any further obligation hereunder without being subject to a
claim by Seller for liquidated damages or any other claims for damages.
10.2 Confidentiality. Each of Buyer and Seller shall each keep
confidential all information obtained by it with respect to the other party
hereto in connection with this Agreement and the negotiations preceding this
Agreement, including, without limitation, the results of, and information
relating to, the Studies (as defined in Section 10.8) and will use such
information solely in connection with the transactions contemplated by this
Agreement, and if the transactions contemplated hereby are not consummated for
any reason, each shall return to each other party hereto, without retaining a
copy thereof, any schedules, documents or other written information obtained
from such other party in connection with this Agreement and the transactions
contemplated hereby except to the extent required or useful in connection with
any claim made with respect to the transactions contemplated by this Agreement
or the negotiation thereof which will be returned following settlement of the
claim. Notwithstanding the foregoing, no party shall be required to keep
confidential or return any information which (a) is known or available through
other lawful sources, not bound by a confidentiality agreement with the
disclosing party, or (b) is or becomes publicly known through no fault of the
receiving party or its agents, or (c) is required to be disclosed pursuant to
an order or request of a judicial or government authority (provided the
non-disclosing party is given reasonable prior notice such that it may seek, at
its expense, confidential treatment of the information to be disclosed), (d) is
developed by the receiving party independently of the disclosure by the
disclosing party or (e) is required to be disclosed under applicable law or
rule, as determined by counsel for the receiving party.
10.3 Cooperation. Buyer and Seller shall cooperate fully with
one another in taking any actions, including actions 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.
10.4 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 from any and all loss, cost,
damage and expense (including but not limited to, reasonable attorney's fees)
sustained by Buyer as a result of any failure of Seller to comply with any
"bulk sales" or similar laws.
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10.5 Public Announcements. Neither Buyer nor Seller shall issue
any press release or make any disclosure with respect to the transaction
contemplated by this Agreement without the prior written approval of the other
party, except as may be required by applicable law or by obligations pursuant
to any listing agreement with any securities exchange or the Nasdaq National
Market or any stock exchange or Nasdaq National Market regulations in which
case Buyer or Seller, as the case may be, shall give notice to the other party
prior to making such disclosure.
10.6 Hart-Scott-Rodino. Seller and Buyer shall submit to the
United States Department of Justice and the United States Federal Trade
Commission (the "FTC") not later than 15 business days after the date of this
Agreement all of the forms and information applicable to this transaction
required under the HSR Act and will use commercially reasonable efforts to
respond promptly to any request by them for additional information. Buyer and
Seller shall use commercially reasonable efforts (including the filing of a
request for early termination) to obtain the early termination of the waiting
period under the HSR Act. Seller shall reimburse Buyer for one-half of the
filing fees for Buyer's HSR Act filing.
10.7 Employee Matters. At least 45 days prior to the Closing
Date, Buyer will provide Seller with a list (the "Employee List") of all
employees to whom Buyer intends to make offers of employment. Buyer will offer
employment as of the Closing to all employees on such Employee List, on such
terms of employment and conditions as determined by Buyer in its sole
discretion. Seller shall be responsible for all obligations or liabilities to
those employees not offered employment by Buyer, and Buyer shall have no
obligations with respect to those employees.
10.8 Condition of Real Estate. Buyer may, at its sole expense,
conduct environmental studies, title examinations, and land surveys (the
"Studies") of the Real Estate provided all information received as a result of,
or in the course of, any of the Studies will be deemed confidential (subject to
Section 10.2). Seller agrees to cooperate with any reasonable request of Buyer
for a site assessment or site review concerning any environmental, title or
survey matter, including the making available of such personnel of Seller as
Buyer may reasonably request, so long as such activities do not unreasonably
interfere with the conduct of Seller's business. At the discretion of Buyer,
Buyer may arrange, at its sole expense, for one or more independent contractors
to conduct tests of the Real Estate, including tests of air, soil (including
surface and subsurface materials), surface water and ground water, or any
equipment or facilities located thereon, in order to identify any present or
past release or threatened release of any hazardous substances. Such tests may
be done at any time, or from time to time, upon reasonable notice and under
reasonable conditions, which do not impede the performance of such tests. If
Buyer notifies Seller
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within 45 days of the date of this Agreement that the Studies disclose
potential Environmental Costs and Liabilities in excess of $100,000 or the
presence of Hazardous Materials at concentrations exceeding those allowed by
Environmental Laws, evidence encroachments that materially and adversely affect
the use (for the purpose currently used) of the Real Estate, or any other
matters that materially affect the title, value or use of the Real Estate,
Seller shall promptly commence remedial action at its expense to cure the
condition giving rise to such matter and attempt to cure such condition prior
to the Closing; provided that Seller shall not be obligated to spend (but may
choose to spend) more than $100,000 in the aggregate in its attempts to cure
all such conditions. Seller shall notify Buyer within 30 days after its
receipt of Buyer's Studies if it determines that it is unable to cure such
conditions for $100,000 or less and chooses not to attempt to cure such
conditions, in which case Buyer may elect within 30 days after Buyer's receipt
of Seller's notice that it chooses not to attempt to cure such conditions (a)
to terminate this Agreement or (b) to waive such obligations and receive a
$100,000 credit at the Closing. If this Agreement is terminated in accordance
with the immediately preceding sentence, no party shall have any liability to
the other with respect to such termination. Either party may extend the
Closing by not more than 30 days if either reasonably determines that any
necessary remedial action can be completed during such period.
10.9 Warn Act Compliance. Through the Closing Date, Seller
shall take all necessary actions to comply with the Federal Workers Adjustment
and Retraining Act to the extent applicable. Buyer shall not have any
disclosure or announcement obligations under such act with respect to any
employees or former employees of Seller, and Seller shall indemnify Buyer and
hold Buyer harmless from any action, claim, suit, proceeding or assertion of
liability with respect thereto. Seller shall take all necessary actions to
comply with Part 6, Subtitle B, of Title I of ERISA with respect to its
employees and former employees, and Buyer shall not have any obligations or
liability with respect to qualifying events (as defined in Section 603 of ERISA
on or before the Closing Date.
ARTICLE 11
CONDITIONS OF CLOSING BY BUYER
The obligations of Buyer hereunder, including, without limitation, the
obligation to close the transactions contemplated herein, are, at its option,
subject to satisfaction, at or prior to the Closing, of all of the following
conditions, any of which may be waived by Buyer:
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11.1 Representations, Warranties and Covenants. All
representations and warranties of Seller made in this Agreement or in any
Exhibit, Schedule or document delivered pursuant hereto, shall be true and
correct in all material respects as of the date hereof and on and as of the
Closing Date as if made on and as of that date, except for changes expressly
permitted by the terms of this Agreement and except those given as of a
specified date which must only be true and correct as of such specified date.
Notwithstanding anything herein to the contrary, a breach of Section 6.1.6
resulting from Buyer's breach of Section 9.1.5 shall not be deemed a breach of
Section 6.1.6 by Seller.
11.2 Compliance with Agreement. All of the terms, covenants and
conditions to be complied with and performed by Seller on or prior to the
Closing shall have been complied with or performed in all material respects.
11.3 Third Party Consents and Approvals. Seller shall have
obtained all third-party consents and approvals, if any, required for the
transfer or continuance, as the case may be, of the Contracts designated by an
asterisk as "essential" on Schedule 1.1.3 (and contracts of a similar nature
that would have been marked as such on Schedule 1.1.3 had they been in
existence on the date of this Agreement).
11.4 Closing Certificates. Buyer shall have received a
certificate, dated as of the Closing Date, from Seller, executed by a an
executive officer of Seller to the effect of Sections 11.1 and 11.2.
11.5 Governmental Consents.
(a) The FCC Consents shall have been issued by the FCC
without any conditions that would otherwise permit Buyer to terminate this
Agreement pursuant to Section 15.1(e), below, and each such FCC consent shall
have become a Final Order (as defined in Section 4.1).
(b) All applicable notification and waiting period
requirements under the HSR Act shall have been satisfied.
11.6 Adverse Proceedings. No injunction, order, decree or
judgment of any court, agency or other Governmental Entities shall have been
rendered against Seller or Buyer which would render it unlawful, as of the
Closing, to effect the transactions contemplated by this Agreement in
accordance with its terms.
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11.7 Closing Documents. Seller shall have delivered or caused
to be delivered to Buyer, on the Closing Date, all special warranty deeds,
bills of sale, endorsements, assignments and other instruments of conveyance
and transfer consistent with the terms hereof and otherwise reasonably
satisfactory in form and substance to Buyer, effecting the sale, transfer,
assignment and conveyance of the Stations Assets to Buyer.
11.8 [Intentionally Omitted].
11.9 Noncompetition Agreement. Seller shall have executed and
delivered to Buyer a Noncompetition Agreement in the form of Exhibit B hereto.
11.10 Indemnification and Escrow Agreement. Seller shall have
executed and delivered to Buyer the Indemnification and Escrow Agreement.
11.11 Release of Encumbrances. Evidence satisfactory to Buyer's
counsel of the payment or release of any and all Liens (other than Liens not
required to be released pursuant to the provisions of this Agreement).
11.12 Legal Opinions. Buyer shall have received an opinion of
Benesch, Friedlander, Coplan & Aronoff LLP and David Tillotson, each dated as
of the Closing Date, substantially in the form of Exhibits C-1 and C-2 hereto.
11.13 Earnest Money Letter of Credit. The Earnest Money Letter
of Credit (as defined in Section 14.3.1) shall have been returned to Buyer for
cancellation.
11.14 No Material Adverse Change. Since the date hereof, there
shall have been no material adverse change to the financial condition or
operating results of the Stations (other than as a result of regulatory changes
affecting the radio broadcasting industry generally or general economic
conditions).
11.15 1445 Certificate. Seller shall have executed and delivered
a certificate, in a form reasonably satisfactory to the Buyer stating that
Seller is not a foreign person within the meaning of Section 1445 of the Code.
11.16 Other Acquisitions. The Zebra Acquisition and Zapis
Acquisition shall concurrently close with the transactions contemplated under
this Agreement unless the Zebra Acquisition or the Zapis Acquisition does not
close solely due to the breach by Buyer of the agreement governing the Zebra
Acquisition or the Zapis Acquisition, as applicable, in which
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case this condition shall not apply with respect to such acquisition which does
not close solely due to the Buyer's breach.
11.17 STA Completion. The construction of the facilities for
WRMR authorized in Seller's construction permit BP-950428AD shall have been
completed in accordance with the terms of said permit and Seller shall have
filed an application (at Seller's sole cost and expense) with the FCC for a
license for such facilities (including the filing of any amendments,
supplements or additional information requested by the FCC or any changes in
the facilities, or construction thereof, requested by the FCC at Seller's sole
cost and expense) and all expenditures, payments, costs and expenses associated
therewith shall have been paid in full by Seller; provided, however, that if
such construction is not completed or any of the expenditures, payments, costs
or expense associated therewith has not been paid in full, the parties shall
reduce the Purchase Price by an amount equal to the amount required (or to the
extent such amount is not ascertainable, reasonably determined, in good faith,
by Buyer) to complete such construction and pay in full such expenditures,
payments, costs and expenses.
11.18 Tower Space License Agreement. Buyer shall have obtained
an estoppel certificate in a form reasonably satisfactory to it or other
documentation reasonably satisfactory to it evidencing Seller's valid and
enforceable leasehold interest in and to the property described under the
License Agreement, dated August 26, 1983, between Cleveland Associates Co., as
Licensor, and Globe Broadcasting Co., as Licensee.
11.19 Studio Lease. Seller shall have entered into a valid and
enforceable amendment to the Lease between OSWGI Limited Partnership and Seller
dated as of January ___, 1991 (the "Studio Lease"), in a form reasonably
satisfactory to Buyer, pursuant to which (i) Article XV of the Studio Lease
would be amended to permit the sublet or assignment (including without
limitation, any transfer of the Studio Lease by merger, consolidation, or
liquidation or any change in ownership or power to vote of the tenant
thereunder) of the Demised Premises (as defined in the Studio Lease) with the
consent of the landlord thereunder, which consent shall not be unreasonably
withheld, provided that if such consent is given, the lessee thereunder would
not be released from its obligations under the Studio Lease and (ii) Section
14.1 of the Studio Lease would be amended to except from tenant's
indemnification obligation with respect to the landlord under the Studio Lease
any claims, loss expense, cost, damage or injury to the extent arising from or
caused by landlord's (or any agent, employee or contractor of landlord)
negligence.
11.20 WRMR Site Lease. Seller shall have entered into a valid
and enforceable amendment to the Lease dated November 29, 1993, between OSWGI
Limited Partnership and Seller (the "Site Lease"), in a form reasonably
satisfactory to Buyer, pursuant to which
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the Site Lease would be amended to reflect that the term of Site Lease shall
expire on December 1, 2023, without any right by the landlord thereunder to
terminate the Site Lease pursuant to Section 2.1 of the Site Lease.
11.21 Termination of Management Agreements. Each of the
Management Agreements shall have been terminated and shall be of no further
force and effect and Buyer shall have no obligations or liabilities arising
from or related to any of the Management Agreements.
ARTICLE 12
CONDITIONS OF CLOSING BY SELLER
The obligations of Seller hereunder including, without limitation, the
obligation to close the transactions contemplated herein are, at their option,
subject to the satisfaction, at or prior to the Closing Date, of all of the
following conditions, any of which may be waived by Seller:
12.1 Representations, Warranties and Covenants. All
representations and warranties of Buyer made in this Agreement or in any
Exhibit, Schedule or document delivered pursuant hereto, shall be true and
correct in all material respects as of the date hereof and on and as of the
Closing Date as if made on and as of that date, except for changes expressly
permitted by the terms of this Agreement and except those given as of a
specified date which must only be true and correct as of such specified date.
12.2 Compliance with Agreement. All the terms, covenants, and
conditions to be complied with and performed by Buyer on or prior to the
Closing shall have been complied with or performed in all material respects.
12.3 Certifications, Etc. Seller shall have received a
certificate, dated as of the Closing Date, from Buyer, executed by an executive
officer of Buyer to the effect of Sections 12.1 and 12.2.
12.4 Governmental Approval.
(a) The FCC Consents shall have been issued by the FCC
and each shall have become a Final Order (as defined in Section 4.1).
(b) All applicable notification and waiting period
requirements under the HSR Act shall have been satisfied.
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12.5 Adverse Proceedings. No injunction, decree or judgment of
any court, agency or other governmental entities shall have been rendered
against Buyer or Seller which would render it unlawful, as of the Closing, to
effect the transactions contemplated by this Agreement in accordance with its
terms.
12.6 Opinions. Buyer shall have delivered to Seller an opinion
of Weil, Gotshal & Manges LLP, dated as of the Closing Date, in the form of
Exhibit D hereto.
12.7 Closing Documents. Buyer shall have delivered or caused to
be delivered to Seller, on the Closing Date, an assumption agreement with
respect to Assumed Liabilities reasonably satisfactory in form and substance to
Seller.
12.8 Indemnification and Escrow Agreement. Buyer shall have
executed and delivered to Seller the Indemnification and Escrow Agreement.
ARTICLE 13
TRANSFER TAXES; FEES AND EXPENSES
13.1 Expenses. Except as set forth in Sections 13.2 and, 13.3
below, each party hereto shall be solely responsible for all costs and expense
incurred by it in connection with the negotiation, preparation and performance
of and compliance with the terms of this Agreement.
13.2 Transfer Taxes and Similar Charges. All costs of
transferring the Stations 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 Buyer and Seller. Buyer and Seller agree
to cooperate with each other and to file all necessary documentation
(including, but not limited to, all Tax Returns) with respect to all such
amounts in a timely manner.
13.3 Governmental Filing or Grant Fees. Any filing or grant
fees imposed by any governmental authority the consent of or filing with which
is required for the consummation of the transactions contemplated hereby,
including but not limited to, the FCC, the FTC, and the Department of Justice
shall be borne equally by Buyer and Seller.
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ARTICLE 14
LIQUIDATED DAMAGES, SPECIFIC PERFORMANCE, LETTER OF CREDIT
14.1 Liquidated Damages. (a) If this Agreement is terminated by
Seller pursuant to Sections 15.1(b)(ii) or 15.1(g) the parties agree and
acknowledge that Seller will suffer damages that are not practicable to
ascertain. Accordingly, in such event, Seller shall be entitled to the sum of
$9,500,000 as liquidated damages (and not as a penalty), payable solely and
exclusively by drawing upon the Earnest Money Letter of Credit and through the
delivery to Seller, of the sum of $4,750,000 via wire transfer of immediately
available funds. The parties agree that the foregoing liquidated damages are
reasonable considering all the circumstances existing as of the date hereof and
constitute the parties' good faith estimate of the actual damages reasonably
expected to result from the termination of this Agreement pursuant to Sections
15.1(b)(ii) or 15.1(g). In such event, Buyer shall immediately instruct the
Earnest Money Escrow Agent (as defined in Section 14.3) to deliver the Escrow
Money Letter of Credit to Seller to permit it to draw upon the Earnest Money
Letter of Credit and shall deliver to Seller, via wire transfer of immediately
available funds, the sum of $4,750,000. Seller agrees that, to the fullest
extent permitted by law, the right to draw upon the Earnest Money Letter of
Credit and to receive the additional sum of $4,750,000 from Buyer as provided
in this Section 14.1 shall be its sole and exclusive remedy with respect to any
damages whatsoever that Seller may suffer or allege to suffer as a result of a
termination pursuant to Sections 15.1(b)(ii) or 15.1(g). Except for a
termination pursuant to Sections 15.1(b)(ii) or 15.1(g) (for which the sole
recourse of Seller shall be as provided in this Section 14.1) or pursuant to
Section 15.1(a) or 10.8 (for which no party shall have any liability to the
other), the termination of this Agreement shall not relieve the parties for any
liability or obligation relating to their breaches of this Agreement occurring
prior to such termination.
14.2 Specific Performance. In addition to any other remedies
which Buyer may have at law or in equity, Seller hereby acknowledges that the
Stations Assets are unique, and that the harm to Buyer resulting from a breach
by Seller of its obligations to sell the Stations Assets to Buyer cannot be
adequately compensated by damages. Accordingly, Seller agrees that Buyer shall
have the right to have this Agreement specifically performed by Seller,
provided that Buyer is not in material breach of this Agreement and hereby
agrees, in such event, not to assert any objections to the imposition of the
equitable remedy of specific performance by any court of competent
jurisdiction.
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14.3 Letter of Credit.
14.3.1 Concurrently with the execution of this Agreement,
Buyer shall deposit an original, irrevocable letter of credit (the "Earnest
Money Letter of Credit"), issued by The Toronto-Dominion Bank for the sum of
$4,750,000 with Key Trust Company of Ohio, N.A. (the "Earnest Money Escrow
Agent") to be held in escrow in accordance with the Earnest Money Escrow
Agreement substantially in the form of Exhibit E hereto.
14.3.2 The Earnest Money Letter of Credit shall be held by
the Earnest Money Escrow Agent in accordance with the terms of the Earnest
Money Escrow Agreement. Subject to satisfaction of the conditions to the
Seller's obligations set forth in Article 12, at the Closing, Seller shall
instruct the Earnest Money Escrow Agent to release and return the Earnest Money
Letter of Credit to Buyer for cancellation.
14.3.3 If this Agreement is terminated as provided in
Sections 15.1(b)(ii) or 15.1(g), Buyer shall instruct the Earnest Money Escrow
Agent to release the Earnest Money Letter of Credit to Seller, all as provided
in Section 14.1. In all other events, Seller shall join in instructions to the
Earnest Money Escrow Agent to return the Earnest Money Letter of Credit to
Buyer.
ARTICLE 15
TERMINATION RIGHTS
15.1 Termination. This Agreement may be terminated at any time
prior to Closing as follows:
(a) by the mutual consent of Buyer and Seller;
(b) by written notice of (i) Buyer to Seller if Seller
breaches in any material respect any of its representations or
warranties or defaults in any material respect in the observance or in
the due and timely performance of any of its covenants or agreements
herein contained and such breach or default shall not be cured within
thirty (30) days of the date of notice of breach or default served by
Buyer or (ii) Seller to the Buyer if Buyer breaches in any material
respect any of its representations or warranties or defaults in any
material respect in the observance or in the due and timely
performance of any of its covenants or agreements herein contained and
such breach or default shall not be cured within thirty (30) days of
the notice of breach or default served by Seller;
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(c) by Buyer or Seller by written notice to the other, if
a court of competent jurisdiction or other Governmental Entity shall
have issued an order, decree or ruling or taken any other action
(which order, decree or ruling the parties hereto shall use their best
efforts to lift), in each case permanently restraining, permanently
enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, and such order, decree, ruling or other action shall
have become final and nonappealable; provided that Buyer shall not
have the right to terminate this Agreement pursuant to this Section
15.1(c) unless Buyer has satisfied the covenants contained in Section
9.1.5 hereof;
(d) by the party whose qualifications are not at issue,
if, for any reason, the FCC denies or dismisses any of the FCC
Applications and the time for reconsideration or court review under
the Communications Act with respect to such denial or dismissal has
expired and there is not pending with respect thereto a timely filed
petition for reconsideration or request for review;
(e) by written notice of Buyer to Seller if the FCC
Consents contain a condition on Buyer that (i) is unrelated to Buyer's
qualifications, (ii) could reasonably be expected to have a materially
adverse impact on the financial condition or business operations of
the Stations, and (iii) the time for reconsideration or court review
under the Communications Act with respect to such condition(s) has
expired without the filing with respect thereto of a timely petition
for reconsideration or request for review;
(f) by written notice of Buyer to Seller, or by Seller to
the Buyer, if the Closing shall not have been consummated on or before
June 1, 1999, subject to extensions as provided in Sections 10.8 and
16.1; or
(g) by written notice of Seller to Buyer, if by May 31,
1999 all of the conditions of closing by Buyer identified in Article
11 have been satisfied other than the expiration of the applicable
waiting period requirements under the HSR Act.
Notwithstanding the foregoing, no party hereto may effect a termination hereof
if such party is in material default or breach of this Agreement.
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ARTICLE 16
RISK OF LOSS
16.1 Risk of Loss.
(a) The risk of loss or damage to the Stations Assets
shall be upon Seller at all times prior to the Closing. In the event
of loss or damage, Seller shall promptly notify Buyer thereof (the
"Seller's Risk of Loss Notice") and if the lost or damaged Stations
Assets are capable of being replaced or repaired for an aggregate
amount less than $100,000, then Seller shall, at its sole cost and
expense, replace or repair such Stations Assets prior to the Closing
or deliver to Buyer at the Closing an amount in cash equal to the cost
of replacement or repair of such Station Assets, as mutually agreed in
good faith by Buyer and Seller. Notwithstanding the foregoing, if the
amount required to replace or repair such Station Assets exceeds
$100,000, Seller may elect in the Seller's Risk of Loss Notice not to
replace or repair such Station Assets (which election must be set
forth in Seller's Risk of Loss Notice), provided, however, that in
such event Buyer, at its option, may elect within 30 days after
receipt of the Seller's Risk of Loss Notice to terminate this
Agreement without either party being subject to a claim by the other
for liquidated damages or any other claims for damages, or waive any
default or breach with respect to the loss or damage and receive a
$100,000 credit at Closing. Either party may extend the Closing Date
by up to 30 days in order to allow Seller to complete the repair or
replacement.
(b) Seller shall use its commercially reasonable efforts
to avoid any of the Stations being off the air for three (3) or more
consecutive days or five (5) or more days in any thirty (30) day
period. Seller shall give prompt written notice to Buyer if either of
the following (a "Specified Event") shall occur: (i) the regular
broadcast transmissions of the Stations in the normal and usual manner
are interrupted or discontinued for more than thirty (30) minutes; or
(ii) the Stations are operated at less than their licensed antenna
height above average terrain or at less than ninety percent (90%) of
their licensed effective radiated power. If any Specified Event
persists for more than seventy-two (72) consecutive hours or five or
more days, whether or not consecutive, during any period of thirty
(30) consecutive days, then Buyer may, at its option: (i) terminate
this Agreement by written notice given to Seller not more than ten
(10) days after the expiration of such thirty (30) day period (without
either party being subject to a claim by the other for liquidated
damages or any other claims for damages), or (ii) proceed in the
manner set forth in Section 16.1(a) above. In the event of
termination of this Agreement by Buyer pursuant to this Section 16.1,
the parties shall be released and discharged from any further
obligation hereunder
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(without being subject to a claim by Seller for liquidated damages or
any other claims for damages). With respect to Acts of God which may
adversely affect Stations operations, Seller shall use its
commercially reasonable efforts to reinstate Stations operations
within 30 days and shall have all of the Stations operating at not
less than seventy percent (70%) of maximum authorized effective
radiated power by the Closing Date.
(c) Resolution of Disagreements. If the parties are
unable to agree upon the extent of any loss or damage, the cost to
repair, replace or restore any lost or damaged property, the adequacy
of any repair, replacement, or restoration of any lost or damaged
property, or any other matter arising under this Section 16.1, the
disagreement shall be referred to a qualified consulting
communications engineer mutually acceptable to Seller and Buyer who is
a member of the Association of Federal Communications Consulting
Engineers, whose decision shall be final, binding upon and
non-appealable by the parties, and whose fees and expenses shall be
paid one-half by Seller and one-half by Buyer.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 Survival of Representations and Warranties; Remedy for
Breach. Except as to representations and warranties contained in Sections
6.1.8 (as to title to assets only), 6.1.9 (as to title to assets only), and
6.1.17 (as to title to assets only) which shall survive the Closing
indefinitely (the "Excepted Representations"), all representations and
warranties made by Seller and Buyer in this Agreement, or pursuant hereto,
shall survive the consummation of the transactions contemplated in this
Agreement for a period of one year after the Closing Date, regardless of any
investigation at any time made by or on behalf of Buyer or Seller, and shall
not be deemed merged in any document or instrument executed or delivered at the
Closing. Buyer's sole remedies for any breach of a representation or warranty
(other than the Excepted Representations) or pre-Closing breach of a covenant
or agreement shall be those set forth in the Indemnification and Escrow
Agreement.
17.2 Certain Interpretive Matters and Definitions. Unless the
context otherwise requires, (a) all references to Sections, Articles or
Schedules are to Sections, Articles or Schedules of or to this Agreement, (b)
each term defined in this Agreement has the meaning assigned to it, (c) each
accounting term not otherwise defined in this Agreement has the meaning
assigned to it in accordance with generally accepted accounting principles as
in effect on the date hereof, (d) "or" is disjunctive but not necessarily
exclusive, and (e) words in the singular include the plural and vice versa, and
(f) the term "Affiliate" has the meaning
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given it in Rule 12b-2 of Regulation 12B under the Securities Exchange Act of
1934, as amended. All references to "$" or dollar amounts will be to lawful
currency of the United States of America.
17.3 Further Assurances. At and after the Closing, Seller shall
from time to time, at the request of and without further cost or expense to
Buyer, execute and deliver such other instruments of assignment, conveyance and
transfer and take such other actions as may reasonably be requested in order to
more effectively consummate the transactions contemplated hereby, and Buyer
shall from time to time, at the request of and without further cost or expense
to Seller, execute and deliver such other instruments and take such other
actions as may reasonably be requested in order to more effectively assume the
Assumed Liabilities.
17.4 Financial Statements. At all times after the date hereof,
Seller shall, and shall cause their representatives (including their
independent public accountants) to, cooperate in all reasonable respects with
the efforts of Buyer and their independent auditors to prepare such audited and
interim unaudited financial statements of the Stations as Buyer may reasonably
determine are necessary in connection with any filing required to be made by it
or any of its Affiliates under the Exchange Act of 1934, as amended (the
"Exchange Act"), or the Securities Act of 1933, as amended (the "Securities
Act"). Seller shall execute and deliver to Buyer's independent accountants
such customary management representation letters as they may require as a
condition to their ability to sign an unqualified report upon the audited
financial statements of the Stations for the periods for which such financial
statements are required under the Exchange Act or the Securities Act. Seller
shall cause its independent public accountants to make available to Buyer and
its representatives all of their work papers related to the financial
statements or Tax Returns of Seller (to the extent they relate to the Stations)
and to provide Buyer's independent public accountants with full access to those
personnel who previously have been involved in the audit or review of Seller's
financial statements or Tax Returns. Any reasonable out-of-pocket costs
incurred by Seller in connection with Seller's obligations under this Section
17.4 shall be promptly reimbursed by Buyer upon Buyer's receipt of reasonably
detailed information regarding such costs.
17.5 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, whether by operation of law or otherwise; provided, however, that
without releasing Buyer from any of its obligations or liabilities hereunder
(a) nothing in this Agreement shall limit Buyer's ability to sell or transfer
any or all of its respective assets (whether by sale of stock or assets, or by
merger, consolidation or otherwise) without the consent of Seller, (b) nothing
in this Agreement shall limit Buyer's ability to assign the Stations Assets
(including the right to
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acquire the Stations Assets at the Closing) to any Affiliate of Buyer without
the consent of Seller, and (c) nothing in this Agreement shall limit Buyer's
ability to make a collateral assignment of its rights under this Agreement to
any institutional lender that provides funds to Buyer without the consent of
Seller. Seller shall execute an acknowledgment of such assignment(s) and
collateral assignments in such forms as Buyer or its institutional lenders may
from time to time reasonably request; provided, however, that unless written
notice is given to Seller that any such collateral assignment has been
foreclosed upon, Seller shall be entitled to deal exclusively with Buyer as to
any matters arising under this Agreement or any of the other agreements
delivered pursuant hereto. In the event of such an assignment, the provisions
of this Agreement shall inure to the benefit of and be binding on Buyer's
successors and assigns.
17.6 Amendments. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
17.7 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
17.8 Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the State of Ohio without giving
effect to the choice of law provisions thereof.
17.9 Notices. Any notice, demand or request required or
permitted to be given under the provisions of this Agreement shall be in
writing and shall be deemed to have been duly delivered and received when
electronically confirmed if sent by telecopy; on the date of personal delivery;
on the third day after deposit in the U.S. mail if mailed by registered or
certified mail, postage prepaid and return receipt requested; on the day after
delivery to a nationally recognized overnight courier service if sent by an
overnight delivery service for next morning delivery and shall be addressed to
the following addresses (or at such other address which party shall specify to
the other party in accordance herewith):
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(a) In the case of Seller, to:
Thomas J. Embrescia, Chairman
Independent Group Limited Partnership
One Radio Lane
Cleveland, Ohio 44114
Telecopy: (216) 687-0145
With a copy to:
Benesch, Friedlander, Coplan & Aronoff LLP
2300 BP America Building
Cleveland, Ohio 44114
Attention: Deanna C. Kursh
Telecopy: (216) 363-4588
(b) In the case of Buyer:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention: Jeffrey A. Marcus
Telecopy: (972) 879-3671
With copies to:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention: Eric C. Neuman
Telecopy: (972) 879-3671
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and
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201
Attention: Michael A. Saslaw
Telecopy: (214) 746-7777
17.10 Schedules. The schedules and exhibits attached to this
Agreement and the other documents delivered pursuant hereto are hereby made a
part of this Agreement as if set forth in full herein.
17.11 Entire Agreement. This Agreement and the other documents
or agreements delivered in connection with this Agreement constitute the entire
agreement among the parties hereto with respect to their subject matter and
supersede all negotiations, prior discussions, agreements, letters of intent,
and understandings, written or oral, relating to the subject matter of this
Agreement and the other documents and agreements delivered in connection with
this Agreement.
17.12 Severability. If any provision of this Agreement is held
to be unenforceable, invalid, or void to any extent for any reason, that
provision shall remain in force and effect to the maximum extent allowable, and
the enforceability and validity of the remaining provisions of this Agreement
shall not be affected thereby.
17.13 Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together shall constitute but one and the same instrument.
17.14 No Third-Party Rights. Nothing in this Agreement, express
or implied, shall be construed to confer upon any person, other than the
parties hereto, their successors and permitted assigns, any legal or equitable
rights, remedies, claims, obligations or liabilities under or by reason of this
Agreement (other than as provided in the Indemnification and Escrow Agreement).
17.15 Equitable Assignment. To the extent that any of the
Stations Assets are not capable of being sold, assigned, transferred, delivered
or subleased without the waiver or consent of any third party or if such sale,
assignment, transfer, delivery or sublease or attempted sale, assignment,
transfer, delivery or sublease would constitute a breach thereof
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or a violation of any law or regulation, this Agreement and any assignment
executed pursuant hereto shall not constitute a sale, assignment, transfer,
delivery or sublease or an attempted sale, assignment, transfer, delivery or
sublease thereof. In those cases where consents and/or waiver to the transfer
and assignment to Buyer of any of the Stations Assets has not been obtained at
or prior to the Closing Date, and Seller and Buyer elect to close, this
Agreement and any assignment executed pursuant hereto, to the extent permitted
by law, shall constitute an equitable assignment by Seller to Buyer of all of
Seller's rights, benefits, title and interest in and to such Stations Assets,
and where appropriate, Buyer shall be deemed to be Seller's agent for the
purpose of completion, fulfilling and discharging all Seller's rights and
liabilities arising after the Closing Date in relation to such Stations Assets,
provided however, Seller's failure to obtain the requisite waiver or consent of
such third person within ninety (90) days after the Closing shall be deemed to
be a breach of this Agreement for which Buyer shall be entitled to remedy,
including, but not limited to, under the Indemnification and Escrow Agreement;
provided further, however, that no such breach shall be deemed to have occurred
if Buyer has incurred no liability, loss or damage from such failure.
17.16 Arbitration. All disputes which cannot be resolved by
agreement of the parties shall be arbitrated in Washington, D.C. in accordance
with the rules of the American Arbitration Association before a single
arbitrator who shall be jointly selected by Seller and Buyer, or if Seller and
Buyer cannot agree on the selection of such arbitrator, such arbitrator shall
be selected by the head of the Washington, D.C. office of the American
Arbitration Association. The costs of such arbitrator shall be paid by Seller
and Buyer in such proportion as the arbitrator deems equitable based on the
relative merits of the positions of the parties.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed and delivered as of the first above written.
SELLER:
INDEPENDENT GROUP LIMITED PARTNERSHIP
By: Independent Group, Inc.,
its general partner
By: /s/ Thomas J. Embrescia
-------------------------------
Thomas J. Embrescia
Chairman
BUYER:
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By: /s/ Eric C. Neuman
---------------------------------------
Eric C. Neuman
Senior Vice President
<PAGE> 59
EXHIBIT A - IGLP ACQUISITION
INDEMNIFICATION AND ESCROW AGREEMENT
THIS INDEMNIFICATION AND ESCROW AGREEMENT (this "Agreement")
is made and entered into as of this ____ day of ______________, _____, by and
among Chancellor Media Corporation of Los Angeles, a Delaware corporation
("Buyer"), Independent Group Limited Partnership, an Ohio limited partnership
("Seller"), and Key Trust Company of Ohio, N.A., as escrow agent ("Agent").
RECITALS
A. Pursuant to that certain Asset Purchase Agreement, dated as of
August 11, 1998, by and between Buyer and Seller (the "Asset Purchase
Agreement"), Buyer has agreed to acquire from Seller, and Seller has agreed to
sell to Buyer, all of the Station Assets (as defined in the Asset Purchase
Agreement).
B. It is a condition precedent to the closing of the transactions
contemplated by the Asset Purchase Agreement (the "Closing"), that Buyer,
Seller and Agent execute and deliver this Agreement.
C. Unless otherwise defined herein, capitalized terms used herein
shall have the meanings assigned to them in the Asset Purchase Agreement.
AGREEMENTS
In consideration of the recitals and of the respective
agreements and covenants contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
Section 1.1 Funds. (a) At the Closing, and only if the Closing
occurs, Buyer shall place in an escrow account with Agent (the "Account") the
sum of $2,763,640 out of the Purchase Price paid pursuant to Section 3.1 of the
Asset Purchase Agreement (the "Funds").
(b) The Funds shall be held by Agent in the Account for the
benefit of Buyer and Seller as provided in this Agreement. In no event shall
Agent disburse or invest the Funds except in accordance with this Agreement.
<PAGE> 60
Section 1.2 Acceptance of Appointment as Agent. Agent, by signing
this Agreement, accepts the appointment as Agent and agrees to hold and deliver
the Funds and make disbursements from the Account in accordance with the terms
of this Agreement.
Section 1.3 Distribution of Funds to Buyer Indemnitees. Agent shall
disburse to Buyer (for its own account or for the account of any Buyer
Indemnitee, as defined in Section 2.1) such portion of the Funds as may be
necessary to pay the Damages (as defined in Section 2.1) for which a Buyer
Indemnitee is entitled to reimbursement under Section 2.1. Payment shall be
made not more than three (3) business days after (i) the delivery to Agent of
written instructions signed by Buyer and Seller, specifying an amount to be
paid to a Buyer Indemnitee, or (ii) the delivery to Agent and Seller of a copy
of a Final Determination (as defined below) establishing a Buyer Indemnitee's
right to reimbursement under this Agreement with respect to such Damages. A
"Final Determination" shall mean a judgment of a court of competent
jurisdiction having the authority to determine the amount of, and liability
with respect to, the determined item, which judgment is not subject to appeal,
reconsideration or review. Agent, at its option, shall be entitled to seek
and, if received, rely conclusively upon an opinion of legal counsel to the
effect that the judgment delivered to Agent pursuant to this Section 1.3 (or
pursuant to Section 1.6(b)) is a Final Determination.
Section 1.4 Investment of Funds. (a) Pending disbursement of the
Funds, Agent shall invest the Funds in Permitted Investments (as defined
below). For purposes of this Agreement, "Permitted Investments" shall mean
direct obligations of the U.S. government having maturities of 180 days or
less, money market funds that invest solely in direct obligations of the U.S.
government, including, without limitation, the Victory U.S. Obligation Fund,
and such other investments as may be specified from time to time by joint
written agreement between Buyer and Seller. As and when any payment is to be
made from the Funds or the Funds are to be otherwise disbursed under this
Agreement, Agent shall cause a sufficient portion of the Permitted Investments
to be converted into cash. Agent shall select the investments or types of
investments to be so converted. Neither Buyer nor Seller shall be liable for
any loss of principal or income due to the choice of Permitted Investments in
which the Funds are invested or the choice of Permitted Investments converted
into cash pursuant to this paragraph (a).
(b) For Tax purposes, the Funds shall be property of
Seller and all interest, dividends and other income earned on the Funds
(collectively, the "Earnings") shall be the income of Seller and be distributed
to the Seller following the Expiration Date (as hereinafter defined). Buyer
and Seller shall file Tax Returns consistent with such treatment.
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Section 1.5 No Distribution of Expenses. Except as provided in
Section 2.1 of this Agreement, neither Buyer nor Seller shall be entitled to
reimbursement out of the Funds or from any alternative recovery for any costs
and expenses incurred by them in connection with exercising their rights or
performing their duties under this Agreement.
Section 1.6 Segregation of the Funds. (a) Notwithstanding any other
provision of this Agreement to the contrary, Agent shall segregate from the
Account and transfer into a separate sub-account (the "Pending Claim Account")
maintained by Agent for the benefit of Buyer and Seller the portion of the
Funds that may be necessary to satisfy in full all Pending Claims (as defined
below) and shall hold such portion in accordance with this Section 1.6;
provided, however, that Agent shall not so segregate from the Account and
transfer to the Pending Claim Account the Funds that may be necessary to
satisfy Pending Claims under Section 2.1 until such time as the aggregate
amount of Damages asserted by Buyer and any Buyer Indemnitees under Section
2.1, taken as a whole, exceeds the Indemnification Basket (as defined in
Section 3.1(a)). "Pending Claims" shall mean unresolved claims for
indemnification under Section 2.1 that are the subject of Claim Notices (as
defined in Section 2.4).
(b) Any portion of the Funds segregated under Section
1.6(a) shall continue to be segregated by Agent until released thereafter to
Seller in accordance with Section 1.7 or until Agent is directed to release
such Funds by (i) written instructions signed by Buyer, that are agreed to in
writing by Seller, or (ii) a copy of a Final Determination establishing a Buyer
Indemnitee's right to receive such Funds as reimbursement for indemnification
claims under Article 2, or establishing Seller's right to receive such Funds.
Section 1.7 Distribution of Funds to Seller. Within three business
days after the Expiration Date (as defined below), Agent shall distribute to
Seller from the Account an amount equal to the Earnings and the then remaining
amount of Funds less the total amount of Funds that are then being segregated
with respect to Pending Claims under Section 1.6. "Expiration Date" shall mean
one year after the Closing Date. Any amounts segregated as of the Expiration
Date with respect to Pending Claims shall be released thereafter as provided in
Section 1.6(b).
ARTICLE II
INDEMNIFICATION CLAIMS
Section 2.1 Indemnification by Seller. From and after the Closing,
but subject to the conditions and limitations set forth in this Agreement,
Buyer and its respective successors and assigns and their officers, directors,
stockholders, employees and agents (collectively, the
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"Buyer Indemnitees") shall be entitled to reimbursement from Seller for any and
all losses, costs, damages, claims, fines, penalties, expenses (including,
without limitation, reasonable attorneys' fees and expenses), amounts paid in
settlement, court costs, out-of-pocket costs, costs of investigation, and
reasonable costs of litigation (including, without limitation, reasonable fees
and expenses of accountants, investment bankers and other experts)
(collectively, "Damages") actually incurred or suffered by a Buyer Indemnitee
or to which any of the Buyer Indemnitees may be subjected, to the extent
resulting from, arising out of, based on or relating to (a) any inaccuracy in
any representation or warranty of Seller contained in the Asset Purchase
Agreement or in any schedule, instrument, exhibit, or certificate delivered
pursuant thereto (a "Related Document"), (b) any breach of any covenant or
agreement of the Seller contained in the Asset Purchase Agreement, (c) any
Retained Liabilities or (d) any liabilities with respect to Seller's failure to
comply with any "bulk sales" or similar laws in connection with the
consummation of the transactions contemplated by the Asset Purchase Agreement.
Section 2.2 Indemnification by Buyer. From and after the
Closing, but subject to the conditions and limitations set forth in this
Agreement, Seller and its respective successors and assigns, and its partners,
employees and agents (collectively, the "Seller Indemnitees") shall be entitled
to reimbursement from the Buyer for any and all Damages actually incurred or
suffered by a Seller Indemnitee, or to which any of the Seller Indemnitees may
be subjected, to the extent resulting from, arising out of, based on or
relating to (a) any inaccuracy in any representation or warranty of Buyer
contained in the Asset Purchase Agreement or in any Related Document, (b) any
breach of any covenant or agreement of the Buyer contained in the Asset
Purchase Agreement or (c) the Assumed Liabilities.
Section 2.3 Procedures Regarding Third Party Claims. (a) In the
event that any person entitled to indemnification under this Article 2 (the
"Indemnified Party") becomes aware of any matter with respect to which it
believes it is entitled to indemnification under this Article 2 from Buyer or
Seller, as applicable (the "Indemnifying Party"), and such matter involves (i)
any claim made against the Indemnified Party by any party other than a party to
the Asset Purchase Agreement or (ii) the commencement of any action, suit,
investigation, arbitration or similar proceeding against the Indemnified Party
by any party other than a party to the Asset Purchase Agreement (a "Third Party
Claim"), the Indemnified Party shall notify the Indemnifying Party in writing
with reasonable promptness of such Third Party Claim, specifying, to the extent
known, the nature, circumstances and the amount of such Third Party Claim (a
"Third Party Claim Notice") accompanied by all correspondence, documents,
pleadings or other writings received with respect to such Third Party Claim.
Failure to give such reasonably prompt notice shall not relieve the
Indemnifying Party of its obligations under this Article 2, except to the
extent the Indemnifying Party is materially prejudiced thereby. The
Indemnifying Party shall have ten (10) business days from its receipt of a
Third Party Claim Notice (the "Third Party Claim
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Notice Period") to notify the Indemnified Party (and if Seller is the
Indemnifying Party and any Funds continue to be held by Agent, Agent as well)
(i) whether the Indemnifying Party disputes the Indemnified Party's right of
indemnification, and (ii) if the Indemnifying Party does not dispute such right
of indemnification, whether or not it desires to defend the Indemnified Party
against such Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnified
Party (and if Seller is the Indemnifying Party and any Funds continue to be
held by Agent, Agent as well) in writing within the Third Party Claim Notice
Period that (i) the Indemnifying Party does not dispute the Indemnified Party's
right of indemnification and (ii) the Indemnifying Party desires to defend
against such Third Party Claim, then the Indemnifying Party shall have the
right to assume and control, at its sole cost, expense and liability, the
defense of such Third Party Claim by appropriate proceedings with counsel
reasonably acceptable to the Indemnified Party. The Indemnified Party may
participate in any such defense or settlement, at its sole cost and expense.
(c) If (i) the Indemnifying Party disputes the
Indemnified Party's right of reimbursement with respect to a Third Party Claim,
(ii) the Indemnifying Party does not dispute such right of reimbursement but
fails to promptly assume and prosecute the defense of such Third Party Claim,
or (iii) the Indemnified Party reasonably believes that a conflict of interest
exists between the Indemnified Party and the Indemnifying Party, then the
Indemnified Party shall be entitled to assume and control (at the Indemnifying
Party's sole cost, expense and liability) the defense of such Third Party Claim
with counsel reasonably acceptable to Indemnifying Party. If the Indemnifying
Party does not assume the defense of a Third Party Claim for any reason, it may
still participate in, but not control, the defense of such Third Party Claim at
the Indemnifying Party's sole cost and expense.
(d) The party responsible for the defense of any Third
Party Claim (the "Responsible Party") shall, to the extent reasonably requested
by the other party, keep such other party informed as to the status of any
Third Party Claim for which such other party is not the Responsible Party,
including, without limitation, all settlement negotiations and offers. Each
party shall make available to the other party and its representatives
(including accountants and counsel) all books and records of such party
relating to such Third Party Claim and shall render to each other such
assistance and access to the books and records that they may reasonably require
of each other in order to ensure the proper and adequate defense of such Third
Party Claim, including, without limitation, making employees available (upon
reasonable advance notice and with due regard for prior scheduling commitments)
to testify in any proceeding, pretrial deposition or otherwise, except that
unless required to do so by valid governmental or judicial order or legal
process, a party shall not be required to make available to the other party any
books, records, documents or other information that such party reasonably
determines to be confidential or subject to attorney-client privilege until the
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other party shall have entered into such agreements as is reasonably necessary
in light of all the surrounding circumstances to protect such confidentiality
or privilege.
(e) Neither the Indemnified Party nor the Indemnifying
Party shall enter into any settlement of any Third Party Claim without the
prior written consent of the other party (which shall not be unreasonably
withheld or delayed). The Responsible Party shall promptly notify the other
party of each settlement offer (including whether or not the Responsible Party
is willing to accept the proposed settlement offer) with respect to a Third
Party Claim. Such other party agrees to notify the Responsible Party with
reasonable promptness whether or not such party is willing to accept the
proposed settlement offer.
Section 2.4 Procedures Regarding Direct Claims. In the event that an
Indemnified Party has a claim for reimbursement which does not involve a Third
Party Claim (a "Direct Claim"), the Indemnified Party shall notify the
Indemnifying Party (and if Seller is the Indemnifying Party and any Funds
continue to be held by Agent, Agent as well) with reasonable promptness,
specifying, to the extent known, the nature, circumstances and amount of such
Direct Claim (a "Direct Claim Notice" and together with Third Party Claim
Notices, the "Claim Notices"), including with particularity the specific
representation and warranty or covenant and agreement alleged to have been
breached and the manner in which such representation and warranty or covenant
and agreement is alleged to have been breached. Failure to give such
reasonably prompt notice shall not relieve the Indemnifying Party of its
obligations under this Article 2, except to the extent the Indemnifying Party
is materially prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it disputes the Indemnified Party's right of
reimbursement with respect to a particular Direct Claim, the Indemnified Party
and the Indemnifying Party shall use their reasonable efforts to negotiate a
resolution of such dispute promptly. Nothing herein shall be deemed to prevent
the Indemnified Party from initiating litigation under this Agreement, and
subject to the limitations contained herein, against the Indemnifying Party
with respect to any Direct Claim disputed by the Indemnifying Party for the
purpose of obtaining a Final Determination in order to establish the
Indemnified Party's right to reimbursement hereunder.
ARTICLE III
LIMITATIONS ON LIABILITY
Section 3.1 Limitations on Reimbursement. (a) The Buyer Indemnitees
shall not be entitled to indemnification pursuant to Section 2.1 unless and
until aggregate Buyer Indemnitees' Damages for which indemnification otherwise
would be available under Section 2.1 exceed $172,727 (the "Indemnification
Basket"), in which event the Buyer Indemnitees
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shall be entitled to reimbursement hereunder for the amount of all such Damages
(including the initial $172,727).
(b) Except with respect to indemnification pursuant to
Section 2.1(a) for the breach by Seller of any representation or warranty set
forth in Section 6.1.8 (as to title to assets only), 6.1.9 (as to title to
assets only) or 6.1.17 (as to title to assets only) of the Asset Purchase
Agreement (including any bring-down of any such representation or warranty
pursuant to any certificate delivered at Closing), the right to reimbursement
from the Funds shall constitute the sole remedy of any Buyer Indemnitee with
respect to any matter for which such Buyer Indemnitee is entitled to
indemnification under Section 2.1(a) or, as to breaches prior to the Closing,
Section 2.1(b).
(c) Any claim by any Buyer Indemnitee for reimbursement
under Section 2.1(a) must be asserted within the period of survival, as set
forth in the Asset Purchase Agreement, of the representation or warranty with
respect to which such claim relates.
(d) After the Expiration Date, no Buyer Indemnitee may
assert any claim for reimbursement from the Funds.
(e) For all purposes of this Agreement, the amount of
Damages, and the amount reimbursable with respect thereto, shall be reduced to
the extent of any insurance proceeds or other third party recovery received by
the Indemnified Party with respect to such Damages. If the Indemnified Party
receives any such insurance proceeds or other recovery after the Indemnifying
Party shall have made any payment to the Indemnified Party with respect to such
Damages, the Indemnified Party shall promptly return such payment to the
Indemnifying Party to the extent of insurance proceeds or other recovery
received; provided, however, that any such payment returned to Seller prior to
the Expiration Date shall be placed in the Account and become part of the Funds
and such amount shall not be deemed to have been paid to any Indemnified Party
as Damages under this Agreement. The Indemnified Party shall timely file
claims for insurance proceeds and pursue all other reasonable third party
reimbursement rights with respect to any Damages sustained by the Indemnified
Party.
(f) An Indemnified Party's rights to reimbursement or
indemnification for Damages resulting from any untrue or incorrect
representation or warranty of the Indemnifying Party shall not be affected by
any investigation made by the Indemnified Party or whether or not the
Indemnified Party relied upon such untrue or incorrect representation or
warranty; provided, however, that no Indemnified Party shall be entitled to
reimbursement or indemnification for Damages resulting from an untrue or
incorrect representation or warranty of the Indemnifying Party if (i) the fact
that such representation or warranty was untrue or incorrect was disclosed in
writing to the Indemnified Party prior to the Closing
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(along with an acknowledgment by the Indemnifying Party that the conditions to
the Indemnified Party's obligation to effect the Closing, as a result of the
failure of such representation or warranty to be true and correct, are not
satisfied) and (ii) the Indemnified Party nevertheless determines to effect the
Closing.
ARTICLE IV
AGENT
Section 4.1 Rights and Responsibilities of Agent. (a) The duties
and responsibilities of Agent shall be limited to those expressly set forth in
this Agreement and it shall not be subject to, nor obligated to recognize, any
other agreement between, or direction or instruction of, the parties to this
Agreement, unless such agreement, direction or instruction is in writing and is
signed by both Buyer and Seller.
(b) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, Agent will not be required to determine the
controversy or to take any action regarding it. Agent may hold all documents
and funds and may wait for settlement of any such controversy by final
appropriate legal proceedings or other means as, in Agent's discretion, Agent
may require, despite what may be set forth elsewhere in this Agreement. In
such event, Agent will not be liable for interest or damage. Furthermore,
Agent may, at its option, file an action of interpleader requiring the parties
to answer and litigate any claims and rights among themselves. Agent is
authorized to deposit with the clerk of the court all documents and funds held
in escrow. All costs, expenses, charges and reasonable attorney fees incurred
by Agent due to the interpleader action shall be paid one-half by Buyer and
one-half by Seller, in each case jointly and severally. Upon initiating such
action, Agent shall be fully released and discharged of and from all
obligations and liability imposed by the terms of this Agreement.
(c) In performing any duties under the Agreement, Agent
shall not be liable to any party for damages, losses, or expenses, except as a
result of gross negligence or willful misconduct on the part of Agent. Agent
shall not incur any such liability for any action taken or omitted in reliance
upon any instrument, including any written statement or affidavit provided for
in this Agreement that Agent shall in good faith believe to be genuine, nor
will Agent be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of any representative authority. In addition, Agent may
consult with legal counsel in connection with Agent's duties under this
Agreement and shall be fully protected in any act taken, suffered, or permitted
by it in good faith in accordance with the advice of counsel. In the absence
of knowledge that any action taken or purported to be taken hereunder is
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wrongful, Agent is not responsible for determining and verifying the authority
of any person acting or purporting to act on behalf of any party to this
Agreement.
(d) Agent, and any successor Agent, may resign at any
time as escrow agent hereunder by giving at least 30 days prior written notice
to Seller and Buyer. Upon such resignation and the appointment of a successor
escrow agent, the resigning Agent shall be absolved from any and all liability
in connection with the exercise of its powers and duties as escrow agent
hereunder except for liability arising in connection with its own gross
negligence or willful misconduct. Upon their receipt of notice of resignation
from Agent, Buyer and Seller shall use commercially reasonable efforts jointly
to designate a successor Agent. In the event Buyer and Seller do not agree
upon a successor escrow agent within 30 days after the receipt of such notice,
Agent so resigning may petition any court of competent jurisdiction for the
appointment of a successor Agent or other appropriate relief and any such
resulting appointment shall be binding upon all parties hereto. By mutual
agreement, Buyer and Seller shall have the right at any time upon not less than
10 days' prior written notice to Agent to terminate the appointment of Agent,
or successor Agent, as escrow agent hereunder. Agent or successor Agent shall
continue to act as escrow agent until a successor is appointed and qualified to
act as Agent.
Section 4.2 Fees and Expenses of Agent. Agent shall (a) be paid a
fee for its services under this Agreement as provided by Exhibit A and (b) be
entitled to reimbursement for reasonable expenses (including the reasonable
fees and disbursements of its counsel engaged pursuant to Sections 1.3 and/or
1.4 hereof, or otherwise) actually incurred by it in connection with its duties
under this Agreement (collectively, the "Agent Fees and Expenses"). All Agent
Fees and Expenses shall be paid one-half by Buyer and one-half by Seller.
Escrow Agent shall have a lien upon the Funds for payment or its fees and
expenses. Escrow Agent may pay itself from the Funds for any fees and expenses
for which it has not been paid.
Section 4.3 Indemnification of Agent. The parties and their
respective successors and assigns agree jointly and severally to indemnify and
hold Agent harmless against any and all losses, claims, damages, liabilities,
and expenses, including reasonable costs of investigation, reasonable legal
counsel fees and disbursements that may be imposed on Agent or incurred by
Agent in connection with the performance of its duties under this Agreement,
including but not limited to any litigation arising from this Agreement or
involving its subject matter, provided, however, neither Buyer nor Seller nor
their successors and assigns need indemnify Agent for any loss, claim, damage,
liability or expense caused by Agent's gross negligence or willful misconduct.
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ARTICLE V
MISCELLANEOUS
Section 5.1 Notices. All notices, requests, consents or other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given or delivered by any party (a) when
received by such party if delivered by hand, (b) upon confirmation when
delivered by telecopy, (c) within one day after being sent by recognized
overnight delivery service, or (d) upon receipt of a return receipt after being
mailed by certified mail, return receipt requested, and in each case addressed
as follows:
(i) if to Buyer or to any Buyer Indemnitee:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard, Suite 1130
Irving, Texas 75039
Attention: Jeffrey A. Marcus
Telecopy No.: (972) 879-3671
with copies to:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard, Suite 1130
Irving, Texas 75039
Attention: Eric C. Neuman
Telecopy No.: (972) 879-3671
and:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Michael A. Saslaw
Telecopy No.: (214) 746-7777
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(ii) if to Seller or to any Seller Indemnitee, to:
Thomas J. Embrescia
860 Halle Building
1220 Euclid Avenue
Cleveland, Ohio 44115
Telecopy No.: (216) 687-6195
with copies to:
Benesch, Friedlander, Coplan & Aronoff LLP
2300 BP America Building
Cleveland, Ohio 44114
Attention: Deanna C. Kursh
Telecopy No.: (216) 363-4588
(iii) if to Agent, to:
Mail or other Instructions
Key Trust Company of Ohio, N.A.
127 Public Square, 15th Floor
Cleveland, Ohio 44114
Attention: Joyce A. Apostolec
Telecopy No.: (216) 689-3777
Any party by written notice to the other parties pursuant to this Section 5.1
may change the address or the persons to whom notices or copies thereof shall
be directed.
Section 5.2 Assignment. This Agreement and the rights and duties
hereunder shall be binding upon and inure to the benefit of the parties hereto
and the successors and assigns of each of the parties to this Agreement. No
rights, obligations or liabilities hereunder shall be assignable by any party
without the prior written consent of the other parties, except that Buyer may
assign its rights under this Agreement without obtaining the prior written
consent of the other parties hereto to any person or entity to whom, pursuant
to the Asset Purchase Agreement, Buyer is permitted to assign all or a portion
of its rights under the Asset Purchase Agreement, provided that any such
assignee duly executes and delivers an agreement to assume Buyer's obligations
under this Agreement and that Buyer remains liable with respect to such
obligations.
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Section 5.3 Amendment. This Agreement may be amended or modified
only by an instrument in writing duly executed by Agent, Buyer and Seller.
Section 5.4 Waivers. Any waiver by any party hereto of any breach of
or failure to comply with any provision of this Agreement by any other party
hereto shall be in writing and shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this Agreement.
Section 5.5 Construction. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Ohio
without giving effect to the choice of law provisions thereof. The headings in
this Agreement are solely for convenience of reference and shall not be given
any effect in the construction or interpretation of this Agreement. Unless
otherwise stated, references to Sections and Exhibits are references to
Sections and Exhibits of this Agreement.
Section 5.6 Third Parties. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
or entity other than Buyer, Buyer Indemnitees, Seller, Seller Indemnitees and
Agent any rights or remedies under, or by reason of, this Agreement.
Section 5.7 Termination. This Agreement shall terminate at the time
of the final resolution of all Pending Claims and, if any amount remains
thereunder, disbursement of the Funds, all in accordance with the provisions of
this Agreement.
Section 5.8 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed any original and all of which
together shall constitute a single instrument.
Section 5.9 Waiver of Offset Rights. Agent hereby waives any and all
rights to offset that it may have against the Funds including, without
limitation, claims arising as a result of any claims, amounts, liabilities,
costs, expenses, damages, or other losses that Agent may be otherwise entitled
to collect from any party to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
BUYER:
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By:
--------------------------------
Eric C. Neuman
Senior Vice President
SELLER:
INDEPENDENT GROUP LIMITED PARTNERSHIP
By: Independent Group, Inc., its
general partner
By:
----------------------------
Thomas J. Embrescia
Chairman
AGENT:
KEY TRUST COMPANY OF OHIO, N.A.
By:
--------------------------------
Name:
-----------------------------------
Title:
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EXHIBIT A
Fees of Agent
$2,500.00 Annual Escrow Agent Fee for Administration.
Escrow Fee will be payable upon execution of the Escrow Agreement and annually
thereafter on the anniversary date of the agreement.
<PAGE> 1
EXHIBIT 2.48
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ZAPIS COMMUNICATIONS CORPORATION
AND
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
AS OF AUGUST 11, 1998
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TABLE OF CONTENTS
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ARTICLE 1
PURCHASE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
ASSUMPTION OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 5
2.1 Assumption of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 3
CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Delivery of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Allocation of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Allocations and Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 4
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 5
GOVERNMENTAL CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9
5.1 FCC Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 FCC Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . 10
6.1 Representations and Warranties of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1.1 Organization, Good Standing, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1.4 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1.5 Compliance with Applicable Laws, FCC Matters . . . . . . . . . . . . . . . . . . . 12
6.1.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1.8 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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6.1.9 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1.10 Liens and Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.1.13 Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1.14 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1.15 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1.16 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1.17 Patents, Trademarks, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1.18 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . 20
6.1.19 Commission or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1.20 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1.21 Seller's Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1.22 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1.23 Barter Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1.24 Interest in Competitors, Suppliers and Customers . . . . . . . . . . . . . . . . . 22
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . 22
7.1 Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1.2 Authorization and Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . 22
7.1.3 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1.4 Absence of Conflicting Agreements or Required Consents . . . . . . . . . . . . . . 23
7.1.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1.6 Commission or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.7 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 8
COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . 24
8.1 Seller Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1.1 Conduct Prior to the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1.3 Satisfaction of Conditions; Closing . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1.4 Sale of Acquired Assets; Negotiations . . . . . . . . . . . . . . . . . . . . . . . 27
8.1.5 No Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1.6 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1.7 FCC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1.8 Updating of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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8.1.9 Response to Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1.10 Barter and Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1.11 Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1.12 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1.13 Transfer of Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1.14 Termination of Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 9
COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . 29
9.1 Buyer Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1.1 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1.2 No Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1.3 Post-Closing Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1.4 Satisfaction of Conditions; Closing . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1.5 Response to Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1.6 Accrued Vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1.7 Other Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 10
JOINT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1 FCC Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.4 Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.5 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.6 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.7 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.8 Condition of Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.9 Warn Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 11
CONDITIONS OF CLOSING BY BUYER . . . . . . . . . . . . . . . . . . . . 34
11.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.2 Compliance with Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.3 Third Party Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.4 Closing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.5 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.6 Adverse Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.7 Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.8 Consulting, Confidentiality and Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . 35
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11.9 Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.10 Indemnification and Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.11 Release of Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.12 Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.13 Earnest Money Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.14 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.15 1445 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.16 Other Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.17 Termination of Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 12
CONDITIONS OF CLOSING BY SELLER . . . . . . . . . . . . . . . . . . . . 36
12.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
12.2 Compliance with Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.3 Certifications, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.4 Governmental Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.5 Adverse Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.6 Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.7 Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.8 Indemnification and Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 13
TRANSFER TAXES; FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . 37
13.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.2 Transfer Taxes and Similar Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.3 Governmental Filing or Grant Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 14
LIQUIDATED DAMAGES, SPECIFIC PERFORMANCE, LETTER OF CREDIT . . . . . . . . . . . . . 38
14.1 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.2 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14.3 Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 15
TERMINATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . 39
15.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 16
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.1 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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ARTICLE 17
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 42
17.1 Survival of Representations and Warranties; Remedy for Breach . . . . . . . . . . . . . . . . . 42
17.2 Certain Interpretive Matters and Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.3 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.6 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.10 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
17.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
17.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
17.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
17.14 No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
17.15 Equitable Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
17.16 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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SCHEDULES
Schedule 1.1.1 - Station Licenses
Schedule 1.1.2 - Personal Property
Schedule 1.1.3 - Contracts
Schedule 1.1.4 - Intellectual Property
Schedule 1.1.7 - Owned Real Estate
Schedule 1.1.8 - Leased Real Estate
Schedule 1.2.8 - Excluded Assets
Schedule 6.1.3 - Financial Statements
Schedule 6.1.4 - Undisclosed Liabilities
Schedule 6.1.5 - Noncompliance with Communications Act and the FCC
Schedule 6.1.6 - Litigation (Seller)
Schedule 6.1.7 - Insurance
Schedule 6.1.10 - Permitted Liens
Schedule 6.1.11 - Environmental Matters
Schedule 6.1.12 - Tax Matters
Schedule 6.1.13 - Personnel
Schedule 6.1.14 - Necessary Contracts
Schedule 6.1.15 - ERISA Matters
Schedule 6.1.16 - Labor Matters
Schedule 6.1.23 - Barter Arrangements
Schedule 6.1.24 - Interest in Competitors, Suppliers and Customers
Schedule 7.1.4 - Consents
Schedule 9.1.5 - Certain Actions
EXHIBITS
Exhibit A - Indemnification and Escrow Agreement
Exhibit B-1 - Consulting, Confidentiality and Noncompetition Agreement
Exhibit B-2 - Noncompetition Agreement
Exhibit C-1 - Opinion of Thano G. Pasalis & Associates
Exhibit C-2 - Opinion of Paul, Hastings, Janofsky & Walker LLP
Exhibit D - Opinion of Weil, Gotshal & Manges LLP
Exhibit E - Earnest Money Escrow Agreement
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DEFINED TERMS
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<CAPTION>
Defined Terms Section
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Account Receivable Amount . . . . . . . . . . . . . . . . . . . . . 3.1
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.2
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Cash Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2
Communications Act . . . . . . . . . . . . . . . . . . . . . . . . 6.1.5
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.3
Earnest Money Escrow Agent . . . . . . . . . . . . . . . . . . . . 14.3
Earnest Money Letter of Credit . . . . . . . . . . . . . . . . . . 14.3
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . 6.1.15
Employee List . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.7
Environmental Costs and Liabilities . . . . . . . . . . . . . . . . 6.1.11(f)
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . 6.1.11(f)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.15
ERISA Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.15
Excepted Representations . . . . . . . . . . . . . . . . . . . . . 17.1
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.4
Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
FAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.5(b)
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.1
FCC Applications . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
FCC Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
Final Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
FTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.6
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.3
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . 6.1.2
Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . 6.1.11(d)
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.2
Indemnification and Escrow Agreement . . . . . . . . . . . . . . . 3.1
Independent Auditor . . . . . . . . . . . . . . . . . . . . . . . . 3.3.2
Independent Group Acquisition . . . . . . . . . . . . . . . . . . . Recitals
</TABLE>
vii
<PAGE> 9
<TABLE>
<CAPTION>
Defined Terms Section
- ------------- -------
<S> <C>
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 1.1.4
Leased Real Estate . . . . . . . . . . . . . . . . . . . . . . . . 1.1.8
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.10
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . 6.1.1
May 1998 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . 6.1.4
Other Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Owned Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.7
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.10
Predecessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.11(a)
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.8
Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . 2.2
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . 17.4
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Seller's Financial Statements . . . . . . . . . . . . . . . . . . . 6.1.3
Specified Event . . . . . . . . . . . . . . . . . . . . . . . . . . 16.1(b)
Station Management . . . . . . . . . . . . . . . . . . . . . . . . 6.1.13
Station . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Station Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Station Licenses . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.1
Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.8
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.12(g)
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.12(g)
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.12(g)
Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 1.1.3
Wincom Acquisition . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Zebra Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
</TABLE>
viii
<PAGE> 10
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), made as of August
11, 1998, is by and between Zapis Communications Corporation, an Ohio
corporation ("Seller"), and Chancellor Media Corporation of Los Angeles, a
Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller owns certain assets, which are used in connection with
the operation of radio station WZAK 93.1 FM in Cleveland, Ohio (the "Station");
and
WHEREAS, contemporaneously herewith, Buyer shall enter into (a) a
Stock Purchase Agreement with ML Media Partners L.P. to purchase all of the
stock of Wincom Broadcasting Corporation which (through a wholly-owned
subsidiary) operates radio station WQAL 104.1 FM in Cleveland, Ohio (the
"Wincom Acquisition"), (b) an Asset Purchase Agreement with Independent Group
Limited Partnership to purchase substantially all of the assets used in
connection with the operation of radio stations WDOK 102.1 FM and WRMR 850 AM
in Cleveland, Ohio (the "Independent Group Acquisition") and (c) a Stock
Purchase Agreement with the other signatories thereto to purchase all of the
stock of Young Ones, Inc. and Zebra Broadcasting Corporation ("Zebra") which
operates radio stations WZJM 92.3 FM and WJMO 1490 AM in Cleveland Heights,
Ohio (the "Zebra Acquisition," and together with the Wincom Acquisition and the
Independent Group Acquisition, the "Other Acquisitions"); and
WHEREAS, Seller desires to sell the Station, and Buyer desires to
purchase substantially all of the assets of Seller used in connection with the
operation of the Station in accordance with the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound hereby agree as follows:
ARTICLE 1
PURCHASE OF ASSETS
1.1 Transfer of Assets. On the terms and subject to the
conditions hereof, as of the Closing (as defined in Section 4.1), Seller shall
assign, transfer, convey and deliver to
<PAGE> 11
Buyer and Buyer shall acquire and assume from Seller, all of the right, title
and interest of Seller in and to all of the following assets, properties,
interests and rights of Seller except for the Excluded Assets (as defined in
Section 1.2) (collectively the "Station Assets") free and clear of all Liens
(as defined in Section 6.1.10) other than Permitted Liens (as defined in
Section 6.1.10):
1.1.1 All of Seller's rights in and to the licenses, permits
and other authorizations issued to Seller by any governmental authority,
including those issued by the Federal Communications Commission (the "FCC")
(hereafter referred to as the "Station Licenses"), used in connection with the
operation of the Station, along with renewals or modifications of such items
between the date hereof and the Closing, including but not limited to those
listed in Schedule 1.1.1 hereto;
1.1.2 All equipment, office furniture and fixtures, office
materials and supplies, inventory, spare parts and all other tangible personal
property of every kind and description, and Seller's rights therein, owned,
leased or held by Seller and used in connection with the operations of the
Station, including but not limited to those items described or listed in
Schedule 1.1.2 hereto, together with any replacements thereof, improvements or
additions thereto made between the date hereof and the Closing, and less any
retirements or dispositions thereof made between the date hereof and the
Closing in the ordinary course of business of Seller consistent with past
practices;
1.1.3 All of Seller's rights in and under those contracts,
agreements, leases and legally binding contractual rights of any kind, written
or oral, relating to the operation of the Station listed in Schedule 1.1.3
hereto and (i) those contracts entered into by Seller between the date hereof
and the Closing in the ordinary course of business of Seller consistent with
past practices, subject to Section 1.2.4 and Section 8.1.1 hereto; (ii) all
contracts for the sale of advertising time for cash, subject to Section 8.1.1
hereto; and (iii) all contracts for consideration other than cash, such as
merchandise, services or promotional consideration ("Trade Agreements"),
subject to Section 8.1.1 hereto consistent with past practices (collectively,
"Contracts");
1.1.4 All of Seller's rights in and to all call letters,
trademarks, trade names, service marks, franchises, copyrights, Internet domain
names, including registrations and applications for registration of any of
them, computer software programs and programming material of whatever form or
nature, jingles, slogans, the Station's logos and all other logos or licenses
to use same and all other intangible property rights of Seller, which are used
in connection with the operation of the Station, including but not limited to
those listed in
2
<PAGE> 12
Schedule 1.1.4 hereto (collectively, the "Intellectual Property") together with
any associated goodwill and any additions thereto between the date hereof and
the Closing;
1.1.5 All of Seller's rights in and to all the files,
documents, records, and books of account relating to the operation of the
Station or to the Station Assets, including, without limitation, each Station's
public files, programming information and studies, technical information and
engineering data, news and advertising studies or consulting reports, marketing
and demographic data, sales correspondence, lists of advertisers, promotional
materials, credit and sales reports and filings with the FCC, originals of all
written Contracts to be assigned hereunder, logs, software programs and books
and records relating to personnel, financial, accounting, operation and
technical matters;
1.1.6 All of Seller's rights under manufacturers' and
vendors' warranties relating to items included in the Station Assets and all
similar rights against third parties relating to items included in the Station
Assets;
1.1.7 All real property owned by Seller together with all
appurtenant easements thereunto and all structures, fixtures and improvements
located thereon used in connection with the Station operations as more fully
described in Schedule 1.1.7 hereto, together with any additions thereto between
the date hereof and the Closing ("Owned Real Estate");
1.1.8 All rights and interests of Seller under any and all of
the leases of real property used in connection with the Station operations (the
"Leased Real Estate," and together with the Owned Real Estate, the "Real
Estate") which Leased Real Estate is identified and described in Schedule
1.1.8;
1.1.9 All accounts receivable of Seller subject to Section
1.2.10;
1.1.10 All such other assets, properties, interests and
rights owned by Seller that are used in connection with the business and
operation of the Station or that are located as of the Closing Date on the Real
Estate, except Excluded Assets; and
1.1.11 All of Seller's rights in and to all causes of action,
including, without limitation, for any past infringement of any of the
Intellectual Property.
1.2 Excluded Assets. Notwithstanding anything to the contrary
contained herein, it is expressly understood and agreed that the Station Assets
shall not include the following assets or any right, title or interest therein
(the "Excluded Assets"):
3
<PAGE> 13
1.2.1 All cash, marketable securities, and cash equivalents
of Seller on hand and/or in banks;
1.2.2 All notes receivable of Seller;
1.2.3 All tangible and intangible personal property of Seller
disposed of or consumed in the ordinary course of business of Seller consistent
with past practices between the date hereof and the Closing Date, as permitted
hereunder;
1.2.4 All Contracts that have terminated or expired on or
prior to the Closing in the ordinary course of business of Seller;
1.2.5 Seller's corporate seals, minute books, charter
documents, corporate stock record books and such other books and records as
pertain to the organization, existence, share capitalization of Seller and
duplicate copies of such financial records as are necessary to enable Seller to
file their Tax Returns (as defined in Section 6.1.12(g))and reports as well as
any other records or materials relating to Seller generally;
1.2.6 Contracts of insurance and all insurance proceeds
arising or related to the Station Assets to the extent such proceeds (a) relate
to expenditures which were made by Seller prior to the Closing or (b) relate to
expenditures which Seller remains obligated to make after the Closing;
1.2.7 The Employee Benefit Plans (as defined in Section
6.1.15) and the assets thereof;
1.2.8 Those specific assets identified on the Excluded Assets
Schedule attached to this Agreement as Schedule 1.2.8; and
1.2.9 All Tax (as defined in Section 6.1.12(h)) refunds
relating to all periods prior to the Closing.
1.2.10 All amounts due and owing (including any accounts
receivable or notes receivable) from Seller's affiliates, including, without
limitation, Zebra, The Park Lane Group, Inc. ("Parklane") and their respective
shareholders.
4
<PAGE> 14
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
2.1 Assumption of Obligations. Subject to the provisions of this
Section 2.1 and Section 2.2, on the Closing Date (as defined in Section 4.1),
Buyer shall assume the obligations of Seller arising or to be performed after
the Closing Date under the Contracts referred to in Section 1.1.3 hereto in
effect as of the Closing and all other liabilities and obligations that arise
from the ownership or operation of the Station Assets after the Closing. All
of the foregoing liabilities and obligations shall be referred to herein
collectively as the "Assumed Liabilities."
2.2 Retained Liabilities. Notwithstanding anything contained in
this Agreement to the contrary, Buyer does not assume or agree to pay, satisfy,
discharge or perform, and will not be deemed by virtue of the execution and
delivery of this Agreement or any document delivered at the execution of this
Agreement, or as a result of the consummation of the transactions contemplated
by this Agreement, to have assumed, or to have agreed to pay, satisfy,
discharge or perform, any liability or obligation of the Seller other than the
Assumed Liabilities, including, without limitation, any of the following
liabilities or obligations of the Seller (the "Retained Liabilities"):
(a) all obligations or liabilities of Seller or any
predecessor or Affiliate (as defined in Section 17.2) of Seller which
in any way relate to or arise out of any of the Excluded Assets;
(b) other than Taxes expressly allocated pursuant to
other provisions of this Agreement, Tax liabilities of any and all
kinds (federal, state, local, and foreign) of Seller including,
without limitation, any liabilities for Taxes on or measured by
income, liabilities for withheld federal and state income Taxes and
employee F.I.C.A. (Federal Insurance Contribution Act) or employer
F.I.C.A., and liabilities for income Taxes arising as a result of the
transfer of the Station Assets or otherwise by virtue of the
consummation of the transactions contemplated hereby;
(c) except for the lease with 2501 St. Clair, Inc. listed
on Schedule 1.1.8, all liabilities or obligations of Seller owed to
Seller's Affiliates, including without limitation, Zebra, Parklane and
their respective shareholders;
(d) all liabilities or obligations of Seller for borrowed
money or for interest on such borrowed money;
5
<PAGE> 15
(e) all liabilities or obligations arising out of any
breach by Seller or any predecessor or Affiliate of any of the terms
or conditions of any provision of any Contract;
(f) all liabilities and obligations of Seller or any
predecessor or Affiliate of Seller resulting from, caused by or
arising out of, any violation of law;
(g) any claims, liabilities, and obligations of Seller as
an employer, including, without limitation, liabilities for wages,
supplemental unemployment benefits, vacation benefits (except as
otherwise provided in Section 9.1.6), severance benefits, retirement
benefits, COBRA benefits, FMLA benefits, WARN obligations and
liabilities, or any other employee benefits, withholding Tax
liabilities, workers' compensation, or unemployment compensation
benefits or premiums, hospitalization or medical claims, occupational
disease or disability claims, or other claims attributable in whole or
in part to employment or termination by Seller or arising out of any
labor matter involving Seller as an employer, and any claims,
liabilities and obligations arising from or relating to the Employee
Benefit Plans;
(h) Any claims, liabilities, losses, damages, or expenses
relating to any litigation, proceeding, or investigation of any nature
arising out of the operations of the Station prior to or as of the
Closing including, without limitation, any claims against or any
liabilities for injury to or death of persons or damage to or
destruction of property, any workers' compensation claims, and any
warranty claims;
(i) Except as provided in Section 3.3, any accounts
payable, other indebtedness, obligations or accrued liabilities of
Seller;
(j) Any claims, liabilities, losses, damages, expenses or
obligations resulting from the failure to comply with or imposed
pursuant to any Environmental Law (as defined in Section 6.1.11(f)) or
resulting from the use, presence, generation, storage, treatment,
transportation, handling, disposal, emission or release of Hazardous
Substances (as hereinafter defined in Section 6.1.11 hereof), solid
wastes, and gaseous matters by Seller and by any other person in
relation to Seller or the Station to the extent related to, arising
from or otherwise attributable to acts or omissions prior to or
conditions existing as of the Closing, including, without limitation,
any liability or obligation for cleaning up waste disposal sites from
or related to acts or omissions prior to or as of the Closing; and
6
<PAGE> 16
(k) Any fees and expenses incurred by Seller in
connection with negotiating, preparing, closing, and carrying out this
Agreement and the transactions contemplated by this Agreement,
including, without limitation, the fees and expenses of Seller's
attorneys, accountants, consultants and brokers.
ARTICLE 3
CONSIDERATION
3.1 Delivery of Consideration. In exchange for the Station
Assets, in addition to the assumption of the Assumed Liabilities, Buyer shall,
subject to Articles 11 and 12 hereof, at the Closing (as defined in Section
4.1) deliver to Seller the sum of (a) Ninety Three Million Seven Hundred and
Fifty Thousand ($93,750,000), plus (b) an amount (the "Account Receivable
Amount") equal to the accounts receivable of Seller as of 12:01 a.m. of the
Closing Date (the "Effective Time"), net of an allowance for uncollectible
accounts established in accordance with GAAP (as defined in Section 6.1.3
hereof) determined as of the Effective Time consistent with the Company's past
accounting practices and policies during the fiscal year ended December 31,
1996 in which Seller was audited by Cohen & Company (subject to adjustment as
set forth in this Agreement, the "Purchase Price") by wire transfer of
immediately available funds; provided that a portion of the Purchase Price
equal to $2,727,200 will be paid by Buyer into escrow pursuant to the terms of
the Indemnification and Escrow Agreement among Buyer, Seller and Key Trust
Company of Ohio, N.A., as escrow agent, attached hereto as Exhibit A (the
"Indemnification and Escrow Agreement"). The Accounts Receivable Amount paid
at Closing shall be based on a good faith estimate which is mutually agreed
upon by Buyer and Seller and shall be adjusted post-Closing, if necessary, in
conjunction with the final allocation and proration provided for in Section
3.3.2.
3.2 Allocation of Consideration. Buyer and Seller agree that the
Purchase Price (including the amount of the Assumed Liabilities) will be
allocated among the Station Assets prior to the Closing Date by mutual
agreement between Buyer and Seller, and Buyer and Seller agree to be bound by
such allocation. Such allocation may be adjusted if necessary as a result of
an adjustment pursuant to Section 3.3.2. Such allocation shall comply with
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and
Treasury Regulations promulgated thereunder. Subject to the requirements of
applicable Tax law, all Tax Returns and reports including, without limitation,
Form 8594, filed by Buyer and Seller shall be prepared consistently with such
allocation and neither Buyer nor Seller shall take a position contrary thereto.
Any disputes regarding the allocation of the Purchase Price (including the
amount of the Assumed Liabilities) shall be referred for resolution to BIA, and
the fees and expenses of BIA shall be borne equally by Buyer and Seller.
7
<PAGE> 17
3.3 Allocations and Prorations.
3.3.1 The operation of the Station and the income and
expenses attributable thereto through the Effective Time shall be for the
account of Seller and thereafter shall be for the account of Buyer. Expenses
for goods and services received both before and after the Effective Time,
utilities charges, ad valorem, real estate, property and other Taxes (other
than income Taxes, which shall be Seller's sole responsibility for all taxable
periods ending prior to and including the Effective Time, and those Taxes
arising from the sale and transfer of the Station Assets, which, in the case of
transfer and other similar Taxes, shall be paid as set forth in Section 13.2),
income and expenses under the Contracts (other than Trade Agreements), prepaid
expenses, music and other license fees (including any retroactive adjustments
thereof), and rents and similar prepaid and deferred items shall be prorated
between Seller and Buyer in accordance with the foregoing. Notwithstanding the
foregoing, no proration shall be made with respect to any prepaid expense or
other deferred item unless Buyer will receive a benefit in respect of such
prepayment or deferral after the Effective Time. For purposes of this Section
3.3.1, ad valorem and other real estate Taxes shall be apportioned on the basis
of the Taxes assessed for the most recently-completed calendar year, with a
reapportionment as promptly as practicable after the Tax rates and real
property valuations for the calendar year in which the Closing occurs can be
ascertained. In addition, Buyer shall be entitled to a credit in this
proration process for the amount of any Taxes (or other governmental charges)
that are due and payable by Seller, but are being contested by Seller in good
faith in appropriate proceedings and are secured by Liens on the Station Assets
that have not been removed as of or before the Closing (but once such amounts
are finally determined, Buyer shall use such credit to remove such liens and
return to Seller the excess of (i) the amount of such credit minus (ii) the
amount of such Taxes or other governmental charges as finally determined, or
Seller shall pay to Buyer the deficiency, as appropriate).
3.3.2 Allocation and proration of the items set forth in
Subsection 3.3.1 above shall be made by Buyer and a statement thereof given to
Seller within thirty (30) days after the Closing Date. Seller shall give
written notice of any objection thereto within twenty (20) business days after
receipt of such statement, detailing the reason for such objection and stating
the amount of the proposed final allocation and proration and/or Account
Receivable Amount, as applicable. If a timely objection is made and the
parties cannot reach agreement within thirty (30) days after receipt of the
objection as to the amount of the final allocation and proration and/or Account
Receivable Amount, as applicable, the matter shall be referred to Ernst & Young
LLP (the "Independent Auditor") to resolve the matter, whose decision will be
final and binding on the parties, and whose fees and expenses shall be borne by
Buyer and Seller in accordance with the following: each party shall pay an
amount equal to the sum of all fees and expenses of the Independent Auditor on
a proportional basis taking
8
<PAGE> 18
into account the amount of the net allocation and proration proposed by each of
Buyer and Seller and the amount of the final allocation and proration
determined by the Independent Auditor (for example, if Buyer proposed a payment
of $10 to Seller, Seller proposed a payment of $100, and the Independent
Auditor proposed a payment of $30, Buyer would pay 20/90ths of the Independent
Auditor's fees and Seller would pay 70/90ths of those fees based on the $90 in
dispute between the parties).
ARTICLE 4
CLOSING
4.1 Closing. The consummation of the transactions contemplated
herein (the "Closing") shall occur, except as otherwise mutually agreed upon by
Buyer and Seller (a) within ten (10) business days after the FCC Consents (as
hereinafter defined) to the assignment of the Station Licenses have become
Final Orders (as hereinafter defined) or (b) at such later date that all other
terms and conditions as set forth in Articles 11 and 12 have been satisfied, or
such other date as may be mutually agreed to by the parties ("Closing Date");
provided, however, that in no event shall the Closing occur prior to January 4,
1999. For purposes of the Agreement, "Final Order" means action by the FCC
consenting to the assignments contemplated by this Agreement which is not
reversed, stayed, enjoined, set aside, annulled or suspended, and with respect
to which action no timely request for stay, petition for rehearing, or
reconsideration, application for review or appeal is pending, and as to which
the time for filing any such request, petition or appeal or reconsideration by
the FCC on its own motion has expired. The Closing shall be held in the
offices of Benesch, Friedlander, Coplan & Aronoff, LLP, 2300 BP America
Building, Cleveland, Ohio, or at such place as the parties hereto may agree.
ARTICLE 5
GOVERNMENTAL CONSENTS
5.1 FCC Consent. It is specifically understood and agreed by
Buyer and Seller that the Closing and the assignment of the Station Licenses
and the transfer of the Station Assets are expressly conditioned on and are
subject to the prior consent and approval of the FCC ("FCC Consents").
5.2 FCC Applications. Within ten (10) business days after the
execution of this Agreement or such earlier time as shall be agreed to by all
of the parties hereto, Buyer and Seller shall file applications with the FCC
for the FCC Consents ("FCC Applications").
9
<PAGE> 19
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER
6.1 Representations and Warranties of Seller. Seller represents
and warrants to the Buyer the following:
6.1.1 Organization, Good Standing, Etc. (a) Seller is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Ohio, has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted and is duly qualified to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, other than in such jurisdictions where the
failure to so qualify has not had and would not reasonably be expected to have
a material adverse effect on the Station Assets, the Assumed Liabilities or the
business of the Station, or on Seller's ability to consummate the transactions
contemplated by this Agreement (a "Material Adverse Effect").
(b) Seller has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Seller
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Seller.
This Agreement has been duly executed and delivered by Seller and constitutes
the legal, valid and binding obligation of Seller, enforceable against it in
accordance with its terms.
6.1.2 Authority. Assuming the consents identified by this
Section 6.1.2 and Section 6.1.14 are obtained, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby by Seller (i) violate, conflict with or result in any
breach of any provision of the articles of incorporation and code of
regulations of Seller, (ii) violate, conflict with or will result in a
violation or breach of, or constitute a default (with or without due notice or
lapse of time or both) under, or permit the termination of, or will result in
the acceleration of, or entitle any party to accelerate (whether as a result of
the sale of the Station Assets or otherwise) any obligation, or result in the
loss of any benefit, or give rise to the creation of any lien, charge, security
interest or encumbrance upon any of the properties or assets of Seller or any
of its subsidiaries under any of the terms, conditions or provisions of any
loan or credit agreement, note, bond, mortgage, indenture or deed of trust, or
any license, lease, agreement or other instrument or obligation to which any of
them are a party or by which they or any of their properties or assets may be
bound or affected, or (iii) violate any order, writ, judgment, injunction,
decree, statute,
10
<PAGE> 20
rule or regulation, of any court, administrative agency or commission or other
governmental authority or instrumentality (a "Governmental Entity") applicable
to Seller or any of its respective properties or assets, except for those
violations that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Seller in connection with the
execution, and delivery of this Agreement by Seller or the consummation by
Seller of the transactions contemplated hereby, except for (i) the filing of a
premerger notification report under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the expiration of the
applicable waiting period thereunder, and (ii) the FCC Consents.
6.1.3 Financial Statements. Attached as Schedule 6.1.3 are
copies of the Station's (a) audited balance sheet at December 31, 1996 and the
related statements of income and cash flow for the fiscal year then ended, with
an audit report thereon issued by Cohen & Company, (b) balance sheet at
December 31, 1997 and the related statements of income and cash flow for the
fiscal year then ended, which has been reviewed by Cohen & Company; and (c)
internally prepared balance sheets at May 31, 1997 and 1998, and the related
statement of income for the periods then ended (such financial statements
collectively being referred to as the "Seller's Financial Statements"). Except
as set forth on Schedule 6.1.3, the Seller's Financial Statements were prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods covered thereby ("GAAP") and present
fairly, in all material respects, the financial position, results of operations
and changes in cash flow (only as to the Station's financial statements for the
years ended December 31, 1996 and 1997 as described in clauses (a) and (b)
above) of the Seller as of such dates and for the periods then ended (subject
to the absence of notes and to normal, recurring adjustments that would not be
material in the aggregate), other than Trade Agreements.
6.1.4 Absence of Undisclosed Liabilities. Except as set
forth on Schedule 6.1.4 hereto, there are no material liabilities of Seller of
any kind whatsoever with respect to the Station (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) that are required to
be reflected on, or disclosed in the notes to, a consolidated balance sheet of
Seller prepared in accordance with GAAP, other than liabilities and obligations
(a) provided for or reserved against in the Seller's internally prepared
balance sheet at May 31, 1998 described in Section 6.1.3 (the "May 1998 Balance
Sheet") or reflected in the notes thereto or (b) arising after May 31, 1998, in
the ordinary course of business and consistent with past practices and which
individually or in the aggregate have not had and could not reasonably be
expected to have a Material Adverse Effect.
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6.1.5 Compliance with Applicable Laws, FCC Matters. (a)
Except as permitted or contemplated hereby, the operations of the Station have
been and now are being conducted in compliance in all material respects with
the Station Licenses, each law, ordinance, regulation, judgment, decree,
injunction, rule or order of the FCC or any other Governmental Entity binding
on Seller, the Station or its respective properties or assets. No
investigation or review by any Governmental Entity with respect to Seller or
the Station is pending or, to the Seller's knowledge, is threatened. Without
limiting the generality of the foregoing, Seller has complied in all material
respects with the Communications Act of 1934, as amended (the "Communications
Act"), all rules, regulations and written policies of the FCC thereunder, all
obligations with respect to equal opportunity under applicable law and the
FCC's policy on exposure to radio frequency radiation applicable to the
Station. No renewal of any Station License would constitute a major
environmental action under the rules of the FCC. Access to the Station's
transmission facilities are restricted in accordance with the policies of the
FCC. In addition, Seller has duly and timely filed, or caused to be filed,
with the appropriate Governmental Entities all reports, statements, documents,
registrations, filings or submissions with respect to the operations of the
Station and the ownership thereof, including, without limitation, applications
for renewal of authority required by applicable law to be filed. All such
filings complied in all material respects with applicable laws when made and,
to the Seller's knowledge, no deficiencies have been asserted with respect to
any such filings. All of the material required by 47 C.F.R. Section 73.3526
to be kept in the public inspection files of the Station is in such files.
Except as disclosed on Schedule 6.1.5, Seller has no knowledge of any fact or
circumstance relating to Seller or the Station arising from noncompliance with
the Communications Act, or the rules, regulations or written policies of the
FCC in effect on the date of this Agreement that could reasonably be expected
to (i) disqualify the Seller from assigning the Station Licenses to the Buyer
or (ii) prevent or delay the consummation by them of the transactions
contemplated by this Agreement.
(b) Schedule 1.1.1 lists (i) all licenses, permits and
other authorizations (including all STL licenses and construction permits)
issued to Seller by the FCC relating to the Station and held by it as of the
date of this Agreement and (ii) all licenses, permits, or authorizations issued
to Seller by any other Governmental Entities which are material to the
operations of the Station and held by it as of the date of this Agreement.
Such licenses, permits and authorizations, and all applications for
modification, extension or renewal thereof or for new licenses, permits,
permissions or authorizations that would be material to the operations of the
Station, are collectively referred to herein as the Station Licenses (as
further defined in Section 1.1.1), each of which is in full force and effect.
All towers and other structures used in the operation of the Station or located
on the Real Property are obstruction marked and lighted to the extent required
by, and in accordance with the rules and regulations of the Federal Aviation
Administration (the "FAA"), the Commission and
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other federal, state and local authorities. Appropriate notifications to the
FAA and registrations with the FCC have been filed for such towers where
required. Except for proceedings affecting the radio broadcast industry
generally, there are no proceedings pending or, to Seller's knowledge,
threatened with respect to Seller's ownership or operation of the Station which
reasonably may be expected to result in the revocation, material adverse
modification, non-renewal or suspension of any of the Station Licenses, the
denial of any pending applications for Station Licenses, the issuance against
Seller of any cease and desist order, or the imposition of any administrative
actions by the FCC or any other Governmental Entity with respect to the Station
Licenses, or which reasonably may be expected to adversely affect the Station's
ability to operate as currently operated or Buyer's ability to obtain
assignment of the Station Licenses. With the exception of such temporary
reduced power operations as are necessary for routine maintenance, the Station
operates (i) in conformity with Station Licenses; and (ii) within the operating
power tolerances specified in 47 C.F.R. Section 73.1560(b). No other
broadcast station or radio communications facility is causing interference to
the Station's transmissions beyond that which is allowed by FCC rules and
regulations. Seller has all necessary authority to use the call signs set
forth on Schedule 1.1.1.
6.1.6 Litigation. Except as disclosed on Schedule 6.1.6,
there are no actions, suits, inquiries, judicial or administrative proceedings,
or arbitrations pending or, to the knowledge of Seller, threatened against
Seller or any of its respective properties or assets by or before any
arbitrator or Governmental Entity nor are there any investigations relating to
Seller or any of its respective properties or assets pending or, to the
knowledge of Seller, threatened by or before any arbitrator or Governmental
Entity that has had or that reasonably could be expected to have a Material
Adverse Effect. There are no material judgments, decrees, injunctions, or
orders of any Governmental Entity or arbitrator outstanding against Seller or
any of its respective properties or assets. There is no action, suit, inquiry,
judicial or administrative proceeding pending or, to the knowledge of Seller,
threatened against Seller by a third party relating to the transactions
contemplated by this Agreement.
6.1.7 Insurance. Schedule 6.1.7 sets forth a list of all
fire, liability and other forms of insurance and all fidelity bonds held by or
applicable to the Station setting forth in respect of each such policy the
policy name, policy number, carrier, term, type of coverage and annual premium,
each of which is in full force and effect on the date hereof, valid and
enforceable in accordance with its terms and in amounts which are adequate in
relation to the business and assets of Seller and the Station. To Seller's
knowledge, no event has occurred, including, without limitation, the failure by
Seller to give any notice or information, or the delivery of any inaccurate or
erroneous notice or information, which limits or impairs the
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rights of Seller under any such insurance policies. Seller shall keep
comparable policies of insurance in effect for acts, omissions and events
occurring on or prior to the Closing Date.
6.1.8 Real Estate. (a) Seller has, and upon Closing,
Buyer will have, good and marketable title to the Owned Real Estate and, except
as set forth on Schedule 1.1.8, valid leaseholds in the Leased Real Estate,
free and clear of any Liens except for the Permitted Liens. The buildings (or
portions thereof), improvements and fixtures that are included in the Real
Estate are suitable for their intended use. Seller owns, or has a valid right
to use adequate routes of ingress and egress to, from and over all of the Real
Estate necessary to operate the Station. The Real Estate has adequate water
supply, sewage and waste disposal facilities, is connected to and served by
telephone, gas, electricity and other utility equipment facilities and services
necessary for the operation or use of the Real Estate. Such facilities and
services are adequate for the present use and operation of the Real Estate on a
fully occupied basis, and are installed and connected pursuant to valid
material permits and are in material compliance with all material governmental
regulations. To Seller's knowledge, no fact or condition exists which would
result in the termination or impairment of the furnishing of utility services
to the Real Estate. Schedule 1.1.7 lists the street address and/or legal
descriptions of the Owned Real Estate and Schedule 1.1.8 lists the street
addresses and/or legal descriptions of the Leased Real Estate. All real estate
Taxes, assessments and use charges pertaining to the Owned Real Estate that
have become due have been paid in full.
(b) The Real Estate, any improvements thereon, and the
use by Seller thereof, conform in all material respects, to (i) all applicable
laws, including but not limited to zoning requirements and the Americans With
Disabilities Act, and (ii) all restrictive covenants, if any. There are no
eminent domain proceedings pending, or to Seller's knowledge, threatened
against the Real Estate. All material improvements (i) have been constructed
in a good and workmanlike manner, free, in all material respects, from defects
in workmanship and material, and (ii) have been constructed, occupied,
maintained and operated in material compliance with all applicable laws,
insurance requirements, contracts, leases, permits, licenses, ordinances,
restrictions, building set-back lines, covenants, reservations, and easements,
and Seller has received no notice, written or verbal, claiming any material
violation of any of the same or requesting or requiring the performance of any
material repairs, alterations or other work in order to so comply. Other than
Permitted Liens, no improvement on any of the Real Estate encroaches upon any
adjacent real property of any other person or entity. The heating, air
conditioning, plumbing, ventilating, utility, sprinkler and other mechanical
and electrical systems, apparatus and appliances located on the Real Estate or
in the improvements are in good operating condition (normal wear and tear
excepted), free from material defects in workmanship and material.
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6.1.9 Personal Property. Schedule 1.1.2 hereto contains a
list of all material tangible personal property and assets owned or held by
Seller and used in the conduct of the business and operations of the Station
(other than Real Estate, which is addressed in the foregoing Section 6.1.8).
Except as disclosed in Schedule 1.1.2, Seller owns and will have on the Closing
Date, and upon Closing Buyer will own and will have, good and marketable title
to all property referred to in the immediately preceding sentence and none of
such property is, or at the Closing will be, subject to any Liens other than
Permitted Liens. The tangible personal property and fixtures owned or used by
Seller necessary for the operation of the Station, are, in all material
respects, in good operating condition (subject to normal wear and tear) and are
sufficient to permit the conduct of the business of the Station in material
compliance with FCC rules and regulations. Seller owns or holds under valid
leases, all of the tangible personal property and fixtures necessary to conduct
the business of the Station as presently conducted. The Station Assets to be
transferred hereunder constitute all of the assets, rights and properties that
are required for the operation of the Station as they are now conducted.
6.1.10 Liens and Encumbrances. All of the Station Assets
are free and clear of all liens, pledges, claims, security interests,
restrictions, mortgages, tenancies and other possessory interests, conditional
sale or other title retention agreements, assessments, easements, rights of
way, covenants, restrictions, rights of first refusal, defects in title,
encroachments and other burdens, options or encumbrances of any kind
(collectively, "Liens") except (a) statutory Liens securing payments not yet
delinquent or the validity of which are being contested in good faith by
appropriate actions, (b) purchase money Liens arising in the ordinary course,
(c) Liens for Taxes not yet delinquent, (d) Liens securing indebtedness, all of
which Liens will be discharged at the Closing upon repayment by Seller of all
amounts due and owing, (e) Liens which in the aggregate do not materially
detract from the value or materially impair the present and continued use of
the properties or assets subject thereto in the usual and normal conduct of the
business of the Station, (f) Liens on leases arising from the provisions of
such leases, (g) zoning ordinances and (h) any other permitted exceptions
listed on Schedule 6.1.10 hereto (the Liens referred to in clauses (a) through
(h) being "Permitted Liens").
6.1.11 Environmental Matters.
On the date of this Agreement, except as disclosed on Schedule 6.1.11:
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(a) The Station and any and all Real Estate is, and to
Seller's actual knowledge with respect to any predecessor or prior
owner, operator or lessee (each a "Predecessor") has been, in
compliance, in all material respects, with all Environmental Laws
(defined in Section 6.1.11(f));
(b) No judicial or administrative proceedings are pending
or, to the knowledge of Seller threatened against Seller, relating to
any of the Real Estate, alleging the violation of or seeking to impose
liability on Seller pursuant to any Environmental Law. Seller has not
received any written notice or claim or other written communication
from any Governmental Entity or other person alleging the violation of
or liability under any Environmental Laws in connection with any of
the Real Estate or operations thereon;
(c) There are no facts, circumstances or conditions
associated with the Real Estate or the operations thereon known to
Seller that could reasonably be expected to give rise to a material
environmental claim against the Station or the owner or operator
thereof or result in the Station or the owners or operators thereof
incurring material Environmental Costs and Liabilities (as defined in
subsection (f) below);
(d) All substances, materials or waste that are regulated
by federal, state or local government under the Environmental Laws as
hazardous, toxic or a pollutant or contaminant as well as any
petroleum or petroleum derived product (collectively, "Hazardous
Substances"), used or generated by Seller or to Seller's actual
knowledge, by any Predecessor in connection with the Real Estate, have
been stored, used, treated, and disposed of by such persons or on
their behalf in such manner as not to result in any material
Environmental Costs or Liabilities;
(e) There are not now, nor have there been in the past,
on, in or under any Real Estate when owned, leased or operated by
Seller or, to Seller's knowledge, when owned, leased or operated by
any Predecessor, any of the following: (i) underground storage tanks,
above-ground storage tanks, dikes or impoundments containing Hazardous
Substances, (ii) asbestos containing materials, (iii) polychlorinated
biphenyls or related compounds (other than those labeled and
maintained in accordance with applicable Environmental Laws) in
amounts or concentrations regulated under the Environmental Laws or
(iv) radioactive substances in amounts or concentrations regulated
under the Environmental Laws; and
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(f) For purposes of this section, the following terms
have the following meanings: "Environmental Laws" shall mean all
applicable federal, state and local laws, statutes, codes, rules,
regulations, common law or other legal requirements relating to the
environment, natural resources, and public or employee health and
safety; "Environmental Costs and Liabilities" means any losses,
including environmental remediation costs, liabilities, obligations,
damages, fines, penalties or judgments, arising from or under any
Environmental Law or order of or agreement with any Governmental
Entity or other person.
6.1.12 Taxes. (a) All Tax Returns (as defined in subsection
(h) below) that are required to be filed on or before the execution of this
Agreement by Seller have been duly filed on a timely basis under the statutes,
rules and regulations of each jurisdiction in which such Tax Returns are
required to be filed and Seller will file or will cause to be duly filed, all
Tax Returns required to be filed by Seller as of the Closing Date and with
respect to any taxable period prior to or which includes the Closing Date. All
such Tax Returns are (or will be) complete and accurate in all respects.
Except as set forth on Schedule 6.1.12, all Taxes, whether or not reflected on
the Tax Returns, which are due with respect to Seller and any Affiliates have
been timely paid by Seller, and/or any such Affiliates, whether or not such
Taxes are disputed. For the purposes of this Section 6.1.12, Affiliates shall
mean any entity that files a consolidated Tax Return with Seller.
(b) No claim for assessment or collection of Taxes has
been asserted against Seller or any Affiliates. Neither Seller nor its
Affiliates are a party to any pending audit, action, proceeding or
investigation by any Governmental Entity for the assessment or collection of
Taxes nor do Seller or any of its Affiliates have knowledge of any threatened
audit, action, proceeding or investigation.
(c) Neither Seller nor its Affiliates have waived or
extended any statutes of limitation for the assessment or collection of Taxes.
No claim has ever been made by a Governmental Entity in a jurisdiction where
Seller or any of its Affiliates do not currently file Tax Returns that it is or
may be subject to taxation by that jurisdiction nor is Seller or any of its
Affiliates aware that any such assertion of jurisdiction is pending or
threatened. No Liens, other than Permitted Liens (whether filed or arising by
operation of law), have been imposed upon or asserted against any of the
Station Assets as a result of or in connection with any failure, or alleged
failure to pay any Tax.
(d) Seller has withheld and paid all Taxes required to be
withheld in connection with any amounts paid or owing to any employee,
creditor, independent contractor or other third party.
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(e) Seller is not a foreign person within the meaning of
Section 1445 of the Code.
(f) The performance of the transactions contemplated
hereby will not (either alone or upon the occurrence of any additional or
subsequent event) result in any payment that would constitute an "excess
parachute payment" within the meaning of Section 280G of the Code.
(g) None of the Station Assets is (i) "tax-exempt use"
property within the meaning of Section 168(h) of the Code, (ii) required to be
treated as owned by another person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, (iii) "tax
exempt bond financed property" within the meaning of Section 168(g) of the Code
or (iv) "limited use property" (as that term is used in Rev. Proc. 76-30).
(h) For purposes of this Agreement, the terms "Tax" and
"Taxes" shall mean all federal, state, local, or foreign taxes, assessments,
duties, levies or similar charges of any kind including, without limitation,
all income, payroll, Medicare, withholding, unemployment insurance, social
security, sales, use, service, service use, leasing, leasing use, excise,
franchise, gross receipts, value added, alternative or add-on minimum,
estimated, occupation, real and personal property, stamp, duty, transfer,
workers' compensation, severance, windfall profits, environmental (including
Taxes under Section 59A of the Code), other Tax, charge, fee, levy or
assessment of the same or of a similar nature, including any interest, penalty,
or addition thereto' whether disputed or not. The term "Tax Return" means any
return, declaration, report, claim for refund, or information return or
statement relating to Taxes or any amendment thereto, and including any
schedule or attachment thereto.
(i) Alternative Procedure. Buyer and Seller agree that,
pursuant to the "Alternative Procedure" provided in section 5 of Revenue
Procedure 96-60, 1996-2 C.B. 399, (i) Buyer and Seller will report on a
predecessor/successor basis as set forth therein, (ii) Seller will be relieved
from filing a Form W-2 with respect to any employee of Seller who accepts
employment with Buyer and (iii) Buyer will undertake to file (or cause to be
filed) a Form W-2 for each such employee for the year that includes the Closing
Date (including the portion of such year that such employee was employed by
Seller). Seller agrees to provide Buyer with all payroll and
employment-related information with respect to each employee of Seller who
accepts employment with Buyer.
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6.1.13 Personnel. Attached as Schedule 6.1.13 is a complete
and correct list as of the date of this Agreement of the names, positions, and
location of all employees or other station and broadcast personnel (whether
employees or independent contractors) of the Station, which sets forth the
current salaries of all such employees and the other compensation arrangements
with all General Managers, Station Managers, General Sales Managers, Local
Sales Managers, National Sales Managers, Program Directors, Business Managers
and Traffic Managers (collectively, "Station Management") and all on-the-air
broadcast personnel of the Station and indicates which of those employees,
Station Management or on-the-air broadcast personnel is a party to an
employment or consulting or similar contract with Seller that is not terminable
upon not more than 60 days notice without additional cost to Seller.
6.1.14 Certain Agreements. Except as set forth in Schedule
6.1.14, the Contracts are the only contractual agreements necessary to carry
out the business and operations of the Station as currently conducted. Each
Contract (as identified on Schedule 1.1.3) is a valid and binding obligation of
Seller and is in full force and effect and, to the knowledge of Seller, each
other party to such Contract with respect to the Station, has performed in all
material respects the obligations required to be performed by it and is not
(with or without lapse of time or the giving of notice, or both) in material
breach or default thereunder. Schedule 1.1.3 identifies, as to each Contract,
whether the consent of the other party thereto is required in order for such
Contract to continue in full force and effect upon the consummation of the
transactions contemplated hereby. There has not been (i) any threatened
cancellation of any material Contracts, (ii) any outstanding disputes, of a
material nature, under any material Contracts or (iii) to the Seller's
knowledge, any bases for any claim of breach or default thereunder. Seller has
no knowledge that any of the material Contracts that are renewable will not be
renewed by the other party on commercially reasonable terms.
6.1.15 ERISA Compliance. Neither Seller nor any other
trades or businesses under common control, or which is treated as a single
employer with Seller under Sections 414(b),(c),(m) or (o) of the Code
(collectively, the "ERISA Group") has contributed or been obligated to
contribute to any "multi employer plan" as such term is defined in Section
3(37) or Section 4001(a)(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") except as disclosed on Schedule 6.1.15. Schedule
6.1.15 lists all "employee benefit plans" within the meaning of Section 3(3) of
ERISA and bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
salary continuation, educational assistance, club memberships, company car
(other than those provided to employees pursuant to employment agreements
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listed on Schedule 1.1.3 hereto), insurance or other plan or arrangement or
understanding providing benefits to any present or former employee or
contractor of the Station maintained by Seller or as to which Seller (with
respect to such individuals) has any liability or obligation (collectively,
"Employee Benefit Plans").
6.1.16 Labor. Seller has not 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 its employees. Except as
disclosed on Schedule 6.1.16, since June 30, 1995, Seller (a) is and has been
in compliance, in all material respects, with all applicable laws regarding
employment and employment practices, terms and conditions of employment, wages
and hours, and plant closing, occupational safety and health and workers'
compensation and is not engaged, nor has it engaged, in any unfair labor
practices, (b) has no, and has not had any unfair labor practice charges or
complaints pending or, to the Seller's knowledge, threatened against it before
the National Labor Relations Board, (c) has no and has not had any grievances
pending or, to Seller's knowledge, threatened against it and (d) has no, and
has not had any charges pending or, to Seller's knowledge, threatened against
it before the Equal Employment Opportunity Commission or any state or local
agency responsible for the prevention of unlawful employment practices. There
is no labor strike, slowdown, work stoppage or lockout actually pending or, to
the knowledge of Seller, threatened against or affecting the Station. To
Seller's knowledge, no union organizational campaign or representation petition
is currently pending with respect to the employees of Seller.
6.1.17 Patents, Trademarks, Etc. Schedule 1.1.4 sets forth
all call letters, patents, patent applications, trademarks, trade names,
Internet domain names, service marks, trade secrets, applied for, issued, owned
or used, copyrights and other proprietary Intellectual Property used in the
operation of the Station (whether owned, leased or licensed by Seller). Seller
has, and upon the Closing Buyer will have, good and marketable title to the
material Intellectual Property owned by it, free and clear of any Liens except
for Permitted Liens and except for any infringement claims by third parties of
which Seller is not aware. Seller has not received any notice of any claimed
conflict, violation or infringement of such Intellectual Property rights, and
to the Seller's knowledge, none of such Intellectual Property rights are being
infringed by any third party. To Seller's knowledge, the operation of Seller's
business does not infringe on the intellectual property rights of any other
person.
6.1.18 Absence of Certain Changes or Events. Except as
contemplated or expressly permitted by this Agreement, since December 31, 1997
there has not been (a) any material damage, destruction or loss of any kind
with respect to the Station not covered by valid and collectible insurance,
nor, to Seller's knowledge, has there been any event or
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circumstance which has had or reasonably could be expected to have a Material
Adverse Effect; (b) the execution of any agreement with any Station Management
or broadcast personnel (whether an employee or independent contractor)
providing for his/her employment, or any increase in compensation or severance
or termination of benefits payable or to become payable by Seller to any
officer, Station Management, or broadcast personnel (whether an employee or
independent contractor), or any increase in benefits under any collective
bargaining agreement, except as to all of the foregoing in this clause (b), in
the ordinary course of business consistent with prior practices and except as
permitted by Section 8.1.1 or (c) any change by Seller in its financial or Tax
accounting principles or methods, except insofar as required by GAAP,
applicable law or circumstances which did not exist as of the date of the
December 31, 1997 balance sheet included in the Seller's Financial Statements.
6.1.19 Commission or Finder's Fees. Neither Seller nor any
entity acting on behalf of Seller has agreed to pay a commission, finder's fee
or similar payment to any person or entity in connection with this Agreement or
any matter related hereto.
6.1.20 Full Disclosure. No representation or warranty by
Seller contained in this Agreement (including the Schedules hereto) or in any
certificate furnished pursuant to this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
6.1.21 Seller's Financial Condition. No insolvency
proceedings of any character, including, without limitation, bankruptcy,
receivership, reorganization, composition or arrangement with creditors,
voluntary or involuntary, affecting Seller or any of its respective assets or
properties are pending, or to the 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 a basis for, the institution of any such
insolvency proceedings. Seller shall use the proceeds received under this
Agreement to pay or to make appropriate provision for the payment of any and
all creditors of Seller prior to making any distribution to its shareholders.
6.1.22 Books and Records. The books, records and accounts
of Seller maintained with respect to the Station, accurately and fairly
reflect, in reasonable detail, in all material respects, the transactions and
the assets and liabilities of Seller. Seller has not engaged in any
transaction, maintained any bank account or used any of the funds of Seller
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except for transactions, bank accounts and funds which have been and are
reflected, in all material respects, in the normally maintained books and
records of the Station.
6.1.23 Barter Arrangements. Schedule 6.1.23 accurately
describes all barter, trade or similar arrangements for the sale of advertising
for other than cash and all Trade Agreements relating to the operation of the
Station which are outstanding as of July 29, 1998. With respect to the
Station, all advertising time sold under barter, trade or similar arrangements
for other than cash or under Trade Agreements may be, preempted by advertising
time that is sold for cash. All barter, trade or similar arrangements for the
sale of advertising time for other than cash and all Trade Agreements have been
entered into in the ordinary course consistent with past practices.
6.1.24 Interest in Competitors, Suppliers and Customers.
Except as set forth on Schedule 6.1.24 hereto, neither Seller nor any officer,
director or Affiliate of Seller has any ownership interest in any competitor,
supplier, customer or other service provider of Seller or any property used in
the operation of the business of Seller.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BUYER
7.1 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller the following:
7.1.1 Organization and Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and is duly qualified to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, other than in such jurisdictions where the
failure to so qualify has not had and would not reasonably be expected to have
a material adverse effect on the assets, or the business of Buyer, or on
Buyer's ability to consummate the transactions contemplated by this Agreement.
7.1.2 Authorization and Binding Obligation. Buyer has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. Buyer's execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Buyer and constitutes the legal, valid and
binding obligation of Buyer, enforceable against it in accordance with its
terms.
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7.1.3 Qualification. To Buyer's knowledge, there is no
fact, allegation, condition, or circumstance that could reasonably be expected
to prevent the prompt grant of the FCC Consents. Buyer knows of no fact that
would, under the Communications Act, or the rules, regulations and policies of
the FCC, disqualify Buyer from becoming the licensee of the Station or, as of
the date hereof, otherwise require Buyer to obtain a waiver of any FCC rule,
regulation or policy in order to obtain the FCC Consents. There are no
proceedings, complaints, notices of forfeiture, claims, or investigations
pending or, to the knowledge of Buyer, threatened against any or in respect of
any of the broadcast stations licensed to Buyer or its Affiliates that would
materially impair the qualifications of Buyer to become a licensee of the
Station or delay the FCC's processing of the FCC Applications.
7.1.4 Absence of Conflicting Agreements or Required
Consents. Except as set forth in Schedule 7.1.4 hereof, the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby by Buyer: (a) do not violate, conflict with or result in
any breach of any provision of the charter or bylaws of Buyer; (b) violate,
conflict with or will result in a violation or breach of, or constitute a
default (with or without due notice or lapse of time or both) under, or permit
the termination of, or will result in the acceleration of, or entitle any party
to accelerate (whether as a result of the sale of the Station Assets or
otherwise) any obligation, or result in the loss of any benefit, or give rise
to the creation of any lien, charge, security interest or encumbrance upon any
of the properties or assets of Buyer or any its subsidiaries under any of the
terms, conditions or provisions of any loan or credit agreement, note, bond,
mortgage, indenture or deed of trust, or any license, lease, agreement or other
instrument or obligation to which any of them are a party or by which they or
any of their properties or assets may be bound or affected, or (c) violate any
order, writ, judgment, injunction, decree, statute, rule or regulation of any
Governmental Entity applicable to Buyer or any of its respective properties or
assets, except for those violations that individually or in the aggregate could
not reasonably be expected to have a material adverse effect on Buyer's ability
to consummate the transactions contemplated by this Agreement.
7.1.5 Litigation. There are no actions, suits, inquiries,
judicial or administrative proceedings, or arbitrations pending or, to the
knowledge of Buyer, threatened against Buyer or any of its respective
properties or assets by or before any arbitrator or Governmental Entity nor are
there any investigations relating to Buyer or any of its respective properties
or assets pending or, to the knowledge of Buyer, threatened by or before any
arbitrator or Governmental Entity that has had or that reasonably could be
expected to have a material adverse effect on Buyer's ability to consummate the
transactions contemplated by this Agreement. There are no material judgments,
decrees, injunctions, or orders of any Governmental Entity or arbitrator
outstanding against Buyer or any of its
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respective properties or assets that has had or that reasonably could be
expected to have a material adverse effect on Buyer's ability to consummate the
transactions contemplated by this Agreement. There is no action, suit,
inquiry, judicial or administrative proceeding pending or, to the knowledge of
Buyer, threatened against Buyer by a third party relating to the transactions
contemplated by this Agreement.
7.1.6 Commission or Finder's Fees. Neither Buyer nor any
entity acting on behalf of Buyer has agreed to pay a commission, finder's fee
or similar payment to any person or entity in connection with this Agreement or
any matter related hereto.
7.1.7 Full Disclosure. No representation or warranty by
Buyer contained in this Agreement (including the Disclosure Schedules hereto)
or in any certificate furnished pursuant to this Agreement contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary, in light of the circumstances under which it was
or will be made, in order to make the statements herein or therein not
misleading.
ARTICLE 8
COVENANTS OF SELLER
8.1 Seller Covenants. Seller covenants and agrees with Buyer
that, pending Closing and except as otherwise agreed to in writing by Buyer:
8.1.1 Conduct Prior to the Closing. Seller shall:
(a) use commercially reasonable efforts to maintain its
present business organization, keep available the services of its
present employees and independent contractors, preserve its
relationships with its customers and others having business
relationships with it, and refrain from materially and adversely
changing any of its business policies (including but not limited to
advertising (including substantially the same amount of cash
expenditure), marketing, pricing, purchasing, personnel, sales, and
budget policies);
(b) maintain its books of account and records in the
usual and ordinary manner and in accordance with GAAP except as
otherwise provided in Section 6.1.3;
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(c) notify Buyer if the regular broadcast transmission of
the Station from its main transmitting facilities at full authorized
effective radiated power is interrupted for a period of more than five
consecutive hours or for an aggregate of 10 or more hours in any
continuous three-day period;
(d) operate in the usual and ordinary course of business
in accordance with past practices and conduct its business in all
material respects in compliance with the terms of the Station Licenses
and all applicable laws, rules, and regulations, including, without
limitation, the applicable rules and regulations of the FCC through
the Closing Date;
(e) use, repair, and, if necessary, replace the Station's
studio and transmission assets in a reasonable manner consistent with
historical practice and maintain its assets in substantially their
current condition, ordinary wear and tear excepted;
(f) maintain insurance in conformity with Section 6.1.7
through the Closing Date;
(g) not knowingly incur any debts, obligations, or
liabilities (absolute, accrued, contingent, or otherwise) that include
obligations (monetary or otherwise) to be performed by Buyer after the
Closing that exceeds $50,000 individually or $150,000 in the
aggregate;
(h) not lease, mortgage, pledge, or subject to a lien,
claim, or encumbrance (other than Permitted Liens) any of the Station
Assets or sell or transfer any of the Station Assets without replacing
such Station Assets with an asset of substantially the same value and
utility;
(i) without the prior consent of Buyer, which consent
shall not be unreasonably withheld or delayed, (i) not modify or
extend any Contracts, other than Contracts for the sale of advertising
time for cash, or (ii) enter into any new Contract, other than
contracts for the sale of advertising time for cash, or other than
non-advertising Contracts obligating the Companies to provide payments
or benefits of less than $50,000 each over the life of the Contract
and $150,000 in the aggregate;
(j) except for stay bonuses paid or payable by Seller,
not make or grant any general wage or salary increase or generally
materially modify the employees' terms and conditions of employment,
other than in the ordinary course of business,
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consistent with past practices, and with respect to any Station
Management and on-air personnel, Seller shall not make or grant any
wage or salary increase or modify any terms and conditions of
employment without the prior consent of Buyer;
(k) not make (i) any change in the accounting principles,
methods, or practices followed by it or depreciation or amortization
policies or rates or (ii) any change in any Tax election or settle any
Tax audit or controversy relating to the Station Assets;
(l) not make any loans or make any dividends or
distributions other than of Excluded Assets;
(m) other than in the ordinary course of business, not
cancel or compromise any debt or claim, or waive or release any right,
of material value (other than any of the foregoing that constitutes
Excluded Assets);
(n) not disclose to any person (other than Buyer and its
representatives) any confidential or proprietary information;
(o) use its commercially reasonable efforts to maintain
the present format of the Station and with programming consistent with
past practices;
(p) other than in the ordinary course of business, not
increase the number of regularly scheduled commercial units run during
the day-parts on the Station (other than changes in the number of
commercial units run during any day-part as a result of operating
difficulties that require commercial units to be broadcast at times
other than as scheduled); and
(q) agree to do any of the foregoing.
8.1.2 Access. Seller shall, or shall cause the Station, to
(a) give Buyer and Buyer's counsel, accountants, engineers and other
representatives, including environmental consultants, reasonable access during
normal business hours to all of Seller's properties, books, Contracts, Trade
Agreements, reports and records including financial information and Tax Returns
relating to the Station, and to all real estate, buildings and equipment
relating to the Station, in order that Buyer may have full opportunity to make
such investigation, including but not limited to, environmental assessments, as
it desires of the affairs of the Station and (b) furnish Buyer with
information, and copies of all documents and agreements including but not
limited to financial and operating data and other information concerning the
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financial condition, results of operations and business of the Station, that
Buyer may reasonably request. The rights of Buyer under this Section shall not
be exercised in such a manner as to interfere unreasonably with the business of
the Station.
8.1.3 Satisfaction of Conditions; Closing. Seller shall
use all commercially reasonable efforts to conduct the business of the Station
in such a manner that on the Closing Date the representations and warranties of
Seller contained in this Agreement shall be true in all material respects as
though such representations and warranties were made on and as of such date.
Furthermore, Seller shall cooperate with Buyer and use all commercially
reasonable efforts to satisfy promptly all conditions required hereby to be
satisfied by Seller in order to expedite the consummation of the transactions
contemplated hereby.
8.1.4 Sale of Acquired Assets; Negotiations. Seller shall
not, and Seller shall cause its respective Affiliates, directors, officers,
employees, agents, representatives, legal counsel, and financial advisors not
to, (a) solicit, initiate, accept, consider, entertain or encourage the
submission of proposals or offers from any person or entity with respect to the
acquisition contemplated by this Agreement or any similar transaction wherein
such person or entity would directly or indirectly acquire all or any portion
of the Station Assets or ownership interests in Seller, or any merger,
consolidation, or business combination, directly or indirectly, with or for
Seller or all or substantially all of the Seller's business, or (b) participate
in any negotiations regarding, or, except as required by legal process
(including pursuant to discovery or agreements existing on the date hereof),
furnish to any person or entity (other than Buyer) to do or seek any of the
foregoing. Seller shall not enter into any agreement or consummate any
transactions that would interfere with the consummation of the transactions
contemplated by this Agreement. Seller shall promptly notify Buyer if it
receives any written inquiry, proposal or offer described in this Section 8.1.4
or any verbal inquiry, proposal or offer described in this Section 8.1.4 that
is competitive with the terms of the transactions contemplated by this
Agreement, and Seller shall inform such inquiring person or entity of the
existence of this Agreement and make such inquiring person or entity aware of
Seller's obligations under this Section 8.1.4. The notification under this
Section 8.1.4 shall include the identity of the person or entity making such
inquiry, offer, or other proposal, the terms thereof, and any other information
with respect thereto as Buyer may reasonably request. Seller shall not provide
any confidential information concerning its business or its properties or
assets to any third party other than in the ordinary course of the business and
consistent with prior practice. Seller has ceased and caused to be terminated
any existing activities, discussions or negotiations with any person or entity
conducted heretofore with respect to any of the foregoing.
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8.1.5 No Inconsistent Action. Seller shall not take any
action which is materially inconsistent with its obligations under this
Agreement.
8.1.6 Notification. Seller shall promptly notify Buyer in
writing of (a) the failure of Seller or, to Seller's knowledge, any employee or
agent of Seller to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with hereunder; (b) the occurrence of any
event that would entitle Buyer to terminate this Agreement pursuant to Section
15.1; or (c) of any overt threat or actual resignation or termination of any
Station Management or over-the-air personnel at the Station prior to the
Closing.
8.1.7 FCC Reports. Seller shall file on a current basis
through the Closing Date all reports and documents required to be filed with
the FCC with respect to the Station Licenses. Copies of each such report and
document filed between the date hereof and the Closing Date shall be furnished
to Buyer promptly after its filing.
8.1.8 Updating of Information. Between the date of this
Agreement and the Closing Date, Seller will deliver to Buyer, on a monthly
basis within 30 days of the end of each month, information relating to the
operation of the Station, including weekly sales reports and such other
financial information that may be reasonably requested.
8.1.9 Response to Certain Actions. Seller agrees to
cooperate and use its commercially reasonable efforts to contest and resist any
action, including administrative or judicial action, and make reasonable
attempts to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent, that is
in effect and that restricts, prevents or prohibits the consummation of the
transactions contemplated by this Agreement.
8.1.10 Barter and Trade. Seller shall use its commercially
reasonable efforts to (a) reduce the total amount of advertising time owed for
other than cash and (b) if the value of Seller's obligations to provide goods
or services other than for cash (all of which obligations are Assumed
Liabilities) are greater than the value of goods or services contemplated to be
received by Seller other than for cash that are to be assigned to Buyer under
this Agreement, reduce such excess amount prior to the Closing; provided,
however, that in no event shall the Purchase Price be decreased as a result of
such remaining excess value existing as of the Closing. Any Trade Agreements
entered into after July 29, 1998 shall have been, or shall be, entered into
only in the ordinary course of Seller's business and consistent with past
practices.
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8.1.11 Interim Financial Statements. Seller shall promptly
deliver to Buyer copies of any monthly, quarterly or annual financial
statements relating to the Station's operations that may be prepared by it
during the period from the date hereof through the Closing Date. Such
financial statements shall fairly present, in all material respects, the
financial position and results of operations of the Seller as at the dates and
for the periods indicated, and shall be prepared on a basis consistent and in
accordance with the basis upon which the financial statements in Section 6.1.3
were prepared.
8.1.12 Estoppel Certificates. If requested by Buyer within
30 days of the date of this Agreement, Seller shall use commercially reasonable
efforts to obtain from third parties the estoppel certificates, nondisturbance
agreements, and/or written clarifications of the rights of Buyer thereunder,
all in form and substance reasonably satisfactory to Buyer.
8.1.13 Transfer of Employees. Prior to Closing, Seller
shall cause all employees of Parklane, as so designated on Exhibit 2 to
Schedule 6.1.13, to become employees of Seller and cause any employment
contracts with respect to such employees to be assigned to Seller without any
further modification of such contracts.
8.1.14 Termination of Management Agreement. Seller shall
cause any agreements, arrangements or understandings with Parklane that relate
in any way to the Station, the Station Assets, or the Seller's employees to be
terminated and of no further force and effect as of the Closing. Seller agrees
that Buyer shall have no obligations or liabilities arising from or related to
such agreements, arrangements or understandings. In addition, Seller agrees to
cause that certain Management Agreement dated as of February 17, 1994, by and
between Seller and Zebra, and any successor agreements thereto (the "Management
Agreement") to be terminated and of no further force and effect as of the
Closing. Seller agrees that Buyer shall have no obligations or liabilities
arising from or related to the Management Agreement.
ARTICLE 9
COVENANTS OF BUYER
9.1 Buyer Covenants. Buyer covenants and agrees that, pending the
Closing and except as otherwise agreed to in writing by Seller:
9.1.1 Notification. Buyer shall promptly notify Seller in
writing of (a) any litigation, arbitration or administrative proceeding pending
or, to its knowledge, threatened against Buyer which challenges the
transactions contemplated hereby or (b) the failure of Buyer, or, to Buyer's
knowledge, any employee or agent of Buyer to comply with or satisfy
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in any material respect any covenant, condition or agreement to be complied
with or satisfied by it hereunder and (c) the occurrence of any event that
would entitle Seller to terminate this Agreement pursuant to Sections 15.1.
9.1.2 No Inconsistent Action. Buyer shall not take any
action which is materially inconsistent with its obligations under this
Agreement.
9.1.3 Post-Closing Access. Buyer, for a period of seven
years following the Closing Date, shall make available during normal business
hours for audit and inspection by Seller and its representatives, for any
reasonable purpose and upon reasonable notice, all records, files, documents
and correspondence transferred to it hereunder relating to the pre-closing
period. During such seven-year period, Buyer shall at no time dispose of or
destroy any such records, files, documents and correspondence without giving 30
days prior notice to Seller to permit Seller, at its expense, to examine,
duplicate or take possession of and title to such records, files, documents and
correspondence. All information, records, files, documents and correspondence
made available or disclosed under this Section 9.1.3 shall be kept
confidential.
9.1.4 Satisfaction of Conditions; Closing. Buyer shall use
all commercially reasonable efforts to conduct its business in such a manner
that on the Closing Date the representations and warranties of Buyer contained
in the Agreement shall be true in all material respects as though such
representations and warranties were made on and as of such date. Furthermore,
Buyer shall cooperate with Seller and use all commercially reasonable efforts
to satisfy promptly all conditions required hereby to be satisfied by Buyer in
order to expedite the consummation of the transactions contemplated hereby.
9.1.5 Response to Certain Actions. Buyer agrees to
cooperate and use its commercially reasonable efforts to contest and resist any
action, including administrative or judicial action, and make reasonable
attempts to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent, that is
in effect and that restricts, prevents or prohibits the consummation of the
transactions contemplated by this Agreement and Buyer agrees to take the
actions described (under the circumstances so described) in Schedule 9.1.5.
9.1.6 Accrued Vacation. If an employee of Seller is hired
by Buyer as of the Closing and such employee has earned or accrued vacation
time since January 1, 1998 that is not subject to statutory payout by Seller,
Buyer shall recognize such earned or accrued vacation time and credit such
employee with such earned or accrued vacation time which shall be deemed an
Assumed Liability; provided, however, that Buyer is not obligated and
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shall not recognize or credit employee with any vacation time accrued by such
employee prior to January 1, 1998.
9.1.7 Other Acquisitions. Buyer agrees to close the Zebra
Acquisition and the Independent Group Acquisition unless Seller is in breach of
this Agreement or any of the applicable sellers are in breach of either of the
Zebra Acquisition or the Independent Group Acquisition agreements or Buyer is
otherwise not obligated to close with Seller under this Agreement or with any
of the applicable sellers under either of the Zebra Acquisition or the
Independent Group Acquisition agreements, in which case Buyer is not obligated
to close any of the Other Acquisitions or consummate the transactions
contemplated under this Agreement.
ARTICLE 10
JOINT COVENANTS
Buyer and Seller covenant and agree that, pending the Closing and
except as otherwise agreed to in writing, they shall act in accordance with the
following:
10.1 FCC Applications. Buyer and Seller shall prosecute the FCC
Applications with all reasonable diligence and otherwise use their commercially
reasonable efforts to obtain the FCC Consents as expeditiously as practicable,
but neither Buyer nor Seller shall have any obligation to satisfy complainants
or the FCC by taking any steps which would have a material adverse effect upon
Buyer or Seller (other than Buyer's obligations under Section 9.1.5).
Notwithstanding anything to the contrary contained herein, either party may
terminate this Agreement upon notice to the other, if, for any reason, other
than Buyer's failure to comply with Section 9.1.5 (in which case only Seller
can terminate), the FCC Applications are designated for hearing by the FCC;
provided, however, that 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 10.1, the
parties shall be released and discharged from any further obligation hereunder
without being subject to a claim by Seller for liquidated damages or any other
claims for damages.
10.2 Confidentiality. Each of Buyer and Seller shall each keep
confidential all information obtained by it with respect to the other party
hereto in connection with this Agreement and the negotiations preceding this
Agreement, including, without limitation, the results of, and information
relating to, the Studies (as defined in Section 10.8) and will use such
information solely in connection with the transactions contemplated by this
Agreement, and if the transactions contemplated hereby are not consummated for
any reason, each shall
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return to each other party hereto, without retaining a copy thereof, any
schedules, documents or other written information obtained from such other
party in connection with this Agreement and the transactions contemplated
hereby except to the extent required or useful in connection with any claim
made with respect to the transactions contemplated by this Agreement or the
negotiation thereof which will be returned following settlement of the claim.
Notwithstanding the foregoing, no party shall be required to keep confidential
or return any information which (a) is known or available through other lawful
sources, not bound by a confidentiality agreement with the disclosing party, or
(b) is or becomes publicly known through no fault of the receiving party or its
agents, or (c) is required to be disclosed pursuant to an order or request of a
judicial or government authority (provided the non-disclosing party is given
reasonable prior notice such that it may seek, at its expense, confidential
treatment of the information to be disclosed), (d) is developed by the
receiving party independently of the disclosure by the disclosing party or (e)
is required to be disclosed under applicable law or rule, as determined by
counsel for the receiving party.
10.3 Cooperation. Buyer and Seller shall cooperate fully with one
another in taking any actions, including actions 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.
10.4 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 from any and all loss, cost,
damage and expense (including but not limited to, reasonable attorney's fees)
sustained by Buyer as a result of any failure of Seller to comply with any
"bulk sales" or similar laws.
10.5 Public Announcements. Neither Buyer nor Seller shall issue
any press release or make any disclosure with respect to the transaction
contemplated by this Agreement without the prior written approval of the other
party, except as may be required by applicable law or by obligations pursuant
to any listing agreement with any securities exchange or the Nasdaq National
Market or any stock exchange or Nasdaq National Market regulations in which
case Buyer or Seller, as the case may be, shall give notice to the other party
prior to making such disclosure.
10.6 Hart-Scott-Rodino. Seller and Buyer shall submit to the
United States Department of Justice and the United States Federal Trade
Commission (the "FTC") not later than 15 business days after the date of this
Agreement all of the forms and information applicable to this transaction
required under the HSR Act and will use commercially
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reasonable efforts to respond promptly to any request by them for additional
information. Buyer and Seller shall use commercially reasonable efforts
(including the filing of a request for early termination) to obtain the early
termination of the waiting period under the HSR Act. Seller shall reimburse
Buyer for one-half of the filing fees for Buyer's HSR Act filing.
10.7 Employee Matters. At least 45 days prior to the Closing Date,
Buyer will provide Seller with a list (the "Employee List") of all employees to
whom Buyer intends to make offers of employment. Buyer will offer employment
as of the Closing to all employees on such Employee List, on such terms of
employment and conditions as determined by Buyer in its sole discretion.
Seller shall be responsible for all obligations or liabilities to those
employees not offered employment by Buyer, and Buyer shall have no obligations
with respect to those employees.
10.8 Condition of Real Estate. Buyer may, at its sole expense,
conduct environmental studies, title examinations, and land surveys (the
"Studies") of the Real Estate provided all information received as a result of,
or in the course of, any of the Studies will be deemed confidential (subject to
Section 10.2). Seller agrees to cooperate with any reasonable request of Buyer
for a site assessment or site review concerning any environmental, title or
survey matter, including the making available of such personnel of Seller as
Buyer may reasonably request, so long as such activities do not unreasonably
interfere with the conduct of Seller's business. At the discretion of Buyer,
Buyer may arrange, at its sole expense, for one or more independent contractors
to conduct tests of the Real Estate, including tests of air, soil (including
surface and subsurface materials), surface water and ground water, or any
equipment or facilities located thereon, in order to identify any present or
past release or threatened release of any hazardous substances. Such tests may
be done at any time, or from time to time, upon reasonable notice and under
reasonable conditions, which do not impede the performance of such tests. If
Buyer notifies Seller within 45 days of the date of this Agreement that the
Studies disclose potential Environmental Costs and Liabilities in excess of
$100,000 or the presence of Hazardous Materials at concentrations exceeding
those allowed by Environmental Laws, evidence encroachments that materially and
adversely affect the use (for the purpose currently used) of the Real Estate,
or any other matters that materially affect the title, value or use of the Real
Estate, Seller shall promptly commence remedial action at its expense to cure
the condition giving rise to such matter and attempt to cure such condition
prior to the Closing; provided that Seller shall not be obligated to spend (but
may choose to spend) more than $100,000 in the aggregate in its attempts to
cure all such conditions. Seller shall notify Buyer within 30 days after its
receipt of Buyer's Studies if it determines that it is unable to cure such
conditions for $100,000 or less and chooses not to attempt to cure such
conditions, in which case Buyer may elect within 30 days after Buyer's receipt
of Seller's notice that it chooses not to attempt to cure
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such conditions (a) to terminate this Agreement or (b) to waive such
obligations and receive a $100,000 credit at the Closing. If this Agreement is
terminated in accordance with the immediately preceding sentence, no party
shall have any liability to the other with respect to such termination. Either
party may extend the Closing by not more than 30 days if either reasonably
determines that any necessary remedial action can be completed during such
period.
10.9 Warn Act Compliance. Through the Closing Date, Seller shall
take all necessary actions to comply with the Federal Workers Adjustment and
Retraining Act to the extent applicable. Buyer shall not have any disclosure
or announcement obligations under such act with respect to any employees or
former employees of Seller, and Seller shall indemnify Buyer and hold Buyer
harmless from any action, claim, suit, proceeding or assertion of liability
with respect thereto. Seller shall take all necessary actions to comply with
Part 6, Subtitle B, of Title I of ERISA with respect to its employees and
former employees, and Buyer shall not have any obligations or liability with
respect to qualifying events (as defined in Section 603 of ERISA on or before
the Closing Date.
ARTICLE 11
CONDITIONS OF CLOSING BY BUYER
The obligations of Buyer hereunder, including, without limitation, the
obligation to close the transactions contemplated herein, are, at its option,
subject to satisfaction, at or prior to the Closing, of all of the following
conditions, any of which may be waived by Buyer:
11.1 Representations, Warranties and Covenants. All
representations and warranties of Seller made in this Agreement or in any
Exhibit, Schedule or document delivered pursuant hereto, shall be true and
correct in all material respects as of the date hereof and on and as of the
Closing Date as if made on and as of that date, except for changes expressly
permitted by the terms of this Agreement and except those given as of a
specified date which must only be true and correct as of such specified date.
Notwithstanding anything herein to the contrary, a breach of Section 6.1.6
resulting from Buyer's breach of Section 9.1.5 shall not be deemed a breach of
Section 6.1.6 by Seller.
11.2 Compliance with Agreement. All of the terms, covenants and
conditions to be complied with and performed by Seller on or prior to the
Closing shall have been complied with or performed in all material respects.
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11.3 Third Party Consents and Approvals. Seller shall have
obtained all third-party consents and approvals, if any, required for the
transfer or continuance, as the case may be, of the Contracts designated by an
asterisk as "essential" on Schedule 1.1.3 (and contracts of a similar nature
that would have been marked as such on Schedule 1.1.3 had they been in
existence on the date of this Agreement).
11.4 Closing Certificates. Buyer shall have received a
certificate, dated as of the Closing Date, from Seller, executed by a an
executive officer of Seller to the effect of Sections 11.1 and 11.2.
11.5 Governmental Consents.
(a) The FCC Consents shall have been issued by the FCC
without any conditions that would otherwise permit Buyer to terminate this
Agreement pursuant to Section 15.1(e), below, and each such FCC consent shall
have become a Final Order (as defined in Section 4.1).
(b) All applicable notification and waiting period
requirements under the HSR Act shall have been satisfied.
11.6 Adverse Proceedings. No injunction, order, decree or judgment
of any court, agency or other Governmental Entities shall have been rendered
against Seller or Buyer which would render it unlawful, as of the Closing, to
effect the transactions contemplated by this Agreement in accordance with its
terms.
11.7 Closing Documents. Seller shall have delivered or caused to
be delivered to Buyer, on the Closing Date, all special warranty deeds, bills
of sale, endorsements, assignments and other instruments of conveyance and
transfer consistent with the terms hereof and otherwise reasonably satisfactory
in form and substance to Buyer, effecting the sale, transfer, assignment and
conveyance of the Station Assets to Buyer.
11.8 Consulting, Confidentiality and Noncompetition Agreement. Mr.
Leon X. Zapis shall have executed and delivered to Buyer a Consulting,
Confidentiality and Noncompetition Agreement in the form attached as Exhibit
B-1 hereto.
11.9 Noncompetition Agreement. Seller shall have executed and
delivered to Buyer a Noncompetition Agreement in the form of Exhibit B-2
hereto.
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11.10 Indemnification and Escrow Agreement. Seller shall have
executed and delivered to Buyer the Indemnification and Escrow Agreement.
11.11 Release of Encumbrances. Evidence satisfactory to Buyer's
counsel of the payment or release of any and all Liens (other than Permitted
Liens not required to be released pursuant to the provisions of this
Agreement).
11.12 Legal Opinions. Buyer shall have received an opinion of Thano
G. Pasalis & Associates and Paul, Hastings, Janofsky & Walker LLP, each dated
as of the Closing Date, substantially in the form of Exhibits C-1 and C-2
hereto.
11.13 Earnest Money Letter of Credit. The Earnest Money Letter of
Credit (as defined in Section 14.3.1) shall have been returned to Buyer for
cancellation.
11.14 No Material Adverse Change. Since December 31, 1997, there
shall have been no material adverse change to the financial condition or
operating results of the Station (other than as a result of regulatory changes
affecting the radio broadcasting industry generally or general economic
conditions).
11.15 1445 Certificate. Seller shall have executed and delivered a
certificate, in a form reasonably satisfactory to the Buyer stating that Seller
is not a foreign person within the meaning of Section 1445 of the Code.
11.16 Other Acquisitions. The Zebra Acquisition and Independent
Group Acquisition shall concurrently close with the transactions contemplated
under this Agreement unless the Zebra Acquisition or Independent Group
Acquisition does not close solely due to the breach by Buyer of the agreement
governing the Zebra Acquisition or the Independent Group Acquisition, as
applicable, in which case this condition shall not apply with respect to such
acquisition which does not close solely due to the Buyer's breach.
11.17 Termination of Management Agreement. The Management Agreement
shall have been terminated and shall be of no further force and effect and
Buyer shall have no obligations or liabilities arising from or related to the
Management Agreement.
ARTICLE 12
CONDITIONS OF CLOSING BY SELLER
The obligations of Seller hereunder including, without limitation, the
obligation to close the transactions contemplated herein are, at their option,
subject to the satisfaction, at
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or prior to the Closing Date, of all of the following conditions, any of which
may be waived by Seller:
12.1 Representations, Warranties and Covenants. All
representations and warranties of Buyer made in this Agreement or in any
Exhibit, Schedule or document delivered pursuant hereto, shall be true and
correct in all material respects as of the date hereof and on and as of the
Closing Date as if made on and as of that date, except for changes expressly
permitted by the terms of this Agreement and except those given as of a
specified date which must only be true and correct as of such specified date.
12.2 Compliance with Agreement. All the terms, covenants, and
conditions to be complied with and performed by Buyer on or prior to the
Closing shall have been complied with or performed in all material respects.
12.3 Certifications, Etc. Seller shall have received a
certificate, dated as of the Closing Date, from Buyer, executed by an executive
officer of Buyer to the effect of Sections 12.1 and 12.2.
12.4 Governmental Approval.
(a) The FCC Consents shall have been issued by the FCC
and each shall have become a Final Order (as defined in Section 4.1).
(b) All applicable notification and waiting period
requirements under the HSR Act shall have been satisfied.
12.5 Adverse Proceedings. No injunction, decree or judgment of any
court, agency or other governmental entities shall have been rendered against
Buyer or Seller which would render it unlawful, as of the Closing, to effect
the transactions contemplated by this Agreement in accordance with its terms.
12.6 Opinions. Buyer shall have delivered to Seller an opinion of
Weil, Gotshal & Manges LLP, dated as of the Closing Date, in the form of
Exhibit D hereto.
12.7 Closing Documents. Buyer shall have delivered or caused to be
delivered to Seller, on the Closing Date, an assumption agreement with respect
to Assumed Liabilities reasonably satisfactory in form and substance to Seller.
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12.8 Indemnification and Escrow Agreement. Buyer shall have
executed and delivered to Seller the Indemnification and Escrow Agreement.
ARTICLE 13
TRANSFER TAXES; FEES AND EXPENSES
13.1 Expenses. Except as set forth in Sections 13.2 and, 13.3
below, each party hereto shall be solely responsible for all costs and expense
incurred by it in connection with the negotiation, preparation and performance
of and compliance with the terms of this Agreement.
13.2 Transfer Taxes and Similar Charges. 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 Buyer and Seller. Buyer and Seller agree to
cooperate with each other and to file all necessary documentation (including,
but not limited to, all Tax Returns) with respect to all such amounts in a
timely manner.
13.3 Governmental Filing or Grant Fees. Any filing or grant fees
imposed by any governmental authority the consent of or filing with which is
required for the consummation of the transactions contemplated hereby,
including but not limited to, the FCC, the FTC, and the Department of Justice
shall be borne equally by Buyer and Seller.
ARTICLE 14
LIQUIDATED DAMAGES, SPECIFIC PERFORMANCE, LETTER OF CREDIT
14.1 Liquidated Damages. (a) If this Agreement is terminated by
Seller pursuant to Sections 15.1(b)(ii) or 15.1(g) the parties agree and
acknowledge that Seller will suffer damages that are not practicable to
ascertain. Accordingly, in such event, Seller shall be entitled to the sum of
$9,375,000 as liquidated damages (and not as a penalty), payable solely and
exclusively by drawing upon the Earnest Money Letter of Credit and through the
delivery to Seller, of the sum of $4,687,500 via wire transfer of immediately
available funds. The parties agree that the foregoing liquidated damages are
reasonable considering all the circumstances existing as of the date hereof and
constitute the parties' good faith estimate of the actual damages reasonably
expected to result from the termination of this Agreement pursuant to Sections
15.1(b)(ii) or 15.1(g). In such event, Buyer shall immediately instruct the
Earnest Money Escrow Agent (as defined in Section 14.3) to deliver the Escrow
Money Letter of Credit to Seller to permit it to draw upon the Earnest Money
Letter of Credit and shall deliver to Seller, via wire transfer of immediately
available funds, the sum of
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$4,687,500. Seller agrees that, to the fullest extent permitted by law, the
right to draw upon the Earnest Money Letter of Credit and to receive the
additional sum of $4,687,500 from Buyer as provided in this Section 14.1 shall
be its sole and exclusive remedy with respect to any damages whatsoever that
Seller may suffer or allege to suffer as a result of a termination pursuant to
Sections 15.1(b)(ii) or 15.1(g). Except for a termination pursuant to Sections
15.1(b)(ii) or 15.1(g) (for which the sole recourse of Seller shall be as
provided in this Section 14.1) or pursuant to Section 15.1(a) or 10.8 (for
which no party shall have any liability to the other), the termination of this
Agreement shall not relieve the parties for any liability or obligation
relating to their breaches of this Agreement occurring prior to such
termination.
14.2 Specific Performance. In addition to any other remedies which
Buyer may have at law or in equity, Seller hereby acknowledges that the Station
Assets are unique, and that the harm to Buyer resulting from a breach by Seller
of its obligations to sell the Station Assets to Buyer cannot be adequately
compensated by damages. Accordingly, Seller agrees that Buyer shall have the
right to have this Agreement specifically performed by Seller, provided that
Buyer is not in material breach of this Agreement and hereby agrees, in such
event, not to assert any objections to the imposition of the equitable remedy
of specific performance by any court of competent jurisdiction.
14.3 Letter of Credit.
14.3.1 Concurrently with the execution of this Agreement,
Buyer shall deposit an original, irrevocable letter of credit (the "Earnest
Money Letter of Credit"), issued by The Toronto-Dominion Bank for the sum of
$4,687,500 with Key Trust Company of Ohio, N.A. (the "Earnest Money Escrow
Agent") to be held in escrow in accordance with the Earnest Money Escrow
Agreement substantially in the form of Exhibit E hereto.
14.3.2 The Earnest Money Letter of Credit shall be held by
the Earnest Money Escrow Agent in accordance with the terms of the Earnest
Money Escrow Agreement. Subject to satisfaction of the conditions to the
Seller's obligations set forth in Article 12, at the Closing, Seller shall
instruct the Earnest Money Escrow Agent to release and return the Earnest Money
Letter of Credit to Buyer for cancellation.
14.3.3 If this Agreement is terminated as provided in
Sections 15.1(b)(ii) or 15.1(g), Buyer shall instruct the Earnest Money Escrow
Agent to release the Earnest Money Letter of Credit to Seller, all as provided
in Section 14.1. In all other events, Seller shall join in instructions to the
Earnest Money Escrow Agent to return the Earnest Money Letter of Credit to
Buyer.
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ARTICLE 15
TERMINATION RIGHTS
15.1 Termination. This Agreement may be terminated at any time
prior to Closing as follows:
(a) by the mutual consent of Buyer and Seller;
(b) by written notice of (i) Buyer to Seller if Seller
breaches in any material respect any of its representations or
warranties or defaults in any material respect in the observance or in
the due and timely performance of any of its covenants or agreements
herein contained and such breach or default shall not be cured within
thirty (30) days of the date of notice of breach or default served by
Buyer or (ii) Seller to the Buyer if Buyer breaches in any material
respect any of its representations or warranties or defaults in any
material respect in the observance or in the due and timely
performance of any of its covenants or agreements herein contained and
such breach or default shall not be cured within thirty (30) days of
the notice of breach or default served by Seller;
(c) by Buyer or Seller by written notice to the other, if
a court of competent jurisdiction or other Governmental Entity shall
have issued an order, decree or ruling or taken any other action
(which order, decree or ruling the parties hereto shall use their best
efforts to lift), in each case permanently restraining, permanently
enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, and such order, decree, ruling or other action shall
have become final and nonappealable; provided that Buyer shall not
have the right to terminate this Agreement pursuant to this Section
15.1(c) unless Buyer has satisfied the covenants contained in Section
9.1.5 hereof;
(d) by the party whose qualifications are not at issue,
if, for any reason, the FCC denies or dismisses any of the FCC
Applications and the time for reconsideration or court review under
the Communications Act with respect to such denial or dismissal has
expired and there is not pending with respect thereto a timely filed
petition for reconsideration or request for review;
(e) by written notice of Buyer to Seller if the FCC
Consents contain a condition on Buyer that (i) is unrelated to Buyer's
qualifications, (ii) could reasonably be expected to have a materially
adverse impact on the financial condition or business operations of
the Station, and (iii) the time for reconsideration or court review
under
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the Communications Act with respect to such condition(s) has expired
without the filing with respect thereto of a timely petition for
reconsideration or request for review;
(f) by written notice of Buyer to Seller, or by Seller to
the Buyer, if the Closing shall not have been consummated on or before
June 1, 1999, subject to extensions as provided in Sections 10.8 and
16.1; or
(g) by written notice of Seller to Buyer, if by May 31,
1999 all of the conditions of closing by Buyer identified in Article
11 have been satisfied other than the expiration of the applicable
waiting period requirements under the HSR Act.
Notwithstanding the foregoing, no party hereto may effect a termination hereof
if such party is in material default or breach of this Agreement.
ARTICLE 16
RISK OF LOSS
16.1 Risk of Loss.
(a) The risk of loss or damage to the Station Assets
shall be upon Seller at all times prior to the Closing. In the event
of loss or damage, Seller shall promptly notify Buyer thereof (the
"Seller's Risk of Loss Notice") and if the lost or damaged Station
Assets are capable of being replaced or repaired for an aggregate
amount less than $100,000, then Seller shall, at its sole cost and
expense, replace or repair such Station Assets prior to the Closing or
deliver to Buyer at the Closing an amount in cash equal to the cost of
replacement or repair of such Station Assets, as mutually agreed in
good faith by Buyer and Seller. Notwithstanding the foregoing, if the
amount required to replace or repair such Station Assets exceeds
$100,000, Seller may elect in the Seller's Risk of Loss Notice not to
replace or repair such Station Assets (which election must be set
forth in the Seller's Risk of Loss Notice), provided, however, that in
such event Buyer, at its option, may elect within 30 days after its
receipt of the Seller's Risk of Loss Notice to terminate this
Agreement without either party being subject to a claim by the other
for liquidated damages or any other claims for damages, or waive any
default or breach with respect to the loss or damage and receive a
$100,000 credit at Closing. Either party may extend the Closing Date
by up to 30 days in order to allow Seller to complete the repair or
replacement.
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(b) Seller shall use its commercially reasonable efforts
to avoid the Station being off the air for three (3) or more
consecutive days or five (5) or more days in any thirty (30) day
period. Seller shall give prompt written notice to Buyer if either of
the following (a "Specified Event") shall occur: (i) the regular
broadcast transmissions of the Station in the normal and usual manner
are interrupted or discontinued for more than thirty (30) minutes; or
(ii) the Station is operated at less than their licensed antenna
height above average terrain or at less than ninety percent (90%) of
their licensed effective radiated power. If any Specified Event
persists for more than seventy-two consecutive (72) hours or five or
more days, whether or not consecutive, during any period of thirty
(30) consecutive days, then Buyer may, at its option: (i) terminate
this Agreement by written notice given to Seller not more than ten
(10) days after the expiration of such thirty (30) day period (without
either party being subject to a claim by the other for liquidated
damages or any other claims for damages), or (ii) proceed in the
manner set forth in Section 16.1(a) above. In the event of
termination of this Agreement by Buyer pursuant to this Section 16.1,
the parties shall be released and discharged from any further
obligation hereunder (without being subject to a claim by Seller for
liquidated damages or any other claims for damages). With respect to
Acts of God which may adversely affect Station operations, Seller
shall use its commercially reasonable efforts to reinstate Station
operations within 30 days and shall have the Station operating at not
less than seventy percent (70%) of maximum authorized effective
radiated power by the Closing Date.
(c) Resolution of Disagreements. If the parties are
unable to agree upon the extent of any loss or damage, the cost to
repair, replace or restore any lost or damaged property, the adequacy
of any repair, replacement, or restoration of any lost or damaged
property, or any other matter arising under this Section 16.1, the
disagreement shall be referred to a qualified consulting
communications engineer mutually acceptable to Seller and Buyer who is
a member of the Association of Federal Communications Consulting
Engineers, whose decision shall be final, binding upon and
non-appealable by the parties, and whose fees and expenses shall be
paid one-half by Seller and one-half by Buyer.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 Survival of Representations and Warranties; Remedy for Breach.
Except as to representations and warranties contained in Sections 6.1.8 (as to
title to assets only), 6.1.9 (as to title to assets only), and 6.1.17 (as to
title to assets only) which shall survive the Closing indefinitely (the
"Excepted Representations"), all representations and warranties
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made by Seller and Buyer in this Agreement, or pursuant hereto, shall survive
the consummation of the transactions contemplated in this Agreement for a
period of one year after the Closing Date, regardless of any investigation at
any time made by or on behalf of Buyer or Seller, and shall not be deemed
merged in any document or instrument executed or delivered at the Closing.
Buyer's sole remedies for any breach of a representation or warranty (other
than the Excepted Representations) or pre-Closing breach of a covenant or
agreement shall be those set forth in the Indemnification and Escrow Agreement.
17.2 Certain Interpretive Matters and Definitions. Unless the
context otherwise requires, (a) all references to Sections, Articles or
Schedules are to Sections, Articles or Schedules of or to this Agreement, (b)
each term defined in this Agreement has the meaning assigned to it, (c) each
accounting term not otherwise defined in this Agreement has the meaning
assigned to it in accordance with generally accepted accounting principles as
in effect on the date hereof, (d) "or" is disjunctive but not necessarily
exclusive, and (e) words in the singular include the plural and vice versa, and
(f) the term "Affiliate" has the meaning given it in Rule 12b-2 of Regulation
12B under the Securities Exchange Act of 1934, as amended. All references to
"$" or dollar amounts will be to lawful currency of the United States of
America.
17.3 Further Assurances. At and after the Closing, Seller shall
from time to time, at the request of and without further cost or expense to
Buyer, execute and deliver such other instruments of assignment, conveyance and
transfer and take such other actions as may reasonably be requested in order to
more effectively consummate the transactions contemplated hereby, and Buyer
shall from time to time, at the request of and without further cost or expense
to Seller, execute and deliver such other instruments and take such other
actions as may reasonably be requested in order to more effectively assume the
Assumed Liabilities.
17.4 Financial Statements. At all times after the date hereof,
Seller shall, and shall cause their representatives (including their
independent public accountants) to, cooperate in all reasonable respects with
the efforts of Buyer and their independent auditors to prepare such audited and
interim unaudited financial statements of the Station as Buyer may reasonably
determine are necessary in connection with any filing required to be made by it
or any of its Affiliates under the Exchange Act of 1934, as amended (the
"Exchange Act"), or the Securities Act of 1933, as amended (the "Securities
Act"). Seller shall execute and deliver to Buyer's independent accountants
such customary management representation letters as they may require as a
condition to their ability to sign an unqualified report upon the audited
financial statements of the Station for the periods for which such financial
statements are required under the Exchange Act or the Securities Act. Seller
shall cause its independent
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public accountants to make available to Buyer and its representatives all of
their work papers related to the financial statements or Tax Returns of Seller
(to the extent they relate to the Station) and to provide Buyer's independent
public accountants with full access to those personnel who previously have been
involved in the audit or review of Seller's financial statements or Tax
Returns. Any reasonable out-of-pocket costs incurred by Seller in connection
with Seller's obligations under this Section 17.4 shall be promptly reimbursed
by Buyer upon Buyer's receipt of reasonably detailed information regarding such
costs.
17.5 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, whether by operation of law or otherwise; provided, however, that
without releasing Buyer from any of its obligations or liabilities hereunder
(a) nothing in this Agreement shall limit Buyer's ability to sell or transfer
any or all of its respective assets (whether by sale of stock or assets, or by
merger, consolidation or otherwise) without the consent of Seller, (b) nothing
in this Agreement shall limit Buyer's ability to assign the Station Assets
(including the right to acquire the Station Assets at the Closing) to any
Affiliate of Buyer without the consent of Seller, and (c) nothing in this
Agreement shall limit Buyer's ability to make a collateral assignment of its
rights under this Agreement to any institutional lender that provides funds to
Buyer without the consent of Seller. Seller shall execute an acknowledgment of
such assignment(s) and collateral assignments in such forms as Buyer or its
institutional lenders may from time to time reasonably request; provided,
however, that unless written notice is given to Seller that any such collateral
assignment has been foreclosed upon, Seller shall be entitled to deal
exclusively with Buyer as to any matters arising under this Agreement or any of
the other agreements delivered pursuant hereto. In the event of such an
assignment, the provisions of this Agreement shall inure to the benefit of and
be binding on Buyer's successors and assigns.
17.6 Amendments. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
17.7 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
17.8 Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the State of Ohio without giving
effect to the choice of law provisions thereof.
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17.9 Notices. Any notice, demand or request required or permitted
to be given under the provisions of this Agreement shall be in writing and
shall be deemed to have been duly delivered and received when electronically
confirmed if sent by telecopy; on the date of personal delivery; on the third
day after deposit in the U.S. mail if mailed by registered or certified mail,
postage prepaid and return receipt requested; on the day after delivery to a
nationally recognized overnight courier service if sent by an overnight
delivery service for next morning delivery and shall be addressed to the
following addresses (or at such other address which party shall specify to the
other party in accordance herewith):
(a) In the case of Seller, to:
Xenophon Zapis, Chairman
Zapis Communications Corporation
60 Seagate Drive, Suite 1003
Naples, FL 34103
Telecopy: (941) 403-7254
With a copy to:
Leon X. Zapis, President
Zapis Communications Corporation
2510 St. Clair Avenue
Cleveland, OH 44114
Telecopy: (216) 621-9315
and
Thano G. Pasalis & Associates
1575 Illuminating Building
55 Public Square
Cleveland, Ohio 44113
Attention: Thano G. Pasalis
Telecopy: (216) 566-8762
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(b) In the case of Buyer:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention: Jeffrey A. Marcus
Telecopy: (972) 879-3671
With copies to:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention: Eric C. Neuman
Telecopy: (972) 879-3671
and
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201
Attention: Michael A. Saslaw
Telecopy: (214) 746-7777
17.10 Schedules. The schedules and exhibits attached to this
Agreement and the other documents delivered pursuant hereto are hereby made a
part of this Agreement as if set forth in full herein.
17.11 Entire Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to its subject matter and
supersedes all negotiations, prior discussions, agreements, letters of intent,
and understandings, written or oral, relating to the subject matter of this
Agreement.
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17.12 Severability. If any provision of this Agreement is held to
be unenforceable, invalid, or void to any extent for any reason, that provision
shall remain in force and effect to the maximum extent allowable, and the
enforceability and validity of the remaining provisions of this Agreement shall
not be affected thereby.
17.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute but one and the same instrument.
17.14 No Third-Party Rights. Nothing in this Agreement, express or
implied, shall be construed to confer upon any person, other than the parties
hereto, their successors and permitted assigns, any legal or equitable rights,
remedies, claims, obligations or liabilities under or by reason of this
Agreement (other than as provided in the Indemnification and Escrow Agreement).
17.15 Equitable Assignment. To the extent that any of the Station
Assets are not capable of being sold, assigned, transferred, delivered or
subleased without the waiver or consent of any third party or if such sale,
assignment, transfer, delivery or sublease or attempted sale, assignment,
transfer, delivery or sublease would constitute a breach thereof or a violation
of any law or regulation, this Agreement and any assignment executed pursuant
hereto shall not constitute a sale, assignment, transfer, delivery or sublease
or an attempted sale, assignment, transfer, delivery or sublease thereof. In
those cases where consents and/or waiver to the transfer and assignment to
Buyer of any of the Station Assets has not been obtained at or prior to the
Closing Date, and Seller and Buyer elect to close, this Agreement and any
assignment executed pursuant hereto, to the extent permitted by law, shall
constitute an equitable assignment by Seller to Buyer of all of Seller's
rights, benefits, title and interest in and to such Station Assets, and where
appropriate, Buyer shall be deemed to be Seller's agent for the purpose of
completion, fulfilling and discharging all Seller's rights and liabilities
arising after the Closing Date in relation to such Station Assets, provided
however, Seller's failure to obtain the requisite waiver or consent of such
third person within ninety (90) days after the Closing shall be deemed to be a
breach of this Agreement for which Buyer shall be entitled to remedy,
including, but not limited to, under the Indemnification and Escrow Agreement;
provided further, however, that no such breach shall be deemed to have occurred
if Buyer has incurred no liability, loss or damage from such failure.
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17.16 Arbitration. All disputes which cannot be resolved by
agreement of the parties shall be arbitrated in Washington, D.C. in accordance
with the rules of the American Arbitration Association before a single
arbitrator who shall be jointly selected by Seller and Buyer, or if Seller and
Buyer cannot agree on the selection of such arbitrator, such arbitrator shall
be selected by the head of the Washington, D.C. office of the American
Arbitration Association. The costs of such arbitrator shall be paid by Seller
and Buyer in such proportion as the arbitrator deems equitable based on the
relative merits of the positions of the parties.
[The remainder of this page is intentionally left blank]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed and delivered as of the first above written.
SELLER:
ZAPIS COMMUNICATIONS CORPORATION
By: /s/ Xenophon Zapis
----------------------------------
Xenophon Zapis
Chairman
BUYER:
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
By: /s/ Eric C. Neuman
----------------------------------
Eric C. Neuman
Senior Vice President
<PAGE> 59
EXHIBIT A - ZAPIS ACQUISITION
INDEMNIFICATION AND ESCROW AGREEMENT
THIS INDEMNIFICATION AND ESCROW AGREEMENT (this "Agreement")
is made and entered into as of this ____ day of ______________, _____, by and
among Chancellor Media Corporation of Los Angeles, a Delaware corporation
("Buyer"), Zapis Communications Corporation, an Ohio corporation ("Seller"),
and Key Trust Company of Ohio, N.A., as escrow agent ("Agent").
RECITALS
A. Pursuant to that certain Asset Purchase Agreement, dated as of
August 11, 1998, by and between Buyer and Seller (the "Asset Purchase
Agreement"), Buyer has agreed to acquire from Seller, and Seller has agreed to
sell to Buyer, all of the Station Assets (as defined in the Asset Purchase
Agreement).
B. It is a condition precedent to the closing of the transactions
contemplated by the Asset Purchase Agreement (the "Closing"), that Buyer,
Seller and Agent execute and deliver this Agreement.
C. Unless otherwise defined herein, capitalized terms used herein
shall have the meanings assigned to them in the Asset Purchase Agreement.
AGREEMENTS
In consideration of the recitals and of the respective
agreements and covenants contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
Section 1.1 Funds. (a) At the Closing, and only if the Closing
occurs, Buyer shall place in an escrow account with Agent (the "Account") the
sum of $2,727,200 out of the Purchase Price paid pursuant to Section 3.1 of the
Asset Purchase Agreement (the "Funds").
(b) The Funds shall be held by Agent in the Account for
the benefit of Buyer and Seller as provided in this Agreement. In no event
shall Agent disburse or invest the Funds except in accordance with this
Agreement.
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Section 1.2 Acceptance of Appointment as Agent. Agent, by signing
this Agreement, accepts the appointment as Agent and agrees to hold and deliver
the Funds and make disbursements from the Account in accordance with the terms
of this Agreement.
Section 1.3 Distribution of Funds to Buyer Indemnitees. Agent shall
disburse to Buyer (for its own account or for the account of any Buyer
Indemnitee, as defined in Section 2.1) such portion of the Funds as may be
necessary to pay the Damages (as defined in Section 2.1) for which a Buyer
Indemnitee is entitled to reimbursement under Section 2.1. Payment shall be
made not more than three (3) business days after (i) the delivery to Agent of
written instructions signed by Buyer and Seller, specifying an amount to be
paid to a Buyer Indemnitee, or (ii) the delivery to Agent and Seller of a copy
of a Final Determination (as defined below) establishing a Buyer Indemnitee's
right to reimbursement under this Agreement with respect to such Damages. A
"Final Determination" shall mean a judgment of a court of competent
jurisdiction having the authority to determine the amount of, and liability
with respect to, the determined item, which judgment is not subject to appeal,
reconsideration or review. Agent, at its option, shall be entitled to seek
and, if received, rely conclusively upon an opinion of legal counsel to the
effect that the judgment delivered to Agent pursuant to this Section 1.3 (or
pursuant to Section 1.6(b)) is a Final Determination.
Section 1.4 Investment of Funds. (a) Pending disbursement of the
Funds, Agent shall invest the Funds in Permitted Investments (as defined
below). For purposes of this Agreement, "Permitted Investments" shall mean
direct obligations of the U.S. government having maturities of 180 days or
less, money market funds that invest solely in direct obligations of the U.S.
government, including, without limitation, the Victory U.S. Obligation Fund,
and such other investments as may be specified from time to time by joint
written agreement between Buyer and Seller. As and when any payment is to be
made from the Funds or the Funds are to be otherwise disbursed under this
Agreement, Agent shall cause a sufficient portion of the Permitted Investments
to be converted into cash. Agent shall select the investments or types of
investments to be so converted. Neither Buyer nor Seller shall be liable for
any loss of principal or income due to the choice of Permitted Investments in
which the Funds are invested or the choice of Permitted Investments converted
into cash pursuant to this paragraph (a).
(b) For Tax purposes, the Funds shall be property of
Seller and all interest, dividends and other income earned on the Funds
(collectively, the "Earnings") shall be the income of Seller and be distributed
to the Seller following the Expiration Date, as hereinafter defined. Buyer and
Seller shall file Tax Returns consistent with such treatment.
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Section 1.5 No Distribution of Expenses. Except as provided in
Section 2.1 of this Agreement, neither Buyer nor Seller shall be entitled to
reimbursement out of the Funds or from any alternative recovery for any costs
and expenses incurred by them in connection with exercising their rights or
performing their duties under this Agreement.
Section 1.6 Segregation of the Funds. (a) Notwithstanding any other
provision of this Agreement to the contrary, Agent shall segregate from the
Account and transfer into a separate sub-account (the "Pending Claim Account")
maintained by Agent for the benefit of Buyer and Seller the portion of the
Funds that may be necessary to satisfy in full all Pending Claims (as defined
below) and shall hold such portion in accordance with this Section 1.6;
provided, however, that Agent shall not so segregate from the Account and
transfer to the Pending Claim Account the Funds that may be necessary to
satisfy Pending Claims under Section 2.1 until such time as the aggregate
amount of Damages asserted by Buyer and any Buyer Indemnitees under Section
2.1, taken as a whole, exceeds the Indemnification Basket (as defined in
Section 3.1(a)). "Pending Claims" shall mean unresolved claims for
indemnification under Section 2.1 that are the subject of Claim Notices (as
defined in Section 2.4).
(b) Any portion of the Funds segregated under Section
1.6(a) shall continue to be segregated by Agent until released thereafter to
Seller in accordance with Section 1.7 or until Agent is directed to release
such Funds by (i) written instructions signed by Buyer, that are agreed to in
writing by Seller, or (ii) a copy of a Final Determination establishing a Buyer
Indemnitee's right to receive such Funds as reimbursement for indemnification
claims under Article 2, or establishing Seller's right to receive such Funds.
Section 1.7 Distribution of Funds to Seller. Within three business
days, after the Expiration Date (as defined below), Agent shall distribute to
Seller from the Account an amount equal to the Earnings and the then remaining
amount of Funds less the total amount of Funds that are then being segregated
with respect to Pending Claims under Section 1.6. "Expiration Date" shall mean
one year after the Closing Date. Any amounts segregated as of the Expiration
Date with respect to Pending Claims shall be released thereafter as provided in
Section 1.6(b).
ARTICLE II
INDEMNIFICATION CLAIMS
Section 2.1 Indemnification by Seller. From and after the Closing,
but subject to the conditions and limitations set forth in this Agreement,
Buyer and its respective successors and assigns and their officers, directors,
stockholders, employees and agents (collectively, the
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"Buyer Indemnitees") shall be entitled to reimbursement from Seller for any and
all losses, costs, damages, claims, fines, penalties, expenses (including,
without limitation, reasonable attorneys' fees and expenses), amounts paid in
settlement, court costs, out-of-pocket costs, costs of investigation, and
reasonable costs of litigation (including, without limitation, reasonable fees
and expenses of accountants, investment bankers and other experts)
(collectively, "Damages") actually incurred or suffered by a Buyer Indemnitee
or to which any of the Buyer Indemnitees may be subjected, to the extent
resulting from, arising out of, based on or relating to (a) any inaccuracy in
any representation or warranty of Seller contained in the Asset Purchase
Agreement or in any schedule, instrument, exhibit, or certificate delivered
pursuant thereto (a "Related Document"), (b) any breach of any covenant or
agreement of the Seller contained in the Asset Purchase Agreement, (c) any
Retained Liabilities, (d) any liabilities with respect to Seller's failure to
comply with any "bulk sales" or similar laws in connection with the
consummation of the transactions contemplated by the Asset Purchase Agreement
or (e) the case of Sandra J. Doolittle v. Zapis Communications Corporation, et.
al., Case No. 97 CV01381, that is pending in the Court of Common Pleas,
Trumball County, Warren, Ohio or the facts from which such case has arisen.
Section 2.2 Indemnification by Buyer. From and after the
Closing, but subject to the conditions and limitations set forth in this
Agreement, Seller and its respective successors and assigns, and its officers,
directors, stockholders, employees and agents (collectively, the "Seller
Indemnitees") shall be entitled to reimbursement from the Buyer for any and all
Damages actually incurred or suffered by a Seller Indemnitee, or to which any
of the Seller Indemnitees may be subjected, to the extent resulting from,
arising out of, based on or relating to (a) any inaccuracy in any
representation or warranty of Buyer contained in the Asset Purchase Agreement
or in any Related Document, (b) any breach of any covenant or agreement of the
Buyer contained in the Asset Purchase Agreement or (c) the Assumed Liabilities.
Section 2.3 Procedures Regarding Third Party Claims. (a) In the
event that any person entitled to indemnification under this Article 2 (the
"Indemnified Party") becomes aware of any matter with respect to which it
believes it is entitled to indemnification under this Article 2 from Buyer or
Seller, as applicable (the "Indemnifying Party"), and such matter involves (i)
any claim made against the Indemnified Party by any party other than a party to
the Asset Purchase Agreement or (ii) the commencement of any action, suit,
investigation, arbitration or similar proceeding against the Indemnified Party
by any party other than a party to the Asset Purchase Agreement (a "Third Party
Claim"), the Indemnified Party shall notify the Indemnifying Party in writing
with reasonable promptness of such Third Party Claim, specifying, to the extent
known, the nature, circumstances and the amount of such Third Party Claim (a
"Third Party Claim Notice") accompanied by all correspondence, documents,
pleadings or other writings received with respect to such Third Party Claim.
Failure to give such reasonably prompt notice shall not relieve the
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Indemnifying Party of its obligations under this Article 2, except to the
extent the Indemnifying Party is materially prejudiced thereby. The
Indemnifying Party shall have ten (10) business days from its receipt of a
Third Party Claim Notice (the "Third Party Claim Notice Period") to notify the
Indemnified Party (and if Seller is the Indemnifying Party and any Funds
continue to be held by Agent, Agent as well) (i) whether the Indemnifying Party
disputes the Indemnified Party's right of indemnification, and (ii) if the
Indemnifying Party does not dispute such right of indemnification, whether or
not it desires to defend the Indemnified Party against such Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnified
Party (and if Seller is the Indemnifying Party and any Funds continue to be
held by Agent, Agent as well) in writing within the Third Party Claim Notice
Period that (i) the Indemnifying Party does not dispute the Indemnified Party's
right of indemnification and (ii) the Indemnifying Party desires to defend
against such Third Party Claim, then the Indemnifying Party shall have the
right to assume and control, at its sole cost, expense and liability, the
defense of such Third Party Claim by appropriate proceedings with counsel
reasonably acceptable to the Indemnified Party. The Indemnified Party may
participate in any such defense or settlement, at its sole cost and expense.
(c) If (i) the Indemnifying Party disputes the
Indemnified Party's right of reimbursement with respect to a Third Party Claim,
(ii) the Indemnifying Party does not dispute such right of reimbursement but
fails to promptly assume and prosecute the defense of such Third Party Claim,
or (iii) the Indemnified Party reasonably believes that a conflict of interest
exists between the Indemnified Party and the Indemnifying Party, then the
Indemnified Party shall be entitled to assume and control (at the Indemnifying
Party's sole cost, expense and liability) the defense of such Third Party Claim
with counsel reasonably acceptable to Indemnifying Party. If the Indemnifying
Party does not assume the defense of a Third Party Claim for any reason, it may
still participate in, but not control, the defense of such Third Party Claim at
the Indemnifying Party's sole cost and expense.
(d) The party responsible for the defense of any Third
Party Claim (the "Responsible Party") shall, to the extent reasonably requested
by the other party, keep such other party informed as to the status of any
Third Party Claim for which such other party is not the Responsible Party,
including, without limitation, all settlement negotiations and offers. Each
party shall make available to the other party and its representatives
(including accountants and counsel) all books and records of such party
relating to such Third Party Claim and shall render to each other such
assistance and access to the books and records that they may reasonably require
of each other in order to ensure the proper and adequate defense of such Third
Party Claim, including, without limitation, making employees available (upon
reasonable advance notice and with due regard for prior scheduling commitments)
to testify in any proceeding, pretrial deposition or otherwise, except that
unless required to do so by
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valid governmental or judicial order or legal process, a party shall not be
required to make available to the other party any books, records, documents or
other information that such party reasonably determines to be confidential or
subject to attorney-client privilege until the other party shall have entered
into such agreements as is reasonably necessary in light of all the surrounding
circumstances to protect such confidentiality or privilege.
(e) Neither the Indemnified Party nor the Indemnifying
Party shall enter into any settlement of any Third Party Claim without the
prior written consent of the other party (which shall not be unreasonably
withheld or delayed). The Responsible Party shall promptly notify the other
party of each settlement offer (including whether or not the Responsible Party
is willing to accept the proposed settlement offer) with respect to a Third
Party Claim. Such other party agrees to notify the Responsible Party with
reasonable promptness whether or not such party is willing to accept the
proposed settlement offer.
Section 2.4 Procedures Regarding Direct Claims. In the event that an
Indemnified Party has a claim for reimbursement which does not involve a Third
Party Claim (a "Direct Claim"), the Indemnified Party shall notify the
Indemnifying Party (and if Seller is the Indemnifying Party and any Funds
continue to be held by Agent, Agent as well) with reasonable promptness,
specifying, to the extent known, the nature, circumstances and amount of such
Direct Claim (a "Direct Claim Notice" and together with Third Party Claim
Notices, the "Claim Notices"), including with particularity the specific
representation and warranty or covenant and agreement alleged to have been
breached and the manner in which such representation and warranty or covenant
and agreement is alleged to have been breached. Failure to give such
reasonably prompt notice shall not relieve the Indemnifying Party of its
obligations under this Article 2, except to the extent the Indemnifying Party
is materially prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it disputes the Indemnified Party's right of
reimbursement with respect to a particular Direct Claim, the Indemnified Party
and the Indemnifying Party shall use their reasonable efforts to negotiate a
resolution of such dispute promptly. Nothing herein shall be deemed to prevent
the Indemnified Party from initiating litigation under this Agreement, and
subject to the limitations contained herein, against the Indemnifying Party
with respect to any Direct Claim disputed by the Indemnifying Party for the
purpose of obtaining a Final Determination in order to establish the
Indemnified Party's right to reimbursement hereunder.
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ARTICLE III
LIMITATIONS ON LIABILITY
Section 3.1 Limitations on Reimbursement. (a) The Buyer Indemnitees
shall not be entitled to indemnification pursuant to Section 2.1 unless and
until aggregate Buyer Indemnitees' Damages for which indemnification otherwise
would be available under Section 2.1 exceed $170,455 (the "Indemnification
Basket"), in which event the Buyer Indemnitees shall be entitled to
reimbursement hereunder for the amount of all such Damages (including the
initial $170,455).
(b) Except with respect to indemnification pursuant to
Section 2.1(a) for the breach by Seller of any representation or warranty set
forth in Section 6.1.8 (as to title to assets only), 6.1.9 (as to title to
assets only) or 6.1.17 (as to title to assets only) of the Asset Purchase
Agreement (including any bring-down of any such representation or warranty
pursuant to any certificate delivered at Closing), the right to reimbursement
from the Funds shall constitute the sole remedy of any Buyer Indemnitee with
respect to any matter for which such Buyer Indemnitee is entitled to
indemnification under Section 2.1(a) or, as to breaches prior to the Closing,
Section 2.1(b).
(c) Any claim by any Buyer Indemnitee for reimbursement
under Section 2.1(a) must be asserted within the period of survival, as set
forth in the Asset Purchase Agreement, of the representation or warranty with
respect to which such claim relates.
(d) After the Expiration Date, no Buyer Indemnitee may
assert any claim for reimbursement from the Funds.
(e) For all purposes of this Agreement, the amount of
Damages, and the amount reimbursable with respect thereto, shall be reduced to
the extent of any insurance proceeds or other third party recovery received by
the Indemnified Party with respect to such Damages. If the Indemnified Party
receives any such insurance proceeds or other recovery after the Indemnifying
Party shall have made any payment to the Indemnified Party with respect to such
Damages, the Indemnified Party shall promptly return such payment to the
Indemnifying Party to the extent of insurance proceeds or other recovery
received; provided, however, that any such payment returned to Seller prior to
the Expiration Date shall be placed in the Account and become part of the Funds
and such amount shall not be deemed to have been paid to any Indemnified Party
as Damages under this Agreement. The Indemnified Party shall timely file
claims for insurance proceeds and pursue all other reasonable third party
reimbursement rights with respect to any Damages sustained by the Indemnified
Party.
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(f) An Indemnified Party's rights to reimbursement or
indemnification for Damages resulting from any untrue or incorrect
representation or warranty of the Indemnifying Party shall not be affected by
any investigation made by the Indemnified Party or whether or not the
Indemnified Party relied upon such untrue or incorrect representation or
warranty; provided, however, that no Indemnified Party shall be entitled to
reimbursement or indemnification for Damages resulting from an untrue or
incorrect representation or warranty of the Indemnifying Party if (i) the fact
that such representation or warranty was untrue or incorrect was disclosed in
writing to the Indemnified Party prior to the Closing (along with an
acknowledgement by the Indemnifying Party that the conditions to the
Indemnified Party's obligation to effect the Closing, as a result of the
failure of such representation or warranty to be true and correct, are not
satisfied) and (ii) the Indemnified Party nevertheless determines to effect the
Closing.
ARTICLE IV
AGENT
Section 4.1 Rights and Responsibilities of Agent. (a) The duties
and responsibilities of Agent shall be limited to those expressly set forth in
this Agreement and it shall not be subject to, nor obligated to recognize, any
other agreement between, or direction or instruction of, the parties to this
Agreement, unless such agreement, direction or instruction is in writing and is
signed by both Buyer and Seller.
(b) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, Agent will not be required to determine the
controversy or to take any action regarding it. Agent may hold all documents
and funds and may wait for settlement of any such controversy by final
appropriate legal proceedings or other means as, in Agent's discretion, Agent
may require, despite what may be set forth elsewhere in this Agreement. In
such event, Agent will not be liable for interest or damage. Furthermore,
Agent may, at its option, file an action of interpleader requiring the parties
to answer and litigate any claims and rights among themselves. Agent is
authorized to deposit with the clerk of the court all documents and funds held
in escrow. All costs, expenses, charges and reasonable attorney fees incurred
by Agent due to the interpleader action shall be paid one-half by Buyer and
one-half by Seller, in each case jointly and severally. Upon initiating such
action, Agent shall be fully released and discharged of and from all
obligations and liability imposed by the terms of this Agreement.
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(c) In performing any duties under the Agreement, Agent
shall not be liable to any party for damages, losses, or expenses, except as a
result of gross negligence or willful misconduct on the part of Agent. Agent
shall not incur any such liability for any action taken or omitted in reliance
upon any instrument, including any written statement or affidavit provided for
in this Agreement that Agent shall in good faith believe to be genuine, nor
will Agent be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of any representative authority. In addition, Agent may
consult with legal counsel in connection with Agent's duties under this
Agreement and shall be fully protected in any act taken, suffered, or permitted
by it in good faith in accordance with the advice of counsel. In the absence
of knowledge that any action taken or purported to be taken hereunder is
wrongful, Agent is not responsible for determining and verifying the authority
of any person acting or purporting to act on behalf of any party to this
Agreement.
(d) Agent, and any successor Agent, may resign at any
time as escrow agent hereunder by giving at least 30 days prior written notice
to Seller and Buyer. Upon such resignation and the appointment of a successor
escrow agent, the resigning Agent shall be absolved from any and all liability
in connection with the exercise of its powers and duties as escrow agent
hereunder except for liability arising in connection with its own gross
negligence or willful misconduct. Upon their receipt of notice of resignation
from Agent, Buyer and Seller shall use commercially reasonable efforts jointly
to designate a successor Agent. In the event Buyer and Seller do not agree
upon a successor escrow agent within 30 days after the receipt of such notice,
Agent so resigning may petition any court of competent jurisdiction for the
appointment of a successor Agent or other appropriate relief and any such
resulting appointment shall be binding upon all parties hereto. By mutual
agreement, Buyer and Seller shall have the right at any time upon not less than
10 days' prior written notice to Agent to terminate the appointment of Agent,
or successor Agent, as escrow agent hereunder. Agent or successor Agent shall
continue to act as escrow agent until a successor is appointed and qualified to
act as Agent.
Section 4.2 Fees and Expenses of Agent. Agent shall (a) be paid a
fee for its services under this Agreement as provided by Exhibit A and (b) be
entitled to reimbursement for reasonable expenses (including the reasonable
fees and disbursements of its counsel engaged pursuant to Sections 1.3 and/or
1.4 hereof, or otherwise) actually incurred by it in connection with its duties
under this Agreement (collectively, the "Agent Fees and Expenses"). All Agent
Fees and Expenses shall be paid one-half by Buyer and one-half by Seller.
Escrow Agent shall have a lien upon the Funds for payment of its fees and
expenses. Escrow Agent may pay itself from the Funds for any fees and expenses
for which it has not been paid.
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Section 4.3 Indemnification of Agent. The parties and their
respective successors and assigns agree jointly and severally to indemnify and
hold Agent harmless against any and all losses, claims, damages, liabilities,
and expenses, including reasonable costs of investigation, reasonable legal
counsel fees and disbursements that may be imposed on Agent or incurred by
Agent in connection with the performance of its duties under this Agreement,
including but not limited to any litigation arising from this Agreement or
involving its subject matter, provided, however, neither Buyer nor Seller nor
their successors and assigns need indemnify Agent for any loss, claim, damage,
liability or expense caused by Agent's gross negligence or willful misconduct.
ARTICLE V
MISCELLANEOUS
Section 5.1 Notices. All notices, requests, consents or other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given or delivered by any party (a) when
received by such party if delivered by hand, (b) upon confirmation when
delivered by telecopy, (c) within one day after being sent by recognized
overnight delivery service, or (d) upon receipt of a return receipt after being
mailed by certified mail, return receipt requested, and in each case addressed
as follows:
(i) if to Buyer or to any Buyer Indemnitee:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard, Suite 1130
Irving, Texas 75039
Attention: Jeffrey A. Marcus
Telecopy No.: (972) 879-3671
with copies to:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard, Suite 1130
Irving, Texas 75039
Attention: Eric C. Neuman
Telecopy No.: (972) 879-3671
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and:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Michael A. Saslaw
Telecopy No.: (214) 746-7777
(ii) if to Seller or to any Seller Indemnitee, to:
Xenophon Zapis, Chairman
Zapis Communications Corporation
60 Seagate Drive, Suite 1003
Naples, Florida 34103
Telecopy No.: (941) 403-7254
with copies to:
Leon X. Zapis, President
Zapis Communications Corporation
2510 St. Clair Avenue
Cleveland, Ohio 44114
Telecopy No.: (216) 621-9315
and:
Thano G. Pasalis & Associates
1575 Illuminating Building
55 Public Square
Cleveland, Ohio 44113
Attention: Thano G. Pasalis
Telecopy No.: (216) 566-8762
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(iii) if to Agent, to:
Mail or other Instructions
Key Trust Company of Ohio, N.A.
127 Public Square, 15th Floor
Cleveland, Ohio 44114
Attention: Joyce A. Apostolec
Telecopy No.: (216) 689-3777
Any party by written notice to the other parties pursuant to this Section 5.1
may change the address or the persons to whom notices or copies thereof shall
be directed.
Section 5.2 Assignment. This Agreement and the rights and duties
hereunder shall be binding upon and inure to the benefit of the parties hereto
and the successors and assigns of each of the parties to this Agreement. No
rights, obligations or liabilities hereunder shall be assignable by any party
without the prior written consent of the other parties, except that Buyer may
assign its rights under this Agreement without obtaining the prior written
consent of the other parties hereto to any person or entity to whom, pursuant
to the Asset Purchase Agreement, Buyer is permitted to assign all or a portion
of its rights under the Asset Purchase Agreement, provided that any such
assignee duly executes and delivers an agreement to assume Buyer's obligations
under this Agreement and that Buyer remains liable with respect to such
obligations.
Section 5.3 Amendment. This Agreement may be amended or modified
only by an instrument in writing duly executed by Agent, Buyer and Seller.
Section 5.4 Waivers. Any waiver by any party hereto of any breach of
or failure to comply with any provision of this Agreement by any other party
hereto shall be in writing and shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this Agreement.
Section 5.5 Construction. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Ohio
without giving effect to the choice of law provisions thereof. The headings in
this Agreement are solely for convenience of reference and shall not be given
any effect in the construction or interpretation of this Agreement. Unless
otherwise stated, references to Sections and Exhibits are references to
Sections and Exhibits of this Agreement.
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Section 5.6 Third Parties. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
or entity other than Buyer, Buyer Indemnitees, Seller, Seller Indemnitees and
Agent any rights or remedies under, or by reason of, this Agreement.
Section 5.7 Termination. This Agreement shall terminate at the time
of the final resolution of all Pending Claims and, if any amount remains
thereunder, disbursement of the Funds, all in accordance with the provisions of
this Agreement.
Section 5.8 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed any original and all of which
together shall constitute a single instrument.
Section 5.9 Waiver of Offset Rights. Agent hereby waives any and all
rights to offset that it may have against the Funds including, without
limitation, claims arising as a result of any claims, amounts, liabilities,
costs, expenses, damages, or other losses that Agent may be otherwise entitled
to collect from any party to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
BUYER:
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
By:
--------------------------------
Eric C. Neuman
Senior Vice President
SELLER:
ZAPIS COMMUNICATIONS CORPORATION
By:
--------------------------------
Xenophon Zapis
Chairman
AGENT:
KEY TRUST COMPANY OF OHIO, N.A.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE> 73
EXHIBIT A
Fees of Agent
$2,500.00 Annual Escrow Agent Fee for Administration.
Escrow Fee will be payable upon execution of the Escrow Agreement and annually
thereafter on the anniversary date of the agreement.
<PAGE> 1
EXHIBIT 2.49
STOCK PURCHASE AGREEMENT
BY AND AMONG
YOUNG ONES, INC.,
ZEBRA BROADCASTING CORPORATION,
THE SELLING STOCKHOLDERS NAMED HEREIN,
AND
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
AS OF AUGUST 11, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
TERMS OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Sale of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2
GOVERNMENTAL CONSENTS . . . . . . . . . . . . . . . . . . . . . . 5
2.1 FCC Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 FCC Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY . . . . . . . . . . . . . 5
3.1 Representations and Warranties of Sellers and the Company . . . . . . . . . . . . . . . . . . . . 5
3.1.1 Title to Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1.4 Organization, Good Standing, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1.5 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1.7 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1.8 Compliance with Applicable Laws, FCC Matters . . . . . . . . . . . . . . . . . . . . . . 8
3.1.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1.11 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1.12 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1.13 Liens and Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1.14 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1.16 Personnel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1.17 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1.18 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.19 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1.20 Patents, Trademarks, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1.21 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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3.1.22 Commission or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.23 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.24 The Company's Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.25 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.26 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.27 Availability of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.28 Interest in Competitors, Suppliers and Customers . . . . . . . . . . . . . . . . . . . 21
3.1.29 Controlled Group Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.30 Barter Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.31 Settlement Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.32 No Assets, Liabilities or Operations . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . 23
4.1 Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1.2 Authorization and Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1.3 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1.4 Absence of Conflicting Agreements or Required Consents . . . . . . . . . . . . . . . . . 23
4.1.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1.6 Commission or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1.7 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1.8 Investment Intent; Sophisticated Buyer . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 5
COVENANTS OF SELLERS AND THE COMPANY . . . . . . . . . . . . . . . . . . . 25
5.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1.1 Conduct Prior to the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.1.3 Satisfaction of Conditions; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.1.4 Sale of Acquired Assets; Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.1.5 No Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1.6 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1.7 FCC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1.8 Updating of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1.9 Response to Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1.10 Barter and Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1.11 Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1.12 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1.13 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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5.1.14 Termination of Management Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 6
COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . 31
6.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1.1 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1.2 No Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1.3 Post-Closing Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1.4 Satisfaction of Conditions; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1.5 Response to Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1.6 Other Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 7
JOINT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1 FCC Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.5 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.6 Condition of Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.7 Cobra Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 8
CONDITIONS OF CLOSING BY BUYER . . . . . . . . . . . . . . . . . . . . 35
8.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.2 Compliance with Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Third Party Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.4 Closing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.5 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.6 Adverse Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.7 The Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.8 Indemnification and Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.9 Release of Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.10 Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.11 Earnest Money Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.12 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.13 Resignation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.14 Other Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.15 1445 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.16 Termination of Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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ARTICLE 9
CONDITIONS OF CLOSING BY SELLERS . . . . . . . . . . . . . . . . . . . . 38
9.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.2 Compliance with Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.3 Certifications, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.4 Governmental Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.5 Adverse Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.6 Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.7 Indemnification and Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.8 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 10
TRANSFER TAXES; FEES AND EXPENSES; TAX MATTERS . . . . . . . . . . . . . . . . 39
10.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2 Sales and Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.3 Governmental Filing or Grant Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.4 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 11
LIQUIDATED DAMAGES, SPECIFIC PERFORMANCE, LETTER OF CREDIT . . . . . . . . . . . . . 41
11.1 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.2 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.3 Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 12
TERMINATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . 43
12.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 13
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.1 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 14
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 46
14.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
14.2 Certain Interpretive Matters and Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
14.3 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
14.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
14.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
14.6 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
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14.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.10 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.14 No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.15 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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SCHEDULES
Schedule 2.1 Licenses
Schedule 3.1.1 Shares
Schedule 3.1.6 Financial Statements
Schedule 3.1.7 Undisclosed Liabilities
Schedule 3.1.8 Noncompliance with the Communications Act and the FCC
Schedule 3.1.9 Litigation
Schedule 3.1.10 Insurance
Schedule 3.1.11 Real Estate
Schedule 3.1.12 Personal Property
Schedule 3.1.13 Permitted Liens
Schedule 3.1.14 Environmental Matters
Schedule 3.1.15 Taxes
Schedule 3.1.16 Personnel
Schedule 3.1.17 Contracts
Schedule 3.1.18 ERISA Matters
Schedule 3.1.19 Labor Matters
Schedule 3.1.20 Intellectual Property
Schedule 3.1.28 Interest in Competitors, Suppliers and Customers
Schedule 3.1.30 Barter Arrangements
Schedule 4.1.4 Consents
Schedule 6.1.5 Certain Actions
EXHIBITS
Exhibit A Indemnification and Escrow Agreement
Exhibit B-1 Opinion of Thano G. Pasalis & Associates
Exhibit B-2 Opinion of Paul, Hastings, Janofsky & Walker LLP
Exhibit C Opinion of Weil, Gotshal & Manges LLP
Exhibit D Earnest Money Escrow Agreement
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DEFINED TERMS
<TABLE>
<CAPTION>
Defined Terms Section
- ------------- -------
<S> <C>
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 14.2
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.15
Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.8
Company Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Nonvoting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.3
Company Voting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.3
Company's Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.6
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.17
Earnest Money Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.3
Earnest Money Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.3
Earnest Money Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.3
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.18
Environmental Costs and Liabilities . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.14
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.14
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.18
ERISA Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.18
Estimate Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.3
Excepted Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 14.1
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 14.4
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1
FCC Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
FCC Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1
Final Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4
Final Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.4
FTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.5
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.6
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.5
Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.14
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.5
Indemnification and Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . Section 1.2
</TABLE>
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<S> <C>
Independent Group Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.20
Leased Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.11(c)
Liability Adjustment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.2
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.13
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.4
May 1998 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.7
Objection Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.5
Other Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Owned Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.11(c)
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.13
Predecessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.14
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.2
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.11(c)
Reviewing Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.5
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.1.8
Seller Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.1
Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Settlement Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.31
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Specified Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 13.1
Station Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.16
Stations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Stations Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1
Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.6
Tax or Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.15
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.15
Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.2
Wincom Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Working Capital Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.1
Young Ones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Young Ones Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Zapis Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
</TABLE>
viii
<PAGE> 10
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), made as of August
11, 1998, is by and among Young Ones, Inc., an Ohio corporation ("Young Ones"),
Zebra Broadcasting Corporation, an Ohio corporation (the "Company"), Maria
Zapis Wymer, Leon X. Zapis, Donna Zapis Thomas, and Renee Zapis Seybert (all
such individuals collectively referred to as the "Sellers"), and Chancellor
Media Corporation of Los Angeles, a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, the Company owns certain assets, which are used in connection
with the operation of radio stations WZJM 92.3 FM and WJMO 1490 AM in Cleveland
Heights, Ohio (the "Stations"); and
WHEREAS, Sellers own all of the issued and outstanding shares of
capital stock of Young Ones, which constitutes all of the issued and
outstanding equity interests of Young Ones (the "Young Ones Shares"); and
WHEREAS, Sellers own all of the issued and outstanding nonvoting
capital stock of the Company (the "Company Nonvoting Shares"), which, together
with all of the issued and outstanding voting capital stock of the Company
owned by Young Ones (the "Company Voting Shares"), constitutes all of the
issued and outstanding equity interests of the Company (the "Company Shares,"
and together with the Young Ones Shares, the "Shares"); and
WHEREAS, contemporaneously herewith, Buyer shall enter into (a) a
Stock Purchase Agreement with ML Media Partners L.P., Wincom Broadcasting
Corporation and WIN Communications, Inc. to purchase all of the stock of Wincom
Broadcasting Corporation, which operates radio station WQAL 104.1 FM in
Cleveland, Ohio (the "Wincom Acquisition"), (b) an Asset Purchase Agreement
with Independent Group Limited Partnership to purchase substantially all of the
assets used in connection with the operation of radio stations WDOK 102.1 FM
and WRMR 850 AM in Cleveland, Ohio (the "Independent Group Acquisition") and
(c) an Asset Purchase Agreement with Zapis Communications Inc. to purchase
substantially all of the assets used in connection with the operation of radio
stations WZAK 93.1 FM in Cleveland, Ohio (the "Zapis Acquisition," and together
with the Independent Group Acquisition and the Wincom Acquisition, the "Other
Acquisitions"); and
<PAGE> 11
WHEREAS, Sellers desire to sell the Shares and Buyer desires to
purchase the Shares in accordance with the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound hereby agree as follows:
ARTICLE 1
TERMS OF THE TRANSACTION
1.1 Sale of Shares. On the terms and subject to the conditions
contained in this Agreement, at the Closing (as defined in Section 1.4),
Sellers shall sell and assign to Buyer, and Buyer shall purchase and acquire
from Sellers, the Shares.
1.2 Purchase Price. In exchange for the Shares, Buyer shall,
subject to Articles 8 and 9 hereof, at the Closing deliver to Sellers the
amount equal to Thirty-Five Million Dollars ($35,000,000), plus or minus as the
case may be, the Working Capital Amount as defined in Section 1.3.1 hereof,
minus the Liability Adjustment Amount as defined in Section 1.3.2 hereof (as
adjusted, the "Purchase Price") by wire transfer of immediately available
funds; provided that a portion of the Purchase Price equal to $1,018,160 will
be paid by Buyer into escrow pursuant to the Indemnification and Escrow
Agreement among Buyer, Sellers and Key Trust Company of Ohio, N.A., as escrow
agent in the form attached as Exhibit A hereto (the "Indemnification and Escrow
Agreement").
1.3 Adjustments.
1.3.1 (a) The "Working Capital Amount" means the amount
equal to the Company's current assets, net of an allowance for uncollectible
accounts established in accordance with GAAP (as defined in Section 3.1.6)
consistent with the Company's past accounting practices and policies during the
fiscal year ended December 31, 1996 in which Seller was audited by Cohen &
Company, as of 12:01 a.m. on the Closing Date (as defined in Section 1.4) (the
"Effective Time"), minus the Company's current liabilities as of the Effective
Time, calculated in accordance with GAAP.
(b) The payments to Sellers shall be made by Buyer, or on
behalf of Buyer, to Sellers or Sellers' designee pursuant to an irrevocable pay
proceeds letter delivered by Sellers to Buyer at least three business days
prior to the Closing Date.
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<PAGE> 12
1.3.2 The "Liability Adjustment Amount" means the amount
equal to the total of, without duplication, (a) all of the liabilities and
obligations of the Company as of the Effective Time required to be reflected on
a balance sheet prepared in accordance with GAAP, (b) any prepayment penalties
and premiums and other penalties, costs and expenses associated with the
prepayment or retirement of any indebtedness of the Company, whether or not
incurred at Closing, (c) any stay bonuses paid to employees of the Company
prior to or at the Closing or committed to, prior to the Closing, to be paid by
the Company after the Closing, (d) Taxes relating to any periods ending on or
prior to the Closing Date, whether or not then due, (e) any severance
obligations of the Company with respect to employees terminated prior to or as
of the Closing, and (f) all liabilities and obligations to any Affiliates (as
defined in Section 14.2) of Sellers, the Company or Young Ones (including
without limitation Zapis Communications Corporation ("Zapis") and The Parklane
Group, Inc. ("Parklane")) but, excluding (i) the liabilities and obligations of
the Company which relate to the operations of the Company after the Closing,
(ii) any liabilities and obligations reflected in the Working Capital Amount,
(iii) any liabilities and obligations related to vacation and sick pay of
employees who remain with the Company accrued since January 1, 1998, (iv) any
liabilities and obligations of the Company paid prior to or as of the Closing,
provided that to the extent that cash of the Company is used to make such
payments, the use of such cash is reflected in the Working Capital Amount, and
(v) all liabilities and obligations relating to bartered goods and services
("Trade Agreements").
1.3.3 Sellers shall prepare and deliver to Buyer, at least
five business days prior to the Closing Date, a statement (the "Estimate
Statement") showing the amount reasonably estimated by Sellers, in good faith,
to be (a) the Working Capital Amount, together with reasonable detail as to how
such amount was determined and (b) the Liability Adjustment Amount, together
with reasonable detail as to how such amount was determined. Prior to Closing,
Sellers and the Company shall provide to Buyer copies of or reasonable access
to all books and records as Buyer may reasonably request for purposes of
verifying the estimated Working Capital Amount, the estimated Liability
Adjustment Amount and the calculations set forth on the Estimate Statement.
Sellers and Buyer agree to work together in good faith to resolve on or before
the Closing Date any disagreement with respect to any matter set forth in the
Estimate Statement. The Purchase Price paid by Buyer shall be based on the
estimated Working Capital Amount and estimated Liability Adjustment Amount set
forth in the Estimate Statement agreed to by Buyer and shall be adjusted
post-Closing, if necessary pursuant to this Section 1.3.
1.3.4 Buyer will deliver to Sellers, within 60 days after
the Closing Date, a schedule which sets forth the actual Working Capital Amount
and the actual Liability Adjustment Amount as of the Effective Time and sets
forth in reasonable detail how such
3
<PAGE> 13
amounts were determined (the "Final Statement"). Buyer shall provide to Sellers
copies of or reasonable access to all books and records of the Company as
Sellers may reasonably request for purposes of verifying the final Working
Capital Amount, the final Liability Adjustment Amount and the calculations set
forth in the Final Statement.
1.3.5 If within 30 days after Buyer delivers the Final
Statement to Sellers (the "Objection Period"), Sellers notify Buyer of any
objections to the calculation of the amounts set forth in the Final Statement,
Buyer and Sellers will attempt in good faith to agree by the date which is 100
days after the Closing Date upon such amounts. If Buyer and Sellers cannot
agree by such date as to the final Working Capital Amount and/or Liability
Adjustment Amount, Buyer and Sellers hereby designate Ernst & Young LLP (the
"Reviewing Firm") to review the Final Statement, Sellers' objections and any
other relevant documents. The cost of retaining such Reviewing Firm shall be
borne one-half by Buyer and one-half by Sellers. The Reviewing Firm shall
report its conclusions in writing to both Buyer and Sellers and such
conclusions as to factual and accounting matters respecting the final Working
Capital Amount and/or the final Liability Adjustment Amount and the
calculations set forth in the Final Statement shall be conclusive on all
parties to this Agreement and not subject to review or dispute. Buyer or
Sellers, as applicable, shall within ten days of the earlier to occur of (a)
the parties' agreement to the final Working Capital Amount and the final
Liability Adjustment Amount or (b) the Reviewing Firm's final determination of
such amounts, pay the amount owing to the other party by wire transfer of
immediately available funds.
1.4 Closing. The consummation of the transactions contemplated
herein (the "Closing") shall occur, except as otherwise mutually agreed upon by
Buyer and Sellers (a) within ten (10) business days after the FCC Consents (as
defined in Section 2.1) to the transfer of control of the Stations Licenses (as
defined in Section 2.1) have become Final Orders (as hereinafter defined) or
(b) at such later date that all other terms and conditions as set forth in
Articles 8 and 9 have been satisfied, or such other date as may be mutually
agreed to by the parties ("Closing Date"); provided, however, that in no event
shall the Closing occur prior to January 4, 1999. For purposes of the
Agreement, "Final Order" means action by the FCC (as defined in Section 2.1)
consenting to the transactions contemplated by this Agreement which is not
reversed, stayed, enjoined, set aside, annulled or suspended, and with respect
to which action no timely request for stay, petition for rehearing, or
reconsideration, application for review or appeal is pending, and as to which
the time for filing any such request, petition or appeal or reconsideration by
the FCC on its own motion has expired. The Closing shall be held in the offices
of Benesch, Friedlander, Caplan & Aronoff, LLP, 2300 BP America Building,
Cleveland, Ohio, or at such place as the parties hereto may agree.
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<PAGE> 14
ARTICLE 2
GOVERNMENTAL CONSENTS
2.1 FCC Consents. It is specifically understood and agreed by
Buyer and Sellers that the Closing and the transfer of control of the Stations
Licenses and the transfer of the Shares are expressly conditioned on and are
subject to the prior consent and approval of the Federal Communications
Commission ("FCC Consents"). "Stations Licenses" means all of the Company's
rights in and to the licenses, permits and other authorizations issued to the
Company by any governmental authority, including those issued by the Federal
Communications Commission (the "FCC"), used in connection with the operation of
the Stations, along with renewals or modifications of such items between the
date hereof and the Closing, including but not limited to those listed in
Schedule 2.1 hereto.
2.2 FCC Applications. Within ten business days after the execution
of this Agreement or such earlier time as shall be agreed to by all of the
parties hereto, Buyer, Sellers and the Company shall file applications with the
FCC for the FCC Consents ("FCC Applications").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY
3.1 Representations and Warranties of Sellers and the Company.
Sellers and the Company, jointly and severally, represent and warrant to the
Buyer the following:
3.1.1 Title to Shares. Sellers are the true and lawful
owners, of record and beneficially, of the Shares. Except as set forth on
Schedule 3.1.1, the Shares are, and at the Closing will be, owned by Sellers
free and clear of all Liens. Except as set forth on Schedule 3.1.1, other than
the rights and obligations arising under this Agreement, none of the Shares is
subject to any rights of any other person to acquire the same. Except as set
forth on Schedule 3.1.1, none of the Shares is subject to any Liens (as defined
in Section 3.1.13) or restrictions on transfer thereof, except for restrictions
imposed by applicable federal and state securities laws. Young Ones is the true
and lawful owner, of record and beneficially, of the Company Voting Shares. The
Company Voting Shares are owned by Young Ones free and clear of all Liens. None
of the Company Voting Shares is subject to any rights of any other person to
acquire the same. None of the Company Voting Shares is subject to any Liens or
restrictions on transfer thereof, except for restrictions imposed by applicable
federal and state securities laws.
5
<PAGE> 15
3.1.2 Subsidiaries. The Company does not have any
subsidiaries or any debt or equity investment in any other corporation,
partnership, joint venture or other business enterprise (the "Company Nonvoting
Shares"). Except for its ownership interest in the Company, Young Ones does not
have any subsidiaries or any debt or equity investment in any other
corporation, partnership, joint venture or other business enterprise.
3.1.3 Capital Stock. The authorized capital stock of the
Company consists solely of 750 shares of Class A Common Stock, no par value, of
which 650 shares are classified as nonvoting shares and of which 100 shares are
classified as voting shares. Except as set forth on Schedule 3.1.1, as of the
date hereof and as of the Closing, there are, and will be, 90 Voting Shares and
305.15 Nonvoting Shares issued and outstanding. The authorized capital stock of
Young Ones consists solely of 750 shares of common stock, no par value, of
which 100 shares are, as of the date hereof, and will be, as of the Closing,
issued and outstanding. There are no shares of capital stock of the Company or
Young Ones held in treasury. All of the outstanding shares of capital stock of
the Company and Young Ones are duly authorized and validly issued, fully paid
and nonassessable. None of the outstanding shares of the Company or Young Ones
were issued in violation of any preemptive or preferential right. There are no
other equity securities of the Company or Young Ones outstanding. There are
outstanding no securities or indebtedness convertible into, exchangeable for or
carrying the right to acquire, common stock or other equity securities of the
Company or Young Ones, or subscriptions, warrants, options, rights or other
arrangements or commitments obligating the Company or Young Ones to issue or
dispose of any of its common stock or other equity securities or any ownership
therein, except as set forth in Schedule 3.1.1 hereto. Except as set forth on
Schedule 3.1.1, there are no voting trusts, proxies or other agreements or
understandings with respect to the voting of any capital stock of the Company
or Young Ones.
3.1.4 Organization, Good Standing, Etc. (a) Young Ones and
the Company are corporations duly incorporated, validly existing and in good
standing under the laws of the State of Ohio, and each has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and is duly qualified to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
other than in such jurisdictions where the failure to so qualify has not had
and would not reasonably be expected to have a material adverse effect on the
assets, liabilities or the business of the Company or the Stations, or on
Sellers' or the Company's ability to consummate the transactions contemplated
by this Agreement (a "Material Adverse Effect").
6
<PAGE> 16
(b) Each of Sellers, the Company and Young Ones has all
requisite power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Sellers, the Company and Young Ones and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary action on the part of Sellers, the Company and Young Ones. This
Agreement has been duly executed and delivered by Sellers, the Company and
Young Ones and constitutes the legal, valid and binding obligation of Sellers,
the Company and Young Ones, enforceable against each of them in accordance with
its terms.
3.1.5 Authority. Assuming the consents identified in this
Section 3.1.5 and Section 3.1.17 are obtained, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby by the Company, Young Ones or any of the Sellers (a)
violate, conflict with or result in any breach of any provision of the articles
of incorporation or code of regulations (whether written or oral) of Young Ones
or the Company, (b) violate, conflict with or will result in a violation or
breach of, or constitute a default (with or without due notice or lapse of time
or both) under, or permit the termination of, or will result in the
acceleration of, or entitle any party to accelerate (whether as a result of the
sale of the Shares or otherwise) any obligation, or result in the loss of any
benefit, or give rise to the creation of any lien, charge, security interest or
encumbrance upon any of the properties or assets of Sellers, the Company or
Young Ones under any of the terms, conditions or provisions of any loan or
credit agreement, note, bond, mortgage, indenture or deed of trust, or any
license, lease, agreement or other instrument or obligation to which any of
them are a party or by which they or any of their properties or assets may be
bound or affected, or (c) violate any order, writ, judgment, injunction,
decree, statute, rule or regulation, of any court, administrative agency or
commission or other governmental authority or instrumentality (a "Governmental
Entity") applicable to Sellers, the Company or Young Ones or any of their
respective properties or assets, except, in the case of (b) and (c) above, for
those violations that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Sellers, the Company or Young Ones in
connection with the execution, and delivery of this Agreement by Sellers, the
Company or Young Ones or the consummation by Sellers, the Company or Young Ones
of the transactions contemplated hereby, except for (x) the filing of a
premerger notification report under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the expiration of the
applicable waiting period thereunder, and (y) the FCC Consents.
7
<PAGE> 17
3.1.6 Financial Statements. Attached as Schedule 3.1.6 are
copies of the Company's (a) audited balance sheet at December 31, 1996 and the
related statements of income and cash flow for the fiscal year then ended with
an audit report thereon issued by Cohen & Company; (b) the unaudited balance
sheet at December 31, 1997 and the related statements of income and cash flow
for the fiscal year then ended; and (c) internally prepared balance sheets as
of May 31, 1997 and 1998, and the related statement of income for the periods
then ended (such financial statements collectively being referred to as the
"Company's Financial Statements"). Except as set forth on Schedule 3.1.6
hereto, the Company's Financial Statements were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby ("GAAP") and present fairly, in all
material respects, the financial position, results of operations and, as to the
year end statements only, changes in cash flows of the Company as of such dates
and for the periods then ended (subject to the absence of notes and to normal,
recurring adjustments that would not be material in the aggregate), other than
Trade Agreements.
3.1.7 Absence of Undisclosed Liabilities. Except as set
forth on Schedule 3.1.7, there are no material liabilities of the Company of
any kind whatsoever (whether absolute, accrued, contingent or otherwise, and
whether due or to become due) that are required to be reflected on, or
disclosed in the notes to, a balance sheet of the Company prepared in
accordance with GAAP, other than liabilities and obligations (a) provided for
or reserved against in the Company's internally prepared balance sheet at May
31, 1998 described in Section 3.1.6 (the "May 1998 Balance Sheet") or reflected
in the notes thereto or (b) arising after May 31, 1998, in the ordinary course
of business and consistent with past practices and which individually or in the
aggregate have not had and could not reasonably be expected to have a Material
Adverse Effect.
3.1.8 Compliance with Applicable Laws, FCC Matters. (a)
Except as permitted or contemplated hereby, the operations of the Company,
including, without limitation, the operation of the Stations have been and now
are being conducted in substantial compliance, in all material respects, with
the Stations Licenses, each law, ordinance, regulation, judgment, decree,
injunction, rule or order of the FCC or any other Governmental Entity binding
on the Company or its respective properties or assets. No investigation or
review by any Governmental Entity with respect to the Company is pending or, to
Sellers' or the Company's knowledge, is threatened. Without limiting the
generality of the foregoing, each of Sellers and the Company has complied in
all material respects with the Communications Act of 1934, as amended (the
"Communications Act"), all rules, regulations and written policies of the FCC
thereunder, all obligations with respect to equal opportunity under applicable
law, and the FCC's policy on exposure to radio frequency radiation
8
<PAGE> 18
applicable to the Stations. No renewal of any Stations Licenses would
constitute a major environmental action under the rules of the FCC. Access to
the Stations' transmission facilities are restricted in accordance with the
policies of the FCC. In addition, each of Sellers and the Company has duly and
timely filed, or caused to be filed, with the appropriate Governmental Entities
all reports, statements, documents, registrations, filings or submissions with
respect to the operations of the Company, including, without limitation, the
operation of the Stations and the ownership thereof, including, without
limitation, applications for renewal of authority required by applicable law to
be filed. All such filings complied in all material respects with applicable
laws when made and to the Sellers' or the Company's knowledge, no deficiencies
have been asserted with respect to any such filings. All of the material
required by 47 C.F.R. Section 73.3526 to be kept in the public inspection files
of the Stations is in such files. Except as disclosed on Schedule 3.1.8,
neither Sellers nor the Company has knowledge of any fact or circumstance
relating to the Company or the Stations arising from noncompliance with the
Communications Act, or the rules, regulations or written policies of the FCC in
effect on the date of this Agreement that could reasonably be expected to (i)
disqualify Sellers from assigning the Shares to the Buyer or (ii) prevent or
delay the consummation by Sellers and Buyer of the transactions contemplated by
this Agreement. The ground system of the AM Station is as specified in the
current license or applicable construction permit for the AM Station (including
with respect to the number, length and burial depth of radials).
(b) Schedule 2.1 lists (i) all licenses, permits and
other authorizations (including all STL licenses and construction permits)
issued to the Company or the Sellers by the FCC relating to the Stations and
held by them as of the date of this Agreement and (ii) all licenses, permits,
or authorizations issued to the Company by any other Governmental Entities.
Such licenses, permits and authorizations, and all applications for
modification, extension or renewal thereof or for new licenses, permits,
permissions or authorizations that would be material to the operations of the
Stations, are collectively referred to herein as the Stations Licenses (as
further defined in Section 2.1), each of which is in full force and effect. All
towers and other structures used in the operation of the Stations or located on
the Real Property are obstruction marked and lighted to the extent required by,
and in accordance with the rules and regulations of the FAA, the FCC and other
federal, state and local authorities. Appropriate notifications to the FAA and
registrations with the FCC have been filed for such towers where required.
Except for proceedings affecting the radio broadcast industry generally, there
are no proceedings pending or, to Sellers' or the Company's knowledge,
threatened with respect to the Company's ownership or operation of the Stations
which reasonably may be expected to result in the revocation, material adverse
modification, non-renewal or suspension of any of the Stations Licenses, the
denial of any pending applications for the Stations Licenses, the issuance
against the Company of any cease and
9
<PAGE> 19
desist order, or the imposition of any administrative actions by the FCC or any
other Governmental Entity with respect to the Stations Licenses, or which
reasonably may be expected to adversely affect the Stations' ability to operate
as currently operated or Buyer's ability to obtain assignment of the Shares.
With the exception of such temporary reduced power operations as are necessary
for routine maintenance, the Stations operate (i) in conformity with their
licenses and (ii) within the operating power tolerances specified in 47 C.F.R.
Section 73.1560(b). No other broadcast station or radio communications facility
is causing interference to the Stations' transmissions beyond that which is
allowed by FCC rules and regulations. The Company has all necessary authority
to use the call signs set forth on Schedule 2.1.
3.1.9 Litigation. Except as disclosed on Schedule 3.1.9,
there are no actions, suits, inquiries, judicial or administrative proceedings,
or arbitrations pending or, to the knowledge of Sellers or the Company,
threatened against Sellers, the Company or Young Ones or any of their
respective properties or assets by or before any arbitrator or Governmental
Entity nor are there any investigations relating to Sellers, the Company or
Young Ones or any of their respective properties or assets pending or, to the
knowledge of Sellers or the Company threatened by or before any arbitrator or
Governmental Entity that has had or that reasonably could be expected to have a
Material Adverse Effect. There are no material judgments, decrees, injunctions,
or orders of any Governmental Entity or arbitrator outstanding against Sellers,
the Company or Young Ones or any of their respective properties or assets.
There is no action, suit, inquiry, judicial or administrative proceeding
pending or, to the knowledge of Sellers or the Company threatened against
Sellers, the Company or Young Ones by a third party relating to the
transactions contemplated by this Agreement.
3.1.10 Insurance. Schedule 3.1.10 sets forth a list of all
fire, liability and other forms of insurance and all fidelity bonds held by or
applicable to the Company or the Stations setting forth in respect of each such
policy the policy name, policy number, carrier, term, type of coverage and
annual premium, each of which is in full force and effect on the date hereof,
valid and enforceable in accordance with its terms and in amounts which are
adequate in relation to the business and assets of the Company and the
Stations. To Sellers' knowledge, no event has occurred, including, without
limitation, the failure by Sellers or the Company to give any notice or
information, or the delivery of any inaccurate or erroneous notice or
information, which limits or impairs the rights of Sellers or the Company under
any such insurance policies. The Company shall keep comparable policies of
insurance in effect for acts, omissions and events occurring on or prior to the
Closing Date.
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3.1.11 Real Estate. (a) The Company has, and upon Closing,
will continue to have, good and marketable title to the Owned Real Estate (as
hereinafter defined) and, except as set forth on Schedule 3.1.11, valid
leaseholds in the Leased Real Estate (as defined in subparagraph (c) below),
free and clear of any Liens except for the Permitted Liens (as defined in
Section 3.1.13). The buildings (or portions thereof), improvements and fixtures
that are included in the Real Estate (as defined in subparagraph (c) below) are
suitable for their intended use. The Company owns, or has a valid right to use
adequate routes of ingress and egress to, from and over all of the Real Estate
necessary to operate the Stations. The Real Estate has adequate water supply,
sewage and waste disposal facilities, is connected to and served by telephone,
gas, electricity and other utility equipment facilities and services necessary
for the operation or use of the Real Estate. Such facilities and services are
adequate for the present use and operation of the Real Estate on a fully
occupied basis, and are installed and connected pursuant to valid material
permits and are in material compliance with all material governmental
regulations. To Sellers' and the Company's knowledge, no fact or condition
exists which would result in the termination or impairment of the furnishing of
utility services to the Real Estate. Schedule 3.1.11 lists the street address
and/or legal descriptions of the Owned Real Estate and the street addresses
and/or legal descriptions of the Leased Real Estate. All real estate Taxes,
assessments and use charges pertaining to the Owned Real Estate that have
become due have been paid in full.
(b) The Real Estate, any improvements thereon, and the
use by the Company thereof, conform in all material respects, to (i) all
applicable laws, including but not limited to zoning requirements and the
Americans With Disabilities Act, and (ii) all restrictive covenants, if any.
There are no eminent domain proceedings pending, or to Sellers' and the
Company's knowledge, threatened against the Real Estate. All material
improvements (i) have been, to Seller's knowledge, constructed in a good and
workmanlike manner, free, in all material respects, from defects in workmanship
and material; and (ii) have been constructed, occupied, maintained and
operated, and to Seller's knowledge, constructed, in material compliance with
all applicable laws, insurance requirements, contracts, leases, permits,
licenses, ordinances, restrictions, building set-back lines, covenants,
reservations, and easements, and the Company has not received any notice,
written or verbal, claiming any material violation of any of the same or
requesting or requiring the performance of any material repairs, alterations or
other work in order to so comply. Other than Permitted Liens, no improvement on
any of the Real Estate encroaches upon any adjacent real property of any other
person or entity. The heating, air conditioning, plumbing, ventilating,
utility, sprinkler and other mechanical and electrical systems, apparatus and
appliances located on the Real Estate or in the improvements are in good
operating condition (normal wear and tear excepted), free from material defects
in workmanship and material.
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(c) The "Owned Real Estate" means all real property owned
by the Company together with all appurtenant easements thereunto and all
structures, fixtures and improvements located thereon as more fully described
in Schedule 3.1.11 hereto, together with any additions thereto between the date
hereof and the Closing. The "Leased Real Estate" means all rights and interests
of the Company under any and all of the leases of real property held by the
Company as more fully described in Schedule 3.1.11. The "Real Estate" means the
Owned Real Estate together with the Leased Real Estate.
3.1.12 Personal Property. Schedule 3.1.12 hereto contains a
list of all material tangible personal property and assets owned or held by the
Company (other than Real Estate, which is addressed in the foregoing Section
3.1.11). Except as disclosed in Schedule 3.1.12, the Company owns and will have
as of the Closing, good and marketable title to all property referred to in the
immediately preceding sentence and none of such property is, or at the Closing
will be, subject to any Liens (as defined in Section 3.1.13) other than
Permitted Liens (as defined in Section 3.1.13). The tangible personal property
and fixtures owned or used by the Company are, in all material respects, in
good operating condition (subject to normal wear and tear) and are sufficient
to permit the conduct of the business of the Stations in material compliance
with FCC rules and regulations. The Company owns or holds under valid leases
all of the tangible personal property and fixtures necessary to conduct the
business of the Company as presently conducted. The assets owned or held by the
Company (including the Real Estate) constitute all of the assets, rights and
properties that are required for the operation of the Company and the Stations
as they are now conducted.
3.1.13 Liens and Encumbrances. All properties and assets,
including leases, owned by the Company are free and clear of all liens,
pledges, claims, security interests, restrictions, mortgages, tenancies and
other possessory interests, conditional sale or other title retention
agreements, assessments, easements, rights of way, covenants, restrictions,
rights of first refusal, defects in title, encroachments and other burdens,
options or encumbrances of any kind (collectively, "Liens") except (a)
statutory Liens securing payments not yet delinquent or the validity of which
are being contested in good faith by appropriate actions, (b) purchase money
Liens arising in the ordinary course, (c) Liens for Taxes (as defined in
Section 3.1.15(k)) not yet delinquent, (d) Liens securing indebtedness, all of
which Liens will be discharged at the Closing upon repayment by Sellers of all
amounts due and owing, (e) Liens which in the aggregate do not materially
detract from the value or materially impair the present and continued use of
the properties or assets subject thereto in the usual and normal conduct of the
business of the Company, (f) Liens on leases arising from the provisions of
such leases, (g) zoning ordinances and (h) any other permitted
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exceptions listed on Schedule 3.1.13 hereto (the Liens referred to in clauses
(a) through (h) being "Permitted Liens").
3.1.14 Environmental Matters.
On the date of this Agreement, except as disclosed on Schedule 3.1.14:
(a) The Stations and any and all Real Estate is, and to
any of Sellers' and the Company's actual knowledge with respect to any
predecessor or prior owner, operator or lessee (each a "Predecessor")
has been, in compliance in all material respects, with all
Environmental Laws (as defined in subparagraph (f) below);
(b) No judicial or administrative proceedings are pending
or, to the knowledge of the Sellers or the Company, threatened against
Sellers or the Company, relating to any of the Real Estate alleging
the violation of or seeking to impose liability on Sellers or the
Company pursuant to any Environmental Law. Neither the Sellers nor
the Company has received any written notice, claim or other written
communication from any Governmental Entity or other person alleging
the violation of or liability under any Environmental Laws in
connection with any of the Real Estate or operations thereon;
(c) There are no facts, circumstances or conditions
associated with Real Estate or the operations thereon that could
reasonably be expected to give rise to a material environmental claim
against the Stations or the owner or operator thereof or result in the
Stations or the owners or operators thereof incurring material
Environmental Costs and Liabilities (as defined in subparagraph (f)
below);
(d) All substances, materials or waste that are regulated
by federal, state or local government under the Environmental Laws as
hazardous, toxic or a pollutant or contaminant as well as any
petroleum or petroleum derived product (collectively, "Hazardous
Substances"), used or generated by the Company or to Sellers' or the
Company's actual knowledge, by any Predecessor in connection with the
Real Estate, have been stored, used, treated, and disposed of by such
persons or on their behalf in such manner as not to result in any
material Environmental Costs or Liabilities;
(e) There are not now, nor have there been in the past,
on, in or under any Real Estate when owned, leased or operated by the
Company or, to Sellers' or the Company's knowledge, when owned, leased
or operated by any Predecessor, any of the following: any (i)
underground storage tanks, above-ground storage tanks, dikes
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or impoundments containing Hazardous Substances, (ii) asbestos
containing materials, (iii) polychlorinated biphenyls or related
compounds (other than those labeled and maintained in accordance with
applicable Environmental Laws) in amounts or concentrations regulated
under the Environmental Laws or (iv) radioactive substances in amounts
or concentrations regulated under the Environmental Laws; and
(f) For purposes of this Section 3.1.14, the following
terms have the following meanings: "Environmental Laws" shall mean all
applicable federal, state and local laws, statutes, codes, rules,
regulations, common law or other legal requirements relating the
environment, natural resources, and public or employee health and
safety; "Environmental Costs and Liabilities" means any losses,
including environmental remediation costs, liabilities, obligations,
damages, fines, penalties or judgments, arising from or under any
Environmental Law or order of or agreement with any Governmental
Entity or other person.
3.1.15 Taxes. (a) All Tax Returns (as defined in subsection
(j) below) that are required to be filed by or on behalf of the Company on or
before the execution of this Agreement have been duly filed on a timely basis
under the statutes, rules and regulations of each jurisdiction in which such
Tax Returns are required to be filed and Sellers and the Company will file or
will cause to be duly filed, all Tax Returns required to be filed by or on
behalf of the Company as of the Closing Date and with respect to any taxable
period prior to or which includes the Closing Date. All such Tax Returns are
(or will be) complete and accurate in all respects. Except as set forth on
Schedule 3.1.15, all Taxes, whether or not reflected on the Tax Returns, which
are due with respect to the Company and any Affiliates as of the date hereof
have been timely paid by the Company, and/or any such Affiliates. For the
purposes of this Section 3.1.15, Affiliates shall mean any entity that files a
consolidated combined or unitary Tax Return with the Company. All Taxes,
whether or not reflected on the Tax Returns, which are due with respect to the
Company through the Closing Date will be included as a liability in Working
Capital Amount or the Liability Adjustment Amount.
(b) No claim for assessment or collection of Taxes has
been asserted against the Company or any Affiliates. Neither the Company nor
any of its Affiliates is a party to any pending audit, action, proceeding or
investigation by any Governmental Entity for the assessment or collection of
Taxes nor does the Company or any of its Affiliates have knowledge of any
threatened audit, action, proceeding or investigation. No issue has been raised
by any Governmental Entity in any prior examination which could reasonably be
expected to result in a proposed deficiency for any subsequent taxable period.
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(c) Neither the Company nor any of its Affiliates has
waived or extended any statutes of limitation for the assessment or collection
of Taxes. No claim has ever been made by a Governmental Entity in a
jurisdiction where the Company or any of its Affiliates do not currently file
Tax Returns that it is or may be subject to taxation by that jurisdiction nor
is the Company or any of its Affiliates aware that any such assertion of
jurisdiction is pending or threatened. No Liens, other than Permitted Liens
(whether filed or arising by operation of law), have been imposed upon or
asserted against any of the assets of the Company as a result of or in
connection with any failure, or alleged failure to pay any Tax.
(d) The Company has withheld and paid over to the
appropriate Governmental Entity all Taxes required to be withheld in connection
with any amounts paid or owing to any employee, creditor, independent
contractor or other third party.
(e) None of the Sellers is a foreign person within the
meaning of Section 1445 of the Internal Revenue Code of 1986, as amended (the
"Code").
(f) The Company has not (A) filed a consent pursuant to
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to the disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by the Company, (B) agreed nor is required
to make any adjustments pursuant to Section 481(a) of the Code or any other
similar provision of state, local or foreign law by reason of a change in
accounting method initiated by the Company or have any knowledge that the
Internal Revenue Service ("IRS") has proposed any such adjustment or change in
accounting method, or has any application pending with any Governmental Entity
requesting permission for any changes in accounting methods that relate to the
business or operations of the Company, (C) executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision
thereof or any similar provision of state, local or foreign law with respect to
the Company, (D) requested any extension of time within which to file any Tax
Return, which Tax Return has since not been filed, or (E) executed a power of
attorney with respect to any Tax matter which is currently in force.
(g) No property owned by the Company constitutes (i)
"tax-exempt use property" within the meaning of Section 168(h)(1) of the Code,
(ii) "tax-exempt bond financed property" within the meaning of Section 168(g)
of the Code, or (iii) "limited use property" (as that term is used in Rev.
Proc. 76-30), nor is any such property required to be treated as owned by
another person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986.
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(h) The Company is not a party to any tax sharing, tax
indemnification or similar agreement or arrangement (whether or not written)
with respect to Taxes pursuant to which it will have any obligation to make any
payments after the Closing Date.
(i) The Company has never been a member of any
consolidated, combined unitary or affiliated group of corporations for any Tax
purposes.
(j) For purposes of this Agreement, the terms "Tax" and
"Taxes" shall mean all federal, state, local, or foreign taxes, assessments,
duties, levies or similar charges of any kind including, without limitation,
all income, payroll, Medicare, withholding, unemployment insurance, social
security, sales, use, service, service use, leasing, leasing use, excise,
franchise, gross receipts, value added, alternative or add-on minimum,
estimated, occupation, real and personal property, stamp, duty, transfer,
workers' compensation, severance, windfall profits, environmental (including
Taxes under Section 59A of the Code), other Tax, charge, fee, levy or
assessment of the same or of a similar nature, including any interest, penalty,
or addition thereto whether disputed or not. The term "Tax Return" means any
return, declaration, report, claim for refund, or information return or
statement relating to Taxes or any amendment thereto, and including any
schedule or attachment thereto.
3.1.16 Personnel. Attached as Schedule 3.1.16 is a complete
and correct list as of the date of this Agreement of the names, positions, and
location of all employees or other station and broadcast personnel (whether
employees or independent contractors) of the Company, which sets forth the
current salaries of all such employees and the other compensation arrangements
with all General Managers, Station Managers, General Sales Managers, Local
Sales Managers, National Sales Managers, Program Directors, Business Managers
and Traffic Managers, if any, (collectively, "Station Management"), all
on-the-air broadcast personnel of the Stations and all directors and officers
of the Company and indicates which of those employees, Station Management,
on-the-air broadcast personnel, or director or officer is a party to an
employment or consulting or similar contract with the Company. The Company has
delivered to Buyer accurate and complete copies of all such employment
agreements, confidentiality agreements and all other agreements, plans and
other instruments to which the Company is a party and under which such
employees are entitled to receive benefits of any value that involve payment by
or to the Company in excess of $25,000.
3.1.17 Certain Agreements. The Contracts (as defined below)
are the only contractual agreements necessary to carry out the business and
operations of the Company and the Stations as currently conducted. Each
Contract is a valid and binding obligation of
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the Company and is in full force and effect and, to the knowledge of Sellers
and the Company, each other party to such Contract, has performed in all
material respects the obligations required to be performed by it and is not
(with or without lapse of time or the giving of notice, or both) in material
breach or default thereunder. Schedule 3.1.17 identifies, as to each Contract,
whether the consent of the other party thereto is required in order for such
Contract to continue in full force and effect upon the consummation of the
transactions contemplated hereby. "Contracts" means all of the Company's right
in and under those contracts, agreements, leases and legally binding
contractual rights of any kind, written or oral, relating to the operation of
the Company listed in Schedule 3.1.17 hereto and (i) those contracts entered
into by the Company between the date hereof and the Closing in the ordinary
course of business of the Company consistent with past practices, subject to
Section 5.1 hereto; (ii) all contracts for the sale of advertising time for
cash, subject to Section 5.1 hereto; and (iii) all Trade Agreements, subject to
Section 5.1 hereto; and (iv) all other contracts, agreements, leases,
understandings, arrangements and legally binding contractual rights of any
kind, written or oral, to which the Company is a party or by which the
Company's assets or properties are bound that involve a payment by or to the
Company in excess of $25,000 individually or $150,000 in the aggregate. There
has not been (i) any threatened cancellation of any material Contracts, (ii)
any outstanding disputes, of a material nature, under any material Contracts or
(iii) to Sellers' or the Company's knowledge, any bases for any claim of breach
or default thereunder. Sellers and the Company have no knowledge that any of
the material Contracts that are renewable will not be renewed by the other
party on commercially reasonable terms.
3.1.18 ERISA Compliance. (a) Neither the Company nor any other
trades or businesses under common control, or which is treated as a single
employer with the Company under Sections 414(b),(c),(m) or (o) of the Code
(collectively, the "ERISA Group") has contributed or been obligated to
contribute to any "multi-employer plan" as such term is defined in Section
3(37) or Section 4001(a)(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), except as disclosed on Schedule 3.1.18. Schedule
3.1.18 lists all "employee benefit plans" within the meaning of Section 3(3) of
ERISA and bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
salary continuation, educational assistance, club memberships, company car
(other than those provided to employees pursuant to employment agreements
listed on Schedule 3.1.18 hereto), retirement, vacation, severance, disability,
death benefit, hospitalization, insurance or other plan or arrangement or
understanding providing benefits to any present or former employee or
contractor of the Company or as to which the Company (with respect to such
individuals) has any liability or obligation (collectively, "Employee Benefit
Plans"). Accurate and complete copies of such plans and their related summary
plan descriptions have been delivered to
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Buyer. The ERISA Group does not maintain or contribute to, and is not obligated
to maintain or contribute to, any employee pension benefit plan, as defined in
Section 3(2) of ERISA, subject to Part 3 of Title I of ERISA or Title IV of
ERISA.
(b) The Employee Benefit Plans and their related trusts
intended to qualify under Sections 401 and 501(a) of the Code, respectively, so
qualify. Any voluntary employee benefit association which provides benefits to
current or former employees of the Company or its beneficiaries, is and has
been qualified under Section 501(c)(9) of the Code.
(c) All contributions or other payments required to have
been made by Company to or under any Employee Benefit Plan by applicable law or
the terms of such Employee Benefit Plan have been timely and properly made.
(d) The Employee Benefit Plans have been maintained and
administered in all material respects in accordance with their terms and
applicable laws.
(e) Except as disclosed in Schedule 3.1.18, there are no
pending or, to the knowledge of the Company, threatened actions, claims or
proceedings against or relating to any Employee Benefit Plan other than routine
benefit claims by persons entitled to benefits thereunder.
(f) Except as disclosed in Schedule 3.1.18, the Company
does not maintain or have an obligation to contribute to retiree life or
retiree health plans which provide for continuing benefits or coverage for
current or former officers, directors or employees of the Company except (i) as
may be required under Part 6 of Title I of ERISA) and at the sole expense of
the participant or the participant's beneficiary or (ii) a medical expense
reimbursement account plan pursuant to Section 125 of the Code.
(g) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) result in
any payment becoming due to any employee of the Company, (ii) increase any
amounts otherwise payable under any Employee Benefit Plan or (iii) result in
the acceleration of the time of payment or vesting of any such benefits.
(h) Assuming the Company was the only member of an ERISA
Group, the amount of withdrawal liability they would incur, in the aggregate,
as a result of a complete withdrawal from each of the multiemployer plans set
forth in Schedule 3.1.18 would not exceed the amount set forth in Schedule
3.1.18 for each such plan.
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(i) No amount payable to any employee of the Company in
connection with the transactions contemplated by this Agreement will fail to be
deductible by the Company by reason of Section 280G of the Code.
(j) Neither the Company nor any Person with whom the
Company would be treated as an "employer" for purposes of the Worker Adjustment
and Retraining Notification Act or any similar state law has incurred or will
incur in connection with the transactions contemplated by this Agreement any
liability or obligation under such laws.
3.1.19 Labor. The Company has not 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 its employees.
Except as disclosed on Schedule 3.1.19, since June 30, 1995, the Company (a) is
and has been in compliance, in all material respects, with all applicable laws
regarding employment and employment practices, terms and conditions of
employment, wages and hours, and plant closing, occupational safety and health
and workers' compensation and is not engaged, nor has it engaged, in any unfair
labor practices, (b) has no, and has not had, any unfair labor practice charges
or complaints pending or, to Sellers' or the Company's knowledge, threatened
against the Company before the National Labor Relations Board, (c) has no and
has not had any grievances pending or, to Sellers' or the Company's knowledge,
threatened against the Company and (d) has no, and has not had any charges
pending or, to Sellers' or the Company's knowledge, threatened against the
Company before the Equal Employment Opportunity Commission, the FCC or any
state or local agency responsible for the prevention of unlawful employment
practices. There is no labor strike, slowdown, work stoppage or lockout
actually pending or, to the knowledge of Sellers or the Company, threatened
against or affecting the Company. To Sellers' and the Company's knowledge, no
union organizational campaign or representation petition is currently pending
with respect to the employees of the Company.
3.1.20 Patents, Trademarks, Etc. Schedule 3.1.20 sets forth
all call letters, patents, patent applications, trademarks, trade names,
Internet domain names, service marks, trade secrets, applied for, issued, owned
or used, copyrights and other proprietary Intellectual Property (as defined
below) used in the operation of the Company's businesses (whether owned, leased
or licensed by the Company). The Company has, and upon the Closing will
continue to have, good and marketable title to the material Intellectual
Property owned by it, free and clear of any Liens except for Permitted Liens
and for any infringement claims by third parties of which Sellers are not
aware. The Company has not received any notice of any claimed conflict,
violation or infringement of such Intellectual Property rights, and to Sellers'
and the Company's knowledge, none of such Intellectual Property rights are
being infringed by any third party. To Sellers' knowledge, the operation of the
Company's
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businesses does not infringe on the intellectual property rights of any other
person. "Intellectual Property" means all of the Company's rights in and to all
call letters, trademarks, trade names, service marks, franchises, copyrights,
Internet domain names, including registrations and applications for
registration of any of them, computer software programs and programming
material of whatever form or nature, jingles, slogans, the Stations' logos and
all other logos or licenses to use same and all other intangible property
rights of the Company, including, but not limited to those listed on Schedule
3.1.20 hereto together with any associated goodwill and any additions thereto
between the date hereof and the Closing.
3.1.21 Absence of Certain Changes or Events. Except as
contemplated or expressly permitted by this Agreement, since December 31, 1997,
there has not been (a) any material damage, destruction or loss of any kind
with respect to the Company or the Stations not covered by valid and
collectible insurance, nor, to Sellers' or the Company's knowledge, has there
been any event or circumstance which has had or reasonably could be expected to
have a Material Adverse Effect; (b) the execution of any agreement with any
Station Management or broadcast personnel of the Company (whether an employee
or independent contractor) providing for his/her employment, or any increase in
compensation or severance or termination of benefits payable or to become
payable by the Company to any officer, Station Management, or broadcast
personnel of the Company (whether an employee or independent contractor), or
any increase in benefits under any collective bargaining agreement, except as
to all of the foregoing in this clause (b), in the ordinary course of business
consistent with past practices and except as permitted by Section 5.1.1 or (c)
any change by the Company in its financial or Tax accounting principles or
methods, except insofar as required by GAAP, applicable law or circumstances
which did not exist as of the date of the December 31, 1997 balance sheet
included in the Company's Financial Statements.
3.1.22 Commission or Finder's Fees. Neither Sellers, the
Company, or Young Ones, nor any entity acting on behalf of any of them has
agreed to pay a commission, finder's fee or similar payment to any person or
entity in connection with this Agreement or any matter related hereto.
3.1.23 Full Disclosure. No representation or warranty by
Sellers, the Company or Young Ones contained in this Agreement (including the
Schedules hereto) or in any certificate furnished pursuant to this Agreement
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading.
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3.1.24 The Company's Financial Condition. No insolvency
proceedings of any character, including, without limitation, bankruptcy,
receivership, reorganization, composition or arrangement with creditors,
voluntary or involuntary, affecting the Company or Young Ones or any of its
respective assets or properties are pending, or to Sellers', the Company's or
Young Ones' knowledge, threatened, and the Company has not made assignment for
the benefit of creditors, nor taken any action with a view to, or which would
constitute a basis for, the institution of any such insolvency proceedings.
3.1.25 Books and Records. The books, records and accounts of
the Company and Young Ones maintained with respect to the Company and the
Stations, and Young Ones, respectively, accurately and fairly reflect, in
reasonable detail, in all material respects, the transactions and the assets
and liabilities of the Company and the Stations and Young Ones. Neither Sellers
nor the Company have engaged in any transaction, maintained any bank account or
used any of the funds of the Company except for transactions, bank accounts and
funds which have been and are reflected, in all material respects, in the
normally maintained books and records of the Company.
3.1.26 Accounts Receivable. All accounts, notes and loans
receivable of the Company reflected in the Company's Financial Statements or
arising since the date thereof (a) arose in the ordinary course of business of
the Company, (b) are subject to a reserve for bad debts which has been computed
in accordance with GAAP and (c) are valid and genuine. All such accounts, notes
and loans receivable are free and clear of Liens. There is no right or claim of
offset, no valid defenses or counterclaims with respect to any such accounts,
notes or loans receivable. None of the obligors of such accounts, notes or
loans receivable has refused or given notice that it refuses to pay the full
amount or any material portion thereof.
3.1.27 Availability of Documents. The Company and Young Ones
has heretofore made available for inspection by Buyer and its representatives
true, correct and complete copies of the articles of incorporation and code of
regulations or other organizational documents of each of the Company and Young
Ones, all written agreements, arrangements, commitments, and documents referred
to in the Schedules hereto, and the corporate minute books of each of the
Company and Young Ones. Such corporate minute books contain all of the minutes
of meetings of stockholders, board of directors, and any committees of the
board of directors of each of the Company and Young Ones and all of the written
consents to action executed in lieu thereof.
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3.1.28 Interest in Competitors, Suppliers and Customers.
Except as set forth on Schedule 3.1.28 hereto, neither Sellers nor any officer,
director or Affiliate of the Company, Sellers or Young Ones has any ownership
interest in any competitor, supplier, customer or other service provider of the
Company or any property used in the operation of the businesses of the Company.
3.1.29 Controlled Group Liability. The Company is not and will
not be subject to any liability on account of Sellers, the Company and Young
Ones having been affiliated, prior to the Closing Date, directly or indirectly,
with any other entity or person under Code Section 414, ERISA Section 4001 or
any similar foreign law.
3.1.30 Barter Arrangements. Schedule 3.1.30 accurately
describes all barter, trade or similar arrangements for the sale of advertising
time for other than cash and all Trade Agreements of the Company or of Sellers
relating to the operation of the Stations which are outstanding as of July 29,
1998. With respect to the Stations, all advertising time sold under barter,
trade or similar arrangements for the sale of advertising time for other than
cash and Trade Agreements may, at the Stations' option, be, preempted by
advertising time that is sold for cash. All barter, trade or similar
arrangements for the sale of advertising time for other than cash and all Trade
Agreements have been entered into in the ordinary course of business consistent
with past practices.
3.1.31 Settlement Agreement. Buyer has been provided with true
and complete copies of that certain Letter Agreement, dated as of December 22,
1993, by and among the Company, the Cleveland, Ohio Branch of the National
Association for the Advancement of Colored People and other parties signatory
thereto, and all amendments thereof and other documents related thereto
(collectively, the "Settlement Agreement"). The Settlement Agreement is a valid
and binding obligation of the Company and is in full force and effect and the
Company has complied and satisfied all of its obligations under the Settlement
Agreement, including without limitation all payment obligations thereunder,
required to be satisfied as of the date hereof and Sellers and the Company
shall continue to comply with and satisfy such obligations of the Company
through the Closing Date. The Company has no outstanding payment obligations
under, or arising from, the Settlement Agreement.
3.1.32 No Assets, Liabilities or Operations. Young Ones has no
assets (other than the Company Voting Shares, its corporate seal, minute books,
charter documents, stock record books and other books and records as pertain to
its organization, existence and share capitalization) or liabilities. Young
Ones has no, and never has had any, operations of any kind.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Representations and Warranties of Buyer. Buyer represents and
warrants to Sellers the following:
4.1.1 Organization and Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and is duly qualified to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, other than in such jurisdictions where the
failure to so qualify has not had and would not reasonably be expected to have
a material adverse effect on the assets, or the business of Buyer, or on
Buyer's ability to consummate the transactions contemplated by this Agreement.
4.1.2 Authorization and Binding Obligation. Buyer has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. Buyer's execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on the
part of Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable against it in accordance with its terms.
4.1.3 Qualification. To Buyer's knowledge, there is no
fact, allegation, condition, or circumstance that could reasonably be expected
to prevent the prompt grant of the FCC Consents. Buyer knows of no fact that
would, under the Communications Act, or the rules, regulations and policies of
the FCC, disqualify Buyer from acquiring the Shares or, as of the date hereof,
otherwise require Buyer to obtain a waiver of any FCC rule, regulation or
policy in order to obtain the FCC Consents. There are no proceedings,
complaints, notices of forfeiture, claims, or investigations pending or, to the
knowledge of Buyer, threatened against any or in respect of any of the
broadcast stations licensed to Buyer or its Affiliates that would materially
impair the qualifications of Buyer to acquire the Shares or delay the FCC's
processing of the FCC Applications.
4.1.4 Absence of Conflicting Agreements or Required
Consents. Except as set forth in Schedule 4.1.4 hereof, the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby by Buyer: (a) do not violate, conflict with or result in
any breach of any provision of the charter or bylaws of Buyer; (b) violate,
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conflict with or will result in a violation or breach of, or constitute a
default (with or without due notice or lapse of time or both) under, or permit
the termination of, or will result in the acceleration of, or entitle any party
to accelerate (whether as a result of the sale of the Shares or otherwise) any
obligation, or result in the loss of any benefit, or give rise to the creation
of any lien, charge, security interest or encumbrance upon any of the
properties or assets of Buyer or any of its subsidiaries under any of the
terms, conditions or provisions of any loan or credit agreement, note, bond,
mortgage, indenture or deed of trust, or any license, lease, agreement or other
instrument or obligation to which any of them are a party or by which they or
any of their properties or assets may be bound or affected, or (iii) violate
any order, writ, judgment, injunction, decree, statute, rule or regulation of
any Governmental Entity applicable to Buyer or any of its respective properties
or assets, except for those violations that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on Buyer's
ability to consummate the transactions contemplated by this Agreement.
4.1.5 Litigation. There are no actions, suits, inquiries,
judicial or administrative proceedings, or arbitrations pending or, to the
knowledge of Buyer, threatened against Buyer or any of its respective
properties or assets by or before any arbitrator or Governmental Entity nor are
there any investigations relating to Buyer or any of its respective properties
or assets pending or, to the knowledge of Buyer, threatened by or before any
arbitrator or Governmental Entity that has had or that reasonably could be
expected to have a material adverse effect on Buyer's ability to consummate the
transactions contemplated by this Agreement. There are no material judgments,
decrees, injunctions, or orders of any Governmental Entity or arbitrator
outstanding against Buyer or any of its respective properties or assets that
has had or that reasonably could be expected to have a material adverse effect
on Buyer's ability to consummate the transactions contemplated by this
Agreement. There is no action, suit, inquiry, judicial or administrative
proceeding pending, or, to the knowledge of Buyer, threatened against Buyer by
a third party relating to the transactions contemplated by this Agreement.
4.1.6 Commission or Finder's Fees. Neither Buyer nor any
entity acting on behalf of Buyer has agreed to pay a commission, finder's fee
or similar payment to any person or entity in connection with this Agreement or
any matter related hereto.
4.1.7 Full Disclosure. No representation or warranty by
Buyer contained in this Agreement (including the Disclosure Schedules hereto)
or in any certificate furnished pursuant to this Agreement contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary, in light of the circumstances under
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which it was or will be made, in order to make the statements herein or therein
not misleading.
4.1.8 Investment Intent; Sophisticated Buyer. Buyer (a) is
an informed sophisticated entity with sufficient knowledge and experience in
investing so as to be able to evaluate the risks and merits of its investment
in the Shares, (b) is financially able to bear the risks of investing in the
Company, (c) has had an opportunity to discuss the business, management and
financial affairs of the Company with the management of the Company, (d) is
acquiring the Shares for its own account for the purpose of investment and not
with a view to or for sale in connection with any distribution thereof, (e)
understands that (i) the Shares have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), (ii) the Shares must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (f) has no present need for
liquidity in connection with its purchase of the Shares, (g) understands that
the purchase of the Shares involves a high degree of risk, and (h) acknowledges
that the purchase of the Shares is consistent with its general investment
objectives.
ARTICLE 5
COVENANTS OF SELLERS AND THE COMPANY
5.1 The Company, Young Ones and Sellers covenant and agree with
Buyer that, pending Closing and except as otherwise agreed to in writing by
Buyer:
5.1.1 Conduct Prior to the Closing. (a) The Company shall:
((i) use commercially reasonable efforts to maintain its
present business organization, keep available the services of its
present employees and independent contractors, preserve its
relationships with its customers and others having business
relationships with it, and refrain from materially and adversely
changing any of its business policies (including but not limited to
advertising (including substantially the same amount of cash
expenditure), marketing, pricing, purchasing, personnel, sales, and
budget policies);
((ii) maintain its books of account and records in the
usual and ordinary manner and in accordance with GAAP except as
otherwise provided in Section 3.1.6;
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((iii) notify Buyer if the regular broadcast transmission of
the Stations from their main transmitting facilities at full
authorized effective radiated power is interrupted for a period of
more than five consecutive hours or for an aggregate of ten or more
hours in any continuous three-day period;
((iv) operate in the usual and ordinary course of business
in accordance with past practices and conduct its business in all
material respects in compliance with the terms of the Stations
Licenses and all applicable laws, rules, and regulations, including,
without limitation, the applicable rules and regulations of the FCC
through the Closing Date;
((v) use, repair, and, if necessary, replace any of the
Stations' studio and transmission assets in a reasonable manner
consistent with historical practice and maintain its assets in
substantially their current condition, ordinary wear and tear
excepted;
((vi) maintain insurance in conformity with Section 3.1.10
through the Closing Date;
((vii) not knowingly incur any debts, obligations, or
liabilities (absolute, accrued, contingent, or otherwise) that include
obligations (monetary or otherwise) to be performed by Buyer after the
Closing that exceed $50,000 individually or $150,000 in the aggregate;
((viii) not lease, mortgage, pledge, or subject to a lien,
claim, or encumbrance (other than Permitted Liens) any of its assets
or sell or transfer any of its assets without replacing such assets
with an asset of substantially the same value and utility;
((ix) without the prior consent of Buyer, which consent
shall not be unreasonably withheld or delayed, (x) not modify or
extend any Contracts, other than Contracts for the sale of advertising
for cash, or (y) enter into any new Contract, other than Contracts for
the sale of advertising time for cash, or other than non-advertising
Contracts obligating the Company to provide payments or benefits of
less than $50,000 each over the life of the Contract and $150,000 in
the aggregate;
((x) except for stay bonuses which are taken into account
in the Working Capital Amount or the Liability Adjustment Amount, not
make or grant any general wage or salary increase or generally
materially modify the employees' terms and
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conditions of employment, other than in the ordinary course of
business, consistent with past practices, and with respect to any
Station Management and on-air personnel, the Company shall not make or
grant any wage or salary increase or modify any terms and conditions
of employment without the prior consent of Buyer;
((xi) not make (x) any change in the accounting principles,
methods, or practices followed by it or depreciation or amortization
policies or rates or (y) any change in any Tax election or settle or
compromise any Tax liability;
((xii) not make any loans or make any dividends or
distributions;
((xiii) other than in the ordinary course of business, not
cancel or compromise any debt or claim, or waive or release any right,
of material value;
((xiv) not disclose to any person (other than Buyer and its
representatives) any confidential or proprietary information;
((xv) use its commercially reasonable efforts to maintain
the present formats of the Stations and with programming consistent
with past practices;
((xvi) other than in the ordinary course of business, not
increase the number of regularly scheduled commercial units run during
the day-parts on the Stations (other than changes in the number of
commercial units run during any day-part as a result of operating
difficulties that require commercial units to be broadcast at times
other than as scheduled);
(xvii) not make capital expenditures, or enter into any
commitment which commits the Company to expend, in the aggregate, in
excess of $500,000;
((xviii) not (x) issue, grant or dispose of, or make any
agreement, arrangement or commitment obligating it to issue, grant or
dispose of, any of its capital stock or other securities it, (y)
authorize or effect any reorganization, recapitalization, or split-up
of its capital stock or (z) redeem, purchase, or otherwise acquire,
directly or indirectly, any of its capital stock;
((xix) not amend or otherwise change its articles of
incorporation or code of regulations; and
((xx) agree to do any of the foregoing.
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(b) Young Ones shall:
((i) not disclose to any person (other than Buyer and its
representatives) any confidential or proprietary information;
((ii) not amend or otherwise change its articles of
incorporation or code of regulations;
((iii) not incur any liabilities of any kind or commence any
operations of any kind; and
((iv) agree to do any of the foregoing.
5.1.2 Access. The Company, Sellers and Young Ones shall (a)
give Buyer and Buyer's counsel, accountants, engineers and other
representatives, including environmental consultants, reasonable access during
normal business hours to all of Young Ones' and the Company's properties,
books, Contracts, Trade Agreements, reports and records including financial
information and Tax Returns, and to all Real Estate, buildings and equipment,
in order that Buyer may have full opportunity to make such investigation,
including but not limited to, environmental assessments, as it desires of the
affairs of the Company, the Stations and Young Ones and (b) furnish Buyer with
information, and copies of all documents and agreements including but not
limited to financial and operating data and other information concerning the
financial condition, results of operations and business of the Company, the
Stations and Young Ones, that Buyer may reasonably request. The rights of Buyer
under this Section shall not be exercised in such a manner as to interfere
unreasonably with the business of the Stations.
5.1.3 Satisfaction of Conditions; Closing. Sellers and the
Company shall use all commercially reasonable efforts to conduct the business
of the Company and the Stations in such a manner that on the Closing Date the
representations and warranties of Sellers and the Company contained in this
Agreement shall be true in all material respects as though such representations
and warranties were made on and as of such date. Furthermore, the Sellers, the
Company and Young Ones shall cooperate with Buyer and use all commercially
reasonable efforts to satisfy promptly all conditions required hereby to be
satisfied by Sellers, the Company and Young Ones in order to expedite the
consummation of the transactions contemplated hereby.
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5.1.4 Sale of Acquired Assets; Negotiations. None of the
Sellers, the Company or Young Ones shall, and Sellers, the Company and Young
Ones shall cause their respective Affiliates, directors, officers, employees,
agents, representatives, legal counsel, and financial advisors not to, (a)
solicit, initiate, accept, consider, entertain or encourage the submission of
proposals or offers from any person or entity with respect to the transactions
contemplated by this Agreement or any similar transaction wherein such person
or entity would directly or indirectly acquire all or any portion of the assets
of the Company or ownership interests in the Company or Young Ones, or any
merger, consolidation, or business combination, directly or indirectly, with or
for the Company or Young Ones or all or substantially all of the Company's
business, or (b) participate in any negotiations regarding, or, except as
required by legal process (including pursuant to discovery or agreements
existing on the date hereof), furnish to any person or entity (other than
Buyer) to do or seek any of the foregoing. None of the Sellers, the Company or
Young Ones shall enter into any agreement or consummate any transactions that
would interfere with the consummation of the transactions contemplated by this
Agreement. Each of Sellers, the Company and Young Ones shall promptly notify
Buyer if it receives any written inquiry, proposal or offer described in this
Section 5.1.4 or any verbal inquiry, proposal or offer described in this
Section 5.1.4 that is competitive with the terms of the transactions
contemplated by this Agreement, and the Company, Sellers or Young Ones, as
applicable, shall inform such inquiring person or entity of the existence of
this Agreement and make such inquiring person or entity aware of Sellers', the
Company's or Young Ones' obligations under this Section 5.1.4. The notification
under this Section 5.1.4 shall include the identity of the person or entity
making such inquiry, offer, or other proposal, the terms thereof, and any other
information with respect thereto as Buyer may reasonably request. None of the
Sellers, the Company or Young Ones shall provide any confidential information
concerning the Company's business or properties or assets to any third party
other than in the ordinary course of the business of the Company and consistent
with prior practices of the Company. Sellers, the Company and Young Ones have
ceased and caused to be terminated any existing activities, discussions or
negotiations with any person or entity conducted heretofore with respect to any
of the foregoing.
5.1.5 No Inconsistent Action. None of the Sellers, the
Company or Young Ones shall take any action which is materially inconsistent
with its respective obligations under this Agreement.
5.1.6 Notification. Sellers, the Company and Young Ones
shall promptly notify Buyer in writing of (a) the failure of Sellers, the
Company or Young Ones or, to Sellers', the Company's or Young Ones' knowledge,
any employee or agent of Sellers or the Company to comply with or satisfy in
any material respect any covenant, condition or
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agreement to be complied with hereunder; (b) the occurrence of any event that
would entitle Buyer to terminate this Agreement pursuant to Section 12.1; or
(c) of any overt threat or actual resignation or termination of any Station
Management or over-the-air personnel at the Stations or any officers or
directors of the Company prior to the Closing Date.
5.1.7 FCC Reports. The Company shall file on a current
basis through the Closing Date all reports and documents required to be filed
with the FCC with respect to the Stations Licenses. Copies of each such report
and document filed between the date hereof and the Closing Date shall be
furnished to Buyer promptly after its filing.
5.1.8 Updating of Information. Between the date of this
Agreement and the Closing Date, the Company will deliver to Buyer, on a monthly
basis within 30 days of the end of each month, information relating to the
operation of the Stations, including weekly sales reports and such other
financial information that may be reasonably requested.
5.1.9 Response to Certain Actions. Sellers, the Company and
Young Ones agree to cooperate and use their commercially reasonable efforts to
contest and resist any action, including administrative or judicial action, and
make reasonable attempts to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that restricts, prevents or prohibits the
consummation of the transactions contemplated by this Agreement.
5.1.10 Barter and Trade. Sellers and the Company shall use
their commercially reasonable efforts to (a) reduce the total amount of
advertising time owed for other than cash and (b) if the value of the Company's
obligations to provide goods or services other than for cash is greater than
the value of the goods or services to be received by the Company other than for
cash on or after the Closing Date, reduce such excess amount prior to the
Closing Date; provided, however, that in no event shall the Purchase Price be
decreased as result of such remaining excess value existing as of the Closing.
Any Trade Agreements entered into during the period between the date hereof and
the Closing Date shall be entered into only in the ordinary course of the
Company's business and consistent with past practices.
5.1.11 Interim Financial Statements. Sellers and the Company
shall promptly deliver to Buyer copies of any monthly, quarterly or annual
financial statements relating to the Company's operations that may be prepared
by it during the period from the date hereof through the Closing Date. Such
financial statements shall fairly present, in all material respects, the
financial position and results of operations of the Company as at the dates and
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for the periods indicated, and shall be prepared on a basis consistent and in
accordance with the basis upon which the financial statements in Section 3.1.6
were prepared.
5.1.12 Estoppel Certificates. If requested by Buyer within 30
days of the date of this Agreement, the Company and Sellers shall use
commercially reasonable efforts to obtain from third parties the estoppel
certificates, nondisturbance agreements, and/or written clarifications of the
rights of Buyer thereunder, all in form and substance reasonably satisfactory
to Buyer.
5.1.13 Employee Benefit Plans. Sellers shall (a) satisfy all
liabilities and obligations with respect to the Employee Benefit Plans arising
prior to the Closing Date, (b) cause Zapis to maintain in full force and effect
the Employee Benefit Plans, including related insurance policies, to the extent
necessary to permit Sellers to satisfy all liabilities and obligations arising
thereunder prior to the Closing Date and (c) cause the Company to cease
participation in the Employee Benefit Plans as of the Closing Date.
5.1.14 Termination of Management Agreements. Sellers shall
cause any agreements, arrangements or understandings with Parklane that relate
in any way to the Stations, the assets of the Company, or the Company's
employees to be terminated and of no further force and effect as of the
Closing. Sellers agree that Buyer (and following the Closing, the Buyer and the
Company) shall have no obligations or liabilities arising from or related to
such agreements, arrangements or understandings. In addition, Sellers agree to
cause that certain Management Agreement dated as of February 17, 1994, by and
between Zapis and the Company, and any successor agreements thereto (the
"Management Agreement") to be terminated and of no further force and effect as
of the Closing Date. Sellers agree that Buyer (and following the Closing, the
Buyer and the Company) shall have no obligations or liabilities arising from or
related to the Management Agreement.
ARTICLE 6
COVENANTS OF BUYER
6.1 Buyer covenants and agrees that, pending the Closing and
except as otherwise agreed to in writing by Sellers:
6.1.1 Notification. Buyer shall promptly notify Sellers in
writing of (a) any litigation, arbitration or administrative proceeding pending
or, to its knowledge, threatened against Buyer which challenges the
transactions contemplated hereby or (b) the failure of Buyer, or, to Buyer's
knowledge, any employee or agent of Buyer to comply with or satisfy
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in any material respect any covenant, condition or agreement to be complied
with or satisfied by it hereunder and (c) the occurrence of any event that
would entitle Sellers to terminate this Agreement pursuant to Section 12.1.
6.1.2 No Inconsistent Action. Buyer shall not take any
action which is materially inconsistent with its obligations under this
Agreement.
6.1.3 Post-Closing Access. Buyer, for a period of seven
years following the Closing Date, shall make available during normal business
hours for audit and inspection by Sellers and their representatives, for any
reasonable purpose and upon reasonable notice, all records, files, documents
and correspondence of the Company relating to the pre-Closing period. During
such seven-year period, Buyer shall at no time dispose of or destroy any such
records, files, documents and correspondence without giving 30 days prior
notice to Sellers to permit Sellers, at their expense, to examine, duplicate or
take possession of and title to such records, files, documents and
correspondence. All information, records, files, documents and correspondence
made available or disclosed under this Section 6.1.3 shall be kept
confidential.
6.1.4 Satisfaction of Conditions; Closing. Buyer shall use
all commercially reasonable efforts to conduct its business in such a manner
that on the Closing Date the representations and warranties of Buyer contained
in the Agreement shall be true in all material respects as though such
representations and warranties were made on and as of such date. Buyer shall
cooperate with Sellers and the Company and use commercially reasonable efforts
to satisfy promptly all conditions required hereby to be satisfied by Buyer in
order to expedite the consummation of the transactions contemplated hereby.
6.1.5 Response to Certain Actions. Buyer agrees to
cooperate and use its commercially reasonable efforts to contest and resist any
action, including administrative or judicial action, and make reasonable
attempts to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent, that is
in effect and that restricts, prevents or prohibits the consummation of the
transactions contemplated by this Agreement and Buyer agrees to take the
actions described (under the circumstances so described) on Schedule 6.1.5.
6.1.6 Other Acquisitions. Buyer agrees to close the Other
Acquisitions unless any of the Sellers are in breach of this Agreement or any
of the applicable sellers is in breach of the Zapis Acquisition or Independent
Group Acquisition agreements or Buyer is otherwise not obligated to close with
any of the Sellers under this Agreement or with any of the applicable sellers
under the Zapis Acquisition or Independent Group Acquisition
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agreements, in which case Buyer is not obligated to close any of the Other
Acquisitions or consummate the transactions contemplated under this Agreement.
ARTICLE 7
JOINT COVENANTS
Buyer, Sellers and the Company covenant and agree that, pending the
Closing and except as otherwise agreed to in writing, they shall act in
accordance with the following:
7.1 FCC Applications. Buyer, Sellers, the Company and Young Ones
shall prosecute the FCC Applications with all reasonable diligence and
otherwise use their commercially reasonable efforts to obtain the FCC Consents
as expeditiously as practicable, but none of Buyer, the Company, Sellers or
Young Ones shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have a material adverse effect upon Buyer, the
Company or Sellers (other than Buyer's obligations under Section 6.1.5).
Notwithstanding anything to the contrary contained herein, Buyer or Sellers may
terminate this Agreement upon notice to the other, if, for any reason, other
than Buyer's failure to comply with Section 6.1.5 (in which case only Sellers
can terminate), the FCC Applications are designated for hearing by the FCC;
provided, however, that notice of termination must be given within 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 7.1, the parties
shall be released and discharged from any further obligation hereunder without
being subject to a claim by Sellers for liquidated damages or for any other
claims for damages.
7.2 Confidentiality. Each of Buyer, Sellers, the Company and Young
Ones shall keep confidential all information obtained by it with respect to the
other parties hereto in connection with this Agreement and the negotiations
preceding this Agreement, including, without limitation, the results of, and
information relating to, the Studies (as defined in Section 7.6), and will use
such information solely in connection with the transactions contemplated by
this Agreement, and if the transactions contemplated hereby are not consummated
for any reason, each shall return to each other party hereto, without retaining
a copy thereof, any schedules, documents or other written information obtained
from such other party in connection with this Agreement and the transactions
contemplated hereby except to the extent required or useful in connection with
any claim made with respect to the transactions contemplated by this Agreement
or the negotiation thereof which will be returned following settlement of the
claim. Notwithstanding the foregoing, no party shall be required to keep
confidential or return any information which (a) is known or available
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through other lawful sources, not bound by a confidentiality agreement with the
disclosing party, or (b) is or becomes publicly known through no fault of the
receiving party or its agents, or (c) is required to be disclosed pursuant to
an order or request of a judicial or government authority (provided the
non-disclosing party is given reasonable prior notice such that it may seek, at
its expense, confidential treatment of the information to be disclosed), (d) is
developed by the receiving party independently of the disclosure by the
disclosing party or (e) is required to be disclosed under applicable law or
rule, as determined by counsel for the receiving party.
7.3 Cooperation. Buyer, Sellers, the Company and Young Ones shall
cooperate fully with one another in taking any actions, including actions 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.
7.4 Public Announcements. None of Buyer, Sellers, the Company or
Young Ones shall issue any press release or make any disclosure with respect to
the transactions contemplated by this Agreement without the prior written
approval of the other party, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any securities exchange or
the Nasdaq National Market or any stock exchange or Nasdaq National Market
regulations in which case Buyer, Sellers, the Company or Young Ones, as the
case may be, shall give notice to the other parties prior to making such
disclosure.
7.5 Hart-Scott-Rodino. Sellers, Buyer, the Company and Young Ones
shall submit to the United States Department of Justice and the United States
Federal Trade Commission ("FTC") not later than 15 business days after the date
of this Agreement all of the forms and information applicable to this
transaction required under the HSR Act and will use commercially reasonable
efforts to respond promptly to any request by them for additional information.
Buyer, the Company and Sellers shall use commercially reasonable efforts
(including the filing of a request for early termination) to obtain the early
termination of the waiting period under the HSR Act. Sellers shall reimburse
Buyer for one-half of the filing fees for Buyer's HSR Act filing.
7.6 Condition of Real Estate. Buyer may, at its sole expense,
conduct environmental studies, title examinations, and land surveys (the
"Studies") of the Real Estate provided all information received as a result of,
or in the course of, any of the Studies will be deemed confidential (subject to
Section 7.2). Sellers, the Company and Young Ones agree to cooperate with any
reasonable request of Buyer for a site assessment or site review
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concerning any environmental, title or survey matter, including the making
available of such personnel of the Company as Buyer may reasonably request, so
long as such activities do not unreasonably interfere with the conduct of the
Company's businesses. At the discretion of Buyer, Buyer may arrange, at its
sole expense, for one or more independent contractors to conduct tests of the
Real Estate, including tests of air, soil (including surface and subsurface
materials), surface water and ground water, or any equipment or facilities
located thereon, in order to identify any present or past release or threatened
release of any hazardous substances. Such tests may be done at any time, or
from time to time, upon reasonable notice and under reasonable conditions,
which do not impede the performance of such tests. If Buyer notifies Sellers
within 45 days of the date of this Agreement that the Studies disclose
potential Environmental Costs and Liabilities in excess of $100,000, or the
presence of Hazardous Materials at concentrations exceeding those allowed by
Environmental Laws, evidence encroachments that materially and adversely affect
the use (for the purpose currently used) of the Real Estate, or any other
matters that materially affect the title, value or use of the Real Estate,
Sellers shall promptly commence remedial action at their expense to cure the
condition giving rise to such matter and attempt to cure such condition prior
to the Closing; provided that Sellers shall not be obligated to spend (but may
choose to spend) more than $100,000 in the aggregate in their attempts to cure
all such conditions. Sellers shall notify Buyer within 30 days after their
receipt of Buyer's Studies if they determine that they are unable to cure such
conditions for $100,000 or less and choose not to attempt to cure such
conditions, in which case Buyer may elect within 30 days after Buyer's receipt
of Sellers' notice that they choose not to attempt to cure such conditions (a)
to terminate this Agreement or (b) to waive such obligations and receive a
$100,000 credit at the Closing. If this Agreement is terminated in accordance
with the immediately preceding sentence, no party shall have any liability to
the other with respect to such termination. Either party may extend the Closing
by not more than 30 days if either reasonably determines that any necessary
remedial action can be completed during such period.
7.7 Cobra Compliance. Sellers shall take all necessary actions to
comply with Part 6, Subtitle B, of Title I of ERISA with respect to the
employees and former employees of the Company, and Buyer shall not have any
obligations or liability with respect thereto on or before the Closing Date.
ARTICLE 8
CONDITIONS OF CLOSING BY BUYER
The obligations of Buyer hereunder, including, without limitation, the
obligation to close the transactions contemplated herein, are, at its option,
subject to satisfaction, at or
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prior to the Closing, of all of the following conditions, any of which may be
waived by Buyer:
8.1 Representations, Warranties and Covenants. All representations
and warranties of Sellers, the Company and Young Ones made in this Agreement or
in any Exhibit, Schedule or document delivered pursuant hereto, shall be true
and correct in all material respects as of the date hereof and on and as of the
Closing Date as if made on and as of that date, except for changes expressly
permitted by the terms of this Agreement and except those given as of a
specified date which must only be true and correct as of such specified date.
Notwithstanding anything herein to the contrary, a breach of Section 3.1.9
resulting from Buyer's breach of Section 6.1.5 shall not be deemed a breach of
Section 3.1.9 by Sellers.
8.2 Compliance with Agreement. All of the terms, covenants and
conditions to be complied with and performed by Sellers, the Company and Young
Ones on or prior to the Closing Date shall have been complied with or performed
in all material respects.
8.3 Third Party Consents and Approvals. Sellers and the Company
shall have obtained all third-party consents and approvals, if any, required
for the transfer or continuance, as the case may be, of the Contracts
designated by an asterisk as "essential" on Schedule 3.1.17 (and contracts of a
similar nature that would have been marked as such on Schedule 3.1.17 had they
been in existence on the date of this Agreement).
8.4 Closing Certificates. Buyer shall have received a certificate,
dated as of the Closing Date, from Sellers, the Company and Young Ones,
executed by an executive officer of each of Sellers, the Company and Young Ones
to the effect of Sections 8.1 and 8.2.
8.5 Governmental Consents. (a) The FCC Consents shall have been
issued by the FCC without any conditions that would otherwise permit Buyer to
terminate this Agreement pursuant to Section 12.1(e), below, and the FCC
Consents shall have become Final Orders (as defined in Section 1.4).
(b) All applicable notification and waiting period
requirements under the HSR Act shall have been satisfied.
8.6 Adverse Proceedings. No injunction, order, decree or judgment
of any court, agency or other Governmental Entities shall have been rendered
against Sellers, the Company, Young Ones or Buyer which would render it
unlawful, as of the Closing, to effect the transactions contemplated by this
Agreement in accordance with its terms.
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8.7 The Shares. Sellers, the Company and Young Ones shall have
delivered or caused to be delivered to Buyer, on the Closing Date, the stock
certificates evidencing the Shares, duly endorsed or accompanied by a duly
executed stock power assigning the shares to Buyer and otherwise in good form
for transfer.
8.8 Indemnification and Escrow Agreement. The Sellers shall have
executed and delivered to Buyer the Indemnification and Escrow Agreement.
8.9 Release of Encumbrances. Evidence satisfactory to Buyer's
counsel of the payment or release of any and all Liens (other than Permitted
Liens not required to be released pursuant to the provisions of this
Agreement).
8.10 Legal Opinions. Buyer shall have received an opinion of Thano
G. Pasalis & Associates and Paul, Hastings, Janofsky & Walker LLP, each dated
as of the Closing Date, substantially in the form of Exhibits B-1 and B-2
hereto.
8.11 Earnest Money Letter of Credit. The Earnest Money Letter of
Credit (as defined in Section 11.3) shall have been returned to Buyer for
cancellation.
8.12 No Material Adverse Change. Since the date hereof, there shall
have been no material adverse change to the financial condition or operating
results of the Company (other than as a result of regulatory changes affecting
the radio broadcasting industry generally or general economic conditions).
8.13 Resignation of Directors. The directors of the Company and
Young Ones shall have resigned effective as of the Closing Date.
8.14 Other Acquisitions. The Zapis Acquisition and the Independent
Group Acquisition shall concurrently close with the transactions contemplated
under this Agreement unless the Zapis Acquisition and the Independent Group
Acquisition do not close solely due to the breach by Buyer of the agreement
governing the Zapis Acquisition or the Independent Group Acquisition, as
applicable, in which case this condition shall not apply with respect to any
such acquisition that does not close solely due to the Buyer's breach.
8.15 1445 Certificate. Sellers shall have executed and delivered a
certificate, in a form reasonably satisfactory to Buyer, stating that none of
Sellers is a foreign person within the meaning of Section 1445 of the Code.
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8.16 Termination of Management Agreement. The Management Agreement
shall have been terminated and shall be of no further force and effect and
Buyer or the Company shall have no obligations or liabilities arising from or
related to the Management Agreement.
ARTICLE 9
CONDITIONS OF CLOSING BY SELLERS
The obligations of Sellers hereunder including, without limitation,
the obligation to close the transactions contemplated herein, are, at their
option, subject to the satisfaction, at or prior to the Closing Date, of all of
the following conditions any of which may be waived by Sellers:
9.1 Representations, Warranties and Covenants. All representations
and warranties of Buyer made in this Agreement or in any Exhibit, Schedule or
document delivered pursuant hereto, shall be true and correct in all material
respects as of the date hereof and on and as of the Closing Date as if made on
and as of that date, except for changes expressly permitted by the terms of
this Agreement and except those given as of a specified date which must only be
true and correct as of such specified date.
9.2 Compliance with Agreement. All the terms, covenants, and
conditions to be complied with and performed by Buyer on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
9.3 Certifications, etc. Sellers shall have received a
certificate, dated as of the Closing Date, from Buyer, executed by an executive
officer of Buyer to the effect of Sections 9.1 and 9.2.
9.4 Governmental Approval. (a) The FCC Consents shall have been
issued by the FCC and shall have become Final Orders (as defined in Section
4.1).
(b) All applicable notification and waiting period
requirements under the HSR Act shall have been satisfied.
9.5 Adverse Proceedings. No injunction, order, decree or judgment
of any court, agency or other Governmental Entities shall have been rendered
against Buyer, Sellers or the Company which would render it unlawful, as of the
Closing, to effect the transactions contemplated by this Agreement in
accordance with its terms.
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9.6 Opinions. Buyer shall have delivered to Sellers an opinion of
Weil, Gotshal & Manges LLP, dated as of the Closing Date, in the form of
Exhibit C hereto.
9.7 Indemnification and Escrow Agreement. Buyer shall have
executed and delivered to the Sellers the Indemnification and Escrow Agreement.
9.8 Release. Mr. Xenophon Zapis and Zapis shall have been released
from their obligations as guarantors under that certain Lease between Radio
Seaway, Inc., as Lessor, and Friendly Broadcasting Company, as Lessee, dated
February 16, 1989, as amended.
ARTICLE 10
TRANSFER TAXES; FEES AND EXPENSES; TAX MATTERS
10.1 Expenses. Except as set forth in Sections 10.2 and, 10.3
below, each party hereto shall be solely responsible for all costs and expense
incurred by it in connection with the negotiation, preparation and performance
of and compliance with the terms of this Agreement; provided that all such
costs and expenses of the Company and Young Ones shall be borne by the Sellers.
10.2 Sales and Transfer Taxes. All sales, excise, use, transfer,
deed, duties, stamp, notary public and other similar taxes, duties and transfer
fees applicable to the transactions contemplated by this Agreement, including
fees to record assignments, shall be borne equally by Sellers and Buyer. Buyer
and Sellers agree to cooperate with each other and to file all necessary
documentation (including but not limited to, all Tax Returns) with respect to
all amounts in a timely manner.
10.3 Governmental Filing or Grant Fees. Any filing or grant fees
imposed by any governmental authority the consent of or filing with which is
required for the consummation of the transactions contemplated hereby,
including but not limited to, the FCC, the FTC, and the Department of Justice
shall be borne equally by Buyer and Sellers.
10.4 Tax Matters.
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(a) Preparation of Tax Returns; Payment of Taxes.
(i) The Seller Representative shall prepare all
Tax Returns required to be filed by the Company and Young Ones, with
respect to taxable periods of the Company or Young Ones ending on or
prior to the Closing Date (taking into account any extensions) and the
Seller Representative shall pay any and all Taxes due with respect to
such Tax Returns to the extent such Taxes exceed Taxes attributable to
taxable periods ending on or before the Closing Date taken into
account in determining Liability Adjustment Amount or Working Capital
Amount. All Tax Returns described in this Section 10.4(a)(i) shall be
prepared in a manner consistent with prior practice. Seller
Representative shall provide Buyer with a copy of such Tax Returns at
least 20 days prior to the due date for filing such Tax Returns. Buyer
shall have the right to review and approve any such Tax Returns filed
after the Closing Date, and Buyer and the Seller Representative shall
attempt in good faith mutually to resolve any disagreements regarding
such Tax Return within fifteen (15) days of the Buyer's receipt
thereof. Any disagreement regarding such Tax Return shall be resolved
pursuant to Section 10.4(c). Any amount owing under this Section
10.4(a)(i) shall be paid by the Seller Representative to Buyer no
later than five (5) days before the due date (including extensions, if
any) for payment of Taxes with respect to any such Tax Return.
(ii) For federal income tax purposes, the taxable
year of the Company and Young Ones shall end as of the close of the
Closing Date and, with respect to all other Taxes, the Seller
Representative and Buyer will, unless prohibited by applicable law,
close the taxable period of the Company and Young Ones as of the close
of the Closing Date. Except as otherwise required by applicable law,
neither Sellers nor Buyer shall take any position inconsistent with
the preceding sentence on any Tax Return. In any case where applicable
law does not permit the Company or Young Ones to close its taxable
year on the Closing Date or in any case in which a Tax is assessed
with respect to a taxable period which includes the Closing Date (but
does not begin or end on that day) (the "Straddle Period"), then
Taxes, if any, attributable to the taxable period of the Company or
Young Ones beginning before and ending after the Closing Date shall be
allocated (A) to Sellers for the period up to and including the
Closing Date, and (B) to Buyer for the period subsequent to the
Closing Date. Any allocation of income or deductions required to
determine any Taxes attributable to any period beginning before and
ending after the Closing Date shall be prepared by Buyer and shall be
made by means of a closing of the books and records of the Company and
Young Ones as of the close of the Closing Date, provided that
exemptions, allowances or deductions that are calculated on an annual
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basis (including, but not limited to, depreciation and amortization
deductions) shall be allocated between the period ending on the
Closing Date and the period after the Closing Date in proportion to
the number of days in each such period.
(iii) With respect to any Tax Returns for Straddle
Periods, the Seller Representative shall pay to Buyer an amount equal
to that portion of the Taxes shown on such Tax Returns attributable to
the portion of the taxable period ending on the Closing Date as
determined pursuant to subparagraph (ii), in excess of Taxes
attributable to such period taken into account in determining
Liability Adjustment Amount or Working Capital Amount. Buyer shall
provide the Seller Representative with a schedule showing the
computation of such amount at least 20 days prior to the due date for
filing such Tax Returns along with a copy of such Tax Return. The
Seller Representative shall have the right to review and approve any
such Tax Return and schedule, and Buyer and the Seller Representative
shall attempt in good faith mutually to resolve any disagreements
regarding the determination of such amount within fifteen (15) days of
the Seller Representative's receipt thereof. Any disagreement
regarding such determination shall be resolved pursuant to Section
10.4(c) below. Any amount owing under this Section 10.4(a)(iii) shall
be paid by the Seller Representative to Buyer no later than five (5)
days before the due date (including extensions, if any) for payment of
Taxes with respect to any such Tax Return.
(b) Cooperation with Respect to Taxes. Buyer and Sellers
agree to furnish or cause to be furnished to each other, and each at their own
expense, as promptly as practicable, such information (including access to
books and records) and assistance, including making employees available on a
mutually convenient basis to provide additional information and explanations of
any material provided, relating to the Company as is reasonably necessary for
the filing of any Tax Return, for the preparation of any audit, and for the
prosecution and defense of any claim, suit or proceeding relating to Taxes.
(c) Dispute Procedures. Any disputes as to matters
covered hereby shall be resolved by Ernst & Young LLP. The parties will
instruct the accounting firm to reach its conclusion regarding any such dispute
as promptly as practicable. The report of the accounting firm shall be final,
binding and conclusive on Sellers and Buyer. The fees and expenses of such
accounting firm shall be borne equally by the Sellers, jointly and severally on
the one hand, and Buyer, on the other hand.
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ARTICLE 11
LIQUIDATED DAMAGES, SPECIFIC PERFORMANCE, LETTER OF CREDIT
11.1 Liquidated Damages. If this Agreement is terminated by Sellers
pursuant to Sections 12.1(b)(ii) or 12.1(g) the parties agree and acknowledge
that Sellers will suffer damages that are not practicable to ascertain.
Accordingly, in such event, Sellers shall be entitled to the sum of $3,500,000
as liquidated damages (and not as a penalty), payable solely and exclusively by
drawing upon the Earnest Money Letter of Credit and through the delivery to
Sellers, of the sum of $1,750,000 via wire transfer of immediately available
funds. The parties agree that the foregoing liquidated damages are reasonable
considering all the circumstances existing as of the date hereof and constitute
the parties' good faith estimate of the actual damages reasonably expected to
result from the termination of this Agreement pursuant to Sections 12.1(b)(ii)
or 12.1(g). In such event, Buyer shall immediately instruct the Earnest Money
Escrow Agent (as hereinafter defined) to deliver the Earnest Money Letter of
Credit to Leon X. Zapis, on behalf of and for the benefit of all of the Sellers
(the "Seller Representative") to permit it to draw upon the Earnest Money
Letter of Credit and shall deliver to Sellers, via wire transfer of immediately
available funds, the sum of $1,750,000. Sellers agree that, to the fullest
extent permitted by law, the right to draw upon the Earnest Money Letter of
Credit and to receive the additional sum of $1,750,000 from Buyer as provided
in this Section 11.1 shall be their sole and exclusive remedy with respect to
any damages whatsoever that Sellers may suffer or allege to suffer as a result
of a termination pursuant to Sections 12.1(b)(ii) or 12.1(g). Except for a
termination pursuant to Sections 12.1(b)(ii) or 12.1(g) (for which the sole
recourse of Sellers shall be as provided in this Section 11.1) or pursuant to
Section 12.1(a) or 7.6 (for which no party shall have any liability to the
other), the termination of this Agreement shall not relieve the parties for any
liability or obligation relating to their breaches of this Agreement occurring
prior to such termination.
11.2 Specific Performance. In addition to any other remedies which
Buyer may have at law or in equity, Sellers hereby acknowledge that the Shares
are unique, and that the harm to Buyer resulting from a breach by Sellers of
their obligations to sell the Shares to Buyer cannot be adequately compensated
by damages. Accordingly, Sellers agree that Buyer shall have the right to have
this Agreement specifically performed by Sellers, provided that Buyer is not in
material breach of this Agreement, and hereby agree, in such event, not to
assert any objections to the imposition of the equitable remedy of specific
performance by any court of competent jurisdiction.
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11.3 Letter of Credit.
11.3.1 Concurrently with the execution of this Agreement,
Buyer shall deposit an original, irrevocable letter of credit, which shall be
in a form reasonably satisfactory to Buyer and Sellers (the "Earnest Money
Letter of Credit"), issued by The Toronto-Dominion Bank for the sum of
$1,750,000 with Key Trust Company of Ohio, N.A. (the "Earnest Money Escrow
Agent") to be held in escrow in accordance with the Earnest Money Escrow
Agreement substantially in the form of Exhibit D hereto.
11.3.2 The Earnest Money Letter of Credit shall be held by the
Earnest Money Escrow Agent in accordance with the terms of the Earnest Money
Escrow Agreement. Subject to satisfaction of the conditions to the Sellers'
obligations set forth in Article 9, at the Closing, the Seller Representative
shall instruct the Earnest Money Escrow Agent to release and return the Earnest
Money Letter of Credit to Buyer for cancellation.
11.3.3 If this Agreement is terminated as provided in Sections
12.1(b)(ii) or 12.1(g), Buyer shall instruct the Earnest Money Escrow Agent to
release the Earnest Money Letter of Credit to the Seller Representative, all as
provided in Section 11.1. In all other events, the Seller Representative shall
join in instructions to the Earnest Money Escrow Agent to return the Earnest
Money Letter of Credit to Buyer.
ARTICLE 12
TERMINATION RIGHTS
12.1 Termination. This Agreement may be terminated at any time
prior to Closing as follows:
(a) by the mutual consent of Buyer and Sellers;
(b) by written notice of (i) Buyer to Sellers if any of
the Sellers, the Company or Young Ones breaches in any material
respect any of their representations or warranties or defaults in any
material respect in the observance or in the due and timely
performance of any of their covenants or agreements herein contained
and such breach or default shall not be cured within thirty (30) days
of the date of notice of breach or default served by Buyer or (ii)
Sellers, the Company and Young Ones to the Buyer if Buyer breaches in
any material respect any of their representations or warranties or
default in any material respect in the observance or in the due and
timely performance of any of its covenants or agreements herein
contained and such
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breach or default shall not be cured within thirty (30) days of the
notice of breach or default served by Sellers, the Company and Young
Ones;
(c) by Buyer, Sellers, the Company or Young Ones by
written notice to the other, if a court of competent jurisdiction or
other Governmental Entity shall have issued an order, decree or ruling
or taken any other action (which order, decree or ruling the parties
hereto shall use their best efforts to lift), in each case permanently
restraining, permanently enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree,
ruling or other action shall have become final and nonappealable;
provided that Buyer shall not have the right to terminate this
Agreement pursuant to Section 12.1(c) unless Buyer has satisfied the
covenants contained in Section 6.1.5 hereof;
(d) by the party whose qualifications are not at issue,
if, for any reason, the FCC denies or dismisses any of the FCC
Applications and the time for reconsideration or court review under
the Communications Act with respect to such denial or dismissal has
expired and there is not pending with respect thereto a timely filed
petition for reconsideration or request for review;
(e) by written notice of Buyer to Sellers if the FCC
Consents contain a condition on Buyer that (i) is unrelated to Buyer's
qualifications, (ii) could reasonably be expected to have a materially
adverse impact on the financial condition or business operations of
the Stations, and (iii) the time for reconsideration or court review
under the Communications Act with respect to such condition(s) has
expired without the filing with respect thereto of a timely petition
for reconsideration or request for review;
(f) by written notice of Buyer to Sellers, or by Sellers
to the Buyer, if the Closing shall not have been consummated on or
before June 1, 1999, subject to extensions as provided in Sections 7.6
and 13.1; or
(g) by written notice of Sellers to Buyer, if by May 31,
1999 all of the conditions of Closing by Buyer identified in Article 8
have been satisfied other than the expiration of the applicable
waiting period requirements under the HSR Act.
Notwithstanding the foregoing, no party hereto may effect a termination hereof
if such party is in material default or breach of this Agreement.
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ARTICLE 13
RISK OF LOSS
13.1 Risk of Loss. (a) The risk of loss or damage to the assets of
the Company shall be upon Sellers at all times prior to the Closing Date. In
the event of loss or damage, Sellers shall promptly notify Buyer thereof (the
"Sellers' Risk of Loss Notice") and if the lost or damaged assets of the
Company are capable of being replaced or repaired for an aggregate amount less
than $100,000, then Sellers shall, at their sole cost and expense, replace or
repair such assets of the Company prior to the Closing Date or deliver to Buyer
at the Closing an amount in cash equal to the cost of replacement or repair of
such assets of the Company, as mutually agreed in good faith by Buyer and
Sellers. Notwithstanding the foregoing, if the amount required to replace or
repair such Station Assets exceeds $100,000, Sellers may elect in the Sellers'
Risk of Loss Notice not to replace or repair such assets of the Company (which
election must be set forth in Seller's Risk of Loss Notice), provided, however,
that in such event Buyer, at its option, may elect within 30 days after its
receipt of the Sellers' Risk of Loss Notice, to terminate this Agreement
without either party being subject to a claim by the other for liquidated
damages or any other claims or damages, or waive any default or breach with
respect to the loss or damage and receive a $100,000 credit at Closing. Either
party may extend the Closing Date by up to 30 days in order to allow Sellers
and the Company to complete the repair or replacement.
(b) The Company shall use its commercially reasonable
efforts to avoid the Stations being off the air for three or more consecutive
days or five or more days in any 30 day period. The Company shall give prompt
written notice to Buyer if either of the following (a "Specified Event") shall
occur: (i) the regular broadcast transmissions of the Stations in the normal
and usual manner are interrupted or discontinued for more than thirty (30)
minutes; or (ii) the Stations are operated at less than their licensed antenna
height above average terrain or at less than ninety percent (90%) of their
licensed effective radiated power. If any Specified Event persists for more
than seventy-two (72) consecutive hours or five or more days, whether or not
consecutive, during any period of thirty (30) consecutive days, then Buyer may,
at its option: (i) terminate this Agreement by written notice given to Sellers
and the Company not more than ten (10) days after the expiration of such thirty
(30) day period (without either party being subject to a claim by the other for
liquidated damages or any other claims for damages); or (ii) proceed in the
manner set forth in Section 13.1(a) above. In the event of termination of this
Agreement by Buyer pursuant to this Section 13.1, the parties shall be released
and discharged from any further obligation hereunder (without being subject to
a claim by Sellers or the Company for liquidated damages or any other claims
for damages). With respect to Acts of God which may adversely affect the
Stations' operations, Sellers shall use their commercially reasonable efforts
to reinstate the Stations'
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operations within 30 days and shall have the Stations operating at not less
than seventy percent (70%) of maximum authorized effective radiated power by
the Closing Date.
(c) Resolution of Disagreements. If the parties are
unable to agree upon the extent of any loss or damage, the cost to repair,
replace or restore any lost or damaged property, the adequacy of any repair,
replacement, or restoration of any lost or damaged property, or any other
matter arising under this Section 13.1, the disagreement shall be referred to a
qualified consulting communications engineer mutually acceptable to Sellers,
Buyer and the Company who is a member of the Association of Federal
Communications Consulting Engineers, whose decision shall be final, binding
upon and non-appealable by the parties, and whose fees and expenses shall be
paid one-half by Sellers and one-half by Buyer.
ARTICLE 14
MISCELLANEOUS PROVISIONS
14.1 Survival of Representations and Warranties. Except as to
representations and warranties contained in Section 3.1.1 and 3.1.32 which
shall survive the Closing indefinitely and Sections 3.1.14, 3.1.15 and 3.1.18
which shall survive the Closing until the expiration of the applicable
statute(s) of limitations (the "Excepted Representations"), all representations
and warranties made by Sellers, Buyer, the Company and Young Ones in this
Agreement, or pursuant hereto, shall survive the consummation of the
transactions contemplated in this Agreement for a period of one year after the
Closing Date, regardless of any investigation at any time made by or on behalf
of Buyer or Sellers, and shall not be deemed merged in any document or
instrument executed or delivered at the Closing. Buyer's sole remedies for any
breach of representation or warranty (other than Excepted Representations) or
pre-Closing breach of a covenant or agreement shall be those set forth in the
Indemnification and Escrow Agreement.
14.2 Certain Interpretive Matters and Definitions. Unless the
context otherwise requires, (a) all references to Sections, Articles or
Schedules are to Sections, Articles or Schedules of or to this Agreement, (b)
each term defined in this Agreement has the meaning assigned to it, (c) each
accounting term not otherwise defined in this Agreement has the meaning
assigned to it in accordance with generally accepted accounting principles as
in effect on the date hereof, (d) "or" is disjunctive but not necessarily
exclusive, and (e) words in the singular include the plural and vice versa, and
(f) except with respect to Section 3.1.15, the term "Affiliate" has the meaning
given it in Rule 12b-2 of Regulation 12B under the Securities Exchange Act of
1934, as amended. All references to "$" or dollar amounts will be to lawful
currency of the United States of America.
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14.3 Further Assurances. At and after the Closing, Sellers shall
from time to time, at the request of and without further cost or expense to
Buyer, execute and deliver such other instruments of assignment, conveyance and
transfer and take such other actions as may reasonably be requested in order to
more effectively consummate the transactions contemplated hereby.
14.4 Financial Statements. At all times after the date hereof,
Sellers, the Company and Young Ones shall, and shall cause their
representatives (including their independent public accountants) to, cooperate
in all reasonable respects with the efforts of Buyer and their independent
auditors to prepare such audited and interim unaudited financial statements of
the Company and Young Ones as Buyer may reasonably determine are necessary in
connection with any filing required to be made by it or any of its Affiliates
under the Exchange Act of 1934, as amended (the "Exchange Act"), or the
Securities Act. Sellers, the Company and Young Ones shall execute and deliver
to Buyer's independent accountants such customary management representation
letters as they may require as a condition to their ability to sign an
unqualified report upon the audited financial statements of the Company and
Young Ones for the periods for which such financial statements are required
under the Exchange Act or the Securities Act. Sellers, the Company and Young
Ones shall cause their independent public accountants to make available to
Buyer and its representatives all of their work papers related to the financial
statements or Tax Returns of Sellers (to the extent they relate to the
Stations), the Company and Young Ones and to provide Buyer's independent public
accountants with full access to those personnel who previously have been
involved in the audit or review of Sellers', the Company's and Young Ones'
financial statements or Tax Returns. Any reasonable out-of-pocket costs
incurred by Sellers in connection with Sellers' obligations under this Section
14.4 shall be promptly reimbursed by Buyer upon Buyer's receipt of reasonably
detailed information regarding such costs.
14.5 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, whether by operation of law or otherwise; provided, however, that
without releasing Buyer from any of its obligations or liabilities hereunder
(a) nothing in this Agreement shall limit Buyer's ability to sell or transfer
any or all of its respective assets (whether by sale of stock or assets, or by
merger, consolidation or otherwise) without the consent of Sellers, the Company
or Young Ones, (b) nothing in this Agreement shall limit Buyer's ability to
assign the Shares (including the right to acquire the Shares at the Closing) to
any Affiliate of Buyer without the consent of Sellers, the Company or Young
Ones, and (c) nothing in this Agreement shall limit Buyer's ability to make a
collateral assignment of its rights under this Agreement to any institutional
lender that provides funds to Buyer without the consent of Sellers, the Company
or Young Ones. Sellers, the Company and Young Ones shall execute an
acknowledgment of
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such assignment(s) and collateral assignments in such forms as Buyer or its
institutional lenders may from time to time reasonably request; provided,
however, that unless written notice is given to Sellers, the Company and Young
Ones that any such collateral assignment has been foreclosed upon, Sellers, the
Company and Young Ones shall be entitled to deal exclusively with Buyer as to
any matters arising under this Agreement or any of the other agreements
delivered pursuant hereto. In the event of such an assignment, the provisions
of this Agreement shall inure to the benefit of and be binding on Buyer's
successors and assigns.
14.6 Amendments. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
14.7 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
14.8 Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the State of Ohio without giving
effect to the choice of law provisions thereof.
14.9 Notices. Any notice, demand or request required or permitted
to be given under the provisions of this Agreement shall be in writing and
shall be deemed to have been duly delivered and received when electronically
confirmed if sent by facsimile; on the date of personal delivery; on the third
day after deposit in the U.S. mail if mailed by registered or certified mail,
postage prepaid and return receipt requested; on the day after delivery to a
nationally recognized overnight courier service if sent by an overnight
delivery service for next morning delivery and shall be addressed to the
following addresses (or at such other address which party shall specify to the
other party in accordance herewith):
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(a) In the case of Sellers, the Seller Representative,
the Company or Young Ones, to:
Leon X. Zapis
2510 St. Clair Avenue
Cleveland, OH 44114
Telecopy: (216) 621-9315
With a copy to:
Thano G. Pasalis & Associates
1575 Illuminating Building
55 Public Square
Cleveland, Ohio 44113
Attention: Thano G. Pasalis
Telecopy: (216) 566-8762
(b) In the case of Buyer:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention: Jeffrey A. Marcus
Telecopy: (972) 879-3671
With copies to:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention: Eric C. Neuman
Telecopy: (972) 879-3671
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and
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201
Attention: Michael A. Saslaw
Telecopy: (214) 746-7777
14.10 Schedules. The schedules and exhibits attached to this
Agreement and the other documents delivered pursuant hereto are hereby made a
part of this Agreement as if set forth in full herein.
14.11 Entire Agreement. This Agreement contains the entire agreement
among the parties hereto with respect to its subject matter and supersedes all
negotiations, prior discussions, agreements, letters of intent, and
understandings, written or oral, relating to the subject matter of this
Agreement.
14.12 Severability. If any provision of this Agreement is held to be
unenforceable, invalid, or void to any extent for any reason, that provision
shall remain in force and effect to the maximum extent allowable, and the
enforceability and validity of the remaining provisions of this Agreement shall
not be affected thereby.
14.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute but one and the same instrument.
14.14 No Third-Party Rights. Nothing in this Agreement, express or
implied, shall be construed to confer upon any person, other than the parties
hereto, their successors and permitted assigns, any legal or equitable rights,
remedies, claims, obligations or liabilities under or by reason of this
Agreement (other than as provided for in the Indemnification and Escrow
Agreement).
14.15 Arbitration. All disputes which cannot be resolved by
agreement of the parties shall be arbitrated in Washington, D.C. in accordance
with the rules of the American Arbitration Association before a single
arbitrator who shall be jointly selected by Sellers and Buyer, or if Sellers
and Buyer cannot agree on the selection of such arbitrator, such arbitrator
shall be selected by the head of the Washington, D.C. office of the American
Arbitration Association. The costs of such arbitrator shall be paid by Sellers
and Buyer in
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such proportion as the arbitrator deems equitable based on the relative merits
of the positions of the parties.
[The remainder of this page is intentionally left blank]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed and delivered as of the first above written.
SELLERS:
/s/ Maria Zapis Wymer
-----------------------------------
Maria Zapis Wymer
/s/ Leon X. Zapis
-----------------------------------
Leon X. Zapis
/s/ Donna Zapis Thomas
-----------------------------------
Donna Zapis Thomas
/s/ Renee Zapis Seybert
-----------------------------------
Renee Zapis Seybert
ZEBRA BROADCASTING CORPORATION
By: /s/ Leon X. Zapis
--------------------------------
Name: Leon X. Zapis
------------------------------
Title: President
-----------------------------
YOUNG ONES, INC.
By: /s/ Leon X. Zapis
--------------------------------
Name: Leon X. Zapis
------------------------------
Title: President
-----------------------------
<PAGE> 62
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By: /s/ Eric C. Neuman
--------------------------------
Eric C. Neuman
Senior Vice President
<PAGE> 63
EXHIBIT A - ZEBRA ACQUISITION
INDEMNIFICATION AND ESCROW AGREEMENT
THIS INDEMNIFICATION AND ESCROW AGREEMENT (this "Agreement")
is made and entered into as of this ____ day of ______________, _____, by and
among Chancellor Media Corporation of Los Angeles, a Delaware corporation
("Buyer"), Maria Zapis Wymer, Leon X. Zapis, Donna Zapis Thomas, and Renee
Zapis Seybert (all such individuals collectively referred to as "Sellers" and
each, individually, as a "Seller"), and Key Trust Company of Ohio, N.A., as
escrow agent ("Agent").
RECITALS
A. Pursuant to that certain Stock Purchase Agreement, dated as of
August 11, 1998, by and among Buyer, Young Ones, Inc., an Ohio corporation
("Young Ones"), Zebra Broadcasting Corporation, an Ohio corporation (the
"Company"), and Sellers (the "Stock Purchase Agreement"), Buyer has agreed to
acquire from Sellers, and Sellers have agreed to sell to Buyer, all of the
Shares (as defined in the Stock Purchase Agreement).
B. It is a condition precedent to the closing of the transactions
contemplated by the Stock Purchase Agreement (the "Closing"), that Buyer,
Sellers and Agent execute and deliver this Agreement.
C. Unless otherwise defined herein, capitalized terms used herein
shall have the meanings assigned to them in the Stock Purchase Agreement.
AGREEMENTS
In consideration of the recitals and of the respective
agreements and covenants contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
Section 1.1 Funds. (a) At the Closing, and only if the Closing
occurs, Buyer shall place in an escrow account with Agent (the "Account") the
sum of $1,018,160 out of the Purchase Price paid pursuant to Section 1.2 of the
Stock Purchase Agreement (the "Funds").
<PAGE> 64
(b) The Funds shall be held by Agent in the Account for
the benefit of Buyer and Sellers as provided in this Agreement. In no event
shall Agent disburse or invest the Funds except in accordance with this
Agreement.
Section 1.2 Acceptance of Appointment as Agent. Agent, by signing
this Agreement, accepts the appointment as Agent and agrees to hold and deliver
the Funds and make disbursements from the Account in accordance with the terms
of this Agreement.
Section 1.3 Distribution of Funds to Buyer Indemnitees. Agent shall
disburse to Buyer (for its own account or for the account of any Buyer
Indemnitee, as defined in Section 2.1) such portion of the Funds as may be
necessary to pay the Damages (as defined in Section 2.1) for which a Buyer
Indemnitee is entitled to reimbursement under Section 2.1, 2.2, 2.3 or 2.4.
Payment shall be made not more than three (3) business days after (i) the
delivery to Agent of written instructions signed by Buyer and the Seller
Representative (as defined below), specifying an amount to be paid to a Buyer
Indemnitee, or (ii) the delivery to Agent and the Seller Representative of a
copy of a Final Determination (as defined below) establishing a Buyer
Indemnitee's right to reimbursement under this Agreement with respect to such
Damages. A "Final Determination" shall mean a judgment of a court of competent
jurisdiction having the authority to determine the amount of, and liability
with respect to, the determined item, which judgment is not subject to appeal,
reconsideration or review. Agent, at its option, shall be entitled to seek
and, if received, rely conclusively upon an opinion of legal counsel to the
effect that the judgment delivered to Agent pursuant to this Section 1.3 (or
pursuant to Section 1.6(b)) is a Final Determination. The "Seller
Representative" shall mean Leon X. Zapis or, if such person at any time is
unwilling or unable to so serve, another person selected by Sellers (written
notice of which selection shall be delivered by Sellers to Agent and Buyer
promptly following such selection).
Section 1.4 Investment of Funds. (a) Pending disbursement of the
Funds, Agent shall invest the Funds in Permitted Investments (as defined
below). For purposes of this Agreement, "Permitted Investments" shall mean
direct obligations of the U.S. government having maturities of 180 days or
less, money market funds that invest solely in direct obligations of the U.S.
government, including, without limitation, the Victory U.S. Obligation Fund,
and such other investments as may be specified from time to time by joint
written agreement between Buyer and the Seller Representative. As and when any
payment is to be made from the Funds or the Funds are to be otherwise disbursed
under this Agreement, Agent shall cause a sufficient portion of the Permitted
Investments to be converted into cash. Agent shall select the investments or
types of investments to be so converted. Neither Buyer nor Sellers shall be
liable for any loss of principal or income due to the choice of Permitted
Investments in which the Funds are invested or the choice of Permitted
Investments converted into cash pursuant to this paragraph (a).
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(b) For Tax purposes, the Funds shall be property of
Sellers and all interest, dividends and other income earned on the Funds
(collectively, the "Earnings") shall be the income of Sellers and be
distributed to the Sellers following the Expiration Date, as hereinafter
defined. Buyer and Sellers shall file Tax Returns consistent with such
treatment.
Section 1.5 No Distribution of Expenses. Except as provided in
Sections 2.1, 2.2, 2.3 and 2.4 of this Agreement, neither Buyer nor Sellers
shall be entitled to reimbursement out of the Funds or from any alternative
recovery for any costs and expenses incurred by them in connection with
exercising their rights or performing their duties under this Agreement.
Section 1.6 Segregation of the Funds. (a) Notwithstanding any other
provision of this Agreement to the contrary, Agent shall segregate from the
Account and transfer into a separate sub-account (the "Pending Claim Account")
maintained by Agent for the benefit of Buyer and Sellers the portion of the
Funds that may be necessary to satisfy in full all Pending Claims (as defined
below) and shall hold such portion in accordance with this Section 1.6;
provided, however, that Agent shall not so segregate from the Account and
transfer to the Pending Claim Account the Funds that may be necessary to
satisfy Pending Claims hereunder until such time as the aggregate amount of
Damages asserted by Buyer and any Buyer Indemnitees hereunder, taken as a
whole, exceeds the Indemnification Basket (as defined in Section 3.1(a)).
"Pending Claims" shall mean unresolved claims for indemnification under
Sections 2.1, 2.2, 2.3 or 2.4 that are the subject of Claim Notices (as defined
in Section 2.7).
(b) Any portion of the Funds segregated under Section
1.6(a) shall continue to be segregated by Agent until released thereafter to
Sellers in accordance with Section 1.7 or until Agent is directed to release
such Funds by (i) written instructions signed by Buyer, that are agreed to in
writing by the Seller Representative, or (ii) a copy of a Final Determination
establishing a Buyer Indemnitee's right to receive such Funds as reimbursement
for indemnification claims under Article 2, or establishing Sellers' right to
receive such Funds. Any Funds so released to Sellers will be released in
accordance with an allocation among Sellers to be delivered in writing to Agent
by the Seller Representative.
Section 1.7 Distribution of Funds to Sellers. Within three business
days after the Expiration Date (as defined below), Agent shall distribute to
Sellers from the Account an amount equal to the Earnings and the then remaining
amount of Funds less the total amount of Funds that are then being segregated
with respect to Pending Claims under Section 1.6. "Expiration Date" shall mean
one year after the Closing Date. Any amounts segregated as of the Expiration
Date with respect to Pending Claims shall be released thereafter as provided in
Section 1.6(b). Any Funds so released to Sellers will be released in
accordance
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with an allocation among Sellers to be delivered in writing to Agent by the
Seller Representative.
ARTICLE II
INDEMNIFICATION CLAIMS
Section 2.1 Indemnification by Sellers. From and after the Closing,
but subject to the conditions and limitations set forth in this Agreement,
Buyer and its respective successors and assigns (and, following the Closing,
the Companies) and their officers, directors, stockholders, employees and
agents (and each person who is an officer, director, stockholder, employee or
agent of the Companies following the Closing) (collectively, the "Buyer
Indemnitees") shall be entitled to reimbursement from Sellers, on a joint and
several basis, for any and all losses, costs, damages, claims, fines,
penalties, expenses (including, without limitation, reasonable attorneys' fees
and expenses), amounts paid in settlement, court costs, out-of-pocket costs,
costs of investigation, and reasonable costs of litigation (including, without
limitation, reasonable fees and expenses of accountants, investment bankers and
other experts) (collectively, "Damages") actually incurred or suffered by a
Buyer Indemnitee or to which any of the Buyer Indemnitees may be subjected, to
the extent resulting from, arising out of, based on or relating to (a) any
inaccuracy in any representation or warranty of any Seller or the Company
contained in the Stock Purchase Agreement or in any schedule, instrument,
exhibit, or certificate delivered pursuant thereto (a "Related Document") or
(b) any breach of any covenant or agreement of any Seller or the Company
contained in the Stock Purchase Agreement (provided, in the case of any such
breach by the Company, that such breach occurred at or prior to the Closing).
Section 2.2 Tax Indemnification. Without limiting the generality of
any of the foregoing, Sellers, shall, jointly and severally, indemnify and hold
harmless Buyer Indemnities from and against any and all Damages resulting from,
arising out of, based on or relating to, the Company's or Young Ones'
liabilities for (i) all Taxes attributable to taxable periods ending on or
before the Closing Date or which includes any or all days up to and including
the Closing Date (collectively, the "Pre-Closing Date Tax Liability") and (ii)
any and all Taxes of any member of a consolidated, combined or unitary group of
which the Company or Young Ones (or any predecessor) is or was a member on or
prior to the Closing Date, by reason of the liability of the Company or Young
Ones pursuant to Treasury Regulation Section 1.1502-6(a) or any analogous or
similar state, local or foreign law or regulation; if and to the extent that
such liability exceeds Taxes attributable to taxable periods ending on or
before the Closing Date taken into account in determining Liability Adjustment
Amount or Working Capital Amount.
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Section 2.3 ERISA Indemnification. Without limiting the generality
of any of the foregoing, Sellers shall, jointly and severally, indemnify and
hold harmless Buyer Indemnities, from and against any and all Damages resulting
from or relating to any claims of governmental entities, employees or other
third parties relating to or arising out of any of the following:
(i) any Employee Benefit Plan, maintained by, contributed
to, or obligated to contribute to, at any time, by any Seller, Young
Ones, the Company, or any ERISA Affiliate, with respect to any (A)
liability to the PBGC under Title IV of ERISA; (B) liability relating
to a multiemployer plan; (C) liability with respect to non-compliance
with the notice and benefit continuation requirements of COBRA; (D)
liability with respect to any non-compliance with ERISA or any other
applicable laws; or (E) liability with respect to any suit, proceeding
or claim which is brought against Buyer, any Employee Benefit Plan or
any fiduciary or former fiduciary of any such Employee Benefit Plan;
(ii) the employment or termination of employment,
including a constructive termination, by any Seller, the Company or
any of their Affiliates of any individual (including, but not limited
to, any employee of any Seller, the Company or any of their
Affiliates) attributable to any actions or inactions occurring prior
to the Closing;
(iii) any claims by any employee of any Seller, the Company
or any of their Affiliates for workers' compensation and/or related
medical benefits incurred after the Closing which relate to any injury
or illness originating prior to the Closing, to the extent not covered
by insurance;
(iv) WARN or any other statutory or common law or civil
law notice, severance pay, termination pay in lieu thereof or damages
arising as a result of the termination or dismissal (including
constructive termination or dismissal), by the Company or any of its
Affiliates of any or all Employees of the Company on or prior to the
Closing Date; and
(v) any claim of discrimination against the Company or
any of its Affiliates in hiring, management or termination or
dismissal of any individual or group of individuals by the Company or
any of its Affiliates (including constructive termination or
dismissal) which (A) occurred or is alleged to have occurred prior to
the Closing, or (B) in connection with transactions contemplated by
this Agreement.
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Section 2.4 Additional Indemnification by Sellers. Without limiting
the generality of any of the foregoing, Sellers shall, jointly and severally,
indemnify and hold harmless the Buyer Indemnities from and against any and all
Damages resulting from, arising out of, based on or relating to:
(i) any actual or asserted obligations or liability of
Young Ones or the Company or any subsidiary (whether for
indemnification or otherwise) under any agreement entered into prior
to the Closing related to the sale of any securities, assets,
properties, operations or businesses of Young Ones, the Company or any
subsidiary; or
(ii) any civil, criminal or administrative action, suit,
claim, hearing, investigation or proceeding (including but not limited
to any counterclaims or crossclaims), relating to Young Ones, the
Company or any subsidiary arising out of or based upon or with respect
to any condition existing or action or event occurring prior to the
Closing Date, whether or not pending or threatened on the date hereof
or at the Closing, any whether brought, made or instigated by any
Governmental Entity or any private person.
Section 2.5 Indemnification by Buyer. From and after the
Closing, but subject to the conditions and limitations set forth in this
Agreement, Sellers and their respective successors and assigns, and their
officers, directors, stockholders, employees and agents (collectively, the
"Seller Indemnitees") shall be entitled to reimbursement from the Buyer for any
and all Damages actually incurred or suffered by a Seller Indemnitee, or to
which any of the Seller Indemnitees may be subjected, to the extent resulting
from, arising out of, based on or relating to (a) any inaccuracy in any
representation or warranty of Buyer contained in the Stock Purchase Agreement
or in any Related Document, (b) any breach of any covenant or agreement of the
Buyer contained in the Stock Purchase Agreement or (c) the operations of the
businesses of the Companies or the ownership of the Companies' assets following
the Closing Date (except to the extent any such Damages relating to such
operations or ownership following the Closing Date arise from any matter with
respect to which any Buyer Indemnitee is entitled to indemnification under
Section 2.1, 2.2, 2.3 and/or 2.4).
Section 2.6 Procedures Regarding Third Party Claims. (a) In the
event that any person entitled to indemnification under this Article 2 (the
"Indemnified Party") becomes aware of any matter with respect to which it
believes it is entitled to indemnification under this Article 2 from Buyer or
Sellers, as applicable (the "Indemnifying Party"), and such matter involves (i)
any claim made against the Indemnified Party by any party other than a party to
the Stock Purchase Agreement or (ii) the commencement of any action, suit,
investigation, arbitration or similar proceeding against the Indemnified Party
by any party other than a party to the Stock Purchase Agreement (a "Third Party
Claim"), the Indemnified
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Party shall notify the Indemnifying Party in writing with reasonable promptness
of such Third Party Claim, specifying, to the extent known, the nature,
circumstances and the amount of such Third Party Claim (a "Third Party Claim
Notice") accompanied by all correspondence, documents, pleadings or other
writings received with respect to such Third Party Claim. Failure to give such
reasonably prompt notice shall not relieve the Indemnifying Party of its
obligations under this Article 2, except to the extent the Indemnifying Party
is materially prejudiced thereby. The Indemnifying Party shall have ten (10)
business days from its receipt of a Third Party Claim Notice (the "Third Party
Claim Notice Period") to notify the Indemnified Party (and if Seller is the
Indemnifying Party and any Funds continue to be held by Agent, Agent as well)
(i) whether the Indemnifying Party disputes the Indemnified Party's right of
indemnification, and (ii) if the Indemnifying Party does not dispute such right
of indemnification, whether or not it desires to defend the Indemnified Party
against such Third Party Claim. Notwithstanding the foregoing, as used in this
Section 2.6 and in Section 2.7, with respect to any claim for indemnification
by any Buyer Indemnitee against any Seller, the term "Indemnifying Party" shall
be deemed to refer to any and all Sellers against whom such claim for
indemnification is made; provided, that with respect to notices given by or to,
or procedures to be followed by, the Indemnifying Party in the case of any such
claim, the term "Indemnifying Party" shall be deemed to refer to the Seller
Representative.
(b) If the Indemnifying Party notifies the Indemnified
Party (and if any Seller is the Indemnifying Party and any Funds continue to be
held by Agent, Agent as well) in writing within the Third Party Claim Notice
Period that (i) the Indemnifying Party does not dispute the Indemnified Party's
right of indemnification and (ii) the Indemnifying Party desires to defend
against such Third Party Claim, then the Indemnifying Party shall have the
right to assume and control, at its sole cost, expense and liability, the
defense of such Third Party Claim by appropriate proceedings with counsel
reasonably acceptable to the Indemnified Party. The Indemnified Party may
participate in any such defense or settlement, at its sole cost and expense.
(c) If (i) the Indemnifying Party disputes the
Indemnified Party's right of reimbursement with respect to a Third Party Claim,
(ii) the Indemnifying Party does not dispute such right of reimbursement but
fails to promptly assume and prosecute the defense of such Third Party Claim,
or (iii) the Indemnified Party reasonably believes that a conflict of interest
exists between the Indemnified Party and the Indemnifying Party, then the
Indemnified Party shall be entitled to assume and control (at the Indemnifying
Party's sole cost, expense and liability) the defense of such Third Party Claim
with counsel reasonably acceptable to Indemnifying Party. If the Indemnifying
Party does not assume the defense of a Third Party Claim for any reason, it may
still participate in, but not control, the defense of such Third Party Claim at
the Indemnifying Party's sole cost and expense.
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(d) The party responsible for the defense of any Third
Party Claim (the "Responsible Party") shall, to the extent reasonably requested
by the other party, keep such other party informed as to the status of any
Third Party Claim for which such other party is not the Responsible Party,
including, without limitation, all settlement negotiations and offers. Each
party shall make available to the other party and its representatives
(including accountants and counsel) all books and records of such party
relating to such Third Party Claim and shall render to each other such
assistance and access to the books and records that they may reasonably require
of each other in order to ensure the proper and adequate defense of such Third
Party Claim, including, without limitation, making employees available (upon
reasonable advance notice and with due regard for prior scheduling commitments)
to testify in any proceeding, pretrial deposition or otherwise, except that
unless required to do so by valid governmental or judicial order or legal
process, a party shall not be required to make available to the other party any
books, records, documents or other information that such party reasonably
determines to be confidential or subject to attorney-client privilege until the
other party shall have entered into such agreements as is reasonably necessary
in light of all the surrounding circumstances to protect such confidentiality
or privilege.
(e) Neither the Indemnified Party nor the Indemnifying
Party shall enter into any settlement of any Third Party Claim without the
prior written consent of the other party (which shall not be unreasonably
withheld or delayed). The Responsible Party shall promptly notify the other
party of each settlement offer (including whether or not the Responsible Party
is willing to accept the proposed settlement offer) with respect to a Third
Party Claim. Such other party agrees to notify the Responsible Party with
reasonable promptness whether or not such party is willing to accept the
proposed settlement offer.
Section 2.7 Procedures Regarding Direct Claims. In the event that an
Indemnified Party has a claim for reimbursement which does not involve a Third
Party Claim (a "Direct Claim"), the Indemnified Party shall notify the
Indemnifying Party (and if any Seller is the Indemnifying Party and any Funds
continue to be held by Agent, Agent as well) with reasonable promptness,
specifying, to the extent known, the nature, circumstances and amount of such
Direct Claim (a "Direct Claim Notice" and together with Third Party Claim
Notices, the "Claim Notices"), including with particularity the specific
representation and warranty or covenant and agreement alleged to have been
breached and the manner in which such representation and warranty or covenant
and agreement is alleged to have been breached. Failure to give such
reasonably prompt notice shall not relieve the Indemnifying Party of its
obligations under this Article 2, except to the extent the Indemnifying Party
is materially prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it disputes the Indemnified Party's right of
reimbursement with respect to a particular Direct Claim, the Indemnified Party
and the Indemnifying Party shall use their reasonable efforts to negotiate a
resolution of such dispute promptly. Nothing herein shall be deemed to prevent
the Indemnified Party from initiating litigation under this Agreement, and
subject to the
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limitations contained herein, against the Indemnifying Party with respect to
any Direct Claim disputed by the Indemnifying Party for the purpose of
obtaining a Final Determination in order to establish the Indemnified Party's
right to reimbursement hereunder.
Section 2.8 Appointment of Seller Representative. Each Seller
hereby irrevocably designates and appoints the Seller Representative as such
Seller's attorney-in-fact, with full power of substitution and resubstitution,
to take any and all actions in the name and on behalf of such Seller as the
Seller Representative may determine with respect to the Funds and with respect
to any claim for indemnification against such Seller under this Article 2
(including but not limited to any actions that the Seller Representative may
determine with respect to the settlement of any such claim), each of which
actions by the Seller Representative shall be binding on such Seller and shall
be deemed to be the actions of such Seller.
ARTICLE III
LIMITATIONS ON LIABILITY
Section 3.1 Limitations on Reimbursement. (a) The Buyer Indemnitees
shall not be entitled to indemnification hereunder unless and until aggregate
Buyer Indemnitees' Damages for which indemnification otherwise would be
available hereunder exceed $63,636 (the "Indemnification Basket"), in which
event the Buyer Indemnitees shall be entitled to reimbursement hereunder for
the amount of all such Damages (including the initial $63,636).
(b) Except with respect to indemnification pursuant to
Section 2.1(a) for the breach by Seller of any representation or warranty set
forth in Sections 3.1.1, 3.1.14, 3.1.15, 3.1.18, or 3.1.32 of the Stock
Purchase Agreement (including any bring-down of any such representation or
warranty pursuant to any certificate delivered at Closing), the right to
reimbursement from the Funds shall constitute the sole remedy of any Buyer
Indemnitee with respect to any matter for which such Buyer Indemnitee is
entitled to indemnification under Sections 2.1, 2.3 and/or 2.4.
(c) Any claim by any Buyer Indemnitee for reimbursement
under Section 2.1(a) must be asserted within the period of survival, as set
forth in the Stock Purchase Agreement, of the representation or warranty with
respect to which such claim relates.
(d) After the Expiration Date, no Buyer Indemnitee may
assert any claim for reimbursement from the Funds.
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(e) For all purposes of this Agreement, the amount of
Damages, and the amount reimbursable with respect thereto, shall be reduced to
the extent of any insurance proceeds or other third party recovery received by
the Indemnified Party with respect to such Damages. If the Indemnified Party
receives any such insurance proceeds or other recovery after the Indemnifying
Party shall have made any payment to the Indemnified Party with respect to such
Damages, the Indemnified Party shall promptly return such payment to the
Indemnifying Party to the extent of insurance proceeds or other recovery
received; provided, however, that any such payment returned to Seller prior to
the Expiration Date shall be placed in the Account and become part of the Funds
and such amount shall not be deemed to have been paid to any Indemnified Party
as Damages under this Agreement. The Indemnified Party shall timely file
claims for insurance proceeds and pursue all other reasonable third party
reimbursement rights with respect to any Damages sustained by the Indemnified
Party.
(f) An Indemnified Party's rights to reimbursement or
indemnification for Damages resulting from any untrue or incorrect
representation or warranty of the Indemnifying Party shall not be affected by
any investigation made by the Indemnified Party or whether or not the
Indemnified Party relied upon such untrue or incorrect representation or
warranty; provided, however, that no Indemnified Party shall be entitled to
reimbursement or indemnification for Damages resulting from an untrue or
incorrect representation or warranty of the Indemnifying Party if (i) the fact
that such representation or warranty was untrue or incorrect was disclosed in
writing to the Indemnified Party prior to the Closing (along with an
acknowledgment by the Indemnifying Party that the conditions to the Indemnified
Party's obligation to effect the Closing, as a result of the failure of such
representation or warranty to be true and correct, are not satisfied) and (ii)
the Indemnified Party nevertheless determines to effect the Closing.
ARTICLE IV
AGENT
Section 4.1 Rights and Responsibilities of Agent. (a) The duties
and responsibilities of Agent shall be limited to those expressly set forth in
this Agreement and it shall not be subject to, nor obligated to recognize, any
other agreement between, or direction or instruction of, the parties to this
Agreement, unless such agreement, direction or instruction is in writing and is
signed by both Buyer and Seller.
(b) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, Agent will not be required to determine the
controversy or to take any action regarding it.
10
<PAGE> 73
Agent may hold all documents and funds and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in
Agent's discretion, Agent may require, despite what may be set forth elsewhere
in this Agreement. In such event, Agent will not be liable for interest or
damage. Furthermore, Agent may, at its option, file an action of interpleader
requiring the parties to answer and litigate any claims and rights among
themselves. Agent is authorized to deposit with the clerk of the court all
documents and funds held in escrow. All costs, expenses, charges and
reasonable attorney fees incurred by Agent due to the interpleader action shall
be paid one-half by Buyer and one- half by Seller, in each case jointly and
severally. Upon initiating such action, Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(c) In performing any duties under the Agreement, Agent
shall not be liable to any party for damages, losses, or expenses, except as a
result of gross negligence or willful misconduct on the part of Agent. Agent
shall not incur any such liability for any action taken or omitted in reliance
upon any instrument, including any written statement or affidavit provided for
in this Agreement that Agent shall in good faith believe to be genuine, nor
will Agent be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of any representative authority. In addition, Agent may
consult with legal counsel in connection with Agent's duties under this
Agreement and shall be fully protected in any act taken, suffered, or permitted
by it in good faith in accordance with the advice of counsel. In the absence
of knowledge that any action taken or purported to be taken hereunder is
wrongful, Agent is not responsible for determining and verifying the authority
of any person acting or purporting to act on behalf of any party to this
Agreement.
(d) Agent, and any successor Agent, may resign at any
time as escrow agent hereunder by giving at least 30 days prior written notice
to Seller and Buyer. Upon such resignation and the appointment of a successor
escrow agent, the resigning Agent shall be absolved from any and all liability
in connection with the exercise of its powers and duties as escrow agent
hereunder except for liability arising in connection with its own gross
negligence or willful misconduct. Upon their receipt of notice of resignation
from Agent, Buyer and Seller shall use commercially reasonable efforts jointly
to designate a successor Agent. In the event Buyer and Seller do not agree
upon a successor escrow agent within 30 days after the receipt of such notice,
Agent so resigning may petition any court of competent jurisdiction for the
appointment of a successor Agent or other appropriate relief and any such
resulting appointment shall be binding upon all parties hereto. By mutual
agreement, Buyer and Seller shall have the right at any time upon not less than
10 days' prior written notice to Agent to terminate the appointment of Agent,
or successor Agent, as escrow agent hereunder. Agent or successor Agent shall
continue to act as escrow agent until a successor is appointed and qualified to
act as Agent.
11
<PAGE> 74
Section 4.2 Fees and Expenses of Agent. Agent shall (a) be paid a
fee for its services under this Agreement as provided by Exhibit A and (b) be
entitled to reimbursement for reasonable expenses (including the reasonable
fees and disbursements of its counsel engaged pursuant to Sections 1.3 and/or
1.4 hereof, or otherwise) actually incurred by it in connection with its duties
under this Agreement (collectively, the "Agent Fees and Expenses"). All Agent
Fees and Expenses shall be paid one-half by Buyer and one-half by Sellers.
Escrow Agent shall have a lien upon the funds for payment of its fees and
expenses. Escrow Agent may pay itself from the Funds for any fees and expenses
for which it has not been paid.
Section 4.3 Indemnification of Agent. The parties and their
respective successors and assigns agree jointly and severally to indemnify and
hold Agent harmless against any and all losses, claims, damages, liabilities,
and expenses, including reasonable costs of investigation, reasonable legal
counsel fees and disbursements that may be imposed on Agent or incurred by
Agent in connection with the performance of its duties under this Agreement,
including but not limited to any litigation arising from this Agreement or
involving its subject matter, provided, however, neither Buyer nor Sellers nor
their successors and assigns need indemnify Agent for any loss, claim, damage,
liability or expense caused by Agent's gross negligence or willful misconduct.
ARTICLE V
MISCELLANEOUS
Section 5.1 No Right of Contribution. Each Seller hereby
expressly and irrevocably waives and releases any right that such Seller might
otherwise have to contribution from Young Ones or the Company (or any similar
right to recover any amount from Young Ones or the Company) as a result of any
Funds being utilized to satisfy any indemnification claims of any Buyer
Indemnitee, or as a result of any payments by such Seller with respect to any
indemnification claims of any Buyer Indemnitee.
Section 5.2 Notices. All notices, requests, consents or other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given or delivered by any party (a) when
received by such party if delivered by hand, (b) upon confirmation when
delivered by telecopy, (c) within one day after being sent by recognized
overnight delivery service, or (d) upon receipt of a return receipt after being
mailed by certified mail, return receipt requested, and in each case addressed
as follows:
12
<PAGE> 75
(i) if to Buyer or to any Buyer Indemnitee:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard, Suite 1130
Irving, Texas 75039
Attention: Jeffrey A. Marcus
Telecopy No.: (972) 879-3671
with copies to:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard, Suite 1130
Irving, Texas 75039
Attention: Eric C. Neuman
Telecopy No.: (972) 879-3671
and:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Michael A. Saslaw
Telecopy No.: (214) 746-7777
(ii) if to Seller or to any Seller Indemnitee, to:
c/o the Seller Representative
Leon X. Zapis
c/o Zebra Broadcasting Corporation
2510 St. Clair Avenue
Cleveland, Ohio 44114
Telecopy No.: (216) 216-9315
13
<PAGE> 76
with a copy to:
Thano G. Pasalis & Associates
1575 Illuminating Building
55 Public Square
Cleveland, Ohio 44113
Attention: Thano G. Pasalis
Telecopy No.: (216) 566-8762
(iii) if to Agent, to:
Mail or other Instructions
Key Trust Company of Ohio, N.A.
127 Public Square, 15th Floor
Cleveland, Ohio 44114
Attn: Joyce A. Apostolec
Telecopy No.: (216) 689-3777
Any party by written notice to the other parties pursuant to this Section 5.1
may change the address or the persons to whom notices or copies thereof shall
be directed.
Section 5.3 Assignment. This Agreement and the rights and duties
hereunder shall be binding upon and inure to the benefit of the parties hereto
and the successors and assigns of each of the parties to this Agreement. No
rights, obligations or liabilities hereunder shall be assignable by any party
without the prior written consent of the other parties, except that Buyer may
assign its rights under this Agreement without obtaining the prior written
consent of the other parties hereto to any person or entity to whom, pursuant
to the Stock Purchase Agreement, Buyer is permitted to assign all or a portion
of its rights under the Stock Purchase Agreement, provided that any such
assignee duly executes and delivers an agreement to assume Buyer's obligations
under this Agreement and that Buyer remains liable with respect to such
obligations.
Section 5.4 Amendment. This Agreement may be amended or modified
only by an instrument in writing duly executed by Agent, Buyer and Sellers.
Section 5.5 Waivers. Any waiver by any party hereto of any breach of
or failure to comply with any provision of this Agreement by any other party
hereto shall be in writing and shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this Agreement.
14
<PAGE> 77
Section 5.6 Construction. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Ohio
without giving effect to the choice of law provisions thereof. The headings in
this Agreement are solely for convenience of reference and shall not be given
any effect in the construction or interpretation of this Agreement. Unless
otherwise stated, references to Sections and Exhibits are references to
Sections and Exhibits of this Agreement.
Section 5.7 Third Parties. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
or entity other than Buyer, Buyer Indemnitees, Sellers, Seller Indemnitees, the
Seller Representative and Agent any rights or remedies under, or by reason of,
this Agreement.
Section 5.8 Termination. This Agreement shall terminate at the time
of the final resolution of all Pending Claims and, if any amount remains
thereunder, disbursement of the Funds, all in accordance with the provisions of
this Agreement.
Section 5.9 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed any original and all of which
together shall constitute a single instrument.
Section 5.10 Waiver of Offset Rights. Agent hereby waives any and
all rights to offset that it may have against the Funds including, without
limitation, claims arising as a result of any claims, amounts, liabilities,
costs, expenses, damages, or other losses that Agent may be otherwise entitled
to collect from any party to this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
15
<PAGE> 78
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
BUYER:
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By:
----------------------------------
Eric C. Neuman
Senior Vice President
SELLERS:
-------------------------------------
MARIA ZAPIS WYMER
-------------------------------------
LEON X. ZAPIS
-------------------------------------
DONNA ZAPIS THOMAS
-------------------------------------
RENE ZAPIS SEYBERT
<PAGE> 79
AGENT:
KEY TRUST COMPANY OF OHIO, N.A.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 80
EXHIBIT A
Fees of Agent
$2,500.00 Annual Escrow Agent Fee for Administration.
Escrow Fee will be payable upon execution of the Escrow Agreement and annually
thereafter on the anniversary date of the agreement.
<PAGE> 1
EXHIBIT 2.50
STOCK PURCHASE AGREEMENT
BY AND AMONG
ML MEDIA PARTNERS L.P.,
WINCOM BROADCASTING CORPORATION,
WIN COMMUNICATIONS, INC.,
AND
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
AS OF AUGUST 11, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
ARTICLE 1
TERMS OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Sale Of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2
GOVERNMENTAL CONSENTS . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Fcc Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Fcc Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANIES . . . . . . . . . . . . . 5
3.1 Representations And Warranties Of Seller And The Companies . . . . . . . . . . . . . . . . . . . . 5
3.1.1 Title To Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1.4 Organization, Good Standing, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1.5 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1.7 Absence Of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1.8 Compliance With Applicable Laws, Fcc Matters . . . . . . . . . . . . . . . . . . . . . . 8
3.1.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1.11 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1.12 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1.13 Liens And Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1.14 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1.16 Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1.17 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.18 Erisa Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.19 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1.20 Patents, Trademarks, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
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<TABLE>
<S> <C> <C>
3.1.21 Absence Of Certain Changes Or Events . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.22 Commission Or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.23 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.24 The Companies' Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.25 Books And Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . 23
4.1 Representations And Warranties Of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1.1 Organization And Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1.2 Authorization And Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1.3 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1.4 Absence Of Conflicting Agreements Or Required Consents . . . . . . . . . . . . . . . . . 23
4.1.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1.6 Commission Or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1.7 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 5
COVENANTS OF SELLER AND THE COMPANIES . . . . . . . . . . . . . . . . . . 25
5.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1.1 Conduct Prior To The Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1.3 Satisfaction Of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.1.4 Sale Of Acquired Assets; Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.1.5 No Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1.6 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1.7 Fcc Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1.8 Updating Of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1.9 Response To Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1.10 Barter And Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1.11 Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1.12 Estoppel Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1.13 Termination Of Rp Radio Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1.14 1997 Audited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 6
COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . 31
6.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1.1 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1.2 No Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
ii
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<TABLE>
<S> <C> <C>
6.1.3 Post-closing Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1.4 Satisfaction Of Conditions; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 7
JOINT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Fcc Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.5 Hart-scott-rodino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.6 Condition Of Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.7 Employee Benefits Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 8
CONDITIONS OF CLOSING BY BUYER . . . . . . . . . . . . . . . . . . . . 36
8.1 Representations, Warranties And Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.2 Compliance With Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Third Party Consents And Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.4 Closing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.5 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.6 Adverse Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.7 The Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.8 Indemnification And Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.9 Release Of Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.10 Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.11 Earnest Money Letter Of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.12 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.13 Resignation Of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.14 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.15 1445 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.16 Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.17 Rp Radio Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.18 Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 9
CONDITIONS OF CLOSING BY SELLER . . . . . . . . . . . . . . . . . . . . 39
9.1 Representations, Warranties And Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.2 Compliance With Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.3 Certifications, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.4 Governmental Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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<TABLE>
<S> <C> <C>
9.5 Adverse Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.6 Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.7 Indemnification And Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 10
TRANSFER TAXES; FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . 40
10.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2 Sales And Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3 Governmental Filing Or Grant Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 11
LIQUIDATED DAMAGES, SPECIFIC PERFORMANCE, LETTER OF CREDIT . . . . . . . . . . . . . 40
11.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.2 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.3 Letter Of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 12
TERMINATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . 42
12.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 13
RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.1 Risk Of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 14
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 45
14.1 Survival Of Representations And Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
14.2 Certain Interpretive Matters And Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
14.3 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
14.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
14.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
14.6 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
14.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
14.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
14.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
14.10 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.14 No Third-party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
iv
<PAGE> 6
SCHEDULES
Schedule 2.1 Licenses
Schedule 3.1.1 Shares
Schedule 3.1.2 Subsidiaries
Schedule 3.1.3 Capital Stock
Schedule 3.1.6 Financial Statements
Schedule 3.1.8 Noncompliance With The Communications Act And The Fcc
Schedule 3.1.9 Litigation
Schedule 3.1.10 Insurance
Schedule 3.1.11 Real Estate
Schedule 3.1.12 Personal Property
Schedule 3.1.13 Permitted Liens
Schedule 3.1.14 Environmental Matters
Schedule 3.1.15 Taxes
Schedule 3.1.16 Personnel
Schedule 3.1.17 Contracts
Schedule 3.1.18 Erisa Matters
Schedule 3.1.19 Labor Matters
Schedule 3.1.20 Intellectual Property
Schedule 3.1.21 Absence Of Certain Changes Of Events
Schedule 3.1.26 Accounts Receivable
Schedule 3.1.28 Interest In Competitors, Suppliers And Customers
Schedule 3.1.30 Barter Arrangements
Schedule 4.1.4 Consents
Schedule 5.1.7 Fcc Reports
Schedule 6.1.5 Certain Actions
EXHIBITS
Exhibit A Indemnification And Escrow Agreement
Exhibit B-1 Opinion Of Proskauer Rose Llp
Exhibit B-2 Opinion Of Wiley, Rein & Fielding
Exhibit C Opinion Of Weil, Gotshal & Manges Llp
Exhibit D Earnest Money Escrow Agreement
v
<PAGE> 7
DEFINED TERMS
<TABLE>
<S> <C>
Defined Terms Section
- ------------- -------
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 14.2
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Buyer's 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.7(A)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4
Cobra Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.7(B)
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.15
Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.8
Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Companies' Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.6
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.17
Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.16
Earnest Money Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.3
Earnest Money Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.3
Earnest Money Letter Of Credit . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.3
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.18
Environmental Costs And Liabilities . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.14
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.14
Erisa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.18
Erisa Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.18
Estimate Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.3
Excepted Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 14.1
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 14.4
Fcc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1
Fcc Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.2
Fcc Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1
Final Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4
Final Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.4
Ftc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.5
Gaap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.6
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.5
Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.14
Hsr Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.5
Indemnification Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . Section 1.2
</TABLE>
vi
<PAGE> 8
<TABLE>
<S> <C>
Independent Group Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.20
Leased Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.11(C)
Liability Adjustment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.2
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.13
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.4
May 1998 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.7
Objection Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.5
Other Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Owned Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.11(C)
Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.7(A)
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.13
Predecessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.14
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.2
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.11(C)
Reviewing Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.5
Rp Radio Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1.13
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.1.8
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Seller's 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.7(A)
Settlement Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.31
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Specified Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 13.1
Station . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Station Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1
Station Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.16
Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.6
Tax Or Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.15
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.15
Tba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.2
Win-florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.3
Win-indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.3
Winco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Winco Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1.3
Wincom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Working Capital Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3.1
Zapis Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Zebra Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
</TABLE>
vii
<PAGE> 9
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), made as of August
11, 1998, is by and among ML Media Partners L.P., a Delaware limited
partnership ("Seller"), WINCOM Broadcasting Corporation, an Ohio corporation
("WINCOM"), WIN Communications, Inc., an Ohio corporation ("WINCO," and together
with WINCOM, the "Companies"), and Chancellor Media Corporation of Los Angeles,
a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, WINCO owns certain assets, which are used in connection with
the operation of radio station WQAL 104.1 FM in Cleveland, Ohio (the
"Station"); and
WHEREAS, Seller owns all of the issued and outstanding shares of
common stock of WINCOM, which constitutes all of the issued and outstanding
equity interests of WINCOM (the "Shares") and WINCOM owns all of the issued and
outstanding equity interests in WINCO;
WHEREAS, concurrently herewith, Buyer and WINCO are entering into a
Time Brokerage Agreement (the "TBA"), pursuant to which, following the
expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), Buyer will purchase substantially all of the broadcast time of the
Station, subject to the rules and policies of the Federal Communications
Commission (the "FCC");
WHEREAS, contemporaneously herewith, Buyer also is entering into (a) a
Stock Purchase Agreement with the other signatories thereto to purchase all of
the stock of Young Ones, Inc. and Zebra Broadcasting Corporation, which
operates radio stations WZJM 92.3 FM and WJMO 1490 AM in Cleveland Heights,
Ohio (the "Zebra Acquisition"), (b) an Asset Purchase Agreement with
Independent Group Limited Partnership to purchase substantially all of the
assets used in connection with the operation of radio stations WDOK 102.1 FM
and WRMR 850 AM in Cleveland, Ohio (the "Independent Group Acquisition") and
(c) an Asset Purchase Agreement with Zapis Communications Inc. to purchase
substantially all of the assets used in connection with the operation of radio
stations WZAK 93.1 FM in Cleveland, Ohio (the "Zapis Acquisition," and together
with the Independent Group Acquisition and the Zebra Acquisition, the "Other
Acquisitions"); and
<PAGE> 10
WHEREAS, Seller desires to sell the Shares and Buyer desires to
purchase the Shares in accordance with the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound hereby agree as follows:
ARTICLE 1
TERMS OF THE TRANSACTION
1.1 Sale of Shares. On the terms and subject to the conditions
contained in this Agreement, at the Closing, Seller shall sell and assign to
Buyer, and Buyer shall purchase and acquire from Seller, the Shares.
1.2 Purchase Price. In exchange for the Shares, Buyer shall,
subject to Articles 8 and 9 hereof, at the Closing deliver to Seller the amount
equal to Fifty-One Million Two Hundred Fifty Thousand Dollars ($51,250,000.00),
plus or minus as the case may be, the Working Capital Amount as defined in
Section 1.3.1 hereof, minus the Liability Adjustment Amount as defined in
Section 1.3.2 hereof (as adjusted, the "Purchase Price") by wire transfer of
immediately available funds; provided that a portion of the Purchase Price
equal to $2,500,000 will be paid by Buyer into escrow pursuant to the
Indemnification and Escrow Agreement among Buyer, Seller and Key Trust Company
of Ohio, N.A., as escrow agent in the form attached as Exhibit A hereto (the
"Indemnification and Escrow Agreement").
1.3 Adjustments.
1.3.1 The "Working Capital Amount" means the amount equal
to the Companies' consolidated current assets, net of reserves for bad debt, as
of 12:01 a.m. on the Closing Date (as defined in Section 1.4) (the "Effective
Time"), minus the Companies' consolidated current liabilities as of the
Effective Time, in each case calculated in accordance with GAAP (as hereinafter
defined in Section 3.1.6).
1.3.2 The "Liability Adjustment Amount" means the amount
equal to the total of, without duplication, (a) all of the liabilities and
obligations of the Companies as of the Effective Time required to be reflected
on a balance sheet prepared in accordance with GAAP (as defined in Section
3.1.6), (b) any prepayment penalties and premiums and other penalties, costs
and expenses associated with the prepayment or retirement of any indebtedness
of the Companies, whether or not incurred at Closing, (c) any stay bonuses paid
to employees of the Companies prior to or at the Closing or committed to, prior
to the
2
<PAGE> 11
Closing, to be paid by either of the Companies after the Closing, (d) Taxes
relating to any periods ending on or prior to the Closing Date, whether or not
then due and (e) any severance obligations of the Company with respect to
employees terminated prior to or as of the Closing, but, excluding (i) the
liabilities and obligations of the Companies which relate to the operations of
the Companies after the Closing, (ii) any liabilities and obligations reflected
in the Working Capital Amount, (iii) any liabilities and obligations related to
vacation and sick pay of employees who remain with the Companies accrued since
January 1, 1998, (iv) any liabilities and obligations of the Companies paid
prior to or as of the Closing, provided that to the extent that cash of either
of the Companies is used to make such payments, the use of such cash is
reflected in the Working Capital Amount, and (v) all liabilities and
obligations relating to bartered goods and services ("Trade Agreements").
1.3.3 Seller shall prepare and deliver to Buyer, at least
five business days prior to the Closing Date, a statement (the "Estimate
Statement") showing the amount reasonably estimated by Seller, in good faith,
to be (a) the Working Capital Amount, together with reasonable detail as to how
such amount was determined and (b) the Liability Adjustment Amount, together
with reasonable detail as to how such amount was determined. Prior to Closing,
Seller and the Companies shall provide to Buyer copies of or reasonable access
to all books and records as Buyer may reasonably request for purposes of
verifying the estimated Working Capital Amount, the estimated Liability
Adjustment Amount and the calculations set forth on the Estimate Statement.
Seller and Buyer agree to work together in good faith to resolve on or before
the Closing Date any disagreement with respect to any matter set forth in the
Estimate Statement. The Purchase Price paid by Buyer shall be based on the
estimated Working Capital Amount and estimated Liability Adjustment Amount set
forth in the Estimate Statement agreed to by Buyer and shall be adjusted
post-Closing, if necessary pursuant to this Section 1.3.
1.3.4 Buyer will deliver to Seller, within 60 days after
the Closing Date, a schedule which sets forth the actual Working Capital Amount
and the actual Liability Adjustment Amount as of the Effective Time and sets
forth in reasonable detail how such amounts were determined (the "Final
Statement"). Buyer shall provide to Seller copies of or reasonable access to
all books and records of the Companies as Seller may reasonably request for
purposes of verifying the final Working Capital Amount, the final Liability
Adjustment Amount and the calculations set forth in the Final Statement.
1.3.5 If within 30 days after Buyer delivers the Final
Statement to Seller (the "Objection Period"), Seller notifies Buyer of any
objections to the calculation of the amounts set forth in the Final Statement,
Buyer and Seller will attempt in good faith to agree by the date which is 100
days after the Closing Date upon such amounts. If Buyer and Seller
3
<PAGE> 12
cannot agree by such date as to the final Working Capital Amount and/or
Liability Adjustment Amount, Buyer and Seller hereby designate Ernst & Young
LLP (the "Reviewing Firm") to review the Final Statement, Seller's objections
and any other relevant documents. The cost of retaining such Reviewing Firm
shall be borne one-half by Buyer and one-half by Seller. The Reviewing Firm
shall report its conclusions in writing to both Buyer and Seller and such
conclusions as to factual and accounting matters respecting the final Working
Capital Amount and/or the final Liability Adjustment Amount and the
calculations set forth in the Final Statement shall be conclusive on all
parties to this Agreement and not subject to review or dispute. Buyer or
Seller, as applicable, shall within ten days of the earlier to occur of (a) the
parties' agreement to the final Working Capital Amount and the final Liability
Adjustment Amount or (b) the Reviewing Firm's final determination of such
amounts, pay the amount owing to the other party by wire transfer of
immediately available funds.
1.4 Closing. The consummation of the transactions contemplated
herein (the "Closing") shall occur, except as otherwise mutually agreed upon by
Buyer and Seller (a) within ten (10) business days after the FCC Consent (as
defined in Section 2.1) to the transfer of control of the Station Licenses (as
defined in Section 2.1) have become Final Orders (as hereinafter defined) or
(b) at such later date that all other terms and conditions as set forth in
Articles 8 and 9 have been satisfied, or such other date as may be mutually
agreed to by the parties ("Closing Date"); provided, however, that in no event
shall the Closing occur prior to January 4, 1999. For purposes of the
Agreement, "Final Order" means action by the FCC (as defined in Section 2.1)
consenting to the transactions contemplated by this Agreement which is not
reversed, stayed, enjoined, set aside, annulled or suspended, and with respect
to which action no timely request for stay, petition for rehearing, or
reconsideration, application for review or appeal is pending, and as to which
the time for filing any such request, petition or appeal or reconsideration by
the FCC on its own motion has expired. The Closing shall be held in the
offices of Benesch, Friedlander, Caplan & Aronoff, LLP, 2300 BP America
Building, Cleveland, Ohio, or at such place as the parties hereto may agree.
ARTICLE 2
GOVERNMENTAL CONSENTS
2.1 FCC Consent. It is specifically understood and agreed by
Buyer and Seller that the Closing and the transfer of control of the Station
Licenses and the transfer of the Shares are expressly conditioned on and are
subject to the prior consent and approval of the Federal Communications
Commission ("FCC Consent"). "Station Licenses" means all of the
4
<PAGE> 13
Companies' rights in and to the licenses, permits and other authorizations
issued to the Companies by any governmental authority, including those issued
by the FCC, used in connection with the operation of the Station, along with
renewals or modifications of such items between the date hereof and the
Closing, including but not limited to those listed in Schedule 2.1 hereto.
2.2 FCC Applications. Within ten business days after the
execution of this Agreement or such earlier time as shall be agreed to by all
of the parties hereto, Buyer, Seller and the Companies shall file applications
with the FCC for the FCC Consent ("FCC Application").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANIES
3.1 Representations and Warranties of Seller and the Companies.
Seller and the Companies, jointly and severally, represent and warrant to the
Buyer the following:
3.1.1 Title to Shares. Seller is the true and lawful
owner, of record and beneficially, of the Shares. Except as set forth on
Schedule 3.1.1, the Shares are, and at the Closing will be, owned by Seller
free and clear of all Liens. Except as set forth on Schedule 3.1.1, other than
the rights and obligations arising under this Agreement, none of the Shares is
subject to any rights of any other person to acquire the same. Except as set
forth on Schedule 3.1.1, none of the Shares is subject to any Liens (as defined
in Section 3.1.13) or restrictions on transfer thereof, except for restrictions
imposed by applicable federal and state securities laws.
3.1.2 Subsidiaries. (a) Except as set forth on Schedule
3.1.2, none of the Companies or WINCO Subsidiaries (as defined in Section
3.1.3) have any subsidiaries or any debt or equity investment in any other
corporation, partnership, joint venture or other business enterprise.
(b) Each of the WINCO Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation. The WINCO Subsidiaries have no
assets (other than its respective corporate seal, minute books, charter
documents, stock record books and other books and records as pertain to its
organization, existence and share capitalization) or liabilities. WIN-Indiana
(as defined in Section 3.1.3) and WIN-Florida (as defined in Section 3.1.3)
have no, and since
5
<PAGE> 14
October 1, 1993 and July 31, 1990, respectively, have had no operations of any
kind. None of the Companies have any liabilities arising from or relating to
the WINCO Subsidiaries.
3.1.3 Capital Stock. The authorized capital stock of
WINCOM consists solely of 2,500 shares of common stock, without par value,
1,275 of which are issued and outstanding. The authorized capital stock of
WINCO consists solely of 750 shares of common stock, without par value, 99.99
of which are issued and outstanding. The authorized capital stock of WIN
Communications Inc. of Indiana, an Indiana corporation ("WIN-Indiana"),
consists solely of 1,000 shares of common stock, without par value, all of
which are issued and outstanding. The authorized capital stock of Win
Communications of Florida, Inc., a Florida corporation ("WIN-Florida," and
together with WIN-Indiana, the "WINCO Subsidiaries") consists solely of 750
shares of common stock, par value $10.00 per share of which 100 are
outstanding. There are no shares of capital stock of the Companies or of the
WINCO Subsidiaries held in treasury. All of the outstanding shares of capital
stock of the Companies and the WINCO Subsidiaries are duly authorized and
validly issued, fully paid and nonassessable. None of the outstanding shares
of the Companies or of the WINCO Subsidiaries were issued in violation of any
preemptive or preferential right. There are no other equity securities of the
Companies or of the WINCO Subsidiaries outstanding. There are outstanding no
securities or indebtedness convertible into, exchangeable for or carrying the
right to acquire, common stock or other equity securities of the Companies or
of the WINCO Subsidiaries, or subscriptions, warrants, options, rights or other
arrangements or commitments obligating the Companies or the WINCO Subsidiaries
to issue or dispose of any of their common stock or other equity securities or
any ownership therein, except as set forth in Schedule 3.1.3 hereto. Except as
set forth on Schedule 3.1.1, there are no voting trusts, proxies or other
agreements or understandings with respect to the voting of any capital stock of
the Companies or the WINCO Subsidiaries.
3.1.4 Organization, Good Standing, Etc. (a) Seller is a
limited partnership and the Companies are corporations duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation and each has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and
is duly qualified to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where the failure to
so qualify has not had and would not reasonably be expected to have a material
adverse effect on the assets, liabilities or the business of the Companies or
the Station, or on Seller's or the Companies' ability to consummate the
transactions contemplated by this Agreement (a "Material Adverse Effect").
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(b) Each of Seller and the Companies has all requisite
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Seller and the Companies and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
action on the part of Seller and the Companies. This Agreement has been duly
executed and delivered by Seller and the Companies and constitutes the legal,
valid and binding obligation of Seller and the Companies, enforceable against
each of them in accordance with its terms.
3.1.5 Authority. Assuming the consents identified in this
Section 3.1.5 and Section 3.1.17 are obtained, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby by the Companies or Seller (a) violate, conflict with or
result in any breach of any provision of the certificate of limited
partnership, limited partnership agreement, articles of incorporation or code
of regulations (whether written or oral) of Seller or either of the Companies,
(b) violate, conflict with or will result in a violation or breach of, or
constitute a default (with or without due notice or lapse of time or both)
under, or permit the termination of, or will result in the acceleration of, or
entitle any party to accelerate (whether as a result of the sale of the Shares
or otherwise) any obligation, or result in the loss of any benefit, or give
rise to the creation of any lien, charge, security interest or encumbrance upon
any of the properties or assets of Seller or the Companies under any of the
terms, conditions or provisions of any loan or credit agreement, note, bond,
mortgage, indenture or deed of trust, or any license, lease, agreement or other
instrument or obligation to which any of them are a party or by which they or
any of their properties or assets may be bound or affected, or (c) violate any
order, writ, judgment, injunction, decree, statute, rule or regulation, of any
court, administrative agency or commission or other governmental authority or
instrumentality (a "Governmental Entity") applicable to Seller or either of the
Companies or any of their respective properties or assets, except, in the case
of (b) and (c) above, for those violations that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
No consent, approval, order or authorization of, or registration, declaration
or filing with, any Governmental Entity is required by or with respect to
Seller or either of the Companies in connection with the execution, and
delivery of this Agreement by Seller or either of the Companies or the
consummation by Seller or either of the Companies of the transactions
contemplated hereby, except for (x) the filing of a premerger notification
report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the expiration of the applicable waiting period
thereunder, and (y) the FCC Consent.
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3.1.6 Financial Statements. Attached as Schedule 3.1.6 are
copies of the (a) Companies' consolidated unaudited balance sheet of WINCOM and
its subsidiaries at (x) December 31, 1996 and the related statements of
operations for the fiscal year then ended; and (y) December 31, 1997 and the
related statements of operations for the fiscal year then ended (the "Draft
1997 Financial Statements") and (b) unaudited balance sheets of WINCO as of May
31, 1997 and 1998, and the related statements of income for the periods then
ended (such financial statements collectively being referred to as the
"Companies' Financial Statements"). Except as set forth on Schedule 3.1.6
hereto, the Companies' Financial Statements were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby ("GAAP") and present fairly, in all
material respects, the financial position and results of operations of WINCOM
and its subsidiaries (or WINCO, as the case may be) as of such dates and for
the periods then ended (subject to the absence of notes and to normal,
recurring adjustments that would not be material in the aggregate), other than
Trade Agreements.
3.1.7 Absence of Undisclosed Liabilities. There are no
material liabilities of the Companies of any kind whatsoever (whether absolute,
accrued, contingent or otherwise, and whether due or to become due) that are
required to be reflected on, or disclosed in the notes to, a consolidated
balance sheet of the Companies prepared in accordance with GAAP, other than
liabilities and obligations (a) provided for or reserved against in WINCO's
unaudited balance sheet at May 31, 1998 described in Section 3.1.6 (the "May
1998 Balance Sheet") or reflected in the notes thereto or (b) arising after May
31, 1998, in the ordinary course of business and consistent with past practices
and which individually or in the aggregate have not had and could not
reasonably be expected to have a Material Adverse Effect.
3.1.8 Compliance with Applicable Laws, FCC Matters. (a)
Except as permitted or contemplated hereby, the operations of the Companies,
including, without limitation, the operation of the Station have been and now
are being conducted in substantial compliance, in all material respects, with
the Station Licenses, each law, ordinance, regulation, judgment, decree,
injunction, rule or order of the FCC or any other Governmental Entity binding
on the Companies or its respective properties or assets. No investigation or
review by any Governmental Entity with respect to the Companies is pending or,
to Seller's or the Companies' knowledge, is threatened. Without limiting the
generality of the foregoing, each of Seller and the Companies has complied in
all material respects with the Communications Act of 1934, as amended (the
"Communications Act"), all rules, regulations and written policies of the FCC
thereunder, all obligations with respect to equal opportunity under applicable
law, and the FCC's policy on exposure to radio frequency radiation applicable
to the Station. No renewal of any Station Licenses would constitute a
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<PAGE> 17
major environmental action under the rules of the FCC. Access to the Station's
transmission facilities are restricted in accordance with the policies of the
FCC. In addition, each of Seller and the Companies has duly and timely filed,
or caused to be filed, with the appropriate Governmental Entities all reports,
statements, documents, registrations, filings or submissions with respect to
the operations of the Companies, including, without limitation, the operation
of the Station and the ownership thereof, including, without limitation,
applications for renewal of authority required by applicable law to be filed.
All such filings complied in all material respects with applicable laws when
made and to the Seller's or the Companies' knowledge, no deficiencies have been
asserted with respect to any such filings. All of the material required by 47
C.F.R. Section 73.3526 to be kept in the public inspection files of the
Station is in such files. Except as disclosed on Schedule 3.1.8, neither
Seller nor either of the Companies has knowledge of any fact or circumstance
relating to the Companies or the Station arising from noncompliance with the
Communications Act, or the rules, regulations or written policies of the FCC in
effect on the date of this Agreement that could reasonably be expected to (i)
disqualify Seller from assigning the Shares to the Buyer or (ii) prevent or
delay the consummation by Seller and Buyer of the transactions contemplated by
this Agreement.
(b) Schedule 2.1 lists (i) all licenses, permits and
other authorizations (including all STL licenses and construction permits)
issued to the Companies or the Seller by the FCC relating to the Station and
held by them as of the date of this Agreement and (ii) all licenses, permits,
or authorizations issued to the Companies by any other Governmental Entities.
Such licenses, permits and authorizations, and all applications for
modification, extension or renewal thereof or for new licenses, permits,
permissions or authorizations that would be material to the operations of the
Station, are collectively referred to herein as the Station Licenses (as
further defined in Section 2.1), each of which is in full force and effect.
All towers and other structures used in the operation of the Station or located
on the Real Property are obstruction marked and lighted to the extent required
by, and in accordance with the rules and regulations of the FAA, the FCC and
other federal, state and local authorities. Appropriate notifications to the
FAA and registrations with the FCC have been filed for such towers where
required. Except for proceedings affecting the radio broadcast industry
generally, there are no proceedings pending or, to Seller's or the Companies'
knowledge, threatened with respect to the Companies' ownership or operation of
the Station which reasonably may be expected to result in the revocation,
material adverse modification, non-renewal or suspension of any of the Station
Licenses, the denial of any pending applications for Station Licenses, the
issuance against the Companies of any cease and desist order, or the imposition
of any administrative actions by the FCC or any other Governmental Entity with
respect to the Station Licenses, or which reasonably may be expected to
adversely affect the Station's ability to operate as currently operated or
Buyer's
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<PAGE> 18
ability to obtain assignment of the Shares. With the exception of such
temporary reduced power operations as are necessary for routine maintenance,
the Station operates (i) in conformity with its licenses and (ii) within the
operating power tolerances specified in 47 C.F.R. Section 73.1560(b). No
other broadcast station or radio communications facility is causing
interference to the Station's transmissions beyond that which is allowed by FCC
rules and regulations. The Companies have all necessary authority to use the
call signs set forth on Schedule 2.1.
3.1.9 Litigation. Except as disclosed on Schedule 3.1.9,
there are no actions, suits, inquiries, judicial or administrative proceedings,
or arbitrations pending or, to the knowledge of Seller or either of the
Companies, threatened against Seller, or any of the Companies or the WINCO
Subsidiaries or any of their respective properties or assets by or before any
arbitrator or Governmental Entity nor are there any investigations relating to
Seller or any of the Companies or the WINCO Subsidiaries or any of their
respective properties or assets pending or, to the knowledge of Seller or
either of the Companies threatened by or before any arbitrator or Governmental
Entity that has had or that reasonably could be expected to have a Material
Adverse Effect. There are no material judgments, decrees, injunctions, or
orders of any Governmental Entity or arbitrator outstanding against Seller or
any of the Companies or the WINCO Subsidiaries or any of their respective
properties or assets. There is no action, suit, inquiry, judicial or
administrative proceeding pending or, to the knowledge of Seller or either of
the Companies threatened against Seller or any of the Companies or the WINCO
Subsidiaries by a third party relating to the transactions contemplated by this
Agreement.
3.1.10 Insurance. Schedule 3.1.10 sets forth a list of all
fire, liability and other forms of insurance and all fidelity bonds held by or
applicable to the Companies or the Station setting forth in respect of each
such policy the policy name, policy number, carrier, term, type of coverage and
annual premium, each of which is in full force and effect on the date hereof,
valid and enforceable in accordance with its terms and in amounts which are
adequate in relation to the business and assets of the Companies and the
Station. To Seller's knowledge, no event has occurred, including, without
limitation, the failure by Seller or either of the Companies to give any notice
or information, or the delivery of any inaccurate or erroneous notice or
information, which limits or impairs the rights of Seller or either of the
Companies under any such insurance policies. The Companies shall keep
comparable policies of insurance in effect for acts, omissions and events
occurring on or prior to the Closing Date.
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3.1.11 Real Estate. (a) The Companies have, and upon
Closing, will continue to have, good and marketable title to the Owned Real
Estate (as hereinafter defined) and, except as set forth on Schedule 3.1.11,
valid leaseholds in the Leased Real Estate (as defined in subparagraph (c)
below), free and clear of any Liens except for the Permitted Liens (as defined
in Section 3.1.13). The buildings (or portions thereof), improvements and
fixtures that are included in the Real Estate (as defined in subparagraph (c)
below) are suitable for their intended use. The Companies own, or have a valid
right to use adequate routes of ingress and egress to, from and over all of the
Real Estate necessary to operate the Station. The Real Estate has adequate
water supply, sewage and waste disposal facilities, is connected to and served
by telephone, gas, electricity and other utility equipment facilities and
services necessary for the operation or use of the Real Estate. Such
facilities and services are adequate for the present use and operation of the
Real Estate on a fully occupied basis, and are installed and connected pursuant
to valid material permits and are in material compliance with all material
governmental regulations. To Seller's and the Companies' knowledge, no fact or
condition exists which would result in the termination or impairment of the
furnishing of utility services to the Real Estate. Schedule 3.1.11 lists the
street address and/or legal descriptions of the Owned Real Estate and the
street addresses and/or legal descriptions of the Leased Real Estate. All real
estate Taxes, assessments and use charges pertaining to the Owned Real Estate
that have become due have been paid in full.
(b) The Real Estate, any improvements thereon, and the
use by the Companies thereof, conform in all material respects, to (i) all
applicable laws, including but not limited to zoning requirements and the
Americans With Disabilities Act, and (ii) all restrictive covenants, if any.
There are no eminent domain proceedings pending, or to Seller's and the
Companies' knowledge, threatened against the Real Estate. All material
improvements (i) have been constructed in a good and workmanlike manner, free,
in all material respects, from defects in workmanship and material; and (ii)
have been constructed, occupied, maintained and operated in material compliance
with all applicable laws, insurance requirements, contracts, leases, permits,
licenses, ordinances, restrictions, building set-back lines, covenants,
reservations, and easements, and neither of the Companies have received any
notice, written or verbal, claiming any material violation of any of the same
or requesting or requiring the performance of any material repairs, alterations
or other work in order to so comply. Other than Permitted Liens, no
improvement on any of the Real Estate encroaches upon any adjacent real
property of any other person or entity. The heating, air conditioning,
plumbing, ventilating, utility, sprinkler and other mechanical and electrical
systems, apparatus and appliances located on the Real Estate or in the
improvements are in good operating condition (normal wear and tear excepted),
free from material defects in workmanship and material.
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(c) The "Owned Real Estate" means all real property owned
by the Companies together with all appurtenant easements thereunto and all
structures, fixtures and improvements located thereon as more fully described
in Schedule 3.1.11 hereto, together with any additions thereto between the date
hereof and the Closing. The "Leased Real Estate" means all rights and
interests of the Companies under any and all of the leases of real property
held by the Companies as more fully described in Schedule 3.1.11. The "Real
Estate" means the Owned Real Estate together with the Leased Real Estate.
3.1.12 Personal Property. Schedule 3.1.12 hereto contains a
list of all material tangible personal property and assets owned or held by the
Companies (other than Real Estate, which is addressed in the foregoing Section
3.1.11). Except as disclosed in Schedule 3.1.12, the Companies own and will
have as of the Closing, good and marketable title to all property referred to
in the immediately preceding sentence and none of such property is, or at the
Closing will be, subject to any Liens (as defined in Section 3.1.13) other than
Permitted Liens (as defined in Section 3.1.13). The tangible personal property
and fixtures owned or used by the Companies are, in all material respects, in
good operating condition (subject to normal wear and tear) and are sufficient
to permit the conduct of the business of the Station in material compliance
with FCC rules and regulations. The Companies own or hold under valid leases
all of the tangible personal property and fixtures necessary to conduct the
business of the Companies as presently conducted. The assets owned or held by
the Companies (including the Real Estate) constitute all of the assets, rights
and properties that are required for the operation of the Companies and the
Station as they are now conducted.
3.1.13 Liens and Encumbrances. All properties and assets,
including leases, owned by the Companies are free and clear of all liens,
pledges, claims, security interests, restrictions, mortgages, tenancies and
other possessory interests, conditional sale or other title retention
agreements, assessments, easements, rights of way, covenants, restrictions,
rights of first refusal, defects in title, encroachments and other burdens,
options or encumbrances of any kind (collectively, "Liens") except (a)
statutory Liens securing payments not yet delinquent or the validity of which
are being contested in good faith by appropriate actions, (b) purchase money
Liens arising in the ordinary course, (c) Liens for Taxes (as defined in
Section 3.1.15(k)) not yet delinquent, (d) Liens securing indebtedness, all of
which Liens will be discharged at the Closing upon repayment by Seller of all
amounts due and owing, (e) Liens which in the aggregate do not materially
detract from the value or materially impair the present and continued use of
the properties or assets subject thereto in the usual and normal conduct of the
business of the Companies, (f) Liens on leases arising from the provisions of
such leases, (g) zoning ordinances and (h) any other permitted
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exceptions listed on Schedule 3.1.13 hereto (the Liens referred to in clauses
(a) through (h) being "Permitted Liens").
3.1.14 Environmental Matters.
On the date of this Agreement, except as disclosed on Schedule 3.1.14:
(a) The Station and any and all Real Estate is, and to
any of Seller's and the Companies' actual knowledge with respect to
any predecessor or prior owner, operator or lessee (each a
"Predecessor") has been, in compliance in all material respects, with
all Environmental Laws (as defined in subparagraph (f) below;
(b) No judicial or administrative proceedings are pending
or, to the knowledge of the Seller or either of the Companies,
threatened against Seller or either of the Companies, relating to any
of the Real Estate alleging the violation of or seeking to impose
liability on Seller or either of the Companies pursuant to any
Environmental Law. Neither the Seller nor either of the Companies has
received any written notice, claim or other written communication from
any Governmental Entity or other person alleging the violation of or
liability under any Environmental Laws in connection with any of the
Real Estate or operations thereon;
(c) There are no facts, circumstances or conditions
associated with Real Estate or the operations thereon that could
reasonably be expected to give rise to a material environmental claim
against the Station or the owner or operator thereof or result in the
Station or the owners or operators thereof incurring material
Environmental Costs and Liabilities (as defined in subparagraph (f)
below);
(d) All substances, materials or waste that are regulated
by federal, state or local government under the Environmental Laws as
hazardous, toxic or a pollutant or contaminant as well as any
petroleum or petroleum derived product (collectively, "Hazardous
Substances"), used or generated by the Companies or to Seller's or
either of the Companies' actual knowledge, by any Predecessor in
connection with the Real Estate, have been stored, used, treated, and
disposed of by such persons or on their behalf in such manner as not
to result in any material Environmental Costs or Liabilities;
(e) There are not now, nor have there been in the past,
on, in or under any Real Estate when owned, leased or operated by the
Companies or, to Seller's or either of the Companies' knowledge, when
owned, leased or operated by any
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Predecessor, any of the following: any (i) underground storage tanks,
above-ground storage tanks, dikes or impoundments containing Hazardous
Substances, (ii) asbestos containing materials, (iii) polychlorinated
biphenyls or related compounds (other than those labeled and
maintained in accordance with applicable Environmental Laws) in
amounts or concentrations regulated under the Environmental Laws or
(iv) radioactive substances in amounts or concentrations regulated
under the Environmental Laws; and
(f) For purposes of this Section 3.1.14, the following
terms have the following meanings: "Environmental Laws" shall mean all
applicable federal, state and local laws, statutes, codes, rules,
regulations, common law or other legal requirements relating the
environment, natural resources, and public or employee health and
safety; "Environmental Costs and Liabilities" means any losses,
including environmental remediation costs, liabilities, obligations,
damages, fines, penalties or judgments, arising from or under any
Environmental Law or order of or agreement with any Governmental
Entity or other person.
3.1.15 Taxes. (a) All Tax Returns (as defined in
subsection (l) below) that are required to be filed by or on behalf of the
Companies on or before the execution of this Agreement have been duly filed on
a timely basis under the statutes, rules and regulations of each jurisdiction
in which such Tax Returns are required to be filed and Seller and the Companies
will file or will cause to be duly filed, all Tax Returns required to be filed
by or on behalf of the Companies on or prior to the Closing Date and with
respect to any taxable period prior to or which includes the Closing Date. All
such Tax Returns are (or will be) complete and accurate in all respects.
Except as set forth on Schedule 3.1.15, all Taxes, whether or not reflected on
the Tax Returns, which are due with respect to the Companies and any Affiliates
as of the date hereof have been timely paid by the Companies, and/or any such
Affiliates. For the purposes of this Section 3.1.15, Affiliates shall mean any
entity that files a consolidated, combined or unitary, Tax Return with the
Companies. All Taxes, whether or not reflected on the Tax Returns, which are
due with respect to the Companies through the Closing Date will be included as
a liability in Working Capital Amount or the Liability Adjustment Amount.
(b) No claim for assessment or collection of Taxes has
been asserted against the Companies or any Affiliates. Neither of the
Companies nor any of their Affiliates are a party to any pending audit, action,
proceeding or investigation by any Governmental Entity for the assessment or
collection of Taxes nor do either of the Companies or any of their Affiliates
have knowledge of any threatened audit, action, proceeding or investigation.
No deficiencies for any Taxes have been proposed, asserted or assessed against
either of the Companies or their Affiliates that have not been fully paid.
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(c) Neither of the Companies nor any of their Affiliates
has waived or extended any statutes of limitation for the assessment or
collection of Taxes. No claim has ever been made by a Governmental Entity in a
jurisdiction where either of the Companies or any of their Affiliates do not
currently file Tax Returns that it is or may be subject to taxation by that
jurisdiction nor are either of the Companies or any of their Affiliates aware
that any such assertion of jurisdiction is pending or threatened. No Liens,
other than Permitted Liens (whether filed or arising by operation of law), have
been imposed upon or asserted against any of the assets of the Companies as a
result of or in connection with any failure, or alleged failure to pay any Tax.
(d) The Companies have withheld and paid over to the
appropriate Governmental Entity all Taxes required to be withheld in connection
with any amounts paid or owing to any employee, creditor, independent
contractor or other third party.
(e) Seller is not a foreign person within the meaning of
Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code").
(f) There is no contract, agreement, plan or arrangement
covering any person that, individually or collectively (either alone or upon
the occurrence of any additional or subsequent event), could give rise to the
payment of any amount that would not be deductible by the Companies by reason
of Section 280G of the Code.
(g) The Companies have not (A) filed a consent pursuant
to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to the disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by the Companies, (B) agreed nor are
required to make any adjustments pursuant to Section 481(a) of the Code or any
other similar provision of state, local or foreign law by reason of a change in
accounting method initiated by the Companies or have any knowledge that the
Internal Revenue Service ("IRS") has proposed any such adjustment or change in
accounting method, or has any application pending with any Governmental Entity
requesting permission for any changes in accounting methods that relate to the
business or operations of the Companies, (C) executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision
thereof or any similar provision of state, local or foreign law with respect to
the Companies, (D) requested any extension of time within which to file any Tax
Return, which Tax Return has since not been filed, or (E) executed a power of
attorney with respect to any Tax matter which is currently in force.
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(h) No property owned by the Companies constitutes (i)
"tax-exempt use property" within the meaning of Section 168(h)(1) of the Code,
(ii) "tax-exempt bond financed property" within the meaning of Section 168(g)
of the Code, or (iii) "limited use property" (as that term is used in Rev.
Proc. 76-30), nor is any such property required to be treated as owned by
another person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986.
(i) The Companies are not a party to any tax sharing, tax
indemnification or similar agreement or arrangement (whether or not written)
with respect to Taxes pursuant to which either of them will have any obligation
to make any payments after the Closing Date.
(j) None of the Companies nor any WINCO Subsidiaries has
ever been a member of any consolidated, combined, unitary or affiliated group
of corporations for any Tax purposes, other than the affiliated group of which
WINCOM is the common parent.
(k) For federal income tax purposes, Seller is treated as
a partnership and not as an association or "publicly traded partnership"
taxable as a corporation.
(l) For purposes of this Agreement, the terms "Tax" and
"Taxes" shall mean all federal, state, local, or foreign taxes, assessments,
duties, levies or similar charges of any kind including, without limitation,
all income, payroll, Medicare, withholding, unemployment insurance, social
security, sales, use, service, service use, leasing, leasing use, excise,
franchise, gross receipts, value added, alternative or add-on minimum,
estimated, occupation, real and personal property, stamp, duty, transfer,
workers' compensation, severance, windfall profits, environmental (including
Taxes under Section 59A of the Code), other Tax, charge, fee, levy or
assessment of the same or of a similar nature, including any interest, penalty,
or addition thereto whether disputed or not. The term "Tax Return" means any
return, declaration, report, claim for refund, or information return or
statement relating to Taxes or any amendment thereto, and including any
schedule or attachment thereto.
3.1.16 Personnel. Attached as Schedule 3.1.16 is a complete
and correct list as of the date of this Agreement of the names, positions, and
location of all employees or other station and broadcast personnel (whether
employees or independent contractors) of the Companies, which sets forth the
current salaries of all such employees and the other compensation arrangements
with all General Managers, Station Managers, General Sales Managers, Local
Sales Managers, National Sales Managers, Program Directors,
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Business Managers and Traffic Managers (collectively, "Station Management"),
all on-the-air broadcast personnel of the Station and all directors and
officers of the Companies and indicates which of those employees, Station
Management, on-the-air broadcast personnel, or director or officer is a party
to an employment or consulting or similar contract with the Companies. The
Companies have delivered to Buyer accurate and complete copies of all such
employment agreements, confidentiality agreements and all other agreements,
plans and other instruments to which either of the Companies is a party and
under which such employees are entitled to receive benefits of any value that
involve payment by or to the Companies in excess of $25,000.
3.1.17 Certain Agreements. The Contracts (as defined below)
are the only contractual agreements necessary to carry out the business and
operations of the Companies and the Station as currently conducted. Each
Contract is a valid and binding obligation of the applicable Companies and is
in full force and effect and, to the knowledge of Seller and the Companies,
each other party to such Contract, has performed in all material respects the
obligations required to be performed by it and is not (with or without lapse of
time or the giving of notice, or both) in material breach or default
thereunder. Schedule 3.1.17 identifies, as to each Contract, whether the
consent of the other party thereto is required in order for such Contract to
continue in full force and effect upon the consummation of the transactions
contemplated hereby. "Contracts" means all of the Companies' right in and
under those contracts, agreements, leases and legally binding contractual
rights of any kind, written or oral, relating to the operation of the Companies
listed in Schedule 3.1.17 hereto and (i) those contracts entered into by the
Companies between the date hereof and the Closing in the ordinary course of
business of the Companies consistent with past practices, subject to Section
5.1 hereto; (ii) all contracts for the sale of advertising time for cash,
subject to Section 5.1 hereto; and (iii) all Trade Agreements, subject to
Section 5.1 hereto; and (iv) all other contracts, agreements, leases,
understandings, arrangements and legally binding contractual rights of any
kind, written or oral, to which the Companies is a party or by which either of
the Companies' assets or properties are bound that involve a payment by or to
the Companies of less than $25,000 individually or $150,000 in the aggregate.
There has not been (i) any threatened cancellation of any material Contracts,
(ii) any outstanding disputes, of a material nature, under any material
Contracts or (iii) to Seller's or the Companies' knowledge, any bases for any
claims of breach or default thereunder. Seller and the Company have no
knowledge that any of the material Contracts that are renewable will not be
renewed by the other party on commercially reasonable terms.
3.1.18 ERISA Compliance. (a) Neither of the Companies nor
any other trades or businesses under common control, or which is treated as a
single employer with either of the Companies under Sections 414(b),(c),(m) or
(o) of the Code (collectively,
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the "ERISA Group") has, within the past six years, contributed or been
obligated to contribute to any "multi-employer plan" as such term is defined in
Section 3(37) or Section 4001(a)(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") except as disclosed on Schedule 3.1.18.
Schedule 3.1.18 lists all "employee benefit plans" within the meaning of
Section 3(3) of ERISA and bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, salary continuation, educational assistance, club
memberships, company car (other than those provided to employees pursuant to
employment agreements listed on Schedule 3.1.18 hereto), retirement, vacation,
severance, disability, death benefit, hospitalization, insurance or other plan
or arrangement or understanding providing benefits to any present or former
employee or contractor of either of the Companies or as to which either of the
Companies (with respect to such individuals) has any liability or obligation
(collectively, "Employee Benefit Plans"). Accurate and complete copies of such
plans and their related summary plan descriptions have been delivered or made
available to Buyer. The ERISA Group does not maintain or contribute to, and is
not obligated to maintain or contribute to, any employee pension benefit plan,
as defined in Section 3(2) of ERISA, subject to Title IV of ERISA.
(b) Each Employee Benefit Plan and its related trust
intended to qualify under Sections 401 and 501(a) of the Code, respectively,
has received an opinion letter or notification from the IRS issued to the
prototype provider for such plan to the effect that the form of plan is
qualified under Section 401 of the Code and its related trust is exempt under
Section 501(a) of the Code and, to the knowledge of the Companies, nothing has
occurred that would have a material adverse effect on the qualified status of
such plan.
(c) All contributions or other payments required to have
been made by Companies to or under any Employee Benefit Plan by applicable law
or the terms of such Employee Benefit Plan have been timely and properly made
or, where applicable, accrued for on the Companies' Financial Statements to the
extent required by GAAP.
(d) Except as disclosed in Schedule 3.1.18, the Employee
Benefit Plans have been maintained and administered in all material respects in
accordance with their terms and applicable laws.
(e) Except as disclosed in Schedule 3.1.18, there are no
pending or, to the knowledge of either of the Companies, threatened actions,
claims or proceedings against or relating to any Employee Benefit Plan other
than routine benefit claims by persons entitled to benefits thereunder.
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(f) Except as disclosed in Schedule 3.1.18, neither of
the Companies maintain or have an obligation to contribute to retiree life or
retiree health plans which provide for continuing benefits or coverage for
current or former officers, directors or employees of the Companies except (i)
as may be required under Part 6 of Title I of ERISA) and at the sole expense of
the participant or the participant's beneficiary or (ii) a medical expense
reimbursement account plan pursuant to Section 125 of the Code.
(g) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) result in
any payment becoming due to any employee of either of the Companies, (ii)
increase any amounts otherwise payable under any Employee Benefit Plan or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits.
3.1.19 Labor. The Companies have not 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 its employees.
Except as disclosed on Schedule 3.1.19, since June 30, 1995, the Companies (a)
are and have been in compliance, in all material respects, with all applicable
laws regarding employment and employment practices, terms and conditions of
employment, wages and hours, and plant closing, occupational safety and health
and workers' compensation and is not engaged, nor has it engaged, in any unfair
labor practices, (b) have no, and have not had, any unfair labor practice
charges or complaints pending or, to Seller's or either of the Companies'
knowledge, threatened against either of the Companies before the National Labor
Relations Board, (c) have no and have not had any grievances pending or, to
Seller's or either of the Companies' knowledge, threatened against either of
the Companies and (d) have no, and have not had any charges pending or, to
Seller's or the Companies' knowledge, threatened against either of the
Companies before the Equal Employment Opportunity Commission, the FCC or any
state or local agency responsible for the prevention of unlawful employment
practices. There is no labor strike, slowdown, work stoppage or lockout
actually pending or, to the knowledge of Seller or either of the Companies,
threatened against or affecting either of the Companies. To Seller's and the
Companies' knowledge, no union organizational campaign or representation
petition is currently pending with respect to the employees of the Companies.
3.1.20 Patents, Trademarks, Etc. Schedule 3.1.20 sets forth
all call letters, patents, patent applications, trademarks, trade names,
Internet domain names, service marks, trade secrets, applied for, issued, owned
or used, copyrights and other proprietary Intellectual Property (as defined
below) used in the operation of the Companies' businesses (whether owned,
leased or licensed by the Companies). The Companies have, and upon the Closing
will continue to have, good and marketable title to the material Intellectual
Property
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owned by them, free and clear of any Liens except for Permitted Liens and for
any infringement claims by third parties of which Seller is not aware. Neither
of the Companies has received any notice of any claimed conflict, violation or
infringement of such Intellectual Property rights, and to Seller's and the
Companies' knowledge, none of such Intellectual Property rights are being
infringed by any third party. To Seller's knowledge, the operation of the
Companies' businesses do not infringe on the intellectual property rights of
any other person. "Intellectual Property" means all of the Companies' rights
in and to all call letters, trademarks, trade names, service marks, franchises,
copyrights, Internet domain names, including registrations and applications for
registration of any of them, computer software programs and programming
material of whatever form or nature, jingles, slogans, the Station's logos and
all other logos or licenses to use same and all other intangible property
rights of the Companies, including, but not limited to those listed on Schedule
3.1.20 hereto together with any associated goodwill and any additions thereto
between the date hereof and the Closing.
3.1.21 Absence of Certain Changes or Events. Except as
contemplated or expressly permitted by this Agreement or as disclosed on
Schedule 3.1.21, since December 31, 1997 there has not been (a) any material
damage, destruction or loss of any kind with respect to the Companies or the
Station not covered by valid and collectible insurance, nor, to Seller's or the
Companies' knowledge, has there been any event or circumstance which has had or
reasonably could be expected to have a Material Adverse Effect; (b) the
execution of any agreement with any Station Management or broadcast personnel
of the Companies (whether an employee or independent contractor) providing for
his/her employment, or any increase in compensation or severance or termination
of benefits payable or to become payable by the Companies to any officer,
Station Management, or broadcast personnel of the Companies (whether an
employee or independent contractor), or any increase in benefits under any
collective bargaining agreement, except as to all of the foregoing in this
clause (b), in the ordinary course of business consistent with past practices
and except as permitted by Section 5.1.1 or (c) any change by either of the
Companies in their financial or Tax accounting principles or methods, except
insofar as required by GAAP, applicable law or circumstances which did not
exist as of the date of the December 31, 1997 balance sheet included in the
Companies' 1997 Audited Financial Statements (as defined in Section 5.14.
3.1.22 Commission or Finder's Fees. Neither Seller, either
of the Companies, or any entity acting on behalf of any of them has agreed to
pay a commission, finder's fee or similar payment to any person or entity in
connection with this Agreement or any matter related hereto.
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3.1.23 Full Disclosure. No representation or warranty by
Seller or either of the Companies contained in this Agreement (including the
Schedules hereto) or in any certificate furnished pursuant to this Agreement
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading.
3.1.24 The Companies' Financial Condition. No insolvency
proceedings of any character, including, without limitation, bankruptcy,
receivership, reorganization, composition or arrangement with creditors,
voluntary or involuntary, affecting either of the Companies or any of their
respective assets or properties are pending, or to Seller's or either of the
Companies' knowledge, threatened, and neither of the Companies have made
assignment for the benefit of creditors, nor taken any action with a view to,
or which would constitute a basis for, the institution of any such insolvency
proceedings.
3.1.25 Books and Records. The books, records and accounts
of the Companies and the WINCO Subsidiaries maintained with respect to each of
the Companies, the WINCO Subsidiaries and the Station, accurately and fairly
reflect, in reasonable detail, in all material respects, the transactions and
the assets and liabilities of the applicable Companies, the WINCO Subsidiaries
and the Station. Neither Seller nor either of the Companies have engaged in
any transaction, maintained any bank account or used any of the funds of the
Companies except for transactions, bank accounts and funds which have been and
are reflected, in all material respects, in the normally maintained books and
records of the Companies.
3.1.26 Accounts Receivable. All accounts, notes and loans
receivable of the Companies reflected in the Companies' Financial Statements or
arising since the date thereof (a) arose in the ordinary course of business of
the Companies, (b) are subject to a reserve for bad debts which has been
computed in accordance with GAAP and (c) are valid and genuine. Except as set
forth on Schedule 3.1.26, all such accounts, notes and loans receivable are
free and clear of Liens. There is no right or claim of offset, no valid
defenses or counterclaims with respect to any such accounts, notes or loans
receivable. None of the obligors of such accounts, notes or loans receivable
has refused or given notice that it refuses to pay the full amount or any
material portion thereof.
3.1.27 Availability of Documents. Each of the Companies has
heretofore made available for inspection by Buyer and its representatives true,
correct and complete copies of the charter and bylaws or other organizational
documents of each
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Company and of each WINCO Subsidiary, all written agreements, arrangements,
commitments, and documents referred to in the Schedules hereto, and the
corporate minute books of each Company and of each WINCO Subsidiary. Such
corporate minute books contain all of the minutes of meetings of stockholders,
board of directors, and any committees of the board of directors of the
Companies and of each WINCO Subsidiary and all of the written consents to
action executed in lieu thereof.
3.1.28 Interest in Competitors, Suppliers and Customers.
Except as set forth on Schedule 3.1.28 hereto, neither Seller nor any officer,
director, partner or Affiliate of the Companies or Seller has any ownership
interest in any competitor, supplier, customer or other service provider of the
Companies or any property used in the operation of the businesses of the
Companies.
3.1.29 Controlled Group Liability. The Companies are not
and will not be subject to any liability on account of Seller and the Companies
having been affiliated, prior to the Closing Date, directly or indirectly, with
any other entity or person under Code Section 414, ERISA Section 4001 or any
similar foreign law.
3.1.30 Barter Arrangements. Schedule 3.1.30 accurately
describes all Trade Agreements of the Companies or of Seller relating to the
operation of the Station which are outstanding as of the date hereof. With
respect to the Station, all such advertising time sold under Trade Agreements
may, at the Station's option, be, preempted by advertising time that is sold
for cash. All Trade Agreements have been entered into in the ordinary course
of business consistent with past practices.
3.1.31 Settlement Agreement. Buyer has been provided with
true and complete copies of the Letter Agreement dated January 24, 1997 between
the Rainbow-PUSH Coalition, successor to the National Rainbow Coalition, and
WINCO and all other documents related thereto (collectively, the "Settlement
Agreement"). The Settlement Agreement is a valid and binding obligation of
WINCO and is in full force and effect and WINCO has complied and satisfied all
of its obligations under the Settlement Agreement required to be satisfied as
of the date hereof and Seller and the Companies shall continue to comply with
and satisfy such obligations of WINCO through the Closing Date. WINCO has no
outstanding payment obligations under, or arising from, the Settlement
Agreement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller the following:
4.1.1 Organization and Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and is duly qualified to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, other than in such jurisdictions where the
failure to so qualify has not had and would not reasonably be expected to have
a material adverse effect on the assets, or the business of Buyer, or on
Buyer's ability to consummate the transactions contemplated by this Agreement.
4.1.2 Authorization and Binding Obligation. Buyer has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. Buyer's execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Buyer and constitutes the legal, valid and
binding obligation of Buyer, enforceable against it in accordance with its
terms.
4.1.3 Qualification. To Buyer's knowledge, there is no
fact, allegation, condition, or circumstance that could reasonably be expected
to prevent the prompt grant of the FCC Consent. Buyer knows of no fact that
would, under the Communications Act, or the rules, regulations and policies of
the FCC, disqualify Buyer from acquiring the Shares or, as of the date hereof,
otherwise require Buyer to obtain a waiver of any FCC rule, regulation or
policy in order to obtain the FCC Consent. There are no proceedings,
complaints, notices of forfeiture, claims, or investigations pending or, to the
knowledge of Buyer, threatened against any or in respect of any of the
broadcast stations licensed to Buyer or its Affiliates that would materially
impair the qualifications of Buyer to acquire the Shares or delay the FCC's
processing of the FCC Applications.
4.1.4 Absence of Conflicting Agreements or Required
Consents. Except as set forth in Schedule 4.1.4 hereof, the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby by Buyer: (a) do not violate, conflict with or result in
any breach of any provision of the charter or bylaws of Buyer; (b) violate,
conflict with or will result in a violation or breach of, or constitute a
default (with or without
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due notice or lapse of time or both) under, or permit the termination of, or
will result in the acceleration of, or entitle any party to accelerate (whether
as a result of the sale of the Shares or otherwise) any obligation, or result
in the loss of any benefit, or give rise to the creation of any lien, charge,
security interest or encumbrance upon any of the properties or assets of Buyer
or any of its subsidiaries under any of the terms, conditions or provisions of
any loan or credit agreement, note, bond, mortgage, indenture or deed of trust,
or any license, lease, agreement or other instrument or obligation to which any
of them are a party or by which they or any of their properties or assets may
be bound or affected, or (iii) violate any order, writ, judgment, injunction,
decree, statute, rule or regulation of any Governmental Entity applicable to
Buyer or any of its respective properties or assets, except for those
violations that individually or in the aggregate could not reasonably be
expected to have a material adverse effect on Buyer's ability to consummate the
transactions contemplated by this Agreement.
4.1.5 Litigation. There are no actions, suits, inquiries,
judicial or administrative proceedings, or arbitrations pending or, to the
knowledge of Buyer, threatened against Buyer or any of its respective
properties or assets by or before any arbitrator or Governmental Entity nor are
there any investigations relating to Buyer or any of its respective properties
or assets pending or, to the knowledge of Buyer, threatened by or before any
arbitrator or Governmental Entity that has had or that reasonably could be
expected to have a material adverse effect on Buyer's ability to consummate the
transactions contemplated by this Agreement. There are no material judgments,
decrees, injunctions, or orders of any Governmental Entity or arbitrator
outstanding against Buyer or any of its respective properties or assets that
has had or that reasonably could be expected to have a material adverse effect
on Buyer's ability to consummate the transactions contemplated by this
Agreement. There is no action, suit, inquiry, judicial or administrative
proceeding pending, or, to the knowledge of Buyer, threatened against Buyer by
a third party relating to the transactions contemplated by this Agreement.
4.1.6 Commission or Finder's Fees. Neither Buyer nor any
entity acting on behalf of Buyer has agreed to pay a commission, finder's fee
or similar payment to any person or entity in connection with this Agreement or
any matter related hereto.
4.1.7 Full Disclosure. No representation or warranty by
Buyer contained in this Agreement (including the Disclosure Schedules hereto)
or in any certificate furnished pursuant to this Agreement contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact necessary, in light of the circumstances under which it was
or will be made, in order to make the statements herein or therein not
misleading.
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4.1.8 Investment Intent; Sophisticated Buyer. Buyer (a) is
an informed sophisticated entity with sufficient knowledge and experience in
investing so as to be able to evaluate the risks and merits of its investment
in the Shares, (b) is financially able to bear the risks of investing in the
Companies, (c) has had an opportunity to discuss the business, management and
financial affairs of the Companies with the management of the Companies, (d) is
acquiring the Shares for its own account for the purpose of investment and not
with a view to or for sale in connection with any distribution thereof, (e)
understands that (i) the Shares have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), (ii) the Shares must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (f) has no present need for
liquidity in connection with its purchase of the Shares, (g) understands that
the purchase of the Shares involves a high degree of risk, and (h) acknowledges
that the purchase of the Shares is consistent with its general investment
objectives.
ARTICLE 5
COVENANTS OF SELLER AND THE COMPANIES
5.1 Each of the Companies and Seller covenant and agree with Buyer
that, pending Closing and except as otherwise agreed to in writing by Buyer:
5.1.1 Conduct Prior to the Closing Date. Each of the
Companies shall:
(a) subject to the provisions of the TBA if the
Commencement Date (as defined in the TBA) has occurred, use
commercially reasonable efforts to maintain its present business
organization, keep available the services of its present employees and
independent contractors, preserve its relationships with its customers
and others having business relationships with it, and refrain from
materially and adversely changing any of its business policies
(including but not limited to advertising (including substantially the
same amount of cash expenditure), marketing, pricing, purchasing,
personnel, sales, and budget policies);
(b) maintain its books of account and records in the
usual and ordinary manner and in accordance with GAAP except as
otherwise provided in Section 3.1.6;
(c) notify Buyer if the regular broadcast transmission of
the Station from its main transmitting facilities at full authorized
effective radiated power is interrupted for a period of more than five
consecutive hours or for an aggregate of ten or more hours in any
continuous three-day period;
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(d) conduct its business in all material respects in
compliance with the terms of the Station Licenses and all applicable
laws, rules, and regulations, including, without limitation, the
applicable rules and regulations of the FCC through the Closing Date
and, subject to the provisions of the TBA if the Commencement Date has
occurred, operate in the usual and ordinary course of business in
accordance with past practices;
(e) use, repair, and, if necessary, replace any of the
Station's studio and transmission assets in a reasonable manner
consistent with historical practice and maintain its assets in
substantially their current condition, ordinary wear and tear
excepted;
(f) maintain insurance in conformity with Section 3.1.10
through the Closing Date;
(g) not knowingly incur any debts, obligations, or
liabilities (absolute, accrued, contingent, or otherwise) that include
obligations (monetary or otherwise) to be performed by Buyer after the
Closing that exceed $50,000 individually or $150,000 in the aggregate;
(h) not lease, mortgage, pledge, or subject to a lien,
claim, or encumbrance (other than Permitted Liens) any of its assets
or sell or transfer any of its assets without replacing such assets
with an asset of substantially the same value and utility;
(i) without the prior consent of Buyer, which consent
shall not be unreasonably withheld or delayed, (x) not modify or
extend any Contracts, other than Contracts for the sale of advertising
for cash, or (y) enter into any new Contract, other than Contracts for
the sale of advertising time for cash, or other than non-advertising
Contracts obligating the Companies to provide payments or benefits of
less than $50,000 each over the life of the Contract and $150,000 in
the aggregate;
(j) except for stay bonuses which are taken into account
in the Working Capital Amount or the Liability Adjustment Amount, not
make or grant any general wage or salary increase or generally
materially modify the employees' terms and conditions of employment,
other than in the ordinary course of business, consistent with past
practices, and with respect to any Station Management and on-air
personnel, the Companies shall not make or grant any wage or salary
increase or modify any terms and conditions of employment without the
prior consent of Buyer;
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(k) not make (x) any change in the accounting principles,
methods, or practices followed by it or depreciation or amortization
policies or rates or (y) any change in any Tax election or settle or
compromise any Tax liability;
(l) not make any loans or make any dividends or
distributions;
(m) other than in the ordinary course of business, not
cancel or compromise any debt or claim, or waive or release any right,
of material value;
(n) not disclose to any person (other than Buyer and its
representatives) any confidential or proprietary information;
(o) use its commercially reasonable efforts to maintain
the present format of the Station and with programming consistent with
past practices;
(p) subject to the provisions of the TBA if the
Commencement Date has occurred, other than in the ordinary course of
business, not increase the number of regularly scheduled commercial
units run during the day-parts on the Station (other than changes in
the number of commercial units run during any day-part as a result of
operating difficulties that require commercial units to be broadcast
at times other than as scheduled);
(q) not make capital expenditures, or enter into any
commitment which commits the Companies to expend, in the aggregate, in
excess of $500,000;
(r) not (x) issue, grant or dispose of, or make any
agreement, arrangement or commitment obligating it to issue, grant or
dispose of, any of its capital stock or other securities, (y)
authorize or effect any reorganization, recapitalization, or split-up
of its capital stock or (z) redeem, purchase, or otherwise acquire,
directly or indirectly, any of its capital stock;
(s) not amend or otherwise change its articles of
incorporation or code of regulations or the charters or bylaws of the
WINCOM Subsidiaries; and
(t) agree to do any of the foregoing.
5.1.2 Access. The Companies and Seller shall (a) give
Buyer and Buyer's counsel, accountants, engineers and other representatives,
including environmental consultants, reasonable access during normal business
hours to all of the Companies'
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properties, books, Contracts, Trade Agreements, reports and records including
financial information and Tax Returns, and to all Real Estate, buildings and
equipment, in order that Buyer may have full opportunity to make such
investigation, including but not limited to, environmental assessments, as it
desires of the affairs of the Companies and the Station and (b) furnish Buyer
with information, and copies of all documents and agreements including but not
limited to financial and operating data and other information concerning the
financial condition, results of operations and business of the Companies and
the Station, that Buyer may reasonably request. The rights of Buyer under this
Section shall not be exercised in such a manner as to interfere unreasonably
with the business of the Station.
5.1.3 Satisfaction of Conditions; Closing. Seller and the
Companies shall use all commercially reasonable efforts to conduct the business
of the Companies and the Station in such a manner that on the Closing Date the
representations and warranties of Seller and the Companies contained in this
Agreement shall be true in all material respects as though such representations
and warranties were made on and as of such date. Furthermore, the Companies
shall cooperate with Buyer and use all commercially reasonable efforts to
satisfy promptly all conditions required hereby to be satisfied by Seller and
the Companies in order to expedite the consummation of the transactions
contemplated hereby.
5.1.4 Sale of Acquired Assets; Negotiations. Neither
Seller nor either of the Companies shall, and Seller and the Companies shall
cause their respective Affiliates, directors, officers, employees, agents,
representatives, legal counsel, and financial advisors not to, (a) solicit,
initiate, accept, consider, entertain or encourage the submission of proposals
or offers from any person or entity with respect to the transactions
contemplated by this Agreement or any similar transaction wherein such person
or entity would directly or indirectly acquire all or any portion of the assets
of either of the Companies or ownership interests in either of the Companies,
or any merger, consolidation, or business combination, directly or indirectly,
with or for either of the Companies or all or substantially all of either of
the Companies' business, or (b) participate in any negotiations regarding, or,
except as required by legal process (including pursuant to discovery or
agreements existing on the date hereof), furnish to any person or entity (other
than Buyer) to do or seek any of the foregoing. Neither Seller nor either of
the Companies shall enter into any agreement or consummate any transactions
that would interfere with the consummation of the transactions contemplated by
this Agreement. Each of Seller and the Companies shall promptly notify Buyer
if it receives any written inquiry, proposal or offer described in this Section
5.1.4 or any verbal inquiry, proposal or offer described in this Section 5.1.4
that is competitive with the terms of the transactions contemplated by this
Agreement, and such Companies or Seller, as applicable, shall inform such
inquiring person or entity of the existence of this Agreement and make such
inquiring person or entity aware of Seller's and the Companies' obligations
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under this Section 5.1.4. The notification under this Section 5.1.4 shall
include the identity of the person or entity making such inquiry, offer, or
other proposal, the terms thereof, and any other information with respect
thereto as Buyer may reasonably request. Neither Seller nor the Companies
shall provide any confidential information concerning the Companies' business
or properties or assets to any third party other than in the ordinary course of
the business of the Companies and consistent with prior practices of the
Companies. Seller and the Companies have ceased and caused to be terminated
any existing activities, discussions or negotiations with any person or entity
conducted heretofore with respect to any of the foregoing.
5.1.5 No Inconsistent Action. Neither Seller nor either of
the Companies shall take any action which is materially inconsistent with its
respective obligations under this Agreement.
5.1.6 Notification. Seller and the Companies shall
promptly notify Buyer in writing of (a) the failure of Seller or either of the
Companies or, to Seller's or the Companies' knowledge, any employee or agent of
Seller or the Companies to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with hereunder; (b) the
occurrence of any event that would entitle Buyer to terminate this Agreement
pursuant to Section 12.1; or (c) of any overt threat or actual resignation or
termination of any Station Management or over-the-air personnel at the Station
or any officers or directors of the Companies prior to the Closing.
5.1.7 FCC Reports. Except as set forth on Schedule 5.1.7,
the Companies shall file on a current basis through the Closing Date all
reports and documents required to be filed with the FCC with respect to the
Station Licenses. Copies of each such report and document filed between the
date hereof and the Closing Date shall be furnished to Buyer promptly after its
filing.
5.1.8 Updating of Information. Between the date of this
Agreement and the Closing Date, unless and until the Commencement Date has
occurred, the Companies will deliver to Buyer, on a monthly basis within 30
days of the end of each month, information relating to the operation of the
Station, including weekly sales reports and such other financial information
that may be reasonably requested.
5.1.9 Response to Certain Actions. Seller and the
Companies agree to cooperate and use their commercially reasonable efforts to
contest and resist any action, including administrative or judicial action, and
make reasonable attempts to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order, whether
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temporary, preliminary or permanent, that is in effect and that restricts,
prevents or prohibits the consummation of the transactions contemplated by this
Agreement.
5.1.10 Barter and Trade. Seller and the Companies shall use
their commercially reasonable efforts to (a) reduce the total amount of
advertising time owed for other than cash and (b) if the value of the
Companies' obligations to provide goods or services other than for cash is
greater than the value of the goods or services to be received by the Companies
other than for cash on or after the Closing Date, reduce such excess amount
prior to the Closing Date; provided, however, that in no event shall the
Purchase Price be decreased as result of such remaining excess value existing
as of the Closing. Any Trade Agreements entered into during the period between
the date hereof and the Closing Date shall be entered into only in the ordinary
course of the Companies' business and consistent with past practices.
5.1.11 Interim Financial Statements. Seller and the Companies
shall promptly deliver to Buyer copies of any monthly, quarterly or annual
financial statements relating to the Companies' operations that may be prepared
by either of them during the period from the date hereof through the Closing
Date. Such financial statements shall fairly present, in all material
respects, the financial position and results of operations of the Companies as
at the dates and for the periods indicated, and shall be prepared on a basis
consistent and in accordance with the basis upon which the financial statements
in Section 3.1.6 were prepared.
5.1.12 Estoppel Certificates. If requested by Buyer within 30
days of the date of this Agreement, the Companies and Seller shall use
commercially reasonable efforts to obtain from third parties the estoppel
certificates, nondisturbance agreements, and/or written clarifications of the
rights of Buyer thereunder, all in form and substance reasonably satisfactory
to Buyer.
5.1.13 Termination of RP Radio Agreement. Seller shall cause
any agreements, arrangements or understandings of the Companies or the WINCO
Subsidiaries with RP Radio, LLC (the "RP Radio Agreement") to be terminated and
of no further force and effect as of the Closing. Sellers agree that Buyer
(and following the Closing, Buyer and the Companies) shall have no obligations
or liabilities arising from or related to such agreements, arrangements or
understandings.
5.1.14 1997 Audited Financial Statements. Seller agrees that
within fifteen (15) business days from the date hereof, Seller shall provide to
Buyer true and complete copies of the consolidated audited balance sheet of
WINCOM and its subsidiaries and
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Affiliated Radio Stations at December 31, 1997 and the related statements of
operations and cash flow for the fiscal year then ended, with an audit report
thereon issued by Deloitte & Touche LLP, together with unaudited combining
balance sheet and statement of operations of WINCOM and its subsidiaries (the
"1997 Audited Financial Statements"). The 1997 Audited Financial Statements,
including the related notes, will be prepared in accordance with GAAP and, will
present fairly, in all material respects, the financial position, results of
operations of WINCOM and its subsidiaries as of such date and for the period
then ended (subject to the absence of notes). The 1997 Audited Financial
Statements shall be substantially identical in all respects to the Draft 1997
Financial Statements except for the debt with Chemical Bank which will be
reclassified from long-term debt to current portion of long-term debt. Upon
the delivery of the 1997 Audited Financial Statements by Seller pursuant to
this Section 5.1.14, the Companies' Financial Statements shall be deemed to
include the 1997 Audited Financial Statements for all purposes under this
Agreement.
ARTICLE 6
COVENANTS OF BUYER
6.1 Buyer covenants and agrees that, pending the Closing and
except as otherwise agreed to in writing by Seller:
6.1.1 Notification. Buyer shall promptly notify Seller in
writing of (a) any litigation, arbitration or administrative proceeding pending
or, to its knowledge, threatened against Buyer which challenges the
transactions contemplated hereby or (b) the failure of Buyer, or, to Buyer's
knowledge, any employee or agent of Buyer to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it hereunder and (c) the occurrence of any event that would
entitle Seller to terminate this Agreement pursuant to Section 12.1.
6.1.2 No Inconsistent Action. Buyer shall not take any
action which is materially inconsistent with its obligations under this
Agreement.
6.1.3 Post-Closing Access. Buyer, for a period of seven
years following the Closing Date, shall make available during normal business
hours for audit and inspection by Seller and its representatives, for any
reasonable purpose and upon reasonable notice, all records, files, documents
and correspondence of the Companies relating to the pre-Closing period. During
such seven-year period, Buyer shall at no time dispose of or destroy any such
records, files, documents and correspondence without giving 30 days prior
notice to Seller to permit Seller, at its expense, to examine, duplicate or
take possession of and title to
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such records, files, documents and correspondence. All information, records,
files, documents and correspondence made available or disclosed under this
Section 6.1.3 shall be kept confidential.
6.1.4 Satisfaction of Conditions; Closing. Buyer shall use
all commercially reasonable efforts to conduct its business in such a manner
that on the Closing Date the representations and warranties of Buyer contained
in the Agreement shall be true in all material respects as though such
representations and warranties were made on and as of such date. Buyer shall
cooperate with Seller and the Companies and use commercially reasonable efforts
to satisfy promptly all conditions required hereby to be satisfied by Buyer in
order to expedite the consummation of the transactions contemplated hereby.
6.1.5 Response to Certain Actions. Buyer agrees to
cooperate and use its commercially reasonable efforts to contest and resist any
action, including administrative or judicial action, and make reasonable
attempts to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent, that is
in effect and that restricts, prevents or prohibits the consummation of the
transactions contemplated by this Agreement and Buyer agrees to take the
actions described (under the circumstances so described) in Schedule 6.1.5.
ARTICLE 7
JOINT COVENANTS
Buyer, Seller and the Companies covenant and agree that, pending the
Closing and except as otherwise agreed to in writing, they shall act in
accordance with the following:
7.1 FCC Applications. Buyer, Seller and the Companies shall
prosecute the FCC Applications with all reasonable diligence and otherwise use
their commercially reasonable efforts to obtain the FCC Consent as
expeditiously as practicable, but none of Buyer, the Companies or Seller shall
have any obligation to satisfy complainants or the FCC by taking any steps
which would have a material adverse effect upon Buyer, the Companies or Seller
(other than Buyer's obligations under Section 6.1.5). Notwithstanding anything
to the contrary contained herein, Buyer or Seller may terminate this Agreement
upon notice to the other, if, for any reason, other than Buyer's failure to
comply with Section 6.1.5 (in which case only Seller can terminate), the FCC
Applications are designated for hearing by the FCC; provided, however, that
notice of termination must be given within 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
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pursuant to this Section 7.1, the parties shall be released and discharged from
any further obligation hereunder without being subject to a claim by Seller for
liquidated damages or for any other claims for damages.
7.2 Confidentiality. Each of Buyer, Seller and the Companies
shall keep confidential all information obtained by it with respect to the
other parties hereto in connection with this Agreement and the negotiations
preceding this Agreement, including, without limitation, the results of, and
information relating to, the Studies (as defined in Section 7.6), and will use
such information solely in connection with the transactions contemplated by
this Agreement, and if the transactions contemplated hereby are not consummated
for any reason, each shall return to each other party hereto, without retaining
a copy thereof, any schedules, documents or other written information obtained
from such other party in connection with this Agreement and the transactions
contemplated hereby except to the extent required or useful in connection with
any claim made with respect to the transactions contemplated by this Agreement
or the negotiation thereof which will be returned following settlement of the
claim. Notwithstanding the foregoing, no party shall be required to keep
confidential or return any information which (a) is known or available through
other lawful sources, not bound by a confidentiality agreement with the
disclosing party, or (b) is or becomes publicly known through no fault of the
receiving party or its agents, or (c) is required to be disclosed pursuant to
an order or request of a judicial or government authority (provided the
non-disclosing party is given reasonable prior notice such that it may seek, at
its expense, confidential treatment of the information to be disclosed), (d) is
developed by the receiving party independently of the disclosure by the
disclosing party or (e) is required to be disclosed under applicable law or
rule, as determined by counsel for the receiving party.
7.3 Cooperation. Buyer, Seller and the Companies shall cooperate
fully with one another in taking any actions, including actions 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.
7.4 Public Announcements. None of Buyer, Seller or the Companies
shall issue any press release or make any disclosure with respect to the
transactions contemplated by this Agreement without the prior written approval
of the other party, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any securities exchange or
the Nasdaq National Market or any stock exchange or Nasdaq National Market
regulations in which case Buyer, Seller or the Companies, as the case may be,
shall give notice to the other parties prior to making such disclosure.
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7.5 Hart-Scott-Rodino. Seller, Buyer and the Companies shall
submit to the United States Department of Justice and the United States Federal
Trade Commission ("FTC") not later than 15 business days after the date of this
Agreement all of the forms and information applicable to this transaction
required under the HSR Act and will use commercially reasonable efforts to
respond promptly to any request by them for additional information. Buyer, the
Companies and Seller shall use commercially reasonable efforts (including the
filing of a request for early termination) to obtain the early termination of
the waiting period under the HSR Act. Seller shall reimburse Buyer for
one-half of the filing fees for Buyer's HSR Act filing.
7.6 Condition of Real Estate. Buyer may, at its sole expense,
conduct environmental studies, title examinations, and land surveys (the
"Studies") of the Real Estate provided all information received as a result of,
or in the course of, any of the Studies will be deemed confidential (subject to
Section 7.2). Seller and the Companies agree to cooperate with any reasonable
request of Buyer for a site assessment or site review concerning any
environmental, title or survey matter, including the making available of such
personnel of the Companies as Buyer may reasonably request, so long as such
activities do not unreasonably interfere with the conduct of the Companies'
businesses. At the discretion of Buyer, Buyer may arrange, at its sole
expense, for one or more independent contractors to conduct tests of the Real
Estate, including tests of air, soil (including surface and subsurface
materials), surface water and ground water, or any equipment or facilities
located thereon, in order to identify any present or past release or threatened
release of any hazardous substances. Such tests may be done at any time, or
from time to time, upon reasonable notice and under reasonable conditions,
which do not impede the performance of such tests. If Buyer notifies Seller
within 45 days of the date of this Agreement that the Studies disclose
potential Environmental Costs and Liabilities in excess of $100,000, or the
presence of Hazardous Materials at concentrations exceeding those allowed by
Environmental Laws, evidence encroachments that materially and adversely affect
the use (for the purpose currently used) of the Real Estate, or any other
matters that materially affect the title, value or use of the Real Estate,
Seller shall promptly commence remedial action at its expense to cure the
condition giving rise to such matter and attempt to cure such condition prior
to the Closing; provided that Seller shall not be obligated to spend (but may
choose to spend) more than $100,000 in the aggregate in its attempts to cure
all such conditions. Seller shall notify Buyer within 30 days after its
receipt of Buyer's Studies if it determines that it is unable to cure such
conditions for $100,000 or less and chooses not to attempt to cure such
conditions, in which case Buyer may elect, within 30 days after Buyer's receipt
of Seller's notice that it chooses not to attempt to cure such conditions (a)
to terminate this Agreement or (b) to waive such obligations and receive a
$100,000 credit at the Closing. If this Agreement is terminated in accordance
with the immediately preceding sentence, no party shall have any liability to
the
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other with respect to such termination. Either party may extend the Closing by
not more than 30 days if either reasonably determines that any necessary
remedial action can be completed during such period.
7.7 Employee Benefits Matters.
(a) As of the Closing Date, Buyer shall permit each
employee of the Companies who has an account balance under the Seller's 401(k)
Plan (as hereinafter defined) (a "Participant") to rollover (whether by direct
or indirect rollover, as selected by such Participant), at any time, his or her
"eligible rollover distribution" (as defined under Section 402(c)(4) of the
Code) from the 401(k) plan in which the Companies are participating employers
(the "Seller's 401(k) Plan") to a retirement plan maintained by Buyer that is
qualified under Section 401(a) of the Code and contains a cash or deferred
feature under Section 401(k) of the Code ("Buyer's 401(k) Plan"). Buyer's
401(k) Plan shall not impose any waiting periods, service requirements or other
limitations that would prohibit any Participant from rolling over an eligible
rollover distribution from Seller's 401(k) Plan, at any time, into Buyer's
401(k) Plan following the Closing Date. Seller and Buyer shall cooperate with
each other (and cause the trustees of Seller's 401(k) Plan and Buyer's 401(k)
Plan to cooperate with each other) with respect to the rollover of the
distributions to the Participants.
(b) Seller shall be responsible for providing
continuation coverage pursuant to Section 601 et seq. of ERISA and Section
4980B of the Code ("COBRA Coverage") to the current and former employees of the
Companies and their beneficiaries who have elected COBRA coverage prior to the
Closing Date. Buyer shall be responsible for COBRA Coverage to the current and
former employees of the Company and their beneficiaries who experience a
"qualifying event" (as defined in Section 4980B of the Code) prior to, on, or
after the Closing Date but who have not elected COBRA Coverage prior to the
Closing Date. Buyer shall cause its health plan(s) (A) to waive any
pre-existing condition exclusions, evidence of insurability provisions and
waiting periods (except to the extent that such exclusions would have then
applied or waiting periods were not satisfied under Seller's health plan(s));
and (B) to credit or otherwise consider any monies paid or accrued under
Seller's health plan(s), by employees of the Companies prior to the Closing
Date toward any deductibles, co-pays or other maximums under Buyer's health
plan(s) during the first plan year in which the Closing Date occurs.
(c) Buyer shall cause each employee benefit plan or
compensation arrangement established, maintained or contributed to by Buyer,
the Companies or any of their Affiliates to grant full credit for all service
or employment with, or recognized by,
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Seller, the Companies and any of their Affiliates for purposes of eligibility
and vesting with respect to any employee pension benefit plan, as defined in
Section 3(2) of ERISA, and, for purposes of eligibility and determining the
amount of any benefit with respect to any vacation program and any employee
welfare benefit plan, as defined in Section 3(1) of ERISA, including, without
limitation, any sick pay plan and severance plan.
(d) For purposes of this Section 7.7, "Affiliate" shall
mean an entity required to be aggregated as a single employer under Section 414
of the Code with respect to Seller, any of the Companies or Buyer, as the
context may require.
ARTICLE 8
CONDITIONS OF CLOSING BY BUYER
The obligations of Buyer hereunder, including, without limitation, the
obligation to close the transactions contemplated herein, are, at its option,
subject to satisfaction, at or prior to the Closing Date, of all of the
following conditions, any of which may be waived by Buyer:
8.1 Representations, Warranties and Covenants. Subject to the
provisions of this Section 8.1, all representations and warranties of Seller
and the Companies made in this Agreement or in any Exhibit, Schedule or
document delivered pursuant hereto, shall be true and correct in all material
respects as of the date hereof, on and as of the Commencement Date, if
applicable, and on and as of the Closing Date as if made on and as of that
date, except for changes expressly permitted by the terms of this Agreement and
except those given as of a specified date which must only be true and correct
as of such specified date. Notwithstanding anything herein to the contrary,
(i) a breach of Section 3.1.9 resulting from Buyer's breach of Section 6.1.5
shall not be deemed a breach of Section 3.1.9 by Seller and (ii) if the
Commencement Date has occurred, the conditions to Buyer's obligation to effect
the Closing shall not be deemed to have failed to be satisfied solely as the
result of the failure of the representations and warranties of Seller and the
Companies in Sections 3.1.7, 3.1.8(a), 3.1.9, 3.1.14, 3.1.17, 3.1.20 or 3.1.21
to be true and correct in all material respects as of the Closing Date if such
failure is caused by actions taken by Buyer pursuant to the TBA.
8.2 Compliance with Agreement. All of the terms, covenants and
conditions to be complied with and performed by Seller and the Companies on or
prior to the Closing Date shall have been complied with or performed in all
material respects.
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8.3 Third Party Consents and Approvals. Seller and the Companies
shall have obtained all third-party consents and approvals, if any, required
for the transfer or continuance, as the case may be, of the Contracts
designated by an asterisk as "essential" on Schedule 3.1.17 (and contracts of a
similar nature that would have been marked as such on Schedule 3.1.17 had they
been in existence on the date of this Agreement).
8.4 Closing Certificates. Buyer shall have received a
certificate, dated as of the Closing Date, from Seller and the Companies,
executed by an executive officer of each of Seller and the Companies to the
effect of Sections 8.1 and 8.2.
8.5 Governmental Consents. (a) The FCC Consent shall have been
issued by the FCC without any conditions that would otherwise permit Buyer to
terminate this Agreement pursuant to Section 12.1(e), below, and the FCC
Consent shall have become a Final Order (as defined in Section 1.4).
(b) All applicable notification and waiting period
requirements under the HSR Act shall have been satisfied.
8.6 Adverse Proceedings. No injunction, order, decree or judgment
of any court, agency or other Governmental Entities shall have been rendered
against Seller, Buyer or either of the Companies which would render it
unlawful, as of the Closing, to effect the transactions contemplated by this
Agreement in accordance with its terms.
8.7 The Shares. Seller and the Companies shall have delivered or
caused to be delivered to Buyer, on the Closing Date, the stock certificates
evidencing the Shares, duly endorsed or accompanied by a duly executed stock
power assigning the shares to Buyer and otherwise in good form for transfer.
8.8 Indemnification and Escrow Agreement. Seller shall have
executed and delivered to Buyer the Indemnification and Escrow Agreement.
8.9 Release of Encumbrances. Evidence satisfactory to Buyer's
counsel of the payment or release of any and all Liens (other than Liens not
required to be released pursuant to the provisions of this Agreement).
8.10 Legal Opinions. Buyer shall have received an opinion of
Proskauer Rose LLP and Wiley, Rein & Fielding, each dated as of the Closing
Date, substantially in the form of Exhibits B-1 and B-2 hereto.
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8.11 Earnest Money Letter of Credit. The Earnest Money Letter of
Credit (as defined in Section 11.3) shall have been returned to Buyer for
cancellation.
8.12 No Material Adverse Change. Since the date hereof, and prior
to the Commencement Date, there shall have been no material adverse change to
the financial condition or operating results of the Companies (other than as a
result of regulatory changes affecting the radio broadcasting industry
generally or general economic conditions); provided, however, that a material
decline in ratings and/or a material decline in revenues caused by any decline
in ratings occurring at any time prior to the Closing shall not be deemed to be
a material adverse change to the financial condition or operating results of
the Companies. Following the Commencement Date, there shall have been no
material adverse change to the financial condition or operating results of the
Companies that is caused by actions taken by Seller or the Companies following
the Commencement Date.
8.13 Resignation of Directors. The directors of the Companies
shall have resigned effective as of the Closing Date.
8.14 [Intentionally Omitted].
8.15 1445 Certificate. Seller shall have executed and delivered a
certificate, in a form reasonably satisfactory to Buyer, stating that Seller is
not a foreign person within the meaning of Section 1445 of the Code.
8.16 Credit Facility. Each of the Companies and the WINCO
Subsidiaries shall be released in full from all of their obligations and
liabilities under the Amended and Restated Credit Security and Pledge Agreement
dated as of August 15, 1988 among Seller, the Companies, the WINCO
Subsidiaries, WEBE Associates, WICC Associates, Media Management Partners and
Chemical Bank and Chemical Bank, as Agent, together with any amendments and any
successor agreements thereto (the "Credit Agreement"). Buyer (and the
Companies and the WINCO Subsidiaries after the Closing Date) shall have no
obligations or liabilities arising from or related to the Credit Agreement.
8.17 RP Radio Agreement. Each of the Companies and the WINCO
Subsidiaries shall be released in full from all of their obligations and
liabilities under the RP Radio Agreement and Buyer (and the Companies and the
WINCO Subsidiaries after the Closing Date) shall have no obligations or
liabilities arising from or related to the RP Radio Agreement.
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8.18 Management Fees. The management fees of Seller accrued by
WINCO as of Closing shall have been paid in full by WINCO to Seller and no
further obligation of WINCO to Seller with respect to such management fees
shall be outstanding.
ARTICLE 9
CONDITIONS OF CLOSING BY SELLER
The obligations of Seller hereunder including, without limitation, the
obligation to close the transactions contemplated herein, are, at their option,
subject to the satisfaction, at or prior to the Closing Date, of all of the
following conditions any of which may be waived by Seller:
9.1 Representations, Warranties and Covenants. All
representations and warranties of Buyer made in this Agreement or in any
Exhibit, Schedule or document delivered pursuant hereto, shall be true and
correct in all material respects as of the date hereof and on and as of the
Closing Date as if made on and as of that date, except for changes expressly
permitted by the terms of this Agreement and except those given as of a
specified date which must only be true and correct as of such specified date.
9.2 Compliance with Agreement. All the terms, covenants, and
conditions to be complied with and performed by Buyer on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
9.3 Certifications, etc. Seller shall have received a
certificate, dated as of the Closing Date, from Buyer, executed by an executive
officer of Buyer to the effect of Sections 9.1 and 9.2.
9.4 Governmental Approval. (a) The FCC Consent shall have been
issued by the FCC and shall have become a Final Order (as defined in Section
4.1).
(b) All applicable notification and waiting period
requirements under the HSR Act shall have been satisfied.
9.5 Adverse Proceedings. No injunction, order, decree or judgment
of any court, agency or other Governmental Entities shall have been rendered
against Buyer, Seller or either of the Companies which would render it
unlawful, as of the Closing, to effect the transactions contemplated by this
Agreement in accordance with its terms.
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9.6 Opinions. Buyer shall have delivered to Seller an opinion of
Weil, Gotshal & Manges LLP, dated as of the Closing Date, in the form of
Exhibit C hereto.
9.7 Indemnification and Escrow Agreement. Buyer shall have
executed and delivered to Seller the Indemnification and Escrow Agreement.
ARTICLE 10
TRANSFER TAXES; FEES AND EXPENSES
10.1 Expenses. Except as set forth in Sections 10.2 and, 10.3
below, each party hereto shall be solely responsible for all costs and expense
incurred by it in connection with the negotiation, preparation and performance
of and compliance with the terms of this Agreement; provided that all such
costs and expenses of the Companies shall be borne by the Seller.
10.2 Sales and Transfer Taxes. All sales, excise, use, transfer,
deed, duties, stamp, notary public and other similar taxes, duties and transfer
fees applicable to the transactions contemplated by this Agreement, including
fees to record assignments, shall be borne equally by Seller and Buyer. Buyer
and Seller agree to cooperate with each other and to file all necessary
documentation (including but not limited to, all Tax Returns) with respect to
all amounts in a timely manner.
10.3 Governmental Filing or Grant Fees. Any filing or grant fees
imposed by any governmental authority the consent of or filing with which is
required for the consummation of the transactions contemplated hereby,
including but not limited to, the FCC, the FTC, and the Department of Justice
shall be borne equally by Buyer and Seller.
ARTICLE 11
LIQUIDATED DAMAGES, SPECIFIC PERFORMANCE, LETTER OF CREDIT
11.1 Liquidated Damages. If this Agreement is terminated by Seller
pursuant to Sections 12.1(b)(ii) or 12.1(g) the parties agree and acknowledge
that Seller will suffer damages that are not practicable to ascertain.
Accordingly, in such event, Seller shall be entitled to the sum of $5,125,000
as liquidated damages (and not as a penalty), payable solely and exclusively by
drawing upon the Earnest Money Letter of Credit and through the delivery to
Seller, of the sum of $2,562,500 via wire transfer of immediately available
funds. The parties agree that the foregoing liquidated damages are reasonable
considering all the
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circumstances existing as of the date hereof and constitute the parties' good
faith estimate of the actual damages reasonably expected to result from the
termination of this Agreement pursuant to Sections 12.1(b)(ii) or 12.1(g). In
such event, Buyer shall immediately instruct the Earnest Money Escrow Agent (as
hereinafter defined) to deliver the Earnest Money Letter of Credit to Seller to
permit it to draw upon the Earnest Money Letter of Credit and shall deliver to
Seller, via wire transfer of immediately available funds, the sum of
$2,562,500. Seller agrees that, to the fullest extent permitted by law, the
right to draw upon the Earnest Money Letter of Credit and to receive the
additional sum of $2,562,500 from Buyer as provided in this Section 11.1 shall
be its sole and exclusive remedy with respect to any damages whatsoever that
Seller may suffer or allege to suffer as a result of a termination pursuant to
Sections 12.1(b)(ii) or 12.1(g). Except for a termination pursuant to Sections
12.1(b)(ii) or 12.1(g) (for which the sole recourse of Seller shall be as
provided in this Section 11.1) or pursuant to Section 12.1(a) or 7.6 (for which
no party shall have any liability to the other), the termination of this
Agreement shall not relieve the parties for any liability or obligation
relating to their breaches of this Agreement occurring prior to such
termination.
11.2 Specific Performance. In addition to any other remedies which
Buyer may have at law or in equity, Seller hereby acknowledges that the Shares
are unique, and that the harm to Buyer resulting from a breach by Seller of its
obligations to sell the Shares to Buyer cannot be adequately compensated by
damages. Accordingly, Seller agrees that Buyer shall have the right to have
this Agreement specifically performed by Seller, provided that Buyer is not in
material breach of this Agreement, and hereby agrees, in such event, not to
assert any objections to the imposition of the equitable remedy of specific
performance by any court of competent jurisdiction.
11.3 Letter of Credit.
11.3.1 Concurrently with the execution of this Agreement,
Buyer shall deposit an original, irrevocable letter of credit, which shall be
in a form reasonably satisfactory to Buyer and Seller (the "Earnest Money
Letter of Credit"), issued by The Toronto-Dominion Bank for the sum of
$2,562,500 with Key Trust Company of Ohio, N.A. (the "Earnest Money Escrow
Agent") to be held in escrow in accordance with the Earnest Money Escrow
Agreement substantially in the form of Exhibit D hereto.
11.3.2 The Earnest Money Letter of Credit shall be held by
the Earnest Money Escrow Agent in accordance with the terms of the Earnest
Money Escrow Agreement. Subject to satisfaction of the conditions to the
Seller's obligations set forth in
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Article 9, at the Closing, Seller shall instruct the Earnest Money Escrow Agent
to release and return the Earnest Money Letter of Credit to Buyer for
cancellation.
11.3.3 If this Agreement is terminated as provided in
Sections 12.1(b)(ii) or 12.1(g), Buyer shall instruct the Earnest Money Escrow
Agent to release the Earnest Money Letter of Credit to Seller, all as provided
in Section 11.1. In all other events, Seller shall join in instructions to the
Earnest Money Escrow Agent to return the Earnest Money Letter of Credit to
Buyer.
ARTICLE 12
TERMINATION RIGHTS
12.1 Termination. This Agreement may be terminated at any time
prior to Closing as follows:
(a) by the mutual consent of Buyer and Seller;
(b) by written notice of (i) Buyer to Seller if Seller or
either of the Companies breaches in any material respect any of their
representations or warranties or defaults in any material respect in
the observance or in the due and timely performance of any of their
covenants or agreements herein contained and such breach or default
shall not be cured within thirty (30) days of the date of notice of
breach or default served by Buyer or (ii) Seller or either of the
Companies to the Buyer if Buyer breaches in any material respect any
of its representations or warranties or default in any material
respect in the observance or in the due and timely performance of any
of its covenants or agreements herein contained and such breach or
default shall not be cured within thirty (30) days of the notice of
breach or default served by Seller or the Companies;
(c) by Buyer, Seller or the Companies by written notice
to the other, if a court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree or ruling or
taken any other action (which order, decree or ruling the parties
hereto shall use their best efforts to lift), in each case permanently
restraining, permanently enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree,
ruling or other action shall have become final and nonappealable;
provided that Buyer shall not have the right to terminate this
Agreement pursuant to Section 12.1(c) unless Buyer has satisfied the
covenants contained in Section 6.1.5 hereof;
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(d) by the party whose qualifications are not at issue,
if, for any reason, the FCC denies or dismisses any of the FCC
Applications and the time for reconsideration or court review under
the Communications Act with respect to such denial or dismissal has
expired and there is not pending with respect thereto a timely filed
petition for reconsideration or request for review;
(e) by written notice of Buyer to Seller if the FCC
Consent contains a condition on Buyer that (i) is unrelated to Buyer's
qualifications, (ii) could reasonably be expected to have a materially
adverse impact on the financial condition or business operations of
the Station, and (iii) the time for reconsideration or court review
under the Communications Act with respect to such condition(s) has
expired without the filing with respect thereto of a timely petition
for reconsideration or request for review;
(f) by written notice of Buyer to Seller, or by Seller to
the Buyer, if the Closing shall not have been consummated on or before
June 1, 1999, subject to extensions as provided in Sections 7.6 and
13.1; or
(g) by written notice of Seller to Buyer, if by May 31,
1999 all of the conditions of Closing by Buyer identified in Article 8
have been satisfied other than the expiration of the applicable
waiting period requirements under the HSR Act.
Notwithstanding the foregoing, no party hereto may effect a termination hereof
if such party is in material default or breach of this Agreement.
ARTICLE 13
RISK OF LOSS
13.1 Risk of Loss. (a) The risk of loss or damage to the assets of
the Companies shall be upon Seller at all times prior to the Closing Date. In
the event of loss or damage, Seller shall promptly notify Buyer thereof (the
"Seller's Risk of Loss Notice") and if the lost or damaged assets of the
Companies are capable of being replaced or repaired for an aggregate amount
less than $100,000, then Seller shall, at its sole cost and expense, replace or
repair such assets of the Companies prior to the Closing Date or deliver to
Buyer at the Closing an amount in cash equal to the cost of replacement or
repair of such assets of the Companies, as mutually agreed in good faith by
Buyer and Seller. Notwithstanding the foregoing, if the amount required to
replace or repair such Station Assets exceeds $100,000, Seller may elect not to
replace or repair such assets of the Companies (which election must
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be set forth in the Seller's Risk of Loss Notice), provided, however, that in
such event Buyer, at its option, may elect, within 30 days after its receipt of
the Seller's Risk of Loss Notice, to terminate this Agreement without either
party being subject to a claim by the other for liquidated damages or any other
claims/or damages, or waive any default or breach with respect to the loss or
damage and receive a $100,000 credit at Closing. Either party may extend the
Closing Date by up to 30 days in order to allow Seller and the Companies to
complete the repair or replacement.
(b) Each of the Companies shall use its commercially
reasonable efforts to avoid the Station being off the air for three or more
consecutive days or five or more days in any 30 day period. The Companies
shall give prompt written notice to Buyer if either of the following (a
"Specified Event") shall occur: (i) the regular broadcast transmissions of the
Station in the normal and usual manner are interrupted or discontinued for more
than thirty (30) minutes; or (ii) the Station is operated at less than its
licensed antenna height above average terrain or at less than ninety percent
(90%) of its licensed effective radiated power. If any Specified Event
persists for more than seventy- two (72) consecutive hours, or five or more
days, whether or not consecutive, during any period of thirty (30) consecutive
days, then Buyer may, at its option: (i) terminate this Agreement by written
notice given to Seller and the Companies not more than ten (10) days after the
expiration of such thirty (30) day period (without either party being subject
to a claim by the other for liquidated damages or any other claims for
damages); or (ii) proceed in the manner set forth in Section 13.1(a) above. In
the event of termination of this Agreement by Buyer pursuant to this Section
13.1, the parties shall be released and discharged from any further obligation
hereunder (without being subject to a claim by Seller or the Companies for
liquidated damages or any other claims for damages). With respect to Acts of
God which may adversely affect Station operations, Seller shall use its
commercially reasonable efforts to reinstate Station operations within 30 days
and shall have the Station operating at not less than seventy percent (70%) of
maximum authorized effective radiated power by the Closing Date.
(c) Resolution of Disagreements. If the parties are
unable to agree upon the extent of any loss or damage, the cost to repair,
replace or restore any lost or damaged property, the adequacy of any repair,
replacement, or restoration of any lost or damaged property, or any other
matter arising under this Section 13.1, the disagreement shall be referred to a
qualified consulting communications engineer mutually acceptable to Seller,
Buyer and the Companies who is a member of the Association of Federal
Communications Consulting Engineers, whose decision shall be final, binding
upon and non-appealable by the parties, and whose fees and expenses shall be
paid one-half by Seller and one-half by Buyer.
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ARTICLE 14
MISCELLANEOUS PROVISIONS
14.1 Survival of Representations and Warranties. Except as to
representations and warranties contained in Section 3.1.1 which shall survive
the Closing indefinitely and Sections 3.1.14, 3.1.15 and 3.1.18 which shall
survive the Closing for a period of two years after the Closing Date (the
"Excepted Representations"), all representations and warranties made by Seller,
Buyer and the Companies in this Agreement, or pursuant hereto, shall survive
the consummation of the transactions contemplated in this Agreement for a
period of one year after the Closing Date, regardless of any investigation at
any time made by or on behalf of Buyer or Seller, and shall not be deemed
merged in any document or instrument executed or delivered at the Closing;
provided, however, that in the event the Closing occurs on or prior to January
4, 1999, all representations and warranties surviving for one year after the
Closing Date shall instead survive until December 31, 1999. Buyer's sole
remedies for any breach of representation or warranty (other than Section
3.1.1) or pre-Closing breach of a covenant or agreement shall be those set
forth in the Indemnification and Escrow Agreement.
14.2 Certain Interpretive Matters and Definitions. Unless the
context otherwise requires, (a) all references to Sections, Articles or
Schedules are to Sections, Articles or Schedules of or to this Agreement, (b)
each term defined in this Agreement has the meaning assigned to it, (c) each
accounting term not otherwise defined in this Agreement has the meaning
assigned to it in accordance with generally accepted accounting principles as
in effect on the date hereof, (d) "or" is disjunctive but not necessarily
exclusive, and (e) words in the singular include the plural and vice versa, and
(f) except with respect to Sections 3.1.15 and 7.7, the term "Affiliate" has
the meaning given it in Rule 12b-2 of Regulation 12B under the Securities
Exchange Act of 1934, as amended. All references to "$" or dollar amounts will
be to lawful currency of the United States of America.
14.3 Further Assurances. At and after the Closing, Seller shall
from time to time, at the request of and without further cost or expense to
Buyer, execute and deliver such other instruments of assignment, conveyance and
transfer and take such other actions as may reasonably be requested in order to
more effectively consummate the transactions contemplated hereby.
14.4 Financial Statements. At all times after the date hereof,
Seller and the Companies shall, and shall cause their representatives
(including their independent public accountants) to, cooperate in all
reasonable respects with the efforts of Buyer and their independent auditors to
prepare such audited and interim unaudited financial statements of the
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Companies as Buyer may reasonably determine are necessary in connection with
any filing required to be made by it or any of its Affiliates under the
Exchange Act of 1934, as amended (the "Exchange Act"), or the Securities Act.
Seller and the Companies shall execute and deliver to Buyer's independent
accountants such customary management representation letters as they may
require as a condition to their ability to sign an unqualified report upon the
audited financial statements of the Companies for the periods for which such
financial statements are required under the Exchange Act or the Securities Act.
Seller and the Companies shall cause their independent public accountants to
make available to Buyer and its representatives all of their work papers
related to the financial statements or Tax Returns of Seller (to the extent
they relate to the Station) and the Companies and to provide Buyer's
independent public accountants with full access to those personnel who
previously have been involved in the audit or review of Seller's and the
Companies' financial statements or Tax Returns. Any reasonable out-of-pocket
costs incurred by Seller in connection with Seller's obligations under this
Section 14.4 shall be promptly reimbursed by Buyer upon Buyer's receipt of
reasonably detailed information regarding such costs.
14.5 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, whether by operation of law or otherwise; provided, however, that
without releasing Buyer from any of its obligations or liabilities hereunder
(a) nothing in this Agreement shall limit Buyer's ability to sell or transfer
any or all of its respective assets (whether by sale of stock or assets, or by
merger, consolidation or otherwise) without the consent of Seller or the
Companies, (b) nothing in this Agreement shall limit Buyer's ability to assign
the Shares (including the right to acquire the Shares at the Closing) to any
Affiliate of Buyer without the consent of Seller or the Companies, and (c)
nothing in this Agreement shall limit Buyer's ability to make a collateral
assignment of its rights under this Agreement to any institutional lender that
provides funds to Buyer without the consent of Seller or the Companies. Seller
and the Companies shall execute an acknowledgment of such assignment(s) and
collateral assignments in such forms as Buyer or its institutional lenders may
from time to time reasonably request; provided, however, that unless written
notice is given to Seller and the Companies that any such collateral assignment
has been foreclosed upon, Seller and the Companies shall be entitled to deal
exclusively with Buyer as to any matters arising under this Agreement or any of
the other agreements delivered pursuant hereto. In the event of such an
assignment, the provisions of this Agreement shall inure to the benefit of and
be binding on Buyer's successors and assigns.
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14.6 Amendments. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
14.7 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
14.8 Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the State of New York without giving
effect to the choice of law provisions thereof.
14.9 Notices. Any notice, demand or request required or permitted
to be given under the provisions of this Agreement shall be in writing and
shall be deemed to have been duly delivered and received when electronically
confirmed if sent by facsimile; on the date of personal delivery; on the third
day after deposit in the U.S. mail if mailed by registered or certified mail,
postage prepaid and return receipt requested; on the day after delivery to a
nationally recognized overnight courier service if sent by an overnight
delivery service for next morning delivery and shall be addressed to the
following addresses (or at such other address which party shall specify to the
other party in accordance herewith):
(a) In the case of Seller, to:
ML Media Partners L.P.
350 Park Avenue
New York, New York 10022
Attention: Elizabeth McNey-Yates
Telecopy: (212) 980-8374
with a copy to:
Proskauer Rose, LLP
1585 Broadway, 22nd Floor
New York, New York 10036-8299
Attention: Lawrence H. Budish
Telecopy: (212) 969-2900
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(b) In the case of Buyer:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention: Jeffrey A. Marcus
Telecopy: (972) 879-3671
With copies to:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention: Eric C. Neuman
Telecopy: (972) 879-3671
and
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201
Attention: Michael A. Saslaw
Telecopy: (214) 746-7777
14.10 Schedules. The schedules and exhibits attached to this
Agreement and the other documents delivered pursuant hereto are hereby made a
part of this Agreement as if set forth in full herein.
14.11 Entire Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to its subject matter and
supersedes all negotiations, prior discussions, agreements, letters of intent,
and understandings, written or oral, relating to the subject matter of this
Agreement.
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14.12 Severability. If any provision of this Agreement is held to
be unenforceable, invalid, or void to any extent for any reason, that provision
shall remain in force and effect to the maximum extent allowable, and the
enforceability and validity of the remaining provisions of this Agreement shall
not be affected thereby.
14.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute but one and the same instrument.
14.14 No Third-Party Rights. Nothing in this Agreement, express or
implied, shall be construed to confer upon any person, other than the parties
hereto, their successors and permitted assigns, any legal or equitable rights,
remedies, claims, obligations or liabilities under or by reason of this
Agreement (other than as provided for in the Indemnification and Escrow
Agreement).
14.15 Arbitration. All disputes which cannot be resolved by
agreement of the parties shall be arbitrated in Washington, D.C. in accordance
with the rules of the American Arbitration Association before a single
arbitrator who shall be jointly selected by Seller and Buyer, or if Seller and
Buyer cannot agree on the selection of such arbitrator, such arbitrator shall
be selected by the head of the Washington, D.C. Office of the American
Arbitration Association. The costs of such arbitrator shall be paid by Seller
and Buyer in such proportion as the arbitrator deems equitable based on the
relative merits of the positions of the parties.
[The remainder of this page is intentionally left blank]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed and delivered as of the first above written.
SELLER:
ML MEDIA PARTNERS, L.P.
By: Media Management Partners, its general partner
By: RP Media Management, its general partner
By: IMP Media Management, Inc.
By: /s/ Elizabeth McNey-Yates
-----------------------------------
Elizabeth McNey-Yates
Vice President
THE COMPANIES:
WINCOM BROADCASTING CORP.
By: /s/ Elizabeth McNey-Yates
--------------------------------
Name: Elizabeth McNey-Yates
-------------------------------
Title: Vice President
------------------------------
WIN COMMUNICATIONS, INC.
By: /s/ Elizabeth McNey-Yates
--------------------------------
Name: Elizabeth McNey-Yates
-------------------------------
Title: Vice President
------------------------------
<PAGE> 59
BUYER:
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By: /s/ Eric C. Neuman
------------------------------
Eric C. Neuman
Senior Vice President
<PAGE> 60
EXHIBIT A - WINCOM ACQUISITION
INDEMNIFICATION AND ESCROW AGREEMENT
THIS INDEMNIFICATION AND ESCROW AGREEMENT (this "Agreement")
is made and entered into as of this ____ day of ______________, _____, by and
among Chancellor Media Corporation of Los Angeles, a Delaware corporation
("Buyer"), ML Media Partners L.P., a Delaware limited partnership ("Seller"),
and Key Trust Company of Ohio, N.A., as escrow agent ("Agent").
RECITALS
A. Pursuant to that certain Stock Purchase Agreement, dated as of
August 11, 1998, by and among Buyer, WIN Communications, Inc. ("WINCO"), WINCOM
Broadcasting Corporation ("WINCOM" and, together with WINCO, the "Companies")
and Seller (the "Stock Purchase Agreement"), Buyer has agreed to acquire from
Seller, and Seller has agreed to sell to Buyer, all of the Shares (as defined
in the Stock Purchase Agreement).
B. It is a condition precedent to the closing of the transactions
contemplated by the Stock Purchase Agreement (the "Closing"), that Buyer,
Seller and Agent execute and deliver this Agreement.
C. Buyer and WINCO have entered into a Time Brokerage Agreement
(the "TBA"), pursuant to which, following the expiration or termination of the
applicable waiting period under the HSR Act, Buyer will purchase substantially
all of the broadcast time of radio station WQAL 104.1 FM (the "Station"),
subject to the rules and policies of the Federal Communications Commission.
D. Unless otherwise defined herein, capitalized terms used herein
shall have the meanings assigned to them in the Stock Purchase Agreement.
AGREEMENTS
In consideration of the recitals and of the respective
agreements and covenants contained herein, and intending to be legally bound
hereby, the parties agree as follows:
<PAGE> 61
ARTICLE I
Section 1.1 Funds. (a) At the Closing, and only if the Closing
occurs, Buyer shall place in an escrow account with Agent (the "Account") the
sum of $2,500,000 out of the Purchase Price paid pursuant to Section 1.2 of the
Stock Purchase Agreement (the "Funds").
(b) The Funds shall be held by Agent in the Account for
the benefit of Buyer and Seller as provided in this Agreement. In no event
shall Agent disburse or invest the Funds except in accordance with this
Agreement.
Section 1.2 Acceptance of Appointment as Agent. Agent, by signing
this Agreement, accepts the appointment as Agent and agrees to hold and deliver
the Funds and make disbursements from the Account in accordance with the terms
of this Agreement.
Section 1.3 Distribution of Funds to Buyer Indemnitees. Agent shall
disburse to Buyer (for its own account or for the account of any Buyer
Indemnitee, as defined in Section 2.1) such portion of the Funds as may be
necessary to pay the Damages (as defined in Section 2.1) for which a Buyer
Indemnitee is entitled to reimbursement under Section 2.1, 2.2, 2.3 or 2.4.
Payment shall be made not more than three (3) business days after (i) the
delivery to Agent of written instructions signed by Buyer and Seller,
specifying an amount to be paid to a Buyer Indemnitee, or (ii) the delivery to
Agent and Seller of a copy of a Final Determination (as defined below)
establishing a Buyer Indemnitee's right to reimbursement under this Agreement
with respect to such Damages. A "Final Determination" shall mean a judgment of
a court of competent jurisdiction having the authority to determine the amount
of, and liability with respect to, the determined item, which judgment is not
subject to appeal, reconsideration or review. Agent, at its option, shall be
entitled to seek and, if received, rely conclusively upon an opinion of legal
counsel to the effect that the judgment delivered to Agent pursuant to this
Section 1.3 (or pursuant to Section 1.6(b)) is a Final Determination.
Section 1.4 Investment of Funds. (a) Pending disbursement of the
Funds, Agent shall invest the Funds in Permitted Investments (as defined
below). For purposes of this Agreement, "Permitted Investments" shall mean
direct obligations of the U.S. government having maturities of 180 days or
less, money market funds that invest solely in direct obligations of the U.S.
government, including, without limitation, the Victory U.S. Obligation Fund,
and such other investments as may be specified from time to time by joint
written agreement between Buyer and Seller. As and when any payment is to be
made from the Funds or the Funds are to be otherwise disbursed under this
Agreement, Agent shall cause a sufficient portion of the Permitted Investments
to be converted into cash. Agent shall select the investments or types of
investments to be so converted. Neither Buyer nor Seller shall be liable for
any loss of principal or income due to the choice of Permitted Investments
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in which the Funds are invested or the choice of Permitted Investments
converted into cash pursuant to this paragraph (a).
(b) For Tax purposes, the Funds shall be property of
Seller and all interest, dividends and other income earned on the Funds
(collectively, the "Earnings") shall be the income of Seller and be distributed
to Seller following the Expiration Date, as hereinafter defined. Buyer and
Seller shall file Tax Returns consistent with such treatment.
Section 1.5 No Distribution of Expenses. Except as provided in
Sections 2.1, 2.2, 2.3 and 2.4 of this Agreement, neither Buyer nor Seller
shall be entitled to reimbursement out of the Funds or from any alternative
recovery for any costs and expenses incurred by them in connection with
exercising their rights or performing their duties under this Agreement.
Section 1.6 Segregation of the Funds. (a) Notwithstanding any other
provision of this Agreement to the contrary, Agent shall segregate from the
Account and transfer into a separate sub-account (the "Pending Claim Account")
maintained by Agent for the benefit of Buyer and Seller the portion of the
Funds that may be necessary to satisfy in full all Pending Claims (as defined
below) and shall hold such portion in accordance with this Section 1.6;
provided, however, that Agent shall not so segregate from the Account and
transfer to the Pending Claim Account the Funds that may be necessary to
satisfy Pending Claims hereunder until such time as the aggregate amount of
Damages asserted by Buyer and any Buyer Indemnitees hereunder, taken as a
whole, exceeds the Indemnification Basket (as defined in Section 3.1(a)).
"Pending Claims" shall mean unresolved claims for indemnification under Section
2.1, 2.2, 2.3 or 2.4 that are the subject of Claim Notices (as defined in
Section 2.7).
(b) Any portion of the Funds segregated under Section
1.6(a) shall continue to be segregated by Agent until released thereafter to
Seller in accordance with Section 1.7 or until Agent is directed to release
such Account by (i) written instructions signed by Buyer, that are agreed to in
writing by Seller, or (ii) a copy of a Final Determination establishing a Buyer
Indemnitee's right to receive such Funds as reimbursement for indemnification
claims under Article 2, or establishing Seller's right to receive such Funds.
Section 1.7 Distribution of Funds to Seller. (a) Within three
business days after the first anniversary of the Closing, Agent shall
distribute to Seller from the Funds an amount equal to (i) $1,500,000 less (ii)
the sum of (x) the total Funds previously paid to any Buyer Indemnitees under
Section 1.3 plus (y) the total funds that are then being segregated with
respect to Pending Claims under Section 1.6(a). Any amounts not so released
shall continue to be held by Agent until either released thereafter as provided
in Section 1.6(b) or released thereafter to Seller as provided in Section
1.7(b).
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(b) Within three business days after the Expiration Date
(as defined below), Agent shall distribute to Seller from the Account an amount
equal to the Earnings and the then remaining amount of Funds less the total
amount of Funds that are then being segregated with respect to Pending Claims
under Section 1.6. "Expiration Date" shall mean two years after the Closing
Date. Any amounts segregated as of the Expiration Date with respect to Pending
Claims shall be released thereafter as provided in Section 1.6(b).
ARTICLE II
INDEMNIFICATION CLAIMS
Section 2.1 Indemnification by Seller. From and after the Closing,
but subject to the conditions and limitations set forth in this Agreement,
Buyer and its respective successors and assigns (and, following the Closing,
the Companies) and their officers, directors, stockholders, employees and
agents (and each person who is an officer, director, stockholder, employee or
agent of the Companies following the Closing) (collectively, the "Buyer
Indemnitees") shall be entitled to reimbursement from Seller for any and all
losses, costs, damages, claims, fines, penalties, expenses (including, without
limitation, reasonable attorneys' fees and expenses), amounts paid in
settlement, court costs, out-of-pocket costs, costs of investigation, and
reasonable costs of litigation (including, without limitation, reasonable fees
and expenses of accountants, investment bankers and other experts)
(collectively, "Damages") actually incurred or suffered by a Buyer Indemnitee
or to which any of the Buyer Indemnitees may be subjected, to the extent
resulting from, arising out of, based on or relating to (a) any inaccuracy in
any representation or warranty of Seller or the Companies contained in the
Stock Purchase Agreement or in any schedule, instrument, exhibit, or
certificate delivered pursuant thereto (a "Related Document"), or (b) any
breach of any covenant or agreement of the Seller or the Companies contained in
the Stock Purchase Agreement (provided, in the case of any such breach by the
Companies, that such breach occurred at or prior to the Closing).
Section 2.2 Tax Indemnification. Without limiting the generality of
any of the foregoing, Seller shall indemnify and hold harmless Buyer
Indemnities from and against any and all Damages resulting from, arising out
of, based on or relating to, the Companies' liabilities for (i) all Taxes
attributable to taxable periods ending on or before the Closing Date or which
includes any or all days up to and including the Closing Date (collectively,
the "Pre-Closing Date Tax Liability") and (ii) any and all Taxes of any member
of a consolidated, combined or unitary group of which either of the Companies
or the WINCO Subsidiaries (or any predecessor) is or was a member on or prior
to the Closing Date, by reason of the liability of either of the Companies or
the WINCO Subsidiaries pursuant to Treasury Regulation Section 1.1502-6(a) or
any analogous or similar state, local or foreign
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law or regulation; if and to the extent that such liability exceeds Taxes
attributable to taxable periods ending on or before the Closing Date taken into
account in determining Liability Adjustment Amount or Working Capital Amount.
Damages shall not include any reduction in net operating loss carryforwards of
WINCOM and its subsidiaries.
Section 2.3 ERISA Indemnification. Without limiting the generality
of any of the foregoing, Seller shall indemnify and hold harmless Buyer
Indemnities, from and against any and all Damages resulting from or relating to
any claims of governmental entities, employees or other third parties relating
to or arising out of the following relating to any period prior to the Closing:
(i) any Employee Benefit Plan, maintained by, contributed
to, or obligated to contribute to by Seller, the Companies, or any
ERISA Affiliate, with respect to any (A) liability to the PBGC under
Title IV of ERISA; (B) liability relating to a multiemployer plan; (C)
liability with respect to non-compliance with the notice and benefit
continuation requirements of COBRA; (D) liability with respect to any
non-compliance with ERISA or any other applicable laws; or (E)
liability with respect to any suit, proceeding or claim which is
brought against Buyer, any Employee Benefit Plan or any fiduciary or
former fiduciary of any such Employee Benefit Plan;
(ii) the employment or termination of employment,
including a constructive termination, by Seller, the Companies or any
of their Affiliates of any individual (including, but not limited to,
any employee of Seller, the Companies or any of their Affiliates)
attributable to any actions or inactions occurring prior to the
Closing;
(iii) any claims by any employee of Seller, the Companies
or any of their Affiliates for workers' compensation and/or related
medical benefits incurred after the Closing which relate to any injury
or illness during their employment by Seller, the Companies or any of
the Affiliates;
(iv) WARN or any other statutory or common law or civil
law notice, severance pay, termination pay in lieu thereof or damages
arising as a result of the termination or dismissal (including
constructive termination or dismissal), by the Companies or any of its
Affiliates of any or all Employees of the Companies prior to the
Closing; and
(v) any claim of discrimination against the Companies or
any of its Affiliates in hiring, management or termination or
dismissal of any individual or group of individuals by the Companies
or any of its Affiliates (including constructive termination or
dismissal) which occurred or is alleged to have occurred during their
employment by Seller, the Companies or any of their Affiliates.
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Notwithstanding the foregoing, Seller shall have no liability with respect to
the termination of any employee during the term of the TBA at the request of
Buyer.
Section 2.4 Additional Indemnification by Seller. Without limiting
the generality of any of the foregoing, Seller shall indemnify and hold
harmless the Buyer Indemnities from and against any and all Damages resulting
from, arising out of, based on or relating to:
(i) any actual or asserted obligations or liability of
the Companies or any subsidiary (whether for indemnification or
otherwise) under any agreement entered into prior to the Closing
related to the sale of any securities, assets, properties, operations
or businesses of the Companies or any subsidiary;
(ii) any civil, criminal or administrative action, suit,
claim, hearing, investigation or proceeding (including but not limited
to any counterclaims or crossclaims), relating to the Companies or any
subsidiary arising out of or based upon or with respect to any
condition existing or action or event occurring prior to the Closing
Date, whether or not pending or threatened on the date hereof or at
the Closing, and whether brought, made or instigated by any
Governmental Entity or any private person (other than any of the
foregoing caused by actions taken by Buyer pursuant to the TBA); or
(iii) any of the WINCO Subsidiaries.
Section 2.5 Indemnification by Buyer. From and after the
Closing, but subject to the conditions and limitations set forth in this
Agreement, Seller and its respective successors and assigns, and its officers,
directors, stockholders, employees and agents (collectively, the "Seller
Indemnitees") shall be entitled to reimbursement from the Buyer for any and all
Damages actually incurred or suffered by a Seller Indemnitee, or to which any
of the Seller Indemnitees may be subjected, to the extent resulting from,
arising out of, based on or relating to (a) any inaccuracy in any
representation or warranty of Buyer contained in the Stock Purchase Agreement
or in any Related Document, (b) any breach of any covenant or agreement of the
Buyer contained in the Stock Purchase Agreement or (c) the operations of the
businesses of the Companies or the ownership of the Companies' assets following
the Closing Date (except to the extent any such Damages relating to such
operations or ownership following the Closing Date arise from any matter with
respect to which any Buyer Indemnitee is entitled to indemnification under
Section 2.1, 2.2, 2.3 and/or 2.4).
Section 2.6 Procedures Regarding Third Party Claims. (a) In the
event that any person entitled to indemnification under this Article 2 (the
"Indemnified Party") becomes aware of any matter with respect to which it
believes it is entitled to indemnification under this Article 2 from Buyer or
Seller, as applicable (the "Indemnifying Party"), and such
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matter involves (i) any claim made against the Indemnified Party by any party
other than a party to the Stock Purchase Agreement or (ii) the commencement of
any action, suit, investigation, arbitration or similar proceeding against the
Indemnified Party by any party other than a party to the Stock Purchase
Agreement (a "Third Party Claim"), the Indemnified Party shall notify the
Indemnifying Party in writing with reasonable promptness of such Third Party
Claim, specifying, to the extent known, the nature, circumstances and the
amount of such Third Party Claim (a "Third Party Claim Notice") accompanied by
all correspondence, documents, pleadings or other writings received with
respect to such Third Party Claim. Failure to give such reasonably prompt
notice shall not relieve the Indemnifying Party of its obligations under this
Article 2, except to the extent the Indemnifying Party is materially prejudiced
thereby. The Indemnifying Party shall have ten (10) business days from its
receipt of a Third Party Claim Notice (the "Third Party Claim Notice Period")
to notify the Indemnified Party (and if Seller is the Indemnifying Party and
any Funds continue to be held by Agent, Agent as well) (i) whether the
Indemnifying Party disputes the Indemnified Party's right of indemnification,
and (ii) if the Indemnifying Party does not dispute such right of
indemnification, whether or not it desires to defend the Indemnified Party
against such Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnified
Party (and if Seller is the Indemnifying Party and any Funds continue to be
held by Agent, Agent as well) in writing within the Third Party Claim Notice
Period that (i) the Indemnifying Party does not dispute the Indemnified Party's
right of indemnification and (ii) the Indemnifying Party desires to defend
against such Third Party Claim, then the Indemnifying Party shall have the
right to assume and control, at its sole cost, expense and liability, the
defense of such Third Party Claim by appropriate proceedings with counsel
reasonably acceptable to the Indemnified Party. The Indemnified Party may
participate in any such defense or settlement, at its sole cost and expense.
(c) If (i) the Indemnifying Party disputes the
Indemnified Party's right of reimbursement with respect to a Third Party Claim,
(ii) the Indemnifying Party does not dispute such right of reimbursement but
fails to promptly assume and prosecute the defense of such Third Party Claim,
or (iii) the Indemnified Party reasonably believes that a conflict of interest
exists between the Indemnified Party and the Indemnifying Party, then the
Indemnified Party shall be entitled to assume and control (at the Indemnifying
Party's sole cost, expense and liability) the defense of such Third Party Claim
with counsel reasonably acceptable to Indemnifying Party. If the Indemnifying
Party does not assume the defense of a Third Party Claim for any reason, it may
still participate in, but not control, the defense of such Third Party Claim at
the Indemnifying Party's sole cost and expense.
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(d) The party responsible for the defense of any Third
Party Claim (the "Responsible Party") shall, to the extent reasonably requested
by the other party, keep such other party informed as to the status of any
Third Party Claim for which such other party is not the Responsible Party,
including, without limitation, all settlement negotiations and offers. Each
party shall make available to the other party and its representatives
(including accountants and counsel) all books and records of such party
relating to such Third Party Claim and shall render to each other such
assistance and access to the books and records that they may reasonably require
of each other in order to ensure the proper and adequate defense of such Third
Party Claim, including, without limitation, making employees available (upon
reasonable advance notice and with due regard for prior scheduling commitments)
to testify in any proceeding, pretrial deposition or otherwise, except that
unless required to do so by valid governmental or judicial order or legal
process, a party shall not be required to make available to the other party any
books, records, documents or other information that such party reasonably
determines to be confidential or subject to attorney-client privilege until the
other party shall have entered into such agreements as is reasonably necessary
in light of all the surrounding circumstances to protect such confidentiality
or privilege.
(e) Neither the Indemnified Party nor the Indemnifying
Party shall enter into any settlement of any Third Party Claim without the
prior written consent of the other party (which shall not be unreasonably
withheld or delayed). The Responsible Party shall promptly notify the other
party of each settlement offer (including whether or not the Responsible Party
is willing to accept the proposed settlement offer) with respect to a Third
Party Claim. Such other party agrees to notify the Responsible Party with
reasonable promptness whether or not such party is willing to accept the
proposed settlement offer.
Section 2.7 Procedures Regarding Direct Claims. In the event that an
Indemnified Party has a claim for reimbursement which does not involve a Third
Party Claim (a "Direct Claim"), the Indemnified Party shall notify the
Indemnifying Party (and if Seller is the Indemnifying Party and any Funds
continue to be held by Agent, Agent as well) with reasonable promptness,
specifying, to the extent known, the nature, circumstances and amount of such
Direct Claim (a "Direct Claim Notice" and together with Third Party Claim
Notices, the "Claim Notices"), including with particularity the specific
representation and warranty or covenant and agreement alleged to have been
breached and the manner in which such representation and warranty or covenant
and agreement is alleged to have been breached. Failure to give such
reasonably prompt notice shall not relieve the Indemnifying Party of its
obligations under this Article 2, except to the extent the Indemnifying Party
is materially prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it disputes the Indemnified Party's right of
reimbursement with respect to a particular Direct Claim, the Indemnified Party
and the Indemnifying Party shall use their reasonable efforts to negotiate a
resolution of such dispute promptly. Nothing herein shall be deemed to prevent
the Indemnified Party from initiating litigation under this Agreement, and
subject to the
8
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limitations contained herein, against the Indemnifying Party with respect to
any Direct Claim disputed by the Indemnifying Party for the purpose of
obtaining a Final Determination in order to establish the Indemnified Party's
right to reimbursement hereunder.
ARTICLE III
LIMITATIONS ON LIABILITY
Section 3.1 Limitations on Reimbursement. (a) The Buyer Indemnitees
shall not be entitled to indemnification hereunder, unless and until aggregate
Buyer Indemnitees' Damages for which indemnification otherwise would be
available hereunder exceed $93,187 (the "Indemnification Basket"), in which
event the Buyer Indemnitees shall be entitled to reimbursement hereunder for
the amount of all such Damages (including the initial $93,187).
(b) Except with respect to indemnification pursuant to
Section 2.1(a) for the breach by Seller of any representation or warranty set
forth in Section 3.1.1 of the Stock Purchase Agreement (including any
bring-down of any such representation or warranty pursuant to any certificate
delivered at Closing), the right to reimbursement from the Funds shall
constitute the sole remedy of any Buyer Indemnitee with respect to any matter
for which such Buyer Indemnitee is entitled to indemnification under Section
2.1, 2.2, 2.3 and/or 2.4.
(c) Any claim by any Buyer Indemnitee for reimbursement
under Section 2.1(a) must be asserted within the period of survival, as set
forth in the Stock Purchase Agreement, of the representation or warranty with
respect to which such claim relates.
(d) After the Expiration Date, no Buyer Indemnitee may
assert any claim for reimbursement from the Funds.
(e) For all purposes of this Agreement, the amount of
Damages, and the amount reimbursable with respect thereto, shall be reduced to
the extent of any insurance proceeds or other third party recovery received by
the Indemnified Party with respect to such Damages. If the Indemnified Party
receives any such insurance proceeds or other recovery after the Indemnifying
Party shall have made any payment to the Indemnified Party with respect to such
Damages, the Indemnified Party shall promptly return such payment to the
Indemnifying Party to the extent of insurance proceeds or other recovery
received; provided, however, that any such payment returned to Seller prior to
the Expiration Date shall be placed in the Account and become part of the Funds
and such amount shall not be deemed to have been paid to any Indemnified Party
as Damages under this Agreement. The Indemnified Party shall timely file
claims for insurance proceeds and pursue all other
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reasonable third party reimbursement rights with respect to any Damages
sustained by the Indemnified Party.
(f) An Indemnified Party's rights to reimbursement or
indemnification for Damages resulting from any untrue or incorrect
representation or warranty of the Indemnifying Party shall not be affected by
any investigation made by the Indemnified Party or whether or not the
Indemnified Party relied upon such untrue or incorrect representation or
warranty; provided, however, that no Indemnified Party shall be entitled to
reimbursement or indemnification for Damages resulting from an untrue or
incorrect representation or warranty of the Indemnifying Party if (i) the fact
that such representation or warranty was untrue or incorrect was disclosed in
writing to the Indemnified Party prior to the Closing (along with an
acknowledgment by the Indemnifying Party that the conditions to the Indemnified
Party's obligation to effect the Closing, as a result of the failure of such
representation or warranty to be true and correct, are not satisfied) and (ii)
the Indemnified Party nevertheless determines to effect the Closing.
ARTICLE IV
AGENT
Section 4.1 Rights and Responsibilities of Agent. (a) The duties
and responsibilities of Agent shall be limited to those expressly set forth in
this Agreement and it shall not be subject to, nor obligated to recognize, any
other agreement between, or direction or instruction of, the parties to this
Agreement, unless such agreement, direction or instruction is in writing and is
signed by both Buyer and Seller.
(b) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, Agent will not be required to determine the
controversy or to take any action regarding it. Agent may hold all documents
and funds and may wait for settlement of any such controversy by final
appropriate legal proceedings or other means as, in Agent's discretion, Agent
may require, despite what may be set forth elsewhere in this Agreement. In
such event, Agent will not be liable for interest or damage. Furthermore,
Agent may, at its option, file an action of interpleader requiring the parties
to answer and litigate any claims and rights among themselves. Agent is
authorized to deposit with the clerk of the court all documents and funds held
in escrow. All costs, expenses, charges and reasonable attorney fees incurred
by Agent due to the interpleader action shall be paid one-half by Buyer and
one-half by Seller, in each case jointly and severally. Upon initiating such
action, Agent shall be fully released and discharged of and from all
obligations and liability imposed by the terms of this Agreement.
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(c) In performing any duties under the Agreement, Agent
shall not be liable to any party for damages, losses, or expenses, except as a
result of gross negligence or willful misconduct on the part of Agent. Agent
shall not incur any such liability for any action taken or omitted in reliance
upon any instrument, including any written statement or affidavit provided for
in this Agreement that Agent shall in good faith believe to be genuine, nor
will Agent be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of any representative authority. In addition, Agent may
consult with legal counsel in connection with Agent's duties under this
Agreement and shall be fully protected in any act taken, suffered, or permitted
by it in good faith in accordance with the advice of counsel. In the absence
of knowledge that any action taken or purported to be taken hereunder is
wrongful, Agent is not responsible for determining and verifying the authority
of any person acting or purporting to act on behalf of any party to this
Agreement.
(d) Agent, and any successor Agent, may resign at any
time as escrow agent hereunder by giving at least 30 days prior written notice
to Seller and Buyer. Upon such resignation and the appointment of a successor
escrow agent, the resigning Agent shall be absolved from any and all liability
in connection with the exercise of its powers and duties as escrow agent
hereunder except for liability arising in connection with its own gross
negligence or willful misconduct. Upon their receipt of notice of resignation
from Agent, Buyer and Seller shall use commercially reasonable efforts jointly
to designate a successor Agent. In the event Buyer and Seller do not agree
upon a successor escrow agent within 30 days after the receipt of such notice,
Agent so resigning may petition any court of competent jurisdiction for the
appointment of a successor Agent or other appropriate relief and any such
resulting appointment shall be binding upon all parties hereto. By mutual
agreement, Buyer and Seller shall have the right at any time upon not less than
10 days' prior written notice to Agent to terminate the appointment of Agent,
or successor Agent, as escrow agent hereunder. Agent or successor Agent shall
continue to act as escrow agent until a successor is appointed and qualified to
act as Agent.
Section 4.2 Fees and Expenses of Agent. Agent shall (a) be paid a
fee for its services under this Agreement as provided by Exhibit A and (b) be
entitled to reimbursement for reasonable expenses (including the reasonable
fees and disbursements of its counsel engaged pursuant to Sections 1.3 and/or
1.4 hereof, or otherwise) actually incurred by it in connection with its duties
under this Agreement (collectively, the "Agent Fees and Expenses"). All Agent
Fees and Expenses shall be paid one-half by Buyer and one-half by Seller.
Escrow Agent shall have a lien upon the Funds for payment of its fees and
expenses. Escrow Agent may pay itself from the Funds for any fees and expenses
for which it has not been paid.
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Section 4.3 Indemnification of Agent. The parties and their
respective successors and assigns agree jointly and severally to indemnify and
hold Agent harmless against any and all losses, claims, damages, liabilities,
and expenses, including reasonable costs of investigation, reasonable legal
counsel fees and disbursements that may be imposed on Agent or incurred by
Agent in connection with the performance of its duties under this Agreement,
including but not limited to any litigation arising from this Agreement or
involving its subject matter, provided, however, neither Buyer nor Seller nor
their successors and assigns need indemnify Agent for any loss, claim, damage,
liability or expense caused by Agent's gross negligence or willful misconduct.
ARTICLE V
MISCELLANEOUS
Section 5.1 No Right of Contribution. Seller hereby expressly
and irrevocably waives and releases any right that Seller might otherwise have
to contribution from either of the Companies (or any similar right to recover
any amount from any of the Companies) as a result of any Funds being utilized
to satisfy any indemnification claims of any Buyer Indemnitee, or as a result
of any payments by Seller with respect to any indemnification claims of any
Buyer Indemnitee.
Section 5.2 Notices. All notices, requests, consents or other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given or delivered by any party (a) when
received by such party if delivered by hand, (b) upon confirmation when
delivered by telecopy, (c) within one day after being sent by recognized
overnight delivery service, or (d) upon receipt of a return receipt after being
mailed by certified mail, return receipt requested, and in each case addressed
as follows:
(i) if to Buyer or to any Buyer Indemnitee:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard, Suite 1130
Irving, Texas 75039
Attention: Jeffrey A. Marcus
Telecopy No.: (972) 879-3671
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with copies to:
Chancellor Media Corporation of Los Angeles
433 East Las Colinas Boulevard, Suite 1130
Irving, Texas 75039
Attention: Eric C. Neuman
Telecopy No.: (972) 879-3671
and:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Michael A. Saslaw
Telecopy No.: (214) 746-7777
(ii) if to Seller or to any Seller Indemnitee, to:
ML Media Partners L.P.
350 Park Avenue
New York, New York 10022
Attention: Elizabeth McNey-Yates
Telecopy No.: (212) 980-8374
with a copy to:
Proskauer Rose, LLP
1585 Broadway, 22nd Floor
New York, New York 10036-8299
Attention: Lawrence H. Budish
Telecopy No.: (212) 969-2900
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(iii) if to Agent, to:
Mail or other Instructions
Key Trust Company of Ohio, N.A.
127 Public Square, 15th Floor
Cleveland, Ohio 44114
Attn: Joyce A. Apostolec
Telecopy No.: (216) 689-3777
Any party by written notice to the other parties pursuant to this Section 5.1
may change the address or the persons to whom notices or copies thereof shall
be directed.
Section 5.3 Assignment. This Agreement and the rights and duties
hereunder shall be binding upon and inure to the benefit of the parties hereto
and the successors and assigns of each of the parties to this Agreement. No
rights, obligations or liabilities hereunder shall be assignable by any party
without the prior written consent of the other parties, except that Buyer may
assign its rights under this Agreement without obtaining the prior written
consent of the other parties hereto to any person or entity to whom, pursuant
to the Stock Purchase Agreement, Buyer is permitted to assign all or a portion
of its rights under the Stock Purchase Agreement, provided that any such
assignee duly executes and delivers an agreement to assume Buyer's obligations
under this Agreement and that Buyer remains liable with respect to such
obligations.
Section 5.4 Amendment. This Agreement may be amended or modified
only by an instrument in writing duly executed by Agent, Buyer and Seller.
Section 5.5 Waivers. Any waiver by any party hereto of any breach of
or failure to comply with any provision of this Agreement by any other party
hereto shall be in writing and shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this Agreement.
Section 5.6 Construction. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Ohio
without giving effect to the choice of law provisions thereof. The headings in
this Agreement are solely for convenience of reference and shall not be given
any effect in the construction or interpretation of this Agreement. Unless
otherwise stated, references to Sections and Exhibits are references to
Sections and Exhibits of this Agreement.
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Section 5.7 Third Parties. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
or entity other than Buyer, Buyer Indemnitees, Seller, Seller Indemnitees and
Agent any rights or remedies under, or by reason of, this Agreement.
Section 5.8 Termination. This Agreement shall terminate at the time
of the final resolution of all Pending Claims and, if any amount remains
thereunder, disbursement of the Funds, all in accordance with the provisions of
this Agreement.
Section 5.9 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed any original and all of which
together shall constitute a single instrument.
Section 5.10 Waiver of Offset Rights. Agent hereby waives any and
all rights to offset that it may have against the Funds including, without
limitation, claims arising as a result of any claims, amounts, liabilities,
costs, expenses, damages, or other losses that Agent may be otherwise entitled
to collect from any party to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
written above.
BUYER:
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
SELLER:
M.L. MEDIA PARTNERS L.P.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
AGENT:
KEY TRUST COMPANY OF OHIO, N.A.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
<PAGE> 76
EXHIBIT A
Fees of Agent
$2,500.00 Annual Escrow Agent Fee for Administration.
Escrow Fee will be payable upon execution of the Escrow Agreement and annually
thereafter on the anniversary date of the agreement.
<PAGE> 1
EXHIBIT 2.51
STOCK PURCHASE AND MERGER AGREEMENT
BY AND AMONG
CHANCELLOR MEDIA CORPORATION,
CHANCELLOR MEXICO LLC,
GRUPO RADIO CENTRO, S.A. DE C.V.,
AND
THE SELLING SHAREHOLDERS
DATED AS OF JULY 9, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I
THE MERGER Page
1.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2 Formation of Newco; Transfer of Cash and Chancellor Stock to Newco
Before the Merger and on the Final Funding Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 The Merger; Merger Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.5 Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II
CONTROLLING TRUST; CPO PURCHASE
2.1 Formation of Controlling Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Deposits in the CPO Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Sale and Purchase of CPOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Exchange for ADSs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Increase Based on 1999 EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Title; Registration; Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Ownership Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.8 Anti-dilution Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1.1 Organization of the Company and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 11
3.1.2 Authorization of Agreement and Other Transaction
Documents; Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1.3 Company SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1.4 No Stamp or Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1.5 Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1.6 Subsidiaries of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1.7 No Conflicts; Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1.8 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
3.1.9 Title to Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1.10 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1.11 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1.12 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.13 Books of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.14 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1.15 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1.16 Liens and Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1.17 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1.18 Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.19 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.21 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1.22 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.23 Personnel Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.24 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.1.25 Compliance With Law; Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.1.26 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.1.27 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.1.28 Commissions or Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.1.29 Certain Business Practices and Regulations; Potential
Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.1.30 Not an Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.1.31 No U.S. Assets or U.S. Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.1.32 No Manipulation or Stabilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.1.33 Trade Deals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.1.34 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.2 Representations and Warranties of the Selling Shareholders. . . . . . . . . . . . . . . . . . . . . 30
3.2.1 Owners of Shares and Beneficial Interests . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.2.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.2.3 No Restrictions; Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.2.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.2.5 Title to Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.2.6 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.3 Representations and Warranties of the Family Trust . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.3.3 Vote at Shareholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.3.4 Title to Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.4 Representations and Warranties of Chancellor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.4.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.4.2 Authorization and Effect of Agreement and
Other Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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3.4.3 Chancellor SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.4.4 Subsidiaries of Chancellor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.4.5 No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . 35
3.4.6 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.4.7 Commissions or Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.4.8 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.4.9 Financial Condition of Chancellor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.4.10 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.4.11 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.4.12 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.4.13 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.4.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.4.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.4.16 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.4.17 Books of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.4.18 Not an Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.4.19 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.4.20 No Manipulation or Stabilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.5 Representations and Warranties of the Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.5.2 Authorization and Effect of Agreement and
Other Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.5.3 No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE IV
CERTAIN COVENANTS
4.1 No Solicitation of Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.3 Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.4 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.6 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.7 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.8 No Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.9 Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.10 Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.11 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.12 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.13 Compliance with Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.14 Controlling Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.15 Bylaw Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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4.16 Shareholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.17 Election of Directors; Indemnification Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.18 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.19 CPO Trust and Deposit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.20 Management Compensation Study. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.21 Transaction Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE V
CONDITIONS TO CLOSING
5.1 Conditions Precedent to Obligations of the Investor Companies
With Respect to the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.1.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.1.2 Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.1.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.1.4 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.1.5 Sale of CPOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.1.6 Initial Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.2 Conditions Precedent to Obligations of Company and the
Selling Shareholders With Respect to the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.2.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.2.2 Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.2.3 Consents or Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.2.4 No Chancellor Stock Price Below Floor . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.3 Conditions to Each Party's Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.3.1 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.3.2 No Adverse Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.3.3 No Adverse Change in Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VI
DOCUMENTS TO BE DELIVERED AT THE CLOSING
6.1 Documents to be Delivered by the Company and the Selling
Shareholders at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.1.1 Certification of Stock Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.1.2 Certified Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.1.3 Controlling Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.1.4 Bylaw Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.1.5 Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.1.6 Shareholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.1.7 Indemnification Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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6.1.8 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.1.9 CPO Trust and Deposit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.1.10 Family Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.1.11 Release of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.1.12 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.1.13 Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.1.14 Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.2 Documents to be Delivered by the Investor Companies at the Closing . . . . . . . . . . . . . . . . . 54
6.2.1 Certified Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.2.2 Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.2.3 Controlling Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.2.4 Shareholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.2.5 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.2.6 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.2.7 Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VII
LIQUIDITY OF CHANCELLOR STOCK
7.1 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.2 Liquidity for Certain Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.3 Irrevocable Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.4 Post-Closing Notifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VIII
TERMINATION
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE IX
GENERAL PROVISIONS
9.1 Survival of Representations and Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . 59
9.2 No Waiver Relating to Claims for Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
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9.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.9 Amendments and Supplements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.10 Rights of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.11 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.13 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.14 Certain Interpretative Matters and Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.15 No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.16 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.17 Appointment of Shareholders' Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.18 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.19 English Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.20 Titles and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.21 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
EXHIBITS
Exhibit A -- Form of Merger Agreement
Exhibit B -- Form of Bylaw Amendment
Exhibit C -- Form of Controlling Trust Agreement
Exhibit D -- Form of Shareholders' Agreement
Exhibit E -- Form of Indemnification Agreement
Exhibit F -- Form of Registration Rights Agreement
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STOCK PURCHASE AND MERGER AGREEMENT
THIS STOCK PURCHASE AND MERGER AGREEMENT, dated as of July 9, 1998
(this "Agreement"), is by and among CHANCELLOR MEDIA CORPORATION, a Delaware
corporation (together with its permitted successors and assigns, "Chancellor");
CHANCELLOR MEXICO LLC, a Delaware limited liability company that is a
wholly-owned subsidiary of Chancellor (together with its successors and
assigns, the "Investor"); GRUPO RADIO CENTRO, S.A. DE C.V., a corporation
organized under the laws of the United Mexican States (the "Company");
BANCOMER, S.A., Institucion de Banca Mcltiple, member of Grupo Financiero
Bancomer, Fiduciary Division, acting as trustee (the "Family Trustee") of trust
number F/29307-6 dated June 3, 1998, established by the Family Shareholders
named hereafter (the "Family Trust"); BANCOMER, S.A., Institucion de Banca
Mcltiple, member of Grupo Financiero Bancomer, Fiduciary Division, acting as
trustee (the "1992 Trustee") of trust number F/23020-1 dated April 24, 1992, as
amended, established by the Family Shareholders named hereafter (the "1992
Trust"); and MARIA ESTHER GOMEZ TOVAR DE AGUIRRE, and MARIA ESTHER AGUIRRE
GOMEZ (collectively with the Family Trustee and the 1992 Trustee, the "Selling
Shareholders").
Chancellor and the Investor are sometimes referred to herein
collectively as the "Investor Companies." Each of the Investor Companies, the
Company, and the Selling Shareholders is referred to individually as a "Party"
and collectively as the "Parties." Maria Esther Gomez Tovar de Aguirre, Maria
Esther Aguirre Gomez, Francisco de Jescs Aguirre Gomez, Ana Maria Aguirre
Gomez, Maria Adriana Aguirre Gomez, Maria Guadalupe Aguirre Gomez, Adrian
Aguirre Gomez, Maria Elena Aguirre Gomez, Carlos de Jescs Aguirre Gomez, Rafael
Felipe de Jescs Aguirre Gomez, Maria Trinidad Aguirre Gomez, and Jose Manuel
Aguirre Gomez are referred to herein collectively as the "Family Shareholders."
The consummation of the transactions contemplated by this Agreement is
subject to the conditions specified in Article V, including regulatory
approvals from the Mexican Ministry of Commerce and Industrial Development
(Secretaria de Comercio y Fomento Industrial) ("SECOFI") and the Mexican
National Foreign Investment Commission (Comision Nacional de Inversiones
Extranjeras) ("CNIE"), the Mexican Federal Competition Commission (Comision
Federal de Competencia) (the "CFC"), and the Mexican Banking and Securities
Commission (Comision Nacional Bancaria y de Valores) ("CNBV").
RECITALS:
A. The Company, directly and indirectly through its Subsidiaries
(as defined herein), currently conducts the business (the "Business") of (i)
radio programming, production and broadcasting and (ii) owning, managing and
operating radio stations in the United Mexican States ("Mexico"). The Investor
Companies and the Company jointly desire to develop programming and investment
opportunities for the Spanish-language radio market in the United States and
Latin America.
<PAGE> 9
B. The Family Trust is the record owner of 51,604,262 shares of
Series A Common Stock, no par value ("Series A Shares"), of the Company, which
Series A Shares represent 26.72% of the issued and outstanding equity of the
Company. Nacional Financiera, S.A., as trustee (the "CPO Trustee") of the
trust created by the trust agreement dated May 24, 1993, among the Company and
the 1992 Trust, as grantors (the "CPO Trust"), is the record owner of
141,529,482 Series A Shares, which represent 73.28% of the issued and
outstanding equity of the Company.
C. The Selling Shareholders, collectively, beneficially own
33,752,248 Ordinary Participation Certificates (each, a "CPO") issued by the
CPO Trust, which CPOs represent financial interests in 17.48% of the issued and
outstanding Series A Shares. The remaining 107,777,234 CPOs represent
financial interests in 55.80% of the issued and outstanding Series A Shares and
are publicly held and traded. Some of these CPOs are traded on The Mexican
Stock Exchange (Bolsa Mexicana de Valores, S.A. de C.V.) ("Bolsa"), and other
CPOs are deposited in an account with S.D. Indeval, S.A. de C.V., Institucion
para el Deposito de Valores ("Indeval"), maintained by Citibank Mexico, S.A.,
Grupo Financiero Citibank, as the custodian and agent of Citibank, N.A., as
depositary (the "Depositary") under the Deposit Agreement (herein so called)
dated as of June 30, 1993, among the Company, the Depositary, and holders and
beneficial owners from time to time of American Depositary Receipts ("ADRs")
issued thereunder, and are traded as American Depositary Shares ("ADSs") on The
New York Stock Exchange. Each ADS represents nine CPOs.
D. Upon the terms and subject to the conditions set forth herein,
the Investor Companies, the Company, and the Selling Shareholders desire that
(i) the Investor form two Mexican trusts of which the Investor will be the sole
beneficiary (the "Interim Trusts"), which Interim Trusts in turn will form a
corporate subsidiary in Mexico ("Newco"), (ii) Chancellor capitalize Newco with
US$39,000,000 and with the number of shares of Common Stock, par value US$.01
per share, of Chancellor (the "Chancellor Stock") determined pursuant to
Section 1.2 and Section 2.8, and (iii) Newco merge with and into the Company,
with the Company remaining as the surviving corporation (the "Merger"). As a
result of the Merger, the issued and outstanding shares of Newco will be
converted into 125,629,248 Series A Shares (the "Merger Shares"), which will be
held temporarily by the Interim Trusts and for which voting power will be
neutralized as to the Investor Companies. Also as a result of the Merger, the
Company will acquire ownership of US$39,000,000 in cash and shares of
Chancellor Stock having a deemed value of US$87,468,833.24 as determined
pursuant to Section 1.2.
E. Upon the terms and subject to the conditions set forth herein,
the Investor and the Family Trust will form a new trust (as more specifically
described hereafter, the "Controlling Trust") with a Mexican bank as trustee
(the "Controlling Trustee") and will contribute Series A Shares to the
Controlling Trust as follows: (i) the Investor will cause the Interim Trusts
to contribute 67,002,853 of the Merger Shares concurrently with the
consummation of the Merger; and (ii) the Family Trust will contribute
21,694,066 Series A Shares upon formation of the Controlling Trust. Upon
completion of the contributions, the Investor will receive a 75.54% beneficial
interest in the Controlling Trust and related limited corporate rights, and the
Family Trust will receive a controlling 24.46% beneficial interest in the
Controlling Trust and related general corporate rights.
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<PAGE> 10
F. Concurrently with the consummation of the Merger, the Investor
will cause the Interim Trusts to contribute to the CPO Trust the remaining
58,626,395 Merger Shares, upon which the CPO Trust will issue 58,626,395 CPOs
to the Investor. Also immediately upon completion of the Merger, the Family
Trust will contribute to the CPO Trust 29,910,196 Series A Shares, and the CPO
Trust will issue 29,910,196 CPOs to the Family Trust, which the Family Trust
will distribute to the Family Shareholders.
G. Upon the terms and subject to the conditions set forth herein,
the Investor will purchase from the Selling Shareholders 33,752,248 CPOs (the
"Family CPOs") for US$81,567,932.67. Immediately thereafter, the Investor will
deposit 92,378,637 of the CPOs it holds with the Depositary, and the Depositary
will issue to the Investor ADRs representing 10,264,293 ADSs.
H. As a result of the foregoing transactions, (i) the Controlling
Trust will be the record owner of 88,696,919 Series A Shares, representing
27.83% of the issued and outstanding equity of the Company, and (ii) the CPO
Trust will be the record owner of 230,066,073 Series A Shares, representing
72.17% of the issued and outstanding equity of the Company. The Investor will
own ADSs, CPOs, and beneficial interests in the Controlling Trust representing
50% of the equity of the Company, and the Family Trust and the Family
Shareholders will own CPOs and beneficial interests in the Controlling Trust
representing 16.19% of the equity of the Company.
I. Upon the terms and subject to the conditions of this
Agreement, the Company will have the right to receive additional shares of
Chancellor Stock having a total base value of US$58,156,050.86 based on the
Company's 1999 EBITDA.
J. The Board of Directors of the Company has determined that the
transactions contemplated by this Agreement are consistent with and in
furtherance of the long-term business strategy of the Company and is fair to,
and in the best interests of, the Company and its shareholders and has approved
and adopted this Agreement and recommended approval and adoption of this
Agreement by the shareholders of the Company. The transactions with the
Selling Shareholders are intended to provide them with the incentive to benefit
the Company by supporting the transactions contemplated by this Agreement.
K. The Board of Directors of Chancellor has determined that the
transactions contemplated by this Agreement are consistent with and in
furtherance of the long-term business strategy of Chancellor and is fair to,
and in the best interests of, Chancellor and its shareholders and has approved
and adopted this Agreement.
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<PAGE> 11
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, and agreements set forth in this
Agreement, the Parties, intending legally to be bound, agree as follows:
ARTICLE I
THE MERGER
1.1 Closing. The execution and delivery of the documents
contemplated in Article VI, and the decision of the Parties to proceed with the
Merger and the purchase of the Family CPOs (the "Closing"), shall take place at
the offices of White & Case, S.C., Mexico City, D.F., Mexico, at 10 a.m.,
Mexico City time, on a date to be specified by Chancellor and the Company (the
"Closing Date"), which date shall be no later than the fifth business day
following the date on which the conditions to the Closing set forth in Section
5.1.3, Section 5.2.3, and Section 5.3.1 have been satisfied or waived, unless
Chancellor and the Company agree in writing to another place, time and date.
The Merger and the purchase of the Family CPOs shall be effected as soon as is
practicable after the Closing occurs.
1.2 Formation of Newco; Transfer of Cash and Chancellor Stock to
Newco Before the Merger and on the Final Funding Date. Subject to the terms
and conditions of this Agreement and in reliance upon the representations,
warranties, and covenants contained herein, at the Closing and before the
Merger Effective Time (defined hereafter), Chancellor shall, indirectly through
the Investor and the Interim Trusts, cause (a) the formation of Newco, the
issued and outstanding stock of which will be represented by 100 shares, no par
value (the "Original Newco Shares"), and immediately thereafter (b) the
adoption of a resolution by Newco's shareholders that provides for an increase
in the capital of Newco that will be represented by 900 shares, no par value
(the "Additional Newco Shares," and, together with the Original Newco Shares,
the "Newco Shares"). The Newco Shares will represent all of the issued and
outstanding capital stock of Newco. The Additional Newco Shares will be
subscribed for as follows: (i) Newco's shareholders shall subscribe for the
Additional Newco Shares on a pro rata basis; (ii) the subscription price (the
"Subscription Price") of the Additional Newco Shares shall be subject to a
contingent upward adjustment pursuant to Section 2.5 (the "Contingent
Adjustment"); (iii) notwithstanding the Contingent Adjustment, at the time the
Additional Newco Shares are issued and subscribed for by Newco's shareholders,
Chancellor, indirectly through Newco's shareholders, shall contribute to the
capital of Newco, as the Subscription Price of the Additional Newco Shares,
cash equal to US$39,000,000, shares of Chancellor Stock equal to the Exchange
Number, free and clear of any Liens (defined in Section 3.1.6), except as arise
under the Transaction Documents (defined in Section 3.1.2); and (iv) on the
Final Funding Date (defined in Section 2.5), Chancellor, directly or indirectly
through the Investor or the Interim Trusts, shall, subject to the conditions of
Section 2.5, contribute to Newco, or to the Company as the surviving entity of
the Merger, for no additional consideration in any form in respect of the
Contingent Adjustment, the Contingent Shares (defined in Section 2.5).
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<PAGE> 12
(a) As used herein, the term "Exchange Number" means the
number of shares of Chancellor Stock equal to:
(i) 2,046,054, if the Chancellor Stock Price is
equal to or less than US$42.75;
(ii) 1,534,540, if the Chancellor Stock Price is
equal to or greater than US$57.00; or
(iii) the number obtained through dividing
US$87,468,833.24 by the Chancellor Stock Price, if the Chancellor
Stock Price is greater than US$42.75 but less than US$57.00.
The Exchange Number as determined under the preceding clause (iii) shall be
rounded down to the nearest whole number. Chancellor will not issue fractional
shares, but in lieu thereof will contribute additional cash to Newco based on
the price used in calculating the Exchange Number.
(b) "Chancellor Stock Price" shall mean the average
closing sales price, regular way, per share of Chancellor Stock on the Nasdaq
Stock Market in U.S. dollars as reported in The Wall Street Journal over the 10
consecutive trading days ending on the third trading day next preceding the
Closing Date.
1.3 The Merger; Merger Effective Time. Subject to the terms and
conditions of this Agreement and in reliance upon the representations,
warranties, and covenants contained herein, Newco shall be merged with and into
the Company at the Merger Effective Time. The Company and Newco shall enter
into the Merger Agreement (herein so called) at the Closing substantially in
the form attached hereto as Exhibit A and shall effect the Merger as soon as
practicable following the Closing. The terms of the Merger and the mode of
carrying the Merger into effect shall be as set forth in the Merger Agreement.
The Merger shall become effective at the time the Merger Agreement is filed for
publication in the Public Commercial Registry of the Federal District of Mexico
(Registro Pcblico de Comercio del Distrito Federal), which time is referred to
herein as the "Merger Effective Time." The Company shall also cause the Merger
Agreement to be published in the Official Daily Gazette of the Federation (El
Diario Oficial de la Federacion) as soon as practicable following the Closing.
1.4 Effects of the Merger. At the Merger Effective Time, (a)
Newco shall be merged with and into the Company, the separate existence of
Newco shall cease, and the Company shall continue as the surviving corporation;
(b) all the property, rights, privileges, powers and franchises of Newco and
the Company (including Newco's cash and the Exchange Number of Chancellor
Stock) shall vest in the Company as the surviving corporation; (c) all debts,
liabilities and duties of Newco and the Company shall become the debts,
liabilities and duties of the Company as the surviving corporation; (d) the
certificate of incorporation (escritura constitutiva) and the bylaws (estatutos
sociales) (collectively, the "Charter")of the Company, as amended and restated
at the Closing substantially in
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<PAGE> 13
the form attached hereto as Exhibit B, shall be the Charter of the Company as
the surviving corporation; and (e) the Merger will have the additional effects
set forth in Section 1.5 and the applicable provisions of the Mexican General
Law of Mercantile Societies (Ley General de Sociedades Mercantiles).
1.5 Merger Consideration. At the Merger Effective Time, by virtue
of the Merger and without any action on the part of the Parties, the Newco
Shares shall in the aggregate be converted into the 125,629,248 Merger Shares.
The Company shall immediately issue and deliver the Merger Shares to the
Interim Trusts as the owners of Newco Shares. The Interim Trusts will
immediately deposit the Merger Shares with the Controlling Trust or the CPO
Trust, as provided in Article II.
ARTICLE II
CONTROLLING TRUST; CPO PURCHASE
2.1 Formation of Controlling Trust. Subject to the terms and
conditions of this Agreement and in reliance upon the representations,
warranties, and covenants contained herein:
(a) at the Closing and before the Merger Effective Time,
the Investor and the Family Trust shall execute and deliver, and cause the
Controlling Trustee to execute and deliver, that Irrevocable Trust Agreement
with respect to the Controlling Trust substantially in the form attached hereto
as Exhibit C (the "Controlling Trust Agreement");
(b) at the Closing and before the Merger Effective Time,
the Family Trust shall transfer to the Controlling Trust all its rights, title,
and interest in 21,694,066 Series A Shares, free and clear of all Liens (except
as arise under the Transaction Documents);
(c) concurrently with the consummation of the Merger, the
Investor Companies shall cause the Interim Trusts to transfer to the
Controlling Trust all their rights, title, and interest in 67,002,853 Merger
Shares, free and clear of all Liens (except as arise under the Transaction
Documents);
(d) concurrently with the consummation of the Merger and
the transfers described in the preceding clauses (b) and (c), the Parties shall
cause the Controlling Trust to issue to the Family Trust controlling beneficial
interests in the Controlling Trust representing 24.4586466% of the economic
interest in the Controlling Trust and related general corporate rights;
(e) concurrently with the consummation of the Merger and
the transfers described in the preceding clauses (b) and (c), the Parties shall
cause the Controlling Trust to issue to the Investor beneficial interests in
the Controlling Trust representing 75.5413534% of the economic interest in the
Controlling Trust and related limited corporate rights;
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<PAGE> 14
(f) concurrently with the consummation of the Merger, the
Company shall register in its stock registry (libro de registro de acciones)
the transfers to the Controlling Trust of the 88,696,919 Series A Shares
described in the preceding clauses (b) and (c).
2.2 Deposits in the CPO Trust. Subject to the terms and
conditions of this Agreement and in reliance upon the representations,
warranties, and covenants contained herein:
(a) at the Closing, the Family Trust shall transfer to
the CPO Trust all its rights, title, and interest in 29,910,196 Series A
Shares, free and clear of all Liens;
(b) concurrently with the consummation of the Merger, the
Investor shall cause the Interim Trusts to transfer to the CPO Trust all their
rights, title, and interest in 58,626,395 Merger Shares, free and clear of all
Liens;
(c) at the Closing and concurrently with the transfer
described in the preceding clause (a), the CPO Trustee shall issue to the
Family Trust 29,910,196 CPOs, free and clear of all Liens (except as arise
under the Transaction Documents), which the Family Trust shall immediately
distribute to the other Family Shareholders;
(d) concurrently with the consummation of the Merger and
the transfers described in the preceding clause (b), the CPO Trustee shall
issue to the Investor 58,626,395 CPOs, free and clear of all Liens (except as
arise under the Transaction Documents); and
(e) concurrently with each of the transfers described in
the preceding clauses (a) and (b), the Company shall register the transfers of
those Series A Shares to the CPO Trust.
2.3 Sale and Purchase of CPOs.
(a) Subject to the terms and conditions of this
Agreement, as soon as practicable after the Closing and the Merger Effective
Time, the Selling Shareholders shall sell and deliver to the Investor an
aggregate of 33,752,248 Family CPOs. Each Selling Shareholder shall transfer
and deliver the number of Family CPOs set forth below opposite such Selling
Shareholder's name, free and clear of all Liens (except as arise under the
Transaction Documents), in each case duly endorsed for transfer or accompanied
by transfer powers duly endorsed in blank, with all requisite transfer taxes
paid and stamps affixed:
Family Trust 28,979,654 CPOs
1992 Trust 3,430,746 CPOs
Maria Esther Gomez Tovar de Aguirre 733,374 CPOs
Maria Esther Aguirre Gomez 608,474 CPOs
(b) Subject to the terms and conditions of this
Agreement, the Investor shall purchase and accept delivery of the Family CPOs
and shall pay each of the Selling Shareholders
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<PAGE> 15
US$21.75 per nine Family CPOs sold by such Selling Shareholder, or a total of
US$81,567,932.67, by wire transfer of same-day funds to the account that the
Selling Shareholders designated in writing to the Investor no later than two
business days before the Closing.
2.4 Exchange for ADSs. As soon as practicable after completion of
the Merger contemplated in Article I and the sale and purchase of the Family
CPOs contemplated in this Article II, the Investor will transfer to the
Depositary 92,378,637 CPOs, and the Depositary will issue to the Investor
10,264,293 ADSs. All ADSs will be represented by ADRs. No fractional amounts
of ADSs will be issued. As a result, the Investor will hold six CPOs,
representing the number of CPOs received in excess of the amount evenly
divisible by nine. At the Investor's election, such CPOs may be withdrawn from
the CPO Trust and deposited as Series A Shares in the Controlling Trust.
2.5 Increase Based on 1999 EBITDA.
(a) On the fifth business day following the end of the
first quarter of 2000 (the "Final Funding Date") and subject to this Section
2.5, Chancellor will pay additional consideration to the Company solely in the
form of shares of Chancellor Stock. The number of shares of Chancellor Stock
to be so delivered (the "Contingent Shares") shall be determined in accordance
with Section 2.5 (c) below on the basis of an amount (the "Adjustment Amount")
equal to the sum of the following clauses (i) and (ii) (it being understood
that neither of the following clauses (i) or (ii) shall negate or otherwise
diminish in any respect the obligations of Chancellor pursuant to Section 1.2
or Section 2.3):
(i) the product of (A) US$29,078,025.43 and (B)
the lesser of (1) the excess, if any, of 1999 EBITDA over X, divided
by US$3,265,000, and (2) 1; plus
(ii) the product of (A) US$29,078,025.43 and (B)
the lesser of (1) the excess, if any, of 1999 EBITDA over Y, divided
by US$3,499,000 and (2) 1.
where:
X = US$31,735,000 and
Y = US$37,500,000
(b) For purposes of this Agreement, "1999 EBITDA" shall
mean the Company's actual consolidated earnings before interest, taxes,
depreciation and amortization as per the consolidated financial statements of
the Company prepared in accordance with Mexican generally accepted accounting
principles ("Mexican GAAP") or United States generally accepted accounting
principles ("U.S. GAAP") as specified in a written notice (the "Election
Notice") signed by the Chief Financial Officer of the Company and delivered to
Chancellor on the Closing Date. The 1999 EBITDA shall not include any
subsidiary or investment the results of which are not consolidated (such as
investments accounted for under the equity method of accounting) in the
financial results of
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<PAGE> 16
the Company under the relevant accounting principles. If the Company's
Election Notice specifies U.S. GAAP, 1999 EBITDA shall be calculated in U.S.
dollars. If the Company's Election Notice specifies Mexican GAAP, (i) 1999
EBITDA shall be calculated in pesos, (ii) the U.S. dollar amounts set forth in
clauses (i) and (ii) of Section 2.6(a) shall be converted into pesos at the
dollar/peso exchange rate in effect on the Closing Date (and, correspondingly,
the Adjustment Amount shall be initially denominated in pesos) and (iii) the
Adjustment Amount, denominated in pesos, shall then be converted to U.S.
dollars at the dollar/peso exchange rate in effect on the Final Funding Date
(in each case using exchange rates published by Banco de Mexico as the tipo de
cambio para solventar obligaciones denominadas en moneda extranjera pagaderas
en la Repcblica Mexicana in El Diario Oficial de la Federacion). If the
Company does not deliver an Election Notice to Chancellor on the Closing Date,
1999 EBITDA shall be determined in accordance with U.S. GAAP and calculated in
U.S. dollars. The Company shall also specify in the Election Notice whether it
elects to have the number of Contingent Shares determined in accordance with
Section 2.5(c)(i) or Section 2.5(c)(ii), it being understood that if the
Company does not make an election as provided herein, the number of Contingent
Shares shall be determined in accordance with Section 2.5(c)(ii). The 1999
EBITDA shall be adjusted to include the EBITDA contribution of any business
acquired in 1998 or 1999 (which shall be the actual EBITDA of the acquired
business for the full year in the case of any acquisition consummated in 1999)
for which the definitive acquisition agreement shall have been executed after
the date of this Agreement, and each of the amounts defined as "X" and "Y" in
the formula set forth in Section 2.5(a) shall be increased by an amount equal
to the acquisition price paid divided by 8.9. It is understood that in certain
circumstances, it may be desirable for the Company to engage in an acquisition
which is dilutive to 1999 EBITDA but which offers other benefits to the
Company. In these circumstances, the Company's management may propose that the
EBITDA contribution from the business so acquired be excluded from the
computation of 1999 EBITDA, and that the amounts defined as "X" and "Y" in the
formula set forth in Section 2.5(a) not be modified, in which event Chancellor
shall not unreasonably withhold its consent to such proposal, it being
understood that nothing in this sentence shall affect the right of Chancellor
to exercise its veto rights under this Agreement or the Shareholders'
Agreement.
(c) The number of Contingent Shares to be delivered
pursuant to Section 2.5(a) shall be determined as follows:
(i) If the Election Notice specifies that the
number of Contingent Shares to be delivered pursuant to Section 2.5(a)
shall be determined in accordance with this Section 2.5(c)(i), the
number of Contingent Shares shall be equal to the Adjustment Amount in
U.S. dollars divided by the Chancellor Stock Price (not to be less
than US$42.75 or greater than US$57.00 for this purpose).
(ii) If the Election Notice specifies that the
number of Contingent Shares to be delivered pursuant to Section 2.5(a)
shall be determined in accordance with this Section 2.5(c)(ii), the
number of Contingent Shares shall be equal to (A) the sum of (1) the
Adjustment Amount and (2) the Interest Amount (as defined below),
divided by (B) the average closing sale price, regular way, per share
of the Chancellor Stock as reported on the
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<PAGE> 17
Nasdaq National Market for the 10 trading days ending on the third
trading day preceding the Final Funding Date. The "Interest Amount"
shall be the amount of interest on the Adjustment Amount accrued from
the Closing Date to and including the Final Funding Date at a rate
equal to (i) if 1999 EBITDA is determined in accordance with U.S.
GAAP, the effective compounded yield which would have been obtained
by investing funds in 13-week United States Treasury bills during such
period (using rates reported therefor in The Wall Street Journal) or
(ii) if 1999 EBITDA is determined in accordance with Mexican GAAP, the
effective compounded yield which would have been obtained by investing
funds in 28-day certificados de la tesoreria (CETES) during such
period (using rates reported therefor in El Diario Oficial de la
Federacion).
(d) For purposes of the laws of Mexico, including the tax
laws of Mexico, the Company shall report and account for the receipt of
Contingent Shares pursuant to this Section 2.5 as a capital transaction.
2.6 Title; Registration; Legends. The Series A Shares, the
beneficial interests in the Controlling Trust , the CPOs, the ADSs, and the
ADRs representing ADSs to be delivered to the Investor Companies pursuant to
Article I and this Article II shall each be free and clear of all Liens (except
as arise under the Transaction Documents or as are created by the Investor or
its Affiliates) and shall be evidenced by appropriate certificates and
receipts, duly registered in the name of the Investor, and executed by duly
authorized directors or officers of the Company, the CPO Trustee, the
Controlling Trust , or the Depositary, as appropriate, as well as by the
corresponding recordations in the authorized transfer records of the Company,
CPO Trust, Controlling Trust , and Depositary. ADRs representing the ADSs
issued to the Investor shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE
ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER)
THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION WILL NOT
VIOLATE APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
The legend shall be removed from any such ADR when and so long as such security
shall have been effectively registered under the United States Securities Act
of 1933 (the "Securities Act") and disposed of pursuant thereto, disposed of
pursuant to the provision of Rule 144, or otherwise disposed of in a
transaction in which such legend is no longer required for compliance under the
Securities Act. At that time, the holder of the security shall be entitled to
receive, at the Company's expense, a new security not bearing a restrictive
legend.
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<PAGE> 18
2.7 Ownership Percentage. The Parties agree that, immediately
after giving effect to the foregoing transactions, the Investor will hold a
beneficial ownership interest in the Controlling Trust representing 21.02% of
the equity of the Company and will hold ADSs and CPOs representing an
additional 28.98% of the equity of the Company, which together will represent
50% of the equity of the Company.
2.8 Anti-dilution Provision. If Chancellor performs (or
establishes a record date for) a stock split, stock dividend, recapitalization,
subdivision, extraordinary dividend, reclassification, combination, exchange of
shares or similar transaction with respect to the outstanding Chancellor Stock
and the record date therefor shall occur prior to the Merger Effective Time or
the Final Funding Date, as the case may be, amounts and calculations set forth
in this Agreement shall be appropriately adjusted to reflect such transaction
or event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company
represents and warrants to the Investor Companies as follows (in each case as
qualified by matters reflected on the disclosure schedule dated as of the date
of this Agreement and delivered by the Company to the Investor Companies on or
before the date of this Agreement (the "Company Disclosure Schedule") and in
the Company SEC Documents (defined in Section 3.1.3) and made a part hereof by
reference, each such matter qualifying each representation and warranty, as
applicable, notwithstanding any specific section or schedule reference or lack
thereof), with the understanding that the Investor Companies are relying on
such representations and warranties in entering into and performing this
Agreement and the other Transaction Documents, and such representations and
warranties shall be unaffected by any investigation heretofore or hereafter
made by any Investor Company:
3.1.1 Organization of the Company and Subsidiaries. The
Company has been duly incorporated and is validly existing and in good standing
as a corporation with variable capital (sociedad anonima de capital variable)
under the laws of Mexico. Each Subsidiary (defined in Section 9.14) of the
Company has been duly organized and is validly existing and in good standing as
a corporation under the laws of Mexico, and each of the Company and its
Subsidiaries is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of the Business makes such
qualification necessary, except to the extent that any failure in respect of
the foregoing would not have a Material Adverse Effect (as hereinafter
defined). The Company has delivered to Chancellor true and complete copies of
the Charter of the Company and each of its Subsidiaries, as in effect at the
date of this Agreement. The Company is not in violation of any provisions of
its Charter, and none of its Subsidiaries is in violation of its Charter.
"Material Adverse Effect" means, with respect to a person, any change, effect,
event or occurrence that is materially adverse to the
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<PAGE> 19
business, operations, assets, condition (financial or other), or results of
operations of such person and its subsidiaries, taken as a whole.
3.1.2 Authorization of Agreement and Other Transaction
Documents; Binding Obligations. The Company has the requisite corporate power
and authority to execute and to deliver this Agreement and each other document
to which it is a party required to be delivered at or before the Closing
pursuant to Article VI (collectively, the "Transaction Documents" and each,
individually, a "Transaction Document") and to perform the transactions
contemplated hereby or thereby to be performed by it. The execution and
delivery by the Company of this Agreement and any other Transaction Document to
which it is a party and the performance by it of the transactions contemplated
hereby or thereby to be performed by it have been duly and validly authorized
by all necessary action (corporate and other) on the part of the Company,
subject, in the case of the Merger, to approval of the Merger Agreement and the
Merger by the shareholders of the Company in accordance with law. This
Agreement and each other Transaction Document to which the Company is a party
have been, or upon execution and delivery will be, duly executed and delivered
by duly authorized legal representatives of the Company holding the necessary
powers of attorney and (assuming that each of the Transaction Documents is a
legal, valid and binding obligation of each other party thereto) constitute, or
upon execution and delivery will constitute, the valid and binding obligations
of the Company enforceable against it in accordance with its respective terms.
3.1.3 Company SEC Documents. The Company has made
available to Chancellor a true and complete copy of each report, schedule,
registration statement and definitive information statement filed by the
Company with the United States Securities and Exchange Commission (the "SEC")
since December 31, 1997, and before or on the date of this Agreement, including
the Company's Report on Form 20-F for the year ended December 31, 1997 (the
"1997 20-F" and, collectively, the "Company SEC Documents"), which are all the
documents (other than preliminary materials) that the Company was required to
file with the SEC between December 31, 1997, and the date of this Agreement.
As of their respective dates, the Company SEC Documents complied in all
material respects with the requirements of the United States Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the
SEC thereunder applicable to such Company SEC Documents, and none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
3.1.4 No Stamp or Other Taxes. No stamp or other issuance
or transfer taxes or duties and no capital gains, income, withholding or other
taxes are payable by the Company (except for immaterial amounts payable by the
Company) or the Investor Companies in Mexico or to any political subdivision or
taxing authority thereof or therein in connection with (a) the authorization,
issuance, sale and delivery of the Series A Shares by the Company in the Merger
or of the Family CPOs by the Selling Shareholders in the manner contemplated by
this Agreement, (b) the issuance of beneficial interests in the Controlling
Trust to the Investor against transfer of Series A Shares to the Controlling
Trust in the manner contemplated by this Agreement, (c) the issuance of CPOs to
the Investor against the transfer of Series A Shares to the CPO Trust in the
manner contemplated by this
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<PAGE> 20
Agreement, (d) the issuance of ADRs evidencing ADSs to the Investor against
deposit with the Depositary of CPOs by the Investor in the manner contemplated
by this Agreement, or (e) the consummation of any other transactions
contemplated by this Agreement and the other Transaction Documents.
3.1.5 Dividends and Distributions. Under current
applicable Mexican laws and regulations, all dividends and other distributions
declared or to be declared and payable on the Series A Shares will be paid in
Mexican pesos, as appropriate, through the Controlling Trust to the beneficial
owners of the Controlling Trust or through the CPO Trustee to the holders of
CPOs, including the Depositary, and such Mexican pesos may be converted into
foreign currency that may be freely transferred outside of Mexico; and all such
dividends and other distributions made to holders of ADSs, CPOs, or beneficial
interests in the Controlling Trust Agreement who are not residents of Mexico
are not subject to Mexican withholding or other taxes under Mexican laws and
regulation and are otherwise free and clear of any tax, duty, withholding or
deduction in Mexico and do not require the obtaining of any governmental
authorization in Mexico; and all cash dividends or distributions received by
the CPO Trustee through Indeval on behalf of the CPO Trustee will be
distributed to the holders of CPOs, including the Depositary, no later than
five business days after the dividend or distribution is received by the CPO
Trustee through Indeval.
3.1.6 Subsidiaries of the Company. Schedule 3.1.6 of the
Company Disclosure Schedule sets forth a true and complete list of all of the
Company's Subsidiaries, together with the jurisdiction of incorporation or
organization of each such Subsidiary and the percentage of each such
Subsidiary's outstanding capital stock or other equity interests owned by the
Company or another Subsidiary of the Company. All outstanding shares of
capital stock of, or other ownership interests in, each Subsidiary of the
Company have been validly issued and are fully paid and nonassessable and are
owned directly or indirectly by the Company, free and clear of all liens,
pledges, voting agreements, voting trusts, proxy agreements, claims, charges,
security interests, restrictions, mortgages, deeds of trust, tenancies, and
other possessory interests, conditional sale or other title retention
agreements, assessments, easements, rights of way, covenants, restrictions,
rights of first refusal, defects in title, encroachments, and other burdens,
options, rights of others, or encumbrances of any kind (collectively, "Liens").
No shares of any corporation or any ownership or other investment interest,
either of record, beneficially or equitably, in any person are owned or held by
the Company or any Subsidiary of the Company. There are no (i) options,
warrants, calls, subscriptions, conversion or other rights, agreements or
commitments obligating the Company or any of its Subsidiaries to issue, sell or
transfer any shares of capital stock of, or any equity interest in the Company
or any such Subsidiary, or any securities convertible into, exchangeable for or
evidencing the right to subscribe for such capital stock or equity interests or
(ii) outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any such capital stock
or equity interests.
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3.1.7 No Conflicts; Required Consents.
(a) The execution and delivery by the Company of this
Agreement and the other Transaction Documents to which it is a party do not,
and the performance by the Company, the Selling Shareholders, or other parties
to this Agreement or any Transaction Document of the transactions contemplated
hereby or thereby to be performed by it will not, subject to obtaining the
consents, approvals, orders or authorizations and making the filings referred
to below, (i) violate, conflict with or result in a breach of any provision of
the Charter of the Company or the Charter of any of its Subsidiaries, (ii)
conflict with, or result in any violation or breach of, or constitute a default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a benefit under, or give any person the right to require any security to be
repurchased under, any permits, licenses, instruments, franchises, concessions,
authorizations and approvals (collectively, "Permits") or any contract, order,
judgment or decree to which the Company or any of its Subsidiaries is a party,
by which any of their respective properties are bound, or that are used by the
Company or any of its Subsidiaries under management agreements, (iii)
constitute a violation of any laws, statutes, rules, regulations, ordinances,
judgments, orders, decrees, injunctions, and writs of any Governmental Entity
(defined in Section 3.1.7(c)) having jurisdiction over the Company or any of
its Subsidiaries or the Business, operations, properties or assets of the
Company or its Subsidiaries, as they may be in effect on or before the Closing
("Law"), or (iv) conflict with or result in a breach of any of the terms and
provisions of, or constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) or require consent under, or
result in the creation or imposition of any Lien upon any property of the
Company or any of its Subsidiaries pursuant to the terms of any agreement to
which the Company or any of its Subsidiaries is a party or by which any of such
entities or their respective properties may be bound or under which the Company
or any of its Subsidiaries owns or operates any of their respective properties
or the Business.
(b) Neither the Company nor any of its Subsidiaries (i)
is in violation of any of their respective Charter, (ii) is in default in the
due performance or observance of any agreement or instrument to which the
Company or any Subsidiary is a party or by which it or any of them or any of
their respective properties may be bound (and no event has occurred which, with
notice or lapse of time or both, would constitute such a default), except for
such defaults as would not have a Material Adverse Effect, (iii) is in
violation of any Law to which it or its property may be subject, except for
such violations as would not have a Material Adverse Effect, or (iv) has failed
to obtain and have in full force and effect any material Permit necessary for
the conduct of its business or the ownership or lease of its property.
(c) Schedule 3.1.7 of the Company Disclosure Schedule
sets forth a complete and correct list of all consents, approvals, orders and
Permits of, and registrations, declarations and filings with, any third party
or any governmental or regulatory department, commission, board, bureau,
agency, court or other instrumentality of the United States, Mexico or any
state, county, parish or municipality, jurisdiction, or other political
subdivision thereof (including the SECOFI, CFC, CNBV, Bolsa, United States
Department of Justice and United States Federal Trade Commission)
("Governmental Entity") (including any consent, approval or authorization with
respect to any contract, Permit or Environmental Permit (defined in Section
3.1.26)) that is required to be obtained
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<PAGE> 22
or made by or with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement and any other
Transaction Documents by the Company or the performance by the Company of the
transactions contemplated hereby or thereby to be performed by it.
3.1.8 Capital Stock.
(a) The authorized capital stock of the Company as of the
date hereof consists solely of 247,414,768 Series A Shares, of which
193,133,744 shares are issued and outstanding. All the issued and outstanding
shares of Series A Shares have been duly authorized and validly issued,
represent the fixed portion of the capital stock, are fully paid and
nonassessable, and were not issued in violation of any preemptive or similar
rights. The Company's Charter as of the date hereof provides for Series "L"
Shares but no Series "L" Shares are issued or outstanding. Schedule 3.1.8 of
the Company Disclosure Schedule hereof sets forth the record ownership of all
capital stock of the Company that is issued and outstanding on the date hereof,
and will be issued and outstanding immediately before the Closing, including
the names, addresses and number of shares held by each record shareholder.
There are no bonds, debentures, notes or other indebtedness issued or
outstanding having the right to vote ("Voting Debt") on any matters on which
holders of capital stock of the Company or capital stock of any of its
Subsidiaries listed on Schedule 3.1.6 of the Company Disclosure Schedule may
vote.
(b) Except for this Agreement and the other Transaction
Documents, there are no options, warrants, calls, subscriptions, conversion or
other rights, agreements or commitments obligating the Company or any of its
Subsidiaries listed in Schedule 3.1.6 of the Company Disclosure Schedule to
issue (i) any additional shares of capital stock of the Company, (ii) any other
securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of capital stock of the Company, or (iii) any Voting
Debt. There are no outstanding contractual obligations of the Company or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company. The shareholders of the Company have no
preemptive rights or other rights to acquire the CPOs or the Series A Shares
that have not been irrevocably waived. There are no restrictions on transfers
of the ADSs, the CPOs, or the Series A Shares, except as required by (A) the
Company's Charter, (B) the CPO Trust, (C) Mexican law with respect to the
ownership of the Series A Shares, (D) the Securities Act and (E) the Deposit
Agreement.
3.1.9 Title to Securities. Immediately after consummation
of the transactions contemplated hereby, the Investor will own, beneficially
and of record and free and clear of any Lien (except as arise under this
Agreement or any other Transaction Documents or that are imposed by the
Investor or its Affiliates), the securities it receives under this Agreement,
and such securities will be duly authorized, validly issued, fully paid, and
non assessable and will not have been issued in violation of any preemptive
rights. Immediately after consummation of the transactions contemplated
hereby, the Series A Shares in which the Investor is acquiring a financial
interest may be freely deposited by the Investor in the CPO Trust against
issuance of CPOs, and any CPOs acquired by the Investor may be freely deposited
with the Depositary against issuance of the ADRs representing
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<PAGE> 23
ADSs. The ADRs, ADSs, CPOs and Series A Shares conform in all material
respects to the descriptions thereof contained in the Company SEC Documents.
Immediately after consummation of the transactions contemplated hereby, the CPO
Trust will hold of record 230,066,073 Series A Shares and the Controlling Trust
will hold of record 88,696,919 Series A Shares (in each case free and clear of
all Liens except as arise under the Transaction Documents), which together will
represent all of the issued and outstanding capital stock of the Company.
3.1.10 Financial Statements.
(a) The Company has delivered to the Investor
Companies true and complete copies of (i) the audited consolidated balance
sheets of the Company at December 31, 1997, 1996, 1995, 1994 and 1993, together
with the related audited consolidated statements of income, shareholders'
equity and cash flows (sources and uses of cash) of the Company for the periods
then ended, and the notes thereto, accompanied by the reports thereon of BDO
International SC, independent public accountants and (ii) the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of March 31,
1998, together with the related unaudited consolidated statements of income,
shareholders' equity and cash flows for the three-month period then ended
(collectively, the "Financial Statements"). The Financial Statements,
including the notes thereto, have been prepared in accordance with Mexican
generally accepted accounting principles consistently applied throughout the
periods involved and have been reconciled with generally accepted accounting
principles in the United States ("GAAP") to the extent required by the Exchange
Act (except as noted therein); and the financial statement schedules thereto
present fairly the information required by the Exchange Act to be stated
therein; except for such deviation from GAAP as described in the Company SEC
Documents. All of the Financial Statements, including the related notes,
present fairly the consolidated financial position, results of operations,
changes in shareholders' equity and cash flows (sources and uses of cash) of
the Company as of such dates and for the periods indicated. References in this
Agreement to the "Balance Sheet Date" shall mean December 31, 1997, and to the
"Balance Sheet" shall mean the audited consolidated balance sheet of the
Company as of December 31, 1997.
(b) There is no liability or obligation of any kind,
whether accrued, absolute, fixed, contingent, or otherwise, of the Company or
its Subsidiaries that is not reflected or reserved against in the Balance Sheet
(or referred to in the footnotes to the Financial Statements), other than (i)
liabilities incurred in the ordinary course of business since the Balance Sheet
Date, or (ii) any such liability which would not be required to be presented in
financial statements or the notes thereto prepared in conformity with GAAP
applied, in a manner consistent with past practice, in the preparation of the
Financial Statements.
3.1.11 Registration Rights. No holder of securities of the
Company has any rights to the registration of securities of the Company,
whether exercisable currently, at a future date, or upon the occurrence of any
contingency.
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<PAGE> 24
3.1.12 Accounts Receivable. There are no discounts, trade
promotions or similar marketing arrangements that affect the collectibility or
value of any accounts receivable of the Company and its Subsidiaries other than
those set forth in the Company SEC Documents.
3.1.13 Books of Account. The books, records and accounts of
the Company and its Subsidiaries accurately and fairly reflect, in reasonable
detail, the transactions and the assets and liabilities of the Company and its
Subsidiaries, as applicable. Neither the Company nor any of its Subsidiaries
has engaged in any transaction, maintained any bank account or used any of the
funds of the Company or such Subsidiary except for transactions, bank accounts
and funds which have been and are reflected in the normally maintained books
and records of the Business.
3.1.14 Certain Agreements.
(a) Schedule 3.1.14 of the Company Disclosure Schedule
contains a complete and correct list of each:
(i) employment, union or consulting contract
(unless such employment or consulting contract is terminable without
liability or penalty on 30 days, or less notice);
(ii) contracts set forth on Schedule 3.1.29(b)
(relating to contracts with Affiliates) of the Company Disclosure
Schedule;
(iii) agreement, contract or commitment exceeding
US$250,000 in value;
(iv) distribution, dealer, representative or sales
agency agreement, contract or commitment, not cancelable by the
Company without material penalty or liability for damages upon no more
than 90 days' notice;
(v) agreement, contract or commitment for any
charitable or political contribution exceeding US$100,000 in value;
(vi) agreement, contract or commitment limiting or
restraining the Company, any of its Subsidiaries or any successor
thereto from engaging or competing in any manner or in any business
(and, to the knowledge of the Company, no employee of the Company is
subject to any such agreement, contract or commitment);
(vii) license, franchise, distributorship or other
agreement which relates in whole or in part to any material software,
patent, trademark, trade name, trade secret, service mark or copyright
or to any ideas, technical assistance or other know-how of or used by
the Company or any of its Subsidiaries (other than licenses or other
agreements relating to non-custom software packages used by the
Company or any of its Subsidiaries); or
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<PAGE> 25
(viii) other contract that is required to be filed
under the Exchange Act (or, with the passage of time, will be required
to be filed under the Exchange Act);
in any such case, to which the Company or either Subsidiary is a party or to
which the Company or either Subsidiary or their respective assets is bound
(such contracts listed or required to be listed being the "Material
Contracts"). Each Material Contract is a valid and binding obligation of the
Company or one of its Subsidiaries and is in full force and effect. The
Company or the relevant Subsidiary and, to the knowledge of the Company, each
other party to the Material Contracts, has performed in all material respects
the obligations required to be performed by it under the Material Contracts and
is not (with or without lapse of time or the giving of notice, or both) in
breach or default thereunder. To the knowledge of the Company, there is no
reason to believe that the other party or parties to each Material Contract for
which the Company or any of its Subsidiaries receives revenues or operates
radio stations (i) will not renew such Material Contract on substantially the
same terms as currently exist on or before the date such Material Contract
expires or (ii) will exercise any right of termination of such Material
Contract. A complete and correct copy of each written Material Contract set
forth in Schedule 3.1.14 of the Company Disclosure Schedule has been made
available to the Investor Companies before the date of this Agreement. With
respect to the Operating Agreement with Comercializadora Siete de Mexico, S.A.
de C.V., identified on Schedule 3.1.14, the Company Disclosure Schedule also
includes a true and correct summary of the principal terms of such Material
Contract, including payment terms, operating rights, and termination
provisions; summary of all principal communications and negotiations held
during the past year with respect to such Material Contract; and summary of the
Company's reasonable expectations about whether such Material Contract will be
renewed, the terms on which such renewal (if any) is likely to occur, and the
Company's plans if such Material Contract is not renewed.
(b) Schedule 3.1.14 of the Company Disclosure Schedule
sets forth each oral or written agreement, plan or arrangement of the Company
and any of its Subsidiaries with any employee or other radio station or
broadcast personnel (whether an employee, consultant or an independent
contractor) of the Company or its Subsidiary (i) the benefits of which are
contingent, or the terms of which are materially altered, upon, or result from,
the occurrence of a transaction involving the Company or its Subsidiary of the
nature of any of the transactions contemplated by this Agreement or the other
Transaction Documents, (ii) providing severance benefits longer than 45 days or
other benefits after the termination of employment or other contractual
relationship regardless of the reason for such termination and regardless of
whether such termination is before or after a change of control, (iii) under
which any person may receive payments subject to excess benefits or similar
taxes, or (iv) any of the benefits of which will be increased, or the vesting
of benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the other Transaction Documents
or the value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement or the other Transaction
Documents.
(c) The Company has made available to the Investor
Companies (i) true and correct copies of all loan or credit agreements, notes,
bonds, mortgages, indentures and other agreements and instruments pursuant to
which any indebtedness of the Company or any of its
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<PAGE> 26
Subsidiaries in an amount exceeding US$100,000 is outstanding or may be
incurred or pursuant to which the Company guarantees or otherwise secures the
indebtedness of any other person in an amount exceeding US$100,000, and (ii)
accurate information regarding the respective principal amounts currently
outstanding thereunder.
3.1.15 Personal Property. The Company and its Subsidiaries
have good title to, or a valid leasehold or license interest in, all of the
machinery, equipment (including the transmitter and studio equipment), computer
programs, computer software, tools, motor vehicles, furniture, furnishings,
leasehold improvements, office equipment, supplies, plant, spare parts, and
other tangible property which is owned or leased by the Company or its
Subsidiaries, which is used or held for use in their respective businesses or
operations as now conducted and which is material to the conduct of the
Business (the "Personal Property").
3.1.16 Liens and Encumbrances. All of the assets of the
Company and its Subsidiaries are free and clear of all Liens, except (i) Liens
set forth in the Company SEC Documents, (ii) Liens for Taxes (as defined in
Section 3.1.27) not delinquent or the validity of which is being contested in
good faith by appropriate proceedings and as to which adequate reserves have
been established on the Balance Sheet in accordance with GAAP consistently
applied throughout the periods indicated therein, (iii) Liens which in the
aggregate do not now have and cannot reasonably be expected in the future to
have a Material Adverse Effect, and (iv) statutory landlord's, workmen's,
repairmen's, labor compensation, unemployment insurance, social security or
other similar Liens arising or incurred in the ordinary course of business and
which are for amounts that are not yet overdue (clauses (ii) through (iv)
collectively the "Permitted Liens").
3.1.17 Intellectual Property. The Company or its
Subsidiaries own or have the unencumbered right to use pursuant to a valid,
binding and enforceable license agreement or other contract or arrangement all
Intellectual Property (as hereinafter defined) used by the Company or its
Subsidiaries in the Business. There are not pending or, to the knowledge of
the Company, threatened actions of any nature affecting the validity of, or
asserting any infringement or misappropriation of, the Intellectual Property.
There is, to the knowledge of the Company, no reasonable basis upon which any
claim may be asserted against the Company or any of its Subsidiaries for
infringement or misappropriation of any Intellectual Property. All letters
patent, registrations and certificates issued by any Governmental Entity
relating to any of the Intellectual Property owned by the Company or any of its
Subsidiaries and all licenses and other agreements pursuant to which the
Company or any of its Subsidiaries uses any of the Intellectual Property are
valid and subsisting and have been properly maintained, and neither the Company
nor any such Subsidiary, nor to the knowledge of the Company, any other person,
is in default or violation thereunder.
As used herein, "Intellectual Property" means all Trademarks,
Know-how, copyrights, copyright registrations and applications for
registration, Patents and all other intellectual property rights whether
registered or not, licensed to or owned by the Company or its Subsidiaries
relating to the business or operations of the Company and its Subsidiaries,
including the call letters of each of the radio stations of the Company and its
Subsidiaries and the goodwill related to the foregoing;
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<PAGE> 27
"Trademarks" means (a) trademarks, service marks, trade names, trade dress,
labels, logos, and all other names and slogans associated with any products or
embodying the goodwill of the business of any radio station, whether or not
registered, and any applications or registrations therefor and (b) any
associated goodwill incident thereto owned by the Company or its Subsidiaries;
"Know-how" means all plans, ideas, concepts and data, research records, all
promotional literature, customer and supplier lists and similar data and
information and all other confidential or proprietary technical and business
information; and "Patent" means all patent and patent applications (including
all reissues, divisions, continuations, continuations-in-part, renewals, and
extensions of the foregoing) owned by the Company or its Subsidiaries.
3.1.18 Condition of Assets. All the assets owned by the
Company are in good operating condition and repair, subject to normal wear and
maintenance, are usable in the regular and ordinary course of business and
conform to all applicable Laws, and all Permits issued to the Company or any of
its Subsidiaries by any Governmental Entity relating to their construction, use
and operation. Such assets, including licenses and leasehold interests,
constitute all assets and rights necessary to operate the Business as currently
conducted and as currently contemplated to be conducted.
3.1.19 Real Property.
(a) Owned Real Property. Title to all real property
owned by the Company or any of its Subsidiaries, together with all appurtenant
consents thereto and all structures, fixtures and improvements thereto (the
"Owned Real Property") is good and marketable, absolute, validly registered in
the appropriate public records, and free and clear of all Liens other than
Permitted Liens. The Company or its Subsidiaries has sufficient title to such
easements, rights of way and other rights appurtenant to each of the Owned Real
Properties as are necessary to permit ingress and egress to and from the Owned
Real Property to a public way, and the improvements on the Owned Real Property
have access to such sewer, water, gas, electric, telephone, and other utilities
as are necessary to allow the Business operated thereon to be operated in the
ordinary course and consistent with past practice. There are no lessees or
tenants at will in possession of any portion of the Owned Real Property other
than the Company or its Subsidiaries. No zoning, building or other federal,
state or municipal law, ordinance, regulation or restriction is violated in any
material respect by the continued maintenance, operation or use of the Owned
Real Property or any tract or portion thereof or interest therein in its
present manner. The current use of the Owned Real Property or any tract or
portion thereof by the Company or its Subsidiaries does not violate any
restrictive covenants of record affecting any of the Owned Real Property.
(b) Leased Real Property. All real property leases to
which the Company or any of its Subsidiaries is a party and that provide for a
monthly rental payment in excess of US$10,000 (the "Real Property Leases") are
valid, binding and enforceable in accordance with their terms, neither the
Company nor any of its Subsidiaries, as applicable, nor, to the knowledge of
the Company, any other party to any such Real Property Lease is in default
thereunder, and no event of default or other event that, with the giving of
notice and/or the passage of time, would constitute an event of default
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<PAGE> 28
has occurred thereunder with respect to the Company or any such Subsidiary or,
to the knowledge of the Company, any other party thereto. No condition exists
with respect to any Real Property Lease which would give the lessor or any
third party the right, before the expiration of the lease term, to dispossess
the Company or its Subsidiary, as the case may be, as lessee provided such
lessee complies with its lease obligations. To the knowledge of the Company,
each parcel of property leased by the Company (the "Leased Real Property") is
properly zoned for, or is entitled to exemption, which permits its present use
under applicable zoning ordinances, and there are no pending or, to the
knowledge of the Company, threatened actions or proceedings which could result
in a modification or termination of such zoning.
(c) Notices with Respect to Real Property. Neither the
Company nor any of its Subsidiaries has received notice that any Owned Real
Property or Leased Real Property is subject to any governmental decree or order
to be sold or is being condemned, expropriated or otherwise taken by any public
authority with or without payment of compensation therefor, nor, to the
knowledge of the Company, has any such condemnation, expropriation or taking
been proposed.
3.1.20 Insurance. Since January 1, 1993, the Company and
its Subsidiaries have been insured against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured.
3.1.21 Absence of Certain Changes. Since the Balance Sheet
Date, the Company and its Subsidiaries have conducted their respective
businesses only in the ordinary course consistent with past practice, and
nothing has occurred that would have been prohibited by Section 4.1 if the
terms of such Section had been in effect as of and after the Balance Sheet
Date. Since the Balance Sheet Date and to the date of this Agreement, other
than pursuant to this Agreement and the other Transaction Documents, there has
not been (a) any event, circumstance, or fact (whether or not covered by
insurance), individually or in the aggregate, that (i) has resulted in a
Material Adverse Effect on the Company or (ii) is reasonably likely to result
in a Material Adverse Effect on the Company other than, for purposes of this
clause (ii), any effect resulting directly and primarily from changes in
general economic conditions in Mexico (a "Material Adverse Change"); (b) any
event, circumstance, or fact (whether or not covered by insurance),
individually or in the aggregate, that materially impairs the operation of the
physical assets of the Company or its Subsidiaries; (c) any material change by
the Company in its accounting methods, principles or practices; (d) any
declaration, setting aside or payment of any dividend or distribution in
respect of any capital stock of the Company or its Subsidiaries (other than to
the Company or its Subsidiaries) or any redemption, purchase or other
acquisition of any of the Company's or its Subsidiaries' securities (other than
from the Company or its Subsidiaries); (e) other than as required by law, any
increase in, amendment to, or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option, stock
purchase or other employee benefit plan; (f) any general increase in
compensation, bonus or other benefits payable to the employees of the Company
or its Subsidiaries, except for increases occurring in the ordinary course of
business in accordance with its customary practice; (g) any declaration or
payment of any bonus to the employees of the Company except for bonuses accrued
or otherwise reflected on the Company's unaudited balance sheet as of
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<PAGE> 29
March 31, 1998; (h) any incurrence of indebtedness for borrowed money (not
including trade payables incurred in the ordinary course of business) or
assumption or guarantee of indebtedness for borrowed money by the Company or
any of its Subsidiaries (other than loans from the Company to any wholly owned
Subsidiary), or the grant of any Lien on the material assets of the Company or
its Subsidiaries to secure indebtedness for borrowed money, in each case in
excess of US$50,000; (i) any sale or transfer of any material assets of the
Company or its Subsidiaries other than in the ordinary course of business and
consistent with past practice and other than any disposition of obsolete
property or property in connection with the acquisition of replacement property
of equal value; (j) any loan, advance or capital contribution to or investment
in any person by the Company or any Subsidiary in excess of US$50,000
(excluding any loan, advance or capital contribution to, or investment in, the
Company or any wholly owned Subsidiary and employee advances of less than
US$25,000 made in the ordinary course of business); (k) any knowledge or
receipt of notice of any actual or threatened war, labor trouble, strike or
other occurrence, event or condition of any similar character which has had or
is reasonably likely to have a Material Adverse Effect; or (l) any acquisition
of businesses or assets by the Company or any of its Subsidiaries completed,
pending, contemplated or currently being negotiated, which are (or after the
passage of time or completion will be) required to be disclosed in the Company
SEC Documents.
3.1.22 Customers. There has not been any adverse change in
the business relationship of the Company or any of its Subsidiaries with any of
the 10 largest advertising or other customers of the Company or any of its
Subsidiaries, and the Company has no reason to believe that there will be any
such adverse change in the future either as a result of the consummation of the
transactions contemplated by this Agreement, the other Transaction Documents or
otherwise.
3.1.23 Personnel Information.
(a) Schedule 3.1.23(a) of the Company Disclosure Schedule
is a true, correct and complete list of the names of the five highest
compensated individuals taking into account salary and benefits per year, with
respect to officers, employees or consultants of the Company and its
Subsidiaries, except collective bargaining agreements, and the Company has
separately provided to the Investor Companies a description of all employment
or consultant contracts or arrangements of the Company and its Subsidiaries
involving such individuals.
(b) Schedule 3.1.23(b) of the Company Disclosure Schedule
is a true, correct and complete description of all of the collective bargaining
agreements relating to the Company and its Subsidiaries and, before the date of
this Agreement, the Company has delivered to the Investor true and complete
copies of each such collective bargaining agreement. Neither the Company nor
any of its Subsidiaries is a party to any written or oral employment or
consultant contract or arrangement with any officer or employee of the Company
or its Subsidiaries in excess of US$100,000.
(c) Schedule 3.1.23(c) of the Company Disclosure Schedule
is a true, correct and complete list of all benefit plans for the personnel of
the Company and its Subsidiaries including profit sharing, stock options, stock
purchase, bonus, pension, retirement, employee group insurance and
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<PAGE> 30
all other employee benefit plans, other than as required by Law or by
collective bargaining agreements disclosed in the Company SEC Documents and,
before the date of this Agreement, the Company has delivered to the Investor
Companies true and complete copies of each such benefit plan. Neither the
Company nor its Subsidiaries is a party to any such benefit plans other than as
required by Law or by collective bargaining agreements disclosed in Schedule
3.1.23(b) of the Company Disclosure Schedule.
(d) There are no labor strikes, disputes, disturbances,
lockouts, slowdowns, stoppages or grievances against the Company or any of its
Subsidiaries that are pending or, to the knowledge of the Company, threatened,
which in either case could reasonably be expected to have a Material Adverse
Effect. The Company and its Subsidiaries are and have been in compliance for
the past five years with all applicable Laws regarding employment and
employment practices and those laws relating to terms and conditions of
employment, wages and hours, occupational safety and health and workers'
compensation and are not engaged in any unfair labor practices, and all
material payments thereof or pursuant to any collective bargaining agreement,
management agreement or employment agreement have been paid or accrued as a
liability on the books of the Company or the relevant Subsidiary in accordance
with GAAP.
(e) The Company does not have any reason to believe that
any employee material to the Business will terminate his or her employment with
the Business as a result of the consummation of the transactions contemplated
by this Agreement, the other Transaction Documents or otherwise. Neither the
execution and delivery of this Agreement or the other Transaction Documents nor
the consummation of the transactions contemplated hereby or thereby will: (i)
result in any payment becoming due to any employee (current, former or retired)
of the Company or any of its Subsidiaries; (ii) increase any benefits under any
employee plan or any arrangement described on Schedule 3.1.23(c) of the Company
Disclosure Schedule; or (iii) result in the acceleration of the time of payment
or vesting of any such benefits.
3.1.24 Absence of Litigation. There are no judicial or
administrative actions, proceedings or investigations pending or, to the
knowledge of the Company, threatened that question the validity of this
Agreement or any other Transaction Document or any action taken or to be taken
by the Company, the Selling Shareholders, or the Family Shareholders in
connection with this Agreement or any other Transaction Document. There are no
material (i) lawsuits, actions, claims, administrative or other proceedings or
investigations relating to the conduct of the Business pending or, to the
knowledge of the Company, threatened by, against or affecting the Company, any
Affiliate thereof or the assets of the Company or any of its Subsidiaries, or
(ii) judgments, injunctions, orders, determinations, awards, settlement
agreements, or decrees of any Governmental Entity binding on the Company, any
of the Company's Subsidiaries or any of their respective assets.
3.1.25 Compliance With Law; Permits.
(a) The Company and its Subsidiaries have complied with
each Law to which the Company, such Subsidiaries or their respective
businesses, operations, assets or properties are subject
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<PAGE> 31
and are not currently in violation of any of the foregoing, except for minor
failures to comply which, applying the full extent of the sanction for such
non-compliance, could not individually or in the aggregate have a Material
Adverse Effect. No investigation or review by any Governmental Entity with
respect to the Company or its Subsidiaries is pending or, to the knowledge of
the Company, threatened. The Company and each of its Subsidiaries has duly and
timely filed or caused to be so filed, all material forms, reports, statements,
and other documents required under applicable Law to be filed with any and all
Governmental Entities. All such material forms, reports, statements and other
documents required under applicable Law to be filed with any Governmental
Entity (other than the Company SEC Documents and the Tax Returns) are referred
to herein, collectively, as the "Company License Reports." All such Company
License Reports complied in all material respects with applicable Law when
made, and no deficiencies have been asserted with respect to any such filings.
The Company and its Subsidiaries are in compliance in all material respects
with the provisions of applicable Law relating to materials to be kept in the
public inspection files.
(b) Schedule 3.1.25 of the Company Disclosure Schedule
contains a complete, correct and true list of all licenses and concessions from
the Mexican Ministry of Communication and Transportation (Secretaria de
Comunicaciones y Transportes") (the "SCT") owned or used by the Company and its
Subsidiaries for the broadcast of radio transmissions in Mexico, together with
the licence number and other government identification, radio frequency to
which it relates, call letters or numbers of the radio station to which it
relates, location for permitted use, and expiration date of the license. The
Company has provided the Investor Companies with true and complete copies of
all such licenses and concessions and any agreements, decrees or other
instruments that modify or affect the terms of such licenses or concessions.
The Permits (which include such licenses and concessions) held by the Company
and its Subsidiaries constitute all the licenses, permits, and authorizations
required for the operation of the Business, each of the Permits is in full
force and effect, and no Permit contains a materially burdensome restriction
not adequately disclosed in the Company SEC Documents. The Business has been
operated in all material respects in accordance with the terms of the Permits
and the Company and its Subsidiaries are otherwise in compliance with, and have
conducted the Business so as to comply with, the terms of such Permits. There
are no proceedings pending against the Company or any of its Subsidiaries or,
to the knowledge of the Company, threatened with respect to the Company's
ownership or operation of the Business which reasonably may be expected to
result in the revocation, material adverse modification, non-renewal, or
suspension of any of the Permits, the denial of any pending applications for
any Permits, the issuance against the Company or any of its Subsidiaries of any
cease and desist order, or the imposition of any administrative actions,
including the proposed assessment of fines and penalties, by any Governmental
Entity with respect to any Permits, or which reasonably may be expected to
adversely affect the operation of the Business as currently conducted, or the
Company's or any Subsidiary's ability to operate the Business. To the
knowledge of the Company, no other broadcast station or radio communications
facility is causing interference to any transmissions by the Company or its
Subsidiaries beyond that which is allowed by applicable Law, and the Business
is not causing interference to any other broadcast station or radio
communications facilities' transmissions beyond that which is allowed by
applicable Law. To the knowledge of the Company, there is no reason to believe
that the applicable Governmental Entity will not renew any of the Permits
issued thereby in
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<PAGE> 32
the ordinary course of business. To the knowledge of the Company, there are no
facts relating to any Selling Shareholder, the Family Trust, any beneficiary of
the Family Trust, the Controlling Trust Agreement, the Company or its
Subsidiaries that have disqualified or reasonably may be expected to prevent
the consummation by the Company of the transactions contemplated by this
Agreement or the other Transaction Documents.
3.1.26 Environmental Matters.
(a) The operation of the Business is in compliance with
all applicable Environmental Laws, except where noncompliance could not
reasonably be expected to result in Environmental Costs and Liabilities in
excess of US$10,000 individually or US$50,000 in the aggregate;
(b) The Company and its Subsidiaries have obtained and
currently maintain all Environmental Permits necessary for their operations and
are in compliance with such Environmental Permits, (i) there are no judicial or
administrative actions, proceedings or investigations pending or, to the
knowledge of the Company, threatened to revoke such Environmental Permits, and
(ii) none of the Company or any of its Subsidiaries has received any notice
from any Governmental Entity or written notice from any person to the effect
that there is lacking any Environmental Permit required for the current use or
operation of any property owned, operated or leased by the Company or any of
its Subsidiaries;
(c) there are no judicial or administrative actions,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries alleging the
violation of any Environmental Law or Environmental Permit;
(d) none of the Company or any of its Subsidiaries, to
the knowledge of the Company, any predecessor of the Company or such
Subsidiaries or, to the knowledge of the Company, any current or former owner
or operator of premises currently leased or operated by the Company or such
Subsidiaries has filed any notice under any Environmental Law indicating past
or present treatment, storage, or disposal of or reporting a Release or
threatened Release of Hazardous Material into the environment;
(e) neither the Company, any of its Subsidiaries nor, to
the knowledge of the Company, any of their past or current facilities and
operations, or, to the best of the Company's knowledge, any predecessor of the
Company or such Subsidiaries, is subject to any outstanding written order,
injunction, judgment, decree, ruling, assessment or arbitration award or any
agreement with any Governmental Entity or other person, or to any federal,
state, local or foreign investigation respecting (i) Environmental Laws, (ii)
Remedial Action, (iii) any Environmental Claim, or (iv) the Release or
threatened Release of any Hazardous Material;
(f) all the Owned Real Property and Leased Real Property
(collectively, the "Real Property") and, to the best of the Company's
knowledge, all real property formerly owned, operated
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<PAGE> 33
or leased by the Company, any of its Subsidiaries or any predecessor of the
Company or any such Subsidiary, is free of contamination by or from any
Hazardous Materials at concentrations exceeding those allowed by Environmental
Laws;
(g) none of the operations of the Company or any of its
Subsidiaries nor, to the best of the Company's knowledge, any predecessor of
the Company or any such Subsidiary or any owner or operator of premises
currently leased or operated by the Company or any such Subsidiary involves or
previously involved the generation, transportation, treatment, storage or
disposal of hazardous waste as defined by applicable Law;
(h) there is not now, nor (to the Company's knowledge for
all periods before its ownership, lease or operation of such real property) has
there been in the past, on, in or under the Real Property or any other real
property currently or formerly owned, leased or operated by the Company, any of
the Company's Subsidiaries or any of their respective predecessors any
underground storage tanks, above-ground storage tanks, dikes or impoundments
containing (i) Hazardous Materials, (ii) any asbestos-containing materials,
(iii) any polychlorinated biphenyls, or (iv) any radioactive substances; and
(i) none of the Company or any of its Subsidiaries is
subject to Environmental Costs and Liabilities with respect to Hazardous
Materials, and no facts or circumstances exist which could give rise to
Environmental Costs and Liabilities in excess of US$100,000 individually or in
the aggregate.
(j) For purposes of the foregoing Section 3.1.26:
"Environmental Claim" means any accusation, allegation, notice
of violation, action claim, Lien, demand, abatement or other order or
directive (conditional or otherwise) by any Governmental Entity or any
other person (including any employee or former employee of any
contractor or subcontractor of the Company or any of its Subsidiaries)
for personal injury (including sickness, disease or death), tangible
or intangible property damage, damage to the environment (including
natural resources), nuisance, pollution, contamination, trespass or
other adverse effects on the environment, or for fines, penalties or
restrictions resulting from or based upon (i) the existence, or the
continuation of the existence, of a Release (including sudden or
non-sudden accidental or non-accidental Releases) of, or exposure to,
any Hazardous Material, odor or audible noise in, into or onto the
environment (including the air, soil, surface water or ground water)
at, in, by, from or related to the Real Property or any other property
currently or formerly owned, operated or leased by the Company or any
of its Subsidiaries or any activities or operations thereof, (ii) the
transportation, storage, treatment or disposal of Hazardous Materials
in connection with the Real Property or any other property currently
or formerly owned, operated or leased by the Company or any of its
Subsidiaries or the operation of the Business, or (iii) the violation,
or alleged violation, of any Environmental Laws or Environmental
Permits relating to environmental matters connected
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<PAGE> 34
with the Real Property or any other property currently or formerly
owned, operated or leased by the Company or any of its Subsidiaries or
the operation of the Business.
"Environmental Costs and Liabilities" shall mean any and all
losses, liabilities, obligations, damages, fines, penalties,
judgments, actions, claims, costs and expenses (including fees,
disbursements and expenses of legal counsel, experts, engineers and
consultants and the costs of investigation and feasibility studies,
remedial or removal actions and cleanup activities) arising from or
under any Environmental Law or Environmental Claim or any order or
agreement now in effect with any Governmental Entity or other person.
"Environmental Law" means any applicable federal, state or
local law, statute, code, ordinance, rule, regulation or other
requirement of Mexico or any of its political subdivisions relating to
the environment, natural resources, or public and employee health and
safety.
"Environmental Permit" means any permit, approval,
authorization, license, variance, registration, or permission required
under any applicable Environmental Law.
"Hazardous Material" means any substance, material or waste
which is regulated by any Governmental Entity, including any material,
substance or waste which is defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous substance,"
"restricted hazardous waste," "contaminant," "toxic waste" or "toxic
substance" under any provision of any Environmental Law, which
includes petroleum, petroleum products (including crude oil and any
fraction thereof), asbestos, asbestos-containing materials, urea
formaldehyde and polychlorinated biphenyls.
"Release" means any release, spill, emission, leaking,
pumping, pouring, dumping, emptying, injection, deposit, disposal,
discharge, dispersal, leaching or migration of a Hazardous Material on
or into the indoor or outdoor environment or into or out of any
property; but shall exclude any release, discharge, emission or
disposal in material compliance with an effective permit or order of a
Governmental Entity.
"Remedial Action" means all actions, including any capital
expenditures, required or voluntarily taken to (i) clean up, remove,
treat, or in any other way address any Hazardous Material or other
substance, (ii) prevent the Release or threat of Release, or minimize
the further Release, of any Hazardous Material so it does not migrate
or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (iii) perform pre-remedial studies and
investigations or post-remedial monitoring and care, or (iv) bring
facilities on any property owned, operated or leased by the Company or
any of its Subsidiaries and the facilities located and operations
conducted thereon into compliance with all Environmental Laws and
Environmental Permits.
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<PAGE> 35
3.1.27 Taxes.
(a) All Tax Returns (as defined in Section 3.1.27(f))
that are required to be filed on or before the Closing Date by the Company or
any of its Subsidiaries have been duly filed (or will be duly filed on or
before the Closing Date) on a timely basis. All such Tax Returns are true,
complete and accurate in all material respects. All Taxes (as defined in
Section 3.1.27(f)) which are due with respect to the Company or any of its
Subsidiaries have been timely paid, whether or not such Taxes are disputed,
except for those Taxes the validity of which is being contested in good faith
by appropriate proceedings and as to which adequate reserves have been
established on the Balance Sheet in accordance with GAAP. Neither the Company
nor any of its Subsidiaries has executed or filed with the applicable taxing
authority any agreement extending the period for filing any Tax Return. With
respect to any Taxes which are not yet due and owing, the Company made due and
sufficient accruals for all such Taxes in its financial statements. The
Company and its Subsidiaries have made all payments of estimated Taxes
sufficient to avoid any understatement penalties.
(b) No claim for assessment or collection of Taxes has
been asserted against the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries is a party to any pending audit, action,
proceeding or investigation by any Governmental Entity for the assessment or
collection of Taxes nor does the Company have knowledge of any such threatened
audit, action, proceeding or investigation.
(c) Neither the Company nor any of its Subsidiaries has
waived or extended any statute of limitation for the assessment or collection
of Taxes. No claim has ever been made by a Governmental Entity in a
jurisdiction where the Company or any of its Subsidiaries does not currently
file Tax Returns that any of them is, or may be, subject to taxation by that
jurisdiction nor is the Company aware that any such assertion of jurisdiction
is threatened. No Liens have been imposed upon or asserted against any of the
assets of the Company or any of its Subsidiaries as a result of or in
connection with any failure, or alleged failure, to pay any Tax.
(d) The Company and its Subsidiaries have withheld and
paid all Taxes required to be withheld or paid in connection with any amounts
paid or owing to any employee, creditor, independent contractor or other third
party.
(e) Neither the Company nor any of its Subsidiaries has
ever been included as a member of any consolidated, combined or unitary Tax
Return and has never been a party to any tax sharing, tax allocation or similar
agreement, except for arrangements solely among the Company and its
Subsidiaries.
(f) For purposes of this Agreement, the terms "Tax" and
"Taxes" shall mean all federal, state, local, or foreign income, payroll,
withholding, unemployment insurance, social security, INFONAVIT, sales, use,
service, service use, leasing, leasing use, excise, franchise, gross receipts,
value added, alternative or add-on minimum, estimated, occupation, real and
personal property, stamp, transfer, workers' compensation, severance,
environmental or other tax, charge, fee, levy or
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<PAGE> 36
assessment of the same or of a similar nature, including any interest, penalty,
or addition thereto, whether disputed or not. The term "Tax Return" means any
return, declaration, report, claim for refund, or information return or
statement relating to Taxes or any amendment thereto, and including any
schedule or attachment thereto.
3.1.28 Commissions or Finders' Fees. None of the Company
nor any of its Affiliates nor any person acting on behalf of the Company or any
such Affiliate has agreed to pay a commission, finder's fee or similar payment
to any person in connection with this Agreement, the other Transaction
Documents or any matter related hereto or thereto.
3.1.29 Certain Business Practices and Regulations; Potential
Conflicts of Interest.
(a) None of the Company, any of its Subsidiaries nor any
of their respective Affiliates, directors, officers, agents or employees has
(i) used any corporate funds for unlawful contributions, gifts, entertainment
or other unlawful expenses relating to political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns from corporate funds or
violated any provision of the United States law known as the Foreign Corrupt
Practices Act of 1977, as amended, as though such law were applicable to the
Company and its Subsidiaries, or (iii) made any other unlawful payment.
(b) None of the Family Shareholders, other 5% or more
beneficial owners (directly or indirectly), officers or directors of the
Company, any Subsidiary or other Affiliate of the Company or any person
controlled by any of the foregoing (i) owns, directly or indirectly, any
significant interest in, or is a director, officer, employee, consultant or
agent of, any person that is a competitor, lessor, lessee or customer of, or
supplier of goods or services to, the Business, (ii) owns, directly or
indirectly, in whole or in part, any real property, leasehold interests or
other property with a fair market value of at least US$60,000 in the aggregate
the use of which is necessary for the Business, (iii) has any cause of action
or other suit, action or claim whatsoever against, or owes any amount to the
Company or any of its Subsidiaries other than claims in the ordinary course of
business, (iv) has sold to or purchased from the Company or any of its
Subsidiaries any assets or property for aggregate consideration in excess of
US$60,000 since January 1, 1993, or (v) is a party to any contract or
participates in any arrangement, written or oral, pursuant to which the
Business provides services of any nature to any such person, except to such
person in his capacity as an employee of the Business.
(c) No shareholder, director, officer, employee or former
employee of the Company or any Affiliate of the Company, or any other person,
firm or corporation owns or has any proprietary, financial or other interest
(direct or indirect) in any contracts or other arrangements involving the
Company or its Subsidiaries, including indebtedness to the Company or its
Subsidiaries, or Permits which the Company or any of its Subsidiaries own,
possess or use in the operation of the Business as now or previously conducted.
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<PAGE> 37
3.1.30 Not an Investment Company. The Company is not and,
after giving effect to the transactions contemplated by this Agreement and the
other Transaction Documents, will not be an "investment company" as defined in
the Investment Company Act of 1940.
3.1.31 No U.S. Assets or U.S. Revenues. The Company
(including all entities controlled by the Company) does not hold assets in the
United States having an aggregate book value of US$15,000,000 or more as of the
Balance Sheet Date, nor did it make aggregate sales in or into the United
States of US$25,000,000 or more in the year ending December 31, 1997, nor will
it have such assets or sales at or during the year ended December 31, 1998.
3.1.32 No Manipulation or Stabilization. None of the
Company or its Affiliates, nor any affiliated purchaser (as defined in
Regulation M under the Exchange Act) has taken or will take, directly or
indirectly, any action designed to stabilize or manipulate the price of any
security of the Company or which has caused or resulted in, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company, whether such action
is taken in the United States, Mexico or elsewhere.
3.1.33 Trade Deals. Schedule 3.1.33 of the Company
Disclosure Schedule correctly sets forth as of May 31, 1998, in all material
respects the balance, in dollar value, of both (a) the Company's and its
Subsidiaries' obligations to the other parties under each Trade Deal (as
hereinafter defined) in effect as of May 31, 1998 (as indicated on Schedule
3.1.33 of the Company Disclosure Schedule), and (b) the amount due the Company
or each of its Subsidiaries under such Trade Deals as of May 31, 1998 (as
indicated on Schedule 3.1.33 of the Company Disclosure Schedule). As used
herein, "Trade Deal" means an exchange by the Company and its Subsidiaries of
their advertising time for goods or services, other than in connection with the
licensing of programs and programming material.
3.1.34 Investment Intent. The Company is an "accredited
investor" as defined in Regulation D under the Securities Act. The Chancellor
Stock to be acquired by the Company under this Agreement is being acquired for
its own account, for investment and with no intention of distributing or
reselling such Chancellor Stock or any part thereof or interest therein in any
transaction which would be a violation of the securities laws of the United
States or any state or any foreign jurisdiction. The Company acknowledges that
the Chancellor Stock to be acquired by it will be "restricted securities" as
defined in Rule 144 under the Securities Act.
3.2 Representations and Warranties of the Selling Shareholders.
Each Selling Shareholder, severally as to himself or herself and not jointly,
represents and warrants to the Investor Companies as follows (in each case as
qualified by matters reflected on the disclosure schedule dated as of the date
of this Agreement and delivered by the Selling Shareholders to the Investor
Companies on or before the date of this Agreement (the "Selling Shareholder
Disclosure Schedule") and in the Company SEC Documents and made a part hereof
by reference, each such matter qualifying each representation and warranty, as
applicable, notwithstanding any specific section or schedule reference or lack
thereof), with the understanding that the Investor Companies are relying on
such
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<PAGE> 38
representations and warranties in entering into and performing this Agreement
and the other Transaction Documents, and such representations and warranties
shall be unaffected by any investigation heretofore or hereafter made by any
Investor Company:
3.2.1 Owners of Shares and Beneficial Interests. As of the
date of this Agreement, such Selling Shareholder is the holder of record of
that number of Series A Shares and CPOs and, as of the Closing Date, will be
the holder of record and will own beneficially that number of Series A Shares
or CPOs, as set forth opposite his or her name on Schedule 3.2.1 of the Selling
Shareholder Disclosure Schedule hereto, free and clear of all Liens (other than
Liens arising pursuant to the Transaction Documents). Schedule 3.2.1 of the
Selling Shareholder Disclosure Schedule also sets forth the names, addresses,
amount of economic interest (which may be expressed as a number of underlying
Series A Shares or CPOs), and voting percentage and other control and voting or
veto rights and understandings of each beneficiary of each of the 1992 Trust
and the Family Trust as of the date hereof and as they will exist immediately
before the Closing.
3.2.2 Authority. Such Selling Shareholder has full legal
capacity to execute and deliver this Agreement and the other Transaction
Documents to which such Selling Shareholder is a party and to perform the
obligations of such Selling Shareholder hereunder and thereunder. With respect
to each Selling Shareholder that is married under separacion de bienes or, if
married under sociedad conyugal, his or her spouse, by executing this Agreement
solely for purposes of this Section 3.2.2, has consented to such Selling
Shareholder's execution of this Agreement and all other Transaction Documents
to be executed by him or her in connection with the transactions contemplated
hereby or thereby. This Agreement and the other Transaction Documents have
been, or upon execution and delivery will be, duly and validly executed and
delivered by such Selling Shareholder and constitute a valid and binding
obligation of such Selling Shareholder, enforceable against such Selling
Shareholder in accordance with their respective terms.
3.2.3 No Restrictions; Required Consents. The execution
and delivery of this Agreement and the other Transaction Documents to which it
is a party by such Selling Shareholder does not, and the performance by such
Selling Shareholder of the transactions contemplated hereby or thereby to be
performed by it will not, subject to obtaining the consents, approvals, orders
or authorizations and making the filings referred to below, (a) violate,
conflict with, or result in any violation of, or constitute a default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
benefit under, any contract, permit, order, judgment or decree to which such
Selling Shareholder is a party, (b) constitute a violation of any Law
applicable to such Selling Shareholder, or (c) result in the creation of any
Lien upon any of the securities to be delivered pursuant to this Agreement or
upon the Family Trust, the Controlling Trust or the Company (except as arise
under the Transaction Documents). No consent, approval, order or authorization
of, or registration, declaration or filing with, any third party or
Governmental Entity is required to be obtained or made by or with respect to
such Selling Shareholder in connection with the execution and delivery of this
Agreement and the other Transaction Documents to which it is a party by such
Selling Shareholder or the performance by such Selling Shareholder or the
Company of the transactions contemplated hereby or thereby to be performed by
it.
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<PAGE> 39
3.2.4 Litigation. There is no action, suit, or proceeding
pending, or to the knowledge of such Selling Shareholder, threatened against
such Selling Shareholder or its property which could reasonably be expected,
individually or in the aggregate, to affect the execution, delivery or
performance of this Agreement or the other Transaction Documents to which it is
a party, or the consummation of the transactions contemplated hereby or
thereby.
3.2.5 Title to Securities. Upon the sale by the Selling
Shareholder of Family CPOs to the Investor against payment therefor pursuant to
this Agreement, the Investor will receive good and valid title to such Family
CPOs, free and clear of all Liens (except as arise under the Transaction
Documents or that are imposed by the Investor or its Affiliates).
3.2.6 Power of Attorney. Each of Messrs. Adrian Aguirre
Gomez, Carlos de Jescs Aguirre Gomez, and Rafael Felipe de Jescs Aguirre Gomez
is the true and lawful agent and attorney-in-fact of such Selling Shareholder,
with any two of them acting together having full power and authority to
exercise and deliver for and on behalf of the Selling Shareholder this
Agreement, the other Transaction Documents, and all consents, waivers,
amendments, certificates, governmental filings and other documents to be
executed or delivered by or on behalf of such Selling Shareholder in connection
therewith.
3.3 Representations and Warranties of the Family Trust. In
addition to its representations and warranties set forth in Section 3.2, the
Family Trust represents and warrants to the Investor Companies as follows (in
each case as qualified by matters reflected on the disclosure schedule dated as
of the date of this Agreement and delivered by the Family Trust to the Investor
Companies on or before the date of this Agreement (the "Family Trust Disclosure
Schedule") and made a part hereof by reference, each such matter qualifying
each representation and warranty, as applicable, notwithstanding any specific
section or schedule reference or lack thereof) to the Investor Companies (with
the understanding that the Investor Companies are relying on such
representations and warranties in entering into and performing this Agreement
and the other Transaction Documents), and such representations and warranties
shall be unaffected by any investigation heretofore or hereafter made the
Investor Companies:
3.3.1 Organization. The Family Trust has been duly formed
and is validly existing as a trust under the laws of Mexico.
3.3.2 Authority. The Family Trust has full power and
authority to enter into each of this Agreement and the other Transaction
Documents to which it is a party; each of this Agreement and the other
Transaction Documents to which it is a party, and the transactions contemplated
hereby or thereby (including the voting of all Series A Shares held by the
Family Trust in favor of the Merger and the transactions contemplated hereby)
have been duly and validly authorized by the Family Trust and its
beneficiaries; each of this Agreement and the other Transaction Documents to
which it is a
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party have been duly and validly executed and delivered by the Family Trust;
and each of this Agreement and the other Transaction Documents to which it is a
party are valid and binding obligations of the Family Trust, enforceable
against the Family Trust in accordance with its terms.
3.3.3 Vote at Shareholders Meeting. The Family Trust has
given an irrevocable power of attorney and instruction to Messrs. Adrian
Aguirre Gomez, Carlos de Jescs Aguirre Gomez, and Rafael Felipe de Jescs
Aguirre Gomez, any two of them acting together, with respect to the
extraordinary meeting of shareholders of the Company to consider the Merger and
the transactions contemplated hereby and has irrevocably instructed such
attorneys to vote in favor of the Merger, the Merger Agreement, the Transaction
Documents, and the transactions contemplated hereby and thereby.
3.3.4 Title to Securities. Upon the transfer by the Family
Trust of Series A Shares to the Controlling Trust pursuant to this Agreement,
the Controlling Trust will receive good and valid title to such Series A
Shares, free and clear of all Liens (except as arise under the Transaction
Documents).
3.4 Representations and Warranties of Chancellor. Chancellor
represents and warrants to the Company as follows (in each case as qualified by
matters reflected on the disclosure schedule dated as of the date of this
Agreement and delivered by Chancellor to the Company on or before the date of
this Agreement (the "Chancellor Disclosure Schedule") and in the Chancellor SEC
Documents (defined in Section 3.4.3) and made a part hereof by reference, each
such matter qualifying each representation and warranty, as applicable,
notwithstanding any specific section or schedule reference or lack thereof),
with the understanding that the Company and the Selling Shareholders are
relying on such representations and warranties in entering into and performing
this Agreement and the other Transaction Documents, and such representations
and warranties shall be unaffected by any investigation heretofore or hereafter
made by the Company or the Selling Shareholders:
3.4.1 Corporate Organization. Chancellor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, United States of America, and has the requisite power and
authority (corporate and other) to own, lease or otherwise hold its properties
and assets and to carry on its business as presently conducted. Chancellor is
duly qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the conduct
of its business requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect. The Investor is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware and is a newly-formed, wholly-owned
subsidiary of Chancellor. When formed, Newco will be a corporation with
variable capital (sociedad anonima de capital variable) duly organized, validly
existing and in good standing under the laws of Mexico and will be owned by the
Interim Trusts, of which the only beneficiary will be the Investor. From the
time of its formation through the Closing Date, Newco will not have conducted
any business other than incidental to its organization and the Transaction
Documents. At the Closing, Newco will not have any liabilities other than
obligations arising under the Transaction Documents.
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3.4.2 Authorization and Effect of Agreement and Other
Transaction Documents. Each of Chancellor and the Investor has the requisite
corporate or limited liability company power and authority to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby or thereby to be
consummated by them. The execution and delivery by each of Chancellor and the
Investor of this Agreement and any other Transaction Document to which either
is a party, and the execution and delivery by Newco of the Merger Agreement at
the Closing, and the consummation by them of the transactions contemplated
hereby or thereby to be consummated by them have been, or upon execution and
delivery will be, duly authorized by all necessary corporate action on the part
of the Investor Companies and Newco. This Agreement and the other Transaction
Documents to which Chancellor or the Investor is a party have been, or upon
execution and delivery will be, duly executed and delivered by each of
Chancellor and the Investor, as applicable, and (assuming that each Transaction
Document is a legal, valid and binding obligation of each other party thereto)
constitute, or upon execution and delivery thereof will constitute, the valid
and binding obligations of each of Chancellor and the Investor, enforceable
against them in accordance with its respective terms. Upon its execution and
delivery, the Merger Agreement will be duly executed and delivered by duly
authorized legal representatives of Newco holding the necessary powers of
attorney and (assuming that the Merger Agreement is a legal, valid and binding
obligation of each other party thereto) will constitute, the valid and binding
obligations of Newco enforceable against Newco in accordance with its
respective terms.
3.4.3 Chancellor SEC Documents. Chancellor has made
available to the Company a true and complete copy of each report, schedule,
registration statement and definitive information statement filed by Chancellor
with the SEC since December 31, 1997, and before or on the date of this
Agreement (the "Chancellor SEC Documents"), which are all the documents (other
than preliminary materials) that Chancellor was required to file with the SEC
between December 31, 1997, and the date of this Agreement. As of their
respective dates, the Chancellor SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the SEC thereunder applicable
to the Chancellor SEC Documents, and none of the Chancellor SEC Documents when
filed contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.4.4 Subsidiaries of Chancellor. Each Subsidiary of
Chancellor has been duly incorporated and is an existing corporation in good
standing under the laws of the jurisdiction of its incorporation, with power
and authority (corporate and other) to own its properties and conduct its
business as presently conducted; and each Subsidiary is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions
in which its ownership or lease of property or the conduct of its business
requires such qualification, except where the failure to be so qualified would
not have a Material Adverse Effect; all of the issued and outstanding capital
stock of each Subsidiary has been duly authorized and validly issued and is
fully paid and nonassessable; and the capital stock of each Subsidiary,
directly or through Subsidiaries, is owned by Chancellor free from Liens.
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3.4.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery by Chancellor of
this Agreement and any other Transaction Document to which it is a party do
not, and the performance by it of the transactions contemplated hereby or
thereby to be performed by it will not, subject to obtaining the consents,
approvals, orders or authorizations and making the filings referred to below,
(i) violate, conflict with its certificate of incorporation or bylaws, (ii)
conflict with, or result in any violation of, or constitute a default (with or
without notice or lapse of time, or both) under, result in the creation or
imposition of a Lien under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under,
any material contract or permit, order, judgment or decree to which Chancellor
or any of its Subsidiaries is a party or by which any of their respective
properties is bound, or (iii) constitute a violation of any Law applicable to
it or any of its Subsidiaries, except for breaches, violations or defaults that
would not individually or in the aggregate have a Material Adverse Effect. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any third party or Governmental Entity (including any consent,
approval or authorization with respect to any contract, Permit or Environmental
Permit) is required to be obtained or made by or with respect to Chancellor or
any Subsidiaries thereof in connection with the execution and delivery by
Chancellor of this Agreement and any other Transaction Documents or the
performance by Chancellor of the transactions contemplated hereby or thereby to
be performed by it.
(b) Neither Chancellor nor any of its Subsidiaries (i) is
in violation of any of their respective certificate of incorporation or bylaws,
(ii) is in default in the due performance or observance of any agreement or
instrument to which Chancellor or any of its Subsidiaries is a party or by
which it or any of them or any of their respective properties may be bound (and
no event has occurred which, with notice or lapse of time or both, would
constitute such a default), except for such defaults as would not have a
Material Adverse Effect, (iii) is in violation of any Law to which it or its
property may be subject, except for such violations as would not have a
Material Adverse Effect, or (iv) has failed to obtain and have in full force
and effect any material Permit necessary for the conduct of its business or the
ownership or lease of its property.
3.4.6 Capital Stock. The capital stock of Chancellor,
including the relative rights thereof, conform in all material respects to the
descriptions thereof contained in the Chancellor SEC Documents. The authorized
capital stock and the number of issued and outstanding shares of capital stock
of Chancellor as of March 31, 1998, are as set forth in Chancellor's Quarterly
Report on Form 10-Q for the Quarterly Period Ended March 31, 1998, included in
the Chancellor SEC Documents. The Chancellor Stock to be issued to Newco and
to become the property of the Company pursuant to the Merger is duly authorized
and, upon completion of the Merger, will be validly issued, fully paid and
nonassessable, will not have been issued in violation of any preemptive rights,
and will be free and clear of any Lien (other than Liens that the Company
imposes or Liens arising under this Agreement or any of the other Transaction
Documents).
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3.4.7 Commissions or Finders' Fees. Neither Chancellor,
any of Chancellor's Affiliates nor any person acting on behalf of Chancellor or
any such Affiliate has agreed to pay a commission, finder's fee or similar
payment to any person in connection with this Agreement, the other Transaction
Documents or any matter related hereto or thereto.
3.4.8 Registration Rights. There are no contracts,
agreements or understandings between Chancellor and any person granting such
person the right to require Chancellor to file a registration statement under
the Securities Act with respect to any securities of Chancellor owned or to be
owned by such person or to require Chancellor to include such securities in any
securities being registered pursuant to any registration statement filed by
Chancellor under the Securities Act.
3.4.9 Financial Condition of Chancellor.
(a) Chancellor has not been, nor is it threatened to be,
declared a bankrupt or in judicial liquidation, has not filed, nor does it
intend to file a voluntary petition in bankruptcy or make any assignment for
the benefit of creditors, has not ceased on or suspended payments to creditors,
nor proposed to its creditors a moratorium of payments or a friendly settlement
thereof nor otherwise ceased or been compelled to cease business.
(b) The financial statements of Chancellor contained in
the Chancellor SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with United
States generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC and except for pro
forma financial statements as required by SEC Regulation S-X) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of Chancellor and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments).
3.4.10 Title to Property. Chancellor and its Subsidiaries
have good and indefeasible title to all real properties and all other
properties and assets owned by them that are material to Chancellor and its
consolidated Subsidiaries considered as a whole, in each case free from Liens
that would materially affect the value thereof or materially interfere with the
use made or to be made thereof by them; and Chancellor and its Subsidiaries
hold any such leased real or personal property under valid and enforceable
leases with no exceptions that would materially interfere with the use made or
to be made thereof by them.
3.4.11 Permits. Chancellor and its Subsidiaries hold all
necessary Permits issued by the appropriate Governmental Entity necessary to
conduct the business now operated by them, except where the failure to hold
such Permits would not individually or in the aggregate have a Material Adverse
Effect, and have not received any notice of proceedings relating to the
revocation or modification of any such Permit that, if determined adversely to
Chancellor or any of its Subsidiaries, would individually or in the aggregate
have a Material Adverse Effect.
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3.4.12 Labor. No labor dispute with the employees of
Chancellor or any of its Subsidiaries exists or, to the knowledge of
Chancellor, is imminent that could reasonably be expected to have a Material
Adverse Effect.
3.4.13 Intellectual Property. Chancellor and its
Subsidiaries own, possess or can acquire on reasonable terms, adequate
Intellectual Property necessary to conduct the business now operated by them,
or presently employed by them, except where the failure to own, possess or
acquire such Intellectual Property would not individually or in the aggregate
have a Material Adverse Effect, and have not received any notice of
infringement of or conflict with asserted rights of others with respect to any
Intellectual Property that, if determined adversely to Chancellor or any of its
Subsidiaries, would individually or in the aggregate have a Material Adverse
Effect.
3.4.14 Taxes. Each of Chancellor and its Subsidiaries has
filed all necessary Tax Returns, except where the failure to file such returns
would not have a Material Adverse Effect, and each of Chancellor and its
Subsidiaries has paid all Taxes shown as due thereon; and other than Taxes that
Chancellor or its Subsidiaries are contesting in good faith and for which
adequate reserves have been provided, there are no Taxes that have been
asserted against Chancellor or its Subsidiaries that would, individually or in
the aggregate, have a Material Adverse Effect.
3.4.15 Environmental Matters. Neither Chancellor nor any of
its Subsidiaries is in violation of any Environmental Laws, owns or operates
any real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and Chancellor
is not aware of any pending investigation which might lead to such a claim.
3.4.16 Litigation. There are no pending claims, actions,
suits, proceedings, inquiries or investigations before or brought by any
Governmental Entity against or affecting Chancellor, any of its Subsidiaries or
any of their respective properties that, if determined adversely to Chancellor
or any of its Subsidiaries, would individually or in the aggregate have a
Material Adverse Effect, or would materially and adversely affect the ability
of Chancellor to perform its obligations under this Agreement, the other
Transaction Documents or the transactions contemplated hereby or thereby; and
no such actions, suits or proceedings are threatened or, to Chancellor's
knowledge, contemplated.
3.4.17 Books of Account. Each of Chancellor and its
Subsidiaries (i) makes and keeps accurate books and records and (ii) maintains
internal accounting controls that provide reasonable assurance that (A)
transactions are executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its financial
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statements and to maintain profitability for its assets, (C) access to its
assets is permitted only in accordance with management's authorization and (D)
the reported accountability for its assets is compared with existing assets at
reasonable intervals.
3.4.18 Not an Investment Company. Chancellor is not and,
after giving effect to the transactions contemplated by this Agreement and the
other Transaction Documents, will not be an "investment company" as defined in
the Investment Company Act of 1940.
3.4.19 Investment Intent. Chancellor is an "accredited
investor" as defined in Regulation D under the Securities Act. The securities
to be acquired by Chancellor under this Agreement are being acquired for its
own account, for investment and with no intention of distributing or reselling
such securities or any part thereof or interest therein in any transaction
which would be a violation of the securities laws of the United States or any
state or any foreign country or jurisdiction. Chancellor acknowledges that the
securities to be acquired by it will be "restricted securities" as defined in
Rule 144 under the Securities Act.
3.4.20 No Manipulation or Stabilization. Except with
respect to the stabilizing activities of underwriters of Chancellor's
securities performed from time to time pursuant to Regulation M under the
Exchange Act, none of Chancellor or its Affiliates, nor any affiliated
purchaser (as defined in Regulation M under the Exchange Act) has taken or will
take, directly or indirectly, any action designed to stabilize or manipulate
the price of any security of the Company or which has caused or resulted in, or
which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the Company,
whether such action is taken in the United States or elsewhere.
3.5 Representations and Warranties of the Investor. The Investor
represents and warrants to the Company as follows (in each case as qualified by
matters reflected on the disclosure schedule dated as of the date of this
Agreement and delivered by the Investor to the Company on or before the date of
this Agreement (the "Investor Disclosure Schedule") and made a part hereof by
reference, each such matter qualifying each representation and warranty, as
applicable, notwithstanding any specific section or schedule reference or lack
thereof), with the understanding that the Company and the Selling Shareholders
are relying on such representations and warranties in entering into and
performing this Agreement and the other Transaction Documents, and such
representations and warranties shall be unaffected by any investigation
heretofore or hereafter made by the Company or the Selling Shareholders:
3.5.1 Corporate Organization. The Investor is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware, United States, and has the requisite power
and authority to own, lease or otherwise hold its properties and assets and to
carry on its business as presently conducted.
3.5.2 Authorization and Effect of Agreement and Other
Transaction Documents. The Investor has the requisite limited liability
company power and authority to execute and deliver
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this Agreement and the other Transaction Documents to which it is a party and
to consummate the transactions contemplated hereby or thereby to be consummated
by it. The execution and delivery by the Investor of this Agreement and any
other Transaction Document to which it is a party and the consummation by it of
the transactions contemplated hereby or thereby to be consummated by it have
been, or upon execution and delivery will be, duly authorized by all necessary
action on the part of the Investor. This Agreement and the other Transaction
Documents to which the Investor is a party have been, or upon execution and
delivery will be, duly executed and delivered by the Investor and (assuming
that each Transaction Document is a legal, valid and binding obligation of each
other party thereto) constitute, or upon execution and delivery thereof will
constitute, the valid and binding obligations of the Investor, enforceable
against the Investor in accordance with its respective terms.
3.5.3 No Conflict; Required Filings and Consents. The
execution and delivery by the Investor of this Agreement and any other
Transaction Document to which it is a party do not, and the performance by it
of the transactions contemplated hereby or thereby to be performed by it will
not, subject to obtaining the consents, approvals, orders or authorizations and
making the filings referred to below, (i) violate, conflict with its
certificate of incorporation or bylaws, (ii) conflict with, or result in any
violation of, or constitute a default (with or without notice or lapse of time,
or both) under, result in the creation or imposition of a Lien under, any
material contract or permit, order, judgment or decree to which the Investor is
a party or by which any of its properties is bound, or (iii) constitute a
violation of any Law applicable to it, except for breaches, violations or
defaults that would not individually or in the aggregate have a Material
Adverse Effect. No consent, approval, order or authorization of, or
registration, declaration or filing with, any third party or Governmental
Entity is required to be obtained or made by or with respect to the Investor in
connection with the execution and delivery by it of this Agreement and any
other Transaction Documents or the performance by it of the transactions
contemplated hereby or thereby to be performed by it.
ARTICLE IV
CERTAIN COVENANTS
From the date hereof and through the closing of the transactions
contemplated by Article I and Article II of this Agreement:
4.1 No Solicitation of Transactions.
(a) None of the Company, its Subsidiaries, or any Selling
Shareholder shall, nor shall they permit their respective Subsidiaries or
Affiliates to (and the Selling Shareholders shall cause the Company and its
Subsidiaries not to), directly or indirectly, through any officer, director,
shareholder, employee, agent, financial advisor, banker or other
representative, or otherwise, solicit, initiate, or encourage the submission of
any proposal or offer from any person relating to any acquisition or purchase
of all or any material portion of the assets of the Company or any of its
Subsidiaries or any equity interest in the Company or its Subsidiaries or any
merger, consolidation,
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share exchange, business combination, or other similar transaction with the
Company or its Subsidiaries or participate in any negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate, or
encourage, any effort or attempt by any other person to do or seek any of the
foregoing.
(b) The Company shall, and the Selling Shareholders shall
cause the Company to, immediately communicate to Chancellor the material terms
of any such proposal (and the identity of the party making such proposal) which
it may receive and, if such proposal is in writing, the Company shall, and the
Selling Shareholders shall cause the Company to, promptly deliver a copy of
such proposal to Chancellor.
(c) The Company and its Subsidiaries agree not to, and
the Selling Shareholders shall cause the Company and its Subsidiaries not to,
release any third party from, or waive any provision of, any confidentiality or
standstill agreement to which the Company or its Subsidiaries is a party.
(d) The Company, its Subsidiaries, and each Selling
Shareholder immediately shall, and the Selling Shareholders shall cause the
Company and its Subsidiaries to, cease and cause to be terminated all existing
discussions or negotiations with any third parties conducted heretofore with
respect to any of the foregoing.
4.2 Access to Information.
(a) Upon reasonable notice from Chancellor to the Company
and subject to the provisions of Section 4.7, the Company will, and the Selling
Shareholders will cause the Company to, afford to the Investor Companies and
their officers, attorneys, accountants or other authorized representatives
(including any independent environmental consultants retained by the Investor
Companies to undertake site investigations, it being understood that no soil
samples will be taken or other monitoring or sampling conducted without the
consent of the Company, which consent will not be unreasonably withheld) of the
Investor Companies full access during normal business hours to the employees,
assets, facilities, Tax Returns and the books and records of the Company and
its Subsidiaries and all other information with respect to the Business so as
to afford the Investor Companies full opportunity to make such review,
examination and investigation of the Business as the Investor Companies may
desire to make, including an environmental evaluation of the Company and its
Subsidiaries. The Investor Companies will be permitted to make extracts from
or to make copies of such books, records and other documents and to discuss the
business of the Company and its Subsidiaries with such officers, directors,
radio station managerial personnel (including the radio station management),
accountants, consultants and counsel for the Company and its Subsidiaries as
the Investor Companies deem reasonably necessary or appropriate for the
purposes of familiarizing themselves with the Company, its Subsidiaries and the
radio stations, including the right to visit the radio stations. In
furtherance of the foregoing the Company shall, and the Selling Shareholders
shall cause the Company to, authorize and instruct its independent public
accountants to meet with the Investor Companies and their representatives,
including the Investor Companies' independent public
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accountants, to discuss the business and accounts of the Company and its
Subsidiaries and to make available (with the opportunity to make copies) to the
Investor Companies and their representatives, including Chancellor's
independent public accountants, all the work papers of its accountants related
to their audit of the financial statements (subject to such conditions and
undertakings as such accountants may reasonably require) and Tax Returns of the
Company and its Subsidiaries.
(b) Within 20 days after the end of each calendar month,
the Company shall, and the Selling Shareholders shall cause the Company to,
deliver to Chancellor for the Company and its Subsidiaries monthly operating
statements (in a form consistent with the monthly operating statements
previously supplied to the Investor Companies) prepared in the ordinary course
of business for internal purposes.
(c) Without duplication of Section 4.2(b), at such time
as the Company provides the same to its lenders, the Company shall, and the
Selling Shareholders shall cause the Company to, provide the Investor Companies
with copies of the financial statements and other information delivered by the
Company to such lenders.
(d) Until the Closing, the Company will, and the Selling
Shareholders will cause to, promptly furnish or cause to be furnished to the
Investor Companies such financial and operating data and other information as
the Investor Companies may reasonably request.
4.3 Assistance.
(a) If Chancellor requests, the Company, its
Subsidiaries, and the Selling Shareholders shall, and the Selling Shareholders
shall cause the Company and its Subsidiaries to, cooperate, and shall cause the
Company's accountants to cooperate, in all reasonable respects in connection
with any financing efforts of any Investor Company or its Affiliates (including
providing reasonable assistance in the preparation of one or more registration
statements or other offering documents relating to debt and/or equity
financing) and any other filings that may be made by an Investor Company or its
Affiliates with the Securities and Exchange Commission, all at the sole expense
of the Investor Companies. The Company shall, and shall cause each of its
Subsidiaries to (and the Selling Shareholders shall cause the Company and its
Subsidiaries to), (i) furnish to its independent accountants (or, if Chancellor
requests, to any Investor Company's independent public accountants), such
customary management representation letters as its accountants may reasonably
require of the Company or its Subsidiaries as a condition to its execution of
any required accountants' consents necessary in connection with the delivery of
any "comfort" letters requested by financing sources of any Investor Company or
its Affiliates and (ii) furnish to any Investor Company all financial
statements (audited and unaudited) and other information in the possession of
the Company or its Subsidiaries or their representatives or agents as the
Investor Company shall reasonably determine are required in connection with
such financing.
(b) The Investor Companies, jointly and severally, shall
indemnify and hold harmless the Company and each Selling Shareholder and their
respective officers, directors, and
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controlling persons against any and all claims, losses, liabilities, damages,
costs, or expenses (including reasonable legal fees and expenses) that may
arise out of or with respect to the financing efforts by the Investor Companies
or their Affiliates, including any registration statement, prospectus, offering
documents, and other filings related thereto; provided, however, that subject
to the limitations and provisions of this Agreement, nothing in this Section
4.3 shall prevent the Investor Companies from asserting any claim for breach of
representation or warranty under this Agreement.
4.4 Conduct of Business. Except as consented to by Chancellor in
writing, during the period from the date of this Agreement and continuing until
the completion of the transactions contemplated by Article I and Article II,
the Company covenants and agrees with the Investor Companies as to the
following (it being understood that references to the Company herein mean the
Company and its Subsidiaries):
(a) the Company shall not change its corporate purpose or
nationality;
(b) the Company shall not merge or consolidate with or
into any other person or otherwise be transformed into another person;
(c) the Company shall not dissolve or liquidate or
undergo any other similar event;
(d) the Company shall not sell or convey all or
substantially all of its assets to any other person, or effect a split-off
(escision) of all or any part of the assets or business of the Company;
(e) the Company shall not effect any cash or stock
dividend or other distribution of capital stock or debt of the Company or any
of its Subsidiaries (except to the Company or any of its Subsidiaries);
(f) the Company shall not directly or indirectly redeem
or repurchase any capital stock of the Company or any of its Subsidiaries
(except from the Company or any of its Subsidiaries);
(g) the Company shall not issue any equity securities;
(h) the Company shall not issue any individual or series
of debt securities;
(i) the Company shall not adopt any business plan or
budget nor amend any existing business plan or budget or take any action
inconsistent with the applicable business plan that has been presented to and
approved by Chancellor;
(j) the Company shall not incur any indebtedness for,
other than ordinary trade payables, or grant or permit any Subsidiary to grant
any guarantee or security interest for, an amount individually or in the
aggregate in excess of US$1,000,000;
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(k) the Company shall not make any investments or
acquisitions, directly or indirectly, in excess of US$3,500,000;
(l) the Company shall not take any action, or fail to
take any action required of it, the result of which is that any of its CPOs or
ADSs ceases to be listed, quoted or traded on the New York Stock Exchange and
the Bolsa or registered or inscribed with the CNBV;
(m) the Company shall not appoint, or terminate, any
President and Chief Executive Officer, General Director, Executive Director of
Operations or Chief Financial Officer;
(n) the Company shall not enter into any employment
agreement, any severance agreement, or any material transaction or series of
related transactions with any of the Selling Shareholders or beneficiaries of
the Family Trust or any of their Affiliates unless the amount involved is
US$25,000 or less and the transaction is on term that are at least as favorable
to the Company as could be obtained in arms-length transactions;
(o) the Company shall not cease to engage BDO Binder or
one of the top five internationally recognized accounting firms as its auditor;
(p) the Company shall not grant any corporate power of
attorney (poderes) with respect to acts of ownership (actos de dominio) other
than those that are exercised jointly with at least an attorney-in-fact
designated for that purpose by Chancellor (mancomunadamente), unless the amount
involved is US$1,000,000 or less;
(q) the Company shall not initiate or consent to the
settlement of, or admit to liability with respect to, any litigation having
liability or settlement value in excess of US$1,000,000, or fail to contest any
such litigation against it;
(r) the Company shall not alter, modify, amend, or change
its Charter;
(s) change any of the accounting principles followed by
it or the methods of applying such principles;
(t) fail to (i) carry on the Business in the usual,
regular and ordinary course as presently conducted and consistent with past
practice of the Company and its Subsidiaries (including maintaining inventory
at historical levels, and in no event less than that which is adequate for use
in the Business), (ii) keep the Business intact, (iii) use its reasonable
efforts to keep available the services of the present employees of the
Business, (iv) use its reasonable efforts to collect outstanding accounts
receivable, and (v) use its reasonable efforts to maintain the goodwill
associated with the Business, including preserving the relationships of
customers (and shall pay amounts due customers on a timely basis), suppliers
and others having business dealings with the Business consistent with past
practices;
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(u) take or knowingly omit to take any action as a result
of which any representation or warranty of the Company in Article III would be
rendered untrue or incorrect if such representation or warranty were made
immediately following the taking or failure to take such action;
(v) make any settlement of or compromise any tax
liability, change any tax election or tax method of accounting or make any new
tax election or adopt any new tax method of accounting;
(w) enter into, or enter into negotiations or discussions
with any person in the United States other than Chancellor with respect to any
local marketing agreement, time brokerage agreement, joint sales agreement or
any other similar agreement; and
(x) agree to or make any commitment, orally or in
writing, to take any actions prohibited by this Agreement.
Notwithstanding the foregoing, if the Company or its Subsidiaries
believes in good faith that taking any one of the above actions is necessary to
avoid serious economic harm to the Business, it shall so notify Chancellor and
Chancellor will not unreasonably withhold its consent to such action.
4.5 Financial Statements. The Company shall deliver to Chancellor
the following, together with management's discussion and analysis of financial
condition and results of operations for the relevant fiscal periods in writing
in the English language and expressed in pesos and in U.S. dollars using the
applicable exchange rate in accordance with Mexican GAAP:
(a) as soon as available and in any event within 60 days
after the end of each fiscal year of the Company (commencing fiscal year 1998),
(i) an audited consolidated balance sheet or equivalent statement of financial
position of the Company and the related consolidated statements of income, cash
flows, and changes in stockholders' equity for such fiscal year, setting forth
in each case in comparative form the figures for the previous fiscal year, and
(ii) a statement of EBITDA for such fiscal year, all presented in accordance
with Mexican GAAP and reported on as to fairness of presentation, accounting
principles and consistency, and otherwise by independent public accountants;
(b) as soon as available and in any event within 30 days
after the end of each calendar month and calendar quarter of each fiscal year
of the Company, (i) an unaudited abbreviated consolidated balance sheet or
equivalent statement of financial position of the Company as of the end of each
such calendar month or such calendar quarter, as applicable, and the related
consolidated statements of income and cash flows for the portion of the
Company's fiscal year ended at the end of each such calendar month or such
calendar quarter, as applicable, setting forth in comparative form in the case
of such statements of income and cash flows the figures for the corresponding
calendar month or calendar quarter, as applicable, of the previous fiscal year,
and (ii) a statement of EBITDA for such calendar month or such calendar
quarter, as applicable (clauses (i) and (ii) collectively, the "Supplemental
Financial Statements"), all presented in accordance with Mexican GAAP and
certified as to fairness of presentation, accounting principles and
consistency by an officer of the Company; and
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(c) as soon as available and in any event no later than
the periods specified in the preceding clause (a), the financial information to
be delivered pursuant to clause (a) shall be reconciled to U.S. GAAP and
reported on or certified in like manner.
4.6 Notification.
(a) Each Party shall notify the other Parties of any
litigation, arbitration or administrative proceeding pending or, to its
knowledge, threatened against it which challenges the transactions contemplated
hereby.
(b) The Company and the Selling Shareholders will provide
prompt written notice to Chancellor of any change in any of the information
contained in the representations and warranties made in Article III by it or
any Exhibits or Schedules referred to herein or attached hereto and shall
promptly furnish any information which Chancellor may reasonably request in
relation to such change; provided, however, that such notice shall not operate
to cure any breach of the representations and warranties made in Article III or
any Exhibits or Schedules referred to herein or attached hereto.
(c) Chancellor and the Investor will provide prompt
written notice to the Company of any change in any of the information contained
in its representations and warranties made in Article III hereof or any
Exhibits or Schedules referred to herein or attached hereto and shall promptly
furnish any information which the Company may reasonably request in relation to
such change; provided, however, that such notice shall not operate to cure any
breach of the representations and warranties made in Article III or any
Exhibits or Schedules referred to herein or attached hereto.
4.7 Confidentiality. The Parties shall, except to the extent
required by any Governmental Authority, keep confidential, and shall use
commercially reasonable efforts, fully commensurate with those which it employs
for the protection of comparable information of its own, to cause to be kept
confidential by their respective Subsidiaries, Affiliates, employees and
representatives, all information disclosed before the date of this Agreement or
hereafter to any such persons in connection with this Agreement and the
consummation of the transactions contemplated hereby (other than information
that is publicly available or that such person is required by Law to disclose),
and none of such information shall be used in any manner other than in
connection with this Agreement and the other agreements contemplated hereby.
4.8 No Inconsistent Action. Each of the Selling Shareholders
agrees that it shall not permit the Company or any Subsidiary, and the Company
covenants and agrees that it shall not and shall not permit any Subsidiary, to
take any action which is inconsistent in any respect with their respective
obligations under this Agreement or that would hinder or delay in any material
respect the consummation of the transactions contemplated by this Agreement.
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4.9 Satisfaction of Conditions. Without limiting the generality
or effect of any provision of Article V, before the Closing, each of the
Parties will use reasonable efforts with due diligence and in good faith to
satisfy promptly all conditions required hereby to be satisfied by such Party
in order to expedite the consummation of the transactions contemplated hereby.
In this regard, as promptly as is practicable following the date hereof, the
Board of Directors of the Company shall call an extraordinary general meeting
of the holders of Series A Shares to authorize the Merger Agreement, the
Merger, the adoption of the Bylaw Amendment of the Company at the Closing, and
each and every other action contemplated by this Agreement and the Transaction
Documents. At that extraordinary general meeting of the holders of Series A
Shares, the Selling Shareholders shall, and shall cause their Affiliates to,
vote in favor of each of the items specified in the preceding sentence.
Further, the Selling Shareholders shall, and shall cause their Affiliates to,
take all actions within their power to consummate the transactions contemplated
in this Agreement and the other Transaction Documents, including giving all
requisite instructions, voting and causing all attorneys in fact to vote all
interests or securities in favor of the transactions, causing their
representatives on technical committees of trusts and boards of directors to
vote in favor of the transactions, and giving instructions for the Family Trust
and the Controlling Trust Agreement to effect the actions required of them
pursuant to this Agreement and the other Transaction Documents; it being
understood that the Selling Shareholders shall not be liable as such under this
covenant for any actions or failures to act by the Company except to the extent
elsewhere in this Agreement such Selling Shareholder has expressly agreed to
cause the Company not to, or to, take such action. The Selling Shareholders
shall not, and shall cause their Affiliates not to, knowingly take any action
the purpose or reasonably foreseeable consequence of which is to interfere with
or prevent the consummation of the transactions contemplated by this Agreement
and the other Transaction Documents.
4.10 Injunctions. Without limiting the generality or effect of any
provision of Section 4.9 or Article V, if any Mexican, United States, any state
thereof, or foreign court having jurisdiction over any Party to this Agreement
issues or otherwise promulgates any injunction, decree or similar order before
the Closing, which prohibits the consummation of the transactions contemplated
hereby, the Parties will use their respective reasonable efforts to have such
injunction dissolved or otherwise eliminated as promptly as possible and,
before or after the Closing, to pursue the underlying litigation diligently and
in good faith.
4.11 Filings. As promptly as practicable after the execution of
this Agreement, each Party shall proceed to prepare and file with the
appropriate Governmental Entities such request, reports or notifications as may
be required in connection with this Agreement and the other Transaction
Documents and shall diligently use its reasonable efforts to obtain
expeditiously, and to cooperate fully with the other Party in obtaining
expeditiously, all authorizations, consents, orders and approvals of any
Governmental Entity or third parties that may be or become necessary in
connection with the consummation of the transactions contemplated by this
Agreement, and to take all reasonable actions to avoid the entry of any order
or decree by any Governmental Entity prohibiting the consummation of the
transactions contemplated by this Agreement and the other Transaction
Documents, and shall furnish to the other all such information in its
possession as may be necessary for the completion of the reports or
notifications to be filed by the other; provided, however, that no Party shall
be required
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to take any action which would have a Material Adverse Effect upon it or any of
its Affiliates, or which would violate any Law or requirement of any
Governmental Entity. Nothing in this Section 4.11 shall require any Investor
Company to divest itself or to cause any Affiliate thereof to divest itself of
any media business or interest therein.
4.12 Publicity. The Parties shall cooperate with each other to
prepare and jointly release one or more press releases regarding the signing of
this Agreement, the transactions contemplated hereby, and the purposes of the
Parties in entering into this Agreement. The joint press release shall be
issued as soon as reasonably practicable following the signing of this
Agreement. No Party hereto will issue or cause the publication of any press
release or other public announcement with respect to this Agreement or the
transactions contemplated hereby without the prior written consent of the other
Parties which consent will not be unreasonably withheld; provided, however,
that nothing herein will prohibit either Party from issuing or causing
publication of any such press release or public announcement to the extent that
such action is required by Law or the rules of any national stock exchange
applicable to it or to its Affiliates, in which event the Party making such
public announcement will use reasonable efforts to allow the other Party
reasonable time to comment on such release or announcement in advance of its
issuance.
4.13 Compliance with Permits. The Company shall operate the
Business in accordance with the Permits and all applicable rules and
regulations of the SCT and in compliance with all other applicable Laws. The
Company shall use all commercially reasonable efforts not to cause or permit
any of the Permits to expire or be surrendered, adversely modified, or
terminated. The Company shall file or cause to be filed with the SCT or other
appropriate Governmental Entity all applications (including license renewals)
or other documents required to be filed in connection with the operation of the
radio stations. Should the SCT or any Governmental Entity institute any
proceedings for the suspension, revocation or adverse modification of any of
the Permits or any forfeiture proceedings, the Company shall use all
commercially reasonable efforts to promptly contest such proceedings and to
seek to have such proceedings terminated in a manner that is favorable to the
radio stations. If the Company (or its counsel) receives an administrative or
other order or notification relating to any violation or claimed violation by
the Company or its Subsidiaries of the rules and regulations of the SCT or any
other Governmental Entity, or should the Company obtain knowledge of any fact
relating to the qualifications of the Company, the Company shall promptly
notify Chancellor in writing and use all commercially reasonable efforts to
take such steps as may be necessary to remove any such impediment to the
transactions contemplated by this Agreement.
4.14 Controlling Trust Agreement. At the Closing, the Family
Trust, the Controlling Trust and the Investor shall execute, deliver and enter
into the Irrevocable Trust Agreement for the Controlling Trust ("Controlling
Trust Agreement") in the form attached hereto as Exhibit B.
4.15 Bylaw Amendment. At the Closing, the Company shall deliver a
fully executed copy of the resolution of the shareholders of the Company
adopting the Bylaw Amendment of the Company, in the form attached hereto as
Exhibit B.
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4.16 Shareholders' Agreement. At the Closing, the Company, the
Controlling Trust Agreement, the Family Trust, the Family Shareholders,
Chancellor, and the Investor shall execute, deliver and enter into a
Shareholders' Agreement in the form attached hereto as Exhibit D (the
"Shareholders' Agreement").
4.17 Election of Directors; Indemnification Agreements. At the
Closing, the Company shall, and the Selling Shareholders shall cause the
Company, to elect three individuals and their respective alternates designated
by the Investor (the "Investor Designees"), effective as of the Closing, to
serve as members of the Company's Board of Directors pursuant to the terms of
the Shareholders' Agreement. At the Closing, the Company shall execute and
enter into an Indemnification Agreement with each of the Investor Designees and
with the other executive officers and directors of the Company in the form
attached hereto as Exhibit E.
4.18 Registration Rights Agreement. At the Closing, the Company,
the Controlling Trust, the Family Trust, and the Investor shall execute,
deliver and enter into a Registration Rights Agreement in the form attached
hereto as Exhibit F (the "Registration Rights Agreement").
4.19 CPO Trust and Deposit Agreement. On or before the Closing,
the Company shall cause the CPO Trust and the Deposit Agreement to be amended
to permit the deposit therein of any Series A Shares, CPOs and ADSs that the
Investor is to acquire pursuant to this Agreement, or shall have provided
evidence, satisfactory to Chancellor in its reasonable discretion, that such
amendments are not required.
4.20 Management Compensation Study. The Compensation Committee of
the Board of Directors of the Company shall retain a compensation consultant to
conduct a study of management and director compensation in comparable
companies, and the Compensation Committee shall prepare a report and
recommendation to the Board of Directors of the Company about suggested levels
of compensation for members of the Company's senior management and directors
after the Closing of the transactions contemplated by this Agreement. Such
recommendation may include stock options, stock- appreciation rights, or other
equity-based compensation for no more than 5% (for management) and 1% to 3%
(for directors) of the equity capital of the Company outstanding at the
Closing, but in no event shall the base or exercise price of any such
equity-based compensation be below US$13.375 per ADS. After the Closing, the
Board of Directors of the Company will be authorized to establish, in its sole
discretion (subject to the Charter, the Shareholders' Agreement, and applicable
law), the plans and specific terms of post-closing management and director
compensation (taking into account such report and recommendation, market
practices, the floor price specified in the preceding sentence, and other
appropriate considerations), including the number of shares subject to awards
and plans, the persons to whom such compensation will be offered, the exercise
or base price of any equity based award, the targets or other conditions for
vesting, exercisability or payout, and any forfeiture provisions.
4.21 Transaction Fee. The Company hereby covenants and agrees with
the Investor Companies that the Company shall pay Hicks, Muse & Co. Partners,
L.P. a transaction fee in the
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amount of US$2,000,000 (the "Transaction Fee") payable at the Merger Effective
Time. Payment of the Transaction Fee shall be made by the Company to Hicks,
Muse & Co. Partners, L.P. by wire transfer of immediately available funds to an
account designated to the Company in writing on or prior to the Closing Date,
or if not so designated, by certified or official bank check payable in
immediately available funds to the order of Hicks, Muse & Co. Partners, L.P.
ARTICLE V
CONDITIONS TO CLOSING
5.1 Conditions Precedent to Obligations of the Investor Companies
With Respect to the Closing. The obligations of the Investor Companies under
this Agreement to consummate the transactions contemplated hereby will be
subject to the satisfaction, at or before the Closing, of all of the following
conditions, any one or more of which may be waived at the option of the
Investor:
5.1.1 Representations, Warranties and Covenants.
(a) All representations and warranties of the Company and
the Selling Shareholders made in this Agreement or in any Exhibit, Schedule or
document delivered pursuant hereto, shall be true and complete as of the date
hereof, without regard to any Schedule updates furnished by any of them after
the date hereof, and on and as of the Closing Date as if made on and as of that
date (except where such representation or warranty speaks by its terms as of a
different date, in which case it shall be true and correct as of such date),
except for such failures to be true and correct (i) (without giving effect to
any limitation as to materiality or Material Adverse Effect set forth therein)
which, individually and in the aggregate, would not have a Material Adverse
Effect, (ii) caused by general economic changes in Mexico not specifically
relating to the Company or its Subsidiaries or by changes in the exchange rate
between the U.S. dollar and the Mexican peso, or (iii) that result from actions
expressly permitted under or taken pursuant to this Agreement or the other
Transaction Documents.
(b) All of the covenants and agreements to be complied
with or performed by the Company, the Selling Shareholders or the Controlling
Trust Agreement on or before the Closing Date shall have been complied with or
performed in all material respects.
(c) The Investor Companies shall have received a
certificate, dated as of the Closing Date, executed on behalf of the Company by
the Chief Executive Officer or by the Chief Financial Officer, on behalf of the
Selling Shareholders (other than the Family Trust) by the Shareholders'
Representative, and on behalf of the Family Trust by the Family Trustee,
certifying in such detail as the Investor Companies may reasonably request that
the conditions specified in Sections 5.1.1(a) and (b) hereof have been
fulfilled.
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5.1.2 Closing Documents. The Company and the Selling
Shareholders, as applicable, shall have delivered to the Investor Companies the
documents identified in Section 6.1.
5.1.3 Consents and Approvals. Each of the governmental and
other approvals, consents or waivers listed on Schedule 3.1.7 of the Company
Disclosure Letter and Schedule 3.2.3 of the Selling Shareholder Disclosure
Schedule shall have been obtained, the sale and purchase of the Family CPOs
shall have been structured so as to comply with the requirements of Section
2.3, and in each case evidence thereof reasonably satisfactory to the Investor
Companies shall have been delivered to the Investor Companies.
5.1.4 No Material Adverse Change. Between the date hereof
and the Closing Date, there will not have been any Material Adverse Change with
respect to the Company.
5.1.5 Sale of CPOs. The Company, the Investor Companies,
and Affiliates (defined in Section 9.15) of the Investor Companies will not
incur any tax, penalty (civil or criminal), fine, withholding obligation,
expense, reporting obligation, loss of entitlement to the representations and
warranties made hereunder that are to survive the consummation of the
transactions contemplated hereby, reputational injury, or other burden or
liability with respect to such purchase and sale.
5.1.6 Initial Business Plan. The initial business plan
under the Shareholders' Agreement, in form and substance satisfactory to the
Investor Companies in their sole discretion, shall have submitted to and
approved by the Investor Companies.
5.2 Conditions Precedent to Obligations of Company and the Selling
Shareholders With Respect to the Closing. The obligations of the Company and
the Selling Shareholders under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or before the
Closing, of all the following conditions, any one or more of which may be
waived at the option of the Company and the Selling Shareholders:
5.2.1 Representations, Warranties and Covenants.
(a) All representations and warranties of the Investor
Companies made in this Agreement or in any Exhibit, Schedule or document
delivered pursuant hereto, shall be true and complete as of the date hereof and
on and as of the Closing Date as if made on and as of that date (except where
such representation or warranty speaks by its terms as of a different date, in
which case it shall be true and correct as of such date), except for such
failures to be true and correct (i) (without giving effect to any limitation as
to materiality or Material Adverse Effect set forth therein) which,
individually and in the aggregate, would not have a Material Adverse Effect,
(ii) caused by general economic changes in the United States or (iii) that
result from actions expressly permitted under or taken pursuant to this
Agreement or the other Transaction Documents.
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(b) All of the covenants and agreements to be complied
with and performed by the Investor Companies on or before the Closing Date
shall have been complied with or performed in all material respects.
(c) The Company and the Selling Shareholders shall have
received a certificate, dated as of the Closing Date, executed on behalf of
each of the Investor Companies by an authorized officer thereof, certifying in
such detail as the Company and the Selling Shareholders may reasonably request
that the conditions specified in Sections 5.2.1(a) and (b) have been fulfilled.
5.2.2 Closing Documents. The Investor Companies shall have
delivered to the Company the documents identified in Section 6.2.
5.2.3 Consents or Approvals. Each of the governmental and
other approvals, consents or waivers listed on Schedule 3.4.5 of the Chancellor
Disclosure Schedule shall have been obtained.
5.2.4 No Chancellor Stock Price Below Floor. The
Chancellor Stock Price, determined as of the Closing Date, shall not be less
than US$42.75.
5.3 Conditions to Each Party's Obligation. The respective
obligations of each Party to effect the transactions contemplated hereby are
subject to the satisfaction on or before the Closing Date of the following
conditions:
5.3.1 Consents and Approvals. All authorizations,
consents, orders, or approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any Governmental Entity necessary
for the consummation of the transactions contemplated by this Agreement shall
have been filed, occurred, or been obtained.
5.3.2 No Adverse Proceedings. No suit, action, claim or
governmental proceeding shall be pending against, and no temporary restraining
order, preliminary or permanent injunction, or other order, decree or judgment
of any court, agency or other Governmental Entity or other legal restraint or
prohibition shall be in effect against any Party which would prohibit or render
it unlawful, as of the Closing Date, to effect the transactions contemplated by
this Agreement in accordance with its terms.
5.3.3 No Adverse Change in Law. No statute, rule, or
regulation shall have been enacted by any Governmental Entity that makes the
consummation of the transactions contemplated hereby illegal.
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ARTICLE VI
DOCUMENTS TO BE DELIVERED AT THE CLOSING
6.1 Documents to be Delivered by the Company and the Selling
Shareholders at the Closing. At the Closing, the Company, the Selling
Shareholders and the Controlling Trust Agreement, as applicable, will deliver
to the Investor Companies the following, in proper form for recording when
appropriate:
6.1.1 Certification of Stock Register. A certified copy of
the registers of the Company, the CPO Trust, the Controlling Trust, and the
Depositary to evidence the issuance to the Investor of the Series A Shares,
CPOs, ADSs, and beneficial interests to be owned by or attributable to it upon
consummation of the transactions contemplated in this Agreement.
6.1.2 Certified Resolutions. Certified resolutions of the
Board of Directors and the shareholders of the Company approving (i) the
execution and delivery of this Agreement and each Transaction Document
delivered by the Company pursuant hereto and (ii) authorizing the consummation
of the transactions contemplated hereby and thereby, including the increase in
authorized capital of the Company, the issuance of the Series A Shares thereby
pursuant to this Agreement, and the adoption of the Bylaw Amendment.
6.1.3 Controlling Trust Agreement. A fully executed
original counterpart of the Controlling Trust Agreement.
6.1.4 Bylaw Amendment. A certified copy of the Bylaw
Amendment of the Company, together with certified copies of the bylaws of each
Subsidiary of the Company amended in form and substance reasonably satisfactory
to the Investor Companies to give effect to the limited corporate rights of the
Investor as contemplated in the Transaction Documents.
6.1.5 Merger Agreement. A fully executed original
counterpart of the Merger Agreement.
6.1.6 Shareholders' Agreement. A fully executed original
counterpart of the Shareholders' Agreement.
6.1.7 Indemnification Agreements. A fully executed
original counterpart of each Indemnification Agreement for Investor Designees.
6.1.8 Registration Rights Agreement. A fully executed
original counterpart of the Registration Rights Agreement.
6.1.9 CPO Trust and Deposit Agreement. Fully executed
original counterparts of the amended Trust Agreement with respect to the CPO
Trust and the amended Deposit Agreement,
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amended in form and substance reasonably satisfactory to the Investor Companies
to permit the deposit therein of any Series A Shares, CPOs and ADSs that the
Investor acquires pursuant to this Agreement, or evidence, satisfactory to the
Investor Companies in their reasonable discretion, that such amendments are not
required.
6.1.10 Family Trust. A certified copy of the fully executed
original of the amended and restated Family Trust, in form and substance
reasonably satisfactory to the Investor Companies to establish the ownership
and relationships among the Family Shareholders consistent with the structure
previously described to the Investor Companies and including all provisions of
the Shareholders' Agreement necessary therein to give effect to the
Shareholders' Agreement.
6.1.11 Release of Liens. Proof of payment of lenders to the
1992 Trust and the Family Trust, and other evidence reasonably satisfactory to
the Investor Companies, that all Liens (other than Liens arising under the
Transaction Documents) on the Family CPOs and the Series A Shares that the
Family Trust contributes to the Controlling Trust have been released.
6.1.12 Certificate. A certificate, dated the Closing Date,
as described in Section 5.1.1.
6.1.13 Opinions. A written opinion of White & Case, S.C.,
counsel to the Company, dated as of the Closing Date, in form and substance
reasonably satisfactory to the Investor Companies, including an opinion as to
(a) the authorization, execution, delivery and enforceability of the
Transaction Documents, (b) that the securities acquired by the Investor
pursuant to this Agreement are duly authorized, validly issued, fully paid, and
non-assessable and not issued in violation of any preemptive right, (c) as to
the approval, validity and effectiveness of the Merger, (d) as to compliance
with Mexican Law and receipt of all necessary consents under Mexican Law, (e)
that neither the Company nor any of its Subsidiaries has incurred a Tax
liability as a result of the transactions contemplated in this Agreement, (f)
that the purchase and sale of the Family CPOs satisfies the standards (as to
legal matters) set forth in Section 2.3, and (g) as to such other matters as
Chancellor may reasonably request.
6.1.14 Other Documents. Such additional information and
materials as the Investor Companies shall reasonably request.
6.2 Documents to be Delivered by the Investor Companies at the
Closing. At the Closing, the Investor Companies will deliver to the Company:
6.2.1 Certified Resolutions. Certified resolutions of the
Boards of Directors or sole member (as appropriate) of the Investor Companies
approving the execution and delivery of this Agreement and each of the other
documents delivered by the Investor Companies pursuant hereto and authorizing
the consummation of the transactions contemplated hereby and thereby.
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6.2.2 Merger Agreement. A fully executed original
counterpart of the Merger Agreement executed by Newco.
6.2.3 Controlling Trust Agreement. A fully executed
original counterpart of the Controlling Trust Agreement executed by the
Investor.
6.2.4 Shareholders' Agreement. A fully executed original
counterpart of the Shareholders' Agreement executed by the Investor Companies.
6.2.5 Registration Rights Agreement. A fully executed
original counterpart of the Registration Rights Agreement executed by the
Investor.
6.2.6 Officer's Certificate. A certificate, dated the
Closing Date, executed on behalf of the Investor Companies in the form
described in Section 5.2.1.
6.2.7 Opinions. A written legal opinion of Vinson & Elkins
L.L.P., counsel to the Investor Companies, as to the existence and good
standing of Chancellor and that the Chancellor Stock delivered under this
Agreement at Closing is, and the Chancellor Stock to be delivered pursuant to
Section 2.5 will be duly authorized, validly issued, fully paid, and
non-assessable.
ARTICLE VII
LIQUIDITY OF CHANCELLOR STOCK
7.1 Right of First Offer.
(a) If at any time the Company desires to sell Chancellor
Stock acquired pursuant to this Agreement, the Company shall give written
notice (the "Offer Notice") to Chancellor stating (a) the number of shares of
Chancellor Stock that the Company desires to sell (the "Offered Shares"),
desired, (b) a price per share at which the Company wishes to sell (which shall
not be more than the average of the closing sale prices, regular way, per share
of Chancellor Stock on the Nasdaq Stock Market in U.S. dollars as reported in
The Wall Street Journal for the ten consecutive trading days ending the trading
day before the date the Offer Notice is given (the "Price"), and (c) an offer
to sell the Offered Shares to Chancellor or Chancellor's designee at the Price.
(b) Upon receipt of the Offer Notice, Chancellor or any
person designated by Chancellor (either, the "Designated Purchaser") shall have
the right to purchase all (but not less than all) of the Offered Shares at the
Price in accordance with the following provisions. Chancellor may exercise the
right to purchase only by giving written notice (the "Acceptance Notice") to
the Company no later than ten business days after delivery of the Offer Notice.
The Acceptance Notice shall (i) state that the Designated Purchaser (who shall
be identified by name in the Acceptance Notice, whether or not it is
Chancellor) accepts the Company's offer for the Designated Purchaser
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purchase all (but not less than all) of the Offered Shares at the Price, and
(ii) state the time and place for the closing of the purchase of the Offered
Shares, which (except as agreed otherwise by the Company and the Designated
Purchaser) shall be at 10:00 a.m., Mexico City time, on the tenth business day
after the date the Acceptance Notice is given and which shall be at the
principal executive offices of Chancellor in Dallas, Texas, United States,
unless the Company and the Designated Purchaser agree in writing to a different
date, time or place. The Acceptance Notice shall be signed by Chancellor and
by the Designated Purchaser (if other than Chancellor), at which time the
Acceptance Notice shall become a binding obligation for the Company to sell to
the Designated Purchaser, and the Designated Purchaser to purchase from the
Company, the Offered Shares on the terms and conditions set forth in this
Section 7.1.
(c) At the closing, the Designated Purchaser's purchase
of the Offered Shares shall be completed on the following terms and conditions:
(i) the Company shall deliver to the Designated
Purchaser duly executed and acknowledged stock powers conveying the
Offered Shares to the Designated Purchaser free and clear of all Liens
(other than those created by the Designated Purchaser);
(ii) the Designated Purchaser shall pay the
Company in legal currency of the United States, by wire transfer in
federal (same day) funds to the account or accounts that the Company
designates, the purchase price for the Offered Shares in an amount
equal to the product of the Price multiplied by the number of Offered
Shares; and
(iii) the Company and the Designated Purchaser
shall each pay 50% of the transfer, stamp, or similar taxes (but not
state or federal income taxes of the other person) due in connection
with the conveyance of the Offered Shares to the Designated Purchaser.
(d) If Chancellor does not give a valid Acceptance Notice
within the time period required under Section 7.1(b), or if Chancellor gives a
valid Acceptance Notice but the Designated Purchaser fails for any reason
(other than default by the Company) to close the purchase of the Offered Shares
within the time period specified in Section 7.1(c), then the Company may sell
the Offered Shares to a third party subject to satisfaction of the following
conditions: (i) if the Offered Shares are sold in a public transaction across
a stock exchange or inter-dealer quotation system that is not a directed or
block trade to a specific buyer, the price at which the Offered Shares are sold
shall be the market price (whether or not lower than the Price); (ii) if the
Offered Shares are sold otherwise than as stated in the preceding clause (i),
the price shall be equal to or greater than the Price; (iii) all the Offered
Shares are sold; and (iv) the sale of all the Offered Shares is completed no
later than 45 days (if Chancellor failed to give a valid Acceptance Notice) or
90 days (if Chancellor gave a valid Acceptance Notice but the Designated
Purchaser failed to timely close the purchase of the Offered Shares) following
the day on which the Offer Notice is given. If the Designated Purchaser is not
Chancellor, Chancellor shall have no liability for any failure of the
Designated Purchaser to close the purchase of the Offered Shares as specified
in this Section 7.1.
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(e) If the Company determines to proceed with a sale that
does not meet the requirements of clause (d) of this Section, the Company shall
re-offer the corresponding shares of Chancellor Stock to Chancellor in
accordance with this Section.
7.2 Liquidity for Certain Sales. If the Company determines that
it must sell shares of Chancellor Stock acquired pursuant to this Agreement for
Regulatory Reasons or that it should sell shares of such Chancellor Stock to
finance an investment or acquisition that the Investor has approved under the
terms of the Shareholders' Agreement, then the Company shall make the Offer
Notice to Chancellor in accordance with Section 7.1. If Chancellor chooses not
to exercise the right to purchase, then Chancellor will use its best efforts,
in good faith, to afford liquidity to such shares of Chancellor Stock at
prevailing market prices. Such efforts may include assisting the Company in
finding a one or more purchasers for the shares in a private transaction or, at
Chancellor's election, making available a registration for the resale of such
shares under the Securities Act. In no event shall Chancellor or any of its
Affiliates be obligated to purchase the Chancellor Stock except upon exercise
of Chancellor's right of first offer under Section 7.1, or to take an action
that would materially interfere with a material possible or pending transaction
involving Chancellor. Chancellor's obligations under this paragraph are not
assignable without Chancellor's prior written consent and shall terminate when
the shares of Chancellor Stock acquired pursuant to this Agreement are first
eligible for sale by the Company under Rule 144, whether or not subject to the
manner-of-sale, volume, and other limitations of such Rule. "Regulatory
Reasons" means the need to sell shares of Chancellor Stock to avoid
characterization of the Company during the following year as an "investment
company" or "foreign investment company" required to register under the United
States Investment Company Act of 1940 or to avoid characterization of the
Company during the following year as a "passive foreign investment company"
under the United States Internal Revenue Code of 1986, as amended.
7.3 Irrevocable Proxy. In order to effect the intentions of the
Parties, the Company hereby constitutes and appoints the Board of Directors of
Chancellor as its true and lawful proxy and attorney-in-fact to vote any and
all of the shares of Chancellor Stock owned by the Company. The Company
acknowledges that the proxy granted hereby is irrevocable, being coupled with
an interest, and that such proxy will continue for so long Chancellor owns at
least ten percent of the equity interests in the Company.
7.4 Post-Closing Notifications. The Investor Companies, the
Company, and the Selling Shareholders will, and each will cause their
respective Affiliates to, comply with any post-Closing notification or other
requirements relating to this Agreement, to the extent then applicable to such
Party, of any antitrust, trade competition, foreign or domestic investment or
control, export or other Law of any Governmental Entity having jurisdiction
over the Investor Companies, the Selling Shareholders, the Company or any of
its Subsidiaries.
7.5 Further Assurances. Each of the Selling Shareholders and the
Company covenants and agrees that it shall and shall cause each Subsidiary, and
each Selling Shareholder covenants and agrees that it shall cause the Company,
at any time and from time to time after the Closing to execute
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and deliver such additional instruments, documents, conveyances or assurances
and take such other actions as shall be necessary, or otherwise requested by
the Investor Companies, to confirm and assure the rights and obligations
provided for in this Agreement and render effective the consummation of the
transactions contemplated hereby, or otherwise to carry out the intent and
purposes of this Agreement.
ARTICLE VIII
TERMINATION
8.1 Termination. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated at any time before
the Closing, if the Party seeking to terminate is not then in material default
or breach of this Agreement:
(a) By the mutual written consent of the Investor
Companies and the Company;
(b) By any of the Investor Companies or the Company:
(i) if the Closing shall not have occurred on or
before nine months from the date of this Agreement;
(ii) if a court or agency of competent
jurisdiction or other Governmental Entity shall have issued a
permanent injunction, order, decree or ruling or taken any other
action (which injunction, order, decree or ruling the Investor
Companies, the Company, and the Selling Shareholders shall use their
best efforts to lift), in each case permanently restraining,
enjoining, rendering unlawful or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement and
the Transaction Documents or any material part thereof in accordance
with the terms hereof, and such order, decree, ruling, or other action
shall become final and nonappealable;
(c) By the Investor Companies:
(i) if, before the Closing Date, any Selling
Shareholder or the Company is in breach of any representation,
warranty, covenant or agreement herein contained of a nature that
would cause the applicable conditions set forth in Section 5.1 not to
be satisfied, and such breach shall not be cured within 20 days of the
date of notice of default served by either Investor Company;
(ii) with respect to a Trading Event or a Banking
Event during the five business days following the date on which the
conditions to the Closing set forth in Section 5.1.3, Section 5.2.3,
and Section 5.3.1 have been satisfied or waived;
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(iii) if a Material Adverse Change occurs with
respect to the Company; or
(d) By the Company and the Selling Shareholders:
(i) if, before the Closing Date, any Investor
Company is in breach of any representation, warranty, covenant or
agreement herein contained of a nature that would cause the applicable
conditions set forth in Section 5.2 not to be satisfied, and such
breach shall not be cured within 20 days of the date of notice of
default served by the Company or the Selling Shareholders.
For purposes of this Agreement, a "Trading Event" shall mean that
trading generally in securities on the New York Stock Exchange or the Mexican
Stock Exchange shall have been suspended or materially limited; and a "Banking
Event" shall mean that a general moratorium on commercial banking activities in
New York, New York, or Mexico City, Mexico, shall have been declared by any
federal or state authority.
The right of any Party to terminate this Agreement pursuant to this
Section 8.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any Party, any person controlling any
such Party or any of their respective officers, directors, employees,
accountants, consultants, legal counsel, agents, or other representatives
whether before or after the execution of this Agreement.
8.2 Effect of Termination. In the event of a termination of this
Agreement by the Company, the Selling Shareholders, or the Investor Companies
as provided in Section 8.1, there shall be no liability on the part of any
Party to this Agreement, except for liability arising out of a breach of any
covenant contained in this Agreement. Article IX and this Article VIII shall
survive the termination of this Agreement.
ARTICLE IX
GENERAL PROVISIONS
9.1 Survival of Representations and Warranties and Covenants.
Regardless of any investigation at any time made by or on behalf of any Party
hereto or of any information any Party may have in respect thereof, none of the
representations and warranties made in this Agreement shall survive the
completion of the transactions contemplated in Article I and Article II other
than the representations and warranties contained in the following provisions
(the "Surviving Warranties"): Section 3.1.1, Section 3.1.2, Section 3.1.4,
Section 3.1.8, Section 3.1.9, Section 3.2.1, Section 3.2.2, Section 3.2.5,
Section 3.3.1, Section 3.3.2, Section 3.4.1, Section 3.4.2, and Section 3.4.6.
From the date hereof to the Closing Date, the exclusive remedy of a Party for
another Party's breach of a representation or warranty in this Agreement (other
than a Surviving Warranty) is termination of this Agreement pursuant to Article
VIII. Following the completion of the transactions contemplated in
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Article I and Article II, no claim can be brought with respect to a breach of a
representation or warranty other than any Surviving Warranty. No Party shall
make or assert any claim with respect to any actual or alleged breach of any
Surviving Warranty or any covenant contained in this Agreement (to the extent
that such covenant was to have been performed before the Closing Date) at any
time after the first anniversary of the Closing Date. Each of the covenants
and agreements contained in Article VII shall survive the Closing indefinitely
(or for such shorter period as is stated in such covenant).
9.2 No Waiver Relating to Claims for Fraud. None of the
provisions set forth in this Agreement, including but not limited to the
provisions set forth in Section 9.1, shall be deemed a waiver by any Party to
this Agreement of any right or remedy which such Party may have at law or
equity based on any other Party's fraudulent acts or omissions, nor shall any
such provisions limit, or be deemed to limit, (a) the amounts of recovery
sought or awarded in any such claim for fraud, (b) the time period during which
a claim for fraud may be brought, or (c) the recourse which any such Party may
seek against another Party with respect to a claim for fraud; provided, that
with respect to such rights and remedies at law or equity, the Parties further
acknowledge and agree that none of the provisions of this Section 9.2, nor any
reference to this Section 9.2 throughout this Agreement, shall be deemed a
waiver of any defenses which may be available in respect of actions or claims
for fraud, including defenses of statutes of limitations or limitations of
damages.
9.3 Notices. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or
when dispatched by electronic facsimile transfer or one business day after
having been dispatched by a internationally recognized overnight courier
service to the appropriate Party at the address specified below:
(a) If to the Company, to:
Grupo Radio Centro, S.A. de C.V.
Av. Constituyentes 1154 (7 Piso)
Col. Lomas Altas
11950 Mexico, D.F.
Facsimile No.: (5)(25) 728-4875 or 4843
Attention: Adrian Aguirre Gomez
with a copy to each of (which shall not constitute
notice for purposes of this Agreement):
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Facsimile No.: (212) 225-3999
Attention: Leslie N. Silverman
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White & Case, S.C.
Torre Optima
Paseo de las Palmas 405 - 5 Piso
Col. Lomas de Chapcltepec
11000 Mexico, D.F., Mexico
Facsimile No.: (5) (25) 540-9699
Attention: Alberto Sepclveda Cosio
(b) If to the Selling Shareholders to:
Grupo Radio Centro, S.A. de C.V.
Av. Constituyentes 1154 (7 Piso)
Col. Lomas Altas
11950 Mexico, D.F.
Facsimile No.: (5)(25) 728-4875 or 4843
Attention: Carlos de Jescs Aguirre Gomez &
Rafael Felipe de Jescs Aguirre
Gomez
with a copy to each of (which shall not constitute
notice for purposes of this Agreement):
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Facsimile No.: (212) 225-3999
Attention: Leslie N. Silverman
White & Case, S.C.
Torre Optima
Paseo de las Palmas 405 - 5 Piso
Col. Lomas de Chapcltepec
11000 Mexico, D.F., Mexico
Facsimile No.: (5) (25) 540-9699
Attention: Alberto Sepclveda Cosio
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<PAGE> 68
(c) If to Chancellor, to:
Chancellor Media Corporation
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Facsimile No.: (972)
Attention: Eric C. Neuman
with a copy to (which shall not constitute notice for
purposes of this Agreement):
Vinson & Elkins L.L.P.
3800 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Facsimile No.: (214) 220-7716
Attention: Robert L. Kimball
or to such other address or addresses as any such Party may from time to time
designate as to itself by like notice.
9.4 Severability. The Parties agree that if one or more
provisions contained in this Agreement shall be deemed or held to be invalid,
illegal or unenforceable in any respect under any applicable Law, this
Agreement shall be construed with the invalid, illegal or unenforceable
provision deleted, and the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected or impaired
thereby.
9.5 Expenses. Each Party will pay any expenses incurred by it
incident to this Agreement and in preparing to consummate and consummating the
transactions provided for herein.
9.6 Successors and Assigns. This Agreement will be binding upon
and inure to the benefit of the Parties hereto and their respective successors
and permitted assigns, but will not be assignable or delegable by any Party
without the prior written consent of the other Party which shall not be
unreasonably withheld; provided, however, that (a) except for the limitations
set forth in the Shareholders' Agreement, the Controlling Trust Agreement, and
the Registration Rights Agreement, nothing in this Agreement is intended to
limit the Investor's ability to sell or to transfer any or all of its interests
in the Company or the Controlling Trust following the Closing Date, and (b)
upon notice to the Company, the Investor Companies may assign or delegate any
or all of its rights or obligations under this Agreement to any Affiliate
thereof, provided that the Investor Companies shall remain responsible for the
full performance of all such obligations. The Company and the Selling
Shareholders agree to execute acknowledgments of such assignment(s) in such
forms as the Investor Companies may from time to time reasonably request. In
the event of such a proposed assignment
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by the Investor Companies, the provisions of this Agreement shall inure to the
benefit of and be binding upon the assigns of the Investor Companies.
9.7 Waiver. The Investor Companies on the one hand or the Selling
Shareholders and the Company on the other by written notice to the other may
(a) extend the time for performance of any of the obligations of the other
under this Agreement, (b) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement or in any document
delivered in connection therewith, (c) waive compliance with any of the
conditions or covenants of the other contained in this Agreement, or (d) waive
or modify performance of any of the obligations of the other under this
Agreement; provided, however, that no such Party may, without the prior written
consent of the other Party, make or grant such extension of time, waiver of
inaccuracies or compliance or waiver or modification of performance with
respect to its (or any of its Affiliates) representations, warranties,
conditions or covenants hereunder. Except as provided in the immediately
preceding sentence, no action taken pursuant to this Agreement will be deemed
to constitute a waiver of compliance with any representations, warranties,
conditions or covenants contained in this Agreement and will not operate or be
construed as a waiver of any subsequent breach, whether of a similar or
dissimilar nature.
9.8 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) supersedes any other agreement, whether written or oral, that
may have been made or entered into by any Party or any of their respective
Affiliates (or by any director, officer or representative thereof) relating to
the matters contemplated hereby. This Agreement, the other Transaction
Documents, and that Further Assurances Agreement of even date herewith between
the Investor Companies and each of the Family Shareholders (together with the
Exhibits and Schedules hereto and thereto) constitute the entire agreement by
and among the Parties, and there are no agreements or commitments by or among
the Parties or their Affiliates except as expressly set forth herein and
therein.
9.9 Amendments and Supplements. This Agreement may be amended or
supplemented at any time by additional written agreements signed by the
Company, the Selling Shareholders, and the Investor Companies.
9.10 Rights of the Parties. Except as provided in Section 9.6,
nothing expressed or implied in this Agreement is intended or will be construed
to confer upon or give any person other than the Parties hereto and their
respective Affiliates any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby.
9.11 Brokers. The Investor Companies hereby agree to indemnify and
hold harmless the Company and the Selling Shareholders against any liability,
claim, loss, damage or expense incurred by the Company and the Selling
Shareholders relating to any fees or commissions owed to any broker, finder, or
financial advisor as a result of actions taken by the Investor Companies and
not disclosed on the Chancellor Disclosure Schedule. The Company and the
Selling Shareholders hereby agree to indemnify and hold harmless the Investor
Companies against any liability, claim, loss, damage or expense incurred by the
Investor Companies relating to any fees or commissions owed to any
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broker, finder, or financial advisor as a result of actions taken by the
Company and the Selling Shareholders and not disclosed on the Company
Disclosure Schedule or the Selling Shareholder Disclosure Schedule.
9.12 Governing Law. This Agreement, including the interpretation,
construction and validity hereof, shall be governed by the laws of the State of
New York, United States.
9.13 Arbitration.
(a) Any dispute, controversy or claim arising out of,
relating to or in connection with this Agreement, including any question
regarding its existence, validity or termination, or regarding a breach thereof
(hereafter, "dispute") shall be submitted to senior management representatives
of the Investor Companies on the one hand and the Company and the Selling
Shareholders on the other to attempt to reach an amicable resolution. A Party
wishing to initiate consideration of a dispute hereunder shall give written
notice to the other Parties hereto of the existence of such dispute and of the
Party's desire to have representatives of the Parties consider the dispute.
Such notice shall set forth a brief description of the nature of the dispute to
be considered.
(b) If a dispute is not settled within 15 calendar days
after notice is given to the other Parties seeking consideration of a dispute
as provided above, then the dispute shall be finally settled by international
arbitration under and in accordance with the Rules of Conciliation and
Arbitration of the International Chamber of Commerce, Paris, France in effect
on the date of this Agreement (the "Rules"). A Party wishing to submit a
dispute to arbitration shall give written notice to such effect to the other
Parties hereto and to the International Chamber of Commerce International Court
of Arbitration (the "ICC Court"). The Parties shall have 30 calendar days from
another Party's notice of such a request for arbitration to designate the
arbitrators for the dispute.
(c) Each of the Investor Companies on the one hand and
the Company and the Selling Shareholders on the other shall designate one
arbitrator and the two designated arbitrators shall in turn choose a third
arbitrator, who shall also be the chairperson of the panel. The ICC Court
shall confirm the appointment of such third arbitrator. If one of the two
Parties appoints an arbitrator but the other Party fails to nominate its
arbitrator within the 30-day period specified in Section 9.13(b) above, then
the appointment of such second arbitrator shall be made by the ICC Court upon
the request of the other Party; and if the appointed arbitrators shall fail to
appoint the third arbitrator within 30 calendar days after the date of
appointment of the most recently appointed arbitrator, the third arbitrator
shall be appointed by the ICC Court upon the request of either Party.
(d) The arbitrators shall be legal practitioners having
at least 10 years experience in international commercial legal matters in the
20 years immediately preceding commencement of the arbitration. In addition,
the chairperson of the panel shall have at least 10 years experience in
practice under the laws of the State of New York. The arbitration shall be
conducted under and in accordance with the Rules, which Rules are deemed to be
incorporated by reference to this clause. The site of the arbitration shall be
New York City, New York, any award shall be deemed to have
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been made there and the language to be used in the arbitration proceedings
shall be the English language. All direct testimony shall be submitted by
sworn affidavit or written question and answer; reasonable discovery shall be
permitted but shall be limited in all cases to requests for documentation. The
decision of the arbitrators shall be rendered within 180 calendar days from the
appointment of the last arbitrator, and shall be final and binding upon all
Parties. Any award shall be in writing in the English language and state the
reasons and contain reference to the legal grounds upon which it is based. The
award may be made public only with the written consent of all parties to the
arbitration, provided, however that any ruling or award, final or otherwise,
may be cited in any subsequent dispute. The arbitrators shall neither have nor
exercise any power to act as amicable compositeur or decide ex aequo et bono;
or to award special, exemplary, indirect, consequential or punitive damages.
The costs of the arbitration shall be fixed in accordance with Article 20 of
the Rules.
9.14 Certain Interpretative Matters and Definitions.
(a) Unless the context otherwise requires, (i) all
references to Sections, Articles, Exhibits or Schedules are to Sections,
Articles, Exhibits or Schedules of or to this Agreement, (ii) each term defined
in this Agreement has the meaning assigned to it, (iii) each accounting term
not otherwise defined in this Agreement has the meaning assigned to it in
accordance with GAAP, (iv) "or" is disjunctive but not necessarily exclusive,
(v) words in the singular include the plural and vice versa, (vi) the term
"Subsidiary" of a specified person is an Affiliate controlled by such person
directly, or indirectly through one or more intermediaries, (vii) the term
"Affiliate" of, or a person "affiliated" with, a specified person, is a person
that directly, or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, the person specified
(provided, that the Investor Companies shall not be deemed Affiliates of the
Company or the Controlling Trust ; and that the Company and the Controlling
Trust shall not be deemed Affiliates of the Investor Companies, (viii) the
term "control" (including the terms "controlling," "controlled by" and "under
common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract, or
otherwise, (ix) the term "person" means any natural person, corporation,
limited liability company, limited partnership, general partnership, joint
stock company, joint venture, association, company, trust, bank trust company,
land trust, business trust or other organization, whether or not a legal
entity, and any government or agency or political subdivision thereof, and (x)
the term "including" (in its various forms) means "including without
limitation." All references to "US$" or dollar amounts will be to lawful
currency of the United States of America. All references to pesos will be to
lawful currency of the United Mexican States.
(b) No provision of this Agreement will be interpreted in
favor of, or against, the Parties by reason of the extent to which such Party
or its counsel participated in the drafting thereof or by reason of the extent
to which any such provision is inconsistent with any prior draft hereof or
thereof.
9.15 No Recourse. The directors, officers, and stockholders of the
Parties and their Affiliates shall not have any personal liability or
obligation arising under this Agreement, the
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Transaction Documents, or any transaction contemplated hereby or thereby
(including any claims that the Company or a Selling Shareholder may assert),
solely by reason of their capacity as such. In addition, no officer or
representative of a Party delivering a certificate or other instrument pursuant
to this Agreement or any other Transaction Document shall have any personal
liability arising from such certificate or instrument.
9.16 Specific Performance. The Parties recognize that in the event
that any Party should refuse to perform under the provisions of this Agreement,
monetary damages alone will not be adequate. The Parties shall therefore be
entitled, in addition to any other remedies which may be available, including
money damages, to obtain specific performance of the terms of this Agreement.
In the event of any action to enforce this Agreement specifically, the Parties
hereby waive the defense that there is an adequate remedy at law.
9.17 Appointment of Shareholders' Representative. (a) By the
execution and delivery of this Agreement, each Selling Shareholder hereby
irrevocably constitutes and appoints Adrian Aguirre Gomez, Carlos de Jescs
Aguirre Gomez, and Rafael Felipe de Jescs Aguirre Gomez, and each of them, with
any two of them acting together, as the true and lawful agent and
attorney-in-fact (the "Shareholders' Representative") of such Selling
Shareholder with full authority and power of substitution to act in the name,
place and stead of such Selling Shareholder with respect to the consummation of
the transactions contemplated hereunder.
(b) The Investor Companies and any other person may
conclusively and absolutely rely, without inquiry, upon any action of the
Shareholders' Representative as the action of each Selling Shareholder in all
matters referred to herein, and each Selling Shareholder confirms all that the
Shareholders' Representative shall do or cause to be done by virtue of his or
her or its appointment as Shareholders' Representative.
(c) Each Selling Shareholder covenants and agrees that it
will not voluntarily revoke the power of attorney conferred in this Section
9.17. If any Selling Shareholder dies or becomes incapacitated, disabled or
incompetent (such deceased, incapacitated, disabled or incompetent Selling
Shareholder being a "Former Selling Shareholder") and, as a result, the power
of attorney conferred by this Section 9.17 is revoked by operation of law, it
shall not be a breach by such Former Selling Shareholder under this Agreement
if the heirs, beneficiaries, estate, administrator, executor, guardian,
conservator or other legal representative of such Former Selling Shareholder
(each a "Successor Selling Shareholder") confirms the appointment of the
Shareholders' Representative as agent and attorney-in-fact for such Successor
Selling Shareholder. Notwithstanding the foregoing sentence, if the power of
attorney conferred by this Section 9.17 is revoked by operation of law and
thereafter not reconfirmed by the Successor Selling Shareholder before the
Closing, such revocation shall not be deemed a breach by the Successor Selling
Shareholder of any of the provisions of this Agreement provided that the
securities attributable to such Successor Selling Shareholder are delivered for
transfer to the Investor at the Closing and further provided that such
Successor Selling Shareholder executes and delivers such other certificates,
documents or instruments (including any amendments hereto) that would have been
delivered on its
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behalf by the Shareholders' Representative had such Successor Selling
Shareholder reconfirmed the agency and power of attorney conferred by this
Section 9.17. The Shareholders' Representative may resign as the Shareholders'
Representative for any reason and at any time by written notice to the Investor
Companies and each Selling Shareholder. If at any time Adrian Aguirre Gomez,
Carlos de Jescs Aguirre Gomez, or Rafael Felipe de Jescs Aguirre Gomez (or any
successor Shareholders' Representative) resigns from his position as a
Shareholders' Representative, the majority-in-interest of the Selling
Shareholders shall designate a successor as soon as practicable and shall
notify Chancellor in writing of such designation. Upon written notice
delivered to Chancellor, the Selling Shareholders may change the identity of
the Shareholders' Representative by written consent signed by the
majority-in-interest of the Selling Shareholders (including as a result of the
resignation by the Shareholders' Representative).
(d) Each of the Selling Shareholders hereby consents and
agrees to all actions or inactions taken or omitted to be taken in good faith
by the Shareholders' Representative under this Agreement or any other
Transaction Document and hereby agrees to indemnify and hold harmless the
Shareholders' Representative from and against all damages, losses, liabilities,
charges, penalties, costs and expenses (including court costs and legal fees
and expenses) incurred in any claim, action, dispute or proceeding between any
such person or persons and the Selling Shareholders (or any of them) or between
any such person or persons and any third party or otherwise incurred or
suffered as a result of or arising out of such actions or inactions.
9.18 Public Announcements. The Company and the Selling
Shareholders, on the one hand, and the Investor Companies, on the other, shall
consult with each other before issuing any press release or otherwise making
any public statements with respect to this Agreement or the transactions
contemplated hereby, except for statements required by law or by any listing
agreements with any national securities exchange or the National Association of
Securities Dealers, Inc., or made in disclosures filed pursuant to the
Securities Act or the Exchange Act or Mexican securities laws.
9.19 English Language. In the construction and interpretation of
the terms and provisions of this Agreement, the English language version of
this Agreement shall be the official version of this Agreement and any version
of this Agreement that has been translated into another language shall have no
force and effect except for purposes of enforcing this Agreement in a court of
law that requires that the Agreement be presented in another language.
9.20 Titles and Headings. Titles and headings to sections herein
are inserted for convenience of reference only, and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
9.21 Execution in Counterparts. This Agreement may be executed in
two or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same agreement.
[SIGNATURE PAGES ATTACHED]
- 66 -
<PAGE> 74
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the Investor Companies, the Company, the Selling Shareholders, and the Family
Shareholders, or the duly authorized officers of the Parties, as appropriate,
effective as of the date first written above.
CHANCELLOR MEDIA CORPORATION
By: /s/ ERIC C. NEUMAN
-------------------------------------------
Eric C. Neuman
Senior Vice President
CHANCELLOR MEXICO LLC
By: CHANCELLOR MEDIA CORPORATION
Its Sole Member
By: /s/ ERIC C. NEUMAN
-------------------------------------------
Eric C. Neuman
Senior Vice President
[Stock Purchase and Merger Agreement - Signature Page 1]
<PAGE> 75
GRUPO RADIO CENTRO, S.A. DE C.V.
By: /s/ ADRIAN AGUIRRE GOMEZ
----------------------------------------
Name: Adrian Aguirre Gomez
Title: Attorney-in-Fact
By: /s/ CARLOS DE JESUS AGUIRRE GOMEZ
----------------------------------------
Name: Carlos de Jesus Aguirre Gomez
Title: Attorney-in-Fact
[Stock Purchase and Merger Agreement - Signature Page 2]
<PAGE> 76
SELLING SHAREHOLDERS
BANCOMER, S.A.,
INSTITUCION DE BANCA MULTIPLE
As Trustee of the Family Trust (No. F/29307-6)
By: /s/ ADRIAN AGUIRRE GOMEZ
----------------------------------------
Name: Adrian Aguirre Gomez
Title: Attorney-in-Fact
By: /s/ Rafael Felipe de Jesus Aguirre Gomez
----------------------------------------
Name: Rafael Felipe de Jesus Aguirre Gomez
Title: Attorney-in-Fact
BANCOMER, S.A.,
INSTITUCION DE BANCA MULTIPLE
As Trustee of the 1992 Trust (No. F/23020-1)
By: /s/ ADRIAN AGUIRRE GOMEZ
----------------------------------------
Name: Adrian Aguirre Gomez
Title: Attorney-in-Fact
By: /s/ Rafael Felipe de Jesus Aguirre Gomez
----------------------------------------
Name: Rafael Felipe de Jesus Aguirre Gomez
Title: Attorney-inFact
MARIA ESTHER GOMEZ TOVAR DE AGUIRRE
/s/ Maria Esther Gomez Tovar de Aguirre
-------------------------------------------------
Maria Esther Gomez Tovar de Aguirre
[Stock Purchase and Merger Agreement - Signature Page 3]
<PAGE> 77
MARIA ESTHER AGUIRRE GOMEZ
/s/ Maria Esther Aguirre Gomez
-------------------------------------------------
Maria Esther Aguirre Gomez
JOSE LUIS RODRIGUEZ IBARRA
/s/ Jose Luis Rodriguez Ibarra
-------------------------------------------------
Jose Luis Rodriguez Ibarra
(Solely for purposes of Section 3.2.2)
[Stock Purchase and Merger Agreement - Signature Page 4]
<PAGE> 78
EXHIBIT D
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (the "Agreement") is entered into and
effective as of _____ __, 1998 [the Closing Date under the Acquisition
Agreement], by and among CHANCELLOR MEDIA CORPORATION, a Delaware corporation
("Chancellor"); CHANCELLOR MEXICO LLC, a Delaware limited liability company
("Chancellor Mexico"); GRUPO RADIO CENTRO, S.A. DE C.V., a corporation
organized under the laws of the United Mexican States (the "Company");
BANCOMER, S.A., Institucion de Banca Multiple, member of Grupo Financiero,
Fiduciary Division, acting as trustee (the "Family Trustee") of trust number
F/29307-6 dated June 3, 1998, established by the other initial Family
Shareholders named hereafter (as amended from time to time, the "Family
Trust"); __________, acting as trustee (the "Controlling Trustee"), of trust
number ________ dated ____________, 1998, established by the Family Trust and
Chancellor Mexico (as amended from time to time, the "Controlling Trust"); each
of the other Persons identified on the signature pages to this Agreement as a
Family Shareholder (as more specifically defined in Article I, collectively
with the Family Trust, the "Family Shareholders"); and each of the other
entities identified on the signature pages to this Agreement as an Investor (as
more specifically defined in Article I, collectively with Chancellor and
Chancellor Mexico, the "Investors").
Chancellor and Chancellor Mexico are sometimes referred to herein
collectively as the "Investor Companies." Each of the Investors, the
Controlling Trust, and the Family Shareholders is hereinafter referred to
individually as a "Shareholder" and are referred to collectively as the
"Shareholders." Each of the Shareholders and the Company is hereinafter
referred to individually as a "Party" and collectively as the "Parties."
This Agreement is entered into as a material part of the consideration
under, and pursuant to the terms of, a Stock Purchase and Merger Agreement
dated as of July 9, 1998, among the Investor Companies, the Company, the Family
Trustee, as trustee of the Family Trust, and certain selling shareholders named
therein (including any amendments thereto, the "Acquisition Agreement").
RECITALS:
A. The Investor Companies and the Company jointly desire to
develop programming and investment opportunities for the Spanish-language
radio market in the United States and Latin America. In order to accomplish
this goal and to align the interests of the Investors with the Family
Shareholders, the Parties to this Agreement desire to implement (i) mutual
rights of first offer and mutual tag-along rights for the Investors on the one
hand and the Family Shareholders on the other, (ii) the principle that the
Family Shareholders (through the Family Trust and the Controlling Trust) will
control the management and operation of the Company, and (iii) the principle
that the Investors (through the Controlling Trust) will have a neutral
investment with only limited corporate rights.
<PAGE> 79
B. The Company has authorized capital stock as of the date hereof
consisting of 318,762,992 Series A Shares of Common Stock, without par value
(the "Series A Shares"), all of which will be issued and outstanding upon
completion of the transactions contemplated in the Acquisition Agreement. No
other capital stock of the Company is authorized or outstanding.
C. Upon consummation of the transactions contemplated in the
Acquisition Agreement, all of the issued and outstanding Series A Shares will
be subject to either (i) the Controlling Trust or (ii) the trust (the "CPO
Trust") established pursuant to that trust agreement dated May 24, 1993, among
Nacional Financiera, S.A., as trustee (the "CPO Trustee"), the Company, and the
1992 Trust (as defined in the Acquisition Agreement), as grantors, pursuant to
which the CPO Trustee has issued ordinary participation certificates ("CPOs"),
each representing a financial interest in one Series A Share.
D. The Company, Citibank, N.A., as depositary, and holders and
beneficial owners of American Depositary Receipts ("ADRs") representing
American Depositary Shares ("ADSs") have entered into a Deposit Agreement dated
as of June 30, 1993, providing for the issuance of ADRs evidencing ADSs, each
of which in turn represents nine CPOs.
E. The ADSs are listed for trading on the New York Stock
Exchange, and the CPOs are listed for trading on the Mexican Stock Exchange
(Bolsa Mexicana de Valores, S.A. de C.V.).
F. Upon consummation of the transactions contemplated in the
Acquisition Agreement, (i) the Controlling Trust will be the record owner of
88,696,919 Series A Shares, representing 27.83% of the issued and outstanding
equity of the Company, (ii) the CPO Trust will be the record owner of
230,066,073 Series A Shares, representing 72.17% of the issued and outstanding
equity of the Company, and (iii) no other capital stock of the Company will be
outstanding.
G. Upon consummation of the transactions contemplated in the
Acquisition Agreement, the Investor will directly own (i) 10,264,293 ADSs and
six CPOs, which in the aggregate represent 92,378,643 CPOs, or 28.98% of the
issued and outstanding equity of the Company, and (ii) a 75.54% beneficial
interest in the Controlling Trust, representing an interest in 67,002,853
Series A Shares or 21.02% of the issued and outstanding equity of the Company.
In total, the Investor will own securities representing 50% of the issued and
outstanding equity of the Company.
H. Immediately following the consummation of the transactions
contemplated by the Acquisition Agreement, (i) the Family Trust will own a
24.46% beneficial interest in the Controlling Trust, representing an interest
in 21,694,066 Series A Shares or 6.81% of the issued and outstanding equity of
the Company, and (ii) the Family Shareholders (other than the Family Trust)
will own 29,910,196 CPOs representing 9.38% of the issued and outstanding
equity of the Company. In total, the Family Shareholders will own securities
representing 16.19% of the issued and outstanding equity of the Company.
D-2
<PAGE> 80
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants hereinafter set forth, the Parties, intending legally to be
bound, hereby agree as follows:
ARTICLE I
GENERAL PROVISIONS;
REPRESENTATIONS AND WARRANTIES
1.1 Certain Terms. Each capitalized term used and not otherwise
defined in this Agreement shall have the meaning given such term in the
Acquisition Agreement. In addition to the terms defined elsewhere herein, when
used herein the following terms shall have the meanings indicated:
"Acceptance Notice" has the meaning given that term in Section
3.1(b)(i)(1).
"Acquired SEs" means the Series A Share Equivalents
represented by the ADSs, CPOs and the Controlling Trust Interests acquired by
the Investor pursuant to the Acquisition Agreement (as such Acquired SEs may be
changed, exchanged, converted, or otherwise adjusted from time to time to
account for the effects of stock splits, stock combinations, stock dividends,
mergers, or similar changes to the Company's Capital Stock, in which case the
Acquired SEs shall also include any other equity securities received with
respect to the Acquired SEs). A Series A Share Equivalent shall cease to be an
Acquired SE when it has been Transferred as described in Section 3.1(d)(ii) or
Section 3.1(d)(iii).
"Acquisition Agreement" has the meaning given that term in the
third paragraph of this Agreement.
"ADRs" has the meaning given that term in paragraph D of the
Recitals to this Agreement.
"ADSs" has the meaning given that term in paragraph D of the
Recitals to this Agreement.
An "Affiliate" of a Person means (i) in all cases, any Person
controlling, controlled by, or under common control with, such Person; (ii) the
spouse, sibling, parent, child or other immediate family member of such Person;
and (iii) in the case of the Investors, "Affiliate" also means (u) HMTFI, (v)
Hicks, Muse, Tate & Furst (Latin America) Incorporated, (w) Hicks, Muse, Tate &
Furst Latin America Fund, L.P., (x) Hicks, Muse, Tate & Furst Latin America
Private Fund, L.P., (y) the Ibero-American Fund to which an Affiliate of Hicks,
Muse, Tate & Furst Latin America Fund, L.P., is party, and (z) any officer or
employee of HMTFI or other Affiliate (as defined in the preceding clause (i))
of HMTFI. A Person will be deemed to control another Person (other than a
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<PAGE> 81
natural person) if the first Person possesses, directly or indirectly, the
power to direct or cause the direction or management and policies of the other
Person, whether through the ownership of voting securities, by contract or
otherwise. Notwithstanding the foregoing, for purposes of this Agreement,
neither the Company nor any of the Family Shareholders shall be deemed
Affiliates of the Investors, and none of the Investors or their Affiliates
shall be deemed Affiliates of the Company or any of the Family Shareholders.
"Aguirre" means Adrian Aguirre Gomez.
"Approved" or "Approval of" or "Approved by" shall mean (i)
with respect to the Investors, the written consent of the Majority in Interest
of the Investors (acting through the Investor Representative) or of the
majority of the Investor Designees or of the majority of the members of the
Technical Committee designated by the Investors; and (ii) with respect to the
Family Shareholders, the written consent of the Family Trust (if all Family
Shareholders (other than the Family Trust) at that time are also beneficiaries
of the Family Trust) or (if any Family Shareholder other than the Family Trust
is not a beneficiary of the Family Trust) the written consent of the Majority
in Interest of the Family Shareholders (acting through the Family Shareholder
Representative). The consent in each case shall be obtained before the taking
of the action for which it is required hereunder.
"beneficial ownership" or "beneficially owned" shall have the
same meaning as in Rule 13d-3 under the Exchange Act, or any successor
provision.
"Bolsa" means The Mexican Stock Exchange (Bolsa Mexicana de
Valores, S.A. de C.V.) or any successor stock exchange.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in the City of New York, New York, United
States, or Mexico City, D.F., Mexico, are authorized by law to close.
"Capital Stock" means the collective reference to Series A
Shares, any Series A Share Equivalents, and any other series of capital stock
or equivalents thereof issued from time to time by the Company. In determining
the number of shares of Capital Stock held by a Shareholder for any purpose
under this Agreement, numbers shall be based on the number of underlying shares
of capital stock of the Company represented by such Capital Stock, without
duplication.
"Capital Stock Pledge" means any pledge or granting of a
security interest in, or the encumbrance of, Capital Stock.
"Chancellor" has the meaning given that term in the first
paragraph of this Agreement.
"Chancellor Mexico" has the meaning given that term in the
first paragraph of this Agreement.
"Chancellor Stock" means any equity security that Chancellor
issued or issues.
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"Charter" means the certificate of incorporation (escritura
constitutiva) and bylaws (estatutos sociales).
"Company" has the meaning given that term in the first
paragraph of this Agreement.
"Company Market Price" has the meaning given that term in
Section 4.3.
"Controlling Trust" has the meaning given that term in the
first paragraph of this Agreement.
"Controlling Trust Agreement" means the agreement establishing
the Controlling Trust identified in the first paragraph of this Agreement, as
it may be amended from time to time.
"Controlling Trustee" has the meaning given that term in the
first paragraph of this Agreement.
"Controlling Trust Interest" means a beneficial interest in
the Controlling Trust.
"CPOs" has the meaning given that term in paragraph C of the
Recitals to this Agreement.
"CPO Trust" has the meaning given that term in paragraph C of
the Recitals to this Agreement.
"CPO Trustee" has the meaning given that term in paragraph C
of the Recitals to this Agreement.
"Demand Offering" has the meaning given that term in the
Registration Rights Agreement.
"Demand Request" has the meaning given that term in the
Registration Rights Agreement.
"Eligible Shareholder" has the meaning given that term in
Section 3.1(c)(i).
"EBITDA" means the Company's consolidated earnings before
interest, taxes, depreciation and amortization as per the consolidated
financial statements of the Company prepared in accordance with Mexican
generally accepted accounting principles. EBITDA shall not include any
subsidiary or investment the results of which are not consolidated (such as
investments accounted for on the equity method of accounting).
"Exchange Act" means the United States Securities Exchange Act
of 1934 or any successor federal statute of the United States, and the rules
and regulations of the United States Securities and Exchange Commission
thereunder, all as the same shall be in effect from time to time.
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"Exercise Notice" has the meaning given that term in Section
4.1.
"Existing Shareholder" means the individuals listed on
Schedule I hereto who on the initial date hereof execute and deliver to the
Company and the Investor Companies a counterpart signature page to this
Agreement.
"Family Designee" has the meaning given that term in Section
2.1(a)(i).
"Family Shareholders" means the Family Trustee as trustee for
the Family Trust, Maria Esther Gomez Tovar de Aguirre, Maria Esther Aguirre
Gomez, Francisco de Jesus Aguirre Gomez, Ana Maria Aguirre Gomez, Maria Adriana
Aguirre Gomez, Maria Guadalupe Aguirre Gomez, Adrian Aguirre Gomez, Maria Elena
Aguirre Gomez, Carlos de Jesus Aguirre Gomez, Rafael Felipe de Jesus Aguirre
Gomez, Maria Trinidad Aguirre Gomez, and Jose Manuel Aguirre Gomez, and their
permitted successors and assigns who execute and deliver to the Company and the
Investors a counterpart signature page to this Agreement or a separate
agreement to be bound by the terms hereof (which counterpart signature page or
separate agreement shall identify such Person as a Family Shareholder and shall
include the signature of such Person's spouse, if the Capital Stock is held as
community property or in sociedad conyugal), and, in each case so long as such
Person holds Capital Stock.
"Family Shareholder Representative" has the meaning given that
term in Section 6.17.
"Family Trust" has the meaning given that term in the first
paragraph of this Agreement.
"Family Trustee" has the meaning given that term in the first
paragraph of this Agreement.
"Fully-Diluted Series A Shares" means, at any time, the then
outstanding Series A Shares of the Company plus (without duplication) all
Series A Shares issuable, whether at such time or upon the passage of time or
the occurrence of future events, upon the exercise, conversion or exchange of
all then-outstanding Series A Share Equivalents.
"HMTFI" means Hicks, Muse, Tate & Furst Incorporated.
"Investor Designee" has the meaning given that term in Section
2.1(a)(ii).
"Investor Representative" means, initially, Chancellor and
thereafter means any other single Person designated in writing as the Investor
Representative by a Majority in Interest of the Investors in a notice given to
the Company and the Family Shareholder Representative.
"Investors" means Chancellor, Chancellor Mexico, and their
permitted successors and assigns who execute and deliver to the Company and the
Family Shareholder Representative a counterpart signature page to this
Agreement or a separate agreement to be bound by the terms
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<PAGE> 84
hereof (which counterpart signature page or separate agreement shall identify
such Person as an Investor), and, in each case so long as such Person holds
Capital Stock or a Controlling Trust Interest.
"Majority in Interest" means (i) with respect to the
Investors, Investors who then hold Acquired SEs representing at least a
majority of the Fully-Diluted Series A Shares represented by the Acquired SEs
that all of the Investors then hold, or (ii) with respect to the Family
Shareholders, the Family Shareholders who then hold Series A Share Equivalents
representing at least a majority of the Fully-Diluted Series A Shares
represented by the Series A Share Equivalents that all of the Family
Shareholders then hold, in each case without duplication.
"Mandatory Repurchase Right" has the meaning given that term
in Section 4.1.
"Mexico" means the United Mexican States.
"Non-Offering Shareholders" has the meaning given that term in
Section 3.1(b)(i).
"NYSE" means The New York Stock Exchange, Inc., or any
successor securities exchange.
"Offer Notice" has the meaning given that term in Section
3.1(b)(i).
"Offer Price" has the meaning given that term in Section
3.1(b)(i).
"Offered Interest" has the meaning given that term in Section
3.1(b)(i).
"Offered SEs" has the meaning given that term in Section
3.1(c)(i).
"Offering" means a Demand Offering or a Piggyback Offering as
defined in the Registration Rights Agreement.
"Offering Shareholder" has the meaning given that term in
Section 3.1(b)(i).
"Participating Shareholders" has the meaning given that term
in Section 3.1(c)(i).
"Participation Notice" has the meaning given that term in
Section 3.1(c)(i)(1).
"Participation Offer" has the meaning given that term in
Section 3.1(c)(i).
"Party" and "Parties" have the meanings given those terms in
the first paragraph of this Agreement.
"Permitted Transfer" means (i) a transfer upon the death of a
Shareholder to such Shareholder's executors, administrators, testamentary
trustees, legatees or beneficiaries; (ii) an
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<PAGE> 85
involuntary transfer mandated by operation of law; provided that in the case of
divorce the transferring Shareholder shall use his or her best efforts to have
all shares of Capital Stock owned by him or her (whether as separate property,
community property, in sociedad conyugal or otherwise) and subject to this
Agreement to be allocated to such Shareholder as such Shareholder's separate
property; (iii) a gift or donation (conditional or otherwise) made by a
Shareholder to the spouse or natural or adoptive children or stepchildren of
that Shareholder, or to a trust established for the benefit of such Shareholder
or one or more of those Persons; (iv) with respect to any Existing Shareholder
other than a Restricted Family Designee, a transfer to at least two-thirds of
the other Existing Shareholders in equal amounts; (v) with respect to any
Existing Shareholder, a transfer to any Restricted Family Designee; (vi) with
respect to any Restricted Family Designee, a transfer that does not involve
Restricted Family Designee Initial Shares so long as the transfer is to at
least two-thirds of the other Existing Shareholders in equal amounts; (vii)
with respect to the Investors, a transfer to an Affiliate; (viii) with respect
to the Investors, a Capital Stock Pledge or the imposition of any Lien on or
negative pledge affecting Series A Share Equivalents or the interest of such
other entity in connection with a bona fide financing transaction; or (ix) a
transfer to any Person when such transfer is specifically Approved as a
Permitted Transfer by the Investors and the Family Shareholders; in each case
(i) through (ix) so long as the transferee takes subject to the rights of
others established in this Agreement and complies with the requirements of
Section 3.1(a)(i).
"Person" means any natural person, corporation, limited
liability company, limited partnership, general partnership, joint stock
company, joint venture, association, company, trust, bank trust company, land
trust, business trust or other organization, whether or not a legal entity, and
any government or agency or political subdivision thereof.
"PORTAL" means the National Association of Securities Dealers'
Private Offerings, Resales and Trading through Automated Linkages system.
"Price" has the meaning given that term in Section 3.1(c)(i).
"Primary Ownership Threshold" means Acquired SEs representing
50% of Fully-Diluted Series A Shares that all the Acquired SEs represent, as
such number may be adjusted from time to time to account for the effects of
stock splits, stock combinations, stock dividends or similar adjustments to the
Capital Stock.
"Purchasing Shareholders" has the meaning given that term in
Section 3.1(b)(ii).
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date of this Agreement and signed by the Company, the
Investor, the Controlling Trust, and the Family Trust, as it may be amended
from time to time.
"Reporting Investors" means those members of the Investors
that are required or are permitted (and have elected to do so) under applicable
accounting rules to report their investment in Acquired SEs of the Company on
either a consolidated basis or using the equity method of accounting.
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"Repurchase Price" has the meaning given that term in Section
4.2.
"Repurchase Closing" has the meaning given that term in
Section 4.4.
"Repurchase Closing Date" has the meaning given that term in
Section 4.4.
"Repurchase SEs" has the meaning given that term in Section
4.1.
"Repurchaser" means the Family Trust and each of the Family
Shareholders, jointly and severally.
"Restricted Family Designees" means Messrs. Aguirre and Carlos
de Jesus Aguirre Gomez, or the successor of each designated in accordance with
Section 2.19.
"Restricted Family Designee Initial Shares" means (a) the
Series A Share Equivalents that a Restricted Family Designee holds on the date
hereof (after consummation of the transactions contemplated in the Acquisition
Agreement) or, (b) with respect to successor Restricted Family Designees, the
Series A Share Equivalents held by the successor at the time the Person becomes
a successor Restricted Family Designee or, if less (for Existing Shareholders
only), the Series A Share Equivalents that such successor holds on the date
hereof (after consummation of the transactions contemplated in the Acquisition
Agreement).
"ROFO Closing" has the meaning given that term in Section
3.1(b)(ii).
"ROFO Closing Period" has the meaning given that term in
Section 3.1(b)(ii).
"Secondary Ownership Threshold" means Acquired SEs
representing 25% of the Fully-Diluted Series A Shares that all the Acquired SEs
represent, as such number may be adjusted from time to time to account for the
effects of stock splits, stock combinations, stock dividends or similar
adjustments to the Capital Stock.
"Securities Act" means the United States Securities Act of
1933 or any successor federal statute of the United States, and the rules and
regulations of the United States Securities and Exchange Commission thereunder,
all as the same shall be in effect from time to time.
"Series A Share Equivalents" means (without duplication with
any other Series A Shares or Series A Share Equivalents) Series A Shares,
rights, warrants, options, convertible securities, or exchangeable securities
or indebtedness, or other rights, exercisable for or convertible or
exchangeable into, or representing a financial interest in, directly or
indirectly, Series A Shares or securities convertible or exchangeable into
Series A Shares or a beneficial interest in, directly or indirectly, Series A
Shares or securities convertible or exchangeable into Series A Shares, whether
at the time of issuance or upon the passage of time or the occurrence of some
future event, including CPOs, ADSs, Controlling Trust Interests, and beneficial
interests in the Family Trust.
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"Series A Shares" has the meaning given that term in paragraph
B of the Recitals to this Agreement.
"Shareholders" has the meaning given that term in the second
paragraph of this Agreement.
"Special Family Designees" means Messrs. Aguirre, Carlos de
Jesus Aguirre Gomez, and Rafael Felipe de Jesus Aguirre Gomez, or the successor
of each designated in accordance with Section 2.19.
"Substitute Designee" has the meaning given that term in
Section 2.1(c).
"Technical Committee" means the technical committee under the
Controlling Trust Agreement.
"Tertiary Ownership Threshold" means Acquired SEs representing
10% of the Fully-Diluted Series A Shares that all the Acquired SEs represent,
as such number may be adjusted from time to time to account for the effects of
stock splits, stock combinations, stock dividends or similar adjustments to the
Capital Stock.
"Transaction Documents" has the meaning given that term in the
Acquisition Agreement.
"Transfer" means, (i) with respect to the Family Shareholders,
any disposition of any security or any interest therein that would constitute a
"sale" thereof within the meaning of the Securities Act and any lease,
exchange, transfer, gift, donation (conditional or otherwise), bequest,
assignment or Capital Stock Pledge of (in one transaction or a series of
related transactions) any security of the Company (including Series A Share
Equivalents), voluntarily or involuntarily, by operation of law or otherwise
and (ii) with respect to the Investors, any disposition of any security or any
interest therein that would constitute a "sale" thereof within the meaning of
the Securities Act and any lease, exchange, transfer, gift, donation
(conditional or otherwise), bequest, or assignment (in one transaction or a
series of related transactions) of any security of the Company (including
Series A Share Equivalents) or of any entity (including Chancellor Mexico)
substantially all of the assets of which are securities (and related rights) of
the Company (including Series A Share Equivalents), voluntarily or
involuntarily, by operation of law or otherwise.
"Transferor" has the meaning given that term in Section
3.1(c)(i).
"Transferor's Notice" has the meaning given that term in
Section 3.1(c)(i).
"Triggering Event" has the meaning given that term in Section
4.5.
"United States" means the United States of America.
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"Withdrawing Designee" has the meaning given that term in
Section 2.1(c).
1.2 References and Titles. Unless the context otherwise requires,
(a) all references in this Agreement to Articles, Sections, subsections and
other subdivisions refer to the corresponding Articles, Sections, subsections
and other subdivisions of this Agreement, (b) titles appearing at the beginning
of any Articles, Sections, subsections or other subdivisions of this Agreement
are for convenience only, do not constitute any part of such Articles,
Sections, subsections or other subdivisions, and shall be disregarded in
construing the language contained therein, (c) the words "this Agreement,"
"herein," "hereby," "hereunder" and "hereof," and words of similar import,
refer to this Agreement as a whole and not to any particular subdivision unless
expressly so limited, (d) the words "this Article," "this Section" and "this
subsection," and words of similar import, refer only to the Articles, Sections
or subsections hereof in which such words appear, (e) the word "or" is not
exclusive, and (f) the word "including" (in its various forms) means "including
without limitation." Pronouns in masculine, feminine or neuter genders shall
be construed to state and include any other gender, and words, terms and titles
(including terms defined herein) in the singular form shall be construed to
include the plural and vice versa, unless the context otherwise expressly
requires. All references to "$," "US$" "dollars," or dollar amounts will be to
lawful currency of the United States, all references to "Ps," "pesos" or peso
amounts will be to lawful currency of Mexico.
1.3 Representations and Warranties.
(a) The Company hereby represents and warrants to each
Shareholder:
(i) the Company has full power and authority to
execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby, and the execution, delivery and
performance by the Company of this Agreement and the completion by the
Company of the transactions contemplated hereby have been duly
authorized by all necessary corporate action;
(ii) this Agreement has been duly and validly
executed and delivered by the Company and constitutes the binding
obligation of the Company enforceable against the Company in
accordance with its terms; and
(iii) the execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of
the transactions contemplated hereby will not, with or without the
giving of notice or the lapse of time, or both, (A) violate any
provision of law, statute, rule or regulation to which the Company is
subject, (B) violate any order, judgment or decree applicable to the
Company, or (C) conflict with, or result in a breach or default under,
any term or condition of the Company's Charter or any agreement or
other instrument to which the Company is a party or by which the
Company is bound.
(b) Each of the Family Shareholders, severally and not
jointly, represents and warrants to the Investors and the Company that:
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(i) it has full power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby, and the execution, delivery and performance by it
of this Agreement and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary action;
(ii) this Agreement has been duly and validly
executed and delivered by it and constitutes the binding obligation of
it enforceable against it in accordance with the Agreement's terms;
and
(iii) the execution, delivery and performance by it
of this Agreement and the consummation by it of the transactions
contemplated hereby will not, with or without the giving of notice or
the lapse of time, or both, (A) violate any provision of law, statute,
rule or regulation to which it is subject, (B) violate any order,
judgment or decree applicable to it, or (C) conflict with, or result
in a breach or default under, any term or condition of its certificate
of incorporation or by-laws, certificate of limited partnership or
partnership agreement, as applicable, trust agreement, or any
agreement or other instrument to which it is a party or by which it is
bound.
(c) Each of the Investors represents and warrants to each
other Shareholder and the Company that:
(i) it has full power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby, and the execution, delivery and performance by it
of this Agreement and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary action;
(ii) this Agreement has been duly and validly
executed and delivered by it and constitutes the binding obligation of
it enforceable against it in accordance with the Agreement's terms;
and
(iii) the execution, delivery and performance by it
of this Agreement and the consummation by it of the transactions
contemplated hereby will not, with or without the giving of notice or
the lapse of time, or both, (A) violate any provision of law, statute,
rule or regulation to which it is subject, (B) violate any order,
judgment or decree applicable to it, or (C) conflict with, or result
in a breach or default under, any term or condition of its certificate
of incorporation or by-laws, certificate of limited partnership or
partnership agreement, as applicable, trust agreement, or any
agreement or other instrument to which it is a party or by which it is
bound.
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ARTICLE II
MANAGEMENT OF THE COMPANY;
ACTIVITIES OF THE SHAREHOLDERS
2.1 Board of Directors; Committees. The Parties shall take all
action within their respective power required to cause the following to occur:
(a) The board of directors of the Company shall at all
times consist of no more than nine principal directors and their respective
alternates (suplentes) or such lesser number as equals the sum of the number of
Family Designees and the number of Investor Designees. Subject to the
provisions set forth in this Section 2.1(a), the Company's directors shall be
elected or appointed to serve as follows:
(i) The Family Shareholders shall designate six
principal directors and their respective alternates (suplentes) to
serve on the Company's board of directors (each, a "Family Designee");
it being agreed that at least two of the six principal directors
designated by the Family Trust shall be Special Family Designees; and
(ii) The Investors shall designate the following
numbers of principal directors and their respective alternates
(suplentes) to serve on the Company's board of directors (each, an
"Investor Designee"):
(A) three Investor Designees and their
respective alternates (suplentes) to serve on the Company's
board of directors as long as the Investors beneficially own
Acquired SEs equal to or greater than the Primary Ownership
Threshold;
(B) two Investor Designees and their
respective alternates (suplentes) to serve on the Company's
board of directors as long as the Investors beneficially own
Acquired SEs fewer than the Primary Ownership Threshold and
equal to or greater than the Secondary Ownership Threshold;
(C) one Investor Designee and his
alternate (suplente) to serve on the Company's board of
directors as the Investors beneficially own Acquired SEs fewer
than the Secondary Ownership Threshold and equal to or greater
than the Tertiary Ownership Threshold; and
(D) none, if the Investors beneficially
own Acquired SEs fewer than the Tertiary Ownership Threshold.
Unless otherwise Approved by the Family Shareholders and the
Investors, no principal director or alternate (suplente) may be an
officer, director or greater than 10% shareholder of any company
(other than the Company, its subsidiaries, and its network affiliates)
that
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engages primarily in the business of radio or television broadcasting
or programming in Mexico City.
(b) Unless otherwise Approved by the Family Shareholders
and the Investors, the board of directors of the Company shall have as
committees only an Executive Committee and a Compensation Committee, which
shall have the authority and be comprised as follows:
(i) The Executive Committee of the board of
directors of the Company shall be vested with all the powers of the
Company's board of directors, subject to the exceptions established in
the Company's Charter, the powers delegated to other committees of the
board of directors, and the limited corporate rights of the Investors.
The Executive Committee shall have five members and their respective
alternates (suplentes). So long as the Investors are entitled to
designate at least one director, then the Investors shall also be
entitled to designate one of the Investor Designees as a member of the
Executive Committee. All other members of the Executive Committee
shall be designated by the Family Shareholders or otherwise in
accordance with the Company's Charter and applicable law, but at least
two of the members of the Executive Committee shall be Special Family
Designees so long as the Investors are entitled to designate at least
one director.
(ii) The Compensation Committee of the board of
directors of the Company shall periodically review the compensation,
employee benefit plans, and fringe benefits paid to or provided for
officers of the Company, recommend the annual salaries and bonuses of
the Company's officers to the board of directors for approval, monitor
the Company's incentive programs and plans, and engage compensation
experts and consultants to advise the Compensation Committee and the
board of directors. The Compensation Committee shall have two members
and their respective alternates (suplentes). So long as the Investors
are entitled to designate at least one director, then one member of
the Compensation Committee shall be an Investor Designee and one
member shall be a Special Family Designee who is not in the Company's
management. If the Investors cease to be entitled to designate at
least one director, then the members and size of the Compensation
Committee shall be determined by the Family Shareholders or otherwise
in accordance with the Company's Charter and applicable law.
(c) If any Family Designee or Investor Designee (a
"Withdrawing Designee") is unable to serve, or once having commenced to serve,
is removed or withdraws from the board of directors of the Company, such
Withdrawing Designee's replacement (the "Substitute Designee") on the board of
directors (and, if applicable, any executive or similar committee thereof)
shall be designated in accordance with Section 2.1(a). Until the Substitute
Designee has been elected, the alternate (suplente) for the Withdrawing
Designee shall serve on the board of directors of the Company and on the
related committee(s), if any, as principal Family Designee or Investor
Designee, as the case may be, with the same powers, rights and committee
memberships as the Withdrawing Designee had. The Parties shall take all action
within its, his or her power to seat the Substitute Designee in place of the
Withdrawing Designee, including, but not limited to, the voting of Capital
Stock of the Company and the giving of, and causing such Shareholder's
representatives or
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designates on the Technical Committee to give, appropriate instructions to the
Controlling Trustee to cause the election of the Substitute Designee as soon as
practicable following the designation of the Substitute Designee.
(d) If any Party is entitled to designate a director or
directors but chooses not to designate a director or directors, such
directorship or directorships shall remain vacant unless such vacancy results
in less than the minimum number of directors required by law, in which case the
vacancy or vacancies shall be filled by an individual or individuals elected by
the shareholders of the Company in the manner provided by the Company's
Charter.
(e) The Parties agree that no action shall be taken at
any meeting of the board of directors of the Company (or any committee thereof
on which an Investor Designee sits) unless each director or member (or
committee member, as appropriate) shall receive at least two Business Days'
notice of the meeting or shall waive that notice in writing before the meeting;
and further, if the Investors are then entitled to designate a director or
directors or a member or members but that directorship or directorships or
membership or memberships are vacant, before any action being taken at any such
meeting the Investor Representative must also receive at least two Business
Days' notice of the meeting or shall waive that notice in writing and the
Investor Representative also shall receive by that date any materials for the
meeting distributed to the other directors or members before the meeting. Each
Investor Designee and the Investor Representative shall have the right to
attend any meeting or meetings by telephone. The board of directors shall not
take any action without such notice unless such notice is waived in writing by
all of the Investor Designees or by the Investor Representative if the
Investors are entitled to designate a director under this Agreement but do not
have an Investor Designee serving on the board of directors at that time.
(f) All designations under this Section 2.1 shall be made
in writing and delivered to the Chief Executive Officer of the Company, the
Family Shareholder Representative, the Investor Representative and the
Controlling Trustee and shall take effect upon such notice unless a later time
of effectiveness is specified in the notice.
2.2 Technical Committee. The Shareholders shall take all action
within their respective power required to cause the following to occur:
(a) The Technical Committee shall at all times consist of
no more than six principal members and their respective alternates (suplentes).
Subject to the provisions set forth in this Section 2.2(a), the members of the
Technical Committee shall be appointed to serve as follows:
(i) The Family Shareholders shall appoint four
principal members of the Technical Committee and their respective
alternates (suplentes); it being agreed that at least two of the four
principal members of the Technical Committee appointed by the Family
Shareholders shall be Special Family Designees; and
(ii) The Investors shall appoint two principal
members of the Technical Committee and their respective alternates
(suplentes) so long as the Investors beneficially own
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Controlling Trust Interests or Acquired SEs that are required under
Mexican law to be neutral but that cannot be neutralized through
deposit into the CPO Trust (in which case the Investors shall have the
right to deposit them into the Controlling Trust). Unless otherwise
Approved by the Family Shareholders and the Investors, no principal
member or alternate (suplente) of the Technical Committee shall be an
officer, director or greater than 10% shareholder of any company
(other than the Company, its subsidiaries, and its network affiliates)
that engages primarily in the business of radio or television
broadcasting or programming in Mexico City.
(b) If any designee to the Technical Committee is unable
to serve, or once having commenced to serve, is removed or withdraws from the
Technical Committee, the Party that designated such designee shall have the
sole right to designate such designee's replacement. Until the substitute
designation has been made, the alternate (suplente) for the withdrawing
designee shall serve on the Technical Committee with the same powers, rights
and committee memberships as the withdrawing designee had.
(c) If any Party is entitled to designate a member or
members of the Technical Committee but chooses not to designate a member or
members, such membership or memberships shall remain vacant unless such vacancy
results in less than the minimum number of members required by the Controlling
Trust Agreement, in which case the vacancy or vacancies shall be filled in the
manner provided by the Controlling Trust Agreement.
(d) The Shareholders agree that no action shall be taken
at any meeting of the Technical Committee unless each member of the Technical
Committee shall receive at least two Business Days' notice of the meeting or
shall waive that notice in writing; and further, if the Investors are then
entitled to designate a member or members but that membership or memberships
are vacant, before any action being taken at any such meeting the Investor
Representative must also receive at least two Business Days' notice of the
meeting or shall waive that notice in writing and the Investor Representative
also shall receive by that date any materials for the meeting distributed to
the other members before the meeting. Each designee of the Investors on the
Technical Committee shall have the right to attend any meeting or meetings by
telephone. The Technical Committee shall not take any action without such
notice unless such notice is waived in writing by all of the Investors'
designees to the Technical Committee or by the Investor Representative if the
Investors are entitled to designate a member under this Agreement but do not
have a designee serving on the Technical Committee at that time.
(e) All designations under this Section 2.2 shall be made
in writing and delivered to the Controlling Trustee, the Family Shareholder
Representative and the Investor Representative and shall take effect upon
notice to the Controlling Trustee unless a later time of effectiveness is
specified in the notice.
2.3 Selection of Statutory Auditors. As long as the Investors
beneficially own Acquired SEs equal to or greater than the Primary Ownership
Threshold, the Parties shall take all action within their respective power to
appoint a statutory auditor (comisario) of the Company and its alternate
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that is designated by the Investors. All other statutory auditors (comisarios)
and their alternates shall be elected in accordance with the Company's Charter
and applicable law. If the Investors choose to exercise their right to
designate a statutory auditor, they shall do so by sending written notice of
that election and the designation to the Chief Executive Officer of the Company
and to the Controlling Trustee. Unless otherwise Approved by the Family
Shareholders and the Investors, no statutory auditor (comisario) of the Company
shall individually be an officer, director, greater than 10% shareholder, or
statutory auditor (comisario) of any company (other than the Company, its
subsidiaries, and its network affiliates) that engages primarily in the
business of radio or television broadcasting or programming in Mexico City.
2.4 Protection of Rights. The Parties shall take all action
within their respective power required to cause the following to occur:
(a) No Family Designee shall be removed from the board of
directors unless Approved by (or at the written direction of) the Family
Shareholders. No designee of the Family Shareholders to the Technical
Committee shall be removed from the Technical Committee unless Approved by (or
at the written direction of) the Family Shareholders. A Family Designee shall
be removed as a director of the Company upon written instructions by the Family
Shareholders to the Controlling Trustee and the Company.
(b) No Investor Designee shall be removed from the board
of directors unless Approved by (or at the written direction of) the Investors.
No designee of the Investor to the Technical Committee shall be removed from
the Technical Committee unless Approved by (or at the written direction of) the
Investors. An Investor Designee shall be removed as a director of the Company
upon written instructions by the Investors to the Controlling Trustee and the
Company.
(c) No action shall be taken at any meeting of the
shareholders of the Company unless the Investor Representative shall receive at
least 10 Business Days' notice of the meeting or shall waive that notice in
writing. A representative of the Investors shall have the right to attend any
meeting or meetings by telephone. The Parties agree to take all action within
its, his or her power, including the voting of Capital Stock (or directing the
Controlling Trustee to so vote such Capital Stock) and the casting of votes at
the Technical Committee, to prevent action on which the Investors have limited
corporate rights under Section 2.7 from being taken by the shareholders of the
Company without such notice unless the Investor Representative waives such
notice in writing.
2.5 Director and Officer Indemnification and Insurance. The
Company shall (a) execute and enter into an Indemnification Agreement with each
member or alternate of the board of directors in the form attached as Exhibit A
to this Agreement [same as Exhibit C to the Acquisition Agreement], and (b)
obtain and maintain director and officer liability insurance in such amounts
and with such coverage as to provide each such member or alternate of the board
of directors and officers of the Company with coverage of at least US$25
million for a single occurrence.
2.6 Other Activities of the Shareholders; Fiduciary Duties. It is
expressly understood and agreed that the Investors and their Affiliates have
interests in other business ventures that may be
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competitive with the activities of the Company and that, to the fullest extent
permitted by law, nothing in this Agreement shall limit the current or future
business activities of the Investors or any of their respective Affiliates
whether or not such activities are competitive with those of the Company.
Chancellor will disclose, from time to time, to the Company any material
ownership interests it or any of its consolidated subsidiaries has in other
companies engaged primarily in the business of Spanish language radio or
television broadcasting or programming in Mexico (excluding ownership positions
of less than five percent in publicly traded companies). Except as expressly
provided herein, nothing in this Agreement shall limit the ability of any
Shareholder to exercise its rights under this Agreement or as a shareholder of
the Company in accordance with its own best judgment. Nothing in this
Agreement, express or implied, shall relieve any officer or director of the
Company, as such, of any fiduciary duties they may have to the shareholders of
the Company.
2.7 Investors' Limited Corporate Rights. The Parties recognize
that the Family Shareholders will control the Company and its management for as
long as the Controlling Trust holds the majority of the outstanding Series A
Shares of the Company. In contrast, the Investors will have only limited
corporate rights as a result of their participation in the Controlling Trust,
which will require certain action to be taken by the mutual agreement of the
Family Shareholders and the Investors. Accordingly, the Company and the
Shareholders agree that, so long as the Investors beneficially own Acquired SEs
equal to or greater than the Primary Ownership Threshold and also beneficially
own Series A Share Equivalents representing equal to or greater than 10% of the
Fully-Diluted Series A Shares, unless otherwise Approved by the Investors, the
Company shall not (and its subsidiaries shall not):
(a) change its corporate purpose or nationality;
(b) merge or consolidate with or into any other Person or
otherwise be transformed into another Person;
(c) dissolve or liquidate or undergo any other similar
event;
(d) sell or convey all or substantially all of its assets
to any other Person, or effect a split-off (escision) of all or any
part of the assets or business of the Company (other than the sale of
shares of Chancellor Stock for cash, which shall not require the
Approval of the Investors);
(e) effect any cash or stock dividend or other
distribution of the Capital Stock;
(f) redeem or repurchase any Capital Stock;
(g) issue any equity securities other than upon the
exercise of outstanding warrants, options, or similar rights
outstanding on the date hereof or issued hereafter with the Approval
of the Investors;
(h) issue any individual or series of debt securities;
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(i) provide demand registration rights or piggyback
registration rights to any Person other than those set forth in the
Registration Rights Agreement;
(j) adopt any business plan or budget nor amend any
Approved initial or subsequent Annual Business Plan or budget or take
any action inconsistent with the applicable initial or subsequent
Annual Business Plan that has been Approved by the Investors as more
particularly described in Section 2.15 (other than the sale of
Chancellor Stock for cash, which shall not require the Approval of the
Investors);
(k) incur any indebtedness for, other than ordinary trade
payables, or grant any guarantee or security interest for, an amount,
individually or in the aggregate, in excess of US$1 million;
(l) make any investments or acquisitions not specifically
provided for in the Annual Business Plan Approved by the Investors and
then in effect, directly or indirectly, in excess of US$1 million,
individually or in the aggregate;
(m) take any action, or fail to take any action required
of it, the result of which is that its Capital Stock ceases to be
listed, quoted or traded on the NYSE and Bolsa or registered or
inscribed with the National Banking and Securities Commission of
Mexico (Comision Nacional Bancaria y de Valores);
(n) enter into any employment agreement, any severance
agreement, or any material transaction or series of related
transactions with any of the Family Shareholders or any of their
Affiliates unless the amount involved is US$25,000 or less and the
transaction is on terms that are at least as favorable to the Company
as could be obtained in arms-length transactions;
(o) cease to engage BDO Binder or one of the top five
internationally recognized accounting firms as its auditor;
(p) grant any corporate power of attorney (poderes) with
respect to acts of ownership (actos de dominio) other than those that
are exercised jointly with at least an attorney-in-fact designated for
that purpose by the Investors (mancomunadamente), unless the amount
involved is, individually or in the aggregate, US$1 million or less;
(q) initiate or consent to the settlement of, or admit to
liability with respect to, any litigation having liability or
settlement value in excess of US$1 million, individually or in the
aggregate, or fail to contest any such litigation against it; or
(r) alter, modify, amend, or change its Charter.
Subject to the provisions of Article IV, the designees of the Investors on the
Technical Committee and the majority of the designees of the Family
Shareholders on the Technical Committee shall agree
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upon the appointment or termination of any President and Chief Executive
Officer, General Director, Executive Director of Operations or Chief Financial
Officer of the Company. References to the Company in this Section 2.7 shall
also mean each direct and indirect subsidiary of the Company, and the Charter
of the Company and, if the Investors reasonably request, each subsidiary shall
expressly give effect to the provisions of this Section 2.7. The Parties shall
take all actions within their respective power required to give effect to the
preceding provisions of this Section 2.7. Notwithstanding the other provisions
of this Section 2.7, (i) the Investors' consent shall not be required for the
Company to sell shares of Chancellor Stock for cash and (ii) so long as
applicable law prohibits the Investor Designees and the members of the
Technical Committee designated by the Investors from having the right to vote
with respect to content or programming matters in connection with licenses
granted by the Mexican government, neither the Investor Designees nor the
members of the Technical Committee designated by the Investors shall have such
right. Notwithstanding the foregoing provisions, the Investor's consent shall
not be required for the Family Shareholders to cause the Company to register
for resale CPOs held by the Family Shareholders if the Family Shareholders pay
all third-party and out-of-pocket expenses of themselves and the Company in
connection with such registration (it being agreed that the Investors hereby
consent to one registration of CPOs for the Family Shareholders in which the
Company pays the expenses of the registration (other than underwriting
discounts and commissions, but including reasonable expenses of the Family
Shareholders)). In addition, if any Investor exercises any piggyback
registration rights with respect to an offering initiated by the Family
Shareholders at their expense, then the Company shall pay the expenses of the
registration (other than underwriting discounts and commissions),
notwithstanding the prior agreement of the Family Shareholders to pay such
expenses.
2.8 Financial Information. The Company shall deliver to the
Investors the following, together with management's discussion and analysis of
financial condition and results of operations for the relevant fiscal periods,
in writing in the English language and expressed in pesos and in U.S. dollars
using the applicable exchange rate:
(a) as soon as available and in any event within 45 days
after the end of each fiscal year of the Company (commencing fiscal year 1998),
(i) an audited consolidated balance sheet or equivalent statement of financial
position of the Company at the end of such fiscal year and the previous fiscal
year, and the related consolidated statements of operations, stockholders
equity, and cash flows or equivalent statements of financial results for such
fiscal year, setting forth in comparative form the figures for the previous two
fiscal years, together with the related notes to financial statements and
schedules, and such other statements that Reporting Investors are then required
to include in their financial statements, and (ii) a statement of the EBITDA of
the Company and its consolidated subsidiaries for such fiscal year, all
presented in accordance with Mexican generally accepted accounting principles,
reconciled to United States generally accepted accounting principles and the
rules and regulations of the United States Securities and Exchange Commission
for financial statements to be included in an Annual Report on Form 10-K, and
reported on as to fairness of presentation, accounting principles and
consistency, and otherwise audited by independent public accountants;
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(b) as soon as available and in any event within 20 days
after the end of each calendar quarter of each fiscal year, (i) an unaudited
abbreviated consolidated balance sheet or equivalent statement of financial
position of the Company at the end of such quarter and the end of the
corresponding period of the preceding fiscal year, and the related consolidated
statements of operations, stockholders equity, and cash flows or equivalent
statements of financial results for the quarter and for the portion of the
fiscal year ended at the end of each such calendar quarter, as applicable,
setting forth in comparative form the figures for the corresponding calendar
quarter and, as applicable, portion of the previous fiscal year, together with
the related abbreviated notes to financial statements and schedules, and such
other statements that Reporting Investors are then required to include in their
financial statements, and (ii) a statement of EBITDA of the Company and its
consolidated subsidiaries for such calendar quarter and, as applicable, portion
of the fiscal year, all presented in accordance with Mexican generally accepted
accounting principles, reconciled to United States generally accepted
accounting principles and the rules and regulations of the United States
Securities and Exchange Commission for financial statements to be included in
an Quarterly Report on Form 10-Q, and certified in writing as to fairness of
presentation, accounting principles and consistency by an officer of the
Company;
(c) as soon as available and in any event within 10 days
after the end of each calendar month of each fiscal year, (i) an unaudited
abbreviated consolidated balance sheet or equivalent statement of financial
position of the Company at the end of such month and the end of the
corresponding period of the preceding fiscal year, and the related consolidated
statements of operations or equivalent statement of financial results for such
calendar month and the portion of the fiscal year ended at the end of each such
calendar month, setting forth in comparative form in the case of such
statements of operations the figures for the corresponding calendar month and
portion of the previous fiscal year, and (ii) a statement of EBITDA of the
Company and its consolidated subsidiaries for such calendar month and portion
of the fiscal year, all presented in accordance with Mexican generally accepted
accounting principles, reconciled to United States generally accepted
accounting principles consistently applied (subject to management estimates of
quarterly and annual adjustments); and
(d) as soon as available and in any event no later than
the periods specified in the preceding clauses (a), (b) and (c), the Company
shall provide the Reporting Investors with preliminary drafts of the financial
information to be delivered pursuant to such clauses.
All computations of EBITDA shall be made and certified in writing by
the Company's Chief Financial Officer (or equivalent officer) and, with respect
to the EBITDA calculation for any completed fiscal year, shall be reviewed and
certified in writing by the Company's independent public accountants.
The Company's obligation to deliver to the Investors reconciliations
of the financial information specified in this Section 2.8 to United States
generally accepted accounting principles or to the rules and regulations of the
United States Securities and Exchange Commission shall be suspended during such
periods that no Reporting Investor is required to prepare its financial
statements under United States generally accepted accounting principles or, as
applicable, the rules
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and regulations of the United States Securities and Exchange Commission.
Nevertheless, to the extent the Company itself is required by law, the rules or
regulations of any securities exchange on which any of its securities is then
listed, or by contract (other than this Agreement) to prepare financial
statements reconciled to such standards, then it shall also deliver such
reconciled financial statement to the Investors no later than the earlier of
the time it is required to deliver such financial statements by law, the rules
of such an exchange, or such contract or the time specified above with respect
to the applicable period.
2.9 Preemptive Rights. To the extent provided under Mexican law
and the Company's Charter, each Shareholder shall have the preemptive right, in
proportion to the number of shares of Capital Stock represented by the Series A
Share Equivalents held by such Shareholder, to subscribe, directly or
indirectly, for the shares of Capital Stock that are issued in case of an
increase in the total issued Capital Stock of the Company. This right must be
exercised within 15 days following the official publication of the approval of
the shareholders' meeting regarding the increase in Capital Stock, or otherwise
in accordance with the Charter of the Company and applicable law. To the
extent any Shareholder is precluded from directly owning such newly-issued
shares of Capital Stock, the Shareholders shall cause (a) such shares to be
issued to the CPO Trustee for deposit in the CPO Trust and corresponding CPOs
to be issued to the Shareholder exercising its preemptive right or, (b) at the
election of such Shareholder or in any event if CPOs cannot be issued in
respect of such new shares due to limitations imposed by law, regulation or
governmental order, such shares to be issued to the Controlling Trustee under
the Controlling Trust for deposit in the Controlling Trust and the
corresponding Controlling Trust Interest to be issued to the Shareholder
exercising its preemptive right. The Shareholders agree that they will waive,
and will instruct the Controlling Trust to waive, their preemptive rights with
respect to any management and director options that are Approved by the Family
Shareholders and the Investors.
2.10 Equal Treatment in Certain Transactions. The Family
Shareholders and the Controlling Trust shall take all actions within their
power to prevent (a) the Company from engaging in any merger, recapitalization,
sale, lease, or other Transfer or conveyance of all or substantially all its
property to any other Person, or dissolution in which the Capital Stock owned
directly or indirectly (by means of CPOs, ADSs, Controlling Trust Interests or
otherwise) by the Investors is treated less favorably than the shares owned
directly or indirectly by the Family Shareholders and (b) the Controlling Trust
from engaging in any transaction in which the Capital Stock owned directly or
indirectly (by means of CPOs, ADSs, Controlling Trust Interests or otherwise)
by the Investors is treated less favorably than the shares owned by the Family
Shareholders. In any such transaction described in the preceding sentence, the
Shareholders shall take all actions necessary to ensure that the rights of the
Investors and the Family Shareholders under this Agreement are preserved.
2.11 Charter and Controlling Trust Provisions. The Charter of the
Company has been amended and the Controlling Trust Agreement has been prepared
to the extent necessary or reasonably requested to give effect to the
provisions of this Agreement, and the Shareholders agree to maintain such
amended provisions in effect for the duration of this Agreement.
Notwithstanding Section 2.1(a)(ii)(B) and (C) to the contrary, the number of
directors and their alternates (suplentes) that the Investors have the right to
designate shall not be reduced under such provisions until the
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Charter of the Company has been amended to reduce the size of the board of
directors to the sum of the number of Family Designees and the number of
Investor Designees (after such contemplated reduction) and to require that the
matters on which the Investors have limited voting right under Section 2.7 be
adopted by a number of directors that includes the majority of the Investor
Designees (to which amendment the Investors hereby consent). In the event of a
conflict between any provision of this Agreement and the Charter of the Company
or the Controlling Trust Agreement, the terms of this Agreement shall be
binding and in full force and effect as between the Shareholders, and the
Shareholders shall use their respective best efforts to seek the enforcement
and interpretation of the Charter and the Controlling Trust Agreement in a
manner consistent with the rights and obligations under this Agreement. Each
Family Shareholder agrees that, if it acquires any Series A Shares (not in the
form of ADSs or CPOs) in the future, it will deposit such Series A Shares in
the Controlling Trust in exchange for Controlling Trust Interests or interests
in the Family Trust.
2.12 Spanish Language Programming and Investments.
(a) Chancellor and the Company jointly desire to develop
programming and investment opportunities for the Spanish-language radio market
in the United States and Latin America, with an initial focus on the United
States. Chancellor and the Company will cooperate with each other to explore
ways to identify and establish mutually beneficial opportunities to develop
programming jointly for the Spanish-language market and explore ways to
identify and make synergistic investments in other companies. Chancellor and
the Company also intend to explore and identify suitable opportunities for each
to introduce the other to entrepreneurs and businesses that may be useful in
the achievement of each company's business objectives. Chancellor and the
Company agree that this joint cooperation does not suggest any degree of
exclusive dealings with the other, does not limit the provisions of Section
2.6, and does not require either Chancellor or the Company to take any action
that it does not believe in good faith is desirable or beneficial.
(b) In furtherance of the foregoing, through the first
anniversary of the date of this Agreement, Chancellor will use reasonable
commercial efforts to (i) assist the Company in being granted the opportunity
to co-invest with Chancellor or an Affiliate in an equity investment in Z
Spanish Radio Network Inc. on the same terms and conditions (including price)
as Chancellor (or its Affiliates) invest; and (ii) facilitate discussions
between Z Spanish Radio Network Inc. and the Company regarding the possibility
of integrating Spanish language programming produced by the Company into the Z
Spanish Radio Network Inc. operations. The Company and the Family Shareholders
acknowledge that there are no assurances that a transaction with Z Spanish
Radio Network Inc. will be consummated or that any particular terms and
conditions regarding the Company's investment or programming arrangements can
be achieved.
2.13 Inspection and Other Information. For so long as the
Investors own Acquired SEs equal to or greater than the Tertiary Ownership
Threshold, the Investors, through their authorized representatives, and the
underwriters and other financial advisors designated by the Investors and their
respective authorized representatives, shall have, from time to time upon
reasonable advance notice, (a) full and complete access to the directors,
officers and employees of the Company, and (b) the right, at the expense of the
Investors, (i) to inspect, copy and retain copies of any Company
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books and records, (ii) to cause the Company to provide such financial and
support information or information about its operations in such detail and with
such frequency as the Investors reasonably may request, (iii) to audit the
books and records of the Company, and (iv) to inspect the properties and
physical assets of the Company, in each case so long as such activity does not
impose an unreasonable burden or cost on the Company.
2.14 Avoidance of Investment Company and PFIC Treatment. The
Company shall, and the Shareholders shall cause the Company to, use its
commercially reasonable best efforts to take all action necessary to prevent
the Company from becoming either an "investment company" or a "foreign
investment company" as defined in the United States Investment Company Act of
1940 or a "passive foreign investment company" as defined in the Internal
Revenue Code of 1986 of the United States.
2.15 Annual Business Plan.
(a) A business plan for the Company for [the 1999 fiscal
year] [through the period ending February 28, 1999](1) has been Approved by the
Investors. No later than December 1 of each fiscal year, the Company shall
prepare and submit to the Investors for their review a draft business plan for
the next fiscal year. No later than February 1 of the fiscal year to which the
business plan relates and each fiscal year thereafter, the Company shall submit
to the Investors for Approval a proposed definitive business plan for the
fiscal year. If requested by the Investors, the Company agrees to cause its
officers and directors to meet to discuss the proposed definitive business plan
or any amendments to an Approved Annual Business Plan currently in use. The
meeting will occur at the offices of the Company in Mexico City, Mexico, or at
such other place as is mutually acceptable to the Company and the Investors,
and at such time as is mutually acceptable (which time, unless the Investors
agree otherwise, shall not be later than seven Business Days before the board
meeting at which a new Annual Business Plan is to be presented to the Company's
board of directors for approval with respect to meetings to discuss a new
business plan and, for any other meeting, which time shall not be later than
five Business Days after a request by the Investors for the meeting. The term
"Annual Business Plan" shall refer to the business plan [for the fiscal year of
1999] [through the period ending February 28, 1999], and the business plan for
each subsequent fiscal year. The fiscal year of the Company shall be the
calendar year, unless otherwise Approved by the Company's shareholders in
accordance with the Company's Charter and applicable law, in which case the
foregoing dates shall be modified accordingly.
(b) The Annual Business Plan must present the budget and
business plan of the Company and its Subsidiaries in reasonable detail,
including specific proposed capital expenditures, borrowings, investments,
acquisitions and dispositions, income, expenses, broadcast cash flow, cash
sources and uses, and debt service costs for the next fiscal year, together
with reasonable projections of fees and operating and net capital transaction
cash flow. The Annual Business Plan will, as separate line items or on an
attached schedule, specify the base compensation and maximum total
- ------------------
(1) If closing occurs before the 1999 budget is adopted, the language
in the second bracket will be used. Otherwise, the language in the first
bracket will be used.
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compensation for the directors and officers of the Company, individually, and
for all employees as a group, including any special compensation arrangements
or incentive programs or plans. The Annual Business Plan will also present
permitted variances (stated as a percentage or amount) for each item and total.
Any amount not included in such summary or outside the variance stated in such
summary shall not be deemed Approved in connection with the Approval by the
Investors of the Annual Business Plan. The Annual Business Plan for each
fiscal year beginning with fiscal 1999 will also set forth the "EBITDA Target"
(herein so called) with respect to that fiscal year, to be determined in
accordance with Mexican generally accepted accounting principles. Such EBITDA
Target shall be used solely for purposes of determining a Triggering Event as
described in Section 4.5 hereof and shall not necessarily be derived from the
line item budget in the Annual Business Plan. Notwithstanding the foregoing,
neither the EBITDA Target nor the proposed business plan shall include any
contribution (or loss) attributable to the Chancellor Stock the Company holds.
(c) It is also contemplated that certain Company costs
and activities must be continued from year to year whether or not an Annual
Business Plan has been Approved by the Investors. Accordingly, the proposed
Annual Business Plan for each fiscal year shall also set forth the annual
adjustment percentage, index or formula for each item of the Annual Business
Plan that the Company believes must be continued whether or not an Annual
Business Plan has been Approved. It is contemplated that the items for which
such an adjustment is provided will be those costs necessary to maintain and
preserve the assets and business of the Company, such as ordinary operating
expenses, insurance, debt service, labor and taxes. Which items are subject to
annual adjustments when subsequent Annual Business Plans have not been
approved, and the nature of the adjustments, are subject to the mutual
agreement of the Company and the Investors and may vary from one Approved
Annual Business Plan to another for subsequent years.
(d) The Investors agree that an Annual Business Plan may
contain project(s) that require multi-year commitments of the Company if they
are each specifically Approved by the Investors. If the Investors Approve a
multi-year commitment of capital for a project, the reapproval of the
Investors of such expenditures or commitments shall not be required in
subsequent years, and such commitments and expenditures shall remain Approved
by the Investors for purposes of this Agreement whether or not the Investors
Approve subsequent Annual Business Plans that the Company proposes.
Nevertheless, if there is a material adverse change in the projected financial
performance of a project, the multi-year commitment for such project shall
cease to be Approved by the Investors if it is reasonably practical for the
Company to withdraw from or cease its funding of the project. Any project with
a multi-year commitment must be so designated in the applicable Annual Business
Plan to qualify for the special continuation of funding or commitment without
the reapproval provisions of this Section 2.15(d) and such designation shall be
a separate document Approved by the Investors that expressly designates the
multi-year commitment.
(e) As soon as practicable after any proposed definitive
Annual Business Plan is submitted to the Investors and in any event no later
than February 28 of the fiscal year to which such plan relates, the Investors
shall Approve or disapprove the proposed definitive Annual Business Plan. If
the proposed definitive Annual Business Plan is Approved by the Investors, then
the proposed definitive Annual Business Plan shall be deemed thereafter to
constitute the Annual Business Plan for
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the fiscal year in question for all purposes hereof, subject to amendment from
time to time. If an Annual Business Plan for any fiscal year is not Approved
by the Investors , the Company shall be managed, maintained, supervised and
directed in accordance with the next preceding Approved Annual Business Plan,
but solely with respect to those items specifically identified as being subject
to continuation and, when so specified, adjustment if subsequent Annual
Business Plans have not been adopted. This interim budget authorization shall
apply until a new Annual Business Plan is Approved by the Investors.
(f) The Company shall have the right from time to time
during each fiscal year to prepare and submit to the Investors for their
Approval proposed amendments to the Annual Business Plan and the EBITDA Target
for such fiscal year. The Investors shall reject or make such revision thereto
as the Investors may deem necessary and proper, which Approval may be withheld
by the Investors in their sole discretion. Once Approved by the Investors, or
so revised by the Investors and approved by the Company, such amendments shall
be incorporated into and become part of the Annual Business Plan and the EBITDA
Target, as the case may be, for the fiscal year in question.
2.16 Implementation of Annual Business Plan by the Company.
(a) The Company will, and the Family Shareholders will
cause the Company to, subject to the provisions of this Agreement (including
Section 2.7) and the availability of cash funds of the Company, use reasonable
efforts to implement the then applicable Annual Business Plan, and, subject to
the provisions of this Agreement (including Section 2.7), the Family
Shareholders shall have all right, power and authority to manage the operations
of the Company through the Controlling Trust and to cause the Company to enter
into agreements and incur obligations in the ordinary course of business and in
a manner consistent with the Approved Annual Business Plan.
(b) The Company shall promptly advise and inform the
Investors and the Family Shareholders of any transaction, notice, event or
proposal about which the Company becomes aware that does or could, in the
reasonable judgment of the Company, significantly affect the Company or any of
its assets, financial condition, business, or prospect, either adversely or
favorably.
2.17 Assistance.
(a) The Company shall and shall cause any of its
Subsidiaries to (and the Family Shareholders and the Controlling Trust shall
cause the Company and any Subsidiary to) prepare and furnish to the Investors
financial statements, reconciled to United States generally accepted accounting
principles, in such manner and by such date as the Investors reasonably request
(in addition to the financial statements provided for in Section 2.8), if the
inclusion of such financial statement in any offering document being prepared
in connection with any financing by such Investors is required by applicable
law. If the Investors so request, the Company, its Subsidiaries, the
Controlling Trust and the Family Shareholders shall, and the Family
Shareholders and the Controlling Trust shall cause the Company and its
Subsidiaries to, cooperate, and shall cause the Company's accountants to
cooperate, in all reasonable respects in connection with any financing efforts
of the Investors or their Affiliates (including providing reasonable assistance
in the preparation of one or
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more registration statements or other offering documents relating to debt
and/or equity financing) and any other filings that may be made by the
Investors or their Affiliates with the United States Securities and Exchange
Commission, all at the sole expense of the Investors. In connection with the
foregoing, the Company shall, and shall cause each of its Subsidiaries to (and
the Family Shareholders and the Controlling Trust shall cause the Company and
its Subsidiaries to), (i) furnish to its independent accountants (or, if
requested by the Investors, to any of the Investors' independent public
accountants), such customary management representation letters as its
accountants may reasonably require of the Company or its Subsidiaries as a
condition to its execution of any required accountants' consents necessary in
connection with the delivery of any "comfort" letters requested by financing
sources of any of the Investors or their Affiliates, and (ii) furnish to the
Investors all financial statements (audited and unaudited) and other
information in the possession of the Company or its Subsidiaries or their
representatives or agents as the Investors shall reasonably determine are
required in connection with such financing.
(b) Each Investor using such information, severally and
not jointly, shall indemnify and hold harmless the Company, the other
Investors, and each Family Shareholder and their respective officers,
directors, and controlling Persons, on demand, against any and all claims,
losses, liabilities, damages, costs, or expenses (including reasonable legal
fees and expenses) that may arise out of or with respect to such Investor's use
of information provided pursuant to the immediately preceding paragraph (a) or,
more generally, the financing efforts by such Investor or such Investor's
Affiliates, including any registration statement, prospectus, offering
documents, and other filings related thereto; provided, however, that subject
to the limitations and provisions of this Agreement, nothing in this Section
2.17 shall prevent the Investors from asserting any claim for breach of
representation or warranty under this Agreement.
2.18 Investor Liquidity. After the third anniversary of the date
of this Agreement and upon the Investors' request, the Company, the Family
Shareholders and the Controlling Trust shall use their respective best efforts
in good faith to assist the Investors to achieve liquidity at prevailing market
prices with respect to their ownership of Controlling Trust Interests. Such
efforts may include assisting the Investors to convert such Controlling Trust
Interests into CPOs, obtaining government approvals to increase the number of
CPOs the Company is permitted to have outstanding, or assisting the Investor
Companies in finding one or more private buyers to purchase the Investors'
Controlling Trust Interests or Series A Shares represented by such Controlling
Trust Interests, subject to the limitations of the Controlling Trust and this
Agreement. In no event shall this Section 2.18 require the Company or the
Family Shareholders to purchase the Controlling Trust Interests of the
Investors or to surrender rights they otherwise have with respect to the
Company or under this Agreement.
2.19 Substitution of Special Family Designees and Restricted Family
Designees.
(a) The Family Shareholders will be entitled to replace
Mr. Rafael Felipe de Jesus Aguirre Gomez as a Special Family Designee with
another Person Approved by the Investors in their reasonable discretion.
Messrs. Adrian Aguirre Gomez and Carlos de Jesus Aguirre Gomez shall not be
replaced as Special Family Designees without the Approval of the Investors,
which the Investors
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may withhold in their sole discretion. Any successor Special Family Designee
may be replaced only on the same terms as that Person's predecessor.
(b) Messrs. Adrian Aguirre Gomez and Carlos de Jesus
Aguirre Gomez shall not be replaced as Restricted Family Designees without the
Approval of the Investors, which the Investors may withhold in their sole
discretion. Any successor Restricted Family Designee may be replaced only on
the same terms as that Person's predecessor. Upon due replacement of a
Restricted Family Designee, (i) the replaced Restricted Family Designee shall
be freed from the limitations imposed under this Agreement solely on Restricted
Family Designees, but shall continue to be subject to the obligations and
limitations imposed under this Agreement on Family Shareholders generally; and
(ii) the new Restricted Family Designee shall become subject to the limitations
imposed under this Agreement solely on Restricted Family Designees, in addition
to the limitations imposed on Family Shareholders generally.
ARTICLE III
TRANSFER OF SECURITIES
3.1 Transfer of Series A Share Equivalents.
(a) General. Subject to prior compliance with Sections
3.1(b) and (c), 3.3 and 3.4 and the provisions of the Registration Rights
Agreement, and subject also to Section 3.2 in the case of any Restricted Family
Designee, any Shareholder may Transfer Series A Share Equivalents held by such
Shareholder in accordance with applicable law; provided, that either (i) the
Shareholder Transferring such Series A Share Equivalents first delivers to the
Company a written agreement of the proposed transferee to become a Shareholder
and be bound by the terms hereof (unless such proposed transferee is already a
Shareholder hereto) or (ii) the Transfer is through the facilities of the
Bolsa, the Mexican intermediate securities market, a United States or foreign
securities exchange, the Nasdaq Stock Market, or an inter-dealer quotation
system (including PORTAL) or a sale that is pursuant to an Offering (in each
case except for a Transfer in a directed sale to an intended transferee or
group of transferees). If any Family Shareholder desires to make a Transfer
that is not a Permitted Transfer, but believes that the Transfer should not
raise concerns for the Investors about changes of control, concentrations of
voting power, or other matters, then the Family Shareholder may discuss the
matter fully with the Investor Representative, and the Investors will have the
option to waive the Investors' rights under Sections 3.1(b) and (c).
(b) Right of First Offer.
(i) Before consummating any Transfer of Series A
Share Equivalents other than a Permitted Transfer, the Shareholder desiring to
effect the Transfer (the "Offering Shareholder") will deliver to the Investors
or to the Family Shareholders, as specified below (whether one or more and as
they may allocate among themselves as set forth below, the "Non-Offering
Shareholders"), a written notice (an "Offer Notice") specifying (A) the
aggregate amount of
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consideration (stated as a cash value in U.S. dollars) (the "Offer Price") for
which the Offering Shareholder proposes in good faith to sell the Series A
Share Equivalents to be offered in such Transfer (the "Offered Interest"), (B)
the identity of the purchaser in such Transfer (if then known), (C) the number
and nature of Series A Share Equivalents that constitute the Offered Interest
and whether such amount represents all or part of the Series A Equivalents
owned by the Offering Shareholder, and (D) all other material terms (if known)
of the proposed Transfer. The Non-Offering Shareholders shall have the right
to elect to purchase from the Offering Shareholder all (but not less than all)
the Offered Interest referred to in the Offer Notice as follows:
(1) If the Offering Shareholder is a
Family Shareholder, the Offering Shareholder will deliver an Offer
Notice to the Investors (through the Investor Representative), and the
Investors shall have the right for a period of 30 days after the
delivery of the Offer Notice to purchase all (but not less than all)
the Offered Interest, which right shall be exercised by each
exercising Investor's delivering notice of exercise to the Investor
Representative as soon as practicable (but no later than 25 days after
the date of the Offer Notice), and the Investor Representative's
delivering to the Offering Shareholder a written notice of the
Investors' exercise of the right to purchase the Offered Interest,
identifying the Non-Offering Shareholders that are exercising their
right to purchase, stating that such Non-Offering Shareholders are
willing to purchase all (but not less than all) of the Offered
Interest in the aggregate subject to the conditions set forth in
Section 3.1(b)(ii) below, and stating the portion of the Offered
Interest that each Non-Offering Shareholder will purchase (an
"Acceptance Notice"). The Investor Representative shall also deliver
a copy of that notice to all Investors. If the Offered Interest is an
interest in the Family Trust, then it will be a requirement of the
Investors' purchase of the Offered Interest that such Offered Interest
be withdrawn from the Family Trust, that the Offered Interest be
deposited with the Controlling Trust, and that the Controlling Trustee
issue a Controlling Trust Interest to the Investors that elected to
purchase the Offered Interest equal in value and economic rights to
the Offered Interest (measured by the number of Series A Shares
indirectly represented by that Offered Interest). In this
circumstance, all references to Offered Interest in the following
clause (3) and the subsequent clause (ii) will mean such Controlling
Trust Interest.
(2) If the Offering Shareholder is an
Investor, the Offering Shareholder will deliver an Offer Notice to the
Family Shareholders (through the Family Shareholder Representative),
and the Family Shareholders shall have the right for a period of 30
days after the delivery of the Offer Notice to purchase all (but not
less than all) the Offered Interest, which right shall be exercised by
each exercising Family Shareholder's delivering notice of exercise to
the Family Shareholder Representative as soon as practicable (but no
later than 25 days after the Offer Notice), and the Family Shareholder
Representative's delivering to the Offering Shareholder a written
notice of the Family Shareholders' exercise of the right to purchase
the Offered Interest, identifying the Non-Offering Shareholders that
are exercising their right to purchase, stating that such Non-Offering
Shareholders are willing to purchase all (but not less than all) of
the Offered Interest in the aggregate subject to the conditions set
forth in Section 3.1(b)(ii), and stating the portion of the Offered
Interest that
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each Non-Offering Shareholder will purchase (an "Acceptance Notice").
The Family Shareholder Representative shall also deliver a copy of
that notice to all Family Shareholders.
(3) In either of the preceding clauses
(1) and (2), any Shareholder that does not duly exercise its right to
purchase the Offered Interest during the applicable period shall be
deemed to have waived that right with respect to that proposed
Transfer. If there is more than one exercising Non-Offering
Shareholder (whether one or more, the "Purchasing Shareholders"), each
Purchasing Shareholder shall participate in the purchase in the same
proportion that the number of Series A Share Equivalents it owns bears
to the aggregate number of Series A Share Equivalents owned by all
Purchasing Shareholders (or on such other basis as the Purchasing
Shareholders may mutually agree). Upon delivery of the Acceptance
Notice, the Acceptance Notice shall become a binding obligation for
the Purchasing Shareholders to purchase from the Offering Shareholder,
and for the Offering Shareholder to sell to the Purchasing
Shareholders, the Offered Interest on the terms and conditions set
forth in Section 3.1(b)(ii). Any Investor shall have the right to
assign its purchase rights under this Section 3.1(b) pursuant to a
Permitted Transfer or to another Person (in this last case, if the
Investor reasonably believes it will not receive the necessary
regulatory approvals based on consultations with the regulatory
authorities), provided such Person becomes a Party to this Agreement
as an Investor in connection with the purchase of the Offered
Interest. The Offering Shareholder and the Purchasing Shareholders
shall use their reasonable commercial efforts to obtain all necessary
government approvals to consummate the purchase and sale of the
Offered Interest by the Purchasing Shareholders.
(ii) The ROFO Closing. Unless the Offering
Shareholder and the Purchasing Shareholders agree otherwise, the consummation
of any purchase and sale of the Offered Interest by the Purchasing Shareholders
pursuant to this Section 3.1 (the "ROFO Closing") will occur on the later of
(A) the twentieth Business Day following the delivery of the Acceptance Notice
and (B) the fifth Business Day following the date on which all necessary
regulatory approvals have been received (such date being referred to herein as
the "ROFO Closing Date"), at the principal executive offices of the Company at
10:00 a.m. (local time). At the ROFO Closing, (1) the Purchasing Shareholders
will deliver to the Offering Shareholder by certified or official bank check or
wire transfer to an account designated by the Offering Shareholder no later
than two Business Days before the ROFO Closing Date an amount in next-day
funds equal to the Offer Price, (2) the Offering Shareholder will deliver one
or more certificates evidencing the Offered Interest, together with such other
duly executed instruments or documents (executed by the Offering Shareholder)
as may be reasonably requested by the Purchasing Shareholders to acquire the
Offered Interest free and clear of any and all Liens, except for Liens created
by federal or state securities law or the Purchasing Shareholders, and (3) the
Offering Shareholder will be deemed to represent and warrant to the Purchasing
Shareholder that, upon the ROFO Closing, the Purchasing Shareholders will
acquire the entire record and beneficial ownership of, and good and valid title
to, the Offered Interest, free and clear of any and all Liens, except for Liens
created by federal and state securities laws or the Purchasing Shareholders.
Each of the Purchasing Shareholders and the Offering Shareholder shall pay
their respective taxes and expenses in connection with the Transfer of the
Offered Interest. If any Purchasing Shareholder defaults in its obligation to
pay its portion of the Offer Price at the ROFO
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Closing, any non-defaulting Purchasing Shareholder may elect to purchase the
portion of the Offered Interest attributable to the defaulting Purchasing
Shareholder and may elect to delay the ROFO Closing Date by up to five Business
Days (unless the non-defaulting Purchasing Shareholders and the Offering
Shareholder agree to another date), which date shall be considered the ROFO
Closing Date. At the ROFO Closing Date (giving effect to such delay, if any),
the non-defaulting Purchasing Shareholders giving such notice shall be
obligated to purchase (and the Offering Shareholder shall be obligated to sell)
the portion of the Offered Interest that the defaulting Purchasing Shareholder
was to have purchased and the non-defaulting Purchasing Shareholders shall also
be obligated to purchase (and the Offering Shareholder shall be obligated to
sell) the portion of the Offered Interest they were to have purchased before
the default. A defaulting Purchasing Shareholder shall not be relieved of
liability for such default to the Offering Shareholder and the non-defaulting
Purchasing Shareholders because of the default of another Purchasing
Shareholder, the Offering Shareholder's sale to a third party under the
following clause (iii), or the sale by non-defaulting Purchasing Shareholders
pursuant to their tag-along rights under Section 3.1(c). Further, no
defaulting Purchasing Shareholder shall have tag-along rights under Section
3.1(c) with respect to the Transfer on which such Purchasing Shareholder
defaulted. If any Purchasing Shareholder is denied the necessary governmental
approvals to consummate the purchase and sale of the Offered Interest by final
order, and if at least one Purchasing Shareholder is able to obtain the
necessary governmental approvals, then the Purchasing Shareholders that obtain
the necessary governmental approvals shall purchase the Offered Interest, which
shall be allocated among them as though they were the only Purchasing
Shareholders. If all Purchasing Shareholders are denied the necessary
governmental approvals, then they shall be released of their obligation to
purchase the Offered Interest without liability to any Party.
(iii) Right to Consummate Transfer. Subject to the
provisions of Section 3.1(c) below, if no Acceptance Notice relating to the
proposed Transfer is delivered to the Offering Shareholder on or before the
expiration of the ROFO Acceptance Period, or if an Acceptance Notice is so
delivered to the Offering Shareholder but the ROFO Closing fails to occur
because of the default of a Purchasing Shareholder on the ROFO Closing Date and
the failure of non-defaulting Purchasing Shareholders to elect to purchase the
portion of the Offered Interest attributable to the defaulting Purchasing
Shareholder, or because of the failure of any non-defaulting Purchasing
Shareholder to purchase the Offered Interest attributable to it subsequent to
such initial default by another Purchasing Shareholder, or because all
Purchasing Shareholders are denied the necessary governmental approvals, then
the Offering Shareholder may (without affecting its rights, if any, arising out
of such default) consummate the Transfer, but only (A) during the 180 calendar
day period immediately following the date of the Offer Notice (if no Acceptance
Notice was timely delivered to the Offering Shareholder) or the 180 calendar
day period immediately following the ROFO Closing Date, as it may have been
delayed as permitted herein (if an Acceptance Notice was timely delivered to
the Offering Shareholder but a Purchasing Shareholder defaulted at the ROFO
Closing, as delayed for any initial default) and (B) at a price equal to or
greater than the Offer Price.
(c) Tag-Along Rights. (i) Before consummating any
Transfer and after complying with the provisions of Section 3.1(b) above, the
Offering Shareholders desiring to complete such Transfer (each such Shareholder
being referred to herein as a "Transferor") shall give written notice to each
other Shareholder (each, an "Eligible Shareholder") of the proposed sale (the
"Transferor's
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Notice") at least 50 days prior to the closing of the proposed sale. The
Transferor's Notice shall specify the proposed transferee, the number and
nature of the Series A Share Equivalents to be sold to such transferee (the
"Offered SEs"), whether such Offered SEs constitute all or fewer than all the
Series A Share Equivalents owned by the Transferor, the amount of consideration
(which may not include consideration other than cash or publicly traded,
readily marketable securities) per share of Capital Stock represented by the
Offered SEs to be received therefor (the "Price"), and the place, date and time
on which the sale is to be completed. The Transferor's Notice shall constitute
the Transferor's offer (the "Participation Offer") to include in the proposed
sale Series A Share Equivalents that represent the economic interest in respect
of a number of shares of Capital Stock designated by each Eligible Shareholder,
not to exceed the number of shares equal to the product of (A) the aggregate
number of shares of Capital Stock represented by the Offered SEs and (B) a
fraction with a numerator equal to the number of shares of Capital Stock
represented by the Series A Share Equivalents held by such Eligible Shareholder
and a denominator equal to the number of shares of Capital Stock represented by
the aggregate of all Series A Share Equivalents held by the Transferor and all
Eligible Shareholders electing to sell pursuant to this provision; provided
that, if the consideration to be received by the Transferor includes any
securities and the transaction is subject to the Securities Act (and not
registered or exempt from registration pursuant to an exemption from
registration other than a private placement exemption), only Eligible
Shareholders who have certified to the reasonable satisfaction of the
Transferor that they are Accredited Investors (as defined in Regulation D under
the Securities Act) shall be entitled to participate in such Transfer, unless
the transferee consents otherwise. The Eligible Shareholders shall have the
right to include Series A Share Equivalents in the proposed sale referred to in
the Transferor's Notice.
If any Eligible Shareholder accepts the Participation Offer (whether
one or more, the "Participating Shareholders"), the Transferor shall reduce to
the extent necessary the amount of Offered SEs it otherwise would have sold in
the proposed sale so as to permit the Participating Shareholders to sell the
amount of Series A Share Equivalents that they are entitled to sell under this
Section 3.1(c)(i), and the Transferor and such Participating Shareholders shall
sell the number of Series A Share Equivalents specified in the Participation
Offer to the proposed transferee in accordance with the terms of such sale set
forth in the Participation Notice.
(ii) The Participation Offer shall be conditioned
upon (A) the Transferor's sale of shares pursuant to the transactions
contemplated in the Transferor's Notice with the transferee named therein, and
(B) each Participating Shareholder's execution and delivery of all agreements
and other documents as the Transferor is required to execute and deliver in
connection with such sale (provided that the Participating Shareholders shall
not be required to make any representations or warranties in connection with
such sale or Transfer other than representations and warranties as to (1) such
Participating Shareholder's ownership of Capital Stock to be sold or
Transferred free and clear of all Liens, (2) such Participating Shareholder's
power and authority to effect such Transfer without the consent or approval of
any other Person and (3) such matters pertaining to compliance with securities
laws as the transferee may reasonably require).
(d) Inapplicability of Sections 3.1(b) and (c) to Certain
Events. Notwithstanding anything in this Agreement to the contrary, in no
event shall any of the following be subject to the
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terms of Section 3.1(b) or (c): (i) an exchange, reclassification, or other
conversion of shares into any cash, securities, or other property pursuant to a
merger, consolidation, or recapitalization of the Company or Chancellor with,
or a sale or Transfer by the Company of all or substantially all its assets to,
any Person, (ii) any Transfer, except for a Transfer in a directed sale to an
intended transferee or group of transferees, that is through the facilities of
the Bolsa, the Mexican intermediate securities market, a United States or
foreign securities exchange, the Nasdaq Stock Market, or any other securities
exchange, securities market or inter-dealer quotation system (including
PORTAL), (iii) a sale that is pursuant to an Offering other than in a directed
sale to an intended transferee or group of transferees, or (iv) a Permitted
Transfer.
3.2 Lock-up of Restricted Family Designees. Notwithstanding the
other provisions of this Article III, each of the Restricted Family Designees
agrees that it will not effect any Transfer of Series A Share Equivalents
(including Permitted Transfers) on or before the third anniversary of the date
of this Agreement unless such Transfer is Approved by the Investors. If a
Restricted Family Designee becomes subject to proceedings for divorce, the
Restricted Family Designee shall use his or her best efforts to have all shares
of Capital Stock owned by him or her (whether as separate property, community
property, in sociedad conyugal or otherwise) and subject to this Agreement to
be allocated to such Restricted Family Designee as such Restricted Family
Designee's separate property. The obligations in the two preceding sentences
shall apply only to the Series A Share Equivalents held by the Restricted
Family Designees on the date hereof (after giving effect to the transactions
contemplated in the Acquisition Agreement) and shall not apply to any Series A
Share Equivalents that a Restricted Family Designee acquires hereafter (whether
by purchase, gift, inheritance or otherwise).
3.3 Transfers in Violation Void. Any purported Transfer by a
Shareholder that is not permitted by the provisions of this Article III, or
which is in violation of such provisions, shall be void and of no force and
effect whatsoever.
3.4 Consent to Transfers. For purposes of any consents required
under the Charter of the Company, the Shareholders hereby irrevocably and
unconditionally consent to any and all Transfers of Series A Share Equivalents
made in compliance with this Agreement, the Registration Rights Agreement and,
if applicable, the Controlling Trust Agreement.
ARTICLE IV
MANDATORY REPURCHASE
4.1 Grant and Exercise. On and after the occurrence of a
Triggering Event, the Investors (acting through the Investor Representative)
shall then have the right and option to require the Repurchaser to purchase
(the "Mandatory Repurchase Right") in accordance with this Article IV all or
any portion of the Investor's Acquired SEs (together with any Company dividend
received by such Investor with respect to Acquired SEs that was in the form of
additional shares of Capital Stock). The securities described in the preceding
sentence are referred to herein as the "Repurchase SEs."
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The Investor shall exercise its Mandatory Repurchase Right by means of notice
to the Repurchaser addressed to the Family Shareholder Representative stating
that the Triggering Event has occurred and specifying the amount and nature of
the Repurchase SEs as to which the Mandatory Repurchase Right is then being
exercised (an "Exercise Notice").
4.2 Repurchase Price. Upon the Investors' exercise of the
Mandatory Repurchase Right, the purchase price for the Repurchase SEs subject
to such exercise (the "Repurchase Price") shall be calculated as the product of
the Company Market Price times the number of shares of Capital Stock
represented by the Repurchase SEs being purchased.
4.3 Company Market Price. For purposes of calculating the
Repurchase Price pursuant to Section 4.2, the term "Company Market Price" shall
mean and shall be calculated as follows:
(a) If as of the date of the relevant Exercise Notice,
shares of Capital Stock (or equivalents in the form of ADRs evidencing ADSs)
are trading on a national securities exchange in the United States or quoted on
the Nasdaq Stock Market or reported on the over-the-counter market by the
National Quotation Bureau, Inc., then the Company Market Price shall be the
average of the following applicable prices for the five consecutive trading
days immediately preceding the date of such Exercise Notice:
(i) The last sales price, regular way of a share
of Capital Stock (or an ADR evidencing an ADS), or, in case no such
sale takes place on such day, the average of the closing bid and asked
price, regular way, of a share of Capital Stock (or an ADR evidencing
an ADS), in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal United States national securities exchange on which the
Capital Stock (or ADRs evidencing ADSs) are listed or admitted to
trading;
(ii) If clause (i) above is not applicable, then
the last closing price of a share of Capital Stock (or an ADR
evidencing an ADS) or, if no such sale takes place on such day, the
average of the high and low asked prices in the over-the-counter
market of a share of Capital Stock (or an ADRs evidencing an ADS), as
reported by Nasdaq Stock Market; or
(iii) If neither clause (i) nor (ii) above is
applicable, then the mean between the average bid and average asked
prices of a share of Capital Stock (or an ADR evidencing an ADS) in
the over-the-counter market as reported by the National Quotation
Bureau, Inc.
(b) If clause (a) above is not applicable, then the
Company Market Price shall be the average closing price of a share of Capital
Stock as published in the Daily Securities Market Activity of the BMV Bolsa
Mexicana, Capital Market Section, with each such quote converted into dollars
based on the exchange rate quoted by Chase Manhattan Bank, N.A., on each such
day, for the five consecutive trading days immediately preceding the date of
such Exercise Notice.
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(c) If an ADR is used under clause (a) in the
determination of the price of a share of Capital Stock, the calculation will be
made taking into account the number of shares of Capital Stock represented by
the CPOs which are represented by the ADS evidenced by such ADR.
4.4 Repurchase Closing.
(a) The consummation of the transactions contemplated by
each exercise of the Mandatory Repurchase Right (the "Repurchase Closing")
shall take place on the date (the "Repurchase Closing Date") that is the later
of (i) the date that is the fifth Business Day after the expiration of 45
calendar days, after the date of the relevant Exercise Notice or (ii) the fifth
Business Day following the date on which all necessary regulatory approvals
have been received, or at such earlier date as the Repurchaser and the
Investors shall agree. The Repurchase Closing shall take place at the
principal executive offices of the Company at 10:00 a.m., local time, on the
Repurchase Closing Date or at such other location and time as the Repurchaser
and the Investors shall agree. At any time during the time period commencing
as of the date of the relevant Exercise Notice and ending as of the second
Business Day prior to relevant Repurchase Closing Date, by means of notice to
the Investors, the Repurchaser may assign and delegate its obligations to
acquire the relevant Repurchase SEs under this Article IV. Any such assignment
and delegation by the Repurchaser shall not otherwise affect the rights and
obligations of the Shareholders arising under this Agreement and shall not
release the Repurchaser from the obligation to purchase the Repurchase SEs.
(b) At the Repurchase Closing (i) as may be applicable,
the Investors shall execute and deliver such documents and instruments as may
be necessary to Transfer the Repurchase SEs, and (ii) the Repurchaser (or if
applicable its assignee) shall tender and pay in immediately available funds
the Repurchase Price to the Investors. At the Repurchase Closing, in
accordance with the above provisions of this Section 4.4(b), the Repurchase SEs
shall be Transferred to the Repurchaser (or if applicable its assignee) free
and clear of all Liens created by, through, or under such Investors, other than
those arising pursuant to the terms of this Agreement.
(c) In addition to the actions described in clause (b)
above, if the Repurchase SEs are comprised of Controlling Trust Interests, then
at the Repurchase Closing, the Investors shall execute and deliver an
instruction to the Trustee in substantially the form of Exhibit B authorizing
the Trustee to evidence on the appropriate registry the Transfer of such
Controlling Trust Interests to the Repurchaser (or if applicable its assignee).
4.5 Triggering Event. The term "Triggering Event" shall mean the
failure within 120 days after receipt of written notice from the Investors
(acting through the Investor Representative) requiring the Company to do so of
the Company to replace those members of management that the Investors designate
for removal (acting through the Investor Representative) with new management
personnel appointed by the Company and reasonably acceptable to the Investor.
The Investors shall have the right to give the notice specified in the
preceding sentence at any time after the Company, during any four consecutive
fiscal years commencing with fiscal 1999, achieves less than 90% of the EBITDA
Target stated in the Annual Business Plan in at least two of the fiscal years
and less than 85% of the EBITDA Target stated in the Annual Business Plan in at
least one of the fiscal years.
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4.6 Multiple Exercises. The Mandatory Repurchase Right shall be
exercisable by the Investors, from time to time, as provided in this Article IV
upon and after the occurrence of the Triggering Event. The exercise of the
Mandatory Repurchase Right by the Investor upon or after the occurrence of the
Triggering Event or the failure of the Investor to exercise the Mandatory
Repurchase Right upon or after the occurrence of the Triggering Event shall not
prejudice the right of the Investor to subsequently exercise the Mandatory
Repurchase Right upon or after the occurrence of a subsequent Triggering Event.
The right of the Investors to exercise such Mandatory Repurchase Right with
respect to the occurrence of a Triggering Event shall cease to be exercisable
with respect to any four year period on the date that is nine months and one
day after the 120-period specified in Section 4.5. In addition, if management
is replaced as contemplated in Section 4.6, then the rolling four-year periods
for the next Triggering Event (if any) shall recommence with the fiscal year
following the last fiscal year that was the basis for the Triggering Event that
resulted in the change in management.
4.7 Nature of Remedy. In the event the Repurchaser breaches its
obligation to repurchase pursuant to this Article IV, the Investors shall have
the right, in addition to any other remedies available under this Agreement,
any other Transaction Document, applicable law or otherwise, to require the
Repurchaser to sell all or any part of its Series A Share Equivalents to the
Investors at the Company Market Price (the "Mandatory Call Right"). The
Investors may elect to exercise the Mandatory Call Right at any time after
giving notice to the Family Shareholders and the Company of the Repurchaser's
failure to fulfill its obligations under this Article IV. Such exercise shall
be by means of written notice to the Repurchaser, and the closing of the
purchase by the Investors of such Series A Share Equivalents shall be at the
place, date and time specified in such notice and otherwise in accordance with
the procedure for the Repurchase Closing set forth in Section 4.4, mutatis
mutandis.
4.8 Independent Covenants. Each Family Shareholder and the
Company acknowledge that the covenants of such Shareholders set forth in this
Article IV constitute independent covenants and shall not be affected by the
performance or non-performance of this Agreement or any other Transaction
Document by any Shareholder other than the Shareholder whose breach or actions
gave rise to the Triggering Event.
ARTICLE V
TERMINATION
5.1 Termination. The provisions of Articles II and III of this
Agreement shall terminate in respect of all Shareholders when such termination
is Approved by the Investors and Approved by the Family Shareholders. A Person
who ceases to own beneficially any Series A Share Equivalents shall cease to be
a Shareholder and shall have no further rights under this Agreement except with
respect to the rights that such Person may have hereunder against any other
Shareholder by reason of such Shareholder's prior breach of this Agreement.
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ARTICLE VI
GENERAL
6.1 Action of Family Shareholders and Investors. Whenever
specified provisions of this agreement require any action, request,
disapproval, approval, notice, or consent by the Family Shareholders as a group
or the Investors as a group, such actions shall be taken in the same manner and
through the same procedures as actions requiring Approval of the Family
Shareholders or Approval of the Investors, respectively. The provisions to
which this Section 6.1 applies are Section 2.1 (relating to the designation of
directors, their alternates, and committee members), Section 2.2 (relating to
the designation of members of the Technical Committee and their alternates),
Section 2.3 (relating to the designation of a statutory auditor (comisario),
Section 2.4 (relating to written instructions of the Shareholders), Section 2.7
(relating to the limited corporate rights of the Investors), Section 2.13
(relating to inspection and other information rights of the Investors), Section
2.15 (relating to requests, communications, agreements, approvals and
disapprovals relating to the Annual Business Plan), and Section 2.17 (relating
to requests for information and assistance). With respect to actions to be
taken by the Majority in Interest of the Investors, the Investors agree not to
enter into any agreements pursuant to which any Investor that holds less than
the Tertiary Ownership Threshold may alone require the Majority in Interest of
the Investors to exercise a right on its behalf.
6.2 Amendment and Waiver. Any provision of this Agreement may be
altered, supplemented, amended or waived by the written consent of each of (a)
the Company, (b) the Majority in Interest of the Investors, and (c) either the
Controlling Trust or the Majority in Interest of the Family Shareholders, in
each case if such Shareholder's rights are adversely affected by such
alteration, supplement, amendment, or waiver. Such alteration, supplement,
amendment, or waiver shall be binding upon all Shareholders. No failure or
delay by any Shareholder in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
6.3 Assignment. Provisions of this Agreement that are for the
Shareholders' benefit as the holders of any Series A Share Equivalents are also
for the benefit of, and enforceable by, all subsequent holders of Series A
Share Equivalents (other than Persons acquiring Series A Share Equivalents in
transactions described in Section 3.1(d)(ii) and (iii), but including Persons
acquiring Series A Share Equivalents in a directed sale), except as otherwise
expressly provided herein. This Agreement shall be binding upon the Company,
each Shareholder and their respective successors and assigns.
6.4 Notices. All notices, requests and other communications to
any Shareholder shall be in writing and shall be deemed to have been duly given
when delivered in person or when dispatched by electronic facsimile transfer or
one Business Day after having been dispatched by a internationally recognized
overnight courier service to the appropriate Party at the address specified
below or on the signature pages hereto.
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(a) If to the Company, to:
Grupo Radio Centro, S.A. de C.V.
Constituyentes 1154 (7th Piso)
Col. Lomas Altas
C.P. 11950
Mexico, D.F., Mexico
Facsimile No.: (011) 525-728-4875
Attention: Adrian Aguirre Gomez
with a copy to (which shall not constitute notice for
purposes of this Agreement):
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Facsimile No.: (212) 225-3999
Attention: Leslie N. Silverman
White & Case, S.C.
Torre Optima
Paseo de las Palmas 405 - 5th Piso
Col. Lomas de Chapultepec
11000 Mexico, D.F., Mexico
Facsimile No.: (5) (25) 540-9699
Attention: Alberto Sepulveda Cosio
(b) If to the Investors, to the Investor
Representative:
Chancellor Media Corporation
433 East Las Colinas Boulevard
Irving, Texas 75039
Facsimile No.: (972) 869-8095
Attention: Eric C. Neuman
with a copy to (which shall not constitute notice for
purposes of this Agreement):
Vinson & Elkins L.L.P.
3800 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Facsimile No.: (214) 220-7716
Attention: Robert L. Kimball
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(c) If to the Family Shareholders, to each of the Family
Shareholder Representatives:
Carlos de Jesus Aguirre Gomez
Grupo Radio Centro, S.A. de C.V.
Constituyentes 1154 (7th Piso)
Col. Lomas Altas
C.P. 11950
Mexico, D.F., Mexico
Facsimile No.: (011) 525-728-4875
Rafael Felipe de Jesus Aguirre Gomez
Boulevard Kukulcan Km.2
Condominio Las Quintas
Casa 4
C.P. 77500
Mexico, Cancun, Quintana Roo
Facsimile No.: (011) 529-883-2844
with a copy to (which shall not constitute notice for
purposes of this Agreement):
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Facsimile No.: (212) 225-3999
Attention: Leslie N. Silverman
White & Case, S.C.
Torre Optima
Paseo de las Palmas 405 - 5th Piso
Col. Lomas de Chapultepec
11000 Mexico, D.F., Mexico
Facsimile No.: (5) (25) 540-9699
Attention: Alberto Sepulveda Cosio
or to such other address or addresses and facsimile number as any such Party
may from time to time designate as to itself by like notice.
6.5 Counterparts. This Agreement may be executed in two or more
counterparts, and each counterpart shall be deemed to be an original and which
counterparts together shall constitute one and the same agreement of the
Parties hereto.
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6.6 Section Headings. Headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit, or extend
the scope or intent of this Agreement or any provisions hereof.
6.7 Governing Law. Except for matters of corporate governance
required by the laws of Mexico to be controlled by the laws of Mexico, which
matters shall be governed by and construed in accordance with the laws of
Mexico, this Agreement shall be governed by and construed in accordance with
the laws of the State of New York, United States.
6.8 Arbitration.
(a) Any dispute, controversy or claim arising out of,
relating to or in connection with this Agreement, including any question
regarding its existence, validity or termination, or regarding a breach thereof
(hereafter, "dispute") shall be submitted to two senior management
representatives of the Investors on the one hand and the Family Shareholders on
the other to attempt to reach an amicable resolution. A Party wishing to
initiate consideration of a dispute by senior management hereunder shall give
written notice to the other Parties hereto of the existence of such dispute and
of the Party's desire to have senior management consider the dispute. Such
notice shall set forth a brief description of the nature of the dispute to be
considered.
(b) If a dispute is not settled within 15 days after the
notice is given to the other Parties seeking senior management consideration of
a dispute, then the dispute shall be finally settled by international
arbitration under and in accordance with the Rules of Conciliation and
Arbitration of the International Chamber of Commerce, Paris, France, in effect
on the date of this Agreement (the "Rules"). A Party wishing to submit a
dispute to arbitration shall give written notice to such effect to the other
Parties hereto and to the International Chamber of Commerce International Court
of Arbitration (the "ICC Court"). The Parties shall have 30 calendar days from
another Party's notice of such a request for arbitration to designate the
arbitrators for the dispute.
(c) Each of the Family Shareholder Representative and the
Investor Representative shall designate one arbitrator, and the two designated
arbitrators shall in turn choose a third arbitrator, who shall also be the
chairman of the panel. The ICC Court shall confirm the appointment of the
third arbitrator. If one of the two Parties appoints an arbitrator but the
other Party fails to nominate its arbitrator within the 30-day period specified
in Section 6.8(b), then the appointment of the second arbitrator shall be made
by the ICC court upon the request of the other Party; and if the appointed
arbitrators shall fail to appoint the third arbitrator within 30 calendar days
after the date of appointment of the most recently appointed arbitrator, the
third arbitrator shall be appointed by the ICC Court upon the request of either
Party.
(d) The arbitrators shall be legal practitioners having
at least 10 years' experience in international commercial legal matters in the
20 years immediately preceding commencement of the arbitration. In addition,
the chairperson of the panel shall have at least 10 years' experience in
practice under the laws of the State of New York. The arbitration shall be
conducted under and in accordance with the Rules, which Rules are deemed to be
incorporated by reference to this clause.
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The site of the arbitration shall be New York, New York, any award shall be
deemed to have been made there, and the language to be used in the arbitration
proceedings shall be the English language. All direct testimony shall be
submitted by sworn affidavit or written question and answer; reasonable
discovery shall be permitted but shall be limited in all cases to requests for
documentation. The decision of the arbitrators shall be rendered within 90
calendar days from the appointment of the last arbitrator, and shall be final
and binding upon all Parties. Any award shall be in writing in the English
language and state the reasons and contain reference to the legal grounds upon
which it is based. The award may be made public only with the written consent
of all parties to the arbitration, provided, however that any ruling or award,
final or otherwise, may be cited in any subsequent dispute. The arbitrators
shall neither have nor exercise any power to act as amicable compositeur or
decide ex aequo et bono; or to award special, exemplary, indirect,
consequential or punitive damages. The costs of the arbitration shall be fixed
in accordance with Article 20 of the Rules.
(e) Notwithstanding anything in this Agreement to the
contrary, the Company and the Family Shareholders agree not to challenge in
arbitration, court or otherwise the exercise by the Investor of any contractual
right created by this Agreement which, by the terms of this Agreement, may be
exercised by the Investor in its sole discretion. Such rights include the
exercise by the Investor of its limited corporate rights specified in Section
2.7 and its rights under Article IV.
6.9 Waiver of Immunity. To the extent that any Shareholder has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid or execution, or otherwise) with respect to itself or its
property, such Shareholder hereby irrevocably waives such immunity in respect
of its obligations under any of this Agreement to the extent permitted by
applicable law and, without limiting the generality of the foregoing, agrees
that the waivers set forth in this Section 6.9 shall have effect to the fullest
extent permitted under the Foreign Sovereign Immunities Act of 1976 of the
United States and are intended to be irrevocable for purposes of such Act.
6.10 Confidentiality. The Shareholders shall, and shall cause
their respective officers, directors, employees, and agents and the
subsidiaries and Affiliates of the Shareholders and their respective officers,
directors, employees, and agents, to hold confidential and not use in any
manner detrimental to the Company all information they may have or obtain
concerning the Company and its assets, Business, operations, or prospects, as
well as the terms of the Acquisition Agreement, this Agreement, any other
Transaction Document, any Offer Notice or Participation Notice and the
documents and transactions contemplated thereby; provided, however, that the
foregoing shall not apply to (a) information that is or becomes generally
available to the public other than as a result of a disclosure by a Shareholder
or any of its employees, agents, accountants, legal counsel, or other
representatives, (b) information that is or becomes available to a Shareholder
or any of its employees, agents, accountants, legal counsel, or other
representatives on a nonconfidential basis prior to its disclosure by the
Company or its employees, agents, accountants, legal counsel, or other
representatives, and (c) information that is required to be disclosed by a
Shareholder or any of its employees, agents, accountants, legal counsel, or
other representatives as a result of any applicable law, rule, or regulation of
any governmental authority or stock exchange.
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6.11 Dollars.
(a) Except as otherwise expressly provided or
contemplated herein, all sums expressed herein or to be paid hereunder shall be
calculated or paid, as applicable, in United States dollars. If for purposes
of this Agreement or for the purpose of obtaining judgment in any court it is
necessary to convert any currency into United States dollars, then the
Shareholders hereto agree, to the fullest extent that they may legally and
effectively do so, that the rate of exchange used for such conversion shall be
that published or announced by Chase Manhattan Bank, N.A. in New York, New
York, United States, on the Business Day immediately preceding the day on which
such calculation is to be made or such judgment is final.
(b) The obligations of the Company and the Family
Shareholders in respect of any sums due from it to the Investors hereunder
shall, notwithstanding any judgment in a currency other than United States
dollars, be discharged only to the extent that, on the Business Day next
succeeding receipt by such Investor Company (or Person) of any sum adjudged to
be so due in the judgment currency, such Investor Company (or Person) may, in
accordance with normal banking procedures, purchase United States dollars with
the judgment currency. If the United States dollars so purchased (less all
exchange fees and related charges) are less than the sum originally due to such
Investor Company (or Person) in United States dollars, the Company and the
Family Shareholders agree, as a separate obligation and notwithstanding any
such judgment, to indemnify such Investor Company (or Person) against such
loss; and if the United States dollars so purchased exceed the sum originally
due to such Investor Company (or Person) in dollars, such Investor Company
shall (or shall cause such Person to) remit such excess to the Company or the
Family Shareholders.
6.12 Cooperation on Costs. In connection with any Transfer of
Series A Share Equivalents pursuant to Section 3.1 or Article IV, the Parties
will take any commercially reasonable actions that the participants to the
Transfer reasonably request in compliance with all applicable law and good
business practice to implement the Transfer in a cost-efficient and tax
efficient manner.
6.13 English Language. In the construction and interpretation of
the terms and provisions of this Agreement, the English language version of
this Agreement shall be the official version of this Agreement and any version
of this Agreement that has been translated into another language shall have no
force and effect except for purposes of enforcing this Agreement in a court of
law that requires that the Agreement be presented in another language.
6.14 Entire Agreement. This Agreement, the Acquisition Agreement,
the other Transaction Documents, and that Further Assurances Agreement dated as
of July 9, 1998, between the Investor Companies and each of the Family
Shareholders (together with the Exhibits and Schedules hereto and thereto)
contain the entire understanding of the Parties hereto respecting the subject
matter hereof and supersede all prior agreements, discussions and
understandings with respect thereto.
6.15 Cumulative Rights. The rights of each of the Shareholders
under this Agreement are cumulative and in addition to all similar and other
rights of the Shareholders under other agreements.
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6.16 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future law, and if the
rights or obligations of the Shareholders under this Agreement shall not be
materially and adversely affected thereby (a) such provision shall be fully
severable, (b) this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance herefrom, and (d) in lieu of such illegal,
invalid, or unenforceable provision, there shall be added automatically as a
part of this Agreement a legal, valid, and enforceable provision as similar in
terms to such illegal, invalid, or unenforceable provision as may be possible.
6.17 Appointment of Family Shareholder Representative. By the
execution and delivery of this Agreement, each Family Shareholder hereby
irrevocably constitutes and appoints Carlos de Jesus Aguirre Gomez and Rafael
Felipe de Jesus Aguirre Gomez as the true and lawful agents and
attorneys-in-fact (together, the "Family Shareholder Representative") of such
Family Shareholder with full power of substitution to act in the name, place
and stead of such Family Shareholder solely with respect to the power to
receive and deliver notices on behalf of the Family Shareholders, including any
Acceptance Notice, Offer Notice, Participation Notice, or Exercise Notice, in
accordance with the terms of this Agreement.
The Investors may conclusively and absolutely rely, without inquiry,
upon any action of the Family Shareholder Representative as the action of each
Family Shareholder in all matters referred to herein, and each such Family
Shareholder hereby ratifies and confirms all that the Family Shareholder
Representative shall do or cause to be done by virtue of his appointment as
Family Shareholder Representative. All actions by the Family Shareholder
Representative are acknowledged by the Parties hereto to be taken by him solely
as agent and attorney-in-fact for each Family Shareholder. By his execution of
this Agreement, Aguirre has accepted his appointment as Family Shareholder
Representative and in consideration for Aguirre's agreement to act as the
Family Shareholder Representative, each Family Shareholder hereby agrees to
indemnify and hold Aguirre harmless from and against all damages, losses,
liabilities, charges, penalties, costs and expenses (including court costs and
attorneys' fees and expenses, if any) incurred by him in connection with his
performance as Family Shareholder Representative. Each Family Shareholder
covenants and agrees that he or she will not voluntarily revoke the power of
attorney conferred in this Section 6.17. If any Family Shareholder dies or
becomes incapacitated, disabled or incompetent (such deceased, incapacitated,
disabled or incompetent Family Shareholder being a "Former Family
Shareholder"), the heirs, beneficiaries, estate, administrator, executor,
guardian, conservator or other legal representative of such Former Family
Shareholder (each a "Successor Family Shareholder") shall reconfirm the agency
and power of attorney conferred by this Section 6.17 or shall execute and
deliver such other certificates, documents or instruments (including, without
limitation, any amendments hereto) that would have been delivered on its behalf
by the Family Shareholder Representative had such Successor Family Shareholder
reconfirmed the agency and power of attorney conferred by this Section 6.17.
If at any time Aguirre dies or resigns from his position as the Family
Shareholder Representative, the other Family Shareholders shall designate a
successor to Aguirre as soon as practicable.
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Each Family Shareholder hereby covenants and agrees with the Investors
that he, she or it will execute a separate power of attorney before a Mexican
notary public granting the Family Shareholder Representative the authority to
act on such Family Shareholder's behalf to an extent which is identical to that
described in this Section 6.17, and shall deliver such power of attorney to the
Investors simultaneously with the execution of this Agreement.
6.18 Best Efforts. Each of the Family Shareholders shall, and
shall cause their Affiliates to, take all actions within such Person's power to
perform fully each of its covenants in this Agreement and to cause the Family
Trust, the Controlling Trust, and the Company to perform fully each of the
covenants made by it in this Agreement and to effect the transactions
contemplated in this Agreement, including giving all requisite instructions,
voting and causing all attorneys-in-fact to vote all interests or securities in
favor of the transactions, causing their representatives on the Technical
Committee and the Family Shareholder Designees to vote in favor of the
transactions, and giving instructions for the Family Trust and the Controlling
Trust to effect the actions required of them pursuant to this Agreement; it
being understood that a Family Shareholder shall not be liable as such under
this covenant for any actions or failures to act by the Company except to the
extent elsewhere in this Agreement such Family Shareholder has expressly agreed
to cause the Company not to, or to, take such action.
6.19 Specific Performance. The Shareholders and the Company
recognize that the obligations imposed on them in this Agreement are special,
unique and of extraordinary character, and that in the event of breach by any
Party, monetary damages alone will be an insufficient remedy. It is therefore
agreed that the Shareholders and the Company shall be entitled, in addition to
any other remedies that may be available, including money damages, to obtain
specific performance of the terms of this Agreement and injunctive relief (in
addition to damages) as a remedy for the enforcement hereof, without proving
damages. In the event of any action to enforce this Agreement specifically,
the Company and the Family Shareholders hereby waive the defense that there is
an adequate remedy at law.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by Chancellor, the Company and the Shareholders or the duly
authorized officers of each of the Shareholders, as appropriate, effective as
of the date first written above.
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EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
and effective as of ___________, 1998, by and among GRUPO RADIO CENTRO, S.A. DE
C.V., a corporation organized under the laws of the United Mexican States (the
"Company"); CHANCELLOR MEXICO LLC, a Delaware limited liability company
(together with its permitted Affiliates, successors and assigns, the
"Investor"); __________, as trustee (the "Controlling Trustee"), of trust
number ___________ dated ___________, ____ (as amended from time to time, the
"Controlling Trust") established by the Family Trust and the Investor; and
BANCOMER, S.A., Institucion de Banca Mcltiple, member of Grupo Financiero
Bancomer, Fiduciary Division, acting as trustee (the "Family Trustee") of trust
number F/29307-6 dated June 3, 1998, established by the Family Shareholders
(the "Family Trust"). The Investor and the Controlling Trust are hereinafter
collectively referred to as the "Shareholders." The Company, the Investor and
the Controlling Trust are hereinafter referred to individually as a "Party" and
collectively as the "Parties." This Agreement is entered into as a material
part of the consideration under, and pursuant to the terms of, a Stock Purchase
and Merger Agreement dated as of July 9, 1998, among Chancellor Media
Corporation, a Delaware corporation, the Investor, Newco, a corporation
organized under the laws of the United Mexican States and an indirect,
wholly-owned subsidiary of Chancellor, the Company and the Selling Shareholders
named therein (including any amendments thereto, the "Acquisition Agreement").
RECITALS:
A. The Company has authorized and outstanding capital stock as of
the date hereof consisting of 318,762,992 Series A Shares of Common Stock,
without par value (the "Series A Shares"), which constitute all of the issued
and outstanding shares of capital stock of the Company.
B. All of the issued and outstanding Series A Shares are subject
to either (i) the Controlling Trust or (ii) the CPO Trust, pursuant to which
ordinary participation certificates ("CPOs"), each representing a financial
interest in one Series A Share, have been issued.
C. The Company, Citibank, N.A., as depositary, and holders and
beneficial owners of American Depositary Receipts ("ADRs") representing
American Depositary Shares ("ADSs") have entered into a Deposit Agreement dated
as of June 30, 1993, providing for the issuance of ADRs evidencing ADSs, each
of which in turn represents nine CPOs.
D. The ADSs are listed on The New York Stock Exchange, and the
CPOs are listed on the Bolsa Mexicana de Valores, S.A. de C.V.
E. Pursuant to the terms and conditions of the Acquisition
Agreement, the Investor has acquired 10,737,783 ADSs (representing 96,640,048
CPOs) and a 74.27% beneficial interest in the Controlling Trust (representing
62,741,448 Series A Shares attributable to the beneficial interest of the
Investor).
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F. The Company, the Controlling Trust and the Family Trust desire
to grant to the Investor certain demand and piggyback registration rights with
respect to the securities of the Company now owned (directly or beneficially)
or hereafter acquired (directly or beneficially) by the Investor.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and obligations hereinafter set forth, the Parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
GENERAL PROVISIONS;
REPRESENTATIONS AND WARRANTIES
1.1 Certain Terms. Each capitalized term used and not otherwise
defined in this Agreement shall have the meaning given such term in the
Acquisition Agreement. In addition to the terms defined elsewhere herein, when
used herein the following terms shall have the meanings indicated:
"Acquisition Agreement" has the meaning set forth in the initial
paragraph of this Agreement.
"ADRs" has the meaning given that term in paragraph C of the Recitals
to this Agreement.
"ADSs" has the meaning given that term in paragraph C of the Recitals
to this Agreement.
"Affiliate" of a Person means (i) in all cases, any Person
controlling, controlled by, or under common control with, such Person and (ii)
in the case of the Investor, "Affiliate" also means any officer or employee of
Chancellor or any of its Affiliates (as defined in the preceding clause (i).
"Agreement" has the meaning set forth in the initial paragraph of this
Agreement.
"beneficial" ownership or "beneficially" owned, with respect to the
CPOs, ADSs and Series A Shares or any other shares of the Company, shall have
the same meaning as in Rule 13d-3 under the Exchange Act.
"Bolsa" means the Mexican Stock Exchange (Bolsa Mexicana de Valores,
S.A. de C.V.) or any successor stock exchange.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City, New York, United States, or Mexico
City, D.F., Mexico, are authorized by law to close.
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"Capital Stock" means the collective reference to Series A Shares, any
Series A Share Equivalents, and any other series of capital stock or
equivalents thereof issued from time to time by the Company.
"Closing Date" means the closing date of the Acquisition Agreement.
"CNBV" means the Mexican National Banking and Securities Commission
(Comision Nacional Bancaria y de Valores) or any other governmental agency of
Mexico administering the securities laws of Mexico.
"Company" has the meaning set forth in the initial paragraph of this
Agreement.
"Controlling Trust" has the meaning set forth in the initial paragraph
of this Agreement.
"CPOs" has the meaning given that term in paragraph B of the Recitals
to this Agreement.
"CPO Trust" has the meaning given that term in paragraph B of the
Recitals to this Agreement.
"Demand Offering" means, as specified by the Requesting Investors, (a)
a Registered Offering, (b) a Rule 144A Offering, (c) a Regulation S Offering,
(d) a Mexico Offering, or (e) any combination of two or more of the foregoing
offerings.
"Demand Request" has the meaning set forth in Section 2.2(a) of this
Agreement.
"Exchange Act" means the United States Securities Exchange Act of 1934
or any successor federal statute of the United States, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect from time
to time.
"Fully-Diluted Series A Shares" means, at any time, the then
outstanding Series A Shares of the Company plus (without duplication) all
Series A Shares issuable, whether at such time or upon the passage of time or
the occurrence of future events, upon the exercise, conversion or exchange of
all then-outstanding Series A Share Equivalents.
"Indemnified Party" has the meaning set forth in Section 2.8(c) of
this Agreement.
"Indemnifying Party" has the meaning set forth in Section 2.8(c) of
this Agreement.
"Inspectors" has the meaning set forth in Section 2.5(j) of this
Agreement.
"Investor Representative" means Chancellor.
"Investor" has the meaning given that term in the initial paragraph of
this Agreement and includes their Affiliates, successors and assigns so long as
such Person holds Registrable Securities.
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"Majority Requesting Investors" has the meaning set forth in Section
2.2(c) of this Agreement.
"Material Adverse Effect" has the meaning set forth in Section 2.2(d)
of this Agreement.
"Mexico" means the United Mexican States.
"Mexico Offering" means a firm commitment underwritten public offering
of Registrable Securities in Mexico that is authorized by the CNBV, which
offering may include a tranche or tranches offered outside Mexico, upon
completion of which such Registrable Securities will be listed on the Bolsa.
"New York Courts" has the meaning set forth in Section 4.7(a) of this
Agreement.
"Offering" means a Demand Offering, a Piggyback Offering or a Shelf
Offering.
"Party" and "Parties" have the meanings given those terms in the
initial paragraph of this Agreement.
"Person" means any natural person, corporation, limited liability
company, limited partnership, general partnership, joint stock company, joint
venture, association, company, trust, bank trust company, land trust, business
trust, or other organization, whether or not a legal entity, and any government
or agency or political subdivision thereof.
"Pesos" means the legal currency in Mexico.
"Piggyback Offering" means (a) an offering pursuant to a registration
statement under the Securities Act of any equity securities (including American
Depositary Shares or Receipts for such securities) by the Company for its own
account or for the account of any of its equity investors (other than a
registration statement on Form S-4, F-4 or S-8 or any substitute form that may
be adopted by the SEC or any registration statement filed in connection with an
exchange offer or offering of securities solely to the Company's existing
security holders), (b) an offering pursuant to an offering circular or offering
memorandum of any equity securities (including American Depositary Shares or
Receipts for such securities) by the Company for its own account or for the
account of any of its equity holders for resale pursuant to Rule 144A (whether
or not such offering also includes a tranche offered outside the United States
pursuant to Regulation S or a tranche offered to institutional accredited
investors as defined in Regulation D) or pursuant to a Regulation S Offering
(whether or not such offering includes a tranche offered inside the United
States pursuant to Rule 144A or a tranche offered to institutional accredited
investors as defined in Regulation D), (c) a public offering in Mexico pursuant
to authorization of the CNBV after formal request therefor of any equity
securities (including CPOs or other ordinary participation certificates) by the
Company for its own account or for the account of any of its equity holders, or
(d) any other offering outside Mexico by the Company for its own account or for
the account of any of its equity holders that results in any equity securities
of the Company being listed, quoted or otherwise traded on a securities
exchange or in an organized securities market or inter-dealer quotation system.
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"Piggyback Securities" has the meaning set forth in Section 2.3(a) of
this Agreement.
"PORTAL" means the National Association of Security Dealers' Private
Offerings, Resales and Trading through Automated Linkages system.
"Process Agent" has the meaning set forth in Section 4.7(b) of this
Agreement.
"qualified institutional buyer" has the meaning given that term in
Rule 144A.
"Records" has the meaning set forth in Section 2.5(j) of this
Agreement.
"Registered Offering" means (a) a public offering of the Registrable
Securities (including American Depositary Shares or Receipts for such
securities) in the United States that is registered on a registration statement
filed with the SEC and declared effective under the Securities Act, which
offering may be underwritten on a firm commitment basis, sold by Underwriters
on an agency, best efforts or reasonable efforts basis, or not involve
Underwriters and which offering may include a tranche offered outside the
United States either pursuant to that registration statement or in reliance on
Regulation S under the Securities Act, upon completion of which such
Registrable Securities (or American Depositary Shares or Receipts for such
Registrable Securities) will be listed on a United States national securities
exchange or on the Nasdaq Stock Market, or (b) a Shelf Offering.
"Registrable Securities" means (a) with respect to the Investor, the
CPOs, ADSs, ADRs, and Series A Shares directly or indirectly acquired pursuant
to the terms of the Acquisition Agreement, any other shares of Capital Stock
hereafter acquired by the Investor, any other shares of Capital Stock into
which such shares may be converted or exchanged in order to facilitate a public
offering of securities held by the Investor, any ordinary participation
certificates, depositary shares or depositary receipts, including but not
limited to, American Depositary Shares and Receipts and ordinary or other
participation certificates, representing interests in any such Capital Stock,
and any such securities represented by the Investor's beneficial interest in
the Controlling Trust now or hereafter acquired by exchange or otherwise, and
(b) includes any other securities issued or issuable with respect to such
shares of Capital Stock and other securities by way of a stock dividend, stock
distribution, or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation, reorganization or spin-off; provided,
that a Registrable Security will cease to be a Registrable Security when (x) a
registration statement covering such Registrable Security has been declared
effective by the SEC and the Registrable Security has been disposed of pursuant
to the effective registration statement, (y) the Registrable Security is sold
on the Bolsa or on any U.S. national securities exchange on which any Capital
Stock is then listed, or (z) the Registrable Security is sold through the
Nasdaq Stock Market or on any securities exchange outside the United States on
which the Capital Stock is then listed or quoted.
"Regulation D" means Regulation D under the Securities Act, as amended
from time to time.
"Regulation S" means Regulation S under the Securities Act, as amended
from time to time.
"Regulation S Offering" means an offering of Registrable Securities
outside the United States and Mexico that satisfies the provisions of
Regulation S, which offering may be underwritten on a
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firm commitment basis, sold by Underwriters on an agency, best efforts or
reasonable efforts basis, or not involve Underwriters, and which offering may
include a tranche or tranches offered in Mexico or the United States, or both,
upon completion of which such Registrable Securities will be listed on a
securities exchange or otherwise quoted in an organized securities market or
inter-dealer quotation system.
"Requesting Investors" has the meaning set forth in Section 2.2(e) of
this Agreement.
"Required Commencement Date" has the meaning set forth in Section 2.1
of this Agreement.
"Rule 144A" means Rule 144A under the Securities Act, as amended from
time to time.
"Rule 144A Offering" means the offering involving a purchase from the
Requesting Investors in reliance on private placement exemptions under the
Securities Act and the resale of the Registrable Securities (including American
Depositary Shares or Receipts for such securities) by the initial purchasers in
reliance on Rule 144A, which offering may be purchased on a firm commitment
basis, sold by Underwriters on an agency, best efforts or reasonable efforts
basis, or not involve Underwriters, and which offering may include a tranche
offered outside the United States in reliance on Regulation S or a tranche
offered to institutional accredited investors as defined in Regulation D.
"SEC" means the United States Securities and Exchange Commission or
any other federal agency of the United States then administering the Securities
Act and other federal securities laws of the United States.
"Securities Act" means the United States Securities Act of 1933 or any
successor federal statute of the United States, and the rules and regulations
of the SEC thereunder, all as they shall be in effect from time to time.
"Series A Share Equivalents" means (without duplication with any other
Series A Shares or Series A Share Equivalents) rights, warrants, options,
convertible securities, or exchangeable securities or indebtedness, or other
rights, exercisable for or convertible or exchangeable into, or representing a
financial interest in, directly or indirectly, Series A Shares or securities
convertible or exchangeable into Series A Shares, whether at the time of
issuance or upon the passage of time or the occurrence of some future event.
"Series A Shares" has the meaning given that term in paragraph A of
the Recitals to this Agreement.
"Shareholders" has the meaning set forth in the initial paragraph of
this Agreement and and includes their successors and assigns.
"Shareholders' Agreement" means the Shareholders' Agreement dated as
of the date of this Agreement and signed by the Chancellor, the Investor, the
Company, the Family Trust, the Controlling Trust and the Family Shareholders,
as it may be amended from time to time.
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"Shelf Offering" means a public offering of the resale from time to
time by the Investor of Registrable Securities (including American Depositary
Shares or Receipts for such securities) in the United States pursuant to Rule
415 under the Securities Act that is registered on a registration statement
filed with the SEC and declared effective under the Securities Act.
"Tax Exemption" means a complete exemption from, or reduction to, the
Mexican tax otherwise imposed on capital gains under the tax laws of Mexico.
"Underwriter" means a securities dealer that purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities, or that acts as agent with respect to the sale of any Registrable
Securities, whether in a Demand Offering or a Piggyback Offering.
"United States" means the United States of America.
1.2 References and Titles. All references in this Agreement to
Exhibits, Schedules, Recitals, Articles, Sections, subsections and other
subdivisions refer to the corresponding Exhibits, Schedules, Recitals,
Articles, Sections, subsections and other subdivisions of this Agreement unless
expressly provided otherwise. Titles appearing at the beginning of any
Articles, Sections, subsections or other subdivisions of this Agreement are for
convenience only, do not constitute any part of such Articles, Sections,
subsections or other subdivisions, and shall be disregarded in construing the
language contained therein. The words "this Agreement," "herein," "hereby,"
"hereunder" and "hereof," and words of similar import, refer to this Agreement
as a whole and not to any particular subdivision unless expressly so limited.
The words "this Section" and "this subsection," and words of similar import,
refer only to the Sections or subsections hereof in which such words appear.
The word "or" is not exclusive, and the word "including" (in its various forms)
means "including without limitation." Pronouns in masculine, feminine or
neuter genders shall be construed to state and include any other gender, and
words, terms and titles (including terms defined herein) in the singular form
shall be construed to include the plural and vice versa, unless the context
otherwise expressly requires.
1.3 Representations and Warranties.
(a) The Company hereby represents and warrants to the
Investor that:
(i) the Company has full power and authority to
execute, deliver and perform this Agreement and to complete the
transactions contemplated hereby, and the execution, delivery and
performance by the Company of this Agreement and the completion by it
of the transactions contemplated hereby have been duly authorized by
all necessary corporate action;
(ii) this Agreement has been duly and validly
executed and delivered by the Company and constitutes the binding
obligation of the Company enforceable against the Company in
accordance with its terms; and
(iii) the execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of
the transactions contemplated hereby
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will not, with or without the giving of notice or the lapse of time,
or both, (A) violate any provision of law, statute, rule or regulation
to which it is subject, (B) violate any order, judgment or decree
applicable to it, or (C) conflict with, or result in a breach or
default under, any term or condition of its charter documents,
including by-laws, or any agreement or other instrument to which the
Company is a party or by which the Company is bound.
(b) Each of the Parties (as to itself only) other than
the Company, severally and not jointly, hereby represents and warrants to each
other Party that:
(i) it has full power and authority to execute,
deliver, and perform this Agreement and to consummate the transactions
contemplated hereby, and the execution, delivery and performance by it
of this Agreement and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary action;
(ii) this Agreement has been duly and validly
executed and delivered by it and constitutes the binding obligation of
it enforceable against it in accordance with its terms; and
(iii) the execution, delivery, and performance by
it of this Agreement and the consummation by it of the transactions
contemplated hereby will not, with or without the giving of notice or
the lapse of time, or both, (A) violate any provision of law, statute,
rule, or regulation to which it is subject, (B) violate any order,
judgment, or decree applicable to it, or (C) conflict with, or result
in a breach or default under, any term or condition of its certificate
of incorporation or by-laws, certificate of limited partnership or
partnership agreement, as applicable, or any agreement or other
instrument to which it is a party or by which it is bound.
ARTICLE II
REGISTRATION OF STOCK
2.1 Registration Rights. The Company, the Controlling Trust and
the Family Trust hereby grant to the Investor the applicable registration
rights with respect to Registrable Securities set forth in this Article II.
The Company, the Controlling Trust and the Family Trust covenant that, if any
Investor gives a Demand Request in accordance with the terms of this Agreement,
the Company will use commercially reasonable efforts to prepare or cause to be
prepared financial statements (including financial statements reconciled to
United States generally accepted accounting principles in accordance with the
applicable requirements of the Securities Act, as may be appropriate for the
intended method of disposition specified in the Demand Request) and disclosure
documents (prepared in accordance with the applicable requirements of the
Securities Act for a Registered Offering and in accordance with the applicable
laws for any other Offering) and will use commercially reasonable efforts to
otherwise take all necessary steps with a view to filing a registration
statement with the SEC with respect to a Registered Offering, completing a Rule
144A preliminary offering circular with respect to a Rule 144A Offering or
Regulation S Offering, or completing and (if required) filing the appropriate
offering materials for any other Offering, in each case as soon as possible but
in any event no later than 45 days after the Company's receipt of a Demand
Request (the "Required Commencement Date").
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2.2 Demand Registration.
(a) Request for Demand Offering.
(i) The Investor Representative may at any time
and from time to time make a written request of the Company (a "Demand
Request") for a Demand Offering of all or part of such Investor's
Registrable Securities representing in the aggregate at least
[US$20,000,000] in value [(based solely on the initial acquisition
price under the Acquisition Agreement)]; provided, that the Company
shall not be required to complete more than five Demand Offerings
pursuant to this Section 2.2(a)(i) and provided, further, that the
US$20,000,000 minimum requirement shall not apply after the fourth
Demand Offering. In addition, if the managing Underwriters of the
Demand Offering or the CNBV recommend or require that the proposed
Demand Offering also include Capital Stock to be issued by the Company
and, in the case of a recommendation, if the Investor Representative
consents to the Company's participation, then the Company shall
include such Capital Stock in the proposed Demand Offering to the
extent so recommended or required.
(ii) Each Demand Request shall specify the number
of Registrable Securities proposed to be sold and the nature of the
Demand Offering requested.
(iii) On or before the Required Commencement Date,
the Company shall file with the CNBV the application request with
respect to the Demand Offering (if the Demand Request is for a Mexico
Offering) and shall file the appropriate registration statement with
the SEC (if the Demand Request is for a Registered Offering), commence
circulation of an appropriate preliminary offering circular (if the
Demand Request is for a Rule 144A Offering), commence circulation of
an appropriate preliminary offering circular (if the Demand Offering
is for a Regulation S Offering), or file (if required) and commence
circulation of other appropriate offering materials (for any other
Offering). The Company shall use commercially reasonable efforts to
cause the Demand Offering to be authorized by the CNBV (if applicable)
and declared effective by the SEC (if applicable) as promptly as
practicable after such formal request or filing, shall cause the firm
commitment underwriting or purchase agreement to be executed and
delivered as promptly as practicable after the Required Commencement
Date, and shall take all actions required of it to complete the Demand
Offering, including requirements of law, requirements imposed by
regulators, customary requirements of Underwriters and purchasers, and
the sale of primary shares required by regulators or recommended by
the managing Underwriters as part of the Demand Offering. The
Controlling Trust shall use its best efforts to cause the Company to
comply with the provisions of this paragraph (iii), to provide or
otherwise obtain all authorizations of the Company stockholders,
approve all amendments to the estatutos sociales, approve all
amendments to any shareholders' agreement that the appropriate
regulatory or securities exchange or market authorities require or
that the managing Underwriters reasonably request, cooperate with the
Company and the Investor to effect the Demand Offering, and take all
other actions as may be required or reasonably requested of the
stockholders of the Company
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by the Investor, the Company, the managing Underwriters, or regulators
to implement the Demand Offering in a timely manner.
(b) Effect of Signing and Effectiveness; Abandonment. An
offering or filing of a registration statement will not count as a Demand
Offering until the registration statement has become effective (for Registered
Offerings only) and the firm commitment underwriting or purchase agreement with
respect to the Demand Offering has been executed and delivered by all parties
thereto; provided that if, after a registration statement for a Registered
Offering has become effective or after the firm commitment underwriting or
purchase agreement with respect to the Demand Offering has been executed and
delivered by all parties thereto, either (i) an offering of Registrable
Securities is interfered with by any stop order, injunction or other order or
requirement of the SEC, CNBV or other governmental agency or court or (b) the
offering is not completed because of the Company's or the Controlling Trust's
failure to satisfy a condition or comply with a covenant required of it, that
offering will be deemed not to have been effected and shall not count as a
Demand Offering. Subject to the foregoing, the Investor may abandon the Demand
Offering at any time without it counting as a Demand Offering and shall retain
the demand rights hereunder.
(c) Selection of Underwriters. The Requesting Investors
holding a majority of Registrable Securities to be included in the Demand
Offering (the "Majority Requesting Investors") (acting through the Investor
Representative) to select the book-running and managing Underwriters and global
coordinators for the Demand Offering; provided, that the Company's Board of
Directors shall have the right to veto any such choice by written notice to the
Investor Representative given no later than seven days after the Investor
Representative gives written notice to the Company of any such selection, which
veto shall not be given unreasonably and which veto shall not be given with
respect to any of the following investment banks or their successors or
international affiliates: Bear, Stearns & Co. Inc., BT Alex. Brown
Incorporated, Chase Securities Inc., Credit Suisse First Boston Corporation,
Donaldson, Lufkin & Jenrette Securities Corporation, Goldman, Sachs & Co., J.P.
Morgan Securities Inc., Merrill Lynch & Co., NationsBanc Montgomery Securities
LLC, Morgan Stanley & Co. Incorporated, and Salomon Smith Barney Inc.
(d) Priority on Demand Offerings. No securities to be
sold for the account of any Person (including the Company) other than a
Requesting Investor shall be included in a Demand Offering unless the managing
Underwriters shall advise the Requesting Investors in writing that the
inclusion of such securities will not materially and adversely affect the price
or success of the Demand Offering (a "Material Adverse Effect"). Furthermore,
if the managing Underwriters shall advise the Requesting Investors that, even
after exclusion of all securities of other Persons pursuant to the immediately
preceding sentence, the amount of Registrable Securities proposed to be
included in such Demand Offering by Requesting Investors is sufficiently large
to cause a Material Adverse Effect, the Registrable Securities of Requesting
Investors to be included in such Demand Offering shall equal the number of
shares which the Company is so advised can be sold in such Demand Offering
without a Material Adverse Effect and such shares shall be allocated pro rata
among the Requesting Investors on the basis that their respective ownership
percentage at the date hereof bears to the aggregate ownership percentage at
the date hereof of all such Requesting Investors.
(e) Multiple Demands. The Company shall promptly (and in
any event within 7 Business Days of its receipt) give the Investor notice and a
copy of any Demand Request it receives
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and of any request it receives with respect to any other demand registration
rights for securities of the Company. If the Company shall receive, within a
period of 30 days, demand requests from more than one Person who has the
contractual right (whether exercisable alone or in conjunction with other
rights) to make a demand request, all such requesting Persons shall be
considered "Requesting Investors" for purposes of this Section 2 and the
allocation provisions of Section 2(d) shall apply with respect thereto.
(f) Postponement for Significant Corporate Events. The
Company shall be entitled to postpone, for a period of time (which shall not
exceed 90 days without the consent of the Majority Requesting Investors), the
request for a Demand Offering under this Section 2.2 if the Company determines,
in the good faith exercise of its reasonable business judgment, that such
request could materially interfere with bona fide financing, acquisition, or
other material business plans of the Company or would require disclosure of
non-public information, the premature disclosure of which could materially
adversely affect the Company or such transaction. If the Company postpones the
Demand Offering requested under this Section 2.2, the Company shall promptly
(but not later than three Business Days following the determination to postpone
the Demand Offering) notify the Investor of the determination to postpone the
Demand Offering and of the facts on which such determination is based. If the
Company postpones the Demand Offering requested under this Section 2.2, the
Company shall promptly (but not later than three Business Days afterwards)
notify the Investor when the events or circumstances permitting such
postponement have ended and at that time shall proceed with the Demand Offering
as requested and in accordance with this Agreement. If the Company shall
postpone the Demand Offering pursuant to this Section 2.2(e), then any related
Demand Request may thereafter be withdrawn by the Investor's giving notice of
withdrawal to the Company. Upon such withdrawal, the withdrawn Demand Request
shall not count as an exercise of the demand registration rights granted
herein.
(g) Suspension of Use of Resale Shelf Registration
Statements. The Company shall be entitled, at any time and from time to time,
to suspend the offer and sale of Registrable Securities in connection with a
Shelf Offering, if the Company determines, in the good faith exercise of its
reasonable business judgment, that any such offer or sale could materially
interfere with bona fide financing, acquisition, or other material business
plans of the Company or would require disclosure of non-public information, the
premature disclosure of which could materially adversely affect the Company or
such transaction. Such suspension will be in effect until the earlier of the
date on which the Company determines in good faith that (i) any such offer or
sale would not materially interfere with such bona fide financing, acquisition,
or other material business plans of the Company or (ii) full disclosure of such
non-public information has been made or is not necessary; provided that such
suspensions will not in any event exceed 90 days without the consent of the
Majority Requesting Investors. If the Company determines to suspend the offer
and sale of Registrable Securities pursuant to this Section 2.2(g), the Company
shall promptly notify the selling shareholders named in the applicable
registration statement of the date on which such suspension shall take effect,
and the selling shareholders shall suspend the use of such registration
statement upon receipt of such notification. If the Company shall suspend a
Shelf Offering pursuant to this Section 2.2(g), then the Company shall extend
the effectiveness of the applicable registration statement by the same number
of days comprising the suspension period. If the Company shall suspend a Shelf
Offering pursuant to this Section 2.2(g), the Company shall promptly (but not
later than 5 Business Days afterwards) notify the Investor when the events or
circumstances permitting such postponement have ended and at that
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time shall proceed with the Shelf Offering as requested and in accordance with
this Agreement. If the Company shall suspend a Shelf Offering pursuant to this
Section 2.2(g) for longer than 30 consecutive days or for more than 45 total
days (whether or not consecutive), then any related Demand Request may
thereafter be withdrawn by the Investor's giving notice of withdrawal to the
Company. Upon such withdrawal, the withdrawn Demand Request and related Shelf
Offering shall not count as an exercise of the demand registration rights
granted herein.
2.3 Piggyback Registration.
(a) If the Company proposes to initiate a Piggyback
Offering, then the Company shall give written notice of such proposed Piggyback
Offering and the Investor's rights under this Section 2.3 to the Investor as
soon as practicable (but in no event less than 30 days before the effective
date of the SEC registration statement, date of the final Rule 144A or
Regulation S offering circular or other appropriate offering materials, or
submission date of the formal approval by the CNBV, as applicable), and that
notice shall offer the Investor the opportunity to register or include such
number of Registrable Securities as the Investor may request. Subject to
Section 2.3(b) hereof, the Company shall include in each such Piggyback
Offering all Registrable Securities requested to be included in the Piggyback
Offering by written notice given to the Company within 20 days after the
Company's notice to the Investor. The Investor shall be permitted to withdraw
all or part of the Investor's Registrable Securities from a Piggyback Offering
at any time before the earlier of the effective date for the Piggyback Offering
(if registered with the SEC) or the signing of a definitive underwriting,
purchase or agency agreement with the Underwriters. Subject to Section 2.3(b)
and Section 2.3(c), the Company shall use commercially reasonable efforts to
cause the managing Underwriters of a proposed Piggyback Offering to permit the
Registrable Securities requested to be included in the Piggyback Offering
("Piggyback Securities") to be included at the same price and on no less
favorable terms and conditions as any similar securities included therein.
(b) If, at any time after giving written notice of a
proposal to initiate a Piggyback Offering, purchase or agency agreement with
the Underwriters, the Company determines for any reason either not to register
or sell or to delay for more than 30 days the registration or sale of the
securities proposed to be sold in the Piggyback Offering, the Company shall
give written notice of that determination to the Investor and shall be relieved
of its obligation under this Section 2.3 to register or sell any Registrable
Securities in connection therewith, without prejudice, however, to the rights
of the Investor under Section 2.2 hereof or the rights of the Investor under
this Section 2.3 to participate in the delayed or any subsequent Piggyback
Offering. No Piggyback Offering completed under this Section 2.3 shall relieve
the Company of its obligation to effect a Demand Offering pursuant to Section
2.2, nor shall any Piggyback Offering completed under this Section 2.3 be
deemed to have been effected pursuant to Section 2.2.
(c) If the Registrable Securities requested to be
included in the registration statement by any Investor differ from the type of
securities proposed to be registered by the Company and the managing
Underwriters advise the Company in writing that, due to such differences, the
inclusion of such Registrable Securities would have a Material Adverse Effect,
then (i) the number of such Investor's Registrable Securities to be included in
the registration statement shall be reduced to an amount which, in the judgment
of the managing Underwriters, would eliminate such Material Adverse Effect or
(ii) if no such reduction would, in the judgment of the managing Underwriters,
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eliminate such Material Adverse Effect, then the Company shall have the right
to exclude all such Registrable Securities from such registration statement
provided no other securities of such type are included and offered for the
account of any other Person in such registration statement. Any partial
reduction in the number of Registrable Securities to be included in the
registration statement pursuant to clause (i) of the immediately preceding
sentence shall be effected pro rata based on the ratio which such Investor's
requested shares bears to the total number of shares requested to be included
in such registration statement by all Persons who have requested that their
shares be included in such registration statement. If the Registrable
Securities requested to be included in the registration statement are of the
same type as the securities being registered by the Company and the managing
Underwriters of a proposed Piggyback Offering advise the Company in writing
that the inclusion of such Registrable Securities would cause a Material
Adverse Effect, the Company will be obligated to include in such registration
statement, as to each Investor, only a portion of the shares such Investor has
requested be registered equal to the ratio which such Investor's requested
shares bears to the total number of shares requested to be included in such
registration statement by all Persons (other than (i) the Company, if such
registration has been initiated by the Company for securities to be offered by
the Company and (ii) by Persons exercising their right to cause a Demand
Offering) who have requested that their shares be included in such registration
statement. It is acknowledged by the Investor that the securities to be
included in such registration pursuant to the this Section 2.3(c) shall be
allocated (x) if such registration has been initiated by the Company for
securities to be offered by the Company, (1) first, to the Company, and (2)
second, to the Investor and all other Persons requesting securities to be
included therein in accordance with the above described ratio, and (y) if such
registration is a Demand Offering, (1) first, to securities offered by Persons
exercising their right to cause a Demand Offering, (2) second, to the Company,
and (3) third, to the Investor and all other Persons requesting securities to
be included therein in accordance with the above described ratio. If as a
result of the provisions of this Section 2.3(c), the Investor shall not be
entitled to include all Registrable Securities in a registration that the
Investor has requested to be so included, the Investor may withdraw the
Investor's request to include Registrable Securities in such registration
statement. No Person may participate in any registration statement hereunder
unless such Person (x) agrees to sell such Person's Registrable Securities on
the basis provided in any underwriting arrangements approved by the Company,
and (y) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements, and other documents reasonably required
under the terms of such underwriting arrangements; provided, however, that no
such Person shall be required to make any representations or warranties in
connection with any such registration other than representations and warranties
as to (i) such Person's ownership of his or its Registrable Securities to be
sold or transferred free and clear of all liens, claims, and encumbrances, (ii)
such Person's power and authority to effect such transfer, and (iii) such
matters pertaining to compliance with securities laws as may be reasonably
requested; provided further, however, that the obligation of such Person to
indemnify pursuant to any such underwriting arrangements shall be several, not
joint and several, among such Persons selling Registrable Securities, and the
liability of each such Person will be in proportion to, and provided further
that such liability will be limited to, the net amount received by such Person
from the sale of his or its Registrable Securities pursuant to such
registration.
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2.4 Lock-up Agreements.
(a) Restrictions on Sale by the Company, the Controlling
Trust and the Family Trust. The Company, the Controlling Trust and the Family
Trust agree (i) not to effect any sale or distribution of any securities
similar to those being offered, or any securities convertible into or
exchangeable or exercisable for such securities, during the 10 Business Days
before, and during the 180-day period (or such shorter period as the managing
Underwriters of the Offering shall authorize in writing to the Company)
beginning on the date of any final prospectus, offering circular or other final
offering material that includes Registrable Securities (unless the sale or
distribution is pursuant to that Offering and either (A) the Investor consents
or (B) the Investor is participating pursuant to Section 2.3 hereof in the
Offering, the Offering was initiated by the Company with respect to the sale of
securities by the Company, and the Investor is not simultaneously participating
in the Offering pursuant to Section 2.2 hereof); and (ii) that any agreement
entered into after the date of this Agreement pursuant to which the Company
issues or agrees to issue any privately placed securities shall contain a
provision under which holders of such securities agree not to effect any public
sale or distribution of any such securities during the period described in (i)
above, including a sale pursuant to Rule 144 under the Securities Act (except
as part of any such Offering, if permitted, to the extent of their
participation in the underlying Offering of the Registrable Securities).
2.5 Demand Procedures. Whenever the Investor has requested that
any Registrable Securities be offered pursuant to Section 2.2 hereof, the
Company will use commercially reasonable efforts to effect the offering and
sale of such Registrable Securities in a Demand Offering in accordance with the
intended method of disposition thereof as soon as is possible, but commencing
no later than the Required Commencement Date, and in connection with any such
request, the Company will (unless the Majority Requesting Investors (acting
through the Investor Representative) consent otherwise):
(a) prepare and, if applicable, file with the CNBV, the
Bolsa, the SEC, any securities exchange or market or inter-dealer quotation
system on which the Company's securities are then listed or quoted and any
other United States, Mexican or foreign federal or state governmental body or
agency, or all of them, as may be applicable for the type of Demand Offering, a
formal request for authorization, an offering circular with respect to a Rule
144A Offering or appropriate offering materials for another type of Demand
Offering, or a registration statement on any form for which the Company then
qualifies or that counsel for the Company shall deem appropriate and that is
available for the sale of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof, and
use commercially reasonable efforts and proceed diligently and in good faith to
obtain and maintain such authorization, to finalize such offering circular or
other offering materials, and to cause such filed registration statement to
become and remain effective under the Securities Act; provided that (i) at
least 20 days before filing a formal request for authorization, circulating a
preliminary offering circular or other offering materials, or filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the Investor and to one counsel (which may include
one local counsel in each applicable country) selected by the Investor (acting
through the Investor Representative), copies of all such documents proposed to
be filed, which documents will be subject to the review of such counsel, and
shall thereafter furnish revised drafts and definitive versions of all such
documents when they are circulated to the working group for the Demand
Offering, and (ii) after the filing of the formal request
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for authorization or registration statement, the Company will promptly notify
the counsel to the Investor of comments received from the CNBV, the SEC, or the
securities exchange or market or inter-dealer quotation system, and other
governmental authorities as may be applicable; provided, that in connection
with a Demand Offering, the Company shall not file or circulate to potential
investors any registration statement or prospectus, offering circular or other
offering materials, or any amendments or supplements thereto, if the Requesting
Investors who hold a majority of the Registrable Securities covered by such
registration statement, prospectus, offering circular or other offering
materials (acting through the Investor Representative or its counsel), the
managing Underwriters, or their counsel shall reasonably object, in writing, on
a timely basis;
(b) prepare and file with the CNBV, the Bolsa, the SEC,
any securities exchange or market or inter- dealer quotation system referred to
in (a) above and any other United States, Mexican or foreign federal or state
governmental body or agency, or all of them, such amendments and supplements to
such request for authorization, offering circular or other offering materials,
or registration statement and the prospectus used in connection therewith as
may be necessary to maintain such authorization, keep such offering circular or
other offering materials current, and keep such registration statement
effective pursuant to Section 2.2 for a period of not less than 180 consecutive
days or, if shorter, the period terminating when all Registrable Securities
covered by such authorization, offering circular or other offering materials,
or registration statement have been sold (but not before the expiration of the
90-day period referred to in Section 4(3) of the Securities Act and Rule 174
thereunder, if applicable) and comply with the provisions of the Securities
Act, the Exchange Act, Mexican securities laws and all other applicable laws
with respect to the disposition of all securities covered by such registration
statement, offering circular or other offering materials during such period in
accordance with the intended methods of disposition by the Investor thereof set
forth in such registration statement, offering circular or other offering
materials;
(c) furnish without charge to the Investor such number of
copies of such registration statement, offering circular or other appropriate
offering materials, each amendment and supplement thereto (in each case
including all exhibits thereto), the prospectus included in such authorization
or registration statement (including each summary or preliminary prospectus,
offering circular or other offering materials), in conformity with the
requirements of the Mexican securities laws, the Securities Act and other
applicable laws, all documents incorporated by reference into such offering
circular, offering materials, prospectus or registration statement, and such
other documents as the Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by the Investor in the
Demand Offering;
(d) notify the Investor promptly, and (if requested by
the Investor) confirm such notice in writing, (i) when a request for
authorization, registration statement, prospectus, offering circular or other
offering material or any supplement or amendment thereto has been filed, and,
with respect to a request for authorization or a registration statement or any
post-effective amendment, when the same has been granted by the CNBV or become
effective under the Securities Act and each applicable state or foreign law,
(ii) of any request by the CNBV, the Bolsa, the SEC or any other United States,
Mexican or foreign federal or state governmental authority for amendments or
supplements to a request for authorization, registration statement, or related
prospectus (or other legally required offering material) or for additional
information, (iii) of the issuance by the CNBV, the Bolsa, the SEC or any other
United States, Mexican or foreign federal or state governmental body
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or agency of any action, including without limitation a stop order, suspending
or withdrawing the authorization for the offering or the effectiveness of a
registration statement, or the initiation of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (v) of the discovery that, or
of the happening of any event as a result of which, the registration statement,
related prospectus, offering circular, other offering materials or any document
incorporated or deemed to be incorporated therein by reference includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that requires the making of any changes in such registration
statement, prospectus, offering circular or other offering materials so that,
in the case of the registration statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the prospectus, offering circular or other offering
materials, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading or that such document otherwise fails to comply with
applicable laws, and (vi) of the Company's reasonable determination that a
post-effective amendment to a registration statement would be appropriate;
(e) use its best efforts to obtain the withdrawal of any
order suspending or withdrawing the authorization for an offering, the
effectiveness of a registration statement, or the lifting of any suspension of
the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment;
(f) cooperate with the Investor and the managing
Underwriters to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which certificates (in the case
of a Registered Offering) shall not bear any restrictive legends and shall be
in a form eligible for deposit with The Depository Trust Corporation or other
appropriate book-entry depositary; and enable such Registrable Securities to be
registered in such names as the managing Underwriters may request at least one
Business Day prior to any sale of Registrable Securities;
(g) use all commercially reasonable efforts to register
or qualify such Registrable Securities as promptly as practicable under such
other securities or blue sky laws of such jurisdictions as the Investor or
managing Underwriters reasonably (in light of the intended plan of
distribution) request and do any and all other acts and things which may be
reasonably necessary or advisable to enable the Investor or managing
Underwriters to complete the disposition in such jurisdictions of the
Registrable Securities owned by the Investor; provided, that the Company will
not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this paragraph (g),
(ii) subject itself to taxation in any such jurisdiction, (iii) consent to
general service of process in any such jurisdiction, or (iv) incur any material
expense outside of the United States or Mexico;
(h) use commercially reasonable efforts to cause such
Registrable Securities and the Demand Offering to be registered with or
approved by such other governmental agencies,
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authorities, and board of directors and stockholders of the Company to enable
the Investor to complete the disposition of such Registrable Securities;
(i) enter into customary agreements in customary form
(including an underwriting, purchase or agency agreement, as requested by the
Investor Representative) and take such other actions as are reasonably required
in order to expedite or facilitate the disposition of such Registrable
Securities;
(j) make available for inspection by the Investor, any
Underwriter participating in any disposition pursuant to such registration
statement, offering circular or other offering materials and any attorney,
accountant or other professional retained by the Investor or Underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries
(collectively, the "Records") as shall be reasonably necessary to enable them
to exercise their due diligence responsibility; cause the Company's officers,
directors, examiners, accountants, attorneys, employees and subsidiaries to
supply all information reasonably requested by any such Inspectors in
connection with such registration statement, offering circular or other
offering materials; and cooperate and assist in the performance of any due
diligence investigation by any Underwriter (including any "qualified
independent underwriter") or the Investor (notwithstanding the foregoing, the
Company shall have no obligation to disclose a Record to the Inspectors if the
Company reasonably determines that such disclosure is reasonably likely to have
an adverse effect on the Company's ability to assert the existence of any
attorney-client privilege with respect thereto);
(k) use commercially reasonable efforts to obtain a
comfort letter or comfort letters from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by comfort letters as the Investor (acting through the Investor
Representative or its counsel) or the managing Underwriters reasonably request,
addressed to the Investor and to the Underwriters;
(l) use best efforts to comply with all applicable rules
and regulations of United States and Mexican securities laws, the CNBV, the
SEC, the Bolsa, any applicable securities exchange or market or inter-dealer
quotation system, and any other applicable securities laws and regulations and,
if the Offering is a Registered Offering, make available to its security
holders, as soon as reasonably practicable, an earnings statement covering a
period of twelve months, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act by reference to the Company's annual
reports on Form 20-F;
(m) use commercially reasonable efforts to cause all such
Registrable Securities to be listed on the U.S. national securities exchange on
which the Company's securities are then listed (or, if there is none, the
Nasdaq Stock Market), the Bolsa or PORTAL, as applicable for the Offering;
(n) if any event contemplated by Section 2.5(d)(vi) above
shall occur, as promptly as practicable prepare a supplement or amendment or
post-effective amendment to such registration statement, related prospectus,
offering circular or other offering materials or any document incorporated
therein by reference or promptly file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Securities, the
prospectus, offering circular and other
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offering materials will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or otherwise will not fail to comply
with applicable law;
(o) keep the Investor advised in writing about the
initiation and progress of any Offering, including any request for
authorization or registration;
(p) cooperate and assist in any filing required to be
made with the National Association of Securities Dealers, Inc.;
(q) if the Offering is a Rule 144A Offering, then so long
as any of the Registrable Securities are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act, during any period in which
the Company is not subject to and in compliance with Section 13 or 15(d) of the
Exchange Act or is not exempt from such reporting requirements pursuant to and
in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each
holder of such restricted securities and to each prospective purchaser (as
designated by such holder) of such restricted securities, upon the request of
such holder or prospective purchaser, any information required to be provided
by Rule 144A(d)(4) (this covenant is intended to be for the benefit of the
holders, and the prospective purchasers designated by such holders, from time
to time of such restricted securities);
(r) if the Offering involves American Depositary Shares
or Receipts, enter into a customary form of deposit agreement with a depositary
and will comply with the terms of the deposit agreement so that American
Depositary Receipts evidencing American Depositary Shares or deposited Capital
Stock will be executed by the depositary and delivered to the Underwriters;
(s) cooperate with the Underwriters with respect to all
roadshows and other marketing activities as may be reasonably requested by the
Underwriters; and
(t) furnish to the Investor a signed legal opinion,
addressed to the Investor, of an opinion of counsel for the Company, dated the
date of the closing of the underwriting or purchase agreement for the Demand
Offering, reasonably satisfactory in form and substance to the Majority
Requesting Investors (acting through the Investor Representative).
The Controlling Trust shall use its best efforts to cause the Company to comply
with the provisions of this Section 2.5. The Controlling Trust shall also use
its best efforts to provide or otherwise obtain all authorizations of the
Company stockholders, approve all amendments to the estatutos sociales, approve
all amendments to any shareholders' agreement that the appropriate regulatory
or securities exchange or market authorities require or that the managing
Underwriters reasonably request, cooperate with the Company and the Investor to
effect the Demand Offering, and take all other actions as may be required or
reasonably requested of the stockholders of the Company by the Investor, the
Company, the managing Underwriters, or regulators to implement the Demand
Offering in a timely manner.
2.6 Piggyback Offering Procedures. Whenever Piggyback Securities
are included in an Offering pursuant to Section 2.3 hereof, the Company will
(unless the Majority Requesting Investors consent otherwise):
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(a) at least 10 days before filing a formal request for
authorization, circulating a preliminary offering circular or other offering
materials, or filing a registration statement or prospectus or any amendments
or supplements thereto, furnish to the Investor and to one counsel (which may
include one local counsel in each applicable country) selected by the Investor
(acting through the Investor Representative), copies of all such documents
proposed to be filed, which documents will be subject to the review of the
Investor and to one counsel (which may include one local counsel in each
applicable country) selected by the Investor (acting through the Investor
Representative) solely for the purposes of reviewing such material in
connection with the Investor's decision of whether to continue to participate
in the Offering in accordance with the terms of this Agreement and reporting to
the Company on a timely basis any inaccuracies with respect to information
regarding the Investor contained in such material, and the Company shall
thereafter furnish revised drafts and definitive versions of all such documents
to the Investor and to one counsel (which may include one local counsel in each
applicable country) selected by the Investor (acting through the Investor
Representative) when they are circulated to the working group for the Demand
Offering, and after the filing of the formal request for authorization or
registration statement, the Company shall promptly notify the counsel to the
Investor of comments received from the CNBV, the SEC, or the securities
exchange or market or inter-dealer quotation system, and other governmental
authorities as may be applicable;
(b) use all commercially reasonable efforts (i) to
include the Piggyback Securities to be included in the Offering (subject to
Section 2.3(c) hereof) in the formal request for authorization, offering
circular, registration statement, or other appropriate offering materials for
the type of Piggyback Offering, (ii) to include the Piggyback Securities to be
included in the Offering in any registration, qualification or authorization of
securities to be sold in the Offering otherwise being made with any
governmental authority under state securities or blue sky laws or other
applicable securities laws, and (iii) to maintain such inclusion for such
period as such authorization, offering circular, registration statement, or
other appropriate materials for the type of Piggyback Offering and such
registration or qualification are otherwise maintained by the Company for the
Person initiating the Piggyback Offering;
(c) furnish without charge to the Investor the number of
copies of the offering circular, other appropriate offering materials or
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto), the prospectus included in the authorization
or registration statement (including each summary or preliminary prospectus or
other legally required offering materials), in conformity with the requirements
of the Mexican securities laws, the Securities Act and other applicable laws,
all documents incorporated by reference into such offering circular, offering
materials, prospectus or registration statement, and such other documents as
the Investor may reasonably request in order to facilitate the disposition of
the Piggyback Securities included in the Offering;
(d) notify the Investor (i) of the issuance by the CNBV,
the Bolsa, the SEC or any other United States, Mexican or foreign federal or
state governmental body or agency of any action, including without limitation a
stop order, suspending or withdrawing the authorization for the offering or the
effectiveness of a registration statement, or the initiation of any proceedings
for that purpose and (ii) if the Person initiating the Piggyback Offering
determines to cease using a registration
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statement, prospectus or other offering document because of either the issuance
by the CNBV, the Bolsa, the SEC or any other United States, Mexican or foreign
federal or state governmental body or agency of a stop order or the discovery
of a material misstatement or omission, to suspend the use of a registration
statement, prospectus or other offering document upon receipt of such
notification;
(e) notify the counsel to the Investor promptly (i) when
a request for authorization, registration statement, prospectus, offering
circular or other offering material for the Piggyback Offering or any
supplement or amendment thereto has been filed, and with respect to a request
for authorization or a registration statement or any post-effective amendment,
when the same has been granted by the CNBV or become effective under the
Securities Act and each applicable state or foreign law, (ii) of any request by
the CNBV, the Bolsa, the SEC or any other United States, Mexican or foreign
federal or state governmental authority for amendments or supplements to a such
a request for authorization, registration statement, or related prospectus (or
other legally required offering material) or for additional information, (iii)
of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (iv) of the Company's
determination that a post-effective amendment to a registration statement would
be appropriate;
(f) cooperate in good faith to facilitate the timely
delivery of certificates representing the Piggyback Securities to be sold;
(g) use all commercially reasonable efforts to include
the Piggyback Securities to be included in the Offering (subject to Section
2.3(c) hereof) in any underwriting agreement, deposit agreement, and listing
applications as otherwise are entered into for the securities of the Person
initiating the Piggyback Offering;
(h) make available for inspection by the Investor or
their Inspectors the Records as shall be reasonably necessary to enable them to
exercise their due diligence investigation responsibility, if any; cause the
Company's officers, directors, examiners, accountants, attorneys, employees and
subsidiaries to supply all information reasonably requested by any such
Inspectors in connection with such registration statement; and cooperate and
assist in the performance of any due diligence investigation by the Investor;
(i) use best efforts to obtain a comfort letter or
comfort letters from the Company's independent public accountants in customary
form and covering such matters covered by comfort letter or comfort letters, if
any, delivered to the managing Underwriters, addressed to the Investor; and
(j) furnish to the Investor a signed legal opinion,
addressed to the Investor, of an opinion of counsel for the Company, dated the
date of the closing of the underwriting or purchase agreement for the Piggyback
Offering, in form and substance equivalent to that counsel's opinion, if any,
to the Underwriters in the Offering.
2.7 Registration Expenses. In connection with any Demand Offering
and Piggyback Offering hereunder, the Company shall pay the following expenses:
(a) all registration and filing fees
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(including for filings to be made with the SEC, the National Association of
Securities Dealers, Inc., and the CNBV); (b) fees and expenses of compliance
with all applicable laws (including securities and blue sky laws) in any
foreign or domestic jurisdiction (including reasonable fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities); (c) all word processing, duplicating, printing and distribution
expenses; (d) internal expenses of the Company (including all salaries and
expenses of its officers and employees performing legal or accounting duties);
(e) the fees and expenses incurred in connection with the listing on any stock
exchange, stock market or inter-dealer quotation system, including the Bolsa,
the Mexican intermediate securities market, the New York Stock Exchange, the
Nasdaq Stock Market, or quotation on PORTAL of the Registrable Securities; (f)
fees and disbursements of counsel for the Company and customary fees and
expenses for independent certified public accountants retained by the Company
(including the expenses of any comfort letters requested or required
hereunder); (g) the fees and expenses of any special experts retained by the
Company in connection with such Offering; (h) fees and expenses of counsel
selected by the Investor Representative incurred in connection with the
Offering; (i) fees and expenses of any qualified independent underwriter or
other independent appraiser participating in any offering pursuant to the
Conduct Rules of the National Association of Securities Dealers, Inc.; (j) all
expenses in connection with the preparation of any trust agreement, deposit
agreement, the deposit of shares under the trust agreement or deposit
agreement, the issuance thereunder of any participation certificates or
depositary shares evidencing such deposited shares, the issuance of any
depositary receipts evidencing such depositary shares or Capital Stock, and the
fees of the depositary and trustee; (k) all travel expenses of the Company's
directors, officers and employees and any other expenses of the Company in
connection with attending or hosting meetings with prospective purchasers of
the offered securities; and (l) all costs and expenses incurred in connection
with compliance with the Company's obligations under Sections 2.5 and 2.6. The
Company shall not have any obligation to pay any underwriting fees, discounts,
commissions or transfer taxes attributable to the sale of Registrable
Securities or, except as provided by clause (b), (h), (i), (j) or (l) above,
any out-of-pocket expenses of the Investor (or the agents who manage its
accounts) or (except as provided in an agreement between the Company and any
Underwriter if the Company is selling newly-issued securities) the fees and
disbursements of counsel for any Underwriter.
2.8 Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees
to indemnify and hold harmless to the full extent permitted by law the
Investor, each Person, if any, who controls the Investor within the meaning of
Section 15 of the Securities Act, Section 20 of the Exchange Act, or the
Mexican securities laws, and the officers, directors, agents, attorneys,
general and limited partners, affiliates, accountants and employees of the
Investor and each such controlling Person from and against any and all losses,
claims, damages, liabilities, and expenses (including reasonable costs of
investigation), joint or several, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
formal request for authorization, offering circular, other offering materials,
registration statement or prospectus relating to an offering or sale of the
Registrable Securities or in any amendment or supplement thereto, or any
document incorporated by reference, or in any preliminary offering circular,
preliminary prospectus, or other preliminary offering materials, or arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of, or are based upon, any
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such untrue statement or omission or allegation thereof based upon information
furnished in writing to the Company by the Investor expressly for use therein,
or the failure of the Investor to deliver a copy of the registration statement
or prospectus or any amendments or supplements thereto after the Company has
furnished a sufficient number of copies of the same. The Company also agrees
to indemnify any Underwriters of the Registrable Securities, their officers and
directors and each Person who controls such Underwriters on substantially the
same basis as that of the indemnification of the Investor provided in this
Section 2.8(a). This indemnity agreement shall survive the transfer of such
Registrable Securities by the Investor and will be in addition to any liability
that the Company may otherwise have.
(b) Indemnification by the Investor. The Investor agrees
to indemnify and hold harmless the Company, and each Person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act, Section 20 of the Exchange Act or the Mexican securities laws, and the
officers, directors, agents, attorneys, general and limited partners,
affiliates, accountants and employees of the Company and each such controlling
Person to the same extent as the foregoing indemnity from the Company to the
Investor, but only with respect to information furnished in writing to the
Company by the Investor expressly for use in any registration statement,
offering circular, prospectus or other offering materials relating to the
Registrable Securities. The liability of the Investor under this Section
2.8(b) shall be limited to the aggregate cash received by the Investor pursuant
to the sale of Registrable Securities covered by such registration statement,
offering circular, prospectus or other offering materials. This indemnity
agreement shall survive the transfer of such Registrable Securities by the
Investor and will be in addition to any liability that the Investor may
otherwise have.
(c) Conduct of Indemnification Proceedings. If any
action or proceeding (including any governmental investigation) shall be
brought or asserted against any Person entitled to indemnification under
Section 2.8(a) or 2.8(b) above (an "Indemnified Party") in respect of which
indemnity may be sought from any Party who has agreed to provide such
indemnification under Section 2.8(a) or 2.8(b) above (an "Indemnifying Party"),
the Indemnified Party shall give prompt notice to the Indemnifying Party and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel satisfactory to such Indemnified Party, and shall assume
the payment of all reasonable expenses of such defense. The Indemnifying Party
shall be entitled to appoint counsel of the Indemnifying Party's choice at the
Indemnifying Party's expense to represent the Indemnified Party in any action
for which indemnification is sought (in which case the Indemnifying Party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the Indemnified Party or Parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the Indemnified
Party. Notwithstanding the Indemnifying Party's election to appoint counsel to
represent the Indemnified Party in an action, the Indemnified Party shall have
the right to employ separate counsel (including local counsel), and the
Indemnifying Party shall bear the fees, costs and expenses of such separate
counsel if (i) the use of counsel chosen by the Indemnifying Party to represent
the Indemnified Party would present such counsel with a conflict of interest,
(ii) the actual or potential defendants in, or targets of, any such action
include both the Indemnified Party and the Indemnifying Party and the
Indemnified Party shall have reasonably concluded that there may be legal
defenses available to it or other Indemnified Parties that are different from
or additional to those available to the Indemnifying Party, (iii) the
Indemnifying Party shall not have employed counsel satisfactory to the
Indemnified Party to represent the
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Indemnified Party within a reasonable time after notice of the institution of
such action, or (iv) the Indemnifying Party shall authorize the Indemnified
Party to employ separate counsel at the expense of the Indemnifying Party.
Notwithstanding the foregoing, the Indemnifying Party shall not, in connection
with any one such action or proceeding or separate but substantially similar
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable at any time for the fees and
expenses of more than one separate firm of attorneys (together in each case
with appropriate local counsel).
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, settle or compromise or consent to the entry of any judgment
with respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
in respect of which indemnification or contribution could be sought under this
Section 2.8 (whether or not the Indemnified Party is an actual or potential
party thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each Indemnified Party from all liability arising out
of such litigation, investigation, proceeding or claim, and (ii) does not
include a statement as to, or an admission of, fault, culpability or a failure
to act by or on behalf of any Indemnified Party.
If at any time an Indemnified Party shall have requested an
Indemnifying Party to reimburse the Indemnified Party for fees and expenses of
counsel, such Indemnifying Party agrees that it shall be liable for any
settlement effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by the Indemnifying Party of the
aforesaid request, (ii) such Indemnifying Party shall have received notice of
the terms of such settlement at least 15 days prior to such settlement being
entered into, and (iii) such Indemnifying Party shall not have reimbursed such
Indemnified Party in accordance with such request prior to the date of such
settlement (except for those amounts to which the Company has in good faith
objected in writing).
(d) Contribution. If the indemnification provided for in
this Section 2.8 is unavailable to the Indemnified Parties or is insufficient
to hold the Indemnified Parties harmless in respect of any losses, claims,
damages, liabilities or judgments referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities and judgments as between the
Company on the one hand and the Investor on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of the Investor in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand
and of the Investor on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such Party, and the Parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
Each of the Company and the Investor agrees that it would not be just
and equitable if contribution pursuant to this Section 2.8(d) were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding
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paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 2.8(d), the Investor shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of the Investor were sold to the
public or qualified institutional buyers exceeds the amount of any damages
which the Investor has otherwise been required to pay by reason by such untrue
or alleged untrue statement or omission or alleged omission. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
2.9 Form of Offering. The Company shall take all commercially
reasonable actions, and proceed diligently and in good faith and use all
commercially reasonably efforts, to cause a Demand Offering, if made, to be
consummated in such manner as reasonably requested by the Investor
Representative so that any capital gains realized from the sale of Registrable
Securities by the Investor pursuant to such Offering qualifies for a Tax
Exemption, including, if requested to do so by the Investor Representative,
maintaining, or establishing as promptly as practicable, at the expense of the
Company an American Depositary Shares or Receipts facility in the United States
in order to permit the Investor to sell American Depositary Shares or Receipts
in lieu of Registrable Securities. The Company, however, shall have no
responsibility whatsoever for whether a Demand Offering as consummated in fact
qualifies for a Tax Exemption.
2.10 Issuance by the Company. Upon receipt by the Company of a
Demand Request given pursuant to Section 2.2(a), the Board of Directors of the
Company shall call an Extraordinary General Meeting of the holders of Capital
Stock for the following purposes:
(a) To authorize the Company to issue and offer shares of
any class of Capital Stock if recommended or required under Section 2.2(a)(i);
(b) To waive, as provided by applicable law, the
preemptive rights of holders of Capital Stock as to any class of the Capital
Stock that may be issued and offered by the Company pursuant to Section 2.2(a)
of this Agreement; and
(c) To amend the estatutos sociales of the Company to
conform to the requirements imposed by any regulatory body, including without
limitation the CNBV and the SEC.
At that Extraordinary General Meeting, the Controlling Trust shall, and shall
cause its Affiliates to, vote in favor of each of the items in this Section.
2.11 Third Party Registration Rights. The Company
shall not provide demand registration rights to any other Person without the
consent of the Investor Representative. The Company shall not provide
piggyback offering rights to any other Person without the consent of the
Investor Representative.
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ARTICLE III
TERMINATION
3.1 Termination. The provisions of Article II of this Agreement
shall terminate in respect of all Parties upon the written consent of all of
(i) the Company, (ii) the Parties (other than the Investor and Affiliates
thereof) who then hold Capital Stock representing at least a majority of the
Fully-Diluted Series A Shares then held by all of the Parties (other than the
Investor and Affiliates thereof) and (iii) the Investor Representative. A
Person who ceases to hold any Capital Stock and who ceases to beneficially own
any Capital Stock shall cease to be a Party and shall have no further rights
under this Agreement except with respect to the rights that such Person may
have hereunder against any other Party by reason of such Party's prior breach
of this Agreement and rights that expressly survive such event. A Party's
rights and obligations under Section 2.8 shall survive each such event.
ARTICLE IV
MISCELLANEOUS
4.1 Amendment and Waiver. Any provision of this Agreement may be
altered, supplemented, amended, or waived only by the written consent of each
of (i) the Company, (ii) the Investor Representative, and (iii) the Parties
(other than the Investor and Affiliates thereof) who then beneficially own
shares of Fully-Diluted Series A Shares representing at least a majority of the
Fully-Diluted Series A Shares beneficially owned by all of the Parties (other
than the Investor and Affiliates thereof) and whose rights are adversely
affected by such alteration, supplement, amendment or waiver. Such alteration,
supplement, amendment or waiver shall be binding upon all Parties. No failure
or delay by any Party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
4.2 Specific Performance. The Parties recognize that the
obligations imposed on them in this Agreement are special, unique, and of
extraordinary character, and that in the event of breach by any Party, damages
will be an insufficient remedy; consequently, it is agreed that any of the
Parties may have specific performance and injunctive relief (in addition to
damages) as a remedy for the enforcement hereof, without proving damages. The
Controlling Trust and the Family Trust shall take all action within its power
required to cause the Company to comply with the terms of this Agreement.
4.3 Assignment. Except as otherwise expressly provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of each of the Parties. No
such assignment shall relieve the Company, the Controlling Trust or the Family
Trust from any liability hereunder, and no such assignment shall relieve the
Investor from any liability under Article II with respect to Capital Stock sold
by the Investor in an Offering or otherwise. The Parties consent to the
assignment of rights under this Agreement by any Investor
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to any Person purchasing Capital Stock from the Investor in a transaction that
is (i) permitted under the Shareholders' Agreement, and (ii) not effected
through the means of a broker-dealer on the Bolsa, the Mexican intermediate
securities market, on any securities exchange, the Nasdaq Stock Market, or any
other inter-dealer quotation system on which the Capital Stock (or CPOs or
American Depositary Shares or Receipts for such Capital Stock) is then listed,
and if such transferee becomes such Investor hereunder then the assigning
Investor shall be released of its obligations hereunder to the extent of the
rights so assigned.
4.4 Notices. All notices, requests and other communications to
any Party shall be in writing (including telex, facsimile transmission or
similar writing) and shall be given to such Party by messenger, telex, or
facsimile transmission (a) at its address, facsimile number or telex number set
forth on the signature pages hereof, or (b) such other address, facsimile
number or telex number as a Party may hereafter specify for the purpose by
notice to each of the other Parties. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answer back is received, (ii) if given by facsimile transmission, when
transmitted to the facsimile number specified in or pursuant to this Section
and electronic confirmation of receipt is received, (iii) if given by messenger
or any other means, when delivered at the address specified in or pursuant to
this Section.
4.5 Counterparts. This Agreement may be executed in two or more
counterparts and each counterpart shall be deemed to be an original and which
counterparts together shall constitute one and the same agreement of the
Parties hereto.
4.6 Section Headings. Headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of this Agreement or any provisions hereof.
4.7 Governing Law; Submission to Jurisdiction; Service of Process.
This Agreement shall be governed by and construed in accordance with the laws
of the State of New York, without regard to principles of conflicts of laws.
(a) Each Party irrevocably submits to the jurisdiction of
the Supreme Court of the State of New York, County of New York, the U.S.
District Court for the Southern District of New York and any appellate court or
body thereto (collectively, the "New York Courts") and to the courts of its own
corporate domicile, with respect to actions brought against it as a defendant,
over any suit, action or proceeding arising out of or relating to this
Agreement. In addition, each Party irrevocably submits to the jurisdiction of
the state and federal courts located in the jurisdiction in which such Party
has been organized in connection with any such suit, action or proceeding that
may be brought against such Party as a defendant. Each Party irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action
or proceeding brought in such court has been brought in an inconvenient forum,
and further agrees that a final judgment in any such suit, action or proceeding
brought in such court shall be conclusive and binding such Party.
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(b) Each of the Company, the Controlling Trust and the
Family Trust hereby appoints CT Corporation System, having offices on the date
hereof at 1633 Broadway, New York, New York 10019 (the "Process Agent"), as
its authorized agent to accept and acknowledge on its behalf service of any and
all process which may be served in any suit, action or proceeding of the nature
referred to above in any New York Court. Each of the Company, the Controlling
Trust and the Family Trust agrees that it shall take any and all reasonable
action, including the execution and filing of any and all documents, that may
be necessary to continue the foregoing designations and appointments in full
force and effect and to cause the Process Agent to continue to act in such
capacity. If the Process Agent shall desire to cease so to act, each of the
Company and the Controlling Trust agrees that prior to the Process Agent
ceasing so to act it shall designate and appoint without delay another such
agent in such jurisdiction satisfactory to the Investor Representative and, if
requested by the Investor Representative, shall promptly deliver to the
Investor Representative evidence in writing of such other agent's acceptance of
such appointment in form and substance reasonably acceptable to the Investor
Representative.
(c) Each of the Company, the Controlling Trust and the
Family Trust consents to process being served in any suit, action or proceeding
of the nature referred to in Section 4.7(b) by serving a copy thereof upon the
Process Agent. If the service upon the Process Agent shall not be possible or
shall otherwise be impractical after reasonable efforts to effect the same,
each of the Company, the Controlling Trust and the Family Trust consents to
process being served in any suit, action or proceeding of the nature referred
to in Section 4.7(b) in any manner then permissible under applicable law, by
the mailing of a copy thereof by registered or certified airmail, postage
prepaid, return receipt requested, to the address of that Party specified in or
pursuant to Section 4.4. Each of the Company, the Controlling Trust and the
Family Trust irrevocably waives, to the fullest extent permitted by law, all
claim of error by reason of any such service and agrees that such service (i)
shall be deemed in every respect effective service of process upon such Party
in any such suit, action or proceeding and (ii) shall to the fullest extent
permitted by law, be taken and held to be valid personal service upon and
personally delivery to such Party.
(d) Nothing in this Section 4.7 shall affect any right of
any Party to serve process in any manner permitted by law or limit the right of
any Party to bring proceedings against the other Parties in the courts of any
jurisdiction or jurisdictions or to bring proceedings in more than one
jurisdiction concurrently.
4.8 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
4.9 Waiver of Immunity. To the extent that any Party has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid or execution, or otherwise) with respect to itself or its
property, such Party hereby irrevocably waives such immunity in respect of its
obligations under this Agreement to the extent permitted by applicable law and,
without limiting the generality of the foregoing, agrees that the waivers set
forth in this Section 4.9 shall have effect to the fullest extent
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permitted under the Foreign Sovereign Immunities Act of 1976 of the United
States of America and are intended to be irrevocable for purposes of such Act.
4.10 Dollars.
(a) All sums expressed herein or to be paid hereunder
shall be calculated or paid, as applicable, in United States Dollars. If for
purposes of this Agreement or for the purpose of obtaining judgment in any
court or arbitral body it is necessary to convert any currency into Dollars,
then the Parties hereto agree, to the fullest extent that they may legally and
effectively do so, that the rate of exchange used for such conversion shall be
that published or announced by Chase Manhattan Bank, N.A. in New York, New
York, United States, on the Business Day immediately preceding the day on which
such calculation is to be made or such judgment is final.
(b) The obligations of the Company, the Controlling Trust
and the Family Trust in respect of any sum due from it to the Investor (or any
Person in whose name or for whose benefit the Investor holds Registrable
Securities) hereunder shall, notwithstanding any judgment in a currency other
than United States Dollars, be discharged only to the extent that, on the
Business Day next succeeding receipt by the Investor (or Person) of any sum
adjudged to be so due in the judgment currency, the Investor (or Person) may,
in accordance with normal banking procedures, purchase United States Dollars
with the judgment currency. If the United States Dollars so purchased (less
all exchange fees and related charges) are less than the sum originally due to
the Investor (or Person) in United States Dollars, the Company, the Controlling
Trust and the Family Trust agree, as a separate obligation and notwithstanding
any such judgment, to indemnify the Investor (or Person) against such loss; and
if the United States Dollars so purchased exceed the sum originally due to the
Investor (or Person) in Dollars, the Investor shall (or shall cause such Person
to) remit such excess to the Company, the Controlling Trust or the Family
Trust.
4.11 English Language. In the construction and interpretation of
the terms and provisions of this Agreement, the English language version of
this Agreement shall be the official version of this Agreement and any version
of this Agreement that has been translated into another language shall have no
force and effect, except for purposes of enforcing this Agreement in a court of
law that requires that the Agreement be presented in another language, in which
case the authenticated translation of this Agreement into that language made by
an officially certified translator selected by the Investor Representative
shall be binding.
4.12 Entire Agreement. This Agreement, the Acquisition Agreement,
the other Transaction Documents, and that Further Assurances Agreement dated as
of July 9, 1998, between the Investor Companies and each of the Family
Shareholders (together with the Exhibits and Schedules hereto and thereto)
contain the entire understanding of the Parties hereto respecting the subject
matter hereof and supersede all prior agreements, discussions and
understandings with respect thereto.
4.13 Cumulative Rights. The rights of each of the Parties under
this Agreement are cumulative and in addition to all similar and other rights
of the Parties under other agreements.
4.14 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future law, and if the
rights or obligations of the Parties under this
F-28
<PAGE> 150
Agreement shall not be materially and adversely affected thereby such provision
shall be fully severable, this Agreement shall be construed and enforced as if
such illegal, invalid, or unenforceable provision had never comprised a part
hereof, the remaining provisions of this Agreement shall remain in full force
and effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance herefrom, and in lieu of such illegal, invalid,
or unenforceable provision, there shall be added automatically as a part of
this Agreement a legal, valid, and enforceable provision as similar in terms to
such illegal, invalid, or unenforceable provision as may be possible.
[SIGNATURES ON FOLLOWING PAGE]
F-29
<PAGE> 151
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the Parties or the duly authorized officers of each of the
Parties, as appropriate, effective as of the date first written above.
GRUPO RADIO CENTRO, S.A. DE C.V.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
--------------------------------------------
--------------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
--------------------------------------------
--------------------------------------------
CHANCELLOR MEXICO LLC
By: CHANCELLOR MEDIA CORPORATION
Its Sole Member
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
--------------------------------------------
--------------------------------------------
F-30
<PAGE> 152
BANCOMER, S.A.,
INSTITUCION DE BANCA MULTIPLE
As Trustee of the Family Trust
(No. F/29307-6)
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
--------------------------------------------
--------------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
--------------------------------------------
--------------------------------------------
BANCOMER, S.A.,
INSTITUCION DE BANCA MULTIPLE
As Trustee of the 1992 Trust (No. F/23020-1)
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
--------------------------------------------
--------------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address:
------------------------------------
--------------------------------------------
--------------------------------------------
F-31
<PAGE> 1
EXHIBIT 4.40
SIXTH AMENDMENT
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED LOAN
AGREEMENT (this "Amendment") made as of the 31st day of July, 1998, among
Chancellor Media Corporation of Los Angeles, a Delaware corporation (formerly
known as Evergreen Media Corporation of Los Angeles) (the "Borrower"), the
financial institutions whose names appear as Lenders on the signature pages
hereto (collectively, the "Lenders"), Toronto Dominion (Texas), Inc., Bankers
Trust Company, The Bank of New York, NationsBank, N.A. and Union Bank of
California (collectively, the "Managing Agents"), Toronto Dominion Securities
(USA), Inc. (the "Syndication Agent") and Toronto Dominion (Texas), Inc., as
administrative agent for the Lenders (the "Administrative Agent"),
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Managing Agents, the
Syndication Agent and the Administrative Agent are parties to that certain
Second Amended and Restated Loan Agreement dated as of April 25, 1997, as
modified and amended by that certain First Amendment to Second Amended and
Restated Loan Agreement dated as of June 26, 1997, as further modified and
amended by that certain Second Amendment to Second Amended and Restated Loan
Agreement dated as of August 7, 1997, as further modified by that certain Third
Amendment to Second Amended and Restated Loan Agreement dated as of October 28,
1997, as further modified and amended by that certain Fourth Amendment to
Second Amended and Restated Loan Agreement dated as of February 10, 1998, and
as further modified and amended by that certain Fifth Amendment to Second
Amended and Restated Loan Agreement dated as of May 1, 1998 (as amended, the
"Loan Agreement"); and
WHEREAS, the Borrower has requested that the Administrative
Agent, the Managing Agents, the Syndication Agent and the Lenders agree to
amend the Loan Agreement as more fully set forth herein;
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the
parties agree that all capitalized terms used herein shall have the meanings
ascribed thereto in the Loan Agreement except as otherwise defined or limited
herein, and further agree as follows:
1. Amendments to Article 1.
(a) Article 1 of the Loan Agreement, Definitions, is
hereby modified and amended by deleting the existing definition of "Non-Core
Business" and by substituting the following therefor:
"'Non-Core Business' shall mean any business which is not
operated primarily in the United States of America or is not any of
the following: (i) the radio or television broadcasting business, (ii)
the business of representing radio and television stations, cable
television stations, interactive Internet service providers, other
broadcasters, publishers and purveyors of publicly accessible media
and other business media and marketing entities in the sale of
advertising and programming, or (iii) the outdoor advertising
business."
<PAGE> 2
(b) Article 1 of the Loan Agreement, Definitions, is
hereby modified and amended by adding the following definition of "OECD" after
the definition of "Obligations":
"OECD" shall mean the Organisation for Economic Co-operation
and Development, a Paris-based intergovernmental organisation having,
as of the Sixth Amendment Date, twenty-nine (29) member countries."
(c) Article I of the Loan Agreement, Definitions, is
hereby modified and amended by deleting the existing definition of "Senior
Debt" and by substituting the following therefor:
"'Senior Debt' shall mean, as of any date, all outstanding
Indebtedness for Money Borrowed of the Borrower to the Lenders and the
Administrative Agent hereunder (including, without limitation, any
Additional Facility Indebtedness), plus any Indebtedness for Money
Borrowed issued as permitted pursuant to Section 7.1(xii)."
(d) Article 1 of the Loan Agreement, Definitions, is
hereby modified and amended by adding the following definition of "Sixth
Amendment Date" after the definition of "Senior Notes":
"'Sixth Amendment Date' shall mean July 31, 1998."
(e) Article 1 of the Loan Agreement, Definitions, is
hereby modified and amended by deleting the existing definition of "Top-50
Market."
2. Amendment to Section 4.1. Section 4.1(e) of the Loan
Agreement, Business, is hereby modified and amended by deleting the last
sentence thereof in its entirety and by substituting the following in lieu
thereof:
"The Borrower and its Subsidiaries are engaged in, or from time to
time may engage in, (i) the radio and television broadcasting
businesses, (ii) the business of representing radio and television
stations, cable television systems, interactive Internet service
providers, other broadcasters, publishers and purveyors of publicly
accessible media and other business media and marketing entities in
the sale of advertising and programming, and (iii) the outdoor
advertising business. In addition, the Borrower and its Subsidiaries
may make Acquisitions and Investments to the extent otherwise
permitted hereunder."
3. Amendment to Section 5.2. Section 5.2 of the Loan Agreement,
Business; Compliance with Applicable Law, is hereby modified and amended by
deleting the entire section (other than the last sentence) and by substituting
the following therefor:
"The Borrower and its Subsidiaries will (a) engage in the business of
(i) radio and television broadcasting, (ii) representing radio and
television stations, cable television systems, interactive Internet
service providers, other broadcasters, publishers and purveyors of
publicly accessible media and other business media and marketing
entities in the sale of advertising and programming, (iii) outdoor
advertising, and (iv) making Acquisitions and Investments, to the
extent permitted by Section 7.6(g) and (h); and (b) substantially
comply with the requirements of all material Applicable Laws."
- 2 -
<PAGE> 3
4. Amendments to Article 7.
(a) Section 7.1 of the Loan Agreement, Indebtedness of
the Borrower and its Subsidiaries, is hereby modified and amended by deleting
subsection (vii) thereof in its entirety and by substituting the following
therefor:
"(vii) Subordinated Indebtedness existing as of the Sixth Amendment
Date, plus up to an additional $750,000,000 of Subordinated
Indebtedness issued thereafter;"
(b) Section 7.1 of the Loan Agreement, Indebtedness of
the Borrower and its Subsidiaries, is hereby further modified and amended by
inserting the following immediately before the period at the end of subsection
(xi) thereof:
"; and
"(xii) On and after the Sixth Amendment Date, other senior
unsecured Indebtedness for Money Borrowed of the Borrower (not
subordinated in right of payment to the Obligations), in an aggregate
amount not to exceed $750,000,000 at any time outstanding, provided
such Indebtedness for Money Borrowed (i) requires no scheduled
principal payments until after the Maturity Date, and (ii) contains no
financial covenants or other terms or conditions more restrictive on
the Borrower and its Subsidiaries than any of those contained in its
indentures for its Subordinated Indebtedness outstanding as of the
Sixth Amendment Date."
(c) Section 7.6 of the Loan Agreement, Investments,
Acquisitions and Assets, Swaps, is hereby modified and amended by deleting the
existing subsection (c) introduction plus items (i) through (v) thereof, and by
substituting the following therefor:
"(c) The Borrower and its Subsidiaries may make
Acquisitions as follows:
"(i) The Borrower or any of its Subsidiaries may make
Acquisitions with the prior written consent of the Required Lenders;
"(ii) The Borrower or any of its Subsidiaries may make one
or more Acquisitions, other than Acquisitions of Non-Core Businesses;
"(iii) The Borrower or any of its Subsidiaries may make
Acquisitions of radio or television broadcasting businesses,
businesses involved in representing radio and television stations,
cable television stations, interactive Internet service providers,
other broadcasters, publishers and purveyors of publicly- accessible
media and other business media and marketing entities in the sale of
advertising and programming, and outdoor advertising businesses, which
businesses operate primarily outside the United States of America, but
primarily in North America or South America or in other countries that
are members of the OECD, provided, however, that the aggregate amount
of Indebtedness for Money Borrowed that may be incurred to effect any
such Acquisition or Acquisitions shall be limited to $600,000,000; and
"(iv) The Borrower or any of its Subsidiaries may make
Acquisitions of Internet service providers operating primarily in the
United States of America, provided that any Indebtedness for Money
Borrowed incurred to effect such Acquisition or Acquisitions shall be
limited to an aggregate amount of $50,000,000."
- 3 -
<PAGE> 4
(d) Section 7.7 of the Loan Agreement, Restricted,
Payments, and Purchases, is hereby modified and amended by adding the following
new language to Section 7.7(b) at the end of such section but immediately prior
to the semicolon:
"plus (vi) $200,000,000, from and after the Sixth Amendment Date, plus
(vii) fifty percent (50%) of the Net Proceeds of additional issuance
of equity by the Borrower or the Parent Company (to the extent of the
amount made available as additional equity to the Borrower)"
5. Amendment to Article 8. Article 8 of the Loan Agreement,
Default, shall be amended by the deletion of existing subsection 8.1(j) and by
substituting the following therefor:
"(j) There shall occur (i) any acceleration of the
maturity of (A) any agreement or instrument evidencing Subordinated
Indebtedness of the Borrower, CMHC, KMG or the Parent Company, or (B)
any other Indebtedness of the Parent Company, CMHC, KMG, the Borrower
or any of the Borrower's Subsidiaries in an aggregate principal amount
exceeding $3,000,000; (ii) any event or occurrence which would permit
such acceleration of such Subordinated Indebtedness or such other
Indebtedness and which event or occurrence has not been cured or
waived in writing within any applicable cure period; (iii) any event
which does not permit the acceleration of such Subordinated
Indebtedness or such other Indebtedness in a principal amount
exceeding $3,000,000, but requires the Parent Company, CMHC, KMG, the
Borrower or any of its Subsidiaries to purchase or acquire such
Subordinated Indebtedness or such other Indebtedness; (iv) any
material default under any Interest Hedge Agreement having a notional
principal amount of $6,000,000 or more;"
6. No Other Amendments or Waivers. Except for the amendments set
forth above, the text of the Loan Agreement and the other Loan Documents shall
remain unchanged and in full force and effect, and the Lenders and the
Administrative Agent expressly reserve the right to require strict compliance
with the terms of the Loan Agreement and the other Loan Documents.
7. Effectiveness; Conditions Precedent. Upon execution of this
Amendment by the Lenders, the provisions of this Amendment shall be effective
subject only to the prior fulfillment of each of the following conditions:
(a) The representations and warranties of the Borrower
under the Loan Agreement and of other obligors under the other Loan Documents
shall be true and correct as of the date hereof, and no Default or Event of
Default shall exist as of the date hereof; and
(b) The Administrative Agent's receipt of all such other
certificates, reports, statements, or other documents as the Administrative
Agent, any Managing Agent, or any Lender may reasonably request.
8. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same agreement.
9. Governing Law. This Amendment shall be deemed to be made
pursuant to the laws of the State of New York with respect to agreements made
and to be performed wholly
- 4 -
<PAGE> 5
in the State of New York and shall be construed, interpreted, performed and
enforced in accordance therewith.
10. Loan Document. This Amendment shall be deemed to be a Loan
Document for all purposes under the Loan Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused their respective
duly authorized officers or representatives to execute and deliver this
Amendment as of the day and year first above written.
BORROWER: CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES, a Delaware corporation
By: /s/ MATT DEVINE
---------------------------------------------
Name: Matt Devine
----------------------------------------
Its: Chief Financial Officer
Attest: /s/[ILLEGIBLE]
--------------------------------------
Name:
---------------------------------
Its: Vice President
ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., a Delaware
corporation
By: /s/ JEFFERY R. LENTS
---------------------------------------------
Name: Jeffery R. Lents
----------------------------------------
Its: Vice President
COLLATERAL AGENT: TORONTO DOMINION (TEXAS), INC., a Delaware
corporation
By: /s/ JEFFERY R. LENTS
---------------------------------------------
Name: Jeffery R. Lents
----------------------------------------
Its: Vice President
ISSUING BANK: THE TORONTO-DOMINION BANK
By: /s/ JEFFERY R. LENTS
---------------------------------------------
Name: Jeffery R. Lents
----------------------------------------
Its: Manager CR. Admin.
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 1
<PAGE> 7
MANAGING AGENTS TORONTO DOMINION (TEXAS), INC., a
AND LENDERS: Delaware corporation
By: /s/ JEFFERY R. LENTS
------------------------------------------
Name: Jeffery R. Lents
-------------------------------------
Its: Vice President
THE BANK OF NEW YORK
By: /s/ JOHN R. CIULLA
------------------------------------------
Name: John R. Ciulla
-------------------------------------
Its: Vice President
NATIONSBANK, N.A.
By: /s/ JULIE A. SCHELL
------------------------------------------
Name: Julie A. Schell
-------------------------------------
Its: Vice President
UNION BANK OF CALIFORNIA
By: /s/ MICHAEL K. MCSHANE
------------------------------------------
Name: Michael K. McShane
-------------------------------------
Its: Senior Vice President
BANKERS TRUST COMPANY
By: /s/ JAMES REILLY
------------------------------------------
Name: James Reilly
-------------------------------------
Its: Vice President
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By:
------------------------------------------
Name:
-------------------------------------
Its: Authorized Signatory
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 2
<PAGE> 8
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ JEFFREY W. MAILLET
------------------------------------------
Name: Jeffrey W. Maillet
-------------------------------------
Its: Senior Vice President & Director
BANK OF AMERICA NT&SA
By: /s/ MATTHEW KOENIG
------------------------------------------
Name: Matthew Koenig
-------------------------------------
Its: Vice President
BANKBOSTON, N.A.
By: /s/ LISA M. PELLOW
------------------------------------------
Name: Lisa M. Pellow
-------------------------------------
Its: Director
BANQUE PARIBAS, LOS ANGELES AGENCY
By: /s/ DAVID J. PASTRE
------------------------------------------
Name: David J. Pastre
-------------------------------------
Its: Vice President
By: /s/ THOMAS G. BRANDT
------------------------------------------
Name: Thomas G. Brandt
-------------------------------------
Its: Director
BARCLAYS BANK PLC
By: /s/ DANIELE IACOVONE
------------------------------------------
Name: Daniele Iacovone
-------------------------------------
Its: Associate Director
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 3
<PAGE> 9
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By:/s/ ANTHONY ROCK
------------------------------------------
Name: Anthony Rock
-------------------------------------
Its: Vice President
By:/s/ MARCUS EDWARD
------------------------------------------
Name: Marcus Edward
-------------------------------------
Its: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH
By:
------------------------------------------
Name:
-------------------------------------
Its: Vice President
CREDIT SUISSE FIRST BOSTON
By:/S/ JUDITH E. SMITH
------------------------------------------
Name: Judith E. Smith
-------------------------------------
Its: Director
By:/s/ TODD C. MORGAN
------------------------------------------
Name: Todd C. Morgan
-------------------------------------
Its: Director
THE DAI-ICHI KANGYO BANK, LTD.
By:/s/ KAZUKI SHIMIZU
------------------------------------------
Name: Kazuki Shimizu
-------------------------------------
Its: Vice President
KEY CORPORATE CAPITAL INC.
By:/s/ JASON R. WEAVER
------------------------------------------
Name: Jason R. Weaver
-------------------------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 4
<PAGE> 10
SOCIETE GENERALE
By: /s/ ELAINE KHALIL
------------------------------------------
Name: Elaine Khalil
-------------------------------------
Its: Vice President
BANK OF MONTREAL
By: /s/ YVONNE BOS
------------------------------------------
Name: Yvonne Bos
-------------------------------------
Its: Senior Vice President
CORESTATES BANK, N.A.
By:
------------------------------------------
Name:
-------------------------------------
Its: Vice President
FLEET NATIONAL BANK
By: /s/ CHRISTINE CAMPANELLI
------------------------------------------
Name: Christine Campanelli
-------------------------------------
Its: Vice President
THE FUJI BANK, LIMITED, HOUSTON AGENCY
By: /s/ PHILIP C. LAUINGER III
------------------------------------------
Name: Philip C. Lauinger III
-------------------------------------
Its: Vice President & Manager
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By:
------------------------------------------
Name:
-------------------------------------
Its: Joint General Manager
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 5
<PAGE> 11
MELLON BANK, N.A.
By: /s/ THOMAS P. JOYCE
------------------------------------------
Name: Thomas P. Joyce
-------------------------------------
Its: Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JEFFREY E. HAUSER
------------------------------------------
Name: Jeffrey E. Hauser
-------------------------------------
Its: Vice President
SANWA BANK LIMITED
By:
------------------------------------------
Name:
-------------------------------------
Its:
THE BANK OF NOVA SCOTIA
By: /s/ TERRY K. FRYETT
------------------------------------------
Name: Terry K. Fryett
-------------------------------------
Its: Vice President
THE SUMITOMO BANK, LTD.
By:
------------------------------------------
Name:
-------------------------------------
Its: Vice President and Manager
By:
------------------------------------------
Name:
-------------------------------------
Its: Vice President
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/ RONALD K. RUEVE
------------------------------------------
Name: Ronald K. Rueve
-------------------------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 6
<PAGE> 12
ABN-AMRO BANK, N.V. - HOUSTON AGENCY
By: /s/ JAMES DUNLEAVY
------------------------------------------
Name: James Dunleavy
-------------------------------------
Its: Senior Vice President
By: /s/ ANN SCHWALBENBERG
------------------------------------------
Name: Ann Schwalbenberg
-------------------------------------
Its: Vice President
DRESDNER BANK AG, NEW YORK BRANCH
By: /s/ JANE A. MAJESKI
------------------------------------------
Name: Jane Majeski
-------------------------------------
Its: First Vice President
By: /s/ BRIAN HAUGHNEY
------------------------------------------
Name: Brian Haughney
-------------------------------------
Its: Assistant Treasurer
SUMMIT BANK
By: /s/ HENRY G. KUSH, JR.
------------------------------------------
Name: Henry G. Kush, Jr.
-------------------------------------
Its: Vice President
THE TOKAI BANK, LIMITED
By:
------------------------------------------
Name:
-------------------------------------
Its: Assistant General Manager
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 7
<PAGE> 13
UNION BANK OF SWITZERLAND, NEW YORK BRANCH
By: /s/ EDUARDO SALAZAR
------------------------------------------
Name: Eduardo Salazar
-------------------------------------
Its: Executive Director
--------------------------------------
By: /s/ ROBERT H. RILEY III
------------------------------------------
Name: Robert H. Riley III
-------------------------------------
Its: Executive Director
--------------------------------------
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
By: /s/ JUAN I. SANCHEZ
------------------------------------------
Name: Juan I. Sanchez
-------------------------------------
Its: Banking Officer
BANK OF IRELAND
By: /s/ LIAM O'MORA
------------------------------------------
Name: Liam O'Mora
-------------------------------------
Its: Account Officer
CREDIT AGRICOLE INDOSUEZ
By:
------------------------------------------
Name:
-------------------------------------
Its: Senior Vice President/Branch Manager
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
CRESTAR BANK
By:
------------------------------------------
Name:
-------------------------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 8
<PAGE> 14
MERITA BANK, LTD., NEW YORK BRANCH
By:
------------------------------------------
Name:
-------------------------------------
Its: Vice President
By:
------------------------------------------
Name:
-------------------------------------
Its: Vice President
NATIONAL CITY BANK
By: /s/ ANDREW J. WALSHAW
------------------------------------------
Name: Andrew J. Walshaw
-------------------------------------
Its: Vice President
THE ROYAL BANK OF SCOTLAND PLC
By: /s/ GRANT F. STODDART
------------------------------------------
Name: Grant F. Stoddart
-------------------------------------
Its: Senior Vice President & Manager
RIGGS BANK, N.A.
By:
------------------------------------------
Name:
-------------------------------------
Its: Vice President
THE SUMITOMO TRUST & BANKING CO., LTD.,
NEW YORK BRANCH
By: /s/ STEPHEN A. STRATICO
------------------------------------------
Name: Stephen A. Stratico
-------------------------------------
Its: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 9
<PAGE> 15
NATIONAL BANK OF CANADA
By: /s/ THERESA WHITE
------------------------------------------
Name: Theresa White
-------------------------------------
Its: Vice President
By: /s/ VINCENT LIMA
------------------------------------------
Name: Vincent Lima
-------------------------------------
Its: Assistant Vice President
CITY NATIONAL BANK
By: /s/ DAVID C. BURDGE
------------------------------------------
Name: David C. Burdge
-------------------------------------
Its: Senior Vice President
SENIOR DEBT PORTFOLIO
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
BANK OF SCOTLAND
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
NATEXIS BANQUE
By: /s/ EVAN S. KRAUS
------------------------------------------
Name: Evan S. Kraus
-------------------------------------
Its: Associate
--------------------------------------
By: /s/ WILLIAM C. MAIER
------------------------------------------
Name: William C. Maier
-------------------------------------
Its: VP Group Manager
--------------------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 10
<PAGE> 16
HELLER FINANCIAL, INC.
By: /s/ PATRICK HAYES
------------------------------------------
Name: Patrick Hayes
-------------------------------------
Its: Vice President
--------------------------------------
GOLDMAN SACHS CREDIT PARTNERS, L.P.
By: /s/ STEPHEN B. KING
------------------------------------------
Name: Stephen B. King
-------------------------------------
Its: Authorized Signatory
--------------------------------------
BEAR STEARNS INVESTMENT PRODUCTS, INC.
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
GULF INTERNATIONAL BANK B.S.C.
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
THE CHASE MANHATTAN BANK
By: /s/ JOHN J. HUBER
------------------------------------------
Name: John J. Huber III
-------------------------------------
Its: Managing Director
--------------------------------------
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ CHRISTIAN GIORDANO
------------------------------------------
Name: Christian Giordano
-------------------------------------
Its: Vice President
--------------------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 11
<PAGE> 17
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
CITIBANK, N.A.
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
FIRST UNION NATIONAL BANK
By: /s/ BRUCE W. LOFTIN
------------------------------------------
Name: Bruce W. Loftin
-------------------------------------
Its: Senior Vice President
--------------------------------------
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (a unit of The Chase Manhattan Bank)
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
KZH-ING-1 CORPORATION
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
PARIBAS CAPITAL FUNDING LLC
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 12
<PAGE> 18
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
By: /s/ SHEILA FINNERTY
------------------------------------------
Name: Sheila Finnerty
-------------------------------------
Its: Vice President
--------------------------------------
CYPRESSTREE INVESTMENT MANAGEMENT, INC.
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
FIRSTRUST
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
COMMERCIAL LOAN FUNDING TRUST I
By: Lehman Commercial Paper, Inc., not in its
individual capacity but solely as
administrative agent
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
COMMERZBANK AG, NEW YORK BRANCH
By:
------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 13
<PAGE> 19
PRIME INCOME TRUST
By:
------------------------------------------
Name:
-------------------------------------
Its:
-------------------------------------
CYPRESSTREE INVESTMENT MANAGEMENT, INC.
By:
------------------------------------------
Name:
-------------------------------------
Its:
-------------------------------------
FIRSTRUST
By:
------------------------------------------
Name:
-------------------------------------
Its:
-------------------------------------
COMMERCIAL LOAN FUNDING TRUST I
By: Lehman Commercial Paper, Inc., not in its
individual capacity but solely as
administrative agent
By: /s/ MICHELE SWANSON
------------------------------------------
Name: Michele Swanson
-------------------------------------
Its: Authorized Signatory
-------------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ MOLLY KACZMARCOK
------------------------------------------
Name: Molly Kaczmarcok
-------------------------------------
Its: Authorized Signatory
-------------------------------------
COMMERZBANK AG, NEW YORK BRANCH
By:
------------------------------------------
Name:
-------------------------------------
Its:
-------------------------------------
FIFTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 13
<PAGE> 20
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: /s/ J. E. PALMER
------------------------------------------
Name: J. E. Palmer
-------------------------------------
Its: Assistant Vice President
--------------------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
SIXTH AMENDMENT TO CHANCELLOR LOAN AGREEMENT
Signature Page 14
<PAGE> 1
EXHIBIT 10.47
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated as of July 7, 1998, among
CHANCELLOR MEDIA CORPORATION, a Delaware corporation ("Chancellor"), and RANGER
EQUITY PARTNERS, L.P., a Delaware limited partnership (the "Stockholder").
WHEREAS, Chancellor and RANGER EQUITY HOLDINGS CORPORATION, a Delaware
corporation (the "Company"), propose to enter into an Agreement and Plan of
Merger dated as of the date hereof (as the same may be amended or supplemented,
the "Merger Agreement"; capitalized terms used but not defined herein shall
have the meanings set forth in the Merger Agreement) providing for the merger
of the Company with and into Chancellor (the "Merger"), upon the terms and
subject to the conditions set forth in the Merger Agreement;
WHEREAS, the Stockholder owns 403,071,532 shares of Common Stock, $0.01
par value, of the Company (the "LIN Common Stock") (such shares of LIN Common
Stock, together with any other shares of capital stock of the Company acquired
by such Stockholder after the date hereof and during the term of this
Agreement, being collectively referred to herein as the "Subject Shares"),
constituting approximately 74.7% of the issued and outstanding shares of LIN
Common Stock (based solely on the Company's representations and warranties set
forth in Section 2.2 of the Merger Agreement); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Chancellor has requested that the Stockholder enter into this
Agreement in order to ensure that the Company obtain the LIN Stockholders
Approval (as defined in the Merger Agreement);
NOW, THEREFORE, to induce Chancellor to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the
premises and the representations, warranties and agreements contained herein,
the parties agree as follows:
1. Representations and Warranties of the Stockholder. The
Stockholder hereby represents and warrants to Chancellor as of the date hereof
as follows:
<PAGE> 2
(a) Authority; Noncontravention. The Stockholder has
all requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Stockholder, and the consummation of
the transactions contemplated hereby, have been duly authorized by all
necessary partnership action on the part of the Stockholder. This
Agreement has been duly authorized, executed and delivered by the
Stockholder and constitutes a valid and binding obligation of the
Stockholder enforceable in accordance with its terms. The execution and
delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof
(including Section 3 of this Agreement) will not, conflict with, or
result in any violation of, or default (with or without notice or lapse
of time or both) under any provision of, the limited partnership
agreement of the Stockholder, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order,
notice, decree, statute, law, ordinance, rule or regulation applicable
to the Stockholder or to the Stockholder's property or assets, including
the Stockholders Agreement referred to in subparagraph (b) below.
(b) The Subject Shares. The Stockholder is the record
and beneficial owner of, and has good and marketable title to, the
Subject Shares, free and clear of any claims, liens, encumbrances and
security interests whatsoever. The Stockholder does not own, of record
or beneficially, any shares of capital stock of the Company other than
the Subject Shares. The Stockholder has the sole right to vote the
Subject Shares. None of the Subject Shares is subject to any voting
trust or other agreement, arrangement or restriction with respect to the
voting of the Subject Shares, except as contemplated by this Agreement
and that certain Stockholders Agreement, dated as of March 3, 1998,
among the Company and the stockholders parties thereto (the
"Stockholders Agreement"). The Stockholders Agreement does not
prohibit, restrict or in any manner affect the right or power of the
Stockholder to vote, consent or otherwise approve the Merger Agreement
or to carry out and perform the terms of this Agreement.
2. Representations and Warranties of Chancellor. Chancellor hereby
represents and warrants to the Stockholder as of the date hereof that
Chancellor has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this
2
<PAGE> 3
Agreement by Chancellor, and the consummation of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action on the part
of Chancellor. This Agreement has been duly executed and delivered by
Chancellor and constitutes a valid and binding obligation of Chancellor
enforceable in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the terms hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time or both)
under any provision of, the certificate of incorporation or bylaws of
Chancellor, any trust agreement, loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, notice, decree, statute, law, ordinance,
rule or regulation applicable to Chancellor or to Chancellor's property or
assets.
3. Covenants of the Stockholder. Until the termination of this
Agreement in accordance with Section 6, the Stockholder agrees as follows:
(a) At any meeting of stockholders of the Company
called to vote upon the Merger and the Merger Agreement or at any
adjournment thereof or in any other circumstances upon which a vote,
consent or other approval (including by written consent) with respect to
the Merger and the Merger Agreement is sought, the Stockholder shall,
including by initiating a written consent solicitation if requested by
Chancellor, vote (or cause to be voted) the Subject Shares in favor of
the Merger, the adoption by the Company of the Merger Agreement and the
approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement.
(b) At any meeting of the stockholders of the Company
or at any adjournment thereof or in any other circumstances upon which
the Stockholder's vote, consent or other approval is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares against
(i) any merger agreement or merger (other than the Merger Agreement and
the Merger), consolidation, combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding up
of or by the Company or any other takeover proposal or Acquisition
Proposal as such term is defined in Section 4.5 of the Merger Agreement
(an "Acquisition Proposal") or (ii) any amendment of the Company's
certificate of incorporation or bylaws or other proposal or transaction
involving the Company or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner
3
<PAGE> 4
impede, frustrate, prevent or nullify the Merger, the Merger Agreement
or any of the other transactions contemplated by the Merger Agreement or
change in any manner the voting rights of the LIN Common Stock. The
Stockholder further agrees not to commit or agree to take any action
inconsistent with the foregoing.
(c) Except as provided in the immediately succeeding
sentence of this Section 3(c), the Stockholder agrees not to (i) sell,
transfer, pledge, assign or otherwise dispose of (including by gift)
(collectively, the "Transfer"), or enter into any contract, option or
other arrangement (including any profit sharing agreement) with respect
to the Transfer of the Subject Shares to any person other than pursuant
to the terms of the Merger, or (ii) enter into any voting arrangement,
whether by proxy, voting agreement or otherwise, in connection with,
directly or indirectly, any Acquisition Proposal, and agrees not to
commit or agree to take any of the foregoing actions. Notwithstanding
the foregoing, the Stockholder shall have the right, for tax planning
purposes, to Transfer the Subject Shares to a transferee provided that,
as a condition to any such Transfer, each such transferee shall execute
and deliver to Chancellor a counterpart of this Agreement and expressly
agree to be bound hereby;
(d) During the term of this Agreement, the Stockholder
shall not, nor shall it permit any investment banker, attorney or other
adviser or representative of the Stockholder to, (i) directly or
indirectly solicit, initiate or encourage the submission of, any
Acquisition Proposal or (ii) directly or indirectly participate in any
discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal.
(e) Until after the Merger is consummated or the Merger
Agreement is terminated, the Stockholder shall use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause
to be done, and to assist and cooperate with Chancellor in doing, all
things necessary, proper or advisable to consummate and make effective,
in the most expeditious manner practicable, the Merger and the other
transactions contemplated by the Merger Agreement.
4
<PAGE> 5
4. Further Assurances. The Stockholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as Chancellor may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
5. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
without the prior written consent of the other parties, except that Chancellor
may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to any direct or indirect wholly owned subsidiary of
Chancellor. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
6. Termination. This Agreement shall terminate upon the earlier of
(a) 15 months from the date hereof or (b) the Effective Time of the Merger;
provided, however, that if the Company is not in breach of its obligations
under the Merger Agreement and the Stockholder is not in breach of its
obligations under this Agreement, this Agreement shall terminate at the time
the Merger Agreement is terminated (i) pursuant to Section 7.1(a), 7.1(b)(ii),
7.1(b)(iii) or 7.1(b)(iv) thereof, or (ii) by the Company pursuant to Section
7.1(b)(v) thereof as a result of a Material Breach of the Agreement by
Chancellor or (iii) otherwise pursuant to its terms solely because the FCC
shall have issued a final, nonappealable order that fails to satisfy the
conditions set forth in Section 6.1(b) of the Merger Agreement (after giving
effect to any waiver thereof by Chancellor).
7. General Provisions.
(a) Amendments. This Agreement may not be amended
except by an instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of delivery) to
Chancellor in accordance with Section 9.1 of the Merger Agreement and to
the Stockholder at its address set forth on the signature pages hereto
(or at such other address for a party as shall be specified by like
written notice).
5
<PAGE> 6
(c) Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section to this
Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Wherever the words
"include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
(d) Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more of the
counterparts have been signed by each of the parties and delivered to
the other party, it being understood that each party need not sign the
same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein)
(i) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with
respect to the subject matter hereof and (ii) is not intended to confer
upon any person other than the parties hereto any rights or remedies
hereunder.
(f) Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
regardless of the laws that might otherwise govern under applicable
principles of conflicts of law thereof.
8. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in a Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity.
In addition, each of the parties hereto (i) consents to submit such party to
the personal jurisdiction of any Federal court in the event any dispute arises
out of this Agreement or any of the transactions contemplated hereby, (ii)
agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (iii)
agrees that such party will not bring any action relating to this Agreement or
the transactions contemplated
6
<PAGE> 7
hereby in any court other than a Federal court sitting in the state of Delaware
or a Delaware state court and (iv) waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this Agreement
or any of the transactions contemplated hereby.
[The remainder of this page is intentionally left blank.]
7
<PAGE> 8
IN WITNESS WHEREOF, Chancellor has caused this Agreement to be signed by
its officer thereunto duly authorized and the Stockholder has duly signed this
Agreement, all as of the date first written above.
CHANCELLOR MEDIA CORPORATION
By: /s/ JEFFREY A. MARCUS
------------------------------------------
Name:
Title:
RANGER EQUITY PARTNERS, L.P., a Delaware
limited partnership
By: TOH/Ranger, LLC, a Texas limited
liability company, its general
partner
By: /s/ MICHAEL J. LEVITT
---------------------------------
Name:
Title:
Address:
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Copy to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Michael D. Wortley, Esq.
(Signature Page to Voting Agreement)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 6/30/98
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000894972
<NAME> CHANCELLOR MEDIA CORPORATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 14,257
<SECURITIES> 0
<RECEIVABLES> 303,116
<ALLOWANCES> 12,775
<INVENTORY> 0
<CURRENT-ASSETS> 336,986
<PP&E> 228,036
<DEPRECIATION> 61,258
<TOTAL-ASSETS> 5,281,596
<CURRENT-LIABILITIES> 160,211
<BONDS> 2,278,000
119,445
409,500
<COMMON> 1,423
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,281,596
<SALES> 555,267
<TOTAL-REVENUES> 555,267
<CGS> 70,744
<TOTAL-COSTS> 584,476
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,085
<INCOME-PRETAX> (101,465)
<INCOME-TAX> (16,928)
<INCOME-CONTINUING> (101,239)
<DISCONTINUED> 0
<EXTRAORDINARY> 31,865
<CHANGES> 0
<NET-INCOME> (145,939)
<EPS-PRIMARY> (1.09)
<EPS-DILUTED> (1.09)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 6/30/98
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001043102
<NAME> CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 14,257
<SECURITIES> 0
<RECEIVABLES> 303,116
<ALLOWANCES> 12,775
<INVENTORY> 0
<CURRENT-ASSETS> 336,986
<PP&E> 228,036
<DEPRECIATION> 61,258
<TOTAL-ASSETS> 5,281,596
<CURRENT-LIABILITIES> 160,211
<BONDS> 2,278,000
119,445
0
<COMMON> 1
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,281,596
<SALES> 555,267
<TOTAL-REVENUES> 555,267
<CGS> 70,744
<TOTAL-COSTS> 584,476
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,085
<INCOME-PRETAX> (101,465)
<INCOME-TAX> (16,928)
<INCOME-CONTINUING> (84,537)
<DISCONTINUED> 0
<EXTRAORDINARY> 31,865
<CHANGES> 0
<NET-INCOME> (133,104)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
