<PAGE>
FORM 10-Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(Mark One)
[x] Quarterly report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from to
Commission file number 0-24516
HEFTEL BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 99-0113417
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Crescent Court, Suite 1777 75201
Dallas, Texas (Zip Code)
(Address of principal executive offices)
(214) 855-8882
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MAY 13, 1998
- ----- ---------------------------
Class A Common Stock, $.001 Par Value 35,160,497
Class B Non-Voting Common Stock, $.001 Par Value 14,156,470
<PAGE>
HEFTEL BROADCASTING CORPORATION
March 31, 1998
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 . . . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of Income for the
Three Months Ended March 31, 1998 and 1997 . . . . . . . . . . 3
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997 . . . . . . . . . . 4
Notes to Condensed Consolidated Financial Statements . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . .10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . .10
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
March 31, December 31,
1998 1997
-------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 211,476,121 $ 6,553,271
Accounts receivable, net 24,939,199 29,324,324
Prepaid expenses and other current assets 1,392,952 817,456
-------------- ------------
Total current assets 237,808,272 36,695,051
-------------- ------------
Property and equipment, at cost, net 32,601,864 33,299,917
-------------- ------------
Intangible assets, net 420,456,190 423,529,926
-------------- ------------
Deferred charges and other assets, net 19,528,039 18,723,785
-------------- ------------
Total assets $ 710,394,365 $512,248,679
-------------- ------------
-------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 25,252,877 $ 25,285,382
Current portion of long-term debt 340,169 440,097
-------------- ------------
Total current liabilities 25,593,046 25,725,479
-------------- ------------
Long-term obligations, less current portion 2,051,490 14,122,019
-------------- ------------
Deferred income taxes 82,941,601 82,441,601
-------------- ------------
Stockholders' equity:
Preferred Stock, cumulative, $.001 par value
Authorized 5,000,000 shares; no shares issued or outstanding - -
Class A Common Stock, $.001 par value
Authorized 50,000,000 shares at March 31, 1998 and
December 31, 1997, respectively; issued and
outstanding 35,160,497 at March 31, 1998 and 29,978,748
at December 31, 1997 35,160 29,979
Class B Common Stock, $.001 par value
Authorized 50,000,000 shares at March 31, 1998 and
December 31, 1997, respectively; issued and
outstanding 14,156,470 14,156 14,156
Additional paid-in capital 665,066,331 459,567,282
Accumulated deficit (65,307,419) (69,651,837)
-------------- ------------
Total stockholders' equity 599,808,228 389,959,580
-------------- ------------
Total liabilities and stockholders' equity $ 710,394,365 $512,248,679
-------------- ------------
-------------- ------------
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
Three Months Ended
March 31,
----------------------------------
1998 1997
-------------- ------------
<S> <C> <C>
Net revenues $ 31,347,088 $ 23,029,373
Operating expenses 20,136,524 16,443,806
-------------- ------------
Operating income before depreciation,
amortization and corporate expenses 11,210,564 6,585,567
Depreciation and amortization 4,338,556 2,918,308
Corporate expenses 1,186,734 994,856
-------------- ------------
Operating income 5,685,274 2,672,403
-------------- ------------
Other income (expense):
Interest income (expense), net 1,678,162 (1,607,793)
Other, net - (121,305)
-------------- ------------
1,678,162 (1,729,098)
-------------- ------------
Income before income tax 7,363,436 943,305
Income tax 3,019,018 377,322
-------------- ------------
Net income $ 4,344,418 $ 565,983
-------------- ------------
-------------- ------------
Net income per common share - basic and diluted $ 0.09 $ 0.02
-------------- ------------
-------------- ------------
Weighted average common shares outstanding:
Basic 48,109,168 34,278,448
Diluted 48,462,844 34,279,782
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
Three Months Ended
March 31,
----------------------------------
1998 1997
-------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,344,418 $ 565,983
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for bad debts 368,949 794,396
Depreciation and amortization 4,338,556 2,918,308
Deferred income taxes 500,000 -
Other (16,694) 239,031
Changes in operating assets and liabilities 4,166,995 1,713,317
-------------- ------------
Net cash provided by operating activities 13,702,224 6,231,035
-------------- ------------
Cash flows from investing activities:
Property and equipment acquisitions (518,894) (803,442)
Dispositions of property and equipment 104,813 -
Additions to intangible assets (102,888) (903,594)
Increase in deferred charges and other assets (56,095) (9,322,937)
Payments related to radio station acquisitions (1,698,088) (1,402,737)
-------------- ------------
Net cash used in investing activities (2,271,152) (12,432,710)
-------------- ------------
Cash flows from financing activities:
Borrowings on long-term obligations - 56,038,990
Payment of deferred financing costs - (1,200,000)
Payments on long-term obligations (12,170,457) (215,079,889)
Proceeds from stock issuances 205,662,235 177,085,075
Other - 45,582
-------------- ------------
Net cash provided by financing activities 193,491,778 16,889,758
-------------- ------------
Net increase in cash and cash equivalents 204,922,850 10,688,083
Cash and cash equivalents at beginning of period 6,553,271 4,787,652
-------------- ------------
Cash and cash equivalents at end of period $ 211,476,121 $ 15,475,735
-------------- ------------
-------------- ------------
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Heftel Broadcasting Corporation and subsidiaries (the "Company") have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
disclosures required by generally accepted accounting principles. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1998. For further information, refer to the consolidated
financial statements and notes thereto included in Heftel Broadcasting
Corporation's Annual Report on Form 10-K for the year ended December 31, 1997.
On November 6, 1997, the Board of Directors of the Company authorized a
two-for-one stock split payable in the form of a stock dividend of one share
of common stock for each issued and outstanding share of common stock. The
dividend was paid on December 1, 1997, to all holders of common stock at the
close of business on November 18, 1997. The net income per common share and
other per share information for all periods presented has been restated to
reflect this two-for-one stock split.
In 1997, the Company adopted Statement of Financial Accounting Standards
No. 128, "Earnings Per Share." Basic earnings per common share is based on
net earnings after preferred stock dividend requirements, if any, and the
weighted-average number of Class A and Class B common shares outstanding
during the period. Diluted earnings per common share assumes the exercise or
conversion of securities (such as stock options) into common stock at the
later of the beginning of the period or date of issuance and includes the
add-back of related interest expense and/or dividends, as required. The
adoption of this new accounting standard, which required the restatement of
all presented periods' earnings per share data, did not have a material
impact on previously reported earnings per share.
Effective with fiscal years beginning after December 15, 1997, companies
are required to adopt Statement of Financial Accounting Standards ("SFAS")
No. 130 "Reporting Comprehensive Income." The Statement establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements.
Comprehensive income includes net income and other comprehensive income,
which comprises certain specific items previously reported directly in
stockholders' equity. Other comprehensive income comprises items such as
unrealized gains and losses on debt and equity securities classified as
available-for-sale securities, minimum pension liability adjustments, and
foreign currency translation adjustments. Since the Company does not
currently have any of these other comprehensive income items, the Company's
comprehensive income equals its net income. Therefore, SFAS No. 130 has no
impact on the way the Company reports or has reported its financial
statements.
2. ACQUISITIONS AND DISPOSITIONS
On January 2, 1997, the Company acquired an option to purchase all of the
assets used in connection with the operation of KSCA(FM), Glendale,
California (the "KSCA Option"). In connection with the acquisition of the
KSCA Option, the Company began providing programming to KSCA(FM) under a time
brokerage agreement on February 5, 1997. The KSCA Option, which is
exercisable only upon the death of Gene Autry, the indirect principal
stockholder of the seller, had an initial term which expired on December 31,
1997. The KSCA Option is renewable for additional one-year terms during the
lifetime of Mr. Autry upon payment by the Company of $3.0 million on or
before the then scheduled expiration date of the KSCA Option. On February 4,
1997, the Company made an initial payment of $10.0 million, as required under
the option
5
<PAGE>
agreement. On December 29, 1997, the Company renewed the KSCA Option through
December 31, 1998. All such payments will be credited against the purchase
price for the KSCA(FM) assets if the KSCA Option is exercised. If the KSCA
Option is not exercised or renewed, all amounts paid will be charged to
expense. The purchase price for the KSCA(FM) assets is the greater of (a)
$112.5 million, or (b) the sum of (i) $105.0 million, plus (ii) an amount
equal to $13,699 per day during the term of the time brokerage agreement.
Consummation of the purchase will be subject to a number of conditions,
including approval by the FCC of the transfer of the FCC licenses.
On February 14, 1997, the Company completed its acquisition of Tichenor
Media System, Inc. ("Tichenor"), a national radio broadcasting company
engaged in the business of acquiring, developing and programming Spanish
language radio stations (the "Tichenor Merger"). At the time of the Tichenor
Merger, Tichenor owned or programmed 20 radio stations in six of the ten
largest Hispanic markets in the United States. The merger was effected
through the merger of a wholly-owned subsidiary of the Company with and into
Tichenor. In connection with the merger, management of Tichenor assumed
management responsibilities of the Company. Pursuant to the Tichenor Merger,
the former Tichenor shareholders and warrant holders received an aggregate of
11,379,756 shares of Common Stock. At the time of the Tichenor Merger,
Tichenor had outstanding approximately $72.0 million of long-term debt, which
was subsequently refinanced by the Company. In addition, all of Tichenor's
outstanding shares of 14% Senior Redeemable Cumulative Preferred Stock
("Tichenor Senior Preferred") were redeemed for approximately $3.4 million.
The total purchase price, including closing costs, allocated to net assets
acquired, was approximately $181.2 million.
On December 1, 1997, the Company entered into an asset exchange agreement
to exchange WPAT(AM), serving the New York City market, and $115.0 million in
cash for the assets of WNWK(FM), serving the New York City market (the
"WNWK(FM) Acquisition"). Following the consummation of the WNWK(FM)
Acquisition, the Company plans to convert the station's programming to a
Spanish language format. The WNWK(FM) Acquisition has been approved by the
FCC but is subject to other closing conditions.
On March 25, 1998, the Company entered into an asset purchase agreement
to acquire the assets of KKPN(FM) (the "KKPN(FM) Acquisition") serving the
Houston market for $54.0 million. Following the consummation of the KKPN(FM)
Acquisition, the Company plans to convert the station's programming to a
Spanish language format. Consummation of the purchase is subject to a number
of conditions, including approval by the FCC of the transfer of the FCC
licenses.
Pro forma results of operations for the three months ended March 31,
1997, calculated as though the Tichenor Merger and completed acquisitions had
occurred at the beginning of 1997, is as follows (dollars in thousands,
except per share data):
<TABLE>
<S> <C>
Net revenues $ 27,741
Operating income 1,434
Net loss (1,989)
Net loss per
common share - basic and diluted (0.05)
</TABLE>
The pro forma results of operations does not purport to represent what
the Company's results of operations actually would have been had the Tichenor
Merger occurred at the date specified, or to project the Company's results of
operations for any future period.
3. LONG-TERM DEBT
On January 29, 1998, the Company repaid the outstanding balance of the
$300.0 million revolving credit facility (the "Credit Facility") which was
$12.0 million. Proceeds from the January 1998 secondary public stock
offering (the "January 1998 Offering") were used to retire this obligation.
6
<PAGE>
On February 12, 1997, the Company repaid borrowings of $142.5 million
outstanding under an existing $155 million credit facility with a portion of
the proceeds from the February 1997 secondary public stock offering (the
"February 1997 Offering"). On February 14, 1997, the Company entered into
the new Credit Facility, replacing the existing credit facility. The Company
used advances under the Credit Facility and a portion of the proceeds from
the February 1997 Offering to retire the outstanding debt and senior
preferred stock of Tichenor assumed on the date of the Tichenor Merger. The
Company's ability to make additional borrowings under the Credit Facility is
subject to compliance with certain financial ratios and other conditions set
forth in the Credit Facility. The Credit Facility is secured by the stock of
the Company's subsidiaries. Borrowings under the Credit Facility bear
interest at a rate based on the LIBOR rate plus an applicable margin as
determined by the Company's leverage ratio. Availability under the Credit
Facility decreases quarterly commencing September 30, 1999 and ending
December 31, 2004.
4. STOCKHOLDERS' EQUITY
On January 22, 1998, the Company completed the January 1998 Offering
selling 5,175,000 shares of Class A Common Stock in an underwritten public
offering for a total of approximately $205.5 million in proceeds. The
Company completed the February 1997 Offering on February 10, 1997, selling
4,830,000 (pre-split) shares of its Class A Common Stock in an underwritten
public offering for a total of approximately $176.4 million in proceeds.
5. LONG-TERM INCENTIVE PLAN
On May 21, 1997, the stockholders of the Company approved the Heftel
Broadcasting Corporation Long-Term Incentive Plan (the "Incentive Plan").
The types of awards that may be granted under the Incentive Plan include (a)
incentive stock options, (b) non-qualified stock options, (c) stock
appreciation rights, (d) rights to receive a specified amount of cash or
shares of Class A Common Stock and (e) restricted stock. In addition, the
Incentive Plan provides that directors of the Company may elect to receive
some or all of their annual director compensation in the form of shares of
Class A Common Stock. Subject to certain exceptions set forth in the
Incentive Plan, the aggregate number of shares of Class A Common Stock that
may be the subject of awards under the Incentive Plan at one time shall be an
amount equal to (a) five percent of the total number of shares of Class A
Common Stock outstanding from time to time minus (b) the total number of
shares of Class A Common Stock subject to outstanding awards on the date of
calculation under the Incentive Plan and any other stock-based plan for
employees or directors of the Company (other than the Company's Employee
Stock Purchase Plan). The Company has granted incentive and non-qualified
stock options for 724,084 shares of Class A Common Stock to directors and key
employees. The exercise prices range from $16.44 to $43.94 per share and
were equal to the fair market value of the Class A Common Stock on the dates
such options were granted.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
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 net revenues (gross revenues net of agency commissions) and
operating expenses (excluding depreciation, amortization and corporate
general and administrative expense). 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, 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 calendar quarter generally produces the lowest revenues. The
second and third quarters generally produce the highest revenues.
7
<PAGE>
Broadcast cash flow is not calculated in accordance with generally
accepted accounting principles. 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.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 TO THE THREE MONTHS ENDED
MARCH 31, 1997
The results of operations for the three months ended March 31, 1998 are
not comparable to results of operations for the same period in 1997 primarily
due to (a) the Tichenor Merger which closed February 14, 1997, and (b) the
start-up of KSCA(FM) in Los Angeles on February 5, 1997. Management's
discussion and analysis of the results of operations for the three months
ended March 31, 1998, as compared to the comparable period in 1997, has been
presented on a pro forma basis as though the Tichenor Merger had occurred on
January 1, 1997. The pro forma results of operations are not necessarily
indicative of what would have occurred had the Tichenor Merger taken place on
January 1, 1997.
The following table sets forth selected data from the operating results
of the Company for the three months ended March 31, 1998 and 1997 on a
historical and pro forma basis (in thousands):
<TABLE>
Three Months Ended March 31,
--------------------------------------------------------------------------------
Historical
--------------------------------------
Historical Pro Forma
1998 1997(1) % Change 1998 1997 % Change
------- ------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues $31,347 $23,029 36.1% $31,347 $27,741 13.0%
Operating Expenses $20,136 $16,443 22.5% $20,136 $20,263 (0.6)%
Broadcast Cash Flow $11,211 $ 6,586 70.2% $11,211 $ 7,478 49.9%
</TABLE>
(1) The Tichenor Merger closed on February 14, 1997. As a result, the
historical results exclude results of operations of Tichenor from January 1,
1997 through February 13, 1997.
Net revenues increased by $8.3 million or 36.1% to $31.3 million in the
three months ended March 31, 1998 from $23.0 million in the same quarter of
1997. Net revenues increased for the three months ended March 31, 1998
compared to the same periods in 1997 primarily because of the Tichenor
Merger, the operation of KSCA(FM) during all of the three months ended March
31, 1998, compared to a portion of the same periods in 1997 and revenue
growth of start-up stations other than KSCA(FM). Had the Tichenor Merger
occurred on January 1, 1997, net revenues for the three months ended March
31, 1998 would have increased 13.0% compared to the same period in 1997.
Operating expenses increased by $3.7 million or 22.5% to $20.1 million
for the three months ended March 31, 1998 from $16.4 million for the same
period of 1997. Operating expenses increased primarily due to the Tichenor
Merger and the start-up stations. Had the Tichenor Merger occurred on
January 1, 1997, operating expenses would have decreased 0.6% on a pro forma
basis compared to the same period of 1997.
8
<PAGE>
Operating income before corporate expenses, depreciation and amortization
(broadcast cash flow) for the three months ended March 31, 1998 increased
70.2% to $11.2 million from $6.6 million in the same quarter of 1997. Had
the Tichenor Merger occurred on January 1, 1997, operating income before
corporate expenses, depreciation and amortization would have increased 49.9%
to $11.2 million on a pro forma basis for the three months ended March 31,
1998, compared to the same period of 1997.
Corporate expenses for the quarter ended March 31, 1998 increased from
$1.0 million to $1.2 million for the same quarter of the prior year. The
increase was primarily due to higher staffing costs of the Company after the
Tichenor Merger. Depreciation and amortization for the quarter ended March
31, 1998 increased 48.7% to $4.3 million compared to $2.9 million for the
same period in 1997. The increase is primarily due to the additional
depreciation and amortization associated with the Tichenor Merger.
Interest expense, net decreased from $1.6 million for the three months
ended March 31, 1997 to $1.7 million of interest income, net for the three
months ended March 31, 1998. The reduction in interest expense was the
result of the repayment of debt funded from the January 1998 Offering.
Interest income increased due to a $193.5 million increase in invested cash
from the January 1998 Offering.
Federal and state income taxes are being provided at an effective rate of
41% in 1998.
For the three months ended March 31, 1998, the Company's net income
totaled $4.3 million ($0.09 per common share) compared to $0.6 million ($0.02
per common share) in the same period of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the three months ended
March 31, 1998 was $13.7 million as compared to $6.2 million for the same
period of 1997. Capital expenditures totaled $0.5 million and $0.8 million
for the three months ended March 31, 1998 and 1997, respectively. The Company
repaid on January 29, 1998, the entire balance of $12.0 million outstanding
under the Credit Facility. For the three months ended March 31, 1998, the
Company repaid $0.2 million of other Company indebtedness. On February 12,
1997, the entire balance of $142.5 million outstanding under the Company's
prior credit agreement was repaid with the proceeds from the Offering. On
February 14, 1997, the Company entered into the Credit Facility. Also on
February 14, 1997, the Company borrowed $46.0 million under the Credit
Facility and used a portion of the remaining proceeds from the Offering to
repay approximately $72.0 million of Tichenor related debt and to redeem the
Tichenor Senior Preferred assumed in connection with the Tichenor Merger.
Available cash on hand plus cash flow provided by operations was
sufficient to fund the Company's operations, meet its debt obligations, and
to fund capital expenditures. The Company believes it will have sufficient
cash on hand and cash provided by operations, borrowings under the Credit
Facility, and proceeds from securities offerings to finance its operations
and satisfy its debt service requirements. The Company regularly reviews
potential acquisitions. The Company intends to finance acquisitions primarily
through proceeds from securities offerings, additional borrowings under the
Credit Facility and/or from cash provided by operations.
FORWARD LOOKING STATEMENTS
Certain statements contained in this report are not based on historical
facts, but are forward looking statements that are based on numerous
assumptions made as of the date of this report. When used in the preceding
and following discussions, the words "believes," "intends," "expects,"
"anticipates" and similar expressions are intended to identify forward
looking statements. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
expressed in any of the forward looking statements. Such risks and
uncertainties include, but are not limited to, industrywide market factors
and regulatory developments affecting the Company's operations, acquisitions
and dispositions of broadcast
9
<PAGE>
properties described elsewhere herein, the financial performance of start-up
stations, and efforts by the new management to integrate its operating
philosophies and practices at the station level. This report should be read
in conjunction with the Company's Annual Report on Form 10-K. The Company
disclaims any obligation to update the forward looking statements in this
report.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
Exhibit
No. Description of Exhibit
--------- ----------------------
<S> <C>
10.1 Asset Purchase Agreement, dated March 25, 1998, by and between
HBC Houston, Inc., HBC Houston License Corporation and SBI
Holding Corporation
27 Financial Data Schedule
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Heftel Broadcasting Corporation
-------------------------------
(Registrant)
/s/ Jeffrey T. Hinson
---------------------------------------
Jeffrey T. Hinson
Senior Vice President/
Chief Financial Officer
Dated: May 13, 1998
10
<PAGE>
INDEX
<TABLE>
Exhibit
No. Description of Exhibit
--------- ----------------------
<S> <C>
10.1 Asset Purchase Agreement, dated March 25, 1998, by and between
HBC Houston, Inc., HBC Houston License Corporation and SBI
Holding Corporation
27 Financial Data Schedule
</TABLE>
11
<PAGE>
ASSET PURCHASE AGREEMENT
among
HBC HOUSTON, INC.,
HBC HOUSTON LICENSE CORPORATION
and
SBI HOLDING CORPORATION
dated as of
March 25, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
ARTICLE I DEFINED TERMS
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 References and Titles . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II SALE AND PURCHASE OF ASSETS
2.1 Agreement to Sell and Buy . . . . . . . . . . . . . . . . . . . . .10
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.3 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . .12
2.4 Adjustments and Prorations. . . . . . . . . . . . . . . . . . . . .12
2.5 Assumption of Liabilities and Obligations . . . . . . . . . . . . .13
2.6 Allocation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties Regarding Seller . . . . . . . . . .14
3.2 Representations and Warranties of Buyer . . . . . . . . . . . . . .22
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . . .24
4.2 Broadcast Transmission Interruption . . . . . . . . . . . . . . . .25
4.3 Consent Decree. . . . . . . . . . . . . . . . . . . . . . . . . . .25
ARTICLE V ADDITIONAL AGREEMENTS OF SELLER
5.1 No Solicitation of Transactions . . . . . . . . . . . . . . . . . .25
5.2 Access and Information. . . . . . . . . . . . . . . . . . . . . . .26
5.3 Compliance With Station Licenses. . . . . . . . . . . . . . . . . .26
5.4 Notification of Certain Matters . . . . . . . . . . . . . . . . . .27
5.5 Third Party Consents. . . . . . . . . . . . . . . . . . . . . . . .27
ARTICLE VI COVENANTS OF BUYER
6.1 Notification of Certain Matters . . . . . . . . . . . . . . . . . .27
6.2 Employee Matters. . . . . . . . . . . . . . . . . . . . . . . . . .28
6.3 Access to Information . . . . . . . . . . . . . . . . . . . . . . .28
ARTICLE VII MUTUAL COVENANTS
7.1 Application for FCC Consents. . . . . . . . . . . . . . . . . . . .28
7.2 Control of Station. . . . . . . . . . . . . . . . . . . . . . . . .29
7.3 Other Governmental Consents . . . . . . . . . . . . . . . . . . . .29
7.4 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . .29
7.5 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . . .30
7.6 Bulk Sales Law. . . . . . . . . . . . . . . . . . . . . . . . . . .30
i
<PAGE>
7.7 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . .30
7.8 Additional Agreements. . . . . . . . . . . . . . . . . . . . .30
7.9 Investigation; No Other Representations or Warranties. . . . .31
7.10 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . .31
7.11 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE VIII CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation. . . . . . . . . . . . .32
8.2 Conditions to Obligation of Buyer. . . . . . . . . . . . . . .33
8.3 Conditions to Obligation of Seller . . . . . . . . . . . . . .33
ARTICLE IX CLOSING
9.1 Deliveries at the Pre-Closing . . . . . . . . . . . . . . . .34
9.2 Release of Escrowed Items . . . . . . . . . . . . . . . . . .35
9.3 Closing Escrow Agreement . . . . . . . . . . . . . . . . . . .36
9.4 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . .36
ARTICLE X TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . .36
10.2 [Intentionally omitted.] . . . . . . . . . . . . . . . . . . .38
10.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . .38
10.4 Return of Documentation. . . . . . . . . . . . . . . . . . . .38
10.5 Sole and Exclusive Remedy. . . . . . . . . . . . . . . . . . .38
10.6 No Limitation. . . . . . . . . . . . . . . . . . . . . . . . .38
ARTICLE XI INDEMNIFICATION
11.1 Indemnification of Buyer . . . . . . . . . . . . . . . . . . .39
11.2 Indemnification of Seller. . . . . . . . . . . . . . . . . . .39
11.3 Defense of Third-Party Claims. . . . . . . . . . . . . . . . .39
11.4 Direct Claims. . . . . . . . . . . . . . . . . . . . . . . . .40
11.5 Limitations. . . . . . . . . . . . . . . . . . . . . . . . . .40
ARTICLE XII GENERAL PROVISIONS
12.1 Survival of Representations, Warranties, and Covenants . . . .41
12.2 Amendment and Modification . . . . . . . . . . . . . . . . . .41
12.3 Waiver of Compliance . . . . . . . . . . . . . . . . . . . . .41
12.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . .42
12.5 Expenses and Obligations . . . . . . . . . . . . . . . . . . .42
12.6 Parties in Interest. . . . . . . . . . . . . . . . . . . . . .42
12.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
12.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .43
12.9 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . .44
12.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . .44
12.11 Public Announcements . . . . . . . . . . . . . . . . . . . . .44
12.12 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . .44
ii
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12.13 Director and Officer Liability . . . . . . . . . . . . . . . .44
12.14 No Reversionary Interest . . . . . . . . . . . . . . . . . . .44
12.15 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . .45
12.16 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . .45
12.17 Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . .45
</TABLE>
iii
<PAGE>
<TABLE>
EXHIBITS:
<S> <C> <C>
Exhibit A -- Form of Bill of Sale and Assignment
Exhibit B -- Form of Assumption Agreement
Exhibit C -- Form of Closing Escrow Agreement
Exhibit D -- Form of Sublease
SCHEDULES:
Schedule 2.2(a) -- Excluded Real Property
Schedule 2.2(g) -- Excluded Choses in Action
Schedule 2.2(k) -- Excluded Personal Property
Schedule 2.2(o) -- Excluded Contracts
Schedule 3.1(d) -- Required Filings and Consents
Schedule 3.1(e)(i) -- Filings with FCC
Schedule 3.1(e)(ii) -- Financial Statements
Schedule 3.1(f) -- Licenses and Permits
Schedule 3.1(g) -- Litigation
Schedule 3.1(h) -- Insurance
Schedule 3.1(j) -- Leased Real Property
Schedule 3.1(k) -- Personal Property
Schedule 3.1(l) -- Liens and Encumbrances
Schedule 3.1(m) -- Environmental Matters
Schedule 3.1(n) -- Certain Agreements
Schedule 3.1(o) -- Labor
Schedule 3.1(p) -- Patents, Trademarks; Etc.
Schedule 3.1(r) -- Tax Returns
Schedule 3.1(s) -- SFX Agreement
Schedule 3.2(c) -- Consents
Schedule 8.2(b) -- Required Consents
Schedule 9.2 -- Delivery of Closing Escrow Items
</TABLE>
iv
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of March 25, 1998, among HBC Houston, Inc., a Delaware corporation,
HBC Houston License Corporation, a Delaware corporation (collectively,
"Buyer"), and SBI Holding Corporation, a Delaware corporation (with its
permitted successors and assigns, individually or collectively, "Seller").
R E C I T A L S
A. As a result of the completion of the SFX Merger (as hereinafter
defined), Seller will acquire control of radio station KKPN-FM, Houston,
Texas (the "Station") pursuant to a license issued by the Federal
Communications Commission ("FCC").
B. Seller desires to sell and Buyer desires to buy substantially all
the assets used or held for use in the operation of the Station, both
tangible and intangible, excluding the Excluded Assets (as hereinafter
defined), and by so doing to acquire the radio broadcast business conducted
by the Station, upon the terms and conditions hereinafter set forth.
A G R E E M E N T S
NOW, THEREFORE, in consideration of the respective representations,
warranties, agreements, and conditions hereinafter set forth, and other good
and valuable consideration, the sufficiency of which is hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS
I.1 DEFINED TERMS. The following terms shall have the following
meanings in this Agreement:
"ACCOUNTS RECEIVABLE" means the rights of Seller to cash payment for
the sale of advertising time by the Station prior to 11:59 p.m. on the day
prior to the Closing Date.
"AFFILIATE" means, with respect to any person, any other person
controlling, controlled by or under common control with such person. For
purposes of this definition and this Agreement, the term "control" (and
correlative terms) means the power, whether by contract, equity ownership or
otherwise, to direct the policies or management of a person.
"ALLOCATION DATE" has the meaning set forth in Section 2.6.
<PAGE>
"APPLICABLE LAWS" means all laws, statutes, rules, regulations,
ordinances, judgments, orders, decrees, injunctions, and writs of any
Governmental Entity having jurisdiction over the Assets or the business or
operations of the Station, as may be in effect on or prior to the Closing.
"APPLICATIONS" has the meaning set forth in Section 7.1.
"ASSETS" means all the tangible and intangible assets owned, leased,
or licensed by Seller that are used or held for use in connection with the
business or operations of the Station, but specifically excluding therefrom the
Excluded Assets.
"ASSUMED CONTRACTS" means (a) those Contracts set forth on
SCHEDULE 3.1(N) identified as being assumed by Buyer, and (b) Trade Deals
described in Section 2.5(b) and (c) all obligations which relate to or result in
a reduction of the Purchase Price pursuant to Section 2.4.
"ASSUMPTION AGREEMENT" means the Assumption Agreement between Buyer
and Seller substantially in the form of EXHIBIT B.
"BACK-UP TRUST AGREEMENT" means that certain trust agreement providing
for the contribution of the Assets to the Capstar Trust if this Agreement is
terminated pursuant to Article X or if the transactions contemplated hereby are
not completed immediately following the SFX Merger.
"BILL OF SALE AND ASSIGNMENT" means the Bill of Sale and Assignment
between Buyer and Seller substantially in the form of EXHIBIT A.
"BUSINESS DAY" means any other day than (a) a Saturday, Sunday, or
federal holiday or (b) a day on which commercial banks in New York, New York or
Dallas, Texas are authorized or required to be closed.
"BUYER" has the meaning set forth in the first paragraph of this
Agreement.
"BUYER INDEMNIFIED COSTS" means (a) any and all damages, losses,
claims, liabilities, demands, charges, suits, penalties, costs, and expenses
(including court costs and reasonable attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) that any of the
Buyer Indemnified Parties incurs and that arise out of any breach or default by
Seller of any of the representations or warranties under this Agreement or any
agreement or document executed in connection herewith; (b) any and all damages,
losses, claims, liabilities, demands, charges, suits, penalties, costs and
expenses (including court costs and reasonable attorneys' fees and expenses
incurred in investigating and preparing for any litigation or proceeding) that
any of the Buyer Indemnified Parties incurs and that arise out of any breach or
default by Seller of any covenant or agreement under this Agreement or any
agreement or document executed in connection herewith; (c) any and all
obligations or liabilities of Seller under any contract or agreement not
expressly assumed by Buyer pursuant to the terms hereof; (d) any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and reasonable attorneys' fees incurred in
investigating and preparing for any litigation or proceeding) that any of the
Buyer Indemnified Parties incurs that arise out of Buyer's waiver of Seller's
<PAGE>
compliance with any bulk sales or fraudulent conveyance statute pursuant to
Section 7.6, (e) any damages, losses, claims, liabilities, demands, charges,
suits, penalties, costs and expenses that any of the Buyer Indemnified Parties
incurs as a result of a waiver or amendment of any covenant of SFX relating to
the Station contained in the SFX Agreement for which Seller does not obtain
Buyer's prior written consent in accordance with Section 5.6; (f) any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and reasonable attorneys' fees incurred in
investigating and preparing for any litigation or proceeding) that any of the
Buyer Indemnified Parties incurs that arise out of Seller's exercise of its
rights to engage in a like-kind exchange or a deferred exchange of like-kind
property pursuant to Section 12.17; and (g) any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs, and expenses,
including reasonable legal fees and expenses, incident to any of the foregoing.
Buyer Indemnified Costs shall exclude any and all punitive damages.
"BUYER INDEMNIFIED PARTIES" means Buyer and each officer, director,
employee, consultant, stockholder, and Affiliate of Buyer.
"CAPSTAR SALES AGREEMENT" means that certain conditional sale
agreement that provides for the sale of the Assets to an Affiliate of Seller in
connection with the contribution of the Assets to the Capstar Trust.
"CAPSTAR TRUST" means the trust formed pursuant to the Back-up Trust
Agreement.
"CERCLA" has the meaning set forth in the definition of Environmental
Laws contained in this Section 1.1.
"CHOSES IN ACTION" means a right to receive or recover property, debt,
or damages on a cause of action, whether pending or not and whether arising in
contract, tort or otherwise. The term shall include rights to indemnification,
damages for breach of warranty or any other event or circumstance, judgments,
settlements, and proceeds from judgments or settlements.
"CLOSING" means the consummation of the transactions contemplated by
this Agreement in accordance with the provisions of Article IX.
"CLOSING DATE" means the date the Purchase Price and the documents
delivered to the Escrow Agent are released from escrow upon the satisfaction or
waiver of all of the conditions to closing in accordance with the terms of this
Agreement and the Closing Escrow Agreement.
"CLOSING ESCROW AGENT" means Norwest Bank Texas, N.A. and includes its
successors and assigns.
"CLOSING ESCROW AGREEMENT" means the Closing Escrow Agreement among
Seller, Buyer and the Closing Escrow Agent, in the form of EXHIBIT C.
"CLOSING ESCROW ITEMS" has the meaning set forth in Section 9.2.
<PAGE>
"CODE" shall mean the United States Internal Revenue Code of 1986, as
amended. All references to the Code, U.S. Treasury regulations or other
governmental pronouncements shall be deemed to include references to any
applicable successor regulations or amending pronouncement.
"COMMUNICATIONS ACT" has the meaning set forth in Section 3.1(f)(i).
"COMPANY REPORTS" has the meaning set forth in Section 3.1(e)(i).
"CONSENT DECREE" has the meaning set forth in Section 3.1(t).
"CONSENTS" means all governmental consents and approvals, including
the FCC Consents, and all consents and approvals of third parties, in each case
that are necessary in order to transfer the Assets to Buyer and otherwise to
consummate the transactions contemplated hereby.
"CONTRACTS" means all agreements, contracts, or other binding
commitments or arrangements, written or oral (including any amendments and other
modifications thereto), to which Seller is a party or is otherwise bound and
which affect or relate to the Assets or the business or operations of the
Station.
"CURE PERIOD" has the meaning set forth in Section 10.1(b)(i).
"DIVESTITURE CONDITION" means any condition imposed or required by the
FCC, DOJ or FTC as a condition for its consent to or approval of the transfer of
control of any of the FCC Licenses or otherwise to any transaction contemplated
hereby or as a condition for its agreement not to institute litigation or any
other proceedings to prevent the transfer of control of any of the FCC Licenses
or otherwise to prevent any of the transactions contemplated hereby which would
require Buyer or any Affiliate of Buyer (or any person in which Buyer or any
Affiliate of Buyer has an attributable interest under FCC rules) to dispose of
any interest in any media or communications property or interest (including,
without limitation, the Station), terminate any venture or arrangement, or
effectuate any change or restructuring of its ownership, including, without
limitation, the withdrawal or removal of officers or directors or the conversion
or repurchase of equity securities of Buyer or any Affiliate of Buyer or owned
by Buyer or any Affiliate of Buyer (or any person in which Buyer or any
Affiliate of Buyer has an attributable interest under FCC rules).
"DOJ" means the United States Department of Justice.
"EMPLOYEE BENEFIT PLANS" means any "employee benefit plan" within the
meaning of Section 3(3) of ERISA and any bonus, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, severance, disability, death benefit, hospitalization or insurance
plan providing benefits to any present or former employee or contractor of
Seller or any member of the ERISA Group maintained by any such entity.
"ENVIRONMENTAL COSTS OR LIABILITIES" has the meaning set forth in
Section 3.1(m)(iv).
"ENVIRONMENTAL LAWS" means all Applicable Laws and rules of common law
pertaining to the environment, natural resources, and public or employee health
and safety including
<PAGE>
the Comprehensive Environmental Response Compensation and Liability Act (42
U.S.C. Section 9601 ET SEQ.) ("CERCLA"), the Emergency Planning and Community
Right to Know Act and the Superfund Amendments and Reauthorization Act of
1986, the Resource Conservation and Recovery Act, the Hazardous and Solid
Waste Amendments Act of 1984, the Clean Air Act, the Clean Water Act, the
Toxic Substances Control Act, the Safe Drinking Water Act, the Occupational
Safety and Health Act of 1970, the Oil Pollution Act of 1990, the Hazardous
Materials Transportation Act, and any similar or analogous statutes,
regulations and decisional law of any Governmental Authority, as each of the
foregoing may be amended and in effect on or prior to the Closing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA GROUP" means Seller or any other trade or business under common
control within the meaning of Section 4001(b)(1) of ERISA with Seller.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXCLUDED ASSETS" has the meaning set forth in Section 2.2.
"EXISTING ESAS" means environmental site assessments conducted on or
before the date of this Agreement with respect to the Real Property described on
SCHEDULE 3.1(i) and SCHEDULE 3.1(j).
"FCC" has the meaning set forth in the first recital hereto.
"FCC CONSENTS" means any initial action by the FCC or the staff of the
FCC acting on delegated authority, granting its consent to the assignment of the
FCC Licenses for the Station to Buyer as contemplated by this Agreement.
"FCC LICENSES" means all of the licenses, permits, and other
authorizations issued by the FCC to Seller and applications of Seller, if any,
to the FCC relating to or used in the business or operations of the Station,
including those listed on SCHEDULE 3.1(f), together with any pending
applications, renewals, extensions or modifications thereof and any additions
thereto between the date hereof and the Closing Date.
"FINANCIAL STATEMENTS" has the meaning set forth in Section
3.1(e)(ii).
"FTC" means the Federal Trade Commission.
"GAAP" means generally accepted accounting principles in the United
States.
"GOVERNMENTAL ENTITY" means any governmental department, commission,
board, bureau, agency, court or other instrumentality of the United States or
any state, county, parish or municipality, jurisdiction, or other political
subdivision thereof.
"HAZARDOUS SUBSTANCES" has the meaning set forth in Section 3.1(m)(iv).
<PAGE>
"HSR ACT" has the meaning set forth in Section 3.1(d).
"INDEMNIFIED COSTS" means the Buyer Indemnified Costs or the Seller
Indemnified Costs, as the case may be.
"INDEMNIFIED PARTIES" means the Buyer Indemnified Parties or the
Seller Indemnified Parties, as the case may be.
"INDEMNIFYING PARTY" means any person who is obligated to provide
indemnification hereunder.
"INITIAL ORDER" means the initial written action or order issued by
the FCC setting forth the FCC Consents.
"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
Seller relating to the business or operations of the Station, including the call
letters of the Station and the goodwill related to the foregoing.
"INTERIM BALANCE SHEET" has the meaning set forth in Section
3.1(e)(ii).
"INTERIM BALANCE SHEET DATE" has the meaning set forth in Section
3.1(e)(ii).
"INTERIM INCOME STATEMENT" has the meaning set forth in Section
3.1(e)(ii).
"KNOW-HOW" means all plans, ideas, concepts and data, research
records, all promotional literature, customer and supplier lists and similar
data and information and all other confidential or proprietary technical and
business information.
"KNOWLEDGE" means, with respect to a specified party hereto, the
actual knowledge of any officer of such party or of any entity directly or
indirectly controlling it, excluding any general managers, or station managers,
who are officers.
"LEASED REAL PROPERTY" means all of the Seller's leasehold interests,
easements, licenses, rights to access and rights-of-way which are identified and
described in SCHEDULE 3.1(J), as modified by any permitted addition or deletion
thereto between the date hereof and the Closing Date.
"LICENSES" means the FCC Licenses and all Permits issued by any
Governmental Entity to Seller relating to or used or held for use in the
business and operations of the Station, including those listed on
SCHEDULE 3.1(f), with any additions thereto between the date hereof and the
Closing Date.
"LIENS" has the meaning set forth in Section 3.1(l).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, operations, properties, financial condition, results of operations,
or assets of the Station.
<PAGE>
"MATERIAL CONTRACT" has the meaning set forth in Section 3.1(n).
"MATERIAL INTERRUPTION" has the meaning set forth in Section 4.2.
"MINIMUM LOSS" has the meaning set forth in Section 11.5(a).
"MULTIEMPLOYER PLAN" has the meaning set forth in Section 3(37) or
Section 4001(a)(3) of ERISA.
"PATENTS" means all patents and patent applications (including all
reissues, divisions, continuations, continuations-in-part, renewals, and
extensions of the foregoing) owned by Seller.
"PERMITS" has the meaning set forth in Section 3.1(m)(iii).
"PERMITTED ENCUMBRANCES" means (a) statutory liens for current Taxes
not yet due and payable, or being contested in good faith by appropriate
proceedings, (b) mechanics', carriers', workers', repairers', and other similar
liens imposed by law arising or incurred in the ordinary course of business for
obligations which are not overdue for a period of more than 90 days or which are
being contested in good faith by appropriate proceedings, (c) in the case of
leases of vehicles, rolling stock, and other personal property, encumbrances,
which do not, individually or in the aggregate, materially impair the operation
of the business at the facility at which such leased equipment or other personal
property is located, (d) other liens, charges, easements, restrictions or other
encumbrances incidental to the operation of the Station or the ownership of the
Assets which were not incurred in connection with the borrowing of money or the
advance of credit and which, in the aggregate, do not materially detract from
the value of the Assets or materially interfere with the use thereof or the
operation of the Station, in each case taken as a whole, (e) liens on leases of
real property arising from the provisions of such leases, including, in relation
to leased real property, any agreements and/or conditions imposed on the
issuance of land use permits, zoning, business licenses, use permits, or other
entitlements of various types issued by any Governmental Entity, necessary or
beneficial to the continued use and occupancy of the Assets or the continuation
of the operation of the Station (as set forth on SCHEDULE 3.1(l)), (f) pledges
or deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other social security legislation, (g)
deposits to secure the performance of bids, contracts (other than for borrowed
money), leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary course of
business, (h) unviolated zoning regulations and restrictive covenants and
easements of record which do not detract from the value of the Real Property and
do not materially and adversely affect, impair or interfere with the use of any
property affected thereby, and (i) public utility easements of record, in
customary form, to serve the Real Property.
"PERMITTED LIENS" has the meaning set forth in Section 3.1(l).
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, or other
entity.
"PERSONAL PROPERTY" means all of the machinery, equipment (including
the transmitter and studio equipment), computer programs, computer software,
tools, motor vehicles, furniture,
<PAGE>
furnishings, leasehold improvements, office equipment, inventories,
supplies, plants, spare parts, and other tangible or intangible personal
property which are owned or leased by Seller for the Station and which are
used or held for use in the business or operations of the Station, together
with any additions thereto between the date hereof and the Closing Date less
any dispositions made in accordance with Section 4.1. The term Personal
Property shall not include any of the Excluded Assets.
"PRE-CLOSING DATE" has the meaning set forth in Section 9.1.
"PURCHASE PRICE" means the consideration payable by Buyer to Seller as
provided in Section 2.3 hereof.
"REAL PROPERTY" means the Leased Real Property.
"SCHEDULES" means the Schedules attached hereto as they may be updated
pursuant to Section 3.1.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SELLER" has the meaning set forth in the first paragraph of this
Agreement and its permitted successors and assigns. After an assignment
pursuant to Section 12.12, Seller shall mean the person to whom this Agreement
has been assigned, and Seller shall no longer mean the assignor.
"SELLER DATE" means the date on which the SFX Merger is completed.
"SELLER INDEMNIFIED COSTS" means (a) any and all damages, losses,
claims, liabilities, demands, charges, suits, penalties, costs, and expenses
(including court costs and reasonable attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) that any of the
Seller Indemnified Parties incurs and that arise out of any breach or default by
Buyer of any of the representations, or warranties under this Agreement or any
agreement or document executed in connection herewith; (b) any and all losses,
liabilities, or damages incurred by any of the Seller Indemnified Parties
resulting from Buyer's operation or control of the Station on and after the
Closing Date, including any and all liabilities arising under the Licenses or
the Assumed Contracts which relate to events occurring after the Closing Date;
(c) any and all damages, losses, claims, liabilities, demands, charges, suits,
penalties, costs, and expenses (including court costs and reasonable attorneys'
fees and expenses incurred in investigating and preparing for any litigation or
proceeding) that any of the Seller Indemnified Parties incurs and that arise out
of any breach or default by Buyer of any covenant or agreement under this
Agreement or any agreement or document executed in connection herewith; and (d)
any and all actions, suits, proceedings claims, demands, assessments, judgments,
costs, and expenses, including reasonable legal fees and expenses, incident to
any of the foregoing. Seller Indemnified Costs shall exclude any and all
punitive damages.
"SELLER INDEMNIFIED PARTIES" means Seller and each officer, director,
employee, consultant, stockholder, and Affiliate of Seller.
"SELLER TERMINATION DATE" means May 21, 1998.
<PAGE>
"SFX" means SFX Broadcasting, Inc. and its Affiliates.
"SFX MERGER" means the transactions contemplated by the SFX Agreement.
"SFX AGREEMENT" means that certain Agreement and Plan of Merger, as
amended, dated August 24, 1997, by and among Seller, SBI Radio Acquisition
Company, Inc. and SFX.
"SFX WARRANTIES" means the representations and warranties of SFX
contained in the SFX Agreement insofar as such representations and warranties
relate to the Station.
"STATION LICENSES" has the meaning set forth in Section 3.1(f)(ii).
"SUBLEASE" means the Sublease for the KQUE-AM broadcast antenna in the
form of EXHIBIT D.
"TAX RETURNS" means any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any Governmental Entity in connection with the determination,
assessment, collection or administration of any Taxes or the administration of
any laws, regulations or administrative requirements relating to any Taxes.
"TAXES" means taxes, charges, fees, imposts, levies, interest,
penalties, additions to tax or other assessments or fees of any kind, including,
but not limited to, income, corporate, capital, excise, property, sales, use,
turnover, value added and franchise taxes, deductions, withholdings and customs
duties, imposed by any Governmental Entity and any payments with respect thereto
required under any tax-sharing agreement.
"TERMINATION DATE" has the meaning set forth in Section 10.1(b)(v).
"TRADE DEALS" means the exchanges by the Station of its advertising
time for goods or services, other than in connection with the licensing of
programs and programming material.
"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 the Station, whether or
not registered, and any applications or registrations therefor and (b) any
associated goodwill incident thereto owned by Seller.
"TRANSACTION DOCUMENTS" has the meaning set forth in Section 3.1(c).
I.2 REFERENCES AND TITLES . All references in this Agreement to
Exhibits, Schedules, Articles, Sections, subsections, and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections,
subsections, and other subdivisions of this Agreement unless expressly
provided otherwise. 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
<PAGE>
unless expressly so limited. The words "THIS SECTION," "THIS SUBSECTION,"
and words of similar import, refer only to the Sections or subsections hereof
in which such words occur. The word "INCLUDING" (in its various forms) means
"INCLUDING WITHOUT LIMITATION." Pronouns in masculine, feminine, or neuter
genders shall be construed to state and include any other gender and words,
terms, and titles (including terms defined herein) in the singular form shall
be construed to include the plural and vice versa, unless the context
otherwise expressly requires. Unless the context otherwise requires, all
defined terms contained herein shall include the singular and plural and the
conjunctive and disjunctive forms of such defined terms.
ARTICLE II
SALE AND PURCHASE OF ASSETS
II.1 AGREEMENT TO SELL AND BUY . Subject to the terms and conditions
set forth in this Agreement and except for the Excluded Assets, Seller shall
sell, assign, transfer and deliver to Buyer on the Closing Date, and Buyer shall
purchase on the Closing Date, all of the Assets, free and clear of any Liens or
liabilities (except for Permitted Encumbrances and liabilities assumed by Buyer
in accordance with Section 2.5). The Assets to be assigned, transferred and
delivered by Seller hereunder shall include the following:
(a) All Personal Property;
(b) All Leased Real Property;
(c) All Licenses and Permits;
(d) All Assumed Contracts;
(e) All Intellectual Property;
(f) The Station's technical information and data, machinery and
equipment warranties (to the extent such warranties are assignable), if any,
maps, plans, diagrams, blueprints and schematics relating to the Station, if
any, including filings with the FCC which relate to the Station, and goodwill
relating to the foregoing;
(g) All books and records relating to the business and operation of
the Station (excluding those described in, or relating to the assets described
in, Section 2.2), including (i) executed copies of the Assumed Contracts, or if
no executed agreement exists, summaries of each Assumed Contract transferred
pursuant to clause (d) above and (ii) all records required by the FCC to be kept
by the Station, subject to the right of Seller to copy and have such books and
records made reasonably available to Seller for tax and other legitimate
business purposes for a period of six years after the Closing;
(h) To the extent assignable, all computer programs and software,
and all rights and interests of Seller in and to computer programs and
software used in connection with the business or operations of the Station;
<PAGE>
(i) All Choses in Action of Seller relating to the Station; and
(j) All intangible assets of Seller relating to the Station or the
business or operation of the Station not specifically described above, including
goodwill, and all other assets, other than the Excluded Assets, used or held for
use in connection with the Station or the business of the Seller.
II.2 EXCLUDED ASSETS . The Excluded Assets shall consist of the
following:
(a) The Real Property described in SCHEDULE 2.2(a);
(b) In each case determined as of 11:59 p.m. on the day prior to the
Closing Date, Seller's cash on hand as of the Closing Date and all other cash in
any of Seller's bank or savings accounts; notes receivable, letters of credit or
other similar items of Seller; any stocks, bonds, certificates of deposit and
similar investments of Seller; and any other cash equivalents of Seller;
(c) Seller's books and records relating solely to internal corporate
matters and any other books and records not related to the Station or the
business or operations of the Station;
(d) Any claims, rights and interest of Seller in and to any (i)
refunds of Taxes or fees of any nature whatsoever or (ii) deposits or utility
deposits, which, in each case, relate solely to the period prior to the Closing
Date;
(e) All insurance contracts, including the cash surrender value
thereof, and all insurance proceeds or claims made by Seller relating to
property or equipment repaired, replaced or restored by Seller prior to the
Closing Date;
(f) All Employee Benefit Plans and all assets or funds held in trust,
or otherwise, associated with or used in connection with the Employee Benefit
Plans;
(g) All Choses in Action, if any, of Seller (i) relating to Taxes or
(ii) described in SCHEDULE 2.2(g);
(h) All Accounts Receivable;
(i) All tangible and intangible personal property disposed of or
consumed in the ordinary course of business between the date of this Agreement
and the Closing Date, or as otherwise permitted under the terms hereof;
(j) Any collective bargaining agreement, any other Contract not
included in the Assumed Contracts, and all Contracts that have terminated or
expired prior to the Closing Date in the ordinary course of business and as
permitted hereunder;
(k) The personal effects and other personal property, if any,
identified on SCHEDULE 2.2(k);
(l) The consideration received by Seller hereunder;
<PAGE>
(m) The rights of Seller under this Agreement or any other
Transaction Document;
(n) The capital stock of any subsidiary of Seller; and
(o) The rights of Seller under the Contracts listed on SCHEDULE
2.2(o) and the executed copies thereof together with any documentation or
records related thereto.
II.3 PURCHASE PRICE. Subject to the adjustments set forth in Section
2.4, the Purchase Price for the Assets is $54,000,000.
II.4 ADJUSTMENTS AND PRORATIONS.
(a) All revenues of Seller arising from the operation of the
Station earned or accrued up until 11:59 p.m. on the day prior to the Closing
Date, and all operating expenses, arising therefrom incurred, accrued or
payable up until such time, including operating expenses arising under the
Assumed Contracts, tower rentals (other than rental payments with respect to
the Station's tower at 315 Ennis Street, Houston, Texas), business and
license fees, utility charges, real and personal property Taxes levied
against the Assets, property and equipment rentals, applicable copyright or
other fees, sales and service charges, other Taxes, wages, salaries,
vacation, sick leave, personal days, commissions and other employee
compensation pay, music license fees and similar prepaid and deferred items,
shall be prorated between Buyer and Seller in accordance with the principle
that (i) Seller shall receive all revenues, refunds and deposits of Seller
held by third parties, and shall be responsible for all operating expenses
incurred, payable or allocable to the conduct of the business and operations
of the Station for the period ending at 11:59 p.m. on the day prior to the
Closing Date and (ii) Buyer shall receive all revenues earned or accrued and
shall be responsible for all operating expenses, incurred, payable or
allocable to the conduct of the business and operations of the Station for
the period commencing on and continuing after the Closing Date. An
adjustment of the Purchase Price and proration shall be made in favor of
Buyer to the extent that Buyer assumes any liability under any Assumed
Contract to refund (or to credit against payments otherwise due) any security
deposit or similar prepayment paid to Seller by any lessee or other third
party which is not otherwise credited to Buyer. Subject to Buyer's receipt
of appropriate estoppel certificates, an adjustment of the Purchase Price and
proration shall be made in favor of Seller to the extent that Seller has made
(A) any security deposit under any Assumed Contract whether or not there is a
proration under such Assumed Contract or (B) other prepayment under any
Assumed Contracts for which there is a proration. Seller shall be liable for
all of the costs of employee compensation relating to the Station properly
attributable to or accruable on account of service with the Seller through
11:59 p.m. on the date prior to the Closing Date, including (1) all Taxes and
related contributions, vacations and sick pay and (2) all group medical,
dental or death benefits for expenses incurred, related to or arising from,
events occurring on or prior to 11:59 p.m. on the date prior to the Closing
Date, or death or disability occurring on or prior to 11:59 p.m. on the date
prior to the Closing Date, whether reported by the Closing Date or
thereafter; Buyer will be liable for all of the costs of employee
compensation (including the types of costs referred to in clauses (1) and (2)
above) relating to the Station, properly attributable or accruable thereafter
on account of service with Buyer. Except as provided in Section 2.5(b),
Trade Deals shall not be adjusted or prorated.
<PAGE>
(b) Adjustments or prorations pursuant to this Section 2.4 will be
determined in accordance with GAAP, consistently applied, at the option of
Seller (i) paid on the Closing Date in accordance with the provisions of
Section 9.1(a)(iv) based upon Seller's good faith calculation delivered to
Buyer no more than five business days prior to the Pre-Closing Date or (ii)
paid within 15 business days following the Closing Date based upon Seller's
good faith calculation delivered to Buyer no more than ten business days
following the Closing Date, with final settlement and payment by the
appropriate party occurring no later than 60 days after the Closing Date,
unless there is a dispute with respect thereto (in which event the payment
shall be made as set forth below). In the event of a dispute regarding
Seller's calculation, within 60 days after the Closing Date, Buyer shall
submit to Seller its good faith determination of the adjustments or
prorations required by this Section 2.4. Buyer's determination of the amount
of adjustment under this Section 2.4 shall be made in accordance with GAAP,
consistently applied. If Seller disagrees with the determination made by
Buyer of the adjustment, Seller shall give prompt written notice thereof, but
in no event later than 20 days after notice of Buyer's determination,
specifying in reasonable detail the nature and extent of the disagreement,
and Buyer and Seller shall have a period of 30 days in which to resolve the
disagreement. If the parties are unable to resolve the disagreement within
the 30-day period, the matter shall be submitted to Coopers & Lybrand L.L.P.,
an independent certified public accounting firm, which accounting firm shall
be directed to submit a final resolution within 30 days. The accounting
firm's determination shall be binding on Buyer and Seller. Each party shall
bear the fees and expenses of its own representatives, including its
independent accountants, if any, and shall share equally the fees and
expenses of Coopers & Lybrand, L.L.P., if engaged, to resolve any
disagreement between the parties. Within five business days following a
final determination hereunder, the party obligated to make payment will make
the payments determined to be due and owing in accordance with this Section
2.4.
II.5 ASSUMPTION OF LIABILITIES AND OBLIGATIONS.
(a) As of the Closing Date, Buyer shall assume and undertake to
pay, discharge and perform all the obligations and liabilities of Seller
relating to the Station under the Licenses and the Assumed Contracts assumed
by Buyer relating to the time period beginning on or arising out of events
occurring on or after the Closing Date. All other obligations and
liabilities of Seller, including (i) obligations or liabilities under any
contract not included in the Assumed Contracts, (ii) obligations or
liabilities under any Assumed Contract for which a Consent, if required, has
not been obtained as of the Closing (until such consent has been obtained),
(iii) any obligations and liabilities arising under the Assumed Contracts
that relate to the time period prior to the Closing Date or arise out of
events occurring prior to the Closing Date, (iv) any forfeiture, claim or
pending litigation or proceeding relating to the business or operations of
the Station prior to the Closing Date, and (v) any obligations or liabilities
with respect employees of the Station who are not employed by Buyer, shall
remain and be the obligation and liability solely of Seller. Other than as
specified in the first sentence of this Section 2.5, Buyer, directly or
indirectly, shall assume no liabilities or obligations of Seller and shall
not be liable therefor. If Buyer is liable by operation of law for
liabilities of Seller not expressly assumed by Buyer, then Seller shall not
be liable to Buyer with respect to such liabilities unless and to the extent
the Seller is liable to Buyer under its indemnification obligations under
Article XI.
(b) On the Closing Date, Buyer shall assume Seller's obligations
under Trade Deals. If, with respect to trade, barter or similar agreements
for the sale of time for merchandise
<PAGE>
and/or services ("Barter Agreements") assumed by Buyer pursuant to Section
2.1(e), excluding any Station or sales promotion trades, there exists on the
Closing Date an aggregate negative barter balance (i.e., the amount by which
the value of the advertising time yet to be aired exceeds the consideration
yet to be received by the Seller therefor) in excess of $50,000, based upon
the Station's then prevailing rates, then such excess will be treated as
prepaid time sales and adjusted for as a proration in Buyer's favor. If,
however, there exists on the Closing Date an aggregate positive barter
balance (i.e., the amount by which the value of the advertising time yet to
be aired is less than the consideration yet to be received by the Seller
therefor) with respect to Barter Agreements assumed by Buyer, Seller shall
receive no credit for the excess benefits to be received by Buyer. The Trade
Deals assumed by Buyer pursuant to the terms of this Section 2.5(b) shall be
considered Assumed Contracts. Buyer agrees to use its reasonable efforts to
cause the current owner and operator of the Station to reduce or eliminate
the obligations of the Station under Trade Deals prior to the Closing.
2.6 ALLOCATION. On or before the date (the "Allocation Date") that is
the later of (i) 30 days after the Closing Date or (ii) ten days after a
final determination of any post-Closing adjustments or prorations to the
Purchase Price pursuant to Section 2.4, Seller and Buyer shall negotiate in
good faith an allocation of the Purchase Price among the Assets (as well as
any liabilities assumed by Buyer) that complies with Section 1060 of the Code
with respect to the allocation of the Purchase Price. If the allocation is
not agreed upon on or before the Allocation Date, then Buyer and Seller agree
that the allocation shall be made and consistently reported by Buyer and
Seller in compliance with Section 1060 based upon an asset valuation supplied
by Bond & Pecaro. The cost of such appraisal shall be shared equally by
Buyer and Seller. Buyer will order such appraisal from Bond & Pecaro as soon
as practicable after such date as Buyer and Seller fail to agree on such
allocation. The appraisal, if required, shall be provided to Seller within
45 days after the date of such order.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
III.1 REPRESENTATIONS AND WARRANTIES REGARDING SELLER. Seller
represents and warrants to Buyer as follows (with the understanding that
Buyer is relying on such representations and warranties in entering into and
performing this Agreement); provided, however, that for purposes of this
Agreement, (i) any representations or warranties given pursuant to Section
3.1(e)(i) and Sections 3.1(f) through 3.1(r) shall be deemed made with
respect to events, act or omissions occurring or conditions coming into
existence on or after the Seller Date (except as otherwise expressly provided
in Section 3.1(f)), (ii) Seller shall not be deemed to be in breach of this
Agreement to the extent such representations or warranties contained in
Section 3.1(e)(i) and in Sections 3.1(f) through 3.1(r) are inaccurate due to
events, acts or omissions occurring or existing or conditions occurring or
existing prior to the Seller Date that do not constitute a material breach by
Seller of any covenants in this Agreement, (iii) the Schedules to this
Agreement are based upon information provided to Seller in connection with
the SFX Agreement, and (iv) Seller shall be permitted to update any Schedule
referred to in Sections 3.1(e) through 3.1(r) to the extent any such Schedule
is inaccurate under the circumstances described in the foregoing clause (ii).
<PAGE>
(a) ORGANIZATION, GOOD STANDING, ETC. Seller is a corporation,
validly existing and in good standing under the laws of the State of
Delaware, 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 and in good standing to do business in each state in
which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, except to the extent that the
failure to be so qualified would not have a Material Adverse Effect. Seller
has delivered to Buyer true and complete copies of its Certificate of
Incorporation and Bylaws, as in effect at the date of this Agreement. Seller
is not in violation of any provisions of its Certificate of Incorporation or
Bylaws.
(b) SUBSIDIARIES OF SELLER. No other corporation, partnership or
other person owns any assets that are material to the ownership or operation
of the Stations that are not included in the Assets.
(c) AUTHORITY. Seller has all requisite corporate power and
authority to enter into this Agreement, the Closing Escrow Agreement, the
Bill of Sale and Assignment, the Assumption Agreement, and each other
agreement, document, and instrument required to be executed in accordance
herewith (collectively, the "Transaction Documents") to which Seller is a
party and to consummate the transactions contemplated hereby or thereby. The
execution and delivery of the Transaction Documents to which Seller is a
party and the consummation by Seller of the transactions contemplated hereby
or thereby have been duly authorized by all necessary corporate action on the
part of Seller. The Transaction Documents to which Seller is a party have
been, or upon execution and delivery will be, duly executed and delivered and
constitute, or upon execution and delivery will constitute, the valid and
binding obligations of Seller enforceable against it in accordance with their
terms, subject as to enforceability to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
(d) NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The execution and
delivery of the Transaction Documents to which Seller is a party do not and
the performance by Seller of the transactions contemplated hereby or thereby
will not, subject to obtaining the consents, approvals, authorizations, and
permits and making the filings described in this Section 3.1(d), SCHEDULE
3.1(d) or on SCHEDULE 3.1(n), (i) violate, conflict with, or result in any
breach of any provision of Seller's Certificate of Incorporation or Bylaws,
(ii) violate, conflict with, or result in a violation or breach of, or
constitute a default (with or without due notice or lapse of time or both)
under, or permit the termination of, or result in the acceleration of, or
entitle any party to accelerate (whether as a result of a change of control
of Seller or otherwise) any obligation, or result in the loss of any benefit,
or give any person the right to require any security to be repurchased, or
give rise to the creation of any Lien upon any of the material Assets under
any of the terms, conditions, or provisions of any loan or credit agreement,
note, bond, mortgage, indenture, or deed of trust, or any license, lease,
agreement, or other instrument or obligation to which Seller is a party or by
which it or any of the material Assets is bound except to the extent that
such violation, conflict, breach, default, termination, acceleration, loss of
benefit, repurchase, or creation of a Lien, charge, security interest or
encumbrance would not have a Material Adverse Effect, or (iii) violate any
material order, writ, judgment, injunction, decree, statute, law, rule, or
regulation of any Governmental Entity applicable to Seller or by which or to
which any of the material Assets is bound or subject, except to the extent
<PAGE>
that such violation would not have a Material Adverse Effect. No Consent of
or registration, declaration, or filing with any Governmental Entity is
required by or with respect to Seller or any Affiliate thereof in connection
with the execution and delivery of any Transaction Documents by Seller or the
consummation of the transactions contemplated hereby or thereby, except as
set forth on SCHEDULE 3.1(d) or for (A), if applicable, 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 or
termination of any waiting period in connection therewith and (B) the FCC
Consents (as contemplated by Section 7.1 hereof) and notification to the FCC
upon consummation of the transactions contemplated by this Agreement.
(e) REPORTS; FINANCIAL STATEMENTS; ABSENCE OF CERTAIN CHANGES OR
EVENTS.
(i) Except as set forth on SCHEDULE 3.1(e)(i), Seller has filed
timely all material forms, reports, statements, and other documents with
respect to the Station that are required to be filed with the FCC or any
and all other Governmental Entities (the "Company Reports"), except for
failures to file that would not have a Material Adverse Effect. The
Company Reports were prepared in all material respects in accordance with
the requirements of applicable law.
(ii) Seller has delivered to Buyer copies of SFX's internally
prepared unaudited balance sheet of the Station as of December 31, 1996
and SFX's internally prepared unaudited income statement of the Station
for the year then ended, together with copies of SFX's internally prepared
unaudited balance sheet (the "Interim Balance Sheet") of the Station as of
December 31, 1997 (the "Interim Balance Sheet Date") and SFX's internally
prepared unaudited statement of income of the Station for the period then
ended (the "Interim Income Statement") (collectively, the "Financial
Statements"). The Financial Statements are set forth in SCHEDULE
3.1(e)(ii). As of the date of this Agreement to Seller's Knowledge,
except as set forth on SCHEDULE 3.1(e)(ii), the Financial Statements
present fairly, in all material respects, the financial position and
results of operations of the Station as of December 31, 1996 and September
30, 1997, as the case may be, and for the year or period then ended in
conformity with GAAP, except for the absence of footnotes and except that
the Interim Balance Sheet and the Interim Income Statement may not have
been prepared in accordance with GAAP and may not contain the disclosure
required by GAAP.
(iii) As of the date of this Agreement, to Seller's Knowledge,
from the Interim Balance Sheet Date to the date of this Agreement, there
has been no:
(A) physical damage, destruction or loss in an amount exceeding
$50,000 in the aggregate affecting the Assets which is not covered by
insurance or not remedied within thirty (30) days;
(B) increase in compensation payable or to become payable to any
of the employees of the Station, or any material change in insurance
benefits or other compensation arrangements affecting the employees of
the Station (other than increases in wages and salaries or bonus
payments made pursuant to employment agreements or in the ordinary
course of business and consistent with past practice); or
<PAGE>
(C) waiver of any rights by Seller under any Contract, which
waiver has had a Material Adverse Effect.
(f) COMPLIANCE WITH APPLICABLE LAWS: FCC MATTERS.
(i) Except as set forth on SCHEDULE 3.1(f), the business of
Seller has been conducted in compliance in all material respects with each
Applicable Law except where the failure to comply would not have a
Material Adverse Effect. Without limiting the generality of the
foregoing, except as set forth on SCHEDULE 3.1(f), the Station has been
operated in compliance in all material respects with the Communications
Act of 1934, as amended, and all material rules, regulations and written
policies of the FCC thereunder (collectively, the "Communications Act"),
all material obligations with respect to equal employment opportunity
under Applicable Laws, and all material rules and regulations of the
Federal Aviation Administration applicable to each of the towers used or
held for use by the Station except where the failure to comply would not
have a Material Adverse Effect. 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 for such materials the failure to include such
would not have a Material Adverse Effect.
(ii) SCHEDULE 3.1(f) contains a true and complete list of (A) all
of the FCC Licenses, including the expiration dates thereof, as of the
date of this Agreement and (B) all other material licenses, permits, or
authorizations issued to Seller in connection with the operation of the
Station by any other Governmental Entities and held by it as of the date
of this Agreement. Such FCC Licenses, and other material licenses,
permits, and authorizations, and all pending applications for
modification, extension, or renewal thereof or for new material licenses,
permits, permissions, or authorizations at the date of grant, are
collectively referred to herein as the "Station Licenses." SCHEDULE
3.1(f) accurately lists as of the date of this Agreement the legally
authorized holder(s) of the Station Licenses. The Station Licenses
constitute all the material licenses, permits and authorizations required
for the operation of the Station as of the date of this Agreement and each
of the Station Licenses is in full force and effect. The Station has been
operated in all material respects in accordance with the terms of its
Station Licenses and the Seller is otherwise in compliance with the terms
of such Station Licenses in all material respects. Except as set forth on
SCHEDULE 3.1(f), there are no proceedings pending against Seller or, to
the Knowledge of Seller, threatened with respect to Seller's ownership or
operation of the Station which has resulted in or would result in the
revocation, material adverse modification, non-renewal, or suspension of
any of the Station Licenses by reason of the actions or qualifications of
Seller, the denial of any pending applications for any Station Licenses by
reason of the actions or qualifications of Seller, the issuance against
Seller of any cease and desist order, or the imposition of any
administrative actions (which shall include the proposed assessment of any
fines or penalties) by the FCC or any other Governmental Entity with
respect to any Station Licenses, or which has materially adversely
affected or would materially adversely affect the Station's ability to
operate as operated on the date of this Agreement or Buyer's ability to
obtain control of any Station Licenses or to operate the Station. Except
as set forth on SCHEDULE 3.1(f), to the Knowledge of Seller, no other
broadcast station or radio communications facility is causing material
interference to the Station's transmissions
<PAGE>
beyond that which is allowed by FCC rules and regulations and the Station
is not causing material interference to any other broadcast station or
radio communications facilities' transmissions beyond that which is
allowed by the FCC rules and regulations. To the Knowledge of Seller,
except as set forth on SCHEDULE 3.1(f), there is no reason to believe that
the FCC will not renew any of the Station Licenses issued by the FCC in the
ordinary course of business. To the Knowledge of Seller, except as set
forth on SCHEDULE 3.1(f), there are no facts relating to Seller under the
Communications Act that have disqualified or would disqualify Seller from
transferring control of any of the Station Licenses pursuant to the terms
of this Agreement or that would prevent the consummation by Seller of the
transactions contemplated by this Agreement. For the purposes of Section
8.2(a), the representations contained in this Section 3.1(f)(ii) shall be
deemed to be made as of the Closing and shall not be deemed modified by
the introductory paragraph to this Section 3.1 when made for such purpose.
(g) ABSENCE OF LITIGATION. Except as set forth on SCHEDULE 3.1(g),
as of the Seller Date, there is no material action, suit, investigation,
judicial, or administrative proceeding, grievance, or arbitration pending or,
to the Knowledge of Seller, threatened against Seller or any of the material
Assets by or before any arbitrator or Governmental Entity, in each case that
would have a Material Adverse Effect. Except as set forth in SCHEDULE
3.1(g), there is no judgment, decree, injunction, order, determination, or
award of any Governmental Entity or arbitrator outstanding against Seller or
any of the material Assets. Except as set forth on SCHEDULE 3.1(g), there is
no action, suit, judicial, or administrative proceeding pending or, to the
Knowledge of Seller, threatened against Seller relating to the transactions
contemplated by this Agreement.
(h) INSURANCE. SCHEDULE 3.1(h) sets forth an accurate summary of
all the policies of general liability, malpractice liability, fire, theft,
and other insurance maintained with respect to the operations, assets, or
business of Seller. Except as set forth on SCHEDULE 3.1(h), such policies
provide adequate coverage against loss. Except as set forth on SCHEDULE
3.1(h), to the Knowledge of Seller, Seller has not taken actions or failed to
act in a manner, including the failure by Seller to give any notice or
information or the delivery of any inaccurate or erroneous notice or
information, which would limit or impair the rights of Seller under any such
insurance policies in such a manner as would have a Material Adverse Effect.
(i) OWNED REAL PROPERTY. Seller does not own any real property in
fee.
(j) LEASED REAL PROPERTY. SCHEDULE 3.1(j) contains a list of all
the leasehold interests relating to the business and operations of the
Station as now conducted. Each lease described in SCHEDULE 3.1(j) is a valid
and binding obligation of Seller and is in full force and effect without
amendment other than as described in SCHEDULE 3.1(j). Except as otherwise
disclosed on SCHEDULE 3.1(j), Seller is not, and to the Knowledge of the
Seller, no other party is, in default in any material respect under any lease
described in SCHEDULE 3.1(J).
(k) PERSONAL PROPERTY. Except as set forth on SCHEDULE 3.1(k),
Seller has good title to, or a valid leasehold or license interest in, all
material Personal Property. Except as otherwise disclosed in SCHEDULE
3.1(k), the Personal Property is in good operating condition and repair
(ordinary wear and tear excepted). Seller is not, and to the Knowledge of
Seller, no other party is, in default under any of the leases, licenses and
other Contracts relating to the Personal Property.
<PAGE>
(l) LIENS AND ENCUMBRANCES. All of the material 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 (i) Permitted Encumbrances and (ii) Liens set
forth on SCHEDULE 3.1(l) (the Liens referred to in clauses (i) and (ii) being
"Permitted Liens"). At the Closing, all of the Assets shall be free and
clear of all Liens other than Permitted Encumbrances.
(m) ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE 3.1(m)
or expressly disclosed in the Existing ESAs, to the Knowledge of Seller:
(i) The real property and facilities owned, operated, and leased
by Seller and the operations of Seller thereon comply in all material
respects with all applicable Environmental Laws, except to the extent that
lack of such compliance would not have a Material Adverse Effect;
(ii) No judicial proceedings are pending or, to the Knowledge of
Seller, threatened against Seller alleging the violation of any
Environmental Laws, and there are no administrative proceedings pending
or, to the Knowledge of Seller, threatened against Seller, alleging the
violation of any Environmental Laws and no written notice from any
Governmental Entity or any private or public person has been received by
Seller claiming any violation of any Environmental Laws in connection with
any real property or facility owned, operated or leased by Seller, or
requiring any remediation, clean-up, modification, repairs, work,
construction, alterations, or installations on or in connection with any
real property or facility owned, operated or leased by Seller that are
necessary to comply with any Environmental Laws and that have not been
complied with or otherwise resolved to the satisfaction of the party
giving such notice;
(iii) All material permits, registrations, licenses, and
authorizations ("Permits") required to be obtained or filed by Seller
under any Environmental Laws in connection with the operation of the
Station, including those activities relating to the generation, use,
storage, treatment, disposal, release, or remediation of Hazardous
Substances (as such term is defined in Section 3.1(m)(iv) hereof), have
been duly obtained or filed, and Seller is in full compliance in all
material respects with the terms and conditions of all such Permits,
except to the extent that the failure to obtain or file any such Permit
would not have a Material Adverse Effect;
(iv) All Hazardous Substances used or generated by Seller on, in,
or under any of the Seller owned, operated, or leased real property or
facilities are generated, stored, used, treated, disposed of, and released
by such persons or on their behalf in such manner as not to result in any
material Environmental Costs or Liabilities, other than those
Environmental Costs and Liabilities that would not have a Material Adverse
Effect. "Hazardous Substances" means (A) any hazardous materials,
hazardous wastes, hazardous substances, toxic wastes, and toxic substances
as those or similar terms are defined under any Environmental Laws;
(B) any asbestos or any material which contains any hydrated mineral
<PAGE>
silicate, including chrysolite, amosite, crocidolite, tremolite,
anthophylite and/or actinolite, whether friable or non-friable; (C) PCBs,
or PCB-containing materials, or fluids; (D) radon; (E) any other
hazardous, radioactive, toxic or noxious substance, material, pollutant,
contaminant, constituent, or solid, liquid or gaseous waste regulated
under any Environmental Law; (F) any petroleum, petroleum hydrocarbons,
petroleum products, crude oil and any fractions or derivatives thereof,
any oil or gas exploration or production waste, and any natural gas,
synthetic gas and any mixtures thereof; (G) any substance that, whether by
its nature or its use, is subject to regulation under any Environmental
Laws or with respect to which any Environmental Laws or Governmental
Entity requires environmental investigation, monitoring or remediation;
and (H) any underground storage tanks, dikes, or impoundments as defined
under any Environmental Laws. "Environmental Costs or Liabilities" means
any material losses, liabilities, obligations, damages, fines, penalties,
judgments, settlements, actions, claims, costs and expenses (including,
without limitation, reasonable fees, disbursements and expenses of legal
counsel, experts, engineers and consultants, and the costs of
investigation or feasibility studies and performance of remedial or
removal actions and cleanup activities) in connection with (1) any
violation of any Environmental Laws, (2) order of, or contract of Seller
with, any Governmental Entity or any private or public persons or (3) a
claim by any private or public person arising out of any exposure of any
person or property to Hazardous Substances;
(v) There are not any Hazardous Substances that are in a
condition or location that violates any Environmental Law or that has
required or would require remediation under any Environmental Laws or give
rise to a claim for damages or compensation by any affected person or to
any Environmental Costs or Liabilities, except for violations, required
remediation, damages or compensation that would not have a Material
Adverse Effect; and
(vi) Seller has not received any notification from any source
advising Seller that: (A) it is a potentially responsible party under
CERCLA or any other Environmental Laws; (B) any real property or facility
currently or previously owned, operated, or leased by it is identified or
proposed for listing as a federal National Priorities List ("NPL") (or
state-equivalent) site or a Comprehensive Environmental Response,
Compensation and Liability Information System ("CERCLIS") list (or
state-equivalent) site; and (C) any facility to which it has ever
transported or otherwise arranged for the disposal of Hazardous Substances
is identified or proposed for listing as an NPL (or state-equivalent) site
or CERCLIS (or state-equivalent) site.
(n) CERTAIN AGREEMENTS. SCHEDULE 3.1(n) hereto lists (excluding
advertising contracts or commitments for the sale of advertising time for
cash entered into in the ordinary course of business and Contracts referred
to in SCHEDULE 3.1(o)) each (i) employment or consulting Contract (unless
such employment or consulting Contract is terminable without liability or
penalty on 30 days or less notice, (ii) Contract under which any party
thereto remains obligated to provide goods or services having a value, or to
make payments aggregating, in excess of $50,000 per year, (iii) other
Contract that is material to the operation of the Station or to the Seller's
business, and (iv) Contract set forth on Schedule 3.1(j) (relating to
leasehold interests) in any such case to which Seller is a party or Seller or
the Assets is bound (such Contracts listed or required to be listed on
SCHEDULE 3.1(n) and 3.1(o), the "Material Contracts"). Each Material
Contract is a valid and binding obligation of Seller
<PAGE>
and is in full force and effect. Seller and, to the Knowledge of Seller,
each other party to such Material Contracts (with or without lapse of time or
the giving of notice, or both) is not in material breach or default
thereunder, except for breaches or defaults that would not have a Material
Adverse Effect. SCHEDULE 3.1(n) identifies, as to each such Material
Contract listed thereon, (A) (1) whether the consent of the other party
thereto is required in connection with the assignment of such Material
Contracts to Buyer and (2) whether notice must be provided to any party
thereto (and the length of such notice), in each case in order for such
Contract to continue in full force and effect upon the consummation of the
transactions contemplated hereby, (B) whether such Contract will be an
Assumed Contract, and (C) whether such Contract can be canceled by the other
party without liability to such other party due to the consummation of the
transactions contemplated hereby. A complete copy of each written Material
Contract and a description of each oral Material Contract listed in SCHEDULE
3.1(n) has been provided to Buyer.
(o) LABOR. Except as set forth on SCHEDULE 3.1(o), Seller is not a
party to any collective bargaining agreement with respect to any employees of
the Station. Except as set forth on SCHEDULE 3.1(o), Seller has received no
written notice of any charges, complaints, or proceedings before the Equal
Employment Opportunity Commission, Department of Labor or any other
Governmental Entity responsible for regulating employment practices, pending,
or, to Seller's Knowledge, threatened against it or the Station. Set forth
on SCHEDULE 3.1(o) are the names of all present employees of the Station and
the positions and total annual compensation of each. Except as set forth on
SCHEDULE 3.1(o), none of these employees are covered by any Employee Benefit
Plan. True and correct copies of each plan described in SCHEDULE 3.1(o) have
been furnished to Buyer along with a summary plan description if one is
required by law or regulation.
(p) PATENTS, TRADEMARKS, ETC. SCHEDULE 3.1(p) is a true and
complete list of all of the Intellectual Property. Except as set forth on
SCHEDULE 3.1(p), Seller owns or has the unencumbered right to use pursuant to
a valid, binding, and enforceable license agreement or other contract or
arrangement all such Intellectual Property. Except as set forth on SCHEDULE
3.1(p), to the Knowledge of Seller, Seller is not infringing any such
Intellectual Property, and Seller is not aware of any infringement by others
of any of the Intellectual Property owned by Seller.
(q) ASSETS. The Assets and the Excluded Assets include all assets
used or held for use in connection with the business and operations of the
Station as currently conducted.
(r) TAXES. Seller has filed Tax Returns for all periods affecting
the Station or the Assets, which are required to be filed by Seller to date,
in accordance with provisions of law pertaining thereto, and has paid all
Taxes required to have been paid by Seller to date with respect to or
involving the Station or the Assets. Except as shown on SCHEDULE 3.1(r)
hereto, Seller has not been advised that any returns relating to the Station
or the Assets, federal, state, local or foreign, have been or are being
audited as of the date of this Agreement, and to the Knowledge of Seller
there are no liens for Taxes upon the Station or the Assets except for the
Permitted Encumbrances. All monies required to be withheld by Seller from
employees or collected from customers has been duly withheld and set aside or
paid to the appropriate governmental agency.
(s) SFX AGREEMENT. Except as set forth on SCHEDULE 3.1(s), Seller
has no Knowledge of the occurrences or failure to occur of any event that has
caused any SFX Warranty to be untrue or inaccurate in any material respect,
or the breach or nonperformance by SFX in any
<PAGE>
material respect of any covenant or agreement contained in the SFX Agreement
which could reasonably be expected to have a Material Adverse Effect, and
neither Seller not any of its Affiliates has executed any waivers in respect
of any such untruth, inaccuracy, breach or nonperformance.
(t) CONSENT DECREE. Seller has delivered to Buyer a true and
correct copy of the most recent draft of that certain Stipulation and Order
dated March 19, 1998, including the proposed Final Judgment, among the DOJ,
SFX, and Capstar Broadcasting Corporation (as executed, the "Consent
Decree"). Seller acknowledges that Buyer has informed it that Buyer intends
to convert the Station to a Spanish language format after the Closing.
III.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller as follows (with the understanding that Seller is relying
on such representations and warranties in entering into and performing this
Agreement):
(a) ORGANIZATION STANDING AND POWER. 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.
(b) AUTHORITY. Buyer has all requisite corporate power and
authority to enter into the Transaction Documents to which it will be a party
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of such Transaction Documents by Buyer and the
consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of Buyer.
The Transaction Documents to which Buyer will be a party have been, or upon
execution and delivery will be, duly executed and delivered and constitute,
or, upon execution and delivery, will constitute the valid and binding
obligation of Buyer, enforceable against it in accordance with their terms.
(c) NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The execution and
delivery of the Transaction Documents to which Buyer will be a party do not
and the performance by Buyer of the transactions contemplated hereby or
thereby will not, subject to obtaining the consents, approvals,
authorizations, and permits and making the filings described in this Section
3.2(c) or on SCHEDULE 3.2(c), (i) violate, conflict with, or result in any
breach of any provisions of Buyer's Articles of Incorporation and Bylaws,
(ii) violate, conflict with, or result in a violation or breach of, or
constitute a default (with or without due notice or lapse of time or both)
under, or permit the termination of, or result in the acceleration of, or
entitle any party to accelerate any obligation, or result in the loss of any
benefit, or give any person the right to require any security to be
repurchased, or give rise to the creation of any Lien upon any of its assets
under any of the terms, conditions, or provisions of any loan or credit
agreement, note, bond, mortgage, indenture, or deed of trust, or any license,
lease, agreement, or other instrument or obligation to which Buyer is a party
or by which it or any of its material assets may be bound or subjected, or
(iii) violate any order, writ, judgment, injunction, decree, statute, law,
rule or regulation, of any Governmental Entity applicable to Buyer or by
which or to which any of the material Assets is bound or subject. No Consent
of, or declaration, registration or filing with, any Governmental Entity is
required by or with respect to Buyer or any Affiliate of Buyer in connection
with the execution and delivery of any Transaction Documents by Buyer or the
consummation by it of the transactions contemplated hereby or thereby, except
for (A) the filing of a premerger notification report under the HSR Act and
the expiration or termination of the waiting period thereunder and (B) the
FCC Consents (as contemplated by
<PAGE>
Section 7.1) and notification to the FCC upon consummation of the
transactions contemplated by this Agreement.
(d) LITIGATION. There is no material action, suit, investigation,
judicial or administrative proceeding, grievance, or arbitration pending or,
to the Knowledge of Buyer, threatened against it by or before any arbitrator
or Governmental Entity relating to the transactions contemplated by this
Agreement or any other Transaction Document which, if adversely determined,
would adversely effect its ability to consummate the transactions
contemplated by this Agreement or to perform its covenants and agreements
under this Agreement or any other Transaction Document.
(e) FCC MATTERS. To the Knowledge of Buyer, there are no facts
relating to Buyer or any Affiliate of Buyer under the Communications Act that
reasonably may be expected to disqualify it or any Affiliate of Buyer from
qualifying as an assignee of the Station Licenses, that would prevent it from
consummating the transactions contemplated by this Agreement or delay the
grant of the FCC Consents, or that may reasonably be expected to cause the
FCC to impose any Divestiture Condition on Buyer or any Affiliate of Buyer
(or any person in which Buyer or any Affiliate of Buyer has an attributable
interest under FCC rules). It is not necessary for Buyer or any Affiliate of
Buyer (or any person in which Buyer or any Affiliate of Buyer has an
attributable interest under FCC rules) to seek or obtain any waiver from the
FCC, dispose of any interest in any media or communications property or
interest (including, without limitation, the Station), terminate any venture
or arrangement, or effectuate any changes or restructuring of its ownership,
including, without limitation, the withdrawal or removal of officers or
directors or the conversion or repurchase of equity securities of Buyer or an
Affiliate of Buyer or owned by Buyer or any Affiliate of Buyer (or any person
in which Buyer or any Affiliate of Buyer has any attributable interest under
FCC rules). Buyer is able to certify on an FCC Form 314 that it is
financially qualified.
(f) DOJ AND FTC MATTERS. There are no facts relating to Buyer,
any Affiliate of Buyer or any ultimate parent entity of Buyer (within the
meaning of the HSR Act) that would cause the DOJ or FTC to seek to (i)
prevent Buyer from consummating the transactions contemplated by the
Agreement or (ii) impose any Divestiture Condition on Buyer or any Affiliate
of Buyer.
(g) CONSENT DECREE. Buyer has received a copy of the draft of the
Consent Decree dated March 19, 1998 from Seller and has been informed by
Seller that the transactions contemplated hereby are being entered into
pursuant to the Consent Decree. Seller has made available to Buyer
information customarily provided in a due diligence process as requested by
Buyer. Seller has afforded Buyer access to personnel of the Station and the
opportunity to make such inspections of the Assets and the financial,
operational, and other information regarding the Station as Buyer has from
time to time requested.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
IV.1 COVENANTS OF SELLER. Except as contemplated by this Agreement or
to the extent that Buyer shall otherwise consent in writing, from the date of
this Agreement (with respect to
<PAGE>
Sections 4.1(f), 4.1(g), and 4.1(h)), and from the Seller Date (with respect
to Sections 4.1(a), 4.1(b), 4.1(c), 4.1(d) and 4.1(e)), until the Closing,
Seller covenants and agrees that Seller shall not:
(a) conduct the business of the Station in any manner except in
the ordinary course; or
(b) fail in the ordinary course of business to preserve intact the
Station's business organization and preserve its relationships with
customers, suppliers and others having business dealings with it; or
(c) fail to use commercially reasonable efforts to maintain the
material Assets in their current condition, except for ordinary wear and tear
and damage by casualty governed by Section 7.7; or
(d) fail to use all commercially reasonable efforts to maintain
the format of the Station; or
(e) except for amendments of employment agreements in the ordinary
course of business, materially amend, terminate, or fail to use commercially
reasonable efforts to renew any Material Contract or default in any material
respect (or take or omit to take any action that, with or without the giving
notice or passage of time, would constitute a material default) under any
Material Contract or, except in the ordinary course of business, enter into
any new Material Contract; or
(f) sell (whether by merger, consolidation, or the sale of an
equity interest or assets), lease, or dispose of any Assets except in the
ordinary course of business or, even if in the ordinary course of business
(other than sales of surplus or obsolete equipment), whether in one or more
transactions, in no event involving an Asset or Assets having an aggregate
fair market value in excess of $50,000, other than pursuant to the Back-up
Trust Agreement in connection with an assignment of this Agreement to, and
the assumption of this Agreement by, the trustee of the Capstar Trust; or
(g) except for the execution of the Back-up Trust Agreement and
the Capstar Sale Agreement, enter into, or enter into negotiations or
discussions with any person other than Buyer with respect to, any local
marketing agreement, time brokerage agreement, joint sales agreement, or any
other similar agreement; or
(h) except for the execution of the Back-up Trust Agreement and
the Capstar Sale Agreement, agree to or make any commitment, orally or in
writing, to take any actions prohibited by this Agreement.
IV.2 BROADCAST TRANSMISSION INTERRUPTION. If, after the Seller Date
and before the Closing, the regular broadcast transmission of the Station is
interrupted for a period of 24 hours or more, excluding normal and routine
maintenance, Seller shall give prompt written notice thereof to Buyer.
Seller shall use its commercially reasonable efforts to restore regular
broadcast transmission, and if that is not possible, to restore transmission
to the highest power and coverage possible. If the regular broadcast
transmission of the Station is interrupted, excluding normal and routine
maintenance, at the Pre-Closing Date and such interruption has existed (a)
for a period of 24 hours or more or (b) for a period of less than 24 hours,
but only if the Station's regular broadcast
<PAGE>
transmission cannot reasonably be expected to be restored within 24 hours (a
"Material Interruption"), Seller shall be entitled to withhold $5,400,000
from the Purchase Price pending the restoration of regular broadcast
transmission and the determination of the cause of the interruption. If a
Material Interruption is occurring at the Closing Date, Buyer and Seller
shall instruct the Closing Escrow Agent to withhold $5,400,000 (or such
lesser amount as Buyer and Seller may agree is appropriate) from the Purchase
Price to be delivered to the Seller pursuant to Section 9.4 and the Closing
Escrow Agreement. Any loss, damage, impairment, confiscation or condemnation
that results in an interruption of regular broadcast transmission as
described above shall be a Buyer Indemnified Cost and shall be treated in
accordance with Section 7.7. Upon the determination of the amount of any
such Buyer Indemnified Cost with respect to amounts held by the Closing
Escrow Agent, Buyer and Seller shall instruct the Closing Escrow Agent to
deliver the amount equal to such Buyer Indemnified Cost to Buyer and the
balance of the amount of the Purchase Price then held in escrow to Seller,
within two business days after such determination.
IV.3 CONSENT DECREE. Seller shall deliver to Buyer a true and correct
copy of the executed Consent Decree as promptly as practicable upon Seller's
receipt thereof.
ARTICLE V
ADDITIONAL AGREEMENTS OF SELLER
V.1 NO SOLICITATION OF TRANSACTIONS. Except for the execution of the
Back-up Trust Agreement and the Capstar Sale Agreement, Seller shall not,
directly or indirectly, through any officer, director, stockholder, 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 or any equity interest in Seller or any merger,
consolidation, share exchange, business combination, or other similar
transaction with Seller 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. Except for the execution of the Back-up Trust Agreement and the
Capstar Sale Agreement, Seller immediately shall cease and cause to be
terminated all existing discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
V.2 ACCESS AND INFORMATION. (a) From the Seller Date until the Closing,
subject only to applicable rules and regulations of the FCC and provided that
Buyer shall agree to be bound by any confidentiality provisions of any
Material Contracts, Seller shall, at the sole cost and expense of Buyer,
afford to Buyer and its representatives (including accountants and counsel)
reasonable access, during normal business hours, upon reasonable prior notice
and in such manner as will not unreasonably interfere with the conduct of the
business of Seller, to all properties, books, records, and Tax Returns of
Seller and all other information with respect to its business, together with
the opportunity, at the sole cost and expense of Buyer, to make copies of
such books, records, and other documents and to discuss the business of
Seller with such officers, directors, accountants, consultants, and counsel
for Seller as Buyer deems reasonably necessary or appropriate for the
purposes of familiarizing itself with Seller and the Station, including the
right to visit the Station; provided, however, that such Station visits shall
be scheduled at least five business days in advance
<PAGE>
and shall be conducted in a manner intended to minimize the disruption of the
operations of the Station; provided, further, however, that Buyer shall not
contact any Station personnel without the express prior consent of Seller.
All information provided to Buyer pursuant to this Agreement shall be
considered confidential information and will not be disclosed to any third
party or utilized by Buyer for any purpose other than consummating the
transactions contemplated hereby, until such time as the transactions
contemplated by this Agreement have been consummated.
(b) Within 10 days after its receipt from SFX, Seller shall
deliver to Buyer, for the Station, monthly operating statements prepared in
the ordinary course of business for internal purposes.
V.3 COMPLIANCE WITH STATION LICENSES. Seller shall cause the Station to
be operated in all material respects in accordance with the Station Licenses
and all applicable rules and regulations of the FCC and in compliance in all
material respects with all other applicable laws, regulations, rules, and
orders. Seller shall use all commercially reasonable efforts not to cause or
permit any of the Station Licenses to expire without the timely filing of an
application for renewal or be surrendered, modified in a materially adverse
manner, or terminated. Seller shall file or cause to be filed with the FCC
all applications (including license renewals) or other documents required to
be filed in connection with the operation of the Station. Should the FCC
institute any proceedings for the suspension, revocation or materially
adverse modification of any of the Station Licenses (other than arising as a
result of any fact pertaining to or any action of Buyer or any of its
Affiliates) or any forfeiture proceedings, Seller will 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 Station.
Seller will use its commercially reasonable efforts to maintain the FCC
construction permits (if any) listed in SCHEDULE 3.1(f) in effect until the
applicable construction projects are timely completed and to diligently
prosecute all pending FCC applications listed in SCHEDULE 3.1(f). If Seller
receives an administrative or other order or notification relating to any
violation or claimed violation by Seller of the rules and regulations of the
FCC, or of any other Governmental Entity, or should Seller become aware of
any fact relating to the qualifications of Seller that reasonably could be
expected to cause the FCC to withhold its consent to the assignment of the
Station Licenses, Seller shall promptly notify Buyer in writing and, other
than with respect to a Divestiture Condition or in connection with any act or
omission of Buyer or any Affiliate of Buyer, use its commercially reasonable
efforts to take such steps as may be necessary to remove any such impediment
to the transactions contemplated by this Agreement. This Section 5.3 shall
apply only after the Seller Date.
V.4 NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt written
notice to Buyer of (a) the occurrence, or failure to occur, of any event of
which it has Knowledge that has caused (i any representation or warranty of
Seller contained in this Agreement to be untrue or inaccurate in any material
respect from the date made to the Closing or (ii) any SFX Warranty to be
untrue or inaccurate in any material respect, or the breach or nonperformance
by SFX of any covenant or agreement contained therein and (b) the failure of
Seller to comply with or satisfy in any material respect any covenant,
condition, or agreement to be complied with or satisfied by it hereunder. No
such notification shall affect the representations or warranties of the
parties or the conditions to their respective obligations hereunder.
V.5 THIRD PARTY CONSENTS. Prior to the Closing, Seller shall use its
commercially reasonable efforts, but excluding making any payments, to obtain
the written consent from any party
<PAGE>
to an agreement or instrument identified in SCHEDULE 3.1(N) or any other
Assumed Contract which is required to permit the consummation of the
transactions contemplated hereby.
V.6 SFX AGREEMENT. Seller agrees that any (a) waiver by it of the
performance by SFX of any covenant of SFX contained in the SFX Agreement that
relates to the Station, or (b) any amendment of any of the covenants of SFX
contained in the SFX Agreement relating to the Station, shall either be
consented to in writing by Buyer or that any damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs and expenses that any
of the Buyer Indemnified Parties incurs as a result of such waiver or
amendment shall constitute Buyer Indemnified Costs.
ARTICLE VI
COVENANTS OF BUYER
VI.1 NOTIFICATION OF CERTAIN MATTERS. If Buyer or any Affiliate of
Buyer receives an administrative or other order or notification relating to
any violation or claimed violation of the rules and regulations of the FCC,
or of any Governmental Entity (including without limitation seeking or
relating to a Divestiture Condition), that could affect Buyer's ability to
consummate the transactions contemplated hereby, or should Buyer or any
Affiliate of Buyer become aware of any fact relating to the qualifications of
Buyer or any of its Affiliates that reasonably could be expected to cause the
FCC to withhold its consent to the assignment of the Station Licenses, Buyer
shall promptly notify Seller thereof and shall take such steps as may be
necessary to remove any such impediment to the transactions contemplated by
this Agreement; including without limitation steps to satisfy or cause to be
removed or prevent the imposition of all Divestiture Conditions, including to
divest itself or cause any Affiliate of Buyer to divest itself of any media
business or interest therein, including without limitation the Station. In
addition, Buyer shall give to Seller prompt written notice of (a) the
occurrence, or failure to occur, of any event of which it has become aware
that has caused any representation or warranty of Buyer contained in this
Agreement to be untrue or inaccurate in any material respect as to the date
made, and (b) the failure 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. No such notification shall affect the
representations or warranties of the parties or the conditions to their
respective obligations hereunder.
VI.2 EMPLOYEE MATTERS. Buyer will use its commercially reasonable
efforts to determine at least ten days prior to the Closing Date those
employees of Seller whom it desires to extend offers of employment. Any
offers so extended by Buyer shall be on such terms and conditions that Buyer
shall determine in its sole discretion. Buyer will give Seller prompt notice
of the names of any employee of Seller who Buyer has determined to extend an
offer of employment.
VI.3 ACCESS TO INFORMATION. From and after the Closing Date, Buyer
shall, during normal business hours and upon reasonable notice, make
available and provide Seller and its representatives with access to the
facilities and properties of the Station and to all information, files,
documents and records relating to the Station for any and all periods prior
to or including the Closing Date which Seller (or any Affiliate of Seller)
requires with respect to any reasonable business purpose or in connection
with any claim, dispute, action, cause of action, investigation or proceeding
of any kind by or against any person including any Indemnified Party and
shall cooperate fully with Seller and
<PAGE>
its representatives in connection with the foregoing, at Seller's sole cost
and expense, including, without limitation, and subject to Section 2.1(h), by
making tax, accounting and financial personnel and the appropriate employees
of Buyer and its Affiliates available to Seller and its representatives with
regard to any reasonable business purpose.
VI.4 COMPLIANCE WITH CONSENT DECREE. Seller agrees to provide
additional information to the DOJ as requested by the DOJ in connection with
its approval of the transactions contemplated hereby pursuant to the Consent
Decree within 15 days of any such request.
ARTICLE VII
MUTUAL COVENANTS
VII.1 APPLICATION FOR FCC CONSENTS. On the date hereof, Seller (or its
assignee) and Buyer will, and will cause all necessary persons or entities
to, join in one or more applications filed with the FCC requesting the FCC's
written consent to the assignment of the FCC Licenses pursuant to this
Agreement (the "Applications"). The parties will use their commercially
reasonable efforts to take such steps as may be necessary (a) to diligently
prosecute the Applications and (b) to promptly obtain the FCC Consents,
including actions by Buyer, at its sole cost and expense, to satisfy or cause
to be removed or prevent the imposition of all Divestiture Conditions,
including to divest itself or cause any Affiliate of Buyer to divest itself
of any media business or interest therein, including without limitation of
the Station. The failure by Buyer to satisfy or cause to be removed or
prevent the imposition of all Divestiture Conditions on or before the
Termination Date or the failure by either party to use commercially
reasonable efforts to timely file or diligently prosecute its portion of any
Application shall be a material breach of this Agreement.
VII.2 CONTROL OF STATION. Between the date of this Agreement and the
Closing Date, Buyer will not directly or indirectly control, supervise or
direct the operation of the Station. Further, between the Seller Date and
the Closing Date, Seller shall, directly or indirectly, supervise and control
the operation of the Station. Such operation shall be the sole
responsibility of Seller.
VII.3 OTHER GOVERNMENTAL CONSENTS. Promptly following the execution of
this Agreement, the parties shall proceed promptly to prepare and file with
the appropriate Governmental Entities (other than the FCC) such requests,
reports, or notifications as may be required in connection with this
Agreement and shall diligently and expeditiously prosecute, and shall
cooperate fully with each other in the prosecution of, such matters (and in
the case of any Divestiture Condition, at the sole cost and expense of
Buyer). Without limiting the foregoing, promptly following the execution of
this Agreement, the parties shall (a) file with the FTC and the DOJ the
notifications and other information (if any) required to be filed under the
HSR Act and the Consent Decree with respect to the transactions contemplated
hereby and shall use their commercially reasonable efforts to cause any
applicable waiting periods under the HSR Act to expire or be terminated as of
the earliest possible date, including without limitation reasonable
cooperation, at the sole cost and expense of Buyer, by Seller with Buyer in
connection with Buyer's obligations hereunder to satisfy or cause to be
removed or prevent the imposition of all Divestiture Conditions, if any,
including to divest Buyer or any of its Affiliates of any media business or
interest therein, which may include the Station, in connection with Sections
6.1, 7.1 or this Section 7.3, (b) make all
<PAGE>
necessary filings, and (c thereafter, at the sole cost and expense of Buyer,
make any other required submissions with respect to the transactions
contemplated hereby under the Securities Act and the rules and regulations
thereunder and any other applicable federal or state securities laws. The
failure by Buyer to satisfy or cause to be removed or prevent the imposition
of all Divestiture Conditions on or before the Seller Termination Date or the
failure by any party to use commercially reasonable efforts to timely file or
diligently prosecute its portion of any such request, report or notification
referred to in the preceding sentence, shall be a material breach of this
Agreement.
VII.4 ACCOUNTS RECEIVABLE. All Accounts Receivable shall remain the
property of Seller. Seller hereby authorizes Buyer, however, to collect such
receivables for a period of 180 days after the Closing. Seller shall deliver
to Buyer a complete and detailed statement of each account within three days
after Closing and Buyer shall use its commercially reasonable efforts,
consistent with its customary collection practices for its own accounts
receivable, without compensation, to collect each Account Receivable during
such 180 days. During that period Buyer shall provide to Seller a detailed
bi-monthly statement of the Accounts Receivable showing amounts collected to
the date, and amounts outstanding as of the same date, and, within 15 days of
the end of the period covered by such statement, deliver to Seller the
Accounts Receivable report and a check for the amounts collected during such
period. All payments received by Buyer during the 180-day period following
the Closing Date from a person obligated with respect to an Account
Receivable shall be applied first to Seller's account and, only after full
satisfaction thereof, to Buyer's account; provided, however, that if such
person has, in the reasonable opinion of Buyer, a legitimate dispute with
respect to such Account Receivable and Buyer also has an account receivable
from such person, all payments received by Buyer during the 180-day period
following the Closing Date from such person shall be applied first to Buyer's
account and only after the earlier to occur of full satisfaction of Buyer's
account or resolution of such dispute, to Seller's account. Buyer shall not
be required to refer any Account Receivable to a collection agency or an
attorney for collection, nor shall it compromise, settle, or adjust any
Account Receivable having a value in excess of $5,000 without receiving the
approval of Seller. Seller shall take no action with respect to the Accounts
Receivable, such as litigation, until the expiration of such 180-day period.
Following the expiration of said 180-day period, Seller shall be free to take
such action as Seller may in its sole discretion determine to collect any
Accounts Receivable then outstanding.
VII.5 BROKERS OR FINDERS. Buyer represents and warrants to Seller that
no agent, broker, investment banker, or other or person engaged by Buyer is
or will be entitled to any broker's or finder's fee or any other commission
or similar fee payable by Seller in connection with any of the transactions
contemplated by this Agreement. Seller represents and warrants to Buyer that
Seller has not engaged any broker, investment banker or other person, other
than Star Media Group and Chancellor Media Corporation of Los Angeles, and
that no person will be entitled to any broker's or finder's fee or any other
commissions or fee from Buyer as a result of Seller's actions in connection
with any of the transactions contemplated by this Agreement.
VII.6 BULK SALES LAW. Buyer hereby waives compliance by Seller with
the requirements of any bulk sales or fraudulent conveyance statute.
VII.7 RISK OF LOSS. The risk of any material loss, damage, impairment,
confiscation, or condemnation of any of the material Assets from any cause
whatsoever shall be borne by Seller at all times prior to the Closing Date.
In the event of any such material loss, damage, impairment
<PAGE>
confiscation, or condemnation, whether or not covered by insurance, Seller
shall promptly notify Buyer of such loss, damage, impairment, confiscation or
condemnation, which notice shall provide an estimate of the costs to repair,
restore or replace such Assets and shall state whether Seller intends to
repair, restore or replace such assets, whether or not covered by insurance.
If Seller, at its expense, repairs, replaces or restores such Assets to their
prior condition to the reasonable satisfaction of Buyer before the Closing,
Seller shall be entitled to all insurance proceeds and condemnation awards,
if any, by reason of such award or loss. If Seller does not or cannot
restore or replace such lost, damaged, impaired, confiscated or condemned
Assets or informs Buyer that it does not intend to restore or replace such
Assets, then the parties shall proceed to the Closing without Seller
completing the restoration and replacement of such Assets, provided that
Seller shall assign all rights under applicable insurance policies and
condemnation awards, if any, to Buyer. To the extent that the repair or
replacement cost of any such Assets is not covered by such insurance proceeds
or condemnation awards, then Buyer and Seller shall submit such matter to
Bond & Pecaro for an appraisal and the amount of any such deficiency shall be
a Buyer Indemnified Cost (which shall be treated as an adjustment to the
Purchase Price) and shall be paid to Buyer by Seller within ten business days
after the determination of such deficiency. In such event, Seller shall have
no further liability with respect to the condition of the Assets directly
attributable to the loss, damage, impairment, confiscation or condemnation.
VII.8 ADDITIONAL AGREEMENTS. Subject to the terms and conditions of
this Agreement, each of the parties hereto will use its commercially
reasonable efforts to do, or cause to be taken all action and to do, or cause
to be done, all things necessary, proper, or advisable under applicable laws
and regulations to consummate and make effective the transactions
contemplated by this Agreement. If at any time after the Closing Date, any
further action is necessary to carry out the purposes of this Agreement, the
parties to this Agreement shall take all such action as is commercially
reasonable. Without limiting the generality of the foregoing, if, after the
Closing Date, Buyer seeks indemnification or recovery from one or more other
parties to an Assumed Contract or otherwise seeks to enforce such Assumed
Contract and, in order to obtain such indemnification, recovery or
enforcement, it is necessary for Seller to initiate a suit, participate in
any enforcement proceeding or otherwise provide assistance to Buyer, then, at
the request, upon reasonable prior notice, during normal business hours and
without unreasonable interruption of such person's business activities, and
at the sole cost and expense of Buyer, Seller shall take such action as Buyer
may reasonably request in connection with Buyer's efforts to obtain such
indemnification, recovery or enforcement.
VII.9 INVESTIGATION; NO OTHER REPRESENTATIONS OR WARRANTIES.
(a) Buyer acknowledges and agrees that it has made its own inquiry
and investigation into, and, based thereon, has formed an independent
judgment concerning, the Station and its business and operations, and Buyer
has been furnished with or given full access to such information about the
Station and its business and operations as it has requested. Buyer has not
received from Seller any projections related to the Station or its business
or operations.
(b) Buyer agrees that, except for the representations and
warranties made by the Seller and expressly set forth in this Agreement,
neither the Seller nor any of its Affiliates or their respective
representatives has made (and shall not be construed as having made) to Buyer
or to any of its Affiliates or any respective representatives thereof any
representation or warranty of any kind.
<PAGE>
(c) Seller agrees that, except for the representations and
warranties made by the Buyer and expressly set forth in this Agreement,
neither the Buyer nor any of its Affiliates or their respective
representatives has made (and shall not be construed as having made) to
Seller or to any of its Affiliates or any respective representatives thereof
any representation or warranty of any kind.
VII.10 CONFIDENTIALITY. Any and all information, disclosures, knowledge
or facts regarding Buyer, Seller or SFX or any of their respective business
or properties to which Buyer or Seller is exposed as a result of the
negotiation, preparation or performance of this Agreement shall be
confidential and shall not be divulged, disclosed or communicated to any
other person, firm, corporation or entity, except for the employees,
attorneys, accountants, investment bankers, investors and lenders, and their
respective attorneys of the party obtaining such information, disclosure,
knowledge or facts on a need-to-know basis for the purpose of consummating
the transactions contemplated by this Agreement; provided that such
obligation shall not impose any restrictions on Buyer with respect to
information regarding the Station after the Closing.
VII.11 ARBITRATION. In case any disagreement shall arise on or before
the Closing Date between the parties hereto in relation to this Agreement,
whether as to the construction or operation hereof or the respective rights
and liabilities hereunder, such disagreement shall be decided by arbitration.
Arbitration shall be initiated by either party giving written notice to
arbitrate to the other party, stating the question to be arbitrated and the
name of the arbitrator selected by that party. Within five (5) days of the
date of said notice to arbitrate certificate, the other party shall select
and give written notice of its arbitrator to the initiating party. The two
arbitrators so selected shall select a third arbitrator and give written
notice within five (5) days after the second arbitrator is chosen. The
arbitration shall be conducted solely by the third arbitrator, who shall hear
evidence and make an award within twenty (20) days after the notice of
selection of the third arbitrator is given to the parties, which award, when
signed by the third arbitrator, shall be final. If either party shall refuse
or neglect to appoint an arbitrator within five (5) days after the other
shall have appointed an arbitrator and given written notice to arbitrate to
the other, requiring such party to appoint an arbitrator, then the arbitrator
so appointed by the first party shall have power to proceed to arbitrate and
determine the matters of disagreement as if he were an arbitrator appointed
by both the parties hereto for that purpose, and his award in writing signed
by him shall be final; provided that such award shall be made within fifteen
(15) days after such refusal or neglect of the other party to appoint an
arbitrator. The party against which such award is made shall pay all costs
and expenses of the arbitration. The Closing Date shall be automatically
postponed during any such arbitration, but not beyond the Termination Date.
ARTICLE VIII
CONDITIONS PRECEDENT
VIII.1 CONDITIONS TO EACH PARTY'S OBLIGATION. The respective
obligations of Buyer and Seller to effect the transactions contemplated
hereby are subject to the satisfaction on or prior to the Closing Date of the
following conditions:
(a) CONSENTS AND APPROVALS. All authorizations, consents, orders,
or approvals of (including any approvals of DOJ required pursuant to the
Consent Decree), or declarations or
<PAGE>
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. The FCC
Consents shall have been granted by Initial Order. Notwithstanding the
foregoing or any provision of this Agreement, any Divestiture Condition
imposed or requested by the FCC, DOJ or FTC shall not excuse Buyer from its
obligation to consummate the Closing, and the failure of the Closing to occur
by reason of the imposition or request of such a Divestiture Condition or the
failure of Buyer to discharge, satisfy or remove such a Divestiture Condition
shall be deemed a material breach by Buyer of the covenants of this Agreement
contained in Sections 6.1, 7.1 and 7.3.
(b) 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 transactions contemplated hereby shall be in effect;
provided, however, that if the foregoing impediment could have been removed
or otherwise avoided by the satisfaction or removal of a Divestiture
Condition, Buyer shall be deemed to be in material breach of the covenants of
this Agreement contained in Sections 6.1, 7.1 and 7.3.
(c) NO ACTION. No action shall have been taken nor any statute,
rule, or regulation shall have been enacted by any Governmental Entity that
makes the consummation of the transactions contemplated hereby illegal;
provided, however, if the foregoing impediment could have been removed or
otherwise avoided by the satisfaction or removal of a Divestiture Condition,
Buyer shall be deemed in material breach of the covenants of this Agreement
contained in Sections 6.1, 7.1 and 7.3.
VIII.2 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
effect the transactions contemplated hereby is subject to the satisfaction of
the following conditions unless waived, in whole or in part, by Buyer:
(a) REPRESENTATIONS AND WARRANTIES AND COVENANTS. The
representations and warranties of Seller set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date
(unless otherwise limited to another date), and Seller shall have performed
in all material respects all obligations required to be performed by it under
this Agreement prior to the Closing Date, except, with respect to such
representations, warranties, and covenants, (i) for changes that are a result
of actions of Seller that are not prohibited by this Agreement and changes to
Schedules that are permitted pursuant to Section 3.1 or (ii) to the extent
that any inaccuracies in such representations and warranties and any breaches
of such performance that have not been waived by Buyer in the aggregate would
not have a Material Adverse Effect. Buyer shall have received a certificate
to the foregoing effect signed on behalf of Seller by the chief executive
officer or by the chief financial officer of Seller.
(b) CONSENTS UNDER AGREEMENTS. Buyer shall have been furnished
with evidence reasonably satisfactory to it of the consent or approval of
each person that is a party to a Material Contract identified in SCHEDULE
8.2(B) whose consent or approval shall be required in order to permit the
consummation of the transactions contemplated hereby and such consent or
approval shall be in form and substance reasonably satisfactory to Buyer.
<PAGE>
(c) CLOSING DELIVERIES. All documents, instruments, certificates
or other items required to be delivered by Seller pursuant to Section 9.2
shall have been delivered.
VIII.3 CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
effect the transactions contemplated hereby is subject to the satisfaction of
the following conditions unless waived, in whole or in part, by Seller.
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date as though made (and they shall be deemed to have been made) on and as of
the Closing Date, and Seller shall have received a certificate to such effect
signed on behalf of Buyer by the chief executive officer or by the chief
financial officer of Buyer.
(b) PERFORMANCE OF OBLIGATIONS OF BUYER. Buyer shall have
performed in all material respects the obligations required to be performed
by it under this Agreement prior to the Closing Date, and Seller shall have
received a certificate to such effect signed on behalf of Buyer by the chief
executive officer or by the chief financial officer of Buyer.
(c) SFX MERGER. The SFX Merger shall have occurred.
(d) CLOSING DELIVERIES. All documents, instruments, certificates
or other items required to be delivered by Buyer pursuant to Section 9.2
shall have been delivered.
ARTICLE IX
CLOSING
IX.1 DELIVERIES AT THE PRE-CLOSING. At any time prior to May 15,
1998, upon five business days prior written notice, and any time from and
after May 15, 1998, upon two business days prior written notice in each case,
from Seller to Buyer that all of the conditions to Buyer's obligation to
effect the transactions contemplated hereby have been satisfied or waived
(the "Pre-Closing Date"), Buyer and Seller shall deliver the following items
to the Closing Escrow Agent at its offices at 10:00 a.m., local time on the
date specified in the notice. Any documents to be delivered hereunder shall
be undated and shall be accompanied by instructions authorizing the Closing
Escrow Agent to date such documents as of the Closing Date; PROVIDED,
HOWEVER, that the certificates referred to in Section 8.2(a) and Sections
8.3(a) and (b) shall be dated the Pre-Closing Date. Buyer and Seller agree
that if the SFX Merger does not occur within ten business days following the
Pre-Closing Date and the items delivered to the Closing Escrow Agent
hereunder are released in accordance with the terms of the Closing Escrow
Agreement and Section 9.2, at any time and from time to time prior to the
Termination Date, Buyer and Seller shall each redeliver such items to the
Closing Escrow Agent upon five business days prior written notice from Seller
(any such subsequent date shall also be referred to herein as the
"Pre-Closing Date").
(a) Buyer shall deliver to the Closing Escrow Agent the following:
<PAGE>
(i) PURCHASE PRICE. The Purchase Price by wire transfer of
immediately available funds;
(ii) CERTIFICATES. The certificates referred to in Section
8.3(a) and (b) or a certificate with any exceptions thereto, which
certificates shall be deemed to be true and correct in all respects as of
the Closing Date if delivered to Seller on the Closing Date;
(iii) ASSUMPTION AGREEMENT. A counterpart of the Assumption
Agreement executed by Buyer;
(iv) PRORATION AMOUNT. The amount of any adjustments or
prorations to be paid by Buyer determined in accordance with
Section 2.4(b) by wire transfer of immediately available funds; and
(v) ANTENNA SUBLEASE. A counterpart of the Sublease executed by
Buyer.
(b) Seller shall deliver to the Closing Escrow Agent the following:
(i) CERTIFICATE. The certificate referred to in Section 8.2(a)
or a certificate with any exceptions thereto, which certificate shall
deemed to be true and correct in all respects as of the Closing Date if
delivered to Buyer on the Closing Date;
(ii) ASSUMPTION AGREEMENT. A counterpart of the Assumption
Agreement executed by Seller;
(iii) TRANSFER DOCUMENTS. The duly executed Bill of Sale and
Assignment, together with any other assignments and other transfer
documents as reasonably requested by Buyer;
(iv) CONSENTS; ACKNOWLEDGMENTS. The original of each Consent
listed on SCHEDULE 8.2(b);
(v) ESTOPPEL CERTIFICATES. Estoppel certificates from the
lessor(s) of the Leased Real Property listed on SCHEDULE 8.2(B) in a form
and substance reasonably satisfactory to Buyer;
(vi) LICENSES, CONTRACTS, BUSINESS RECORDS, ETC. To the extent
they are in the possession of Seller, copies of all Licenses, Assumed
Contracts, blueprints, schematics, working drawings, plans, projections,
statistics, engineering records and all files and records used by Seller
in connection with a Station's business and operations, which copies shall
be available at the Closing or at a Station's principal business offices;
(vii) ASSIGNMENT DOCUMENTS. Any documents deemed necessary or
desirable by Seller to effect an assignment of its rights and obligations
hereunder as contemplated by Section 12.12; and
(viii) ANTENNA SUBLEASE. A counterpart of the Sublease executed by
Seller.
<PAGE>
IX.2 RELEASE OF ESCROWED ITEMS. The items delivered to the Closing
Escrow Agreement pursuant to Section 9.1 (the "Closing Escrow Items") shall
be released to the parties in accordance with this Section 9.2 and the terms
of the Closing Escrow Agreement.
(a) If Seller receives written notice from Buyer between the
Pre-Closing Date and the Closing Date that any of the conditions to Buyer's
obligation to effect the transactions contemplated hereby have not been
satisfied or waived, then Seller shall have the option to:
(i) deliver written instructions to the Closing Escrow Agent to
release the Closing Escrow Items to Buyer and Seller in accordance with
SCHEDULE 9.2; or
(ii) deliver written instructions to the Closing Escrow Agent to
release the Closing Escrow Items to Buyer and Seller in accordance with
SCHEDULE 9.2 and terminate this Agreement by written notice to Buyer.
Any termination of this Agreement by Seller pursuant to this Section
9.2(a) shall not relieve Seller of any liability arising out of a breach of
this Agreement.
(b) If Seller receives written notice from Buyer or otherwise
determines between the Pre-Closing Date and the Closing Date that any of the
conditions to Seller's obligation to effect the transactions contemplated
hereby have not been satisfied (other than the closing of the SFX Merger),
and Seller elects not to waive such failure, then Seller shall have the
option to:
(i) deliver written instructions to the Closing Escrow Agent to
release the items held by the Closing Escrow Agent to Buyer and Seller in
accordance with SCHEDULE 9.2; or
(ii) deliver written instructions to the Closing Escrow Agent to
release the Closing Escrow Items to Buyer and Seller in accordance with
SCHEDULE 9.2 and terminate this Agreement by written notice to Buyer.
IX.3 CLOSING ESCROW AGREEMENT. At the Pre-Closing, Buyer, Seller and
the Closing Escrow Agent shall exchange executed counterpart signature pages to
the Closing Escrow Agreement.
IX.4 CLOSING DATE. The effective date for the consummation of the
transactions contemplated hereby shall be the date on which the Seller
delivers written notice to the Closing Escrow Agent that all of the
conditions to Seller's obligation to effect the transactions contemplated
hereby have been satisfied or waived (the "Closing Date"). Upon receipt of
such notice and subject to the provisions of Section 4.2, the Closing Escrow
Agent shall release the items delivered pursuant to Section 9.2 in accordance
with the terms of the Closing Escrow Agreement. Notwithstanding the
foregoing, but subject to the satisfaction or waiver of the conditions set
forth in Article 8, if the Closing does not occur within 20 days prior to the
latest date to which the FCC Consents remain effective, the parties shall
request approval from the FCC to extend the effective period of the FCC
Consents so that the Closing contemplated hereunder will not violate any FCC
rules or regulations.
<PAGE>
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
X.1 TERMINATION. This Agreement may be terminated prior to the Closing:
(a) by mutual consent of Buyer and Seller;
(b) by either Seller or Buyer:
(i) in the event of a breach by the other party of any
representation, warranty, covenant or agreement contained in this
Agreement which (A) would give rise to the failure of a condition to the
Closing hereunder and (B) cannot be or has not been cured within 30 days
(the "Cure Period") following receipt by the breaching party of written
notice of such breach; provided, however, that (1) there shall be no Cure
Period for Buyer's failure to obtain all funds on or prior to the
Pre-Closing Date necessary to pay the Purchase Price (which failure shall
constitute a material breach hereunder), (2) with respect to Buyer, in no
event may the Cure Period be extended beyond the Seller Termination Date,
and (3) with respect to the Seller, in no event may the Cure Period be
extended beyond the Termination Date;
(ii) 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 and in the case any such order, decree, ruling or
action relates to a Divestiture Condition, at the sole cost and expense of
Buyer), in each case permanently restraining, enjoining, or otherwise
prohibiting the transactions contemplated by this Agreement, and such
order, decree, ruling, or other action shall have become final and
nonappealable;
(iii) if, for any reason, the FCC denies or dismisses any of the
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;
(iv) if, for any reason, any of the Applications is designated
for an evidentiary hearing by the FCC (except that if such designation
occurs because of facts constituting a material breach of this Agreement,
only the party not in breach may terminate);
(v) if the Closing shall not have occurred by the first to occur
of the termination of the SFX Agreement or December 31, 1998 (the
"Termination Date"); provided, however, that the right to terminate this
Agreement under (A) this clause (v) shall not be available to any party
whose breach of this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date, or (B) any of
clauses (i) through (v) of this Section 10.1(b) shall not be available to
Buyer in the event that Buyer's failure to satisfy or remove all
Divestiture Conditions, if any, has been the cause of, or
<PAGE>
resulted in, the matter giving rise to the termination rights set forth in
the applicable clause; or
(vi) upon five days notice to the non-terminating party if (x)
Seller has not received written notice from the DOJ that it does not
object to the sale of the Assets to Buyer within 52 days following the
date of this Agreement or (y) the DOJ has informed Seller in writing that,
pursuant to the terms of the Consent Decree, it has determined to object
to the sale of the Assets to Buyer; or
(c) by Seller in accordance with the provisions of Section 9.2(a)(ii)
or Section 9.2(b)(ii).
The right of any party hereto to terminate this Agreement pursuant
to this Section 10.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
person controlling any such party or any of their respective officers,
directors, employees, accountants, consultants, legal counsel, agents, or
other representatives whether prior to or after the execution of this
Agreement. Notwithstanding anything in the foregoing to the contrary and
except as provided in Section 9.3(a)(ii), no party that is in material breach
of this Agreement shall be entitled to terminate this Agreement except with
the consent of the other party.
X.2 [INTENTIONALLY OMITTED.]
X.3 EFFECT OF TERMINATION.
(a) In the event of a termination of this Agreement by either
Seller or Buyer as provided above, there shall be no liability on the part of
either Buyer or Seller, except for liability arising out of a breach of this
Agreement which liability shall be limited as set forth in this Section 10.3.
Articles I and XII, the last sentence of Section 5.2(a), Section 7.9, any
provision of this Agreement relating to the payment or reimbursement of
expenses and this Article X shall survive the termination of this Agreement.
If this Agreement is terminated by Seller pursuant to Section 10.1(b)(i), the
parties agree and acknowledge that Seller will suffer damages that are not
practicable to ascertain. Accordingly, in such event, and if within 30
business days after termination of this Agreement by Seller pursuant to
Section 10.1(b)(i) Seller delivers to Buyer a written demand for liquidated
damages, Seller shall be entitled to the sum of $5,400,000 in cash as
liquidated damages payable by Buyer within three business days after receipt
of Seller's written demand. The parties agree that the foregoing liquidated
damages are reasonable considering all the circumstances existing as of the
date hereof and constitute the parties' good faith estimate of the actual
damages reasonably expected to result from the termination of this Agreement
by Seller pursuant to Section 10.1(b)(i). Seller agrees that, to the fullest
extent permitted by law, Seller's receipt in full of such liquidated damages
as provided in this Section 10.2 shall be its sole and exclusive remedy if
the Closing does not occur with respect to any damages whatsoever that Seller
may suffer or allege to suffer as a result of any claim or cause of action
asserted by Seller relating to or arising from breaches of the
representations, warranties or covenants of Buyer contained in this Agreement
and to be made or performed at or prior to the Closing other than as provided
in Section 10.5 below.
<PAGE>
(b) The aggregate liability of Seller in connection with a breach
of any one or more representations, warranties, covenants or agreements of
Seller in this Agreement or any other Transaction Document in the event that
the Closing does not occur and this Agreement is terminated shall be limited
to $5,400,000, and in no event shall Seller be liable for punitive damages.
X.4 RETURN OF DOCUMENTATION. Following a termination of this Agreement
in accordance with Section 10.1, Buyer shall return all agreements,
documents, Contracts, instruments, books, records, materials and all other
information relating to the Station and its business and operations provided
to Buyer by Seller or any of its representatives.
X.5 SOLE AND EXCLUSIVE REMEDY. Prior to the Closing, Seller and Buyer
each acknowledge and agree that such party's sole and exclusive remedy with
respect to any and all claims for any breach or liability under this
Agreement or otherwise relating to the subject matter of this Agreement and
the transactions contemplated hereby shall be solely in accordance with, and
limited by, Sections 10.1 and 10.5 hereof.
X.6 NO LIMITATION. No provision in this Article X shall limit Buyer's
or Seller's obligations or liabilities under Section 12.5.
ARTICLE XI
INDEMNIFICATION
XI.1 INDEMNIFICATION OF BUYER. Subject to the provisions of this
Article XI, after the Closing Seller agrees to indemnify and hold harmless
the Buyer Indemnified Parties from and against any and all Buyer Indemnified
Costs.
XI.2 INDEMNIFICATION OF SELLER. Subject to the provisions of this
Article XI, after the Closing Buyer agrees to indemnify and hold harmless the
Seller Indemnified Parties from and against any and all Seller Indemnified
Costs.
XI.3 DEFENSE OF THIRD-PARTY CLAIMS. An Indemnified Party shall give
prompt written notice to any entity or person who is obligated to provide
indemnification under Section 11.1 or 11.2 (an "Indemnifying Party") of the
commencement or assertion of any action, proceeding, demand, or claim by a
third party (collectively, a "third-party action") in respect of which such
Indemnified Party shall seek indemnification hereunder. Any failure so to
notify an Indemnifying Party shall not relieve such Indemnifying Party from
any liability that it, he, or she may have to such Indemnified Party under
this Article XI unless the failure to give such notice materially and
adversely prejudices such Indemnifying Party. The Indemnifying Party shall
have the right to assume control of the defense of, settle, or otherwise
dispose of such third-party action on such terms as it deems appropriate;
provided, however, that:
(a) The Indemnified Party shall be entitled, at its own expense, to
participate in the defense of such third-party action (provided, however,
that the Indemnifying Parties shall pay the attorneys' fees of the
Indemnified Party if (i) the employment of separate counsel shall have been
authorized in writing by any such Indemnifying Party in connection with the
defense of such third-party action, (ii) the Indemnifying Parties shall not
have employed counsel reasonably satisfactory
<PAGE>
to the Indemnified Party to have charge of such third-party action, (iii) the
Indemnified Party shall have reasonably concluded that there may be defenses
available to such Indemnified Party that are different from or additional to
those available to the Indemnifying Party, or (iv) the Indemnified Party's
counsel shall have advised the Indemnified Party in writing, with a copy
delivered to the Indemnifying Party, that there is a material conflict of
interest that could violate applicable standards of professional conduct to
have common counsel);
(b) The Indemnifying Party shall obtain the prior written approval
of the Indemnified Party before entering into or making any settlement,
compromise, admission, or acknowledgment of the validity of such third-party
action or any liability in respect thereof if, pursuant to or as a result of
such settlement, compromise, admission, or acknowledgment, injunctive or
other equitable relief would be imposed against the Indemnified Party or if,
in the opinion of the Indemnified Party, such settlement, compromise,
admission, or acknowledgment could have a material adverse effect on its
business;
(c) No Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to each
Indemnified Party of a release from all liability in respect of such
third-party action; and
(d) The Indemnifying Party shall not be entitled to control (but
shall be entitled to participate at its own expense in the defense of), and
the Indemnified Party shall be entitled to have sole control over, the
defense or settlement, compromise, admission, or acknowledgment of any
third-party action (i) as to which the Indemnifying Party fails to assume the
defense within a reasonable length of time or (ii) to the extent the
third-party action seeks an order, injunction, or other equitable relief
against the Indemnified Party which, if successful, would materially
adversely affect the business, operations, assets, or financial condition of
the Indemnified Party; PROVIDED, HOWEVER, that the Indemnified Party shall
make no settlement, compromise, admission, or acknowledgment that would give
rise to liability on the part of any Indemnifying Party without the prior
written consent of such Indemnifying Party.
The parties hereto shall extend reasonable cooperation in connection with the
defense of any third-party action pursuant to this Article XI and, in
connection therewith, shall furnish such records, information, and testimony
and attend such conferences, discovery proceedings, hearings, trials, and
appeals as may be reasonably requested.
XI.4 DIRECT CLAIMS. In any case in which an Indemnified Party seeks
indemnification hereunder which is not subject to Section 11.3 because no
third-party action is involved, the Indemnified Party shall notify the
Indemnifying Party in writing of any Indemnified Costs which such Indemnified
Party claims are subject to indemnification under the terms hereof. Subject
to the limitations set forth in Section 11.5(b), the failure of the
Indemnified Party to exercise promptness in such notification shall not
amount to a waiver of such claim unless the resulting delay materially
prejudices the position of the Indemnifying Party with respect to such claim.
XI.5 LIMITATIONS. The following provisions of this Section 11.5 shall
limit the indemnification obligations hereunder:
<PAGE>
(a) MINIMUM LOSS. Seller shall not be required to indemnify a
Buyer Indemnified Party for Buyer Indemnified Costs unless and until the
aggregate amount of such Buyer Indemnified Costs for which the Buyer
Indemnified Party is otherwise entitled to indemnification pursuant to this
Article XI exceeds $270,000 (the "Minimum Loss"). After the Minimum Loss is
exceeded, the Indemnified Party shall be entitled to be paid the entire
amount of its Indemnified Costs in excess of (but not including) the Minimum
Loss, subject to the limitations on recovery and recourse set forth in this
Section 11.5.
(b) LIMITATION AS TO TIME. No Indemnifying Party shall be liable
for any Indemnified Costs pursuant to this Article XI unless a written claim
for indemnification in accordance with Section 11.3 or 11.4 is given by the
Indemnified Party to the Indemnifying Party with respect thereto on or before
5:00 p.m., Dallas, Texas time 180 days after the Closing Date.
(c) LIMITED RECOURSE. The aggregate liability of Seller and of
Buyer pursuant to this Article XI shall be limited to $2,700,000, and in no
event shall either party be liable for punitive damages.
(d) SOLE AND EXCLUSIVE REMEDY. Seller and Buyer each acknowledge
and agree that, after the Closing, notwithstanding any other provision of
this Agreement to the contrary, such party's sole and exclusive remedy with
respect to Indemnified Costs and any and all other claims relating to the
subject matter of this Agreement and the transactions contemplated hereby and
by any of the other Transaction Documents shall be in accordance with, and
limited by, the provisions set forth in this Article XI.
(e) LIMITED REMEDY FOR SECTION 3.1(S). Notwithstanding any other
provision of this Agreement to the contrary, the Buyer's sole and exclusive
remedy for a breach of Section 3.1(s) shall be in the form of the termination
right provided for in Section 10.1(b)(i).
(f) EXCEPTIONS TO LIMITATIONS. Notwithstanding the foregoing, the
provisions of Sections 11.5(a), 11.5(b) and 11.5(c) shall not limit or reduce
the obligation of Buyer to indemnify and hold harmless the Seller Indemnified
Parties from and against liabilities of Seller assumed by Buyer pursuant to
this Agreement.
XI.6 WAIVER OF BREACHES. If the Closing occurs, each party shall be
deemed to have waived all breaches of representations, warranties and
covenants of the other party of which such party has Knowledge, and the other
party shall have no liability with respect thereto after the Closing.
ARTICLE XII
GENERAL PROVISIONS
XII.1 SURVIVAL OF REPRESENTATIONS, 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, each of
the representations and warranties made hereunder or pursuant hereto or in
connection with the transactions contemplated hereby shall survive the
Closing. The
<PAGE>
representations and warranties set forth in this Agreement shall terminate
after 5:00 p.m., Dallas, Texas time 180 days after the Closing Date.
Following the date of termination of a representation or warranty, no claim
can be brought with respect to a breach of such representation or warranty,
but no such termination shall affect any claim for a breach of a
representation or warranty that was asserted before the date of termination.
To the extent that such are performable after the Closing, each of the
covenants and agreements contained in each of the Transaction Documents shall
survive the Closing for one year except for Section 6.3 of this Agreement,
which shall survive indefinitely, and for Article XI, which shall survive for
so long as any claim for Indemnified Costs may be made and so long thereafter
as an unresolved claim may be pending.
XII.2 AMENDMENT AND MODIFICATION. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
XII.3 WAIVER OF COMPLIANCE. Any failure of Buyer on the one hand, or
Seller, on the other hand, to comply with any obligation, covenant,
agreement, or condition contained herein may be waived only if set forth in
an instrument in writing signed by the party or parties to be bound thereby,
but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any other failure.
XII.4 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal, or incapable of being enforced by any rule of applicable
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated herein are not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal, or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions contemplated herein
are consummated as originally contemplated to the fullest extent possible.
XII.5 EXPENSES AND OBLIGATIONS. Except as otherwise expressly provided
in this Agreement or any other Transaction Document, all costs and expenses
incurred by the parties hereto in connection with the consummation of the
transactions contemplated hereby shall be borne solely and entirely by the
party which has incurred such expenses. Notwithstanding the foregoing, all
sales taxes arising out of the transactions contemplated by this Agreement
shall be paid by Buyer and Buyer and Seller shall each pay one-half of the
filing fee for the notifications required to be filed under the HSR Act. In
the event of a dispute between the parties in connection with this Agreement
and the transactions contemplated hereby, each of the parties hereto hereby
agrees that the prevailing party shall be entitled to reimbursement by the
other party of reasonable legal fees and expenses and other out-of-pocket
costs incurred in connection with any action or proceeding.
XII.6 PARTIES IN INTEREST. This Agreement shall be binding upon and,
except as provided below, inure solely to the benefit of each party hereto
and their successors and assigns, and nothing in this Agreement, except as
set forth below, express or implied, is intended to confer upon any other
person (other than the Indemnified Parties as provided in Article XI) any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
<PAGE>
XII.7 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
(a) If to Seller, to
SBI Holding Corporation
600 Congress Avenue, Suite 1400
Austin, Texas 78701
Attn: William S. Banowsky, Jr.
Facsimile: (512) 340-7890
with copies to
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attn: Michael D. Wortley
Mark Early
Facsimile: (214) 999-7732
(214) 999-7895
Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, D.C. 20006
Attention: Nathaniel F. Emmons
Facsimile: (202) 429-7049
(b) If to Buyer, to
HBC Houston, Inc.
HBC Houston License Corp.
100 Crescent Court, Suite 1777
Dallas, Texas 75201
Attention: McHenry T. Tichenor, Jr.
Facsimile: (214) 855-8881
with copies to:
Crouch & Hallett
717 North Harwood, Suite 1400
Dallas, Texas 75201
Attention: Bruce H. Hallett
Facsimile: (214) 953-3154
<PAGE>
All notices, requests or instructions given in accordance herewith shall be
deemed given on the date of delivery, if hand delivered; on the date of
receipt, if telecopied; three business days after the date of mailing, if
mailed by registered or certified mail, return receipt requested; and one
business day after the date of sending, if sent by Federal Express or other
recognized overnight courier.
XII.8 COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) 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.
XII.9 ENTIRE AGREEMENT. This Agreement (which term shall be deemed to
include the Exhibits and Schedules hereto and the other certificates,
documents and instruments delivered hereunder) constitutes the entire
agreement of the parties hereto and supersedes all prior agreements, letters
of intent and understandings, both written and oral, among the parties with
respect to the subject matter hereof. There are no representations or
warranties, agreements, or covenants other than those expressly set forth in
this Agreement.
XII.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
XII.11 PUBLIC ANNOUNCEMENTS. Except for statements made or press
releases issued (a) in any filings made pursuant to the Securities Act of
1933 or the Securities Exchange Act of 1934, (b) pursuant to any listing
agreement with any national securities exchange or the National Association
of Securities Dealers, Inc., (c) as otherwise required by law, or (d) in any
financing documents of Seller or any of its Affiliates, Seller and Buyer
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 and shall not issue any such press release
or make any such public statement prior to such consultation.
XII.12 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 (a)
upon notice to Buyer, Seller may assign or delegate any or all of its rights
or obligations under this Agreement to any Affiliate(s) thereof (each of
which shall have the same assignment rights) or to the trustee of the Capstar
Trust, (b) nothing in this Agreement shall limit Seller's ability to make a
collateral assignment of its rights under this Agreement to any institutional
lender that provides funds to Seller without the consent of Buyer and (c)
upon notice to Seller, Buyer may assign to an Affiliate of Buyer its rights
hereunder to receive an assignment of the Assets pursuant to this Agreement.
Once an assignment occurs pursuant to clause (a) above, such Affiliate shall
assume all liabilities and obligations, and be entitled to all benefits, of
SBI Holding Corporation under this Agreement, and SBI Holding Corporation
shall be released from all liabilities and obligations pursuant to this
Agreement. Buyer shall execute an acknowledgment of such assignment(s) and
collateral assignments in such forms as Seller or its institutional lenders
may from time to time reasonably request; PROVIDED, HOWEVER, that unless
written notice is given to Buyer that any such collateral assignment has been
foreclosed upon, Buyer shall be entitled to deal exclusively with Seller as
to any matters arising under this Agreement or any of the other agreements
<PAGE>
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
Seller's assigns.
XII.13 DIRECTOR AND OFFICER LIABILITY. The directors, officers, and
stockholders of the parties to this Agreement and their Affiliates shall not
have any personal liability or obligation arising under this Agreement
(including any claims that another party may assert) other than as an
assignee of this Agreement or pursuant to a written guarantee.
XII.14 NO REVERSIONARY INTEREST. The parties expressly agree, pursuant
to Section 73.1150 of the FCC's rules, that Seller does not retain any right
to reassignment of any of the FCC Licenses in the future, or to operate or
use the facilities of the Station for any period beyond the Closing Date.
XII.15 HEADINGS. The headings of this Agreement are for convenience of
reference only and are not part of the substance of this Agreement.
XII.16 SCHEDULES. Any item disclosed hereunder (including in the
Schedules hereto) shall be deemed disclosed for all purposes hereof
irrespective of the specific representation or warranty to which it is
explicitly referenced.
XII.17 EXCHANGE.
(a) Notwithstanding anything to the contrary contained herein, Seller
shall have the option to either (i) assign its rights under this Agreement to
a "qualified intermediary" as defined in Treas. Reg. Section 1.1031(k)-1(g)
in order to effect a deferred exchange of like-kind property qualifying for
tax-free treatment under Section 1031 of the Code, or (ii) if commercially
reasonable, Seller may identify certain replacement property of equal value
to the Assets, and Buyer shall purchase such assets and transfer them to
Seller in exchange for the Assets in a manner qualifying for a tax-free
treatment under Section 1031 of the Code. If Seller exercises the option set
forth in clause (ii) above, (x) Buyer's transfer to Seller of such
replacement property shall be without representations or warranties as to
such assets, except with respect to adverse claims of ownership or title by,
through or under Buyer, and (y) the parties shall use all commercially
reasonable efforts to provide that Seller shall be entitled to rely on any
representations and warranties provided to Buyer by the prior owner of such
assets in connection with such transaction.
(b) Seller shall exercise the above described option by means of
notice to Buyer. In the event that Seller should exercise the above
described option then the Closing shall be postponed to such date as may be
necessary to implement the contemplated transactions; provided that in no
event shall the Closing Date be delayed beyond the Termination Date and in
the event that the contemplated transactions cannot be implemented by the
Termination Date than such transactions shall be abandoned by the parties and
the parties shall proceed with the Closing as otherwise contemplated in this
Agreement.
(c) In the event that the Seller shall exercise the above described
option then the parties shall enter into good faith negotiations in an
attempt to mutually agree upon the terms and conditions of the definitive
documents necessary to implement such contemplated transaction and shall
otherwise use their respective commercially reasonable efforts to do, or
cause to be taken all action and to do, or cause to be done, all things
necessary, proper, or advisable under applicable laws and
<PAGE>
regulations to consummate and make effective such contemplated transactions.
Seller shall pay all of Buyer's reasonably necessary expenses incurred in
connection with such transactions.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
signed, all as of the date first written above.
BUYER:
HBC HOUSTON, INC.
By: /s/ McHenry T. Tichenor, Jr.
Name: McHenry T. Tichenor, Jr.
Title: President
HBC HOUSTON LICENSE CORPORATION
By: /s/ McHenry T. Tichenor, Jr.
Name: McHenry T. Tichenor, Jr.
Title: President
SELLER:
SBI HOLDING CORPORATION
By: /s/ William Banowsky, Jr.
Name: William Banowsky, Jr.
Title: Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS AS OF AND FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 211,476
<SECURITIES> 0
<RECEIVABLES> 27,474
<ALLOWANCES> 2,535
<INVENTORY> 0
<CURRENT-ASSETS> 237,808
<PP&E> 44,810
<DEPRECIATION> 12,208
<TOTAL-ASSETS> 710,394
<CURRENT-LIABILITIES> 25,593
<BONDS> 0
0
0
<COMMON> 49
<OTHER-SE> 599,759
<TOTAL-LIABILITY-AND-EQUITY> 710,394
<SALES> 0
<TOTAL-REVENUES> 31,347
<CGS> 0
<TOTAL-COSTS> 25,662
<OTHER-EXPENSES> (2,134)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 456
<INCOME-PRETAX> 7,363
<INCOME-TAX> 3,019
<INCOME-CONTINUING> 4,344
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,344
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
