Exhibit 10.10
Asset Purchase Agreement
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), is made this _______ day
of February, 2000 by and between NextMedia Group, LLC, a Delaware limited
liability company ("Buyer") and Lake Broadcasting, Inc., ("Lake") and Red River
Radio, Inc., ("Red River") (each a "Seller" and collectively the "Sellers").
W I T N E S S E T H :
WHEREAS, Sellers own certain assets used in connection with the operation
of Radio Stations KLAK-FM ("KLAK"), Durant, OK, and KMKT (FM) ("KMKT"), Bells,
TX, (collectively, the "Stations"); and
WHEREAS, Lake and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ have entered into a certain letter
agreement dated October 6, 1998 and amended and restated as of February __, 2000
(the "KMAD Option"), whereby Lake was granted the option to purchase the assets
of Station KMAD (FM), Whitesboro, Texas ("KMAD"); and
WHEREAS, Sellers have disclosed to Buyer certain confidential information
concerning their business and the Stations by letter dated February 22, 2000
from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ addressed to Buyer (the "Seller
Disclosure Letter"); and
WHEREAS, Buyer has disclosed certain confidential information concerning
its business by letter dated February 22, 2000 from ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
addressed toSellers (the "Buyer Disclosure Letter"); and
WHEREAS, Buyer desires to acquire from Sellers and Sellers desire to sell
to Buyer the KMAD Option and substantially all of the assets owned by Sellers,
used in or useful to the
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operation of the Stations; and
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto, intending to
be legally bound hereby agree as follows:
ARTICLE 1
PURCHASE OF ASSETS
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1.1. Transfer of Assets. On the terms and subject to the conditions hereof
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and subject to Section 1.2, on the Closing Date (as hereinafter defined),
Sellers shall assign, transfer, convey and deliver to Buyer and Buyer shall
acquire and assume from Sellers, all of the right, title and interest of Sellers
in and to all of the following assets, properties, interests and rights of
Sellers (collectively the "Station Assets") free and clear of all liens, claims,
or encumbrances other than Permitted Liens (as defined in Section 6.1.10):
1.1.1 All of each Sellers' rights in and to the licenses, permits and
other authorizations issued to any Seller by any governmental authority,
including those issued by the Federal Communications Commission (the "FCC"),
used in connection with the operation of the Stations, along with renewals or
modifications of such items from the date hereof through the Closing Date,
including but not limited to those listed in Schedule 1.1.1 hereto (hereafter
referred to as the "Station Licenses");
1.1.2 All equipment, office furniture and fixtures, office materials
and supplies, inventory, spare parts and all other tangible personal property of
every kind and description, and Sellers' rights therein, owned, leased or held
by any Seller and used in or useful to the operations of the Stations, including
but not limited to those items described or listed in Schedule 1.1.2 hereto,
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together with any replacements thereof, improvements or additions thereto made
from the date hereof through the Closing Date, and less any retirements or
dispositions thereof made between the date hereof and the Closing Date in the
ordinary course of business of Sellers;
1.1.3 All of each Sellers' rights in and under those contracts,
agreements, leases and legally binding contractual rights of any kind, written
or oral, relating to the operation of the Stations ("Contracts") that are listed
in Schedule 1.1.3 hereto and (i) those Contracts entered into by a Seller from
the date hereof through the Closing Date in the ordinary course of the Sellers'
business, subject to Section 1.2.4, and Section 8.1; (ii) all Contracts for the
sale of advertising time, subject to Section 8.1 hereto; and (iii) all Contracts
for consideration other than cash, such as merchandise, services or promotional
consideration ("Trade Agreements"), subject to Section 17.10 hereto.
1.1.4 All of each Seller's rights in and to all processes, patents,
trade secrets, proprietary information, call letters, trademarks, trade names,
service marks, franchises, copyrights, Internet domain names, including
registrations and applications for registration of any of them, computer
software programs and programming material of whatever form or nature, jingles,
slogans, the Stations' logos and all other logos or licenses to use same and all
other intangible property rights of Sellers, which are used in connection with
the operation of the Stations, including but not limited to those listed in
Schedule 1.1.4 hereto (collectively, the "Intellectual Property") together with
any associated good will and any additions thereto between the date hereof and
the Closing Date;
1.1.5 All of each Seller's rights in and to all the files, documents,
records, and books of account relating to the operation of the Stations or to
the Station Assets, including, without limitation, each Station's public files,
programming information and studies, technical information and engineering data,
news and advertising studies or consulting reports, marketing and demographic
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data, sales correspondence, lists of advertisers, promotional materials, credit
and sales reports and filings with the FCC, originals of all written Contracts
to be assigned hereunder, logs, software programs and books and records relating
to employees, financial, accounting, operation and technical matters; but
excluding records relating solely to any Excluded Asset (as hereinafter
defined);
1.1.6 All of each Seller's rights under manufacturers' and vendors'
warranties relating to items included in the Station Assets and all similar
rights against third parties relating to items included in the Station Assets;
1.1.7 All real property owned by any Seller together with all
appurtenant easements thereunto and all structures, fixtures and improvements
located thereon used in connection with the Stations' operations as more fully
described in Schedule 1.1.7 hereto, together with any additions thereto from the
date hereof through the Closing Date (the "Owned Real Estate");
1.1.8 All rights and interests of each Seller under any and all of
the leases of real property used in connection with the Stations' operations
(the "Leased Real Estate") (collectively with the Owned Real Estate, the "Real
Estate"), which Leased Real Estate is identified and described in Schedule
1.1.8;
1.1.9 All such other assets, properties, interests and rights owned
by any Seller that are used in connection with the business and operation of the
Stations or that are located as of the Closing Date on the Real Estate, except
Excluded Assets; and
1.1.10 All of any Seller's rights in and to all causes of action for
any past infringement of any of the Intellectual Property.
1.1.11 All of Lake's rights under the KMAD Option.
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1.2 Excluded Assets. Notwithstanding anything to the contrary contained
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herein, it is expressly understood and agreed that the Station Assets shall not
include the following assets or any right, title or interest therein (the
"Excluded Assets"):
1.2.1 All cash, marketable securities, and cash equivalents of the
Sellers on hand and/or in banks;
1.2.2 All accounts receivable or notes receivable of Sellers.
1.2.3 All tangible and intangible personal property of any Seller
disposed of or consumed in the ordinary course of business of Sellers between
the date hereof and the Closing Date, as permitted hereunder;
1.2.4 All Contracts that have terminated or expired on or prior to
the Closing Date in the ordinary course of business of Sellers;
1.2.5 Each Seller's corporate seals, minute books, charter, limited
liability company, and/or partnership documents, corporate stock record books
and such other books and records as pertain to the organization, existence,
share capitalization or partnership interests of that Seller, and duplicate
copies of such financial records as are necessary to enable each Seller to file
its tax returns and reports as well as any other records or materials relating
to any Seller generally;
1.2.6 Contracts of insurance and all insurance proceeds or claims
made by any Seller arising or related to the Station Assets prior to Closing
(except to the extent made after the date hereof with respect to Station
Assets);
1.2.7 The Employee Benefit Plans (as defined hereinafter) and the
assets thereof;
1.2.8 Any right to use the names "Lake Broadcasting" and "Red River
Radio" or any variation thereof;
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1.2.9 All contracts entered into before this Agreement and not
listed in Schedule 1.1.3;
1.2.10 Those specific assets identified on the Excluded Assets
Schedule attached to this Agreement as Schedule 1.2.10;
1.2.11 Except as described in Section 1.1.10, all of any Seller's
rights in and to all causes of action; and
1.2.12 All tax refunds relating to the operatons of the Stations by
any of the Sellers.
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
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2.1 Assumption of Obligations. Subject to the provisions of this Section
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2.1 and Section 2.2, on the Closing Date, Buyer shall assume the obligations of
each Seller arising or to be performed after the Closing Date under the
Contracts referred to in Section 1.1.3 hereto in effect on the Closing Date, and
all liabilities and obligations that arise from the ownership or operation of
the Station Assets, including the KMAD Option, after the Closing Date. All of
the foregoing liabilities and obligations shall be referred to herein
collectively as the "Assumed Liabilities."
2.2 Retained Liabilities. Notwithstanding anything contained in this
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Agreement to the contrary, Buyer does not assume or agree to pay, satisfy,
discharge or perform, and will not be deemed by virtue of the execution and
delivery of this Agreement or any document delivered at the execution of this
Agreement, or as a result of the consummation of the transactions contemplated
by this Agreement, to have assumed, or to have agreed to pay, satisfy, discharge
or perform, any liability or obligation of any Seller other than the Assumed
Liabilities, including any of the following liabilities or obligations of the
Sellers (the "Retained Liabilities"):
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2.2.1 All obligations or liabilities of any Seller or any predecessor
or Affiliate of a Seller which relate to any of the Excluded Assets;
2.2.2 Other than taxes expressly allocated pursuant to other
provisions of this Agreement, tax liabilities of any and all kinds (federal,
state, local, and foreign) of Sellers including, without limitation, any
liabilities for taxes on or measured by income, liabilities for withheld federal
and state income taxes and employee F.I.C.A. (Federal Insurance Contribution
Act) or employer F.I.C.A., and liabilities for income taxes arising as a result
of the transfer of the Station Assets or otherwise by virtue of the consummation
of the transactions contemplated hereby;
2.2.3 All liabilities or obligations of any Seller owed to any of its
Affiliates (as hereinafter defined);
2.2.4 All liabilities or obligations arising out of any breach by any
Seller or a predecessor or Affiliate of any Seller of any of the terms or
conditions of any provision of any Real Estate Lease or Contract;
2.2.5 All liabilities and obligations of any Seller or a predecessor
or Affiliate of any Seller resulting from, caused by or arising out of, any
violation of law;
2.2.6 Any claims, liabilities and obligations of any Seller as an
employer, including, without limitation, liabilities for wages, supplemental
unemployment benefits, vacation benefits, severance benefits, retirement
benefits, COBRA benefits, FAMLA benefits, WARN obligations and liabilities, or
any other employee benefits, withholding tax liabilities, workers' compensation,
or unemployment compensation benefits or premiums, hospitalization or medical
claims, occupational disease or disability claims, or other claims attributable
in whole or in part to employment or termination by that Seller or arising out
of any labor matter involving that Seller as an employer, and
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any claims, liabilities and obligations arising from or relating to the Employee
Benefit Plans;
2.2.7 Any claims, liabilities, losses, damages, or expenses relating
to any litigation, proceeding, or investigation of any nature arising out of the
operations of any of the Stations on or prior to the Closing Date including,
without limitation, any claims against or any liabilities for injury to or death
of persons or damage to or destruction of property, any workers' compensation
claims, and any warranty claims;
2.2.8 Except as provided in Section 3.3, any accounts payable, other
indebtedness, obligations or accrued liabilities of any Seller;
2.2.9 Any liabilities or obligations resulting from the failure to
comply with or imposed pursuant to any environmental protection, health, or
safety laws or regulations or resulting from the generation, storage, treatment,
transportation, handling, disposal, release of hazardous substances, solid
wastes, and liquid and gaseous matters by any Seller and by any other person in
relation to Sellers or the Stations, including, without limitation, any
liability or obligation for cleaning up waste disposal sites from or related to
acts or omissions on or prior to the Closing Date; and
2.2.10 Any fees and expenses incurred by Sellers in connection with
negotiating, preparing, closing, and carrying out this Agreement and the
transactions contemplated by this Agreement, including, without limitation, the
fees and expenses of Sellers' attorneys, accountants, consultants and brokers.
ARTICLE 3
CONSIDERATION
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3.1 Delivery of Consideration. In exchange for the Station Assets, in
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addition to the assumption of certain obligations of Sellers pursuant to Section
2.1 above, Buyer shall, subject to Articles 11 and 12 hereof, at the Closing (as
hereinafter defined) deliver to Sellers and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ an aggregate Purchase
Price of Fourteen Million Two Hundred Fifty Thousand Dollars ($14,250,000.00)
(subject to adjustment, the "Purchase Price") by wire transfer of immediately
available funds, adjusted pursuant to the provisions of Section 3.3, and by the
$337,500 Holdback Amount required by Section 8.10, below. The payment to ▇▇▇▇▇▇
▇▇▇▇▇▇▇ shall be in the amount of Five Hundred Thousand Dollars ($500,000.00).
The remainder of the Purchase Price after payment to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and the
adjustments and the Holdback, shall be paid 69.3168685 percent to Lake and
30.6831315 percent to Red River as specified by Sellers in wiring instructions
delivered prior to Closing.
3.1.1 (i) If Buyer Moves the transmitting facilities of KLAK, KMKT,
or KMAD in the direction of the Dallas-Fort Worth Metroplex and subsequently
sells the assets of one of these stations to a third party for a sales price
that yields at least Eight Million Dollars ($8,000,000.00) after deduction of
Buyer's costs of relocating that station's facilities (including sums paid to
other stations for changing their facilities), then Buyer shall pay (x) Lake one
half of the Adjusted Proceeds upon such subsequent sale of KLAK or KMAD and (y)
Red River one half of the Adjusted Proceeds upon such subsequent sale of KMKT.
(ii) As used herein, "Adjusted Proceeds" means the price received by Buyer
for the sale of a station minus the sum of (x) all costs associated with
relocating the station (including sums paid to other stations for changing their
facilities) and (y) Buyer's original cost of acquiring the station and (z) the
costs of transferring the format, call sign and business of the station to the
facilities of
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one of Buyer's remaining stations, including the cost of relocating the
transmitting facilities of such remaining station to the antenna height and
location presently used by the station that was sold.
(iii) The transmitting facilities of Station KMAD(FM), may be moved to the
current KLAK-FM tower site without creating any obligation on the part of Buyer
under this Section 3.1.1.
3.2 Allocation of Consideration. Upon execution of this Agreement,
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Sellers and Buyer shall negotiate in good faith an allocation of the total
consideration provided herein among the Station Assets (the "Allocation"). If
the Allocation is not agreed upon within thirty (30) days after the execution of
this Agreement, Buyer will order an appraisal of the Station Assets from
Broadcast Investments Analysts or another mutually agreeable appraiser (the
"Appraiser") and the Appraiser will determine the Allocation. The appraisal, if
required, shall be provided to Sellers within forty five (45) days after it is
ordered. Buyer and Sellers agree to prepare and file all income tax returns
(including, if applicable, Form 8594) in a manner consistent with the Allocation
and will not in connection with the filing of such returns make any allocation
that is contrary to the Allocation. Buyer and Sellers agree to consult with
each other with respect to all issues related to the Allocation in connection
with any tax audits, controversy or litigation. The fees for the Appraiser shall
be borne equally by Buyer and Sellers.
3.3 Allocations and Prorations.
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3.3.1 The operation of the Stations and the income and expenses
attributable thereto through 11:59 p.m. on the Closing Date (the "Effective
Time") shall be for the account of Sellers and thereafter shall be for the
account of Buyer. Expenses for goods and services received both before and
after the Effective Time, utilities charges, ad valorem, real estate, property
and other taxes (other than income taxes, which shall be Sellers' sole
responsibility for all taxable periods
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ending prior to and including the Closing Date, and those taxes arising from the
sale and transfer of the Station Assets, which shall be paid as set forth in
Section 13.2), income and expenses under the Contracts (other than Trade
Agreements), prepaid expenses, music and other license fees (including any
retroactive adjustments thereof), wages, salaries, and other employee benefit
expenses (whether such wages, salaries or benefits are current or deferred
expenses) (including, without limitation, liabilities accrued up to the
Effective Time for bonuses, commissions, vacation pay, payroll taxes, workers'
compensation and social security taxes) and rents and similar prepaid and
deferred items shall be prorated between Sellers and Buyer in accordance with
the foregoing. Notwithstanding the foregoing, no proration shall be made with
respect to (i) severance or sick leave with respect to any employee or (ii) any
prepaid expense or other deferred item unless Buyer will receive a benefit in
respect of such prepayment or deferral after the Effective Time. For purposes of
this Section 3.3.1, ad valorem and other real estate taxes shall be apportioned
on the basis of the taxes assessed for the most recently completed calendar
year, with a reapportionment as promptly as practicable after the tax rates and
real property valuations for the calendar year in which the Closing occurs can
be ascertained. In addition, Buyer shall be entitled to a credit in this
proration process for the amount of any taxes (or other governmental charges)
that are due and payable by Sellers, but are being contested by Sellers in good
faith in appropriate proceedings and are secured by Liens on the Station Assets
that have not been removed as of or before the Closing (but once such amounts
are finally determined, Buyer shall use such credit to remove such liens and
return to Sellers the excess of (i) the amount of such credit minus (ii) the
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amount of such taxes or other governmental charges as finally determined, or
Sellers shall pay to Buyer the deficiency, as appropriate).
3.3.2 Allocation and proration of the items set forth in Subsection
3.3.1 above shall
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be made by Buyer and a statement thereof given to Sellers prior to the Closing
Date. Sellers shall give written notice of any objection thereto within twenty
(20) business days after delivery of such statement, detailing the reason for
such objection and stating the amount of the proposed final allocation and
proration. If a timely objection is made and the parties cannot reach agreement
within thirty (30) days after receipt of the objection as to the amount of the
final allocation and proration, the matter shall be referred to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
L.L.P. (the "Independent Auditor") to resolve the matter, whose decision will be
final and binding on the parties, and whose fees and expenses shall be borne by
Buyer and Sellers in accordance with the following: each party shall pay an
amount equal to the sum of all fees and expenses of the Independent Auditor on a
proportional basis taking into account the amount of the net allocation and
proration proposed by each of Buyer and Sellers and the amount of the final
allocation and proration determined by the Independent Auditor (for example, if
Buyer proposed a payment of $10 to Sellers, Sellers proposed a payment of $100,
and the Independent Auditor proposed a payment of $30, Buyer would pay 20/90ths
of the Independent Auditor's fees and Sellers would pay 70/90ths of those fees
based on the $90 in dispute 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 3.3.
ARTICLE 4
CLOSING
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4.1. Closing. The consummation of the transactions contemplated herein
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(the "Closing") shall occur, except as otherwise mutually agreed upon by Buyer
and Sellers, (i) within ten (10) business days after the FCC Consents (as
hereinafter defined) to the assignment of the Station
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Licenses have become Final Orders (as hereinafter defined), or (ii) at such
later date that all other terms and conditions as set forth in Articles 11 and
12 have been satisfied, or (iii) such other date as may be mutually agreed to by
the parties ("Closing Date"). For purposes of the Agreement, "Final Order" means
action by the FCC granting an application contemplated by this Agreement which
is not reversed, stayed, enjoined, set aside, annulled or suspended, and with
respect to which action no timely request for stay, petition for rehearing, or
reconsideration, application for review or appeal is pending, and as to which
the time for filing any such request, petition or appeal or reconsideration by
the FCC on its own motion has expired. The Closing shall be held in the offices
of ▇▇▇▇▇▇▇▇▇ & Associates, P.A., ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇, or at such place as the parties hereto may agree.
ARTICLE 5
GOVERNMENTAL CONSENTS
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5.1 FCC Consent. It is specifically understood and agreed by Buyer and
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Sellers that the Closing and the assignments of the Station Licenses and the
transfer of the Station Assets are expressly conditioned on and are subject to
the prior consent and approval of the FCC ("FCC Consent").
5.2 FCC Applications. On or before March 1, 2000, Buyer and Sellers shall
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file applications with the FCC for the FCC Consent ("FCC Applications"). Buyer
and Sellers shall prosecute the FCC Applications with all reasonable diligence
and otherwise use their best efforts to obtain the FCC Consent as expeditiously
as practicable.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLERS
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6.1 Representations and Warranties of Sellers. Each Seller represents and
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warrants to the Buyer the following:
6.1.1 Organization, Good Standing, Etc. (i) Each Seller is a
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corporation duly organized and validly existing under the laws of Texas, has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and is duly qualified to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary.
(ii) Each Seller has all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by each Seller and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
action on the part of Sellers, their officers, directors and shareholders. This
Agreement has been duly executed and delivered by Sellers and constitutes the
legal, valid and binding obligation of each Seller, enforceable against it in
accordance with its terms.
6.1.2 Authority. Assuming the consents contemplated by Sections
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6.1.2 and 6.1.14 are obtained, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
violate, conflict with or result in any breach of any provision of the
organizational documents of any Seller, (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 the
sale of the Station Assets or otherwise) any material obligation, or result in
the loss of any material benefit, or give rise to the creation of any material
lien, charge, security interest or encumbrance upon any of the properties or
assets of any Seller or any of its subsidiaries
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under any of the terms, conditions or provisions of any loan or credit
agreement, note, bond, mortgage, indenture or deed of trust, or any material
license, lease, agreement or other material instrument or obligation to which
any of them is a party or by which they or any of their properties or assets may
be bound or affected, or (iii) violate any order, writ, judgment, injunction,
decree, statute, rule or regulation of any court, administrative agency or
commission or other governmental authority or instrumentality (a "Governmental
Entity") applicable to any Seller or any of its properties or assets. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to Sellers
in connection with the execution and delivery of this Agreement by Sellers or
the consummation by Sellers of the transactions contemplated hereby, except for
consents of the FCC to the assignments of the Station Licenses (as defined in
Section 1.1.1) and the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976
("HSR Act") filings referenced herein.
6.1.3 Financial Statements. Attached to the Seller Disclosure Letter
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are most recent copies of the Stations' balance sheets, and the related income
statements and pro forma broadcast cash flow analyses and the internally
prepared financial statements including income statements and pro forma
broadcast cash flow analyses (such financial statements collectively being
referred to as the "Sellers' Financial Statements"). The Sellers' Financial
Statements, except for the pro forma broadcast cash flow analyses, were prepared
in accordance with the accrual tax payer method applied on a consistent basis
throughout the periods covered thereby and present fairly, in all material
respects, the consolidated financial position, results of operations and changes
in cash flow of the Stations as of such dates and for the periods then ended
(subject in the case of the Sellers' Financial Statements, to the absence of
notes and to normal, recurring adjustments that would not
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be material in the aggregate).
6.1.4 Absence of Undisclosed Liabilities. There are no material
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liabilities of any kind whatsoever with respect to any Station (whether
absolute, accrued, contingent or otherwise, and whether due or to become due),
other than liabilities and obligations (i) provided for or reserved against in
the Sellers' Financial Statements or (ii) arising in the ordinary course of
business after the date of the latest balance sheet pertaining to that Station
and consistent with past experience.
6.1.5 Compliance with Applicable Laws; FCC Matters. (i) Except as
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permitted or contemplated hereby, the operations of the Stations have been and
now are being conducted in substantial compliance with each law, ordinance,
regulation, judgment, decree, injunction, rule or order of the FCC or any other
Governmental Entity binding on any Seller, the Stations or their respective
properties or assets. No investigation or review by any Governmental Entity with
respect to any Seller or any Station is pending or, to the Sellers' knowledge,
is threatened. Without limiting the generality of the foregoing and with respect
to the Stations, to Sellers' knowledge the Stations comply in all material
respects with the Communications Act of 1934, as amended (the "Communications
Act"), all rules, regulations and written policies of the FCC thereunder, all
obligations with respect to equal opportunity under applicable law, and all
rules and regulations of the FCC and the Federal Aviation Administration
applicable to the towers used by the Stations (including all rules regulating
hazards to air navigation, registration of radio towers, and exposure of humans
to non-ionizing radio frequency radiation). In addition, Sellers have duly and
timely filed, or caused to be filed, with the appropriate Governmental Entities
all applications, reports, statements, fees, documents, registrations, filings
or submissions with respect to the operations of the Stations and the ownership
thereof, including, without limitation, applications for renewal of authority
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required by applicable law to be filed. All such filings complied in all
material respects with applicable laws when made, and no material deficiencies
have been asserted with respect to any such filings. All the material required
by 47 C.F.R. (S) 73.3526 to be kept in the public inspection files of the
Stations is in such files. Except as stated in the Seller Disclosure Letter,
Sellers have no knowledge of any fact or circumstance relating to any Seller or
Station arising from noncompliance with the Communications Act, or the rules,
regulations or written policies of the FCC in effect on the date of this
Agreement that could reasonably be expected to (a) disqualify Sellers from
assigning the Station Licenses to the Buyer or (b) prevent or delay the
consummation by them of the transactions contemplated by this Agreement.
(ii) Schedule 1.1.1 lists (a) all licenses, permits and other
authorizations (including all STL licenses and construction permits) issued by
the FCC relating to the Stations as of the date of this Agreement and (b) all
licenses, permits, or authorizations issued by any other Governmental Entities
which are material to the operations of the Stations as of the date of this
Agreement. Such licenses, permits and authorizations, and all applications for
modification, extension or renewal thereof or for new licenses, permits,
permissions or authorizations that would be material to the operations of the
Stations, are collectively referred to herein as the Station Licenses (as
further defined in Section 1.1.1), each of which is in full force and effect. To
Sellers' knowledge, the Stations have been operated in all material respects in
accordance with the terms of the Station Licenses. Except for proceedings
affecting the radio broadcast industry generally, there are no proceedings
pending or, to the any Seller's knowledge, threatened with respect to ownership
or operation of any Station which reasonably may be expected to result in the
revocation, material adverse modification, non-renewal or suspension of any of
the Station Licenses, the denial of any
17
pending applications for Station Licenses, the issuance of any cease and desist
order, or the imposition of any administrative actions by the FCC or any other
Governmental Entity with respect to the Station Licenses, or which reasonably
may be expected to adversely affect any Station's ability to operate as
currently operated or the Buyer's ability to obtain assignment of the Station
Licenses. With the exception of operations pursuant to any existing STAs set out
in Section 1.1.1 hereto, and with the further exception of such temporary
reduced power operations as are necessary for routine maintenance, the Stations
operate in conformity with the Station Licenses and within the operating power
tolerances specified in 47 C.F.R. (S) 73.1560(b). To Sellers' knowledge, no
other broadcast station or radio communications facility is causing interference
to the Stations' transmissions beyond that which is allowed by FCC rules and
regulations.
6.1.6 Litigation. Except as stated in the Seller Disclosure Letter,
----------
(i) there is no action, suit, inquiry, judicial or administrative proceeding, or
arbitration pending or, to the knowledge of Sellers, threatened against any
Seller or any Station or any of their respective properties or assets by or
before any arbitrator or Governmental Entity nor are there any investigations
relating to Sellers or any of the Stations or any of their respective properties
or assets pending or threatened by or before any arbitrator or Governmental
Entity; (ii) there is no judgment, decree, injunction, or order of any
Governmental Entity or arbitrator outstanding against any Seller or any Stations
or any of their respective properties or assets and; (iii) there is no action,
suit, inquiry, judicial or administrative proceeding pending or threatened
against any Seller or any of the Stations by a third party relating to the
Sellers or the Station Assets or any of the transactions contemplated by this
Agreement.
6.1.7 Insurance. The Seller Disclosure Letter includes copies of all
---------
fire, liability
18
and other policies of insurance and all fidelity bonds held by or applicable to
the Stations setting forth in respect of each such policy the policy name,
policy number, carrier, term, type of coverage and annual premium. No event has
occurred, including, without limitation, the failure to give any notice or
information, or the delivery of any inaccurate or erroneous notice or
information, which materially limits or impairs the rights of the insured
parties under any such insurance policies. Sellers shall cause comparable
policies of insurance to remain in effect for acts, omissions and events
occurring on or prior to the Closing Date.
6.1.8. Real Estate.
-----------
(i) Schedule 1.1.7 accurately lists and describes all of the Owned Real
Estate held or used by the Stations. Sellers have good and marketable fee
simple title, insurable at standard rates, to all of the Owned Real Estate
(including the improvements thereon), free and clear of all liens, mortgages,
pledges, covenants, easements, restrictions, encroachments, leases, charges and
other claims and encumbrances of any nature whatsoever, and without reservation
or exclusion of any mineral, timber or other rights or interests, except for
Permitted Liens.
(ii) Schedule 1.1.8 accurately lists and describes all of the Leased Real
Estate held or used in the operation of the Stations. Each lease of real
property pertaining to the Leased Real Estate (a "Real Estate Lease") is in full
force and effect and is binding and enforceable in accordance with its terms.
Each Seller has timely performed its obligations under the Real Estate Leases.
To Sellers' knowledge there is no default or claim of default against any Seller
or any other party to the Real Estate Leases, or any event or circumstance that,
with the passage of time or the giving of notice or both, would result in (x) a
default by a Seller or (y) to the best of Sellers' knowledge, a material default
by any other party to the Real Estate Leases. No notice of termination has been
issued with
19
respect to any Real Estate Lease. Subject to Sellers obtaining any required
consents, the Real Estate Leases are assignable to Buyer on the same terms and
conditions as Sellers now enjoy under the Real Estate Leases.
(iii) There are no pending or, to the best of Sellers' knowledge,
threatened condemnation or eminent domain proceedings that may have a material
adverse affect on Buyer's use of the Real Estate for the operation of the
Stations.
(iv) Sellers have valid contractual rights to use adequate routes of
ingress and egress to, from and over all of the Real Estate necessary to operate
the Stations.
(v) To the best of Sellers' knowledge, no utility lines serving the
Stations pass over the lands of others, except where appropriate easements or
licenses have been obtained.
(vi) No improvement on any of the Real Estate encroaches upon the
adjacent real property of any other person or entity.
6.1.9 Personal Property. Schedule 1.1.2 hereto contains a list of
-----------------
all material tangible personal property and assets owned or held by Sellers and
used in the conduct of the business and operations of the Stations (other than
Real Estate, which is addressed in the foregoing Section 6.1.8). Except as
stated in the Seller Disclosure Letter, Sellers own and have good and marketable
title to all property referred to in the immediately preceding sentence and
none of such property is subject to any Liens, other than Permitted Liens. The
tangible personal property and fixtures owned or used or to be acquired by
Sellers, and necessary for the operation of the Stations, are in good operating
condition (subject to normal wear and tear) and are sufficient to permit the
conduct of the business of the Stations in compliance with FCC rules and
regulations. At Closing, Sellers shall own or hold under valid leases all of the
tangible personal property listed in Schedule
20
1.1.2 and this shall include all of the tangible personal property and fixtures
necessary to conduct the business of the Stations as presently conducted. The
Station Assets to be transferred hereunder constitute all of the assets, rights
and properties that are required for the operation of the Stations in compliance
with FCC rules and regulations and as they are now operated.
6.1.10 Liens and Encumbrances. All of Sellers' properties and assets
----------------------
relating to the Stations, including leases and the KMAD Option, 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)
statutory Liens securing payments not yet delinquent or the validity of which
are being contested in good faith by appropriate actions, (ii) Liens for taxes
not yet delinquent, (iii) Purchase Money Liens and Liens securing indebtedness,
all of which Liens will be discharged by Sellers at the Closing upon repayment
of all amounts due and owing, (iv) Liens incurred in the usual and normal
conduct of the business of the Stations, which in the aggregate do not
materially detract from the value or materially impair the present and continued
use of the properties or assets subject thereto, (v) Liens on leases arising
from the provisions of such leases or by operation of law, and (vi) zoning
ordinances (the Liens referred to in clauses (i) through (vi) being "Permitted
Liens").
6.1.11 Environmental Matters. On the date of this Agreement, except
----------------------
as disclosed on Schedule 6.1.11:
(i) To Sellers' knowledge the Real Estate used in connection
with the Stations and the operations thereon is, and has been, in substantial
compliance with all applicable
21
federal, state and local statutes, codes, rules or regulations as well as common
law decisions relating to the environment, natural resources and public or
employee health and safety ("Environmental Laws");
(ii) No judicial or administrative proceedings are pending
or threatened against a Seller or, to Sellers' knowledge, any of the Real Estate
used in connection with the Stations alleging the violation of or seeking to
impose liability pursuant to any Environmental Law. No notice or claim from any
Governmental Entity or other person has been given to a Seller or Sellers
claiming violation of or alleging any liability under remediation of any
Environmental Laws in connection with any of the Real Estate used in connection
with the Station or operations thereon;
(iii) To Sellers' knowledge there are no facts, circumstances
or conditions on the Real Estate or the operations thereon used in connection
with the Stations or the operations thereon that are reasonably likely to give
rise to an environmental claim or result in Environmental Costs and Liabilities;
(iv) All substances, materials or waste that are regulated
by federal, state or local government, as well as any petroleum or petroleum
derived product, used or generated by any Seller in connection with the Leased
Real Estate used in connection with the Stations ("Hazardous Substances"), have
been stored, used, treated, and disposed of by such persons or on their behalf
in such manner as not to result in any material Environmental Costs or
Liabilities. "Environmental Costs and Liabilities" means any losses, including
environmental remediation costs, liabilities, obligations, damages, fines,
penalties or judgments, arising from or under any Environmental Law or order of
or agreement with any Governmental Entity or other person;
(v) To the best of Sellers' knowledge, there are not now,
nor have there
22
been in the past, on, in or under any Leased Real Estate used in connection with
the Stations when leased or operated by Sellers or, when owned, leased or
operated by any Predecessor, any of the following: any (a) underground storage
tanks, above-ground storage tanks, dikes or impoundments containing Hazardous
Substances, (b) asbestos containing materials, (c) polychlorinated byphenyls or
(d) radioactive substances; and
(vi) The Stations' operations do not have a significant
environmental impact, as defined by 47 C.F.R. (S) 1.1307.
6.1.12 Taxes. (i) All material Tax Returns (as defined in subsection
-----
(vii) below) that are required to be filed on or before the execution of this
Agreement by Sellers have been duly filed on a timely basis under the statutes,
rules and regulations of each applicable jurisdiction. To Sellers' knowledge,
all such Tax Returns are complete and accurate in all material respects. Except
as stated in the Seller Disclosure Letter, all material Taxes, whether or not
reflected on the Tax Returns, which are due with respect to the Sellers and any
of their Affiliates have been timely paid by the Sellers and/or any such
Affiliates, whether or not such Taxes are disputed. For the purposes of this
Section 6.1.12 only, Affiliates shall mean any entity that files a consolidated
tax return with any Seller.
(ii) No claim for assessment or collection of Taxes has been
asserted against any Seller or any Affiliates. To Sellers' knowledge none of
Sellers nor any of Sellers' Affiliates is a party to any pending audit, action,
proceeding or investigation by any Governmental Entity for the assessment or
collection of Taxes, nor does any Seller or any Affiliate have knowledge of any
threatened audit, action, proceeding or investigation.
(iii) None of Sellers nor any of Sellers' Affiliates has
waived or extended any statutes of limitation for the assessment or collection
of Taxes. To Sellers' knowledge, no claim
23
has ever been made by a Governmental Entity in a jurisdiction where any Seller
or any Affiliate does not currently file Tax Returns that any of Sellers or
their Affiliates is or may be subject to taxation by that jurisdiction. Nor is
any Seller or any of its Affiliates aware that any such assertion of tax
jurisdiction is pending or threatened. No Liens, other than Permitted Liens
(whether filed or arising by operation of law) have been imposed upon or
asserted against any of the assets of the Stations as a result of or in
connection with any failure, or alleged failure to pay any Tax.
(iv) To Sellers' knowledge, each Seller has withheld and
paid all Taxes required to be withheld in connection with any amounts paid or
owing to any employee, creditor, independent contractor or other third party.
(v) No Seller is a foreign person within the meaning of
Section 1445 of the Internal Revenue Code (the "Code").
(vi) No payment described in this Agreement is subject to
Section 280G of the Code.
(vii) For purposes of this Agreement, the terms "Tax" and
"Taxes" shall mean all federal, state, local, or foreign income, payroll,
Medicare, withholding, unemployment insurance, social security, sales, use,
service, service use, leasing, leasing use, excise, franchise, gross receipts,
value added, alternative or add-on minimum, estimated, occupation, real and
personal property, stamp, duty, transfer, workers' compensation, severance,
windfall profits, environmental (including taxes under Section 59A of the Code),
other tax, charge, fee, levy or assessment of the same or of a similar nature,
including any interest, penalty, or addition thereto, whether disputed or not.
The term "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes or any amendment thereto,
and including any schedule or
24
attachment thereto.
6.1.13 Personnel. The Seller Disclosure Letter includes a complete
---------
and correct list as of February 1, 2000 of the names, positions, and location of
all employees or other Station and broadcast personnel (whether employees or
independent contractors or employees of a time broker) of the Stations, which
sets forth the current salaries of all such employees and the other compensation
arrangements with all General Managers, Station Managers, General Sales
Managers, Local Sales Managers, National Sales Managers, Program Directors,
Business Managers and Traffic Managers (collectively, "Station Management") and
all on-the-air broadcast personnel of the Stations and indicates which of those
employees, Station Management or on-the-air broadcast personnel is a party to an
employment or consulting or similar contract with that is not terminable upon
notice of 60 days or less without additional cost to the employer.
6.1.14 Contracts The Contracts are the only contractual agreements
---------
necessary to carry out the business and operations of the Stations as currently
conducted. Each Contract with respect to the Stations is a valid and binding
obligation of Sellers, and is in full force and effect. Sellers and each other
party to such Contract with respect to the Stations have performed in all
material respects the obligations required to be performed by them and are not
(with or without lapse of time or the giving of notice, or both) in material
breach or default thereunder. Schedule 1.1.3 identifies, as to each Contract
with respect to the Stations listed thereon, whether the consent of the other
party thereto is required in order for such Contract to continue in full force
and effect upon the consummation of the transactions contemplated hereby.
6.1.15 ERISA Compliance. Except as stated in the Seller Disclosure
----------------
Letter, no Seller nor any other trades or businesses under common control within
the meaning of Section
25
4001(b)(1) of ERISA (collectively, the "ERISA Group") has contributed or been
obligated to contribute to any "multi employer plan" as such term is defined in
Section 3(37) or Section 4001 (a)(3) of ERISA. Included in the Seller Disclosure
Letter are written lists of all "employee benefit plans" within the meaning of
Section 3(3) of ERISA and bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, insurance or other plan or arrangement or understanding
providing benefits to any present or former employee or contractor of the
Stations maintained by Sellers, or as to which any Seller (with respect to such
individuals) has any liability or obligation (collectively, "Employee Benefit
Plans").
6.1.16 Labor Sellers have not agreed to recognize any union or other
-----
collective bargaining unit, nor has any union or other collective bargaining
unit been certified as representing any of Sellers' employees. Except as stated
in the Seller Disclosure Letter, Sellers, with respect to the Stations, (i) are
and have been in substantial compliance with all applicable laws regarding
employment and employment practices, terms and conditions of employment, wages
and hours, and plant closing, occupational safety and health and workers'
compensation and are not engaged, nor has any of them engaged, in any unfair
labor practices; (ii) have no, and have not had any, unfair labor practice
charges or complaints pending or threatened against any of them before the
National Labor Relations Board; (iii) to Sellers knowledge have no, and have not
had any, grievances pending or threatened against any of them; and (iv) have no,
and have not had any, charges pending or threatened against any of them before
the Equal Employment Opportunity Commission or any state or local agency
responsible for the prevention of unlawful employment practices. There is no
labor strike, slowdown, work stoppage or lockout actually pending or threatened
against or affecting any
26
of the Stations. No union organizational campaign or representation petition is
currently pending with respect to any of the employees working for any of the
Stations.
6.1.17 Patents, Trademarks, Etc. Schedule 1.1.4 sets forth all call
-------------------------
letters, patents, patent applications, trademarks, trade names, Internet domain
names, service marks, trade secrets, applied for, issued, owned or used
copyrights and other proprietary Intellectual Property used in the operation of
the Stations (whether owned, leased or licensed). No Seller has received any
notice of any claimed conflict, violation or infringement of such Intellectual
Property rights. To Sellers' knowledge none of such material Intellectual
Property rights is being infringed by any third party.
6.1.18 Absence of Certain Changes or Events. Except as contemplated
------------------------------------
or expressly permitted by this Agreement, since the date of the last relevant
balance sheet pertaining to each Station (as revealed in the Seller Disclosure
Letter) there has not been (i) any material damage, destruction or loss of any
kind with respect to that Station not covered by valid and collectible
insurance; (ii) with respect to that Station the execution of any agreement with
any Station management or broadcast personnel (whether an employee or
independent contractor) providing for his/her employment, or any increase in
compensation or severance or termination of benefits payable or to become
payable by Sellers, to any officer, Station management, or broadcast personnel
(whether an employee or independent contractor), or any increase in benefits
under any collective bargaining agreement, except in any case in the ordinary
course of business consistent with prior practice and except as permitted by
Section 8.1.1 (x); or (iii) any change by any Seller in its financial or tax
accounting principles or methods.
6.1.19 Commission or Finder's Fees. Neither Sellers nor any entity
---------------------------
acting on behalf of Sellers has agreed to pay a commission, finder's fee or
similar payment in connection with this
27
Agreement or any matter related hereto other than to Media Services Group, Inc.,
whose fee shall be paid at Closing by Sellers.
6.1.20 Full Disclosure. No representation or warranty by any Seller
---------------
contained in this Agreement (including the Schedules hereto) or in the Seller
Disclosure Letter or in any certificate furnished pursuant to this Agreement
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading.
6.1.21 Sellers' Financial Condition. Except as stated in the Seller
----------------------------
Disclosure Letter, no insolvency proceedings of any character, including,
without limitation, bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting any Seller or
any of its respective assets or properties are to Sellers' knowledge pending, or
threatened, and no Seller has made any assignment for the benefit of creditors,
nor has any Seller taken any action with a view to, or which would constitute a
basis for, the institution of any such insolvency proceedings. Sellers shall
use the proceeds received under this agreement to pay or to make appropriate
provision for the payment of any and all creditors of Sellers prior to making
any distribution to their shareholders.
6.1.22 KMAD Option. The Seller Disclosure Letter contains a true and
-----------
correct copy of the KMAD Option. The KMAD Option is freely assignable to Buyer.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
7.1 Organization and Standing. Buyer is a limited liability company
-------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
28
7.2 Authorization and Binding Obligation. Buyer has all necessary power
------------------------------------
and authority to enter into and perform this Agreement and the transactions
contemplated hereby, and to own or lease the Station Assets and to carry on the
business of the Stations upon the consummation of the transactions contemplated
by this Agreement. Buyer's execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and validly authorized
by all necessary action on behalf of Buyer and constitute the valid and binding
obligation of Buyer, enforceable in accordance with its terms.
7.3 Qualification. To Buyer's knowledge, there is no fact, allegation,
-------------
condition, or circumstance relating to Buyer that could reasonably be expected
to prevent the grant of the FCC Consent. Buyer knows of no fact that would,
under the Communications Act of 1934, as amended, or the rules, regulations and
policies of the FCC, disqualify Buyer from becoming the licensee of the
Stations.
7.4 Absence of Conflicting Agreements or Required Consents. Except for
------------------------------------------------------
the FCC Application contemplated herein and except as stated in the Buyer
Disclosure Letter, the execution, delivery and performance of this Agreement by
Buyer: (i) do not violate or conflict with any of the terms, conditions or
provisions of the Certificate of Formation or Regulations of Buyer; (ii) do not
require the consent of any third party not affiliated with Buyer; (iii) will not
violate any applicable law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority to which Buyer is a party;
and (iv) will not, either alone or with the giving of notice or the passage of
time, violate the terms, conditions or provisions of, or constitute a default
under, any agreement, instrument, license or permit to which Buyer is now
subject.
7.5 Litigation: Compliance with Law. There is no litigation,
-------------------------------
administrative action,
29
arbitration or other proceeding, or petition, complaint or investigation before
any court or governmental body pending against Buyer that would adversely affect
Buyer's ability to perform its obligations pursuant to this Agreement or the
agreements to be executed by Buyer in connection herewith. Buyer has committed
no violation of any applicable law, regulation or ordinance or any other
requirement of any governmental body or court which would have an adverse effect
on Buyer or its ability to perform its obligations pursuant to this Agreement or
the agreements to be executed in connection herewith.
7.6 Commission or Finder's Fees. Neither Buyer nor any entity acting on
---------------------------
behalf of Buyer has agreed to pay a commission, finder's fee or similar payment
in connection with this Agreement or any matter related hereto to any person or
entity other than Star Media Group, Inc., whose fees shall be paid by Buyer.
7.7 Full Disclosure. No representation or warranty by Buyer contained in
---------------
this Agreement (including the Schedules hereto) or in the Buyer Disclosure
Letter or in any certificate furnished pursuant to this Agreement contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was or will be made, in order to make the statements herein or therein not
misleading.
ARTICLE 8
COVENANTS OF SELLERS
--------------------
8.1 Conduct of Stations Prior to the Closing Date:
---------------------------------------------
8.1.1 Sellers covenant and agree with Buyer that between the date of
this Agreement and (except as otherwise noted below) the Closing Date, the
Sellers, with respect to each Station shall:
30
(i) use commercially reasonable efforts to maintain its
present business organization, keep available the services of its present
employees and independent contractors, preserve its relationships with customers
and others having business relationships with the Station, and refrain from
materially and adversely changing any of its business practices and policies
(including but not limited to advertising (including substantially the same
amount of cash expenditure), marketing, pricing, purchasing, personnel, sales,
and budget practices and policies);
(ii) maintain its books of account and records in the usual
and ordinary manner and in accordance with the accrual tax payer method;
(iii) notify Buyer if the regular broadcast transmission of
the Station from its main transmitting facilities at full authorized effective
radiated power is interrupted for a period of more than five consecutive hours
or for an aggregate of 10 or more hours in any continuous three-day period;
(iv) operate in the usual and ordinary course of business in
accordance with past practice and conduct its business in all material respects
in compliance with the terms of the Station Licenses and all applicable laws,
rules, and regulations, including, without limitation, the applicable rules and
regulations of the FCC;
(v) use, repair, and, if necessary, replace any of the
Station's studio and transmission assets in a reasonable manner consistent with
historical practice and maintain the assets in substantially their current
condition, ordinary wear and tear excepted;
(vi) maintain insurance in accordance with Section 6.1.7;
(vii) not, without the prior consent of Buyer, incur any
debts, obligations, or liabilities (absolute, accrued, contingent, or otherwise)
that include obligations (monetary or
31
otherwise) to be performed by Buyer that exceed Ten Thousand Dollars ($10,000)
individually or Twenty-five Thousand Dollars ($25,000) in the aggregate;
(viii) not lease, mortgage, pledge, or subject to a lien,
claim, or encumbrance (other than Permitted Liens ) any of the Station Assets or
sell or transfer any of the Station Assets without replacing such Station Assets
with an asset of substantially the same value and utility;
(ix) not, without the prior consent of Buyer, (a) modify or
extend any Contracts or (b) enter into any new Contracts the payments under
which exceed Ten Thousand Dollars ($10,000) individually or Twenty-five Thousand
Dollars ($25,000) in the aggregate;
(x) not make or grant any general wage or salary increase
or generally materially modify the employees' terms and conditions of
employment, and with respect to any Station Management and on-air personnel,
Sellers shall not make or grant any wage or salary increase or modify any terms
and conditions of employment without the prior consent of Buyer; provided,
however, that Sellers shall be permitted to make bonus payments to any employees
including Station Management and on-air personnel;
(xi) not make any change in the accounting principles,
methods, or practices followed by it or depreciation or amortization policies or
rates;
(xii) not make any loans or make any dividends or
distributions other than of Excluded Assets;
(xiii) other than in the ordinary course of business, not
cancel or compromise any debt or claim, or waive or release any right, of
material value;
(xiv) not disclose to any person (other than Buyer and its
representatives)
32
any confidential or proprietary information;
(xv) use commercially reasonable efforts to maintain the
present format of the Station and with programming consistent with past
practices;
(xvi) other than in the ordinary course of business, not
increase the number of regularly scheduled commercial units run during the day-
parts on the Station (other than changes in the number of commercial units run
during any day-part as a result of operating difficulties that require
commercial units to be broadcast at times other than as scheduled); or
(xvii) agree to do any of the foregoing.
8.2 Buyer Access. Sellers shall (i), upon reasonable notice, give or
------------
cause the Stations to give Buyer and Buyer's counsel, accountants, engineers and
other representatives, including environmental consultants, reasonable access
during normal business hours to all of Sellers' properties, books, Contracts,
Trade Agreements, reports and records including financial information and tax
returns relating to the Stations, and to all real estate, buildings and
equipment relating to the Stations, in order that Buyer may have full
opportunity to make such investigation, including but not limited to,
environmental assessments, as it desires of the affairs of the Stations, and
(ii) furnish Buyer with information and copies of all documents and agreements
including, but not limited to, financial and operating data and other
information concerning the financial condition, results of operations and
business of the Stations, that Buyer may reasonably request. The rights of Buyer
under this Section shall not be exercised in such a manner as to interfere
unreasonably with the business of the Stations.
8.2.1 Interim Financial Statements. Sellers shall promptly deliver
----------------------------
to Buyer copies of any monthly, quarterly or annual financial statements
relating to the Stations' operations
33
that may be prepared or received by Sellers during the period from the date
hereof through the Closing Date. Such financial statements shall fairly present
the financial position and results of operations of the Stations as of the dates
and for the periods indicated, and if prepared by or on behalf of Sellers, shall
be prepared on a basis consistent and in accordance with the basis upon which
the financial statements in Section 6.1.3 were prepared.
8.3 Other Consents. Sellers will use their best efforts to obtain all
--------------
consents, authorizations, or approvals required for the consummation of the
transactions contemplated by this Agreement.
8.4 No Inconsistent Action. Sellers shall not take any action which is
----------------------
inconsistent with their obligations under this Agreement.
8.5 Notification. Sellers shall promptly notify Buyer in writing of (i)
------------
the failure of Sellers or any employee or agent of Sellers to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with hereunder; (ii) the occurrence of any event that would entitle
Buyer to terminate this Agreement pursuant to Section 15.1; or (iii) any overt
threat or actual resignation or termination of any Station's Management or over-
the-air personnel at the Stations.
8.6 Updating of Schedules. From time to time prior to the Closing, Sellers
---------------------
will supplement or amend the Schedules and the Seller Disclosure Letter
delivered in connection herewith with respect to any matter which exists or
occurs after the date of this Agreement and which, if existing or occurring at
or prior to the date of this Agreement, would have been required to be set forth
or described in the Schedules or the Seller Disclosure Letter or which is
necessary to correct any information therein. The provisions of this Section
are informational only and Buyer
34
shall not be bound to the terms of any changed Schedules unless they are
incorporated into this Agreement by a written amendment signed by Buyer.
8.7 Enforcement of Agreements. During the period prior to Closing, Lake
--------------------------
shall not amend the KMAD Option and shall enforce, if necessary, the terms of
the KMAD Option.
8.8 FCC Filings. Sellers shall file or cause to be filed on a current
-----------
basis until the Closing Date all applications, fees, reports and documents
required to be filed with the FCC with respect to the Stations. Copies of each
such application, fee filing, report and document filed between the date hereof
and the Closing Date shall be furnished to Buyer promptly after its filing.
8.9 Updating of Information. Between the date of this Agreement and the
-----------------------
Closing Date, Sellers will deliver to Buyer, on a monthly basis within 30 days
of the end of each month, information relating to the operation of the Stations,
including weekly sales reports and such other financial information that may be
reasonably requested.
8.10 Indemnification. [INTENTIONALLY OMITTED]
---------------
8.11 Asset Purchase Agreement. Sellers shall place a complete copy of this
------------------------
Agreement in the local public inspection file of each Station and shall append a
complete copy of this Agreement to each application to the FCC for the FCC
Consent.
ARTICLE 9
COVENANTS OF BUYER
------------------
9.1 Notification. Buyer shall promptly notify Sellers in writing of (i)
------------
any litigation, arbitration or administrative proceeding pending or, to its
knowledge, threatened against Buyer which challenges the transactions
contemplated hereby or (ii) the failure of Buyer, or any employee or agent of
Buyer to comply with or satisfy in any material respect any covenant, condition
or
35
agreement to be complied with or be satisfied by it hereunder and (iii) the
occurrence of any event that would entitle Sellers to terminate this Agreement
pursuant to Section 15.1.
9.2 No Inconsistent Action. Buyer shall not take any action which is
----------------------
inconsistent with its obligations under this Agreement.
9.3 Post-Closing Access. Buyer, for a period of one (1) year following
-------------------
the Closing Date, shall make available during normal business hours for audit
and inspection by Sellers and their representatives, for any reasonable purpose
and upon reasonable notice, all records, files, documents and correspondence
transferred to it hereunder relating to the pre-closing period. All information,
records, files, documents and correspondence made available or disclosed under
this Section 9.3 shall be kept confidential.
9.4 Other Consents. Buyer will use its best efforts to obtain all
--------------
necessary consents, authorizations, or approvals, in each case, required for
Buyer's consummation of the transactions contemplated by this Agreement.
ARTICLE 10
JOINT COVENANTS
---------------
Buyer and Sellers covenant and agree that they shall act in accordance with
the following:
10.1 Confidentiality. Buyer and Sellers shall each keep confidential all
---------------
information obtained by them with respect to the other party hereto in
connection with this Agreement and the negotiations preceding this Agreement,
and will use such information solely in connection with the transactions
contemplated by this Agreement, and if the transactions contemplated hereby are
not consummated for any reason, each shall return to each other party hereto,
without retaining a copy thereof, any schedules, documents or other written
information obtained from such other party in
36
connection with this Agreement and the transactions contemplated hereby except
to the extent required or useful in connection with any claim made with respect
to the transactions contemplated by this Agreement or the negotiation thereof.
Notwithstanding the foregoing, no party shall be required to keep confidential
or return any information which (i) is known or available through other lawful
sources, not bound by a confidentiality agreement with the disclosing party, or
(ii) is or becomes publicly known through no fault of the receiving party or its
agents, or (iii) is required to be disclosed pursuant to an order or request of
a judicial or government authority (provided the non-disclosing party is given
reasonable prior notice such that it may seek, at its expense, confidential
treatment of the information to be disclosed), (iv) is developed by the
receiving party independently of the disclosure by the disclosing party or (v)
is required to be disclosed under applicable law or rule, as determined by
counsel for the receiving party.
10.2 Cooperation. Buyer and Sellers shall cooperate fully with one
-----------
another in taking any actions, including actions to obtain the required consent
of any governmental instrumentality or any third party necessary or helpful to
accomplish the transactions contemplated by this Agreement.
10.3 Control of Stations. Prior to Closing, Buyer shall not, directly or
-------------------
indirectly, control or direct the operations of the Stations.
10.4 Bulk Sales Laws. Buyer hereby waives compliance by Sellers with the
---------------
provisions of the "bulk sales" or similar laws of any state. Sellers shall
indemnify Buyer and hold it harmless from any and all loss, cost, damage and
expense (including but not limited to, reasonable attorneys' fees) sustained by
Buyer as a result of any failure of Sellers to comply with any "bulk sales" or
similar laws.
10.5 Public Announcements. Neither Buyer nor Sellers shall issue any
--------------------
press release
37
or make any disclosure with respect to the transaction contemplated by this
Agreement without the prior written approval of the other party, except as may
be required by applicable law or by obligations pursuant to any listing
agreement with any securities exchange or any stock exchange regulations.
10.6 HSR Act. [INTENTIONALLY OMITTED]
-------
10.7 Employee Matters. (i) Commencing with the execution of this
----------------
Agreement, upon reasonable notice from Buyer, Sellers shall make available the
Stations' personnel during normal business hours for Buyer to interview prior
to the Closing Date. Prior to the Closing Date, Buyer shall notify Sellers of
the names of the employees to whom Buyer shall offer employment (herein
referred to as "Transferred Employees"). Sellers hereby consent to Buyer making
such offers of employment relating to the Stations after FCC Consent and subject
to the Closing. Buyer agrees to assume all written employee contracts, subject
to review and a determination that they are terminable upon terms satisfactory
to Buyer. Sellers shall be responsible for all obligations or liabilities to
those employees not offered employment by Buyer, and Buyer shall have no
obligations with respect to those employees (herein referred to as Retained
Employees).
10.8 Condition of Real Estate.
------------------------
Buyer may, at its sole expense, conduct environmental studies, title
examinations, and land surveys (the "Studies") of the Real Estate. With respect
to environmental studies and land surveys, Buyer shall restore the Real Estate
to the condition that it was in prior to any study by the Buyer.
10.9 Indemnification.
---------------
(i) Indemnification of Buyer. From and after the Closing and
------------------------
subject to the
38
provisions of this Section 10.9, Sellers jointly and severally agree to
indemnify and hold harmless the Buyer Indemnified Parties from and against any
and all Buyer Indemnified Costs. On the Closing Date, Buyer and Sellers will
enter into the Indemnification Escrow Agreement in the form of Exhibit 10.9
hereto in accordance with which Buyer shall at Closing deposit an amount of the
Purchase Price equal to Three Hundred Thirty Seven Thousand Five Hundred Dollars
($337,500.00) (the "Holdback Amount") with the escrow agent identified in the
Indemnification Escrow Agreement (the "Indemnification Escrow Agent"). Sellers
hereby covenant and agree that if, during the term fo the Indemnification Escrow
Agreement, Sellers are or become obligated to indemnify Buyer under this Section
10.9, Sellers will execute and deliver to the Indemnification Escrow Agent
written instructions to release to Buyer such portion of the Holdback Amount as
is necessary to indemnify Buyer for amounts due under this Section.
(ii) Indemnification of Sellers. From and after the Closing and
-------------------------
subject to the provisions of this Section 10.9, Buyer agrees to indemnify and
hold harmless the Seller Indemnified Parties from and against any and all Seller
Indemnified Costs.
(iii) 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 Subsection (i) or (ii) above (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
Section 10.9 unless the failure to give such notice materially and adversely
prejudices such Indemnifying Party. The Indemnifying Party shall have the
39
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 (1) 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, (2) the Indemnifying Parties shall not have
employed counsel reasonably satisfactory to the Indemnified Party to have charge
of such third party action, (3) 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 (4) 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 of 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
40
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 (1) as to which the Indemnifying Party fails to assume the defense within
a reasonable length of time or (2) 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 Section 10.9 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.
(iv) Direct Claims. In any case in which an Indemnified Party
-------------
seeks indemnification hereunder which is not subject to Subsection (iii) 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 Subsection (v)(b), the failure of the Indemnified
Party to exercise promptness in such notification shall not amount to a waiver
of such claim unless the
41
resulting delay materially prejudices the position of the Indemnifying Party
with respect to such claim.
(v) Limitations. The following provisions of this Section 10.9
-----------
shall limit the indemnification obligations hereunder.
(a) Minimum Loss. The Indemnifying Party shall not be
------------
required to indemnify the Indemnified Party for any Indemnified Costs unless and
until the aggregate amount of such Indemnified Costs for which the Indemnified
Party is otherwise entitled to indemnification pursuant to this Section 10.9
exceeds $10,000 (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 Subsection (v).
(b) Limitation as to Time. No Indemnifying Party shall be
---------------------
liable for any Indemnified Costs pursuant to this Section 10.9 unless a written
claim for indemnification in accordance with Subsections (iii) or (iv) is given
by the Indemnified Party to the Indemnifying Party with respect thereto on or
before 5:00 p.m., Dallas, Texas time one (1) year after the Closing Date.
(c) Limited Recourse. The aggregate liability of Sellers
----------------
or Buyer pursuant to this Section 10.9 shall be limited to $337,500, a sum equal
to the Holdback Amount.
(d) Sole and Exclusive Remedy. Seller and Buyer each
-------------------------
acknowledge and agree that, after the Closing Date, 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,
42
the provisions set forth in this Section 10.9.
(vi) Definitions. As used herein:
-----------
(a) "Buyer Indemnified Parties" means Buyer, its members,
managers, employees and its Affiliates;
(b) "Seller Indemnified Parties" means Sellers, their
officers, directors, employees and its Affiliates;
(c) "Buyer Indemnified Costs" means all costs, losses and
damages (including reasonable attorney fees) incurred by Buyer or such
affiliates or assigns as a result of or arising out of (1) the material breach
by a Seller of any of its representations and warranties contained in this
Agreement, (2) the material failure by a Seller to perform its covenants set
forth in this Agreement, (3) the conduct of the operations of the Stations or
the use or ownership of the Station Assets on or before the Closing Date,
including any and all liabilities arising under any of the Station Licenses or
Contracts which relate to events occurring prior to the Closing Date, and (4)
any and all obligations or liabilities of a Seller under any contract or
agreement not expressly assumed by Buyer; and
(d) "Seller Indemnified Costs" means all costs, losses and
damages (including reasonable attorney fees) incurred by a Seller or such
affiliates or assigns as a result of or arising out of (1) the material breach
by Buyer of any of its representations and warranties contained in this
Agreement, (2) the material failure by Buyer to perform its covenants set forth
in this Agreement, (3) the conduct of the operations of the Stations or the use
or ownership of the Station Assets after the Closing Date, including any and all
liabilities arising under any of the Station Licenses which relate to events
occurring after the Closing Date, and (4) any and all obligations or
43
liabilities of Seller after the Closing Date under any contract or agreement
assumed by Buyer pursuant to the terms hereof.
ARTICLE 11
CONDITIONS OF CLOSING BY BUYER
------------------------------
The obligations of Buyer hereunder are, at its option, subject to
satisfaction at or prior to the Closing Date of all of the following conditions:
11.1 Representations and Warranties. All representations and warranties
------------------------------
of Sellers made in Sellers Disclosure Letter or in this Agreement or in any
Exhibit, Schedule or document delivered pursuant hereto, shall be true and
complete in all material respects as of the date hereof and on and as of the
Closing Date as if made on and as of that date, except for changes expressly
permitted or contemplated by the terms of this Agreement. Additionally, with
respect to the Real Estate:
(i) No persons or entities other than the Sellers shall have any
interest in the Real Estate, apart from Permitted liens.
(ii) The buildings (or portions thereof), improvements and fixtures
in the Real Estate shall be suitable for their intended use.
Further, the KMAD Option will be a valid , binding obligation of Lake and ▇▇▇▇▇▇
▇▇▇▇▇▇▇, and will be in full force and effect. Neither Lake nor ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
shall be in material breach of the KMAD Option.
11.2 Compliance with Agreement. All of the terms, covenants and
-------------------------
conditions to be complied with and performed by Sellers on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
44
11.3 Third Party Consents and Approvals; Estoppel Certificates. Sellers
---------------------------------------------------------
shall have obtained all third-party consents and approvals, if any, required for
the transfer or continuance, as the case may be, of the Contracts on Schedule
1.1.3 (and contracts that would have been on Schedule 1.1.3 had they been in
existence on the date of this Agreement), and such third parties have provided
estoppel certificates, non-disturbance agreements, and/or written clarifications
of the rights of Buyer thereunder, all in form and substance reasonably
satisfactory to Buyer.
11.4 Closing Certificates. Buyer shall have received a certificate, dated
--------------------
as of the Closing Date, from the Sellers, executed by the president of each
Seller to the effect of Sections 11.1 and 11.2.
11.5 Governmental Consents.
---------------------
11.5.1 FCC. The FCC Consent shall have been issued by the FCC
---
without any conditions that would otherwise permit Buyer to terminate this
Agreement pursuant to Section 15.1(v), below, and each such FCC Consent shall
have become a Final Order (as defined in Section 4.1).
11.5.2 Other Consents. All other material authorizations, consents,
--------------
approvals, and clearances of federal, state, or local Governmental Entities
required to permit the consummation of the transactions contemplated by this
Agreement shall have been obtained.
11.6 Adverse Proceedings. No injunction, order, decree or judgment of
-------------------
any court, agency or other Governmental Entities shall have been rendered
against Sellers or Buyer which would render it unlawful, as of the Closing Date,
to effect the transactions contemplated by this Agreement in accordance with its
terms.
11.7 Closing Documents. Sellers shall have executed and delivered or
-----------------
caused to be
45
delivered to Buyer, on the Closing Date (i) all special warranty deeds, bills of
sale, endorsements, assignments and other instruments of conveyance and transfer
consistent with the terms hereof and otherwise reasonably satisfactory in form
and substance to Buyer, effecting the sale, transfer, assignment and conveyance
of the Station Assets, including the KMAD Option, to Buyer and (ii) all other
documents, instruments, certificates and agreements required of Sellers under
the terms of this Agreement.
11.8 Material Adverse Change. No material adverse change in the business,
-----------------------
assets, prospects or condition of the Stations (financial or otherwise) shall
have occurred prior to the Closing Date.
11.9 Opinion of Counsel. Buyer shall have received a written opinion of
------------------
Sellers' counsel dated as of the Closing Date in form and substance reasonably
satisfactory to Buyer.
ARTICLE 12
CONDITIONS OF CLOSING BY SELLERS
--------------------------------
The obligations of Sellers hereunder are, at their option, subject to
satisfaction at or prior to the Closing Date of all of the following
conditions:
12.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Buyer made in this Agreement or in the Buyer Disclosure Letter or
in any Exhibit, Schedule or document delivered pursuant hereto, shall be true
and complete in all material respects as of the date hereof and on and as of the
Closing Date as if made on and as of that date, except for changes expressly
permitted or contemplated by the terms of this Agreement and except those given
as of a specified date.
12.2 Compliance with Agreement. All the terms, covenants, and conditions
-------------------------
to be
46
complied with and performed by Buyer on or prior to the Closing Date shall have
been complied with or performed in all material respects.
12.2.1 Certifications, etc. Sellers shall have received a
-------------------
certificate, dated as of the Closing Date, from the Buyer, executed by the
President of Buyer to the effect of Sections 12.1 and 12.2.
12.3 Governmental Approval.
---------------------
12.3.1 FCC. The FCC Consent shall have been issued by the FCC and
---
each such FCC Consent shall have become a Final Order (as defined in Section
4.1).
12.3.2 Other Consents. All other material authorizations, consents,
--------------
approvals, and clearances of federal, state or local Governmental Entities
required to permit the consummation of the transactions contemplated by this
Agreement shall have been obtained.
12.4 Adverse Proceedings. No injunction, decree or judgment of any court,
-------------------
agency or other governmental entities shall have been rendered against Buyer or
Sellers which would render it unlawful, as of the Closing date, to effect the
transactions contemplated by this Agreement in accordance with its terms.
12.5 Closing Documents. Buyer shall have delivered or caused to be
-----------------
delivered to Sellers, on the Closing Date, an assumption agreement with respect
to Assumed Liabilities reasonably satisfactory in form and substance to Sellers.
12.6 Opinion of Buyer's Counsel. Sellers shall have received a written
--------------------------
opinion of Buyer's counsel dated as of the Closing Date in form and substance
reasonably satisfactory to Sellers.
ARTICLE 13
TRANSFER TAXES: FEES AND EXPENSES
---------------------------------
47
13.1 Expenses. Except as set forth in Sections 13.2 and, 13.3 below, each
--------
party hereto shall be solely responsible for all costs and expense incurred by
it in connection with the negotiation, preparation and performance of and
compliance with the terms of this Agreement.
13.2 Transfer Taxes and Similar Charges. All recordation, transfer and
----------------------------------
documentary taxes and fees, and any excise, sales or use taxes, and all similar
costs of transferring the Station Assets in accordance with this Agreement the
shall be borne equally by Buyer and Sellers. Buyer and Sellers shall, in good
faith, attempt to calculate all such taxes and fees prior to Closing and to
settle their respective obligations therefore on or before the Closing Date.
13.3 Governmental Filing or Grant Fees. Any filing or grant fees imposed
---------------------------------
by any governmental authority the consent of which is required for the
consummation of the transactions contemplated hereby, including but not limited
to the FCC, shall be borne equally by Buyer and Sellers.
ARTICLE 14
ESCROW DEPOSIT, LIQUIDATED DAMAGES, SPECIFIC PERFORMANCE
--------------------------------------------------------
14.1 Escrow Deposit. Within five (5) business days after the execution and
--------------
delivery of this Agreement by all Parties, Buyer will deposit with BankBoston,
N.A., ("▇▇▇▇▇▇▇ Money Escrow Agent"), an irrevocable letter of credit in the
amount of Seven Hundred Twelve Thousand Five Hundred Dollars ($712,500.00) (the
"▇▇▇▇▇▇▇ Money Escrow Deposit"). The ▇▇▇▇▇▇▇ Money Escrow Deposit shall be held
and disbursed by ▇▇▇▇▇▇▇ Money Escrow Agent pursuant to the terms of the ▇▇▇▇▇▇▇
Money Escrow Agreement, appended hereto as Exhibit 14.1 (the "▇▇▇▇▇▇▇ Money
Escrow Agreement"), which ▇▇▇▇▇▇▇ Money Escrow Agreement has been entered into
by the Sellers, Buyer and ▇▇▇▇▇▇▇ Money Escrow Agent. At closing, the ▇▇▇▇▇▇▇
Money Escrow Deposit shall be returned
48
to Buyer. If the Closing does not occur because Buyer materially breached this
Agreement or defaulted in the performance of any of its material obligations
hereunder and Sellers has not breached this Agreement or defaulted in the
performance of any of its material obligations hereunder, Buyer and Sellers
shall execute written instructions to the ▇▇▇▇▇▇▇ Money Escrow Agent directing
it to deliver the ▇▇▇▇▇▇▇ Money Escrow Deposit to Sellers as liquidated damages,
as provided in Section 14.2. If the Closing does not occur because Sellers
materially breached this Agreement or defaulted in the performance of any of its
material obligations hereunder and Buyer has not breached this Agreement or
defaulted in the performance of any of its material obligations hereunder, Buyer
and Sellers shall execute written instructions to the ▇▇▇▇▇▇▇ Money Escrow Agent
directing it to deliver the ▇▇▇▇▇▇▇ Money Escrow Deposit to Buyer and Buyer may
seek specific performance of this Agreement, as provided in Section 14.3
14.2 Liquidated Damages. If this Agreement is terminated by Sellers
------------------
pursuant to Section 15.1 (ii)(b), the Parties agree and acknowledge that Sellers
will suffer damages that are not practicable to ascertain. Accordingly, in such
event, Sellers shall be entitled to the sum of $712,500 as liquidated damages,
payable solely and exclusively through the ▇▇▇▇▇▇▇ Money Escrow Agreement. The
Parties agree that the foregoing liquidated damages are reasonable considering
all the circumstances existing as of the date hereof and constitute the Parties'
good faith estimate of the actual damages reasonably expected to result from the
termination of this Agreement pursuant to Section 15.1 (ii)(b). Sellers agree
that, to the fullest extent permitted by law, the right to receive the ▇▇▇▇▇▇▇
Money Escrow Deposit shall be their sole and exclusive remedy if the Closing
does not occur with respect to any damages whatsoever that Sellers may suffer or
allege to suffer as a result of any claim or cause of action asserted by Sellers
relating to or arising from breaches of the
49
representations, warranties or covenants of Buyer contained in this Agreement
and to be made or performed at or prior to the Closing. Except for a termination
pursuant to Section 15.1 (ii)(b) (for which the sole recourse of Sellers shall
be as provided in this Section 14.2) or pursuant to Section 15.1(i) (for which
no party shall have any liability to the other), the termination of this
Agreement shall not relieve the Parties for any liability or obligation relating
to their breaches of this Agreement occurring prior to such termination.
14.3 Specific Performance. In addition to any other remedies which Buyer
--------------------
may have at law or in equity, Sellers hereby acknowledge that the Station Assets
are unique, and that the harm to Buyer resulting from a breach by Sellers of
their obligations to sell the Station Assets to Buyer cannot be adequately
compensated by damages. Accordingly, Sellers agree that Buyer shall have the
right to have this Agreement specifically performed by Sellers and hereby agree
not to assert any objections to the imposition of remedy of specific
performances by any court of competent jurisdiction.
ARTICLE 15
TERMINATION RIGHTS
------------------
15.1 Termination. This Agreement may be terminated at any time prior to
-----------
Closing as follows:
(i) by the mutual consent of Buyer and Sellers;
(ii) by written notice of (a) Buyer to Sellers if Sellers breach in
any material respect any of their representations or warranties or default in
any material respect in the observance or in the due and timely performance of
any of their covenants or agreements herein contained and such breach or default
shall not be cured within thirty (30) days of the date of notice of breach or
50
default served by Buyer, or (b) Sellers to the Buyer if Buyer breaches in any
material respect any of its representations or warranties or defaults in any
material respect in the observance or in the due and timely performance of any
of its covenants or agreements herein contained and such breach or default shall
not be cured within thirty (30) days of the notice of breach or default served
by Sellers; but such notice and cure period shall not apply in the case of
Buyer's or Sellers' failure to consummate the transactions in accordance with
the terms and times specified in Section 4.1 of this Agreement.
(iii) by Buyer or Sellers by written notice to the other, if a court
of competent jurisdiction or other Governmental Entity shall have issued an
order, decree or ruling or taken any other action (which order, decree or ruling
the parties hereto shall use their best efforts to lift), in each case
permanently restraining, permanently enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable;
(iv) by the party whose qualifications are not at issue, if, for any
reason, the FCC denies or dismisses any of the FCC Applications and the time for
reconsideration or court review under the Communications Act with respect to
such denial or dismissal has expired and there is not pending with respect
thereto a timely filed petition for reconsideration or request for review;
(v) by written notice of Buyer to Sellers if the FCC Consents
contain a condition that reduces the value of this transaction to Buyer and the
time for reconsideration or court review under the Communications Act with
respect to such condition(s) has expired without the filing with respect thereto
of a timely petition for reconsideration or request for review;
(vi) by written notice of Buyer to Sellers, or by Sellers to the
Buyer, if the Closing
51
shall not have been consummated within nine months after acceptance for filing
of the FCC Applications.
(vii) Notwithstanding the foregoing, no party hereto may effect a
termination hereof if such party is in material default or breach of this
Agreement.
ARTICLE 16
RISK OF LOSS
------------
16.1 Risk of Loss. The risk of loss or damage to the Station Assets shall
------------
be upon Sellers at all times prior to the Closing Date. In the event of loss or
damage, Sellers shall promptly notify Buyer thereof, and if the lost or damaged
Station Assets are capable of being replaced or repaired for an aggregate amount
less than $150,000, then Sellers shall, at their sole cost and expense, replace
or repair such Stations Assets prior to the Closing Date or deliver to Buyer at
the Closing an amount in cash equal to the cost of replacement or repair of such
Stations Assets, as mutually agreed in good faith by Buyer and Sellers.
Notwithstanding the foregoing, if the amount required to replace or repair such
Station Assets exceeds $150,000, Sellers may elect not to replace or repair such
Stations Assets, provided, however, that in such event Buyer, at its option, may
elect to terminate this Agreement or agree to accept from Sellers, at the
Closing, an amount in cash equal to the cost to replace or repair such Station
Assets, as mutually agreed in good faith by Buyer and Sellers, and waive any
default or breach with respect to the loss or damage. Buyer may terminate this
Agreement, without any additional obligation to Buyer or Sellers, if a Station
is off the air or operating at less than 90 percent (90%) of its licensed power
for five or more consecutive days or eight (8) or more days in any thirty (30)
day period. Either party may extend the Closing Date by up to 30 days in order
to allow Sellers to complete any repair or replacement, required or authorized
52
by this Section.
ARTICLE 17
MISCELLANEOUS PROVISIONS
------------------------
17.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties contained in this Agreement and in any schedule, instrument or
certificate delivered pursuant hereto, shall survive the Closing until one (1)
year after the Closing Date. The Indemnification Escrow Agreement shall be in
substantially the form of Exhibit10.9 hereto and shall be entered into among
Buyer, Sellers and an indemnification escrow agent reasonably satisfactory to
Buyer and Sellers. Buyer's rights to reimbursement or indemnification for Buyer
Indemnified Costs shall not be affected by any investigation made by Buyer or
whether or not Buyer relied upon any untrue or incorrect representation or
warranty.
17.2 Certain Interpretive Matters and Definitions.
--------------------------------------------
17.2.1 In General. Unless the context otherwise requires, (i) all
----------
references to Sections, Articles or Schedules are to Sections, Articles or
Schedules of or to this Agreement, (ii) each term defined in this Agreement has
the meaning assigned to it, (iii) each accounting term not otherwise defined in
this Agreement has the meaning assigned to it in accordance with generally
accepted accounting principles as in effect on the date hereof, (iv) "or" is
disinjunctive but not necessarily exclusive, and (v) words in the singular
include the plural and vice versa.
----------
17.2.2 Affiliate. Unless otherwise specified, the term "Affiliate"
---------
has the meaning given it in Rule 12b-2 of Regulation 12B under the Securities
Exchange Act of 1934, as amended.
17.2.3 Money. All references to "$" or dollar amounts will be to
-----
lawful currency of the United States of America.
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17.2.4 Knowledge. Representations made "to the best of Sellers'
---------
knowledge "mean to the actual knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ after due inquiry of Sellers' employees or agents who are
responsible for or who reasonably could be expected to have substantial
knowledge about the subject matters of the representation being made.
17.3 Further Assurances. At and after the Closing, Sellers shall from
------------------
time to time, at the request of and without further cost or expense to Buyer,
execute and deliver such other instruments of assignment, conveyance and
transfer and take such other actions as may reasonably be requested in order to
more effectively consummate the transactions contemplated hereby, and Buyer
shall from time to time, at the request of and without further cost or expense
to Sellers, execute and deliver such other instruments and take such other
actions as may reasonably be requested in order to more effectively assume the
Assumed Liabilities.
17.4 Audited Financial Statements. At all times after the date hereof,
----------------------------
Sellers shall, and shall cause their representatives (including their
independent public accountants) to, cooperate at Buyer's expense in all
reasonable respects with the efforts of Buyer and its independent auditors to
prepare such audited and interim unaudited financial statements of the Stations
as Buyer may require. Sellers shall execute and deliver to Buyer's independent
accountants such customary management representation letters as they may require
as a condition to their ability to sign an unqualified report upon the audited
financial statements of the Stations for the periods for which such financial
statements may be required. Sellers shall cause their independent public
accountants to make available to Buyer and its representatives all of their work
papers related to the financial statements or Tax Returns of Sellers (to the
extent they relate to the Stations), and to provide Buyer's independent public
accountants with full access to those personnel who previously have been
54
involved in the audit or review of Sellers' financial statements or Tax Returns.
17.5 Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations hereunder shall be assigned by any of the parties hereto, whether
by operation of law or otherwise, provided, however, that without releasing
Buyer from any of its obligations or liabilities hereunder (i) nothing in this
Agreement shall limit Buyer's ability to sell or transfer this Agreement, or any
or all of its assets (whether by sale of equity or assets, or by merger,
consolidation or otherwise) to an entity controlled by Buyer's Affiliates and
Affiliates of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners Group, LLC , (ii) nothing in this Agreement
shall limit Buyer's ability to assign the Station Licenses (including the right
to acquire the Station Licenses at the Closing) to any subsidiary of Buyer
without the consent of Sellers, and (iii) nothing in this Agreement shall limit
Buyer's ability to make a collateral assignment of its rights under this
Agreement to any institutional lender that provides funds to Buyer without the
consent of Sellers. Sellers shall execute an acknowledgment of such
assignment(s) and collateral assignments in such forms as Buyer or its
institutional lenders may from time to time reasonably request; provided,
however, that unless written notice is given to Sellers that any such assignment
has been consummated or any such collateral assignment has been foreclosed upon,
Sellers shall be entitled to deal exclusively with Buyer as to any matters
arising under this Agreement or any of the other agreements delivered pursuant
hereto. In the event of such an assignment, the provisions of this Agreement
shall inure to the benefit of and be binding on Buyer's successors and assigns.
17.6 Amendments. No amendment, waiver of compliance with any provision or
----------
condition hereof or consent pursuant to this Agreement shall be effective unless
evidenced by an instrument in writing signed by the party against whom
enforcement of any waiver, amendment, change,
55
extension or discharge is sought.
17.7 Headings. The headings set forth in this Agreement are for
--------
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
17.8 Governing Law. The construction and performance of this Agreement
--------------
shall be governed by the laws of the State of Texas without giving effect to the
choice of law provisions thereof.
17.9 Notices. Any notice, demand or request required or permitted to be
-------
given under the provisions of this Agreement shall be in writing and shall be
deemed to have been duly delivered and received on the date of personal
delivery; on the third day after deposit in the U.S. Mail if mailed by
registered or certified mail, postage prepaid and return receipt requested; on
the day after delivery to a nationally recognized overnight courier service if
sent by an overnight delivery service for next morning delivery and shall be
addressed to the following addresses:
(i) In the case of Sellers, to:
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Lake Broadcasting, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
And
▇▇. ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇, ▇▇.
Red River Radio, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, PC
3400 Renaissance Tower
56
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(ii) In the case of Buyer:
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
NextMedia Group, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇-▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ & Associates, P.A.
▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
17.10 Barter and Trade. Buyer shall not assume any Trade Agreements
----------------
hereunder unless (i) the Trade Agreements are listed on Schedule 17.10 or
(ii)the Trade Agreements are entered into with Buyer's written consent.
17.11 Schedules. The schedules and exhibits attached to this Agreement
---------
and the other documents delivered pursuant hereto are hereby made a part of this
Agreement as if set forth in full herein.
17.12 Entire Agreement This Agreement contains the entire agreement among
----------------
the parties hereto with respect to its subject matter and supersedes all
negotiations, prior discussions, agreements, letters of intent, and
understandings, written or oral, relating to the subject matter of this
Agreement.
17.13 Severability. If any provision of this Agreement is held to be
------------
unenforceable, invalid,
57
or void to any extent for any reason, that provision shall remain in force and
effect to the maximum extent allowable, and the enforceability and validity of
the remaining provisions of this Agreement shall not be affected thereby.
17.14 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which will be deemed an original, but all of which
together shall constitute but one and the same instrument.
58
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed and delivered as of the date first above written.
Lake Broadcasting, Inc.
By:______________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
President
Red River Radio, Inc.,
By:______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
NextMedia Group, LLC
By:_____________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Secretary
59