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OPTION AND STOCK PURCHASE AGREEMENT
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by and among
BROADCAST HOLDINGS, INC.
G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
ALLIED CAPITAL FINANCIAL CORPORATION
and
WYCB ACQUISITION CORP.
for the sale and purchase of
Station WYCB(AM)
Washington, D.C.
Dated as of November 19, 1997
TABLE OF CONTENTS
PAGE
1. RULES OF CONSTRUCTION.......................................................1
1.1. Defined Terms..................................................1
1.2. Other Definitions..............................................5
1.3. Number and Gender..............................................5
1.4. Headings and Cross-References..................................5
1.5. Computation of Time............................................5
2. ASSIGNMENT AND EXERCISE OF THE OPTION.......................................6
2.1. Assignment of Option Agreement.................................6
2.2. Exercise of the Option Agreement...............................6
3. PURCHASE PRICE AND METHOD OF PAYMENT........................................6
3.1. Consideration. ................................................6
3.2. Payment at Closing. ...........................................6
3.3. Security for the Promissory Note...............................6
4. FCC APPLICATION AND CLOSING.................................................7
4.1. FCC Application................................................7
4.2. Final Closing Date. ...........................................7
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY........................7
5.1. Existence, Power and Identity..................................7
5.2. Binding Effect.................................................8
5.3. No Violation...................................................8
5.4. Governmental Authorizations....................................8
5.5. Contracts......................................................9
5.6. Insurance......................................................9
5.7. Income Statements..............................................9
5.8. Employees. ...................................................10
5.9. Employee Benefit Plans........................................10
5.10. Environmental Protection......................................11
5.11. Compliance with Law...........................................11
5.12. Litigation....................................................12
5.13. Insolvency Proceedings........................................12
5.14. Sales Agreements..............................................12
5.15. Liabilities. .................................................13
5.16. Sufficiency of Assets.........................................13
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5.17. Certain Interests and Related Parties.........................13
5.18. Taxes.........................................................13
5.19. No Misleading Statements......................................14
5.20. Broker........................................................14
5.21. Subsidiaries/Affiliates.......................................14
5.22. Stock.........................................................14
5.23. Property......................................................14
5.24. Corporate Records.............................................15
5.25. Dividends and Other Distributions.............................15
5.26. Names; Principal Place of Business. .........................15
6. REPRESENTATIONS WARRANTIES AND COVENANTS OF SHAREHOLDER....................15
6.1. Binding Effect................................................15
6.2. Ownership of Stock............................................15
6.3. Validity of Option Agreement. ...............................16
7. BUYER'S REPRESENTATIONS WARRANTIES AND COVENANTS...........................16
7.1. Existence and Power. .........................................16
7.2. Binding Effect. ..............................................16
7.3. No Violation. ................................................16
7.4. Litigation. ..................................................16
7.5. Licensee Qualifications. .....................................16
7.6. Financial Qualifications......................................17
7.7. Subsidiary Status.............................................17
8. COVENANTS WITH RESPECT TO CONDUCT OF THE COMPANY...........................17
8.1. Access. .....................................................17
8.2. Material Adverse Changes; Financial Statements................17
8.3. Conduct of Business...........................................17
8.4. Damage........................................................19
(a) Risk of Loss. ......................................19
(b) Failure of Broadcast Transmissions..................20
(c) Resolution of Disagreements.........................20
(d) Administrative Violations...........................20
8.5. Control of Station. ..........................................20
8.6. Cooperation with Respect to Financial and Tax Matters.........21
8.7. Bank Accounts.................................................21
8.8. Closing Obligations...........................................21
8.9. Time Brokerage and Operating Agreement........................21
9. CONDITIONS PRECEDENT.......................................................22
9.1. Mutual Conditions.............................................22
(a) Approval of Transfer of Control Application. .......22
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(b) Absence of Litigation. .............................22
9.2. Additional Conditions to Buyer's Obligation...................22
(a) Representations and Warranties. ....................22
(b) Compliance with Conditions. ........................22
(c) Discharge of Liens. ................................22
(d) Third-Party Consents................................23
(e) Financial Statements. ..............................23
(f) Sales and Customer Information......................23
(g) Opinion of Company's Counsel. ......................23
(h) Final Order.........................................25
(i) Closing Documents. .................................25
(j) Resignation of Directors and Officers...............25
(k) Stock Certificates..................................25
(l) Records.............................................25
(m) Insurance Policies..................................25
(n) Brokerage Fee. .....................................25
(o) Accounts Payable....................................25
(p) Trade and Barter....................................25
(q) Allied Indebtedness.................................25
9.3. Additional Conditions to Company's Shareholder's and Allied's
Obligation....................................................26
(a) Representations and Warranties. ....................26
(b) Compliance with Conditions. ........................26
(c) Opinion of Buyer's Counsel. ........................26
(d) Payment. ...........................................27
(e) Closing Documents. .................................27
(f) Accounts Receivable. ...............................27
10. INDEMNIFICATION...........................................................27
10.1. Obligations of Allied.........................................27
10.2. Obligations of Buyer..........................................28
10.3. Procedure.....................................................28
(a) Notice. ............................................28
(b) Defense. ...........................................28
10.4. Remedies Cumulative...........................................29
10.5. Notice........................................................29
10.6. Threshold Concerning Section 10.1. ..........................29
10.7. Survival of Representations...................................29
10.8. Tax Returns...................................................29
(a) Preparation and Filing of Returns for Pre-Closing
Periods.............................................29
(b) Preparation and Filing of Returns for Post-Closing
Periods.............................................30
10.9. Allocation of Tax Liability...................................30
10.10. Accounts Payable..............................................30
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11. DEFAULT AND REMEDIES......................................................30
11.1. Opportunity to Cure...........................................30
11.2. Company's, Shareholder's and Allied's Remedies. ..............31
11.3. Buyer's Remedies..............................................31
12. CANCELLATION OF AGREEMENT.................................................31
12.1. Termination of Agreement......................................31
(a) Damage to Station...................................31
(b) Mutual Consent......................................31
(c) Material Breach.....................................31
(d) Bankruptcy; Receivership............................32
(e) FCC Approval........................................32
13. GENERAL PROVISIONS........................................................32
13.1. Fees..........................................................32
13.2. Notices.......................................................32
13.3. Assignment....................................................34
13.4. Exclusive Dealings............................................34
13.5. Third Parties.................................................34
13.6. Indulgences...................................................34
13.7. Prior Negotiations. ..........................................34
13.8. Schedules. ...................................................34
13.9. Entire Agreement; Amendment. .................................35
13.10. Counsel.......................................................35
13.11. Governing Law, Jurisdiction...................................35
13.12. Severability..................................................35
13.13. Counterparts..................................................35
13.14. Further Assurances............................................35
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TABLE OF SCHEDULES
SCHEDULE 3.2 Promissory Note
SCHEDULE 3.3 (i) Stock Pledge Agreement
SCHEDULE 3.3 (ii) Guaranty and Security Agreement
SCHEDULE 3.3 (iii) Warrant
SCHEDULE 5.1 Articles/Bylaws
SCHEDULE 5.4 FCC Licenses
SCHEDULE 5.5 Contracts
SCHEDULE 5.6 Insurance Policies
SCHEDULE 5.7 Bank Accounts
SCHEDULE 5.8 Employees
SCHEDULE 5.9 Employee Benefit Plans
SCHEDULE 5.10 Environmental Issues
SCHEDULE 5.12 Litigation
SCHEDULE 5.16 Condition of Assets
SCHEDULE 5.17 Certain Interests and Related Parties
SCHEDULE 5.23.1 Tangible Personal Property
SCHEDULE 5.23.2 Real Property
SCHEDULE 5.26 Company's Places of Business
SCHEDULE 9.2 Sales and Customer Information
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OPTION AND STOCK PURCHASE AGREEMENT
This OPTION AND STOCK PURCHASE AGREEMENT is entered into as of this 19th
day of November, 1997, by and among Broadcast Holdings, Inc., a District of
Columbia corporation (the "Company"); G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III, an individual who
resides at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (the "Shareholder"); and Allied
Capital Financial Corporation ("Allied"); and WYCB Acquisition Corp., a Delaware
corporation (the "Buyer").
RECITALS
WHEREAS, Shareholder is the sole stockholder of the Company;
WHEREAS, the Company is the licensee of Station WYCB(AM), Washington, D.C.
(the "Station");
WHEREAS, Shareholder granted Allied and certain of its affiliates
("Affiliates") an option dated March 13, 1990, to purchase all of the shares of
stock of the Company owned by Shareholder and the Affiliates have assigned all
right, title and interest in the option to Allied;
WHEREAS, Allied wishes to assign the option to Buyer subject to the terms
of this Agreement;
WHEREAS, Buyer wishes to exercise the option subject to the terms of this
Agreement;
WHEREAS, Shareholder consents to the assignment of the option from Allied
to Buyer, and the exercise thereof, subject to the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and, intending to be legally bound hereby, the parties agree as
follows:
1. RULES OF CONSTRUCTION.
1.1. DEFINED TERMS. As used in this Agreement, the following terms shall
have the following meanings:
"ACCOUNTS PAYABLE" means the liabilities of the Company for services
received or goods acquired arising from the Company's operation of the Station
prior to Closing whether or not the Company has issued, prior to Closing, an
invoice, ▇▇▇▇ or other statement reflecting the amount owed.
"ACCOUNTS RECEIVABLE" means the cash accounts receivable of Company arising
from Company's operation of the Station prior to Closing whether or not the
Company has issued, prior
to Closing, an invoice, ▇▇▇▇ or other statement reflecting the amount owed.
After the Closing, Accounts Receivable shall mean cash accounts receivable of
the Company generated by the Company after the Closing subject to a security
interest as further set forth in the Guaranty and Security Agreement.
"ADMINISTRATIVE VIOLATION" means those violations described in Section 8.4
hereof.
"ALLIED" means Allied Capital Financial Corporation.
AALLIED INDEBTEDNESS" means the amount, secured or unsecured, that the
Company owes to Allied as of the Closing Date.
"BUSINESS" means the business of Company consisting primarily of the
operation of Radio Station WYCB(AM), Washington, D.C.
"BUYER" means WYCB Acquisition Corp., a Delaware corporation, and a
wholly-owned subsidiary of Radio One, Inc.
"BUYER DOCUMENTS" means those documents, agreements and instruments to be
executed and delivered by Buyer in connection with this Agreement as described
in Section 7.2.
"CASH FLOW" means cash received less cash operating expenses, shown as
?broadcast cash flow on the Company's Statements.
"CLOSING" means the consummation of the Transaction (as hereinafter
defined).
"CLOSING DATE" means the date on which the Closing takes place, as
determined pursuant to Section 4.2.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMMISSION" means the Federal Communications Commission.
"COMMUNICATIONS ACT" shall mean the Communications Act of 1934, as amended.
"COMPANY" means Broadcast Holdings, Inc., a District of Columbia
corporation.
"COMPANY DOCUMENTS" means those documents, agreements and instruments to be
executed and delivered by Company in connection with this Agreement as described
in Section 5.1.
"CONTRACTS" means those contracts, leases and other agreements listed or
described in Schedule 5.5 which are in effect on the date hereof as are entered
into on or before the Closing Date
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consistent with the provisions of Section 8.3 (n) hereof, but not including
Sales Agreements and Trade Agreements (as hereinafter defined).
"ENCUMBRANCE" means any claim, charge, easement, encumbrance, security
interest, lien, option or pledge imposed by agreement or law, except for any
restrictions on transfer generally arising under any applicable federal or state
securities law.
"ENVIRONMENTAL LAW" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss. 9601 et seq.,
the Toxic Substances Control Act, as amended, 15 U.S.C. ss. 2601 et seq., the
Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. ss. 6901
et seq., the Clean Water Act, as amended, 42 U.S.C. ss. 1251 et seq., the Clean
Air Act, as amended, 42 U.S.C. ss. 7401 et seq., or any regulations or policies
adopted pursuant to such laws.
"FCC LICENSES" means all licenses, pending applications, permits and other
authorizations issued by the Commission for the operation of the Station listed
on Schedule 5.4.
"FINAL ORDER" means any action that shall have been taken by the Commission
(including action duly taken by the Commission's staff, pursuant to delegated
authority) which shall not have been reversed, stayed, enjoined, set aside,
annulled or suspended; with respect to which no timely request for stay,
petition for rehearing, appeal or certiorari or sua sponte action of the
Commission with comparable effect shall be pending; and as to which the time for
filing any such request, petition, appeal, certiorari or for the taking of any
such sua sponte action by the Commission shall have expired or otherwise
terminated.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof, and any agency, court or other entity that
exercises executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"HAZARDOUS SUBSTANCES" means any hazardous or toxic waste, substance or
material or pollutant as defined under Environmental Laws.
"INDEBTEDNESS" means any note, loan or other debt, whether secured or
unsecured, for borrowed money.
"LOSS" means any action, cost, damage, disbursement, expense, liability,
loss, deficiency, diminution in value, obligation, penalty or settlement of any
kind or nature, whether foreseeable or unforeseeable, including but not limited
to, interest or other carrying costs, penalties, reasonable legal, accounting
and other professional fees and expenses incurred in the investigation,
collection, prosecution and defense of claims and amounts paid in settlement,
that may be imposed on or otherwise incurred or suffered by the specified
person.
3
"LAW" means any constitutional provision, statute or other law, rule,
regulation, or interpretation of any governmental entity and any order,
including any order of any governmental agency.
"MATERIAL CONTRACTS" means those leases, contracts and agreements
specifically designated in Schedule 5.5 as being "Material Contracts."
"OPTION AGREEMENT" means the option granted March 13, 1990, by Shareholder
to Allied Investment Corporation and Allied Financial Services Corporation to
purchase all of the issued and outstanding shares of the Company for the sum of
Ten Dollars ($10.00).
"PROMISSORY NOTE" means the note described in Section 3.2.
"PURCHASE PRICE" shall mean the total consideration paid by Buyer to
acquire the Option Agreement and to satisfy certain Indebtedness, pursuant to
Section 3.
"RADIO ONE, INC." means a Delaware corporation which is the parent of
Buyer.
"SALES AGREEMENTS" means agreements entered into by Company for the sale of
time on the Station for cash, as described in Section 5.14.
"GUARANTY AND SECURITY AGREEMENT" means the agreement described in Section
3.3.
"SHARES" means all the issued and outstanding shares of capital stock of
Company.
"SPECIFIED EVENT" means those broadcast transmission failures described in
Section 8.4(b).
"STATION RECORDS" means those documents that have been maintained in the
Station's public file pursuant to the rules of the FCC, the operating and
maintenance logs of the Station, any program logs and the books of account of
the operation of the Station.
"STOCK PLEDGE AGREEMENT" means the agreement for the pledge of stock of the
Company described in Section 3.3.
"STUDIO SITE" means the real estate located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇.▇. that is currently used as the Station's studio and office
facilities.
"TANGIBLE PERSONAL PROPERTY" means all tangible personal property and
fixtures used or useful in the operation of the Business, including the property
and assets listed or described in Schedule 5.23.1, together with supplies,
inventory, spare parts and replacements thereof and improvements and additions
thereto made between the date hereof and the Closing Date.
4
"TRADE AGREEMENTS" means agreements entered into by Company for the sale of
time on the Station in exchange for merchandise or services.
"TRADE BALANCE" means the difference between the aggregate value of time
owed pursuant to the Trade Agreements and the aggregate value of goods and
services to be received pursuant to the Trade Agreements, as computed in
accordance with the Station's customary bookkeeping practices. The Trade Balance
is "negative" if the value of time owed exceeds the value of goods and services
to be received. The Trade Balance is "positive" if the value of time owed is
less than the value of goods and services to be received.
"TRANSACTION" means the assignment of the Option Agreement to Buyer and
acquisition of the Shares by Buyer as contemplated by this Agreement and the
respective obligations of Company, Shareholder, Allied, and Buyer set forth
herein.
"TRANSFER OF CONTROL APPLICATION" means the application on FCC Form 315
that Shareholder, Company and Buyer shall join in and file with the Commission
requesting its consent to the transfer of control of Company to Buyer.
"TRANSMITTER SITE" means the real estate located at ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ that is currently used as the Station's transmitter
site.
"WARRANT" means the contingent warrant issued by Radio One, Inc. described
in Section 3.3.
1.2. OTHER DEFINITIONS. Other capitalized terms used in this Agreement
shall have the meanings ascribed to them herein.
1.3. NUMBER AND GENDER. Whenever the context so requires, words used in the
singular shall be construed to mean or include the plural and vice versa, and
pronouns of any gender shall be construed to mean or include any other gender or
genders.
1.4. HEADINGS AND CROSS-REFERENCES. The headings of the Sections and
Paragraphs hereof, the Table of Contents, and the Table of Schedules, have been
included for convenience of reference only, and shall in no way limit or affect
the meaning or interpretation of the specific provisions of this Agreement. All
cross-references to Sections or Paragraphs herein shall mean the Sections or
Paragraphs of this Agreement unless otherwise stated or clearly required by the
context. All references to Schedules herein shall mean the Schedules to this
Agreement. Words such as "herein" and "hereof" shall be deemed to refer to this
Agreement as a whole and not to any particular provision of this Agreement
unless otherwise stated or clearly required by the context. The term "including"
means "including without limitation."
1.5. COMPUTATION OF TIME. Whenever any time period provided for in this
Agreement is measured in "business days" there shall be excluded from such time
period each day that is a
5
Saturday, Sunday, recognized federal legal holiday, or other day on which the
Commission's offices are closed and are not reopened prior to 5:30 p.m.
Washington, D.C. time. In all other cases all days shall be counted.
2. ASSIGNMENT AND EXERCISE OF THE OPTION.
2.1. ASSIGNMENT OF OPTION AGREEMENT.
(a) Allied hereby irrevocably assigns the Option Agreement to Buyer on
the terms and conditions described herein and contingent on receipt of the
Promissory Note described in Section 3.2.
(b) Shareholder consents to the assignment of the Option Agreement
from Allied to Buyer on the terms and conditions described herein.
2.2. EXERCISE OF THE OPTION AGREEMENT.
(a) Buyer hereby exercises the option to purchase the Shares from
Shareholder with the concurrent payment of Ten Dollars ($10.00) and by executing
this Agreement Shareholder acknowledges that the notice requirement in paragraph
two of the Option Agreement is satisfied.
(b) Shareholder consents to Buyer's exercise of the option on the
terms and conditions described herein.
3. PURCHASE PRICE AND METHOD OF PAYMENT.
3.1. CONSIDERATION. The Purchase Price for the Option Agreement and
Acquisition of the Shares shall be Three Million Seven Hundred Fifty Thousand
Dollars ($3,750,000) payable as set forth in this Section 3.
3.2. PAYMENT AT CLOSING. At Closing, Buyer shall execute a Promissory Note,
in the form attached hereto as Schedule 3.2, in the principal amount of Three
Million Seven Hundred Fifty Thousand Dollars ($3,750,000). The Promissory Note
shall bear an interest rate of Thirteen Percent (13%) per annum payable
quarterly in cash on the basis of Ten Percent (10%) per annum with the balance
thereof of Three Percent (3%) per annum accrued from the date of issuance of the
Note and compounded quarterly. Any and all outstanding principal of the
Promissory Note together with all accrued and unpaid interest thereon shall be
due and payable on the third anniversary of the Closing.
3.3. SECURITY FOR THE PROMISSORY NOTE. The Promissory Note shall be secured
by: (i) a pledge by Buyer of all of the outstanding shares of capital stock of
the Company to be evidenced by a Stock Pledge Agreement executed as of the
Closing in the form attached hereto as Schedule 3.3(i), (ii) a security interest
in substantially all of the tangible and intangible assets of the Company,
excluding any LMA Agreement between the Buyer and Radio One, Inc., and/or
Company, evidenced
6
by a Guaranty and Security Agreement in the form attached hereto as Schedule 3.3
(ii), and (iii) a contingent Warrant in the form attached hereto as Schedule 3.3
(iii) issued by Radio One, Inc., to be exercised for the number of shares of
Radio One, Inc., having a liquidation value of up to Four Million Dollars
($4,000,000) but only to be exercised upon a default under the Promissory Note
where foreclosure on the stock or assets of the Company as further set forth in
the Warrant, are insufficient to cover the full amount of the Promissory Note.
4. FCC APPLICATION AND CLOSING.
4.1. FCC APPLICATION. Within five (5) business days of the execution of
this Agreement Buyer, Shareholder and the Company will join in filing the
Transfer of Control Application. Buyer, Company and Shareholder diligently shall
take or cooperate in the taking of all steps which are reasonably necessary or
appropriate to expedite the prosecution and grant of the Application. Neither
Buyer, Company nor Shareholder by commission or omission shall knowingly impair
its qualifications as a transferor or transferee of the FCC Licenses. Company
will promptly provide Buyer with a copy of any pleading, order, or other
document served on it relating to the Transfer of Control Application. Company
will use its best efforts and otherwise cooperate with Buyer in responding to
any information requested by the FCC related to the Transfer of Control
Application, in making any amendment to this Agreement requested by the FCC
which does not adversely affect Company in a material manner, and in defending
against any petition, complaint, or objection which may be filed against the
Transfer of Control Application. In the event the Transfer of Control
Application as tendered is rejected for any reason, the party liable for the
rejection shall take all reasonable steps to cure the basis for denial provided
that in no event shall any party be required to take any action which would be
materially adverse to that party's interest. Company and Buyer shall share
equally in the amount of any Commission filing fee.
4.2. FINAL CLOSING DATE. Closing of the purchase of the Shares under this
Agreement shall take place within ten (10) business days after the FCC's
approval of the Transfer of Control Application becomes a Final Order at the
offices of ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇,
▇.▇. ▇▇▇▇▇, or at such other time or place as the parties may agree.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY.
The Company hereby makes to and for the benefit of Buyer, the following
representations, warranties and covenants:
5.1. EXISTENCE, POWER AND IDENTITY. The Company is a corporation duly
organized and validly existing under the laws of the District of Columbia with
full corporate power and authority (a) to own, lease and use its properties and
assets, (b) to conduct the business and operation of the Station as currently
conducted, (c) to execute and deliver this Agreement and each other document,
agreement and instrument to be executed and delivered by Company in connection
with this Agreement (collectively, the "Company Documents"), and to perform and
comply with all of the terms, obligations and covenants to be performed and
complied with by Company hereunder and
7
thereunder and (d) true and correct copies of the Company?s Articles of
Incorporation and Bylaws are attached as Schedule 5.1.
5.2. BINDING EFFECT. The execution, delivery and performance by Company of
this Agreement has been and the Company Documents will be duly authorized by all
necessary corporate action, and copies of those authorizing resolutions,
certified by Company's Secretary shall be delivered to Buyer at Closing. No
other corporate action by Company is required for Company's execution, delivery
and performance of this Agreement or any of Company Documents. This Agreement
has been duly and validly executed and delivered by Company to Buyer and
constitutes a legal, valid and binding obligation of Company, enforceable
against Company in accordance with its terms, subject to bankruptcy,
reorganization, fraudulent conveyance, insolvency, moratorium and similar laws
relating to or affecting creditors, and other obligees' rights generally and the
exercise of judicial discretion in accordance with general equitable principles.
5.3. NO VIOLATION. None of (i) the execution, delivery and performance by
Company of this Agreement or any of the Company Documents, (ii) the consummation
of the Transaction, or (iii) Company's compliance with the terms or conditions
hereof will, with or without the giving of notice or the lapse of time or both,
conflict with, breach the terms or conditions of, constitute a default under, or
violate (a) Company's articles of incorporation or bylaws, (b) any judgment,
decree, order, consent, agreement, lease or other instrument (including any
Material Contract) to which Company is a party or by which Company or its
Business may be legally bound or affected, or (c) any law, rule, regulation or
ordinance of any Governmental Authority applicable to Company or its Business or
the operation of the Station.
5.4. GOVERNMENTAL AUTHORIZATIONS. Except for the FCC Licenses or as set
forth on Schedule 5.4 hereto, no licenses, permits, or authorizations from any
Governmental Authority are required to own, use or operate the Station or to
conduct the Business as currently operated and conducted by Company. The FCC
Licenses are all the Commission authorizations held by Company with respect to
the Station, and are all the Commission authorizations used in or necessary for
the lawful operation of the Station as currently operated by Company. The FCC
Licenses are in full force and effect, are subject to no conditions or
restrictions other than those of general applicability and are unimpaired by any
acts or omissions of Company, Company's officers, employees or agents. Company
has delivered true and complete copies of all FCC Licenses to Buyer. There is
not pending or, to the knowledge of Company, threatened, any action by or before
the Commission or any other Governmental Authority to revoke, cancel, rescind or
modify any of the FCC Licenses (other than proceedings to amend Commission rules
of general applicability or otherwise affecting the broadcast industry
generally), and there is not now issued, outstanding or pending or, to the
knowledge of Company, threatened, by or before the Commission or any other
Governmental Authority, any order to show cause, notice of violation, notice of
apparent liability, or notice of forfeiture or complaint against Company or
otherwise with respect to the Station. The Station is operating in material
compliance with all FCC Licenses, the Communications Act and the published
rules, regulations, and policies of the Commission. The Commission's most recent
renewals of the FCC Licenses were not challenged by any petition to deny or any
competing application. Company
8
has no knowledge of any facts relating to it that, under the Communications Act
or the published rules, regulations, and policies of the Commission would
constitute cause for the Commission to deny Commission renewal of the FCC
Licenses or deny Commission consent to the Transaction.
5.5. CONTRACTS. Schedule 5.5 lists all Contracts to which Company is a
party for which a payment greater than $500 is due for the unexpired term
thereof. The Company has provided Buyer access to copies of all such Contracts.
The Contracts so furnished to Buyer have not been amended or terminated and are
in full force and effect. Company has identified each contract which is a
Material Contract with an asterisk on Schedule 5.5.
5.6. INSURANCE. Schedule 5.6 lists all insurance policies held by Company
with respect to the Business and operation of the Station. Such insurance
policies are in full force and effect, all premiums with respect thereto are
currently paid and Company is in compliance with the terms thereof. Company has
not received any notice from any issuer of any such policies of its intention to
cancel, terminate, or refuse to renew any policy issued by it. Company will
maintain the insurance policies listed on Schedule 5.6 in full force and effect
through the Closing Date.
5.7. INCOME STATEMENTS.
(a) Company has furnished Buyer with the unaudited cash-based income
statements (the "Statements") for the calendar years 1993, 1994, 1995 and 1996.
The Statements fairly present Company's income received and cash expenses of the
Station (not including interest, taxes or depreciation and amortization) as of
the dates and for the periods indicated. From December 31, 1996 to the date of
execution of this Agreement, there has been no material adverse change to the
condition of the assets of the Station.
(b) From December 31, 1996 to the date of execution of this Agreement,
(i) Company has not made any contract, agreement or commitment or incurred any
obligation or liability (contingent or otherwise), except in the ordinary course
of business and consistent with past business practices, or (ii) there has not
been any discharge or satisfaction of any obligation or liability owed by
Company, which is not in the ordinary course of business or which is
inconsistent with past business practices.
(c) Company maintains only the bank accounts as shown in Schedule 5.7
and no other bank accounts of any kind. Buyer has been provided with bank
statements, dated as indicated on Schedule 5.7, related to such accounts (the
"Bank Statements"). Except as shown on such Bank Statements or on Schedule 5.7,
and, with respect to items which have not cleared as of the last Bank
Statements, as shown on the Company's cash receipts and disbursements journal,
there have been no material receipts or disbursements, whether by cash or check,
by the Company of any kind except as specifically permitted hereunder. Since the
date of the last of the Bank Statements furnished to Buyer by the Company, no
checks have been issued for any purpose other than in the ordinary course of
business except as specifically permitted hereunder.
9
5.8. EMPLOYEES. Except as otherwise listed in Schedule 5.8, (a) no employee
of Company is represented by a union or other collective bargaining unit, no
application for recognition as a collective bargaining unit has been filed with
the National Labor Relations Board, and, to the knowledge of Company, there has
been no concerted effort to unionize any of Company's employees and (b) Company
has no other written or oral employment agreement or arrangement with any
Company employee, and no written or oral agreement concerning bonus,
termination, hospitalization or vacation. As of this date there is no and at the
time of Closing there will not be any consideration of whatever nature due and
owing by Allied, Shareholder or the Company to any employee of the Company whose
employment is to be terminated effective as of the Closing except regular salary
payments which shall be satisfied by Allied at the end of such employee's
regular pay period. Included in Schedule 5.8 is a list of all persons currently
employed at Company together with an accurate description of the material terms
and conditions of their respective employment as of the date of this Agreement.
Company will promptly advise Buyer of any changes that occur prior to Closing
with respect to such information, provided, that Company, Shareholder and Allied
have no obligation to induce any Company employee to remain employed until the
Closing Date, nor any obligation to Buyer to retain any or all of the employees
until the Closing Date in the event any or all of such employees choose to
resign provided, however, that neither Company Shareholder nor Allied will
encourage employees to seek other employment. Within five (5) days of the filing
of the application specified in Section 4.1, Allied will provide written notice
to each employee that he or she may be terminated by Buyer effective as of the
Closing.
5.9. EMPLOYEE BENEFIT PLANS.
(a) Except as described in Schedule 5.9, Company has not at any time
established, sponsored, maintained, or made any contributions to, or been a
party to any contract or other arrangement or been subject to any statute or
rule requiring it to establish, maintain, sponsor, or make any contribution to,
(i) any "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended, and regulations
thereunder ("ERISA")) ("Pension Plan"); (ii) any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA) ("Welfare Plan"); or (iii) any deferred
compensation, bonus, stock option, stock purchase, or other employee benefit
plan, agreement, commitment, or arrangement ("Other Plan"). Company has no
obligation or liability (whether accrued, absolute, contingent, or unliquidated,
whether or not known, and whether due or to become due) with respect to any
"employee benefit plan" (as defined in Section 3(3) of ERISA), or Other Plan
that is not listed in Schedule 5.9.
(b) Each plan or arrangement listed in Schedule 5.9 (and any related
trust or insurance contract pursuant to which benefits under such plans or
arrangements are funded or paid) has been administered in all material respects
in compliance with its terms and in both form and operation is in compliance
with applicable provisions of ERISA, the Code, the Consolidated Omnibus Budget
Reconciliation Act of 1986 and regulations thereunder, and other applicable law.
Each Pension Plan listed in Schedule 5.9 has been determined by the Internal
Revenue Service to be qualified under Section 401(a) and, if applicable, Section
401(k) of the Code, and nothing has occurred or been omitted since the date of
the last such determination that resulted or could result
10
in the revocation of such determination. To its knowledge Company has made all
required contributions or payments to or under each plan or arrangement listed
in Schedule 5.9 on a timely basis.
(c) The consummation of this Agreement (and the continued employment
by Buyer of the employees of Company) will not result in any liability to Buyer
for taxes, penalties, interest or any other claims resulting from any employee
benefit plan (as defined in Section 3(3) of ERISA) or Other Plan. In addition,
Company makes the following representations to the best of its knowledge (i) as
to all of its Pension Plans: (a) Company has not become liable to the PBGC under
ERISA under which a lien could attach to the assets of Company; (b) Company has
not ceased operations at a facility so as to become subject to the provisions of
Section 4062(e) of ERISA; and (c) Company has not made a complete or partial
withdrawal from a multi-employer plan (as defined in Section 3(37) of ERISA) so
as to incur withdrawal liability as defined in Section 4201 of ERISA, and (ii)
all group health plans maintained by Company have been operated in material
compliance with Section 4980B(f) of the Code.
5.10. ENVIRONMENTAL PROTECTION. Except as set forth on Schedule 5.10, to
the knowledge of Company (a) no Hazardous Substances have been treated, stored,
used, released or disposed of on the Studio Site or Transmitter Site in any
manner that would cause Company to incur material liability under any
Environmental Laws; (b) Company is not liable for cleanup or response costs with
respect to any present or past emission, discharge, or release of any Hazardous
Substances; (c) no "underground storage tank" (as that term is defined in
regulations promulgated by the federal Environmental Protection Agency) is used
in the operation of the Station or is located on the Studio Site or the
Transmitter Site; (d) there are no pending actions, suits, claims, legal
proceedings or any other proceedings based on environmental conditions or
noncompliance at the Studio Site or Transmitter Site, or any part thereof, or
otherwise arising from Company's activities involving Hazardous Substances; (e)
no notice, summons, citation, directive, letter or other communication regarding
Hazardous Substances has been received from any party concerning any intentional
or unintentional action or omission on the part of the Company; (f) there are no
conditions, facilities, procedures or any other facts or circumstances at the
Studio Site or Transmitter Site which constitute material noncompliance with
Environmental Laws; and (g) there are no structures, improvements, equipment,
activities, fixtures or facilities at the Studio Site or Transmitter Site which
are constructed with, use or otherwise contain Hazardous Substances, including,
but without limitation, friable asbestos or material amounts of polychlorinated
biphenyls.
5.11. COMPLIANCE WITH LAW. To the Company's knowledge there is no
outstanding complaint, citation, or notice issued by any Governmental Authority
asserting that Company is in material violation of any law, regulation, rule,
ordinance, order, decree or other material requirement of any Governmental
Authority (including any applicable statutes, ordinances or codes relating to
zoning and land use, health and sanitation, environmental protection,
occupational safety and the use of electric power) affecting the Business or
operations of the Station, and Company is in material compliance with all such
laws, regulations, rules, ordinances, decrees, orders and requirements. Without
limiting the foregoing:
11
(a) The Station's transmitting and studio equipment is in all material
respects operating in accordance with the terms and conditions of the FCC
Licenses, and the rules, regulations, and policies of the Commission, including
all requirements concerning equipment authorization and human exposure to radio
frequency radiation.
(b) Company has, in the conduct of the Business, materially complied
with all applicable laws, rules and regulations relating to the employment of
labor, including those concerning wages, hours, equal employment opportunity,
collective bargaining, pension and welfare benefit plans, and the payment of
Social Security and similar taxes, and Company is not liable for any arrears of
wages or any tax penalties due to any failure to comply with any of the
foregoing.
(c) All ownership reports, employment reports, tax returns and other
material documents required to be filed by Company with the Commission or other
Governmental Authority have been filed; such reports and filings are accurate
and complete in all material respects; such material items as are required to be
placed in the Station's local public inspection file have been placed in such
file; all proofs of performance and measurements that are required to be made by
Company with respect to the Station's transmission facilities have been
completed and filed at the Station; and all material information contained in
the foregoing documents is true, complete and accurate as of the date thereof.
(d) Company has paid to the Commission the regulatory fees due for the
Station for the years 1994-96 and will timely pay the regulatory fee due for
1997.
5.12. LITIGATION. Except for proceedings affecting radio broadcasters
generally and except as set forth on Schedule 5.12, there is no litigation,
complaint, investigation, suit, claim, action or proceeding pending, or to the
knowledge of Company, threatened before or by the Commission, any other
Governmental Authority, or any arbitrator or other person or entity relating to
the Business or the operations of the Station. Except as set forth on Schedule
5.12, there is no other litigation, action, suit, complaint, claim,
investigation or proceeding pending, or to the knowledge of Company, threatened
that may give rise to any claim against the Business or adversely affect
Company's ability to consummate the Transaction as provided herein.
5.13. INSOLVENCY PROCEEDINGS. No insolvency proceedings of any character,
including bankruptcy, receivership, reorganization, composition or arrangement
with creditors, voluntary or involuntary, affecting Company, the Business or the
Station are pending or, to the knowledge of Company, threatened. Company has not
made an assignment for the benefit of creditors.
5.14. SALES AGREEMENTS. The Sales Agreements in existence on the date
hereof have been entered into in the ordinary course of the Business, at rates
consistent with Company's usual past practices and each Sales Agreement is for a
term no longer than 13 weeks or, if longer, is terminable by the Station upon
not more than 15 days notice.
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5.15. LIABILITIES. Except for the Allied Indebtedness and payables arising
in the ordinary course of business, there are no known liabilities or
obligations of Company relating to the Business or the Station, whether related
to tax or non-tax matters, except taxes not due to be paid.
5.16. SUFFICIENCY OF ASSETS. Except as disclosed separately in Schedule
5.16, the material assets currently used in the Business are in working
condition and are in operation and use in the ordinary course of the Business
and are sufficient for the operation of the Business as currently conducted. The
material broadcast-related assets of the Business are and, on the Closing Date
will be, sufficient to conduct the operation and business of the Station in the
manner in which it is currently being conducted; and no material adverse change
shall have occurred to the condition of such related broadcast assets.
5.17. CERTAIN INTERESTS AND RELATED PARTIES. Except as set forth in
Schedule 5.17 and except for the fact that Shareholder is an officer, director
and principal of Allied, (a) Shareholder has neither any material interest in
any property used in or pertaining to the Business, nor is indebted or otherwise
obligated to Company; (b) Company is not indebted or otherwise obligated to
Shareholder or others except for amounts due under arrangements made in the
ordinary course of business as to salary or reimbursement of ordinary business
expenses not unusual in amount or significance; (c) neither Company nor any
shareholder, officer or director of Company has any interest whatsoever in any
corporation, firm, partnership or other business enterprise which has had any
business transactions with Company relating to the Business or the Station; and
(d) no shareholder of Company has entered into any transactions with Company
relating to the Business or the Station. The consummation of the transactions
contemplated by this Agreement will not (either alone, or with the occurrence of
any termination or constructive termination of any arrangement, or with the
lapse of time, or both) result in any benefit or payment (severance or other)
arising or becoming due from Company to Shareholder after the Closing Date.
5.18. TAXES. The Company has timely filed with all appropriate Governmental
Authority all federal, state, local, and other tax or information returns and
tax reports (including, but not limited to, all income tax, unemployment
compensation, social security, payroll, sales and use, profit, excise,
privilege, occupation, property, ad valorem, franchise, license, school and any
other tax under the laws of the United States or of any state or any municipal
entity or of any political subdivision with valid taxing authority) due for all
periods ended on or before the date hereof. To Company's knowledge, Company has
paid in full all federal, state, commonwealth, foreign, local and other
governmental taxes, estimated taxes, interest, penalties, assessments and
deficiencies (collectively, "Taxes") which have become due pursuant to such
returns or without returns or pursuant to any assessments received by Company.
To Company's knowledge such returns and forms are true, correct and complete in
all material respects, and Company has no liability for any Taxes in excess of
the Taxes shown on such returns. Company is not a party to any pending action or
proceeding and, to the knowledge of Company, there is no action or proceeding
threatened by any Governmental Authority against Company for assessment or
collection of any Taxes, and no unresolved claim for assessment or collection of
any Taxes has been asserted against Company. The Company has not
13
executed any agreement with any Governmental Authority extending the period for
assessment or collection of any Taxes. There are no liens for any Taxes on the
assets of the Company.
5.19. NO MISLEADING STATEMENTS. No provision of this Agreement relating to
Company, the Business, or Station or any Schedule contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact required to be stated in order to make the statement, in light of the
circumstances in which it is made, not misleading, and Company will promptly
disclose to Buyer any material fact that Company is obligated to disclose to
assure the continuing accuracy of the representations and warranties contained
in this Section 5 until the Closing Date. All Schedules attached hereto are
materially accurate and complete as of the date hereof.
5.20. BROKER. With the exception of Shareholder's and Company's brokerage
arrangement with ▇▇▇▇▇▇▇▇▇ & Co., Inc. there is no broker or finder or other
person who would have any valid claim against any of the parties to this
Agreement for a commission or brokerage fee or payment in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
of or action taken by Company. Allied will pay the brokerage fee due ▇▇▇▇▇▇▇▇▇ &
Co., Inc. at Closing.
5.21. SUBSIDIARIES/AFFILIATES. The Company does not have any subsidiaries
or affiliates. The Company does not hold title to the stock of any other
corporation.
5.22. STOCK. The authorized capital stock of Company consists of 1,000
shares of common stock and 500,000 shares of preferred stock. There are
currently 100 shares of issued and outstanding common stock all of which are
owned by Shareholder and no shares of preferred stock of the Company are issued
and outstanding. At the Closing, Buyer will acquire good and marketable title to
and complete ownership of the Shares, free and clear of any Encumbrance. Other
than the Option Agreement, the Company has no outstanding options,
subscriptions, warrants, calls, commitments or agreements to issue or to
repurchase any shares of its stock or other securities, including any right of
conversion or exchange under any outstanding security or other instrument. There
are no unsatisfied preemptive rights in respect of the Shares.
5.23. PROPERTY. Schedule 5.23.1 lists the tangible personal property of
Company. The Company has and will have at Closing good and marketable title to
all of its assets, free and clear of all Encumbrances of any nature whatsoever,
except for taxes, assessments, governmental charges or levies on its property,
if such assessments, governmental charges or levies shall not at the time be due
and delinquent and except as permitted by agreements between the parties. The
Company owns or licenses all material trademarks, trade names, service marks,
copyrights, and all computer programs, software and other intangible rights and
property necessary to conduct its business in the ordinary course consistent
with past practices. All real estate owned or leased by Company is separately
listed on Schedule 5.23.2 and all material leasehold properties held by Company
as lessee are held under valid, binding and enforceable leases, subject only to
such exceptions as are not, individually or in the aggregate, material to the
Business. To the knowledge of the Company neither the whole nor any portion of
any of the leased real property is subject to any pending condemnation
14
or similar proceeding by any Governmental Authority. The Company has all
consents, permits, licenses or certificates of occupancy pertaining to the
operations conducted on any leased real property the absence of which would have
a material adverse effect on the business, operations or financial condition of
the Company. The Company has not received written notification specifying the
existence of any violation (which has not been cured) of any building, zoning or
other law, ordinance or regulation in respect of the leased real property or
structures thereon or the use thereof.
5.24. CORPORATE RECORDS. The corporate records of Company have been made
available to Buyer and accurately represent the status of Company in all
material respects.
5.25. DIVIDENDS AND OTHER DISTRIBUTIONS. There has been no dividend or
other distribution of assets or securities whether consisting of money, property
or any other thing of value, declared, issued or paid subsequent to the date of
the most recent Statement described in Section 5.7, except as specifically
permitted herein.
5.26. NAMES; PRINCIPAL PLACE OF BUSINESS. The addresses of Company's chief
executive office and all of Company's additional places of business, and of all
places where any of the tangible personal property of Company is now located, or
has been located during the past 180 days, are correctly listed in Schedule
5.26. During the past five years, Company has not been known by or used, nor, to
the best of Company's knowledge, has any prior owner of the Station been known
by or used, any corporate, partnership, fictitious or other name in the conduct
of the Station's business or in connection with the ownership, use or operation
of the Station, except WYCB-AM or Broadcast Holdings, Inc.
6. REPRESENTATIONS WARRANTIES AND COVENANTS OF SHAREHOLDER.
The Shareholder hereby makes to and for the benefit of Buyer, the following
representations and warranties:
6.1. BINDING EFFECT. This Agreement constitutes the legally valid and
binding obligation of Shareholder, enforceable against him in accordance with
its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally.
6.2. OWNERSHIP OF STOCK. Shareholder is the sole shareholder of the Company
and Shareholder holds title to 100 shares of common stock and no shares of
preferred stock. Such shares are owned free and clear of any Encumbrance. The
Shares are validly issued, fully paid and nonassessable. Other than the Option
Agreement, Shareholder is not a party to any outstanding options, subscriptions,
warrants, calls, commitments or agreements relating to the disposition of any
shares of stock in the Company, including any right of conversion or exchange
under any outstanding security or other instrument. There are no preemptive
rights to which Shareholder is entitled pursuant to the Articles of
Incorporation.
15
6.3. VALIDITY OF OPTION AGREEMENT. The Option Agreement is in full force
and effect and has not been previously exercised, revoked, canceled or
terminated.
7. BUYER'S REPRESENTATIONS WARRANTIES AND COVENANTS. Buyer hereby makes to and
for the benefit of Company and Shareholder, the following representations,
warranties and covenants:
7.1. EXISTENCE AND POWER. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
corporate power and authority to assume and perform this Agreement.
7.2. BINDING EFFECT. The execution, delivery and performance by Buyer of
this Agreement, and each other document, agreement and instrument to be executed
and delivered by Buyer in connection with this Agreement, specifically including
without limitation the Note, the Guaranty and Security Agreement, the Stock
Pledge Agreement and the UCC's, (collectively, the "Buyer Documents") has been
or will be duly authorized by all necessary corporate action, and copies of
resolutions of the Buyer's Board of Directors, certified by Buyer's Secretary,
shall be delivered to Shareholder at Closing. No other corporate action by Buyer
is required for Buyer's execution, delivery and performance of this Agreement or
any of the Buyer Documents. This Agreement has been, and each of the Buyer
Documents will be, duly and validly executed and delivered by Buyer to Company
and constitutes a legal, valid and binding obligation of Buyer, enforceable in
accordance with its terms, subject to bankruptcy, reorganization, fraudulent
conveyance, insolvency, moratorium and similar laws relating to or affecting
creditors' and other obligees' rights generally and the exercise of judicial
discretion in accordance with general equitable principles.
7.3. NO VIOLATION. None of (a) the execution, delivery and performance by
Buyer of this Agreement or any of the Buyer Documents, (b) the consummation of
the Transaction, or (c) Buyer's compliance with the terms and conditions hereof
will, with or without the giving of notice or the lapse of time or both,
conflict with, breach the terms or conditions of, constitute a default under, or
violate (i) Buyer's articles of incorporation or bylaws or (ii) any judgment,
decree, order, consent agreement, indenture, lease or other instrument to which
Buyer is a party or by which Buyer is legally bound.
7.4. LITIGATION. There is no litigation, action, suit, complaint,
proceeding or investigation, pending or, to the knowledge of Buyer, threatened
that may adversely affect Buyer's ability to consummate the Transaction as
provided herein. Buyer is not aware of any facts that could reasonably result in
any such proceedings.
7.5. LICENSEE QUALIFICATIONS. To the knowledge of Buyer there is no fact
that would, under the rules and regulations of the Commission, disqualify Buyer
from being the transferee of the Shares or the owner and operator of the
Station. Should Buyer become aware of any such fact, it
16
will promptly inform Company, and Buyer will use commercially reasonable efforts
to remove any such disqualification. Buyer will not take any action that Buyer
knows, or has reason to believe, would result in such disqualification.
7.6. FINANCIAL QUALIFICATIONS. Buyer has the financial capacity to perform
its obligations hereunder.
7.7. SUBSIDIARY STATUS. As of the Closing, Buyer will be an Unrestricted
Subsidiary as such term is defined in the Indenture dated as of May 15, 1997,
with respect to Radio One, Inc.'s 12% Senior Subordinated Notes due 2004.
8. COVENANTS WITH RESPECT TO CONDUCT OF THE COMPANY.
8.1. ACCESS. Between the date hereof and the Closing Date, Company shall
give Buyer and representatives of Buyer reasonable access during normal business
hours to the Business, the Station, the employees of Company (with the prior
consent of Company not to be unreasonably withheld) and the books and records of
Company relating to the Business and the operation of the Station. It is
expressly understood that, pursuant to this Section, Buyer, at its expense,
shall be entitled to conduct such engineering inspections of the Station, such
environmental assessments and surveys of the Studio Site and the Transmitter
Site (subject to the landlord's prior approval, which Company will cooperate in
obtaining, and provided Buyer restores such sites after such assessments), and
such reviews of Company's financial records as Buyer may desire, so long as the
same do not unreasonably interfere with Company's operation of the Business. No
inspection or investigation made by or on behalf of Buyer, or Buyer's failure to
make any inspection or investigation, shall affect Company's representations,
warranties and covenants hereunder or be deemed to constitute a waiver of any of
those representations, warranties and covenants.
8.2. MATERIAL ADVERSE CHANGES; FINANCIAL STATEMENTS. Through the Closing
Date:
(a) Company shall promptly notify Buyer of any event of which it obtains
knowledge which has had or is likely to have a material adverse effect on the
Business.
(b) Company shall furnish to Buyer (i) monthly cash-based income statements
for Company within fifteen (15) days of the end of the month and (ii) such other
reports as Buyer may reasonably request relating to Company.
(c) Company shall promptly furnish to Buyer copies of all Tax Returns or
excerpts thereof filed with any Governmental Authority relating to Company.
8.3. CONDUCT OF BUSINESS. Between the date that this Agreement is executed
and the Closing Date, Company covenants and agrees that Company shall not
without the prior written consent of Buyer, unless otherwise permitted by this
Agreement:
17
(a) conduct the Business in any manner except in the ordinary course
consistent with past practices;
(b) issue, sell or deliver, split, reclassify, combine or otherwise adjust,
any stock, bonds or other securities of which Company is the issuer (whether
authorized and unissued or held in treasury), or grant or issue any options,
warrants or other rights (including convertible securities) calling for the
issue thereof;
(c) borrow any funds or incur, assume or become subject to, whether
directly or by way of guarantee or otherwise, any obligation or liability
(absolute or contingent), except with respect to liabilities and obligations
arising in the ordinary course of business and consistent with past amounts and
practice;
(d) mortgage or pledge any of its assets, tangible or intangible;
(e) except in the ordinary course of business, sell, lease, exchange or
otherwise transfer, or agree to sell, lease, exchange or otherwise transfer, any
of its material assets, property or rights or cancel any debts or claims;
(f) grant any right of first refusal, option or similar contract to
purchase any of the assets, property or rights used in the Business or held by
Company;
(g) except in the ordinary course of business or as required by Law, make
or agree to any material amendment to or termination of any FCC License relating
to the Business or to which Company is a party;
(h) except as required by Law, adopt, any profit-sharing, bonus, deferred
compensation, insurance, pension, retirement, severance or other employee
benefit plan, payment or arrangement or, except in the ordinary course of
business, enter into any employment, consulting or management contract;
(i) merge or consolidate with any other corporation, acquire control of any
other corporation or business entity, or take any steps incident to, or in
furtherance of, any of such actions, whether by entering into an agreement
providing therefore or otherwise;
(j) make any tax election inconsistent with past practice or Buyer's
interests, or except as required by Law or GAAP, make any material alteration in
the manner of keeping its books, accounts or records, or in the accounting
practices therein reflected;
(k) solicit, either directly or indirectly, initiate, encourage or accept
any offer for the purchase or acquisition of the Business, Company or any of
their respective assets by any party other than Buyer;
18
(l) set aside or pay any dividend on Shares or property or directly or
indirectly redeem, purchase or otherwise acquire any of its own stock or debt,
or make any other distributions of its assets to its Shareholder provided that,
one day prior to the Closing, Company shall be specifically permitted to
dividend or otherwise pay to Allied the amount of all cash held by the Company,
the Business or the Station;
(m) amend or alter the Certificate of Incorporation or Bylaws or other
charter documents of Company;
(n) enter into, extend (except as required by the terms thereof) or amend
any Material Contract, other than with respect to Contracts for the purchase,
production, distribution or licensing of programming in the ordinary course of
business and consistent with prior practice;
(o) enter into any other transactions involving liabilities of more than
$25,000.00 on the part of Company;
(p) terminate without comparable replacement or fail to renew any insurance
coverage applicable to the assets or properties of Company; or
(q) compromise or settle any claims or rights for or having a value, in
excess of $25,000.00.
8.4. DAMAGE.
(A) RISK OF LOSS. The risk of loss or damage, confiscation or
condemnation of the Business, the Station and all associated assets shall be
borne by Company at all times prior to Closing. In the event of material loss or
damage, Company shall promptly notify Buyer thereof and use commercially
reasonable efforts to repair, replace or restore the lost or damaged property to
its former condition as soon as possible. If the cost of repairing, replacing or
restoring any lost or damaged property is Twenty-Five Thousand Dollars ($25,000)
or less, and Company has not repaired, replaced or restored such property prior
to the Closing Date, Closing shall occur as scheduled and Buyer may deduct from
the principal amount of the Promissory Note to be delivered at Closing the
amount necessary to restore the lost or damaged property to its former
condition. If the cost to repair, replace, or restore the lost or damaged
property exceeds Twenty-Five Thousand Dollars ($25,000), and Company has not
repaired, replaced or restored such property prior to the Closing Date to the
satisfaction of Buyer, Buyer may, at its option:
(1) elect to consummate the Closing in which event Buyer may deduct
from the principal amount of the Promissory Note to be delivered at Closing the
amount necessary to restore the lost or damaged property to its former condition
less the proceeds payable under any applicable insurance policies with respect
to such claim; or
19
(2) elect to postpone the Closing, with prior consent of the
Commission if necessary, for such reasonable period of time (not to exceed
ninety (90) days) as is necessary for Company to repair, replace or restore the
lost or damaged property to its former condition. If, after the expiration of
such extension period the lost or damaged property has not been fully repaired,
replaced or restored to Buyer's reasonable satisfaction, Buyer may terminate
this Agreement, and the parties shall be released and discharged from any
further obligation hereunder.
(B) FAILURE OF BROADCAST TRANSMISSIONS. Company shall give prompt
written notice to Buyer if any of the following (a "Specified Event") shall
occur and continue for a period of more than four (4) hours (except for routine
maintenance): (i) the transmission of the regular broadcast programming of the
Station in the normal and usual manner is interrupted or discontinued; or (ii)
the Station is operated at less than its licensed antenna height above average
terrain or at less than eighty percent (80%) of its licensed effective radiated
power. If, prior to Closing, the Station has not operated at its licensed
operating parameters for more than thirty-six (36) hours (or, in the event of
force majeure or utility failure affecting generally the market served by the
Station, ninety-six (96) hours), whether or not consecutive, during any period
of thirty (30) consecutive days, or if there are three (3) or more Specified
Events each lasting more than four (4) consecutive hours, then Buyer may, at its
option: (i) terminate this Agreement, or (ii) proceed in the manner set forth in
Section 8.4(a)(1) or 8.4(a)(2). In the event of termination of this Agreement by
Buyer pursuant to this Section, the parties shall be released and discharged
from any further obligation hereunder.
(C) RESOLUTION OF DISAGREEMENTS. If the parties are unable to agree
upon the extent of any loss or damage, the cost to repair, replace or restore
any lost or damaged property, the adequacy of any repair, replacement, or
restoration of any lost or damaged property, or any other matter arising under
this Section, if the amount in issue is less than $25,000, Buyer shall deduct
its reasonable estimated cost (less proceeds payable under any applicable
insurance policy) from the Purchase Price. If either party believes the amount
to be greater than $25,000 and Buyer is seeking compensation from Company for
that greater amount, then the parties shall enter into negotiations in an
attempt to reach a satisfactory resolution. If after a thirty-day negotiation
period the parties fail to reach an agreement, then either Company or Buyer may
terminate this Agreement and shall be released and discharged from any further
obligation hereunder.
(D) ADMINISTRATIVE VIOLATIONS. If Company receives any finding, order,
complaint, citation or notice prior to Closing which states that any aspect of
the Business' operation violates or may violate any rule, regulation or order of
the Commission or of any other Governmental Authority (an "Administrative
Violation"), including, any rule, regulation or order concerning environmental
protection, the employment of labor or equal employment opportunity, Company
shall promptly notify Buyer of the Administrative Violation, use commercially
reasonable efforts to remove or correct the Administrative Violation, and be
responsible prior to Closing for the payment of all costs associated therewith,
including any fines or back pay that may be assessed.
8.5. CONTROL OF STATION. The Transaction shall not be consummated until
after the Commission has given its written consent thereto and between the date
of this Agreement and the
20
Closing Date, Shareholder and Company shall control, supervise and direct the
operation of the Station.
8.6. COOPERATION WITH RESPECT TO FINANCIAL AND TAX MATTERS. From the date
of Closing and for a period of three (3) years thereafter, Allied shall provide
Buyer with such cooperation and information as Buyer shall reasonably request in
Buyer's: (i) filing of any tax return, amended return or claim or refund, (ii)
determining a liability for taxes or a right to a refund of taxes, (iii)
participating in or conducting any audit or proceeding in respect of taxes or
(iv) analysis and review of the Statements. Such cooperation and information
shall include providing copies of relevant tax returns or portions thereof,
together with accompanying schedules and related work papers and documents
relating to rulings or other determinations by tax authorities. Allied shall
make the Company's independent accounting firm and the information relied upon
by that firm, available to provide explanations of any documents or information
provided hereunder. Such cooperation shall not mean that Allied is required to
bear responsibility for any out-of-pocket expenses incurred (although Allied
remains liable for its indemnification obligations if any under Section 10.1).
Should Allied's cooperation pursuant to this Section result in any out-of-pocket
expense, then Allied shall be entitled to reimbursement from Buyer. However, if
Allied's total out-of-pocket expense would at any time exceed $10,000, then
Allied shall inform Buyer prior to incurring such expense. Should Buyer decline
to accept responsibility for total out-of-pocket expenses in excess of $10,000,
then Allied's cooperation pursuant to this Section shall be limited to efforts
that do not result in Allied incurring out-of-pocket expenses in excess of
$10,000. Any information obtained under this Section shall be kept confidential,
except as may be otherwise necessary in connection with the filing of tax
returns or claims for refund or in conducting an audit or other proceeding.
8.7. BANK ACCOUNTS. Buyer will establish a new bank account on behalf of
the Company upon Closing. Allied shall maintain the preexisting bank account
solely to collect accounts receivable and pay accounts payable and such
preexisting account shall be closed within one hundred eighty (180) days of
Closing.
8.8. CLOSING OBLIGATIONS. Company and Buyer shall make commercially
reasonable efforts to satisfy the conditions precedent to Closing.
8.9. TIME BROKERAGE AND OPERATING AGREEMENT. After execution of this
Agreement, Company and Buyer shall cooperate in good faith and use commercially
reasonable efforts to enter into a Time Brokerage Agreement (?TBA) that would be
effective after execution of this Agreement and would permit Buyer to program up
to 24 hours per day, 7 days per week of the Station's programming subject to
Company's obligation to provide programming responsive to the community's needs.
Such agreement would contain terms and conditions standard in the broadcasting
industry for these types of arrangements, provided, that the TBA shall also
contain provisions modifying or waiving certain representations and warranties
of the Company with respect to conditions or events that may be modified
consistent with Buyer's obligation under the TBA.
21
9. CONDITIONS PRECEDENT.
9.1. MUTUAL CONDITIONS. The respective obligations of Buyer, Shareholder,
Company and Allied to consummate the Transaction are subject to the satisfaction
of each of the following conditions:
(A) APPROVAL OF TRANSFER OF CONTROL APPLICATION. The Commission shall
have granted the Transfer of Control Application, and such grant shall have
become a Final Order.
(B) ABSENCE OF LITIGATION. As of the Closing Date, no litigation,
action, suit or proceeding enjoining, restraining or prohibiting the
consummation of the Transaction shall be pending before any court, the
Commission or any other Governmental Authority or arbitrator; provided, however,
that this Section may not be invoked by a party if any such litigation, action,
suit or proceeding was solicited or encouraged by, or instituted as a result of
any intentional act or omission of, such party.
9.2. ADDITIONAL CONDITIONS TO BUYER'S OBLIGATION.
In addition to the satisfaction of the mutual conditions contained in
Section 9.1, the obligation of Buyer to consummate the Transaction is subject,
at Buyer's option, to the satisfaction or waiver by Buyer of each of the
following conditions:
(A) REPRESENTATIONS AND WARRANTIES. Unless otherwise set forth
therein, the representations and warranties of Company and Shareholder to Buyer
shall be true, complete, and correct in all material respects as of the Closing
Date with the same force and effect as if then made.
(B) COMPLIANCE WITH CONDITIONS. All of the terms, conditions and
covenants to be complied with or performed by Company and Shareholder on or
before the Closing Date under this Agreement and Company Documents shall have
been duly complied with and performed in all material respects.
(C) DISCHARGE OF LIENS.
(1) Company shall have obtained and delivered to Buyer, at Company's
expense, at least 10 days prior to Closing, a report prepared by C.T.
Corporation System (or similar firm reasonably acceptable to Buyer) showing the
results of searches of lien, tax, judgment and litigation records, demonstrating
that the Company and Business are free and clear of all liens, security
interests and encumbrances except the Allied Indebtedness) and any Indebtedness
to be satisfied at Closing and that there are no judgments or pending
litigation. The record searches described in the report shall have taken place
no more than 15 days prior to the Closing Date.
(2) Buyer shall have received a certificate, dated the Closing Date,
and signed by the President of Company to the effect that Company has no
Indebtedness except payables
22
in the ordinary course and the Allied Indebtedness which shall be discharged in
full at Closing. Buyer shall also have received such releases and UCC
termination statements as it may reasonably request in connection with the
discharge of any Indebtedness, including the Allied Indebtedness.
(D) THIRD-PARTY CONSENTS. Company shall have obtained any requisite
third-party consents relating to Material Contracts or other approvals which may
be necessary to consummate the Transaction. The consents from each landlord
under the leases for the Studio Site and the Transmitter Site shall state (i)
that such lease is in full force and effect and has not been amended or
modified; (ii) the date to which all rent and/or other payments due thereunder
have been paid; and (iii) that Company is not in breach or default under such
lease, and that no event has occurred that, with notice or the passage of time
or both, would constitute a breach or default thereunder by Company.
(E) FINANCIAL STATEMENTS. The information set forth in the Station's
Statements for the year ending December 31, 1996, and for the period ending
thirty (30) days prior to the Closing Date fairly and accurately reflect the
performance and results of operation of the Business and the Station for those
periods.
(F) SALES AND CUSTOMER INFORMATION. The sales and customer information
provided in Schedule 9.2 are accurate and complete in all material respects.
(G) OPINION OF COMPANY'S COUNSEL. At Closing, Company and Shareholder
shall deliver to Buyer the written opinion or opinions of Company's counsel,
dated the Closing Date, in scope and form satisfactory to Buyer, to the
following effect:
(i) Company is a corporation validly existing and in good standing
under the laws of the District of Columbia and has all requisite corporate power
and authority to enter into and perform this Agreement.
(ii) This Agreement the Note, the Guaranty and Security Agreement,
the UCCs, the Stock Pledge Agreement, and the Warrant (the "Security Documents")
have been duly executed and delivered by Company and such action has been duly
authorized by all necessary corporate action. This Agreement and the Security
Documents constitute the legal, valid, and binding obligation of Company,
enforceable against Company in accordance with their terms, subject to
bankruptcy, reorganization, fraudulent conveyance, insolvency, moratorium and
similar laws relating to or affecting creditors' and other obligees' rights
generally and the exercise of judicial discretion in accordance with general
equitable principles.
(iii) None of (a) the execution and delivery of this Agreement and
the Security Documents, (b) the consummation of the Transaction, or (c)
compliance with the terms and conditions of this Agreement will, with or without
the giving of notice or lapse of time or both, conflict with, breach the terms
and conditions of, constitute a default under, or violate Company's articles of
incorporation or bylaws, any law, rule, regulation or other requirement of any
23
Governmental Authority, or any judgment, decree, order, material agreement,
material lease or other material instrument known to counsel to which Company is
a party or by which Company, the Business or the Station is bound.
(iv) To counsel's knowledge, counsel is not representing or advising
Company as to any pending or threatened suit, action, claim or proceeding that
questions or may affect the validity of any action to be taken by Company
pursuant to this Agreement or that seeks to enjoin, restrain or prohibit Company
from carrying out the Transaction.
(v) To counsel's knowledge, counsel is not representing or advising
Company as to any outstanding judgment, or any pending or threatened suit,
action, claim or proceeding (other than proceedings affecting radio broadcasters
generally) that could reasonably be expected to have an adverse effect upon the
Station's assets or upon the business or operations of the Station after
Closing.
(vi) Company is the authorized holder of the FCC Licenses, the FCC
Licenses are in full force and effect, and the FCC Licenses are not the subject
of any pending license renewal application. The FCC Licenses set forth on
Schedule 5.4 constitute all FCC licenses and authorizations issued in connection
with the operation of the Station. There are no applications pending before the
Commission with respect to the Station.
(vii) The Commission has consented to the assignment of the FCC
Licenses to Buyer and that consent has become a Final Order.
(viii) To the best of such Counsel's knowledge, there is no
Commission investigation, notice of apparent liability or order of forfeiture,
pending or outstanding against the Station, or any complaint, petition to deny
or proceeding against or involving Company or the Station pending before the
Commission.
(ix) Shareholder holds title to 100 shares of common stock and no
shares of preferred stock, and such Shares are owned free and clear of any
Encumbrance. The Shares are validly issued, fully paid and nonassessable. The
Shares constitute all the issued and outstanding shares of capital stock of
Company. To counsel's knowledge, there are no outstanding stock options or stock
appreciation rights granted by Shareholder or Company to any person or entity
exercisable now or in the future. To counsel's knowledge, Shareholder has no
outstanding subscriptions, warrants, calls, commitments or agreements to issue
or to repurchase any shares of his stock or other securities, including any
right of conversion or exchange under any outstanding security or other
instrument. There are no unsatisfied preemptive rights to which Shareholder is
entitled.
The foregoing opinions shall be for the benefit of and may be relied on by
Buyer and Buyer's lenders (specifically identified by Buyer on or before the
Closing Date). In rendering such opinions, Company's counsel may rely upon: (a)
corporate records of Company, (b) files and records of the FCC, (c) certificates
of public officials; and (d) certificates and representations of the Company and
24
its officers. The opinion may be given as if the law of the District of Columbia
applicable to transactions in that jurisdiction applies.
(H) FINAL ORDER. The Commission's action granting the Transfer of
Control Application shall have become a Final Order.
(I) CLOSING DOCUMENTS. At the Closing Company and Shareholder shall
deliver to Buyer (i) such instruments of conveyance as are necessary to vest in
Buyer title to the Shares, all of which documents shall be dated as of the
Closing Date, duly executed by Company and in form reasonably acceptable to
Buyer; (ii) a certificate, dated the Closing Date, executed by Company's
President certifying as to those matters set forth in Section 9.2(a) and (b);
and (iii) copies of Company's corporate resolutions authorizing the Transaction,
each certified as to accuracy and completeness by Company's Secretary.
(J) RESIGNATION OF DIRECTORS AND OFFICERS. All the directors and
officers of Company identified in an Incumbency Certificate executed by the
President, shall have submitted their resignations in writing to Company. Such
resignations shall be effective as of the Closing.
(K) STOCK CERTIFICATES. Buyer shall receive at Closing duly executed
stock certificates for the shares documenting transfer of the Shares to Buyer.
(L) RECORDS. Buyer shall receive at Closing the original corporate
records of Company and original copies of the Station Records.
(M) INSURANCE POLICIES. Buyer shall receive at Closing all contracts
of insurance (including any cash surrender value thereof).
(N) BROKERAGE FEE. Company shall have paid at Closing the fee due to
▇▇▇▇▇▇▇▇▇ & Co., Inc.
(O) ACCOUNTS PAYABLE. Allied shall deliver a document stating that all
Accounts Payable that have accrued up until the date of Closing shall be
satisfied within 30 days of receipt of notice that the Account Payable is due.
(P) TRADE AND BARTER. At the Closing, Company shall deliver a
certificate to the effect that all advertising time pursuant to trade and barter
agreements entered into prior to Closing shall have been fully satisfied and
that there is no remaining obligation to provide advertising time pursuant to
such contracts.
(Q) ALLIED INDEBTEDNESS. At the Closing, the Allied Indebtedness shall
be discharged, all loan documents shall be marked as paid, all pledged
collateral shall be returned to the Company and any financing statements
required to release liens on the Company's assets shall be executed by Allied
and delivered to the Company.
25
9.3. ADDITIONAL CONDITIONS TO COMPANY'S SHAREHOLDER'S AND ALLIED'S
OBLIGATION. In addition to satisfaction of the mutual conditions contained in
Section 9.1 the obligation of Company, Shareholder and Allied to consummate the
Transaction is subject, at Company's, Shareholder's and Allied's option, to the
satisfaction or waiver by Company, Shareholder and Allied of each of the
following conditions:
(A) REPRESENTATIONS AND WARRANTIES. Unless otherwise set forth
therein, the representations and warranties of Buyer to Company and Shareholder
shall be true, complete and correct in all material respects as of the Closing
Date with the same force and effect as if then made.
(B) COMPLIANCE WITH CONDITIONS. All of the terms, conditions and
covenants to be complied with or performed by Buyer on or before the Closing
Date under this Agreement shall have been duly complied with and performed in
all material respects.
(C) OPINION OF BUYER'S COUNSEL. At Closing, Buyer shall deliver to
Shareholder the written opinion of Buyer's counsel, dated the Closing Date, in
scope and form reasonably satisfactory to Company, to the following effect:
(i) Buyer is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, with all requisite
corporate power and authority to enter into and perform this Agreement.
(ii) This Agreement, the Note, the Guaranty and Security Agreement,
the UCCs, the Stock Pledge Agreement, and the Warrant (the "Security Documents")
have been duly executed by Buyer, and such action has been duly authorized by
all necessary corporate action. This Agreement and the Security Documents
constitute the legal, valid, and binding obligation of Buyer, enforceable
against Buyer in accordance with their terms, subject to bankruptcy,
reorganization, fraudulent conveyance, insolvency, moratorium, and similar laws
relating to or affecting creditors' and other obligees' rights generally and the
exercise of judicial discretion in accordance with general equitable principles.
(iii) None of (a) the execution and delivery of this Agreement and
the Security Documents, (b) the consummation of the Transaction, or (c)
compliance with the terms and conditions of this Agreement will, with or without
the giving of notice, lapse of time or both, conflict with, breach the terms and
conditions of, constitute a default under or violate Buyer's articles of
incorporation or by-laws, or, to the knowledge of counsel, any judgment, decree,
order, agreement, indenture, lease or other instrument to which Buyer is a party
or by which Buyer may be bound identified by Buyer on a certificate attached to
the opinion as being material to the Transaction.
(iv) To the knowledge of counsel, no suit, action or proceeding is
pending or threatened that questions or may affect the validity of any action to
be taken by Buyer pursuant
26
to this Agreement, or that seeks to enjoin, restrain or prohibit Buyer from
carrying out the Transaction.
The foregoing opinions shall be for the benefit of and may be relied on by
Shareholder. In rendering such opinions, Buyer's counsel may rely upon such
corporate records of Buyer, such certificates of public officials and officers
of Buyer. Any opinion concerning the enforceability of this Agreement may be
based on the laws of the District of Columbia applicable to transactions in that
jurisdiction.
(D) PAYMENT. Buyer shall have delivered executed copies of:
(i) the Promissory Note;
(ii) the Stock Pledge Agreement;
(iii) the Guaranty and Security Agreement;
(iv) the Warrant; and
(v) UCC statements to secure the pledge of stock and assets of the
Company.
(E) CLOSING DOCUMENTS. Buyer shall deliver to Company at the Closing
(i) copies of Buyer's corporate resolutions authorizing the Transaction
certified as to accuracy and completeness by Buyer's Secretary; and (ii) a
certificate, dated the Closing Date, executed by Buyer's President certifying as
to those matters set forth in Section 9.3(a) and (b).
(F) ACCOUNTS RECEIVABLE. Buyer shall deliver a document stating that
all Accounts Receivable that have accrued up until the date of Closing and all
cash on hand, if any, shall be the property of Allied from and after the date of
Closing and stating that the Buyer shall collect Accounts Receivable on Allied's
behalf in a reasonable and customary manner.
10. INDEMNIFICATION.
10.1. OBLIGATIONS OF ALLIED. Subject to the limitations of Sections 10.6
and 10.7, Allied agrees to indemnify and hold harmless (after the Closing)
Buyer, and its respective directors, officers, employees, affiliates, agents and
assigns from and against any and all Loss of Buyer or Company, directly or
indirectly, resulting from, based upon or arising out of:
(a) any inaccuracy in or breach of any of the representations or
warranties made by Company or Shareholder in or pursuant to this Agreement; or
27
(b) the failure of Allied, Shareholder or Company to perform any
covenant or obligation of this Agreement relating to the period before the
Closing Date or of Allied after the Closing Date; or
(c) any liability for Taxes or Indebtedness of Company incurred prior
to the Closing; or
(d) any liability for the funding of, payment from or claim against
any Employee Benefit Plans arising prior to the Closing Date; or
(e) third party claims resulting from the actions of Shareholder or
Company in the conduct of the Business prior to the Closing Date.
10.2. OBLIGATIONS OF BUYER. Buyer agrees to indemnify and hold harmless
(after the Closing) Shareholder from and against any Loss of Shareholder,
directly or indirectly, resulting from, based upon or arising out of:
(a) any inaccuracy in or breach of any of the representations,
warranties, covenants or agreements made by Buyer in this Agreement; or
(b) except as to matters as to which Buyer is indemnified under the
terms of Section 10.1, third party claims (in contract, tort or otherwise)
resulting from the actions of Buyer or Company and its conduct of the Business
after Closing; or
(c) any liability for Taxes or Indebtedness of Company incurred after
the Closing.
10.3. PROCEDURE.
(a) NOTICE. Any party seeking indemnification with respect to any Loss
pursuant to Section 10.1 or 10.2 shall give notice to the party required to
provide indemnity hereunder (the "Indemnifying Party"); provided however that
any delay in giving notice shall not release the Indemnifying Party from its
obligations (i) except to the extent the Indemnifying Party is actually
prejudiced thereby or (ii) unless the Indemnifying Party is thereby precluded
from defending or approving settlement of the claim.
(b) DEFENSE. If any claim against an Indemnified Party shall arise by
reason of any claim made by third parties against it, the Indemnifying Party
shall have the right to assume the defense of the matter giving rise to the
claim for indemnification through counsel of its selection reasonably acceptable
to the Indemnified Party at the Indemnifying Party's expense, and the
Indemnified Party shall have the right, at its own expense, to employ counsel to
represent it, which counsel shall act in an advisory capacity only. The
Indemnified Party shall cooperate fully to make available to the Indemnifying
Party all pertinent information under the Indemnified Party's control
28
as to the claim and shall make its appropriate personnel, if any, available for
any discovery, trial or appeal. If the Indemnifying Party fails or refuses to
undertake the defense within 30 days after receiving the indemnification notice,
the Indemnified Party shall have the right to assume the defense of such matter
on behalf of and for the account of the Indemnifying Party; provided, however,
that unless the Indemnifying Party has refused to undertake the defense, the
Indemnified Party shall not settle or compromise any claim without the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. The Indemnifying Party may settle without the
consent of the Indemnified Party any claim for money at any time, if at its sole
expense and if there is no adverse impact on the Indemnified Party, no fault is
assessed against the Indemnified Party and the Indemnified Party is
unconditionally released from all further potential liability in connection
therewith.
10.4. REMEDIES CUMULATIVE. Each party to this Agreement shall have and
retain all rights and remedies set forth in this Agreement and all of the rights
and remedies such parties have at law or equity.
10.5. NOTICE. Each party agrees to notify the other of any liabilities,
claims or misrepresentations, breaches or other matters covered by this Section
10 upon discovery or receipt of notice thereof.
10.6. THRESHOLD CONCERNING SECTION 10.1. Notwithstanding anything to the
contrary in Section 10.1, the parties shall not be entitled to indemnity under
Section 10.1(a) unless the aggregate Loss indemnified against thereunder exceeds
$25,000.00 (in which case, the Indemnified Party shall be entitled to recovery
from the Indemnifying Party the full amount of the Loss).
10.7. SURVIVAL OF REPRESENTATIONS. The representations and warranties of
the parties set forth in this Agreement or in any certificate, document or
instrument delivered in connection herewith shall survive the execution and
delivery of this Agreement and the Closing hereunder. Notwithstanding the
preceding sentence, any claims or actions with respect thereto shall terminate
unless notice of such claim or action is given to the party against whom
indemnification is sought within one year of the Closing Date, unless such
claims arise under Sections 5.1, 5.2, or 5.4, in which case the survival period
shall be eighteen (18) months, or unless such claims arise under Sections 5.10,
5.18, 5.22, 5.23 and 6.2, in which case the survival period shall be three (3)
years.
10.8. TAX RETURNS.
(A) PREPARATION AND FILING OF RETURNS FOR PRE-CLOSING PERIODS. Company
shall be responsible for the initial preparation and timely filing of all
Federal, State, and local income tax returns of the Company for taxable periods
actually ending on or before the Closing Date. Buyer shall have the right,
directly and through its designated representatives, to review at its expense
any such returns that pertain to the Company at least 30 days prior to the
filing thereof. Company agrees not to take any position or make any election on
any such return inconsistent with prior reporting practices without the prior
written consent of Buyer, if the effect of any such election or position
29
may be to increase the Taxes of the Company thereof from taxable periods (or
portions thereof) beginning after the Closing Date or to file for an extension
on the due date for any tax return without first obtaining Buyer's consent.
Allied will forward any "separate company" state and local returns due after the
Closing Date to Buyer, together with any necessary payment of Tax, interest or
penalties, if applicable, for signature and filing at least 15 days prior to the
due date of such returns.
(B) PREPARATION AND FILING OF RETURNS FOR POST-CLOSING PERIODS. Buyer
shall cause to be prepared, and filed, all income tax returns of the Company for
all taxable periods beginning and ending after the Closing.
10.9. ALLOCATION OF TAX LIABILITY.
(A) To the extent permitted by applicable law, the parties hereto
agree to cause federal, state and local tax periods of the Company to be closed
at the close of business on the Closing Date. In the event applicable law does
not permit the closing of any such period, the allocation of tax liability shall
be made in accordance with Section 10.9 (b).
(B) In the case of a tax return for the taxable period beginning
before and ending after the Closing Date ("Overlap Period") based upon income or
gross receipts, the amount of taxes attributable to any Pre-Closing Period or
Post-Closing Period included in the Overlap Period shall be determined by
closing the books of the Company as of the close of business on the Closing Date
and by treating each of such Pre-Closing Period and Post-Closing Period as a
separate taxable year, except that exemptions, allowances or deductions that are
calculated on an annual basis shall be apportioned on a per diem basis. If the
liability for the Taxes for an Overlap Period is determined on a basis other
than income or gross receipts, the amount of Taxes attributable to any
Pre-Closing Period included in the Overlap Period shall be equal to the amount
of Taxes for the Overlap Period multiplied by a fraction, the numerator of which
is the number of days in the Pre-Closing Period included in the Overlap Period
and the denominator of which is the total number of days in the Overlap Period,
and the amount of such Taxes attributable to any Post-Closing Period included in
an Overlap Period shall be the excess of the amount of Taxes for the Overlap
Period over the amount of Taxes attributable to the Pre-Closing Period.
10.10. ACCOUNTS PAYABLE. Following the Closing Date, Allied shall promptly
pay all Accounts Payable arising from the operation of the Company, the Business
or the Station prior to the Closing Date.
11. DEFAULT AND REMEDIES.
11.1. OPPORTUNITY TO CURE. If any party believes the other to be in
material breach hereunder, the former party shall provide the other with written
notice specifying in reasonable detail the nature of such breach. If the
material breach has not been cured by the earlier of: (a) the Closing Date, or
(b) within 20 days after delivery of that notice (or such additional reasonable
time as the circumstances may warrant provided the party in breach undertakes
diligent, good faith efforts to
30
cure the breach within such 20-day period and continues such efforts
thereafter), then the party giving such notice may consider the other party to
be in default and exercise the remedies available to such party pursuant to this
Section, subject to the right of the other party to contest the alleged default
through appropriate proceedings.
11.2. COMPANY'S, SHAREHOLDER'S AND ALLIED'S REMEDIES. Buyer recognizes that
if the Transaction is not consummated as a result of Buyer's default, Company
and Allied may be entitled to compensation the extent of which is difficult and
impractical to ascertain. To avoid this problem, the parties agree that, if the
Transaction is not consummated due to the default of Buyer, then Company,
Shareholder and Allied, provided that neither Company, Allied nor Shareholder is
in default or has otherwise failed to comply with their respective obligations
under this Agreement, shall be entitled to payment from Buyer of One Hundred
Thousand Dollars ($100,000). The parties agree that this sum shall constitute
liquidated damages and shall be in lieu of any other relief to which Company,
Shareholder and/or Allied might otherwise be entitled due to Buyer's failure to
consummate the Transaction as a result of a default by Buyer.
11.3. BUYER'S REMEDIES. Company, Allied and Shareholder agree that the
Shares represent an interest in unique property that cannot be readily obtained
on the open market and that Buyer will be irreparably injured if this Agreement
is not specifically enforced. Therefore, Buyer shall have the right specifically
to enforce Company's, Shareholder's and Allied's performance under this
Agreement, and Company, Shareholder and Allied agree (i) to waive the defense in
any such suit that Buyer has an adequate remedy at law and (ii) to interpose no
opposition, legal or otherwise, as to the propriety of specific performance as a
remedy. If Buyer elects to terminate this Agreement as a result of Company's or
Shareholder's or Allied's default instead of seeking specific performance, Buyer
shall be entitled to cash in the amount of One Hundred Thousand Dollars
($100,000) which amount shall represent liquidated damages and shall be in lieu
of any other relief to which Buyer might otherwise be entitled due to Company's,
Shareholder's or Allied's failure to consummate the Transaction as a result of a
default by Company, Shareholder or Allied.
12. CANCELLATION OF AGREEMENT.
12.1. TERMINATION OF AGREEMENT. Anything herein to the contrary
notwithstanding, this Agreement and the transactions contemplated by this
Agreement shall terminate at any time before the Closing as follows:
(A) DAMAGE TO STATION. By Buyer upon written notice pursuant to
Section 8.4(a) or 8.4(b) or either party upon written notice pursuant to Section
8.4(c).
(B) MUTUAL CONSENT. By mutual consent in writing by Buyer, Company and
Shareholder.
(C) MATERIAL BREACH. Except as otherwise set forth in the provisions
of Section 8.4, by Buyer or Company, provided such party (which in the case of
Company includes
31
Shareholder) is not in material breach of this Agreement, if there has been a
material misrepresentation or other material breach by the other party (and in
the case of Company by Shareholder) of any representation, warranty or covenant
set forth herein; provided, however, that the non-breaching party shall not be
excused from its obligations under this Agreement (i) if such breach (other than
Buyer's failure to deliver the Promissory Note and related Buyer Documents) is
susceptible to cure and the breaching party cures such breach within 20 days
after receipt of notice of such breach from the other party or provides
assurances reasonably satisfactory to the other party that the breach will be
cured prior to Closing or (ii) if such breach gives rise solely to money damages
that can readily be ascertained or estimated with reasonable accuracy and the
breaching party tenders such amount to the other party within 20 days after
receipt of notice of such breach.
(D) BANKRUPTCY; RECEIVERSHIP. By Buyer, if any of the following events
shall have occurred with respect to Company: (i) it has been adjudicated a
bankrupt or insolvent or has admitted in writing its inability to pay its debts
as they mature or has made an assignment for the benefit of creditors, or has
applied for or consented to the appointment of a trustee or receiver for it or
for the major part of its property; (ii) a trustee or receiver has been
appointed for it or for any part of its property without its consent and such
action is not resolved or canceled within sixty (60) days; or (iii) bankruptcy,
reorganization, arrangement or insolvency proceedings, or other proceedings for
relief under any bankruptcy or similar law or laws for the relief of creditors,
have been instituted by or against it and remain undismissed for 60 days or
longer.
(E) FCC APPROVAL. By any party to this Agreement, provided such party
is not otherwise in default, if a Final Order granting the Transfer of Control
Application is not obtained within nine (9) months after the date of Public
Notice announcing the FCC's acceptance of the Transfer of Control Application
for filing.
13. GENERAL PROVISIONS.
13.1. FEES. All Commission filing fees for the Transfer of Control
Application shall be paid one-half by Allied and one-half by Buyer. All other
expenses incurred in connection with this Agreement or the Transaction shall be
paid by the party incurring those expenses whether or not the Transaction is
consummated.
13.2. NOTICES. All notices, requests, demands and other communications
pertaining to this Agreement shall be in writing and shall be deemed duly given
when (a) delivered personally (which shall include delivery by Federal Express
or other recognized overnight courier service that issues a receipt or other
confirmation of delivery) to the party for whom such communication is intended,
(b) delivered by facsimile transmission with confirmation of receipt or (c) five
business days after the date mailed by certified mail, return receipt requested,
postage prepaid, addressed as follows:
32
(i) If to Company or Shareholder:
Mr. G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
Broadcast Holdings, Inc.
c/o Allied Capital Corporation
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇ ▇. Paper, Esquire
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to Buyer:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, President
WYCB Acquisition Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
33
(iii) If to Allied:
Ms. Gay ▇▇▇▇▇▇▇▇
Allied Capital Financial Corporation
Allied Investment Corporation
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change its address for notices by written notice to the other
given pursuant to this Section. Any notice purportedly given by a means other
than as set forth in this Section shall be deemed ineffective.
13.3. ASSIGNMENT. No party may assign this Agreement without the express
prior written consent of the other parties, except that, Buyer may assign its
rights and obligations pursuant to this Agreement without Company's or
Shareholder's consent prior to Closing to (i) an entity which is a subsidiary or
parent of Buyer or to an entity owned or controlled by Buyer or its principals
or (ii) to Buyer's lenders as collateral for any indebtedness incurred by Buyer;
and subsequent to Closing to (a) any entity which acquires all or substantially
all of the Shares or assets of Company or (b) to Buyer's lenders as collateral
for any indebtedness incurred by Buyer. As part of any permitted assignment,
Buyer's assignee shall assume in writing Buyer's indemnification obligations in
Section 10 and any and all of Buyer's other obligations hereunder, and provided
that no such assignment shall discharge Buyer of its financial obligations
hereunder. Subject to the foregoing, this Agreement shall be binding on, inure
to the benefit of, and be enforceable by the original parties hereto and their
respective successors and permitted assignees.
13.4. EXCLUSIVE DEALINGS. For so long as this Agreement remains in effect,
neither Company nor any person acting on Company's behalf shall, directly or
indirectly, solicit or initiate any offer from, or conduct any negotiations
with, any person or entity concerning the acquisition of all or any interest in
the Shares or in the assets of the Business, other than Buyer or Buyer's
permitted assignees.
13.5. THIRD PARTIES. Nothing in this Agreement, whether express or implied,
is intended to: (a) confer any rights or remedies on any person other than
Company, Buyer and their respective successors and permitted assignees; (b)
relieve or discharge the obligations or liability of any third party; or (c)
give any third party any right of subrogation or action against either Company
or Buyer.
13.6. INDULGENCES. Unless otherwise specifically agreed in writing to the
contrary: (a) the failure of any party at any time to require performance by
another party of any provision of this Agreement shall not affect such party's
right thereafter to enforce the same; (b) no waiver by any party of any default
by another party shall be taken or held to be a waiver by such party of any
other preceding or subsequent default; and (c) no extension of time granted by
any party for the
34
performance of any obligation or act by any party shall be deemed to be an
extension of time for the performance of any other obligation or act hereunder.
13.7. PRIOR NEGOTIATIONS. This Agreement supersedes in all respects all
prior and contemporaneous oral and written negotiations, understandings and
agreements between the parties with respect to the subject matter hereof. All of
such prior and contemporaneous negotiations, understandings and agreements are
merged herein and superseded hereby.
13.8. SCHEDULES. The Schedules attached hereto or referred to herein are a
material part of this Agreement, as if set forth in full herein.
13.9. ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Schedules to this
Agreement and the Buyer Documents set forth the entire understanding between the
parties in connection with the Transaction, and there are no terms, conditions,
warranties or representations other than those contained, referred to or
provided for herein and therein. Neither this Agreement nor any term or
provision hereof may be altered or amended in any manner except by an instrument
in writing signed by each of the parties hereto.
13.10. COUNSEL. Each party has been represented by its own counsel in
connection with the negotiation and preparation of this Agreement.
13.11. GOVERNING LAW, JURISDICTION. This Agreement shall be governed by,
and construed and enforced in accordance with the laws of the State of Maryland
without regard to the choice of law rules utilized in that jurisdiction. Buyer,
Company, Shareholder and Allied each (a) hereby irrevocably submit to the
jurisdiction of the courts of that state and (b) hereby waive, and agree not to
assert, by way of motion, as a defense, or otherwise, in any such suit, action
or proceeding, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from attachment
or execution, that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.
Buyer, Shareholder, Company and Allied each hereby consent to service of process
by certified mail at the address to which notices are to be given. Each party
agrees that its submission to jurisdiction and its consent to service of process
by mail is made for the express benefit of the other parties hereto. Final
judgment against any party in any such action, suit or proceeding may be
enforced in other jurisdictions by suit, action or proceeding on the judgment,
or in any other manner provided by or pursuant to the laws of such other
jurisdiction; provided, however, that any party may at its option bring suit, or
institute other judicial proceedings, in any state or federal court of the
United States or of any country or place where the other party or its assets,
may be found.
13.12. SEVERABILITY. If any term of this Agreement is illegal or
unenforceable at law or in equity, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected or
impaired thereby. Any illegal or unenforceable term shall be deemed to be void
and of no force and effect only to the minimum extent necessary to bring such
term within
35
the provisions of applicable law and such term, as so modified, and the balance
of this Agreement shall then be fully enforceable.
13.13. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were on the same instrument. Each fully executed set of counterparts shall be
deemed to be an original, and all of the signed counterparts together shall be
deemed to be one and the same instrument.
13.14. FURTHER ASSURANCES. Allied and Shareholder shall at any time and
from time to time after the Closing execute and deliver to Buyer such further
conveyances, assignments and other written assurances as Buyer may reasonably
request to vest and confirm in Buyer (or its assignee) the title and rights to
and in all the Shares and/or assets of the Business to be and intended to be
transferred, assigned and conveyed hereunder.
36
IN WITNESS WHEREOF, and to evidence their assent to the foregoing, Company,
Shareholder, Allied and Buyer have executed this Option and Stock Purchase
Agreement under seal as of the date first written above.
SELLER:
BROADCAST HOLDINGS, INC.
BY:
---------------------------------
G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
PRESIDENT
SHAREHOLDER (SOLELY TO THE EXTENT
SPECIFICALLY SET FORTH IN THIS
AGREEMENT AT SECTIONS 2.1(B),
2.2(B), 4.1, 6.1, 6.2, 6.3, 11.2,
11.3 AND 13.14):
G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
BY:
---------------------------------
G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
BUYER:
WYCB ACQUISITION CORP.
BY:
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
PRESIDENT
37
ALLIED CAPITAL FINANCIAL CORPORATION
BY:
---------------------------------
NAME: ________________________
TITLE: ________________________
38