Exhibit 10.2
ASSET PURCHASE AGREEMENT
Among
EL DORADO COMMUNICATIONS, INC.
EL DORADO 108, INC.
KXTJ LICENSE, INC.
LBI HOLDINGS II, INC.
LIBERMAN BROADCASTING OF HOUSTON, INC.
and
LIBERMAN BROADCASTING OF HOUSTON LICENSE CORP.
RELATING TO THE ACQUISITION OF KQQK
Dated as of April 5, 2002
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS....................................................... 2
1.1 Definitions....................................................... 2
1.2 Knowledge........................................................ 7
ARTICLE II PURCHASE AND SALE OF ASSETS...................................... 7
2.1 Assets to be Conveyed............................................ 7
2.2 Excluded Assets and Liabilities.................................. 8
ARTICLE III PURCHASE PRICE; METHOD OF PAYMENT; ESCROW DEPOSIT................ 9
3.1 Purchase Price................................................... 9
3.2 Liabilities Assumed.............................................. 11
3.3 Escrow Deposit................................................... 11
3.4 Buyer's Remedies................................................. 13
3.5 Allocation....................................................... 14
3.6 Prorations....................................................... 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES BY SELLER......................... 14
4.1 Organization and Standing........................................ 14
4.2 Authorization.................................................... 14
4.3 KQQK FCC Licenses, Transmitters and Towers....................... 15
4.4 Purchased Assets................................................. 17
4.5 Insurance........................................................ 17
4.6 Litigation....................................................... 17
4.7 Contracts........................................................ 18
4.8 Insolvency....................................................... 18
4.9 Reports.......................................................... 18
4.10 No Defaults...................................................... 18
4.11 Disclosures...................................................... 19
4.12 Environmental Compliance......................................... 19
4.13 Intellectual Property............................................ 19
4.14 Brokers.......................................................... 20
4.15 Prepaid Expenses................................................. 20
4.16 Sale Proceeds Recipients; Recipient Agreement.................... 20
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TABLE OF CONTENTS
(continued)
Page
ARTICLE V REPRESENTATIONS AND WARRANTIES BY BUYER AND LBI HOLDINGS.......... 21
5.1 Status............................................................ 21
5.2 No Defaults....................................................... 21
5.3 Authorization..................................................... 21
5.4 Brokers........................................................... 21
5.5 Qualification as a Broadcast Licensee............................. 22
5.6 Litigation........................................................ 22
5.7 Approvals and Consents............................................ 22
ARTICLE VI COVENANTS OF SELLER............................................... 22
6.1 Affirmative Covenants of Seller................................... 22
6.2 Negative Covenants of Seller...................................... 25
ARTICLE VII ADDITIONAL AGREEMENTS............................................. 26
7.1 Determination of KQQK Closing Date................................ 26
7.2 Application for Commission Consent; Other Consents; Pre-Closing... 26
7.3 Mutual Right to Terminate......................................... 27
7.4 Buyer's Right to Terminate........................................ 28
7.5 Seller's Right to Terminate....................................... 28
7.6 Risk of Loss...................................................... 29
7.7 Transfer Taxes and FCC Filings; Expenses; Bulk Sales.............. 30
7.8 Invoices.......................................................... 31
7.9 Access to Microwave Facilities.................................... 31
7.10 Recipient Agreement............................................... 31
ARTICLE VIII CLOSING CONDITIONS............................................... 31
8.1 Conditions Precedent to Buyer's Obligations....................... 31
8.2 Conditions Precedent to Seller's Obligations...................... 33
ARTICLE IX ITEMS TO BE DELIVERED AT THE CLOSING.............................. 34
9.1 Seller's Performance At Closing................................... 34
9.2 Buyer's Performance at Closing.................................... 36
ARTICLE X INDEMNIFICATION................................................... 37
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TABLE OF CONTENTS
(continued)
Page
10.1 Indemnification by Seller........................................ 37
10.2 Indemnification by LBI Holdings and Buyer........................ 38
10.3 Third-Party Claims............................................... 38
10.4 Cap and Basket................................................... 39
10.5 Holdback......................................................... 40
10.6 Survival of Representations and Warranties....................... 40
ARTICLE XI MISCELLANEOUS PROVISIONS......................................... 40
11.1 Notices.......................................................... 40
11.2 Benefit and Assignment........................................... 42
11.3 Other Documents.................................................. 42
11.4 Appendices....................................................... 42
11.5 Construction..................................................... 42
11.6 Arbitration...................................................... 42
11.7 Counterparts..................................................... 44
11.8 Headings......................................................... 44
11.9 Entire Agreement................................................. 44
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SCHEDULE I Identification of Contracts to be Assumed
SCHEDULE II List of all Permits and KQQK FCC Licenses
SCHEDULE III List of Required Consents; Encumbrances; UCC Financing
Statements; UCC Termination Statements
SCHEDULE IV Identification of Items of Tangible Personal Property Described
in Section 2.1.1
SCHEDULE V Allocation of the Purchase Price
SCHEDULE VI Insurance Coverage on the Purchased Assets
SCHEDULE VII Identification of Intellectual Property
SCHEDULE VIII Schedule of Prepaid Expenses
SCHEDULE IX Sale Proceeds Recipients
SCHEDULE X Information to be Periodically Provided to Buyer
EXHIBIT A Seller Escrow Payment Certificate (FM Only)
EXHIBIT B-1 Opinion of Sellers' Counsel
EXHIBIT B-2 Opinion of Sellers' Texas Counsel
EXHIBIT C Opinion of Sellers' FCC Counsel
EXHIBIT D Opinion of LBI Entities' Counsel
EXHIBIT E Lessor Estoppel Certificates
EXHIBIT F FM Local Marketing Agreement
EXHIBIT G Holdback Escrow Agreement
EXHIBIT H Forms of Required Consents
EXHIBIT I Recipient Agreement
EXHIBIT J Confidentiality
FM ASSET PURCHASE AGREEMENT
THIS FM ASSET PURCHASE AGREEMENT is dated as of April 5, 2002, and
made and entered into by and among El Dorado Communications, Inc., a California
corporation ("EDC"), El Dorado 108, Inc., a Texas corporation ("EDC Sub") and
KXTJ License, Inc., a Delaware corporation ("EDC License Sub"), on the one hand,
and LBI Holdings II, Inc., a California corporation ("LBI Holdings"), Liberman
Broadcasting of Houston, Inc., a California corporation ("LBI"), and Liberman
Broadcasting of Houston License Corp., a California corporation ("LBI Sub"), on
the other. EDC, EDC Sub and EDC License Sub are referred to collectively as
"Seller," and LBI and LBI Sub are referred to collectively as "Buyer."
W I T N E S S E T H:
WHEREAS, Seller owns certain assets used or held for use in
connection with the operation of radio station KQQK, 107.9 FM, Beaumont, Texas
("Station KQQK") and Seller owns, or has the rights to own and as of the KEYH
Closing Date will own, certain assets used or held for use in connection with
the operation of radio station KEYH, 850 AM, Houston, Texas ("Station KEYH")
(each a "Station" and, collectively, the "Stations") and Seller desires to sell
and assign to Buyer the Stations, the businesses of the Stations and their
related assets, and the licenses, permits and other authorizations issued by the
Federal Communications Commission (the "FCC" or "Commission") for or in
connection with the operation of Station KQQK (the "KQQK FCC Licenses") and for
or in connection with the operation of Station KEYH (the "KEYH FCC Licenses";
the KQQK FCC Licenses and the KEYH FCC Licenses are collectively referred to
herein as the "FCC Licenses"); and
WHEREAS, Seller has a right to purchase Station KEYH from Artlite
Broadcasting Company, a Texas corporation ("Artlite") pursuant to the Extension
of LMA and Purchase Rights Agreement effective as of January 31, 1997 by and
between EDC and Artlite (the "KEYH Extension Agreement"), the Agreement to
Purchase Radio Assets and Enter Into Local Marketing Agreement dated July 23,
1995 by and between EDC and Artlite (the "KEYH Purchase Agreement"), the
Agreement Regarding Deposit by and among Artlite, EDC and David Best (the "KEYH
Deposit Agreement") and Agreement to Extend Due Date for Deposit dated August 5,
1996 by and among Artlite, EDC and David Best (the "KEYH Deposit Extension
Agreement") and currently has the right to operate Station KEYH under the Time
Brokerage (Local Marketing) Agreement dated as of August 1, 1995 by and between
EDC and Artlite, as extended until January 31, 2004 pursuant to the KEYH
Extension Agreement (the "KEYH Local Marketing Agreement"); and
WHEREAS, Seller has exercised such right to purchase Station KEYH
from Artlite pursuant to Section 7.1 of the AM Asset Purchase Agreement so as to
be able to sell and assign to Buyer Station KEYH and Seller shall prior to the
KEYH Closing Date use its efforts as set forth in the AM Asset Purchase
Agreement to preserve and cause Artlite to preserve the business of the Station
KEYH; and
WHEREAS, LBI Sub desires to acquire the FCC Licenses and LBI
desires to acquire from Seller all the other assets relating to the Stations and
businesses related thereto; and
WHEREAS, the FCC Licenses may not be assigned to LBI Sub without
the prior written consent of the Commission; and
WHEREAS, Buyer, Seller and LBI Holdings are concurrently entering
into the AM Asset Purchase Agreement of even date herewith (as amended,
supplemented or otherwise modified from time to time, the "AM Asset Purchase
Agreement"); and
WHEREAS, Buyer and Seller wish to consummate the transactions
contemplated hereby and the transactions contemplated by the AM Asset Purchase
Agreement concurrently for an aggregate purchase price (prior to adjustments) of
$30,000,001 but are, under certain circumstances, willing to consummate the
transactions contemplated hereby first and thereafter seek to consummate the
transactions contemplated by the AM Asset Purchase Agreement, in each case in
accordance with the terms of this Agreement and the AM Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the Parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Unless otherwise stated in this Agreement, the
following terms shall have the following meanings:
"Agreement" means this Asset Purchase Agreement, and references to
"Articles," "Sections," "Schedules" and "Exhibits" are to the
Articles and Sections of this Agreement and to the Schedules and
Exhibits attached hereto.
"AM Asset Purchase Agreement" has the meaning set forth in the
recitals to this Agreement, and references to "Articles,"
"Sections," "Schedules" and "Exhibits" thereto are to the Articles
and Sections of the AM Asset Purchase Agreement and to the
Schedules and Exhibits attached thereto.
"AM Local Marketing Agreement" has the meaning set forth in the AM
Asset Purchase Agreement.
"Artlite" has the meaning set forth in the recitals to this
Agreement.
"Assumed Contracts" means only (i) those Contracts listed on
Schedule I, (ii) any other Contract which LBI specifically agrees
in writing to assume in connection with this Agreement in its sole
discretion, and (iii) those Contracts entered into by Seller in the
ordinary course of business between the date hereof and the KQQK
Closing Date which LBI specifically agrees in writing to assume in
connection with this Agreement in its sole discretion.
"Buyer" has the meaning set forth in the first paragraph of this
Agreement.
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"Closing Place" means the offices of O'Melveny & Myers LLP, 400
South Hope Street, 15th Floor, Los Angeles, California 90071, or
such other place mutually agreed to in writing by the Parties.
"Commission" has the meaning set forth in the recitals hereto.
"Communications Act" means the Communications Act of 1934, as
amended, or any successor statute or statutes thereto, and all
rules, regulations, published policies and published decisions of
the FCC thereunder, in each case as from time to time in effect.
"Contracts" means any agreement, written or oral, between Seller
and any third party related to Station KQQK that creates a right or
obligation for either side to make payment or provide goods or
services or otherwise grants rights or creates obligations,
including but not limited to advertising contracts and sales
orders.
"Damages" means any and all claims, demands, liabilities,
obligations, actions suits, proceedings, losses, damages, costs,
expenses, assessments, judgments, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees, of
every kind and description, contingent or otherwise.
"EDC," "EDC License Sub" and "EDC Sub" have the meanings specified
in the first paragraph of this Agreement.
"Effective Date" shall have the meaning assigned to such term in
the FM Local Marketing Agreement.
"Encumbrance" means any option, pledge, security interest, lien,
charge, mortgage, claim, debt, liability, obligation, encumbrance
or restriction (whether on voting, sale, transfer or disposition),
whether imposed by agreement, understanding, law, rule or
regulation, and, with respect to real property assets, including
the Transmitter Buildings and Towers, means any leases, licenses or
other occupancy agreements relating thereto or covering any portion
thereof or any liens or encumbrances existing with respect to
Seller's interest under such documents.
"Escrow Agent" means Union Bank of California, N.A.
"Escrow Agreement" means the Corporate Custodial Agreement Relating
to Earnest Money to be executed by the Escrow Agent, LBI Holdings
and EDC concurrently with the Recipient Agreement.
"Escrow Deposit" has the meaning set forth in Section 3.3.
"Excluded Assets" has the meaning set forth in Section 2.2.1.
"FCC" has the meaning set forth in the recitals hereto.
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"FCC Licenses" has the meaning set forth in the recitals hereto.
"FM Local Marketing Agreement" means the agreement by and between
Seller and Buyer entered into concurrently with this Agreement
attached as Exhibit F.
"FM Only Closing" means the consummation of the purchase and sale
transaction contemplated by this Agreement on the KQQK Closing Date
without the simultaneous consummation of the purchase and sale
transaction contemplated by the AM Asset Purchase Agreement.
"Hazardous Substance" has the meaning set forth in Section 4.12.
"Holdback" has the meaning set forth in Section 3.1.1.
"Holdback Escrow Agent" shall mean Bank of America, JP Morgan
Chase, Citibank or Bank of New York, provided such financial
institution accepts the Holdback Escrow Agreement in the form
attached hereto, with such changes as mutually agreed to by Buyer
or Seller, or, if none of the listed entities so accepts, Union
Bank of California, N.A.
"Holdback Escrow Agreement" means the Corporate Custodial Agreement
Relating to Holdback dated on or about the KQQK Closing Date
executed by the Holdback Escrow Agent, LBI Holdings and EDC
substantially in the form of Exhibit G attached hereto.
"HSRA" means the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended, and the regulations thereunder, as in effect from
time to time.
"Indemnified Party" and "Indemnifying Party" have the meanings
specified in Section 10.3.
"Initial Grant" means the Commission's written consent to the
assignment of the KQQK FCC Licenses to LBI Sub pursuant to the KQQK
Assignment Application (including without limitation, by the Media
Bureau by delegated authority), without any conditions materially
adverse to any Party.
"Intellectual Property" has the meaning set forth in Section
4.13.1.
"KEYH Assignment Application" has the meaning set forth in the AM
Asset Purchase Agreement.
"KEYH Closing Date" has the meaning set forth in the AM Asset
Purchase Agreement.
"KEYH Deposit Agreement" has the meaning set forth in the recitals
to this Agreement.
4
"KEYH Deposit Extension Agreement" has the meaning set forth in the
recitals to this Agreement.
"KEYH Extension Agreement" has the meaning set forth in the
recitals to this Agreement.
"KEYH FCC Licenses" has the meaning set forth in the recitals to
this Agreement.
"KEYH Final Grant Day" has the meaning set forth in the AM Asset
Purchase Agreement.
"KEYH Local Marketing Agreement" has the meaning set forth in the
recitals to this Agreement.
"KEYH Purchase Agreement" has the meaning set forth in the recitals
to this Agreement.
"KQQK Assignment Application" means the application which Seller
and Buyer will join in and file with the Commission requesting its
written consent to the assignment of the KQQK FCC Licenses from EDC
License Sub to LBI Sub.
"KQQK Closing Date" means the date as determined pursuant to
Section 7.1.
"KQQK FCC Licenses" has the meaning set forth in the recitals to
this Agreement.
"KQQK Final Grant Day" means the date on which the Initial Grant
has become a final order, which date shall be the forty-first day
following issuance by the Commission of a public notice announcing
the Initial Grant, unless the Initial Grant has during the
preceding forty-day period become subject to any administrative or
judicial stay, appeal, review, reconsideration or rehearing, in
which case the KQQK Final Grant Day shall not be deemed to occur
until such administrative or judicial stay, appeal, review,
reconsideration or rehearing shall have been resolved by a final,
unappealable order (by the Commission or by a court of competent
jurisdiction if Buyer elects to seek judicial review of any final
order by the Commission) which preserves intact the Initial Grant
without any conditions materially adverse to any Party.
"LBI," "LBI Holdings" and "LBI Sub" have the meanings specified in
the first paragraph of this Agreement.
"Letter of Intent" shall mean that Letter Agreement dated January
17, 2002 by and among EDC and Liberman Broadcasting, Inc., a
California corporation and an indirect wholly owned subsidiary of
LBI Holdings, as extended from time to time.
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"Microwave Facility" shall mean that microwave studio transmitter
link located on the roof of Sellers' Post Oak Road studio and the
Liberty County STL transmission site shared with KSHN.
"Party" means any of EDC, EDC Sub, EDC License Sub, LBI Holdings,
LBI or LBI Sub, as the context requires, and the term "Parties"
mean all such entities; provided, however, that Seller, on the one
hand, and LBI Holdings and Buyer, on the other, shall each be
considered a single Party for purposes of Sections 7.4, 7.5, 10.3
and 10.4.
"Permits" means the licenses, permits, approvals, authorizations,
consents, and orders of any federal, state or local governmental
authority held by Seller in connection with the operation of the
Station KQQK (including the KQQK FCC Licenses) and all pending
requests and applications therefor, including without limitation
those listed on Schedule II.
"Proceeds" has the meaning set forth in Section 7.6.1.
"Purchased Assets" has the meaning set forth in Section 2.1.
"Purchase Price" has the meaning set forth in Section 3.1.
"Recipient Agreement" shall mean an agreement substantially in the
form attached as Exhibit I.
"Required Consents" means the FCC consents to the assignment of the
KQQK FCC Licenses and the other governmental consents, third-party
consents, approvals or waivers in form and substance satisfactory
to Buyer, necessary for Seller to sell, convey or otherwise sell or
assign the Purchased Assets to Buyer, including without limitation
those consents set forth on Schedule III.
"Sale Proceeds Recipients" shall mean Seller and the other entities
and persons listed on Schedule IX.
"Seller" has the meaning set forth in the first paragraph of this
Agreement.
"Seller Escrow Payment Certificate (FM Only)" shall mean a
certificate from an executive officer of Seller in the form of
Exhibit A attached hereto, instructing the Escrow Agent to
distribute a portion of the Escrow Deposit to Seller.
"Simultaneous Closing" means the consummation of the purchase and
sale transaction contemplated by this Agreement on the KQQK Closing
Date simultaneously with the consummation of the purchase and sale
transaction contemplated by the AM Asset Purchase Agreement.
"Simultaneous Closing Date" means the date on which the
Simultaneous Closing occurs.
6
"Station KQQK", "Station KEYH", "Station" and "Stations" have the
meanings set forth in the recitals hereto.
"Tangible Personal Property" has the meaning set forth in Section
2.1.1.
"Towers" means the radio broadcast towers located at the applicable
Transmitter Site upon which is located the broadcast antenna for
Station KQQK.
"Transaction and Wind Down Expenses" means the costs and expenses
incurred by Seller in connection with the transactions contemplated
by this Agreement, or in connection with the wind down of the
business of Seller after the consummation of the transactions
contemplated by this Agreement.
"Transaction Claims" has the meaning set forth in Section 11.6.
"Transmitter Buildings" means the transmitter buildings located at
the Transmitter Sites.
"Transmitter Sites" means the transmitter and antenna sites located
at Liberty County, Texas (KQQK).
1.2 Knowledge. The term "knowledge," as it relates to an
individual, shall mean that such individual will be deemed to have knowledge of
a particular fact or other matter if (a) such individual is actually aware of
such fact or other matter; or (b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or matter. The term "knowledge," as it relates to a Party or any other
person or entity (other than an individual) shall mean that such Party or such
other person or entity will be deemed to have knowledge of a particular fact or
other matter if any individual who is serving, or who has at any time served
during the twelve months prior to the date of this Agreement, as a director,
officer, partner, executor, trustee, or any other managerial employee of such
Party or such other person or entity (or in any similar capacity) has, or at any
time had, "knowledge" of such fact or other matter.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Assets to be Conveyed. On the KQQK Closing Date at the
Closing Place, (i) Seller will sell, assign, convey, transfer and deliver to LBI
Sub the KQQK FCC Licenses and the Permits, and all applications therefor,
together with any renewals, extensions, additions or modifications thereof, and
(ii) Seller will sell, assign, convey, transfer and deliver to LBI the business
of Station KQQK and, all of Seller's right, title and interest in and to the
assets, properties and rights described below (which, together with the KQQK FCC
Licenses and the Permits and applications therefor, are collectively referred to
as the "Purchased Assets"), such sale, assignment, conveyance, transfer and
delivery to be made by instruments of conveyance in form reasonably satisfactory
to Buyer and to be free and clear of all Encumbrances. The Purchased Assets
include the following:
7
2.1.1 All tangible personal property, furniture, fixtures,
improvements and office equipment and other equipment used in the
operation of Station KQQK, including all furniture and inventory in
the Transmitter Buildings, the transmitter facilities, all Towers,
antennas, main and back-up transmitters and generators, STL's, data
links for transmitter telemetry, wireless microphone and other
equipment and tangible personal property located or otherwise
intended for use at the Transmitter Sites, listed on Schedule IV,
together with any replacements thereof or additions thereto made
between the date hereof and the KQQK Closing Date, less any
retirements made in the ordinary and usual course of Station KQQK's
business (collectively, together with all tangible personal
property described in Section 2.1.4, the "Tangible Personal
Property");
2.1.2 All prepaid expenses made by Seller, advance payments by
advertisers to Seller for advertising that would run after the KQQK
Closing Date and other advance payments by third parties for
services to be provided by or for Station KQQK after the KQQK
Closing Date, in each case under the Assumed Contracts;
2.1.3 The Assumed Contracts and all of Seller's rights thereunder
relating to periods and events occurring on and after the KQQK
Closing Date;
2.1.4 Such files, records and logs pertaining to the operation of
Station KQQK as Buyer may reasonably require, including Station
KQQK's public inspection files and other records relating to the
KQQK FCC Licenses and other filings with the Commission and such
sales records and other sales and traffic information that may
exist relating to Station KQQK for the two year period prior to the
date of this Agreement and copies of all sales orders, invoices,
contracts, statements and station logs for such period, but
excluding the corporate and accounting records of Seller to the
extent not described above (it being understood by the Parties that
Seller shall transfer the data pertaining to the operation of the
Station KQQK (including without limitation the data resident in
Seller's Great Plains and ABC Traffic Software) on the computer
systems of Seller to the computer systems of Buyer)
(notwithstanding this conveyance, Buyer agrees to allow Seller
reasonable access to such records of Station KQQK as Seller may
reasonably require from and after the KQQK Closing Date); and
2.1.5 All Intellectual Property.
2.2 Excluded Assets and Liabilities.
2.2.1 Excluded Assets. It is understood and agreed that the
Purchased Assets do not include any assets of Seller that are not
used in the operation of Station KQQK, intellectual property rights
not related to the existing station format, the name El Dorado,
cash (other than the amounts described in Section 2.1.2), cash
equivalents, deposits made by Seller under any contracts (other
than the amounts described in Section 2.1.2), accounts receivable
of Seller not accruing under the FM Local Marketing Agreement,
causes of action, tax refunds, insurance claims or proceeds, in
each case (for such accounts receivable, causes of action, tax
8
refunds and insurance claim and proceeds) accruing prior to the
closing of the transactions contemplated by this Agreement (and not
accruing under the FM Local Marketing Agreement), claims of Seller
which accrue under this Agreement, personal art work of
shareholders of EDC at the office buildings relating to Station
KQQK and excess studio and excess transmission equipment not used
in the operation of Station KQQK, nor do they include the assets of
any pension or other employee benefit plans nor any other assets
specifically excluded from the Purchased Assets by the provisions
of this Agreement (all the foregoing of which are referred to as
the "Excluded Assets").
2.2.2 Liabilities Not Assumed. Except for the liabilities and
obligations specifically assumed pursuant to Section 3.2, Buyer and
LBI Holdings will not assume and will not be or become liable for,
any liabilities or obligations of Seller of any kind or nature
whatsoever, whether absolute, contingent, accrued, known or
unknown, related to the ownership of the Purchased Assets, the
Excluded Assets, the operation of Station KQQK (including without
limitation, Seller's actions in operating Station KQQK under the FM
Local Marketing Agreement but excluding Buyer's actions in
operating Station KQQK under the FM Local Marketing Agreement) or
Seller's employees or otherwise.
ARTICLE III
PURCHASE PRICE; METHOD OF PAYMENT; ESCROW DEPOSIT
3.1 Purchase Price. Subject to Section 7.6.3, the purchase price
to be paid to Seller by Buyer for the Purchased Assets will be Twenty-Three
Million and One Dollars ($23,000,001) plus the aggregate amount of prepaid
expenses made by Seller for services to be provided to Station KQQK after the
KQQK Closing Date under the Assumed Contracts as set forth on Schedule VIII less
any accrued liabilities agreed to be assumed by Buyer, other than liabilities
assumed pursuant to and to the extent set forth in Section 3.2 (the "Purchase
Price").
3.1.1 Payment of Purchase Price. Subject to the terms and
conditions set forth in this Agreement, on the KQQK Closing Date,
LBI Holdings or Buyer will (a) pay the Seller an amount equal to
the Purchase Price minus $1,500,000, by wire transfer of
immediately available funds in accordance with wire transfer
instructions to be provided by Seller to Buyer not less than three
business days prior to the KQQK Closing Date, and (b) deposit
$1,500,000 with the Holdback Escrow Agent by wire transfer of
immediately available funds in accordance with wire transfer
instructions to be provided by Holdback Escrow Agent to Buyer not
less than three business days prior to the KQQK Closing Date to be
held under the Holdback Escrow Agreement in accordance with Section
3.1.4 hereof and the terms of the Holdback Escrow Agreement in
order to secure the indemnification obligations of Seller under
Article X hereof, any other obligations of Seller under this
Agreement, obligations of Seller under Article X of the AM Asset
Purchase Agreement and any other obligations of Seller thereunder
(the "Holdback").
3.1.2 Release of Escrow Deposit. Also on the KQQK Closing Date,
concurrently with the wire transfer of the Purchase Price to
Seller, EDC and LBI
9
Holdings shall jointly execute and deliver to the Escrow Agent
written instructions to deliver $1,000,000 of the Escrow Deposit
(plus any associated interest) to LBI Holdings; provided that if
the KQQK Closing Date is also a Simultaneous Closing Date or if the
AM Asset Purchase Agreement has theretofore been terminated or is
terminated on such date, then EDC and LBI Holdings shall jointly
execute and deliver to the Escrow Agent written instructions to
terminate the Escrow Agreement and deliver the entire Escrow
Deposit to LBI Holdings.
3.1.3 Post-Closing Proration. Following the KQQK Closing Date, the
Parties shall determine and make the prorations called for in
Section 3.6.
3.1.4 Holdback.
(a) Subject to the terms and conditions set forth in this Agreement, on
the KQQK Closing Date, LBI Holdings or Buyer shall deposit the Holdback
with the Holdback Escrow Agent pursuant to the Holdback Escrow Agreement.
The Holdback will be held, maintained, administered and disbursed by the
Holdback Escrow Agent in accordance with the terms and provisions hereof,
of the AM Asset Purchase Agreement and of the Holdback Escrow Agreement,
with the terms of the Holdback Escrow Agreement controlling in the event
of any conflict.
(b) LBI Holdings and/or Buyer will submit claims to Seller by a written
notice specifying the amount of the claim (or estimated amount if the
claim is not reasonably quantifiable) and describing in reasonable detail
the basis for the claim. If Seller does not notify LBI Holdings or Buyer,
as the case may be, within 15 days after receiving such a notice of
Seller's objection to the claim, LBI Holdings and EDC shall at the end of
such 15 day period execute and deliver to Holdback Escrow Agent joint
written instructions to deliver to Buyer from the Holdback an amount
equal to the claimed amount, as determined in accordance with this
Section 3.1.4. If Seller gives notice of objection to LBI Holdings or
Buyer, as the case may be, within the 15-day period, and the Parties
cannot reach agreement on the claim, LBI Holdings and EDC shall at the
end of such 15 day period execute and deliver to Holdback Escrow Agent
joint written instructions to deliver to Buyer from the Holdback an
amount equal to the amount not in dispute, and the Parties will attempt
in good faith to agree upon the amount in dispute. If the Parties cannot
agree within thirty (30) days thereafter, the Parties will submit such
dispute to arbitration, as provided for in Section 11.6. Within three
business days of (i) reaching resolution of such dispute as to the amount
(if any) that LBI Holdings and Buyer are entitled to (in the event that
the parties reach resolution without submitting such dispute to
arbitration), or (ii) an arbitrator determining the amount (if any) that
LBI Holdings and Buyer are entitled to (in the event that such dispute is
submitted to arbitration), LBI Holdings and EDC shall execute and deliver
to Holdback Escrow Agent joint written instructions to deliver to Buyer
from the Holdback an amount equal to such applicable amount. The failure
to give notice of a claim hereunder will not constitute an election of
remedies and will not limit LBI Holdings or Buyer in any manner in the
enforcement of other remedies that may be available to it.
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(c) On the twelve month anniversary of the consummation of the
transaction contemplated by the FM Asset Purchase Agreement on the KQQK
Closing Date, LBI Holdings and EDC shall execute and deliver to the
Holdback Escrow Agent written instructions to deliver to Seller from the
Holdback an amount equal to $800,000 minus the lesser of (x) $800,000 and
(y) the sum of the aggregate amount previously paid since the KQQK
Closing Date to satisfy claims asserted by LBI Holdings and/or Buyer and
the aggregate amount required to satisfy claims asserted by LBI Holdings
and/or Buyer since the KQQK Closing Date and previously resolved (to the
extent the resolution calls for a payment to LBI Holdings and/or Buyer)
or still pending on the date of such release, in each case pursuant to
this Agreement or the AM Asset Purchase Agreement.
(d) On the twenty four month anniversary of the consummation of the
transaction contemplated by the AM Asset Purchase Agreement (or if the
purchase and sale transaction contemplated under the AM Asset Purchase
Agreement does not occur, on the later of (i) the eighteenth month
anniversary of the KQQK Closing Date or (ii) the date on which the AM
Asset Purchase Agreement is terminated), LBI Holdings and EDC shall
execute and deliver to the Holdback Escrow Agent written instructions to
deliver to Seller the remainder of the Holdback, less any amounts
required to satisfy claims asserted by LBI Holdings and/or Buyer and
previously resolved (to the extent the resolution calls for a payment to
LBI Holdings and/or Buyer) or still pending on the date of such release,
in each case pursuant to this Agreement or the AM Asset Purchase
Agreement.
3.2 Liabilities Assumed. As of the KQQK Closing Date, Buyer will
assume and agree to pay, discharge and perform insofar as they relate to the
time period on and after the KQQK Closing Date, and arise out of events
occurring on or after the KQQK Closing Date, all the obligations and liabilities
of Seller under the Assumed Contracts.
3.3 Escrow Deposit. Concurrently with the execution and delivery
of the Recipient Agreement by Seller and the top eight entities listed on
Schedule IX, LBI Holdings will deposit pursuant to this Section 3.3 and pursuant
to Section 3.3 of the AM Asset Purchase Agreement One Million Five Hundred
Thousand Dollars ($1,500,000) under the Escrow Agreement (together with any
interest accrued on such amount, the "Escrow Deposit"). The Escrow Deposit will
be held, maintained, administered and disbursed by the Escrow Agent in
accordance with the terms and provisions hereof, of the AM Asset Purchase
Agreement and of the Escrow Agreement, with the terms of the Escrow Agreement
controlling in the event of any conflict. Once deposited, the Escrow Deposit
will be disbursed as follows:
3.3.1 Notification of Escrow Agent; Delivery of Seller Escrow
Payment Certificate (FM Only). Within three business days of the
occurrence of the KQQK Final Grant Day, Seller shall notify Escrow
Agent in writing, with a copy to Buyer, of such occurrence. Seller
agrees not to deliver to the Escrow Agent the Seller Escrow Payment
Certificate (FM Only) unless it simultaneously delivers to LBI
Holdings such certificate.
3.3.2 Delivery to Seller. If Buyer fails to consummate the
purchase and sale contemplated by this Agreement under
circumstances that would constitute a material breach of this
Agreement and Seller is not then in breach of its
11
representations, warranties or covenants hereunder in any material
respect, then, subject to the satisfaction of the conditions set
forth below, $1,000,000 plus any associated interest of the Escrow
Deposit, will be delivered to Seller on the ninth business day (or,
if Buyer has elected to defer the KQQK Closing Date as set forth in
7.1, the thirty-ninth business day) after the KQQK Final Grant Day,
it being understood and agreed that payment to Seller of $1,000,000
plus any associated interest of the Escrow Deposit (and, if
applicable, the amounts described in the second-to-last sentence of
the following paragraph) (or, prior to the Escrow Deposit being
made, payment to Seller of $1,000,000) will constitute full payment
for any and all damages suffered by Seller by reason of LBI
Holdings' or Buyer's failure to consummate the purchase and sale
contemplated by this Agreement. Conditions to such delivery of
$1,000,000 plus any associated interest of the Escrow Deposit to
Seller on such day will be that (a) the Escrow Agent and LBI
Holdings shall have received on the sixth business day (or, if
Buyer has elected to defer the KQQK Closing Date as set forth in
7.1, the thirty-sixth business day) after the KQQK Final Grant Day
at or prior to 5:00 PM (California time) (with a copy by e-mail to
Lenard Liberman at e-mail lliberman@lbimedia.com and by fax and
e-mail to Joe Kim at fax (213) 430-6407 and e-mail jkim@omm.com and
Steve Chen at fax (213) 430-6407 and e-mail schen@omm.com) a duly
executed Seller Escrow Payment Certificate (FM Only) substantially
in the form of Exhibit A annexed hereto, and (b) the Escrow Agent
shall not have received from LBI Holdings or Buyer a written
challenge challenging the accuracy of such Seller Escrow Payment
Certificate (FM Only) at or prior to 5:00 PM (California time) of
the second business day after receipt by both LBI Holdings and the
Escrow Agent of such Seller Escrow Payment Certificate (FM Only).
THE PARTIES ACKNOWLEDGE AND AGREE IN ADVANCE BY INITIALING
THIS AGREEMENT IN THE SPACES PROVIDED [LBI HOLDINGS' INITIALS
________, BUYER'S INITIALS ________ AND ________, AND SELLER'S
INITIALS _________, _______ AND ________], THAT THE ACTUAL DAMAGES
THAT SELLER WOULD SUFFER AS A RESULT OF BUYER'S FAILURE TO
CONSUMMATE THE PURCHASE AND SALE OF THE ASSETS DESCRIBED IN THIS
AGREEMENT WOULD BE EXTREMELY DIFFICULT OR IMPOSSIBLE TO CALCULATE;
THAT $1,000,000 PLUS ANY ASSOCIATED INTEREST OF THE ESCROW DEPOSIT
(OR, PRIOR TO THE ESCROW DEPOSIT BEING MADE, $1,000,000) IS A FAIR
AND EQUITABLE AMOUNT TO REIMBURSE SELLER FOR ANY DAMAGES WHICH THE
PARTIES ESTIMATE MAY BE SUSTAINED BY SELLER DUE TO BUYER'S FAILURE
TO CONSUMMATE THE PURCHASE AND SALE OF THE ASSETS DESCRIBED IN THIS
AGREEMENT UNDER THE CIRCUMSTANCES STATED IN THIS SECTION 3.3; AND
THAT THIS SECTION 3.3 SHALL CONSTITUTE A LIQUIDATED DAMAGES
PROVISION, WHICH DAMAGES WILL BE SELLER'S SOLE REMEDY HEREUNDER IN
THE EVENT OF LBI HOLDINGS' OR BUYER'S FAILURE TO CONSUMMATE THE
PURCHASE AND SALE OF THE ASSETS DESCRIBED IN THIS AGREEMENT UNDER
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THE CIRCUMSTANCES STATED IN THIS SECTION 3.3. IN THE EVENT THAT LBI
HOLDINGS OR BUYER PROVIDES ESCROW AGENT A WRITTEN CHALLENGE
CHALLENGING THE ACCURACY OF THE SELLER ESCROW PAYMENT CERTIFICATE
(FM ONLY) AND A DISPUTE OVER THE DISBURSEMENT OF $1,000,000 PLUS
ANY ASSOCIATED INTEREST OF THE ESCROW DEPOSIT ARISES THEREFROM,
SUCH DISPUTE SHALL BE RESOLVED IN ACCORDANCE WITH SECTION 11.6. IF
THE ARBITRATOR FINDS THAT THE SELLER ESCROW PAYMENT CERTIFICATE (FM
ONLY) WAS ACCURATE AND THAT SUCH WRITTEN CHALLENGE WAS WITHOUT
MERIT, THEN BUYER SHALL PAY SELLER (1) REASONABLE ATTORNEY'S FEES
AND EXPENSES INCURRED BY SELLER IN CONNECTION WITH SUCH DISPUTE AND
(2) 10% INTEREST ON $1,000,000 PLUS ASSOCIATED INTEREST OF THE
ESCROW DEPOSIT CALCULATED FROM THE DATE OF SUCH WRITTEN CHALLENGE
TO THE DATE THE $1,000,000 PLUS ANY ASSOCIATED INTEREST OF THE
ESCROW DEPOSIT IS PAID TO SELLER. IF THE ARBITRATOR FINDS THAT THE
SELLER ESCROW PAYMENT CERTIFICATE (FM ONLY) WAS INACCURATE AND THAT
SUCH WRITTEN CHALLENGE WAS WITH MERIT, SELLER SHALL PAY BUYER (1)
REASONABLE ATTORNEY'S FEES AND EXPENSES INCURRED BY LBI HOLDINGS
AND BUYER IN CONNECTION WITH SUCH DISPUTE AND (2) 10% INTEREST ON
THE $1,000,000 PLUS ASSOCIATED INTEREST OF THE ESCROW DEPOSIT
CALCULATED FROM THE DATE OF SUCH WRITTEN CHALLENGE TO THE DATE THE
$1,000,000 PLUS ANY ASSOCIATED INTEREST OF ESCROW DEPOSIT IS
RETURNED TO BUYER.
3.3.3 Delivery to LBI Holdings. In the event of a Simultaneous
Closing or in the event of an FM Only Closing in which the AM Asset
Purchase Agreement has theretofore been terminated or is terminated
on such date, the Escrow Deposit shall be delivered to LBI
Holdings. Subject to the following sentence, in the event that the
purchase and sale contemplated by this Agreement and/or the AM
Asset Purchase Agreement is not consummated and Seller is not
entitled to receive the Escrow Deposit in accordance with Section
3.3.2, the entire Escrow Deposit shall be delivered to LBI
Holdings. In the event of an FM Only Closing in which the AM Asset
Purchase Agreement has not theretofore been terminated or is not
terminated on such day, if the transactions contemplated by this
Agreement are consummated, $1,000,000 of the Escrow Deposit (plus
any associated interest) shall be delivered to LBI with the
remainder of the Escrow Deposit remaining in place pursuant to the
AM Asset Purchase Agreement to be released in accordance with
Sections 3.3.2 and 3.3.3 thereof.
3.4 Buyer's Remedies. If the purchase and sale contemplated by
this Agreement is not consummated because of the breach by Seller of its
representations, warranties or covenants hereunder in any material respect, and
Buyer is not in breach of its representations, warranties or covenants hereunder
in any material respect, Seller agrees that, in addition to any other rights and
remedies available at law or in equity, LBI Holdings and Buyer shall have the
13
following rights and remedies: (i) Buyer shall have the right to specific
performance of Seller's obligation to sell the Purchased Assets upon the terms
and conditions set forth in this Agreement, and incidental damages related to
such specific performance; (ii) LBI Holdings shall have the right to the return
of $1,000,000 of the Escrow Deposit (and associated interest); and (iii) LBI
Holdings and Buyer shall have the right to recover money damages for breach of
this Agreement, including but not limited to, benefit of the bargain damages and
compensation for transaction costs; provided, that if LBI Holdings and Buyer
obtain full remedies under clause (i) pursuant to a non-appealable judgment with
which Seller complies, then Buyer shall not thereafter have additional claims
under clause (iii) and if LBI Holdings and Buyer obtain full remedies under
clause (iii) pursuant to a non-appealable judgment with which Seller complies,
then Buyer shall not thereafter have additional claims under clause (i);
provided, further, that if the purchase and sale contemplated by this Agreement
is not consummated because the representation and warranty in the second
sentence of Section 4.6 would not be true on the KQQK Closing Date, then LBI
Holdings and Buyer shall have the remedies in clauses (i) and (ii) but not in
clause (iii). The Parties agree that remedy at law is inadequate and that
damages are not adequate to compensate LBI Holdings and Buyer.
3.5 Allocation. The Purchase Price will be allocated as set forth
on Schedule V.
3.6 Prorations. Other than the prepaid expenses set forth on
Schedule VIII and subject to the rights of Buyer and Seller pursuant to the FM
Local Marketing Agreement, the operation of Station KQQK and, subject to the FM
Local Marketing Agreement, all income, expenses and liabilities attributable
thereto through 11:59 p.m. on the day immediately preceding the KQQK Closing
Date will be for the account of Seller and thereafter for the account of LBI,
and all income and expenses relating to the operation of Station KQQK, including
such items as power and utilities charges, rents and other deferred items
relating to the operation of Station KQQK, will be prorated between Seller and
LBI in accordance with generally accepted accounting principles consistently
applied, the proration to be made and paid, insofar as feasible, on the KQQK
Closing Date, with a final settlement sixty days after the KQQK Closing Date. In
the event of any disputes between the parties as to such adjustments, the
amounts not in dispute shall nonetheless be paid at the time provided herein and
such disputes shall be determined by an independent certified public accountant
mutually acceptable to the parties, and the fees and expenses of such accountant
shall be paid one-half by Seller and one-half by Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY SELLER
Seller hereby represents and warrants to LBI Holdings and Buyer as
follows:
4.1 Organization and Standing. Each of EDC, EDC Sub, and EDC
License Sub is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation. Seller has the
requisite corporate power and authority to enter into and complete the
transactions contemplated by this Agreement.
4.2 Authorization. All necessary corporate actions and
proceedings to duly approve the execution, delivery and performance of this
Agreement, the Escrow Agreement, the
14
Holdback Escrow Agreement, the Recipient Agreement, the FM Local Marketing
Agreement and other agreements, documents and instruments being executed by
Seller in connection herewith or therewith and the consummation of the
transaction contemplated hereby or thereby have been duly and validly taken by
Seller, and each of this Agreement, the Escrow Agreement, the Holdback Escrow
Agreement, the Recipient Agreement, the FM Local Marketing Agreement and other
agreements, documents and instruments being executed by Seller in connection
herewith or therewith has been duly and validly authorized, executed and
delivered by Seller and constitutes the legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with and subject to their
respective terms.
4.3 KQQK FCC Licenses, Transmitters and Towers.
4.3.1 The KQQK FCC Licenses (all of which are listed on Schedule
II, together with any pending applications for KQQK FCC Licenses)
constitute all the licenses, permits and other authorizations
required for and used in connection with the operation of Station
KQQK. As of the date of this Agreement and as of the KQQK Closing
Date, Seller is and shall be holder of all the KQQK FCC Licenses.
Other than the Initial Grant of the KQQK Assignment Application, no
additional order or grant is required from the FCC in order to
consummate the assignment of the KQQK FCC Licenses to LBI Sub.
Schedule II correctly sets forth the respective expiration date of
each KQQK FCC License. Each KQQK FCC License is validly issued and
in full force and effect. Seller has taken all actions and
performed all of their respective obligations that are necessary to
maintain the KQQK FCC Licenses without adverse modification or
impairment, and complete and correct copies of the KQQK FCC
Licenses and any pending applications therefor have been delivered
to Buyer. No event has occurred with respect to Station KQQK (other
than directly as a result of Buyer's actions under the FM Local
Marketing Agreement) which (i) has resulted in, or after notice or
lapse of time or both would result in, revocation, suspension,
adverse modification, non-renewal or termination of or any order of
forfeiture with respect to, any KQQK FCC License or (ii) materially
and adversely affects or in the future may materially and adversely
affect any rights of Seller or its assignees or transferees
thereunder. None of the KQQK FCC Licenses requires that any
assignment thereof must be approved by any public or other
governmental authority other than the FCC.
4.3.2 Seller is not a party to, and there are no investigations,
notices of apparent liability, violations, forfeitures, notices of
violation, orders to show cause or other orders or complaints
issued by or before any court or regulatory body, including,
without limitation, the FCC, or of any other proceedings (other
than proceedings relating to the radio industry generally) that
could in any manner threaten or adversely affect the validity or
continued effectiveness of, or result in the adverse modification
of, any of the KQQK FCC Licenses. In the event Seller learns of any
such action, or the filing or issuance of any such order, notice or
complaint, Seller promptly will notify Buyer of the same in writing
and will take all reasonable measures to contest in good faith or
seek removal or rescission of such action, order, notice or
complaint. Station KQQK is now operating at its licensed
15
power and antenna height, in accordance with the KQQK FCC Licenses,
and is in compliance with the Communications Act including, without
limitation, rules governing the location of Station KQQK's main
studio and rules governing the required contents of Station KQQK's
public inspection files. Seller has no reason to believe that the
KQQK FCC Licenses will not be renewed in the ordinary course.
4.3.3 None of the facilities used in connection with the radio
broadcasting operations of Seller relating to Station KQQK
(including the Transmitter Buildings, the Transmitter Sites and the
Towers) violates the provisions of any applicable building codes,
fire regulations, building restrictions or other governmental
ordinances, orders or regulations (including, without limitation,
any applicable regulation of the Federal Aviation Administration),
except where such violation would not impair, impede or affect
adversely in any respect currently or in the future the continued
uninterrupted operation of Station KQQK at its licensed power and
in accordance with the other terms of the KQQK FCC Licenses, and
each such facility is zoned so as to permit the commercial uses
intended by the owner or occupier thereof. Schedule II identifies
any outstanding variances or special use permits materially
affecting any of Seller's facilities or the uses thereof and Seller
is in compliance therewith. Seller has received no notice of any
complaint being made against Station KQQK relating to its Tower,
Transmitter Site, Transmitter Building or Seller's operation of
such Station (including, without limitation, any complaint relating
to the signals broadcast or otherwise transmitted from any Tower,
either by Seller or by any person subleasing a portion of such
Tower) except, in each case, where such complaint would not impair,
impede or adversely affect the continued, uninterrupted operation
of such Station. Each Tower has been appropriately registered with
the Commission, as described in Schedule II.
4.3.4 Seller is qualified to sell Station KQQK and to assign the
KQQK FCC Licenses in accordance with the terms of this Agreement
and in compliance with the Communications Act. Seller knows of no
party who has expressed any intention to oppose FCC approval of the
assignment of the KQQK FCC Licenses to LBI Sub, nor does Seller
know of any reason why FCC consent to such assignment might be
denied or delayed.
4.3.5 Each report or certification filed by or on behalf of Seller
with the FCC, including, without limitation, any filing pursuant to
47 C.F.R. (S) 73.3615 with respect to its ownership of Station KQQK
and any other filing relating to such Station, was filed, and was
at the time of filing true, correct and complete in all material
respects; there have been no changes in the ownership of Station
KQQK since the filing of the most recent such ownership reports or
certifications and those ownership reports and certifications are
true, correct and complete in all respects.
16
4.3.6 The operation of Station KQQK by Seller does not cause or
result in exposure of workers or the general public to levels of
radio frequency radiation in excess of the applicable limits stated
in 47 C.F.R. ss. 1.1310.
4.4 Purchased Assets. All items as of the date hereof used in
the operation of Station KQQK are listed and described in Schedule IV to this
Agreement. No other affiliate of EDC (including without limitations, direct or
indirect subsidiaries of EDC) other than Seller owns or has any rights, title or
interest in any Purchased Assets or is in any way involved with the operation of
Station KQQK. On the KQQK Closing Date, Seller will have good and valid title to
the Purchased Assets, free and clear of all Encumbrances, other than the
Encumbrances described in Schedule III, which Encumbrances will be released on
the KQQK Closing Date concurrently with the closing. Upon consummation of the
transactions set forth in this Agreement, Buyer will have good and valid title
to the Purchased Assets, free and clear of all Encumbrances (other than liens
granted to Buyer's lenders). Schedule III sets forth each release and/or UCC
termination statement required in order to release such Encumbrances on the KQQK
Closing Date. Schedule III also sets forth all currently effective UCC financing
statements that have been filed against any Purchased Asset. Seller has
maintained and has operated each Transmitter Site, each Tower, each Transmitter
Building and Station KQQK under and in accordance with the terms of all
applicable regulations in all material respects. Seller is not aware of any
complaints regarding the Transmitter Sites, the Towers, the Transmitter
Buildings, the antennas, the radio transmitters or the studio facilities. There
is no pending or, to the knowledge of Seller, threatened action, event,
transaction or proceeding that could interfere with the quiet enjoyment or
operation of the Purchased Assets by Seller or, on and after the KQQK Closing
Date, by Buyer. Buyer will have on and after the KQQK Closing Date reasonable
access to each of the Transmitter Sites, and a continuous means of ingress and
egress thereto from public roads. The items of Tangible Personal Property are in
all material respects in good operating condition for equipment of their age and
usage (ordinary wear and tear excepted). The technical equipment, constituting a
part of the Tangible Personal Property, has been maintained in accordance with
Station KQQK's past practice and is operating and complies in all material
respects with all applicable rules and regulations of the FCC and the terms of
the KQQK FCC Licenses and Permits. The Purchased Assets include all the personal
property and assets, including real estate rights, necessary to conduct the
operation of Station KQQK as now conducted. The sale of the Purchased Assets
relating to Station KQQK is a sale of the entire operating assets of a business
or of a separate division, branch, or identifiable segment of a business within
the meaning of Texas Tax Code Section 151.304 and Texas Administrative Code
Section 3.316.
4.5 Insurance. Seller now has in force insurance on the
Purchased Assets as set forth in Schedule VI and will continue the present
insurance at the present limits in full force and effect up through the KQQK
Closing Date.
4.6 Litigation. On or prior to the date of this Agreement, no
litigation, action, suit, judgment, proceeding or, to the knowledge of Seller,
investigation relating to Station KQQK is pending or outstanding before any
forum, court, or governmental body, department or agency of any kind to which
Seller or Station KQQK is a party and, to the knowledge of Seller, no such
litigation or proceeding is threatened. On or prior to the KQQK Closing Date, no
litigation, action, suit, judgment, proceeding or, to the knowledge of Seller,
investigation relating
17
to Station KQQK (except for such litigation, action, suit, judgment, proceeding
or investigation arising directly as a result of Buyer's actions under the FM
Local Marketing Agreement) that could reasonably be expected or would reasonably
be expected to adversely affect the operation of Station KQQK in accordance with
Seller's past operations or could reasonably be expected or would reasonably be
expected to prevent a consummation of the transaction contemplated hereby shall
be pending or outstanding before any forum, court or governmental body,
department or agency of any kind to which Seller or Station KQQK is a party,
and, to the knowledge of Seller, no such litigation or proceeding shall be
threatened.
4.7 Contracts. Seller has delivered to Buyer prior to the KQQK
Closing Date true and complete copies of all Contracts (in the case of oral
agreements, a written summary of the key terms of such oral Contracts),
including without limitation the Assumed Contracts. The Assumed Contracts will
be enforceable by Buyer after the consummation of the transaction contemplated
hereby in accordance with their respective terms; provided, however, that Seller
makes no warranty as to performance by any other party to any Assumed Contracts
or as to LBI's ability to collect any payments due or to become due thereunder.
Seller has not taken any action that would impair the enforceability of the
Assumed Contracts, or omitted to take any action, the omission of which would
have such effect. There are no material defaults under any of the Assumed
Contracts and the consummation of the transaction contemplated hereby will not
cause any defaults under any of the Assumed Contracts.
4.8 Insolvency. No insolvency proceedings of any character
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
Seller or any of its assets or properties is pending or, to the knowledge of
Seller, threatened.
4.9 Reports. All material returns, reports and statements
currently required to be filed by Seller with the Commission or with any other
governmental agency have been filed and each such return, report and statement
is true, correct and complete in all material respects. Seller has complied in
all material respects with the reporting requirements of the Commission and
other governmental authorities having jurisdiction over Station KQQK and its
operations.
4.10 No Defaults. Neither the execution, delivery and performance
by Seller of this Agreement, the Escrow Agreement, the Holdback Escrow
Agreement, the Recipient Agreement, the FM Local Marketing Agreement and other
agreements, documents and instruments being executed by Seller in connection
herewith or therewith nor the consummation by Seller of the transaction
contemplated hereby is an event that, of itself or with the giving of notice or
the passage of time or both, will (i) conflict with the provisions of the
Articles of Incorporation or Bylaws of Seller, (ii) constitute a violation of,
conflict with or result in any breach of or any default under, result in any
termination or modification of, or cause any acceleration of any obligation
under, any material contract, mortgage, indenture, agreement, lease, license or
other instrument to which Seller is a party or by which it is bound, or by which
it may be affected, or result in the creation of any Encumbrance on any of the
Purchased Assets, (iii) violate any judgment, decree, order, statute, rule or
regulation applicable to Seller or (iv) violate or constitute a breach of any
Assumed Contract. The execution, delivery and performance by Seller of this
Agreement, the Escrow Agreement, the Holdback Escrow Agreement, the Recipient
Agreement, the FM Local Marketing Agreement and other
18
agreements, documents and instruments being executed by Seller in connection
herewith or therewith and the consummation by Seller of the transactions
contemplated hereby do not require the consent of any third party other than as
listed on Schedule III.
4.11 Disclosures. No covenant, representation or warranty by
Seller and no written statement, certificate, appendix or Schedule furnished by
Seller pursuant hereto or in connection with the transaction contemplated hereby
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements contained herein or therein not materially
misleading.
4.12 Environmental Compliance. (i) Seller has not, in connection
with its business or assets, generated, used, transported, treated, stored,
released or disposed of, or has suffered and has permitted no one else to
generate, use, transport, treat, store, release or dispose of any Hazardous
Substance (as defined below) in violation of any applicable environmental law;
(ii) to the knowledge of Seller, there has not been any generation, use,
transportation, treatment, storage, release or disposal of any Hazardous
Substance in connection with the conduct of Seller's business or in any
properties within 100 yards of its business which has created or might
reasonably be expected to create any material liability under any applicable
environmental law or which would require reporting to or notification of any
governmental entity; (iii) to the knowledge of Seller, no asbestos or
polychlorinated biphenyl or underground storage tank is contained in or located
at any facility used in connection with its business; and (iv) to the knowledge
of Seller, any Hazardous Substance handled or dealt with in any way in
connection with Seller's business has been and is being handled or dealt with in
all material respects in compliance with all applicable environmental laws. As
used herein, "Hazardous Substance" means substances that are defined or listed
in, or otherwise classified pursuant to, any applicable laws as "hazardous
substances," "hazardous materials," "hazardous wastes" or "toxic substances," or
any other formulation of any applicable environmental law intended to define,
list or classify substances by reason of deleterious properties such as
ignitibility, corrosivity, reactivity, radioactivity, carcinogenicity,
reproductive toxicity or "EP toxicity," and petroleum and drilling fluids,
produced waters and other wastes associated with the exploration, development,
or production of crude oil, natural gas or geothermal energy.
4.13 Intellectual Property.
4.13.1 Schedule VII contains a true and complete list of all
patents and trademarks, service marks, station names, alternative
station names, slogans, trade names, logos, jingles, assumed names,
fictional business names, copyrights, licenses, permits,
authorizations and other similar intellectual property rights and
interests applied for, issued to or presently owned or used by
Seller (other than the name "El Dorado" and programming and its
contents used but not owned by Seller) which are material to the
operation of Station KQQK, including the call letters "KQQK" and
any other call signs (together with the goodwill associated
therewith, the "Intellectual Property"). Except as set forth on
Schedule VII, on the KQQK Closing Date, Seller will have good and
marketable title to all of the Intellectual Property, free and
clear of all Encumbrances. Seller has not made any registrations or
filings in the United States Copyright Office or the United States
Patent and Trademark Office nor has Seller been issued by the
United States
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Copyright Office or the United States Patent and Trademark Office
any intellectual property rights in connection with or related to
Station KQQK.
4.13.2 Except as set forth on Schedule VII, on the KQQK Closing
Date, Seller has not received any notice from any other person or
entity pertaining to or challenging the right of Seller to use any
of the Intellectual Property or any rights thereunder.
4.13.3 Except as set forth on Schedule VII, Seller has not violated
or infringed any patent, trademark, trade name, jingle, assumed
name, fictional business name, copyright, license, permit or other
similar intangible property right or interest held by others or any
license or permit held by Seller in connection with or related to
Station KQQK.
4.13.4 Except as set forth on Schedule VII, (i) Seller has not
granted any license or other rights and Seller has no obligations
to grant licenses or other rights to any of the Intellectual
Property, and (ii) Seller has not made any claim of any violation
or infringement by others of its rights to or in connection with
any of the Intellectual Property, and there is no basis for the
making of any such claim.
4.14 Brokers. No agent, broker, investment or commercial banker,
person or firm acting on behalf of Seller is or will be entitled to any broker,
finder or financial advisor fee or any other commission or similar fee directly
or indirectly in connection with the transaction contemplated by this Agreement,
other than Houlihan Lokey Howard & Zukin, whose fee shall be paid by Seller.
4.15 Prepaid Expenses. All prepaid expenses made by Seller for
services to be provided to Station KQQK after the KQQK Closing Date under the
Assumed Contracts are set forth on Schedule VIII, except for such expenses as
are subject to proration under Section 3.6.
4.16 Sale Proceeds Recipients; Recipient Agreement. Seller and
Sale Proceeds Recipients listed on Schedule IX constitute all entities and
persons that will receive the proceeds from the sale of the Stations pursuant to
this Agreement and/or the AM Asset Purchase Agreement other than those persons
or entities that will receive only Transaction and Wind Down Expenses. Upon
execution and delivery thereof, (to Seller's knowledge after due inquiry,
including with the Sale Proceeds Recipients) the Recipient Agreement will have
been duly and validly authorized, executed and delivered by Seller and each Sale
Proceeds Recipient signatory thereto and will constitute the legal, valid and
binding obligation of Seller and each Sale Proceeds Recipient signatory thereto,
enforceable against Seller and such Sale Proceeds Recipient in accordance with
and subject to its terms.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES BY BUYER AND LBI HOLDINGS
LBI Holdings and Buyer represent and warrant to Seller as follows:
5.1 Status. Each of LBI Holdings, LBI and LBI Sub is a California
corporation, duly organized, validly existing and in good standing under the
laws of the State of California. LBI Holdings and Buyer each have the requisite
corporate power to enter into and complete the transaction contemplated by this
Agreement.
5.2 No Defaults. Other than the consents set forth in Schedule
III with respect to Buyer, item (2) of which will have been obtained by the KQQK
Closing Date, neither the execution, delivery and performance by LBI Holdings or
Buyer of this Agreement, the Escrow Agreement, the Holdback Escrow Agreement,
the Recipient Agreement, the FM Local Marketing Agreement and other agreements,
documents and instruments being executed by LBI Holdings or Buyer in connection
herewith or therewith nor the consummation by Buyer of the transaction
contemplated hereby is an event that, of itself or with the giving of notice or
the passage of time or both, will (i) conflict with the provisions of the
Articles of Incorporation or Bylaws of LBI Holdings or Buyer, (ii) constitute a
violation of, conflict with or result in any breach of or any default under,
result in any termination or modification of, or cause any acceleration of any
obligation under, any material contract, mortgage, indenture, agreement, lease
or other instrument to which LBI Holdings or Buyer is a party or by which it is
bound, or by which it may be affected, or result in the creation of any
Encumbrance on any of its assets, except for agreements, indentures and
instruments related to the financing of the transaction contemplated by this
Agreement, (iii) violate any judgment, decree, order, statute, rule or
regulation applicable to LBI Holdings or Buyer, or (iv) result in the creation
or imposition of any Encumbrance on Station KQQK or the Purchased Assets, except
for liens, charges or encumbrances relating to the financing of the transaction
contemplated by this Agreement.
5.3 Authorization. All necessary corporate actions and
proceedings to duly approve the execution, delivery and performance of this
Agreement, the Escrow Agreement, the Holdback Escrow Agreement, the Recipient
Agreement, the FM Local Marketing Agreement and other agreements, documents and
instruments being executed by LBI Holdings or Buyer in connection herewith or
therewith and the consummation of the transaction contemplated hereby or thereby
have been duly and validly taken by LBI Holdings and Buyer, and each of this
Agreement, the Escrow Agreement, the Holdback Escrow Agreement, the Recipient
Agreement, the FM Local Marketing Agreement and other agreements, documents and
instruments being executed by LBI Holdings or Buyer in connection herewith or
therewith has been duly and validly authorized, executed and delivered by LBI
Holdings and Buyer and constitutes the legal, valid and binding obligation of
LBI Holdings and Buyer, enforceable against LBI Holdings and Buyer in accordance
with and subject to their respective terms.
5.4 Brokers. No agent, broker, investment or commercial banker,
person or firm acting on behalf of LBI Holdings or Buyer or under the authority
of LBI Holdings or Buyer is or will be entitled to any broker, finder or
financial advisor fee or any other commission or similar fee directly or
indirectly in connection with the transaction contemplated by this Agreement,
other than Kalil & Co., Inc., whose fee shall be paid by Buyer.
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5.5 Qualification as a Broadcast Licensee. Excluding all facts
arising from changes between the date hereof and the KQQK Closing Date to the
radio broadcasting industry generally and any modification during such period of
the FCC rules, regulations or policies affecting all members of the class of
holders of FCC licenses to which Buyer would belong as the holder of KQQK FCC
Licenses or to which Buyer belongs as the holder of its existing FCC licenses,
no fact exists as of the date of this Agreement and as of the KQQK Closing Date,
that would as of the date hereof or as of the KQQK Closing Date, under the
Communications Act, disqualify Buyer as owner, operator and licensee of Station
KQQK. Excluding all requests arising from changes between the date hereof and
the KQQK Closing Date to the radio broadcasting industry generally and any
modification during such period of FCC rules, regulations or policies affecting
all members of the class of holders of FCC licenses to which Buyer would belong
as the holder of KQQK FCC Licenses or to which Buyer belongs as the holder of
its existing FCC licenses, no request for any waiver under the Communications
Act is necessary in order for LBI Holdings or Buyer to obtain a grant of the
KQQK Assignment Application or to consummate the transactions contemplated
hereby.
5.6 Litigation. There are no suits, legal proceedings or
investigations of any nature pending or, to the knowledge of LBI Holdings or
Buyer, threatened against or affecting it that would affect the ability of LBI
Holdings or Buyer to carry out the transaction contemplated by this Agreement.
5.7 Approvals and Consents. To knowledge of LBI Holdings or
Buyer, the only approvals or consents of persons or entities not a party to this
Agreement that are legally or contractually required to be obtained by LBI
Holdings or Buyer in connection with the consummation of the transaction
contemplated by this Agreement are identified on Schedule III.
ARTICLE VI
COVENANTS OF SELLER
6.1 Affirmative Covenants of Seller. Between the date hereof and
the KQQK Closing Date, except as disclosed in this Agreement:
6.1.1 Maintenance. Seller will continue to operate Station KQQK,
in substantial conformity with past practices, and in conformity
with the KQQK FCC Licenses and the Communications Act.
6.1.2 Preserve Relations. Seller will use its commercially
reasonable efforts (such standard being determined as if Seller
intended to continue operation of Station KQQK for at least ten
years from the date of determination) to preserve the business of
Station KQQK and, where commercially reasonable (such standard
being determined as if Seller intended to continue operation of
Station KQQK for at least ten years from the date of
determination), the good relations with the third parties
(including but not limited to lessors, advertisers, clients and
service providers) under all Assumed Contracts, with owners of
property adjacent to or in the area of the Transmitter Sites, the
Transmitter Buildings, the Towers, and with advertisers, service
providers, municipalities and Artlite and its affiliates.
22
6.1.3 Reasonable Access. In addition to the rights of Buyer under
the FM Local Marketing Agreement, following reasonable advance
notification, Seller will provide Buyer and representatives of
Buyer with reasonable access to the employees and the properties,
titles, contracts, books, files, logs, records and affairs of
Station KQQK, and Seller will furnish or will cause to be furnished
such additional information concerning Station KQQK as Buyer may
from time to time reasonably request. Seller agrees that a request
by Buyer at least three business days prior to a visit by personnel
of Buyer to Station KQQK during such Station's normal business
hours shall constitute reasonable advance notification and shall
make best efforts to make available the documents and the personnel
Buyer indicates that its personnel would like to see during such
visit. Buyer will maintain the confidentiality of all such
information in accordance with the terms of confidentiality
previously agreed to between EDC and Liberman Broadcasting, Inc.
pursuant to Section 9 of the Letter of Intent as replaced by
Exhibit J. Buyer shall have the right to make offers of employment
beginning as of the date hereof to such employees of Seller as
Buyer may identify in its sole and absolute discretion without
liability to Seller. Without limiting the generality of the
foregoing, Seller will promptly (and in any event within two
business days) deliver to Buyer any information requested by Buyer
(if applicable, for specified time periods requested by Buyer) that
is within the scope of information described in Schedule X annexed
hereto and that is then available (or should reasonably be
available) to Seller. A copy of the information so requested by
Buyer shall be delivered to Buyer and a copy of such information
shall also remain at the office of Seller (at the address set forth
in Section 11.1) at all times. Seller shall update in its records
the information described in Schedule X on a timely basis in
accordance with its past practices. Buyer may request such
information as often as it chooses. Seller shall comply with the
provisions of the last paragraph of Schedule X.
6.1.4 Obtain Consents. Seller will use its best efforts to procure
the Required Consents.
6.1.5 Books and Records. Seller will maintain the books and
records of Station KQQK consistent with past practices.
6.1.6 Insurance. Seller will maintain in force the existing
insurance policies identified on Schedule VI or reasonably
equivalent policies. Seller will use the proceeds of any claims for
loss payable under such insurance policies to repair, replace, or
restore any of the Purchased Assets destroyed by fire and other
casualties to their former condition as soon as possible after the
loss.
6.1.7 Notification. Seller will promptly upon Seller's learning of
the same notify Buyer of any order to show cause, notice of
violation, notice of apparent liability or of forfeiture or the
filing or written threat of filing of any complaint against Station
KQQK or against Seller in connection with Station KQQK, occurring
between the date hereof and the KQQK Closing Date, and respond to
any action, order, notice or written complaints, and implement
procedures to
23
ensure that the complaints or violations will not recur. Without
limiting the generality of the foregoing, Seller will also promptly
upon Seller's learning of the same notify Buyer of any complaint
being made against Station KQQK relating to its Tower, Transmitter
Site, Transmitter Building or Seller's operation of such Station
(including, without limitation, any complaint related to the
signals broadcast or otherwise transmitted from such Tower, either
by Seller or by any person subleasing a portion of such Tower but
not including complaints relating to the programming or content of
Station KQQK, such complaints which are subject to the first
sentence of this section). Without limiting the generality of the
foregoing, Seller will promptly (and in any event within three
business days) upon Seller's obtaining knowledge of the same notify
Buyer of (i) any termination of sales orders or threats of
termination in either case by any advertiser whose orders total
more than $2,000 per month or by Seller or (ii) the ceasing of
employment of any employee of Station KQQK who is either an account
executive or earns more than $30,000 per year.
6.1.8 Contracts. Seller will provide a copy of any Contract that
involves more than $2,000 per month or with any service provider or
advertiser it enters into prior to the KQQK Closing Date (or a
written description of such Contract, if oral) within five business
days of entering into such Contract and in any event prior to the
KQQK Closing Date. Seller will not enter into any Contract after
the execution of the FM Local Marketing Agreement without the prior
written consent of Buyer, which consent shall not be unreasonably
withheld.
6.1.9 Transition Assistance. Seller will use best efforts (without
incurring unreasonable costs) to assist Buyer in transitioning
third party provided services such as utilities, phone service,
etc. and in transitioning advertisers.
6.1.10 Assistance in Transfer of Records and Data. Seller will
fully cooperate with Buyer and make such advance preparations
(including making copies in advance, collecting paperwork,
coordinating information about computer systems and configurations)
as are necessary so that Seller can deliver, and Seller shall
deliver, the data and records required to be delivered under
Section 2.1.4 to Buyer (including the transfer of data from
Seller's computer systems to Buyer's computer systems) on the
fifteenth business day prior to the Effective Date with title to
such data and records transferring to Buyer only on the KQQK
Closing Date; provided, however, that if after Seller's
commercially reasonable efforts an electronic transfer is not
possible, the same data may be transferred by Seller by manual
input on the tenth business day prior to the Effective Date with
costs of such manual input to be shared between Buyer and Seller.
Such data and records shall be updated on a daily basis until the
Effective Date.
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6.2 Negative Covenants of Seller. From the date hereof through
consummation of the transaction contemplated hereby on the KQQK Closing Date,
except as contemplated by this Agreement, Seller will not without the prior
written consent of Buyer:
6.2.1 Encumbrances. Create or assume any Encumbrance on any of the
Purchased Assets, whether now owned or hereafter acquired, unless
discharged or terminated and fully released prior to the KQQK
Closing Date;
6.2.2 Transfers. Sell, assign, lease or otherwise transfer or
dispose of any of the Purchased Assets, whether now owned or
hereafter acquired, except for retirements in the normal and usual
course of business;
6.2.3 Call Letters. Change Station KQQK's call letters or modify
Station KQQK's facilities in any material respect;
6.2.4 Change in Format or Business. Change Station KQQK's format
(including but not limited to genre of music, demographic or
language) or otherwise materially change Station KQQK's business
model or advertising sales strategy; provided, however, that
nothing in this Section 6.2.4 is intended to constitute an
impermissible abrogation of a licensee's responsibilities under the
Communications Act to maintain control of the operation of Station
KQQK; provided, further, that actions taken by Buyer pursuant to
and in compliance with the FM Local Marketing Agreement shall not
constitute violations of this Section 6.2.4;
6.2.5 Modification of Contracts. Amend or terminate any of the
Assumed Contracts (or waive any substantial right thereunder) or
any advertising contracts that involves more than $2,000 per month;
6.2.6 Rights. Cancel or compromise any claim or waive or release
any right of Seller relating to the Purchased Assets, except in the
ordinary course of business consistent with past practice;
6.2.7 KQQK FCC Licenses and Permits. Cause or permit, by any act
or failure on its part, the KQQK FCC Licenses or Permits to expire
or to be surrendered or modified (unless Buyer has provided prior
written consent with respect to such modification, which consent
shall not be withheld unreasonably in the case of modifications
required pursuant to a casualty event), or take any action which
would cause the FCC or any other governmental authority to
institute proceedings for the suspension, revocation or adverse
modification of any of the KQQK FCC Licenses or Permits, or fail to
prosecute with due diligence any pending applications to any
governmental authority in connection with the operation of Station
KQQK, or take any other action within Seller's control which would
result in Station KQQK being in non-compliance with the
requirements of the Communications Act or any other applicable law
material to the operation of Station KQQK; or
25
6.2.8 No Inconsistent Action. Take any other action inconsistent
with its obligations under this Agreement or which could hinder or
delay the consummation of the transaction contemplated by this
Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Determination of KQQK Closing Date. The KQQK Closing Date
shall occur at 5:00 p.m. CST on the 5/th/ business day following the KQQK Final
Grant Day or such other time mutually agreed to in writing by the Parties unless
Buyer has notified Seller by that time that it intends to close on a date
consistent with the following proviso; provided, however, that (i) if on or
prior to the date which otherwise would have been the KQQK Closing Date it
appears in Buyer's reasonable judgment that the KEYH Closing Date could
reasonably be expected to occur within 30 days from the date which would
otherwise have been the KQQK Closing Date, then, if Buyer so chooses in its sole
discretion, the KQQK Closing Date shall be delayed for up to 30 days (as from
time to time specified by Buyer) in order to consummate a Simultaneous Closing,
and (ii) if following a determination to delay the KQQK Closing Date in
accordance with clause (i) of this proviso it is determined that the delay prior
to the KEYH Closing Date will be longer than 30 days from the date which would
otherwise have been the KQQK Closing Date (prior to taking into account any
delay occurring as a result of clause (i) of this proviso), Buyer may cause the
KQQK Closing Date to occur on the 5th business day after giving notice of such
determination to Seller. Notwithstanding anything in the foregoing to the
contrary, Buyer, in its sole discretion, may choose to have the KQQK Closing
Date occur prior to the KQQK Final Grant Day so long as the Initial Grant has
occurred. Buyer shall in that instance choose a date no earlier than 5:00 p.m.
on the 5th business day following notice of such determination to Seller;
provided, however, that Buyer may revoke such determination at any time prior to
the consummation of the transactions contemplated hereby with respect to Station
KQQK, in which case the KQQK Closing Date shall be determined pursuant to the
first sentence of this Section 7.l.
7.2 Application for Commission Consent; Other Consents;
Pre-Closing.
7.2.1 FCC Consent; Compliance with Schedule II. Buyer and Seller
agree to proceed as expeditiously as practical, and in no event
later than fifteen business days after the execution hereof by
Buyer and Seller, to file or cause to be filed the KQQK Assignment
Application requesting FCC consent to the transaction contemplated
by this Agreement. The Parties agree that the KQQK Assignment
Application will be prosecuted in good faith and with due
diligence, including filing and cooperating with all requests of
the Commission. The Parties acknowledge that this Agreement will
have to be filed with the FCC. The Parties further acknowledge that
the KQQK Assignment Application may have to be amended from time to
time prior to the date it is granted to reflect any changes
resulting from Buyer's financing and related arrangements. Seller
shall comply with the requirements set forth in Sections A, B and C
of Schedule II.
7.2.2 Other Governmental Consents. Promptly, but not later than
ten business days following the filing of the KQQK Assignment
Application, the Parties will
26
proceed to prepare and file with all other appropriate governmental
authorities (if any), such other requests for approval or waiver as
may be required from such governmental authorities to permit the
transfer of the KQQK FCC Licenses and Permits and the Purchased
Assets, or as otherwise required in connection with the transaction
contemplated hereby and will jointly, diligently and expeditiously
prosecute, and will cooperate fully with each other in the
prosecution of, such requests for approval or waiver and all
proceedings necessary to secure such approvals and waivers. The
Parties hereby acknowledge that no filings will be required under
the HSRA because both the Purchase Price and the fair market value
of the Purchased Assets and Assumed Contracts, together with the
Purchased Assets and Assumed Contracts under the AM Asset Purchase
Agreement, are less than $50,000,000.
7.2.3 Control of the Station. This Agreement shall not be
consummated until the KQQK Closing Date. Prior to the KQQK Closing
Date, Seller shall continue to control the operation of Station
KQQK with Buyer's interest in Station KQQK being limited to its
rights under this Agreement, the KQQK Assignment Application and
the FM Local Marketing Agreement.
7.2.4 Preclosing. Buyer and Seller agree to hold a pre-closing
(delivering to their respective counsel all closing documents to
which they are a party) on a mutually agreeable date no later than
at least 3 business days prior to the scheduled KQQK Closing Date.
7.2.5 Rescission. As Buyer has the option to close the
transactions contemplated by this Agreement prior to the KQQK Final
Grant Day, if prior to such time the Initial Grant is reversed or
otherwise set aside pursuant to a final order of the FCC or the
final, unappealable order of a court of competent jurisdiction,
then the parties shall comply with such order in a manner that
otherwise complies with applicable law and returns the parties to
the status quo ante in all material respects, including the return
of the Purchase Price to Buyer and the return of Station KQQK to
Seller (it being understood that in such event Seller may, within
the lesser of thirty (30) days or such shorter time as is available
to allow the Parties to comply with the final order, designate one
or more third parties, each of whom is qualified, in Seller's
reasonable belief, to hold the KQQK FCC Licenses in accordance with
the FCC rules, as the assignees of Station KQQK). In the event a
third party challenges the KQQK Assignment Application, whether
prior to or following Initial Grant, the Parties shall cooperate to
rebut such challenge and, in the event that the Initial Grant is
set aside as a result of such challenge, the parties shall exhaust
all administrative and judicial appeals to protect the Initial
Grant and have it become a final, unappealable grant at all times
prior to the date on which a Party terminates this Agreement
pursuant to Section 7.3 or 7.4.
7.3 Mutual Right to Terminate. Subject to the provisions of
Section 7.6.2, if the purchase and sale transaction contemplated by the FM Asset
Purchase Agreement has not occurred on or before the first anniversary of the
date of this Agreement (or if the effective
27
period of FCC's consent is extended as described in Section 7.6.2 for a certain
number of days due to any damage or event that prevents broadcast transmissions
of Station KQQK, then the date which occurs that many days (but not exceeding in
any event 120 days) after the first anniversary of the date of this Agreement),
either Buyer or Seller, if such Party is not materially in default hereunder in
a manner which has delayed the occurrence of the purchase and sale transaction
contemplated by the FM Asset Purchase Agreement, may terminate this Agreement
upon five days' written notice to the other Party.
7.4 Buyer's Right to Terminate. Buyer, at its option, may
terminate this Agreement, so long as Buyer is not then in material default under
or material breach of this Agreement, upon the happening of any of the following
events:
7.4.1 (i) The KQQK FCC Licenses or other Permits are modified as a
result of any action initiated by Seller without the consent of
Buyer, whose consent shall not be unreasonably withheld if such
modification is required pursuant to a casualty event, or (ii) the
KQQK FCC Licenses or other Permits are unilaterally modified by the
FCC and such modification results in an adverse change in Buyer's
ability to operate Station KQQK in a manner consistent with
Seller's past operations thereof, or (iii) the terms of the KQQK
FCC Licenses or other Permits are substantially modified resulting
in an adverse change in Buyer's ability to operate Station KQQK in
a manner consistent with Seller's past operations thereof;
provided, however, that Sections 7.4.1(ii) and 7.4.1(iii) shall not
apply if such modification is a result of a modification of FCC
rules, regulations or policies affecting all members of the class
of holders of FCC licenses to which Seller belongs as the holder of
the KQQK FCC License;
7.4.2 The KQQK Assignment Application is designated for a hearing
before an administrative law judge;
7.4.3 The FCC institutes revocation of license proceedings against
Station KQQK; or
7.4.4 Seller is in material breach of this Agreement ten business
days after notice of breach and has not commenced and continued to
prosecute diligently a cure therefor or such breach is or becomes
incurable.
7.5 Seller's Right to Terminate. Seller, at its option, may
terminate this Agreement, so long as Seller is not then in material default
under or material breach of this Agreement, upon the happening of any of the
following events:
7.5.1 The KQQK Assignment Application is designated for a hearing
before an administrative law judge; or
7.5.2 Buyer is in material breach of this Agreement ten business
days after notice of breach and has not commenced and continued to
prosecute diligently a cure therefor or such breach is or becomes
incurable.
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7.6 Risk of Loss.
7.6.1 The risk of loss and damage, whether by force majeure or for
any other reason, to the Purchased Assets or the operation of
Station KQQK between the date of this Agreement and the KQQK
Closing Date will be on Seller. Seller shall take all reasonable
steps to repair, replace and restore the Purchased Assets as soon
as possible after any loss or damage, it being understood and
agreed that all insurance proceeds with respect thereto
("Proceeds") will be applied to or reserved for such replacement,
restoration or repair, but that Seller will have no obligation to
repair, replace or restore in excess of the Proceeds (plus any
applicable deductible payment). In instances where the loss and
damage to the Purchased Assets, together with any loss or damage to
the Purchased Assets as defined in the AM Asset Purchase Agreement,
is less than $1,500,000 in the aggregate (or, if the loss or damage
is to the tower used in the operation of Station KQQK, then
$2,500,000 in the aggregate) in Buyer's reasonable estimation,
Buyer's sole remedy if Seller elects not to (or, with respect to
the Purchased Assets as defined in the AM Asset Purchase Agreement,
does not cause Artlite to or causes Artlite not to) fully repair,
replace or restore will be to close in accordance with Section
7.6.3 below. In instances where the loss and damage to the
Purchased Assets, together with any loss or damage to the Purchased
Assets as defined in the AM Asset Purchase Agreement, is equal to
or greater than $1,500,000 (net of insurance proceeds to the extent
received and applied to repair, replace or restore the damaged
Purchased Assets or the Purchased Assets as defined in the AM Asset
Purchase Agreement) in the aggregate (or, if the loss or damage is
to the tower used in the operation of Station KQQK, then $2,500,000
(net of insurance proceeds to the extent received and applied) in
the aggregate) in Buyer's reasonable estimation, Buyer's sole
remedies if Seller elects not to (or , with respect to the
Purchased Assets as defined in the AM Asset Purchase Agreement,
does not cause Artlite to or causes Artlite not to) fully repair,
replace or restore will be (i) to terminate both this Agreement and
the AM Asset Purchase Agreement, in which case the Escrow Deposit
will be delivered to LBI Holdings, or (ii) to close in accordance
with Section 7.6.3 below.
7.6.2 In the event of any damage or event that prevents broadcast
transmissions of Station KQQK in the normal and usual manner and
substantially in accordance with the KQQK FCC Licenses (other than
scheduled ordinary course maintenance), Seller will give prompt
notice thereof to Buyer and Buyer, in addition to its other rights
and remedies, will have the right to postpone the KQQK Closing Date
until transmission in accordance with the KQQK FCC Licenses has
been resumed. The postponed KQQK Closing Date will be any date
within the effective period of the FCC's consent to assignment of
the KQQK FCC Licenses to LBI Sub as Buyer may designate by not less
than five business days' prior written notice to Seller. During the
period of postponement, Seller shall use its best efforts to resume
broadcast transmissions. In the event transmission in accordance
with the KQQK FCC Licenses cannot be resumed within the effective
period of the FCC's consent to assignment of the KQQK FCC Licenses
to LBI Sub, the Parties will join in an application or applications
requesting the FCC to
29
extend the effective period of its consent for one or more periods
not to exceed 120 days in the aggregate. If transmission in
accordance with the KQQK FCC Licenses has not been resumed so that
the KQQK Closing Date does not occur within such extended period,
or any agreed extension thereof, Buyer will have the right, by
giving written notice to Seller within five business days after the
expiration of such 120-day period, or any agreed extension thereof,
to terminate this Agreement and the AM Asset Purchase Agreement
forthwith without any further obligation, in which case the Escrow
Deposit will be delivered to LBI Holdings. In the event
transmission is not in accordance with the KQQK FCC Licenses but
substantially in accordance with the KQQK FCC Licenses, Buyer
agrees to negotiate in good faith with Seller for no more than
twenty business days prior to exercising its rights under this
Section (which negotiation shall not result in an extension of the
120 day period).
7.6.3 If any loss of or damage to the Purchased Assets (including
but not limited to any Tower or any Transmitter Building) occurs
prior to the KQQK Closing Date and full repair, replacement or
restoration of all Purchased Assets has not been made on or before
the KQQK Closing Date (as the KQQK Closing Date may be extended as
provided in Section 7.6.2), or the cost thereof is greater than the
Proceeds (plus any applicable deductible), then Buyer will be
entitled, but not obligated (except in the instances described in
the second to the last sentence in Section 7.6.1), to accept the
Purchased Assets in their then-current condition and will receive
an abatement or reduction in the Purchase Price in an amount equal
to the difference between the amount necessary to fully repair or
replace the damaged Purchased Assets and the amount of the unused
Proceeds, in which case Buyer will be entitled to all the unused
Proceeds and payment of the deductible amount. If Buyer elects to
accept (or, in the instance described in the second to the last
sentence in Section 7.6.1, Buyer accepts) damaged Purchased Assets
at a reduced Purchase Price, the Parties agree to cooperate in
determining the amount of the reduction to the Purchase Price in
accordance with the provisions hereof.
7.7 Transfer Taxes and FCC Filings; Expenses; Bulk Sales.
7.7.1 Transfer Taxes; FCC Filings. All federal, state or local
taxes based on excise, sales or use taxes or similar taxes or costs
imposed on or in connection with the sale, purchase or transfer of
the Purchased Assets and assumption of the Assumed Contracts by
Buyer pursuant hereto will be borne one-half by Buyer and one-half
by Seller; provided, however, if the representation by Seller made
pursuant to the last sentence of Section 4.4 should be false, all
such taxes payable by Buyer shall be considered a loss resulting
from breach of such representation by Seller and be subject to
indemnification pursuant to Article X. All FCC filing fees relating
to the KQQK Assignment Application will be shared equally by Buyer
and Seller. Buyer shall be responsible for the payment of the
filing fees in connection with the filing (if any) required under
the HSRA.
7.7.2 Expenses. Except as otherwise provided herein, Buyer and
Seller shall each pay its own expenses incident to the negotiation,
preparation and
30
performance of this Agreement and consummation of the transaction
contemplated hereby, including but not limited to the fees,
expenses and disbursements of its accountants and counsel.
7.7.3 Compliance With Bulk Sales Laws. If applicable, any loss,
liability, obligation or cost suffered by Seller or Buyer as the
result of the failure of Seller or Buyer to comply with the
provisions of any bulk sales laws applicable to the transfer of the
Purchased Assets as contemplated by this Agreement will be borne
one-half by Buyer and one-half by Seller.
7.8 Invoices. If advertisers whose advertisements air on Station
KQQK on or after the Effective Date make payments prior to, on or after the
consummation of the transactions contemplated by this Agreement to Seller rather
than to Buyer with respect to such advertisements, Seller shall hold such
amounts in trust for Buyer, shall promptly notify Buyer of the receipt of such
funds and shall forward such amounts to Buyer within 5 business days. If
advertisers whose advertisements aired on Station KQQK prior to the Effective
Date make payments prior to, on or after the consummation of the transactions
contemplated by this Agreement to Buyer rather than to Seller with respect to
such pre-Effective Date advertisements, Buyer shall hold such amounts in trust
for Sellers, shall promptly notify Sellers of the receipt of such funds and
shall forward such amounts to Sellers within 5 business days.
7.9 Access to Microwave Facilities. Buyer shall have the right
to transmit programming to the Microwave Facility by telephone line and Sellers
will perform all maintenance on the Microwave Facility after the KQQK Closing
Date at Buyer's direction.
7.10 Recipient Agreement. Seller shall use its best efforts to
cause all Sales Proceeds Recipients to promptly after the date hereof execute
and deliver the Recipient Agreement.
ARTICLE VIII
CLOSING CONDITIONS
8.1 Conditions Precedent to Buyer's Obligations. The obligation
of Buyer to consummate the transaction contemplated hereby is subject to the
fulfillment prior to and as of the consummation of the transaction contemplated
hereby on the KQQK Closing Date of each of the following conditions, each of
which may be waived (but only by an express written waiver) in the sole
discretion of Buyer:
8.1.1 Commission Approval. The definition of KQQK Closing Date
shall have been satisfied.
8.1.2 Representations and Warranties. All representations and
warranties of Seller contained in this Agreement shall be true and
correct in all material respects at and as of the KQQK Closing Date
as if made on the KQQK Closing Date except as specifically
contemplated by this Agreement.
8.1.3 Performance. Seller shall have performed and complied in all
material respects with the covenants, agreements and conditions
required by this
31
Agreement to be performed or complied with by it prior to and on
the KQQK Closing Date.
8.1.4 FCC Licenses. Seller shall be the holder of the KQQK FCC
Licenses. There shall not have been any modification of any of the
KQQK FCC Licenses (excluding any modification of FCC rules,
regulations or policies affecting all members of the class of
holders of KQQK FCC licenses to which Seller belongs as the holder
of the KQQK FCC Licenses) that affects Buyer's ability to conduct
the operation of Station KQQK after the KQQK Closing Date in
accordance with Seller's past operations or that otherwise has or
is reasonably likely to have a material, adverse effect on Station
KQQK. No proceeding shall be pending, the effect of which would be
to revoke, cancel, fail to renew, suspend, impair or modify
adversely any of the KQQK FCC Licenses specifically.
8.1.5 Consents. All Required Consents shall have been obtained and
delivered to Buyer. Such Required Consents shall include, without
limitation, (i) executed consents and releases substantially in the
form of Exhibit H annexed hereto from creditors of Seller listed on
Schedule III consenting to the transaction contemplated hereby and
releasing their Encumbrances relating to the Purchased Assets
(together with executed UCC termination statements, amendments to
UCC financing statements and other documents and instruments
implementing such release) and (ii) other Required Consents in form
and substance reasonably satisfactory to Buyer. In addition, the
lessors under the leases for the Transmitter Sites shall have
executed and delivered to Buyer estoppels in substantially the form
attached to this Agreement as Exhibit F together with such changes
as may reasonably be negotiated by the Parties with respect to each
lease (including confirmation that each lease is in full force and
effect and no defaults exist thereunder and confirmation of the
terms of each lease).
8.1.6 Litigation and Insolvency. Except for matters affecting the
radio broadcasting industry generally, no litigation, action, suit,
judgment, proceeding, complaint or investigation shall be pending
or outstanding before any forum, court, or governmental body,
department or agency of any kind, relating to the operation of
Station KQQK or which has the stated purpose or the probable effect
of enjoining or preventing the consummation of this Agreement, or
the transaction contemplated hereby or to recover damages by reason
thereof, or which questions the validity of any action taken or to
be taken pursuant to or in connection with this Agreement; provided
that if there is pending any litigation relating to Station KQQK
that could not reasonably be expected to or would not reasonably be
expected to adversely affect the operation of Station KQQK in
accordance with Seller's past operations or that could not
reasonably be expected to or would not reasonably be expected to
prevent a consummation of the transactions contemplated hereby,
then the existence of such litigation shall not be considered as
the failure of a condition to Buyer's obligation to close if its
lenders agree to fund the loans that enable the consummation of the
transactions contemplated hereby despite the existence of such
litigation (and LBI Holdings, Buyer and Seller shall cooperate to
seek to convince such lenders (but shall not be obligated
32
to mislead such lenders in any way) to fund such loans despite the
existence of such litigation). No insolvency proceedings of any
character including, without limitation, receivership,
reorganization, composition or arrangement with creditors,
voluntary or involuntary, affecting Seller or any of its assets or
properties (other than the stock of its subsidiaries (other than
any subsidiary that is a Seller hereunder)), shall be pending, and
Seller shall not have taken any action in contemplation of, or
which would constitute the basis for, the institution of any such
insolvency proceedings.
8.1.7 Recipient Agreement. No parties to the Sale Proceeds
Recipients (other than LBI Holdings and Buyer) shall be in breach
of the Recipient Agreement.
8.1.8 Holdback Escrow Agreement. The Holdback Escrow Agent and
Seller shall have executed and delivered the Holdback Escrow
Agreement.
8.1.9 Satisfaction of Schedule II. The requirement in Section A of
Schedule II shall be satisfied.
8.2 Conditions Precedent to Seller's Obligations. The obligation
of Seller to consummate the transaction contemplated hereby is subject to the
fulfillment prior to and as of the consummation of the transaction contemplated
hereby on the KQQK Closing Date of each of the following conditions, each of
which may be waived (but only by an express written waiver) in the sole
discretion of Seller:
8.2.1 Commission Approval. The condition set forth in Section
8.1.1 shall have been satisfied.
8.2.2 Representations and Warranties. All representations and
warranties of LBI Holdings and Buyer contained in this Agreement
shall be true and correct in all material respects at and as of the
KQQK Closing Date as if made on the KQQK Closing Date, except as
specifically contemplated by this Agreement.
8.2.3 Performance. LBI Holdings and Buyer shall each have
performed and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be
performed or complied with by it prior to and at the KQQK Closing
Date.
8.2.4 Litigation and Insolvency. Except for matters affecting the
radio broadcasting industry generally, no litigation, action, suit,
judgment, proceeding, complaint or investigation shall be pending
or outstanding before any forum, court or governmental body,
department or agency of any kind which has the stated purpose or
the probable effect of enjoining or preventing the consummation of
this Agreement or the transaction contemplated hereby or to recover
damages by reason thereof, or which questions the validity of any
action taken or to be taken pursuant to or in connection with this
Agreement; provided that if there is pending any litigation
relating to Station KQQK that could not reasonably be expected to
or would not reasonably be expected to adversely affect the
operation of Station KQQK in accordance with Seller's past
operations or that could not
33
reasonably be expected to or would not reasonably be expected to
prevent a consummation of the transactions contemplated hereby then
the existence of such litigation shall not be considered as the
failure of a condition to Seller's obligation to close if Buyer's
lenders agree to fund the loans that enable the consummation of the
transactions contemplated hereby despite the existence of such
litigation (and LBI Holdings, Buyer and Seller shall cooperate to
seek to convince such lenders (but shall not be obligated to
mislead such lenders in any way) to fund such loans despite the
existence of such litigation). No insolvency proceedings of any
character including, without limitation, reorganization,
receivership, composition or arrangement with creditors, voluntary
or involuntary, affecting Buyer or any of its assets or properties
shall be pending, and Buyer shall not have taken any action in
contemplation of, or which would constitute the basis for, the
institution of any such insolvency proceedings.
ARTICLE IX
ITEMS TO BE DELIVERED AT THE CLOSING
9.1 Seller's Performance At Closing. On the KQQK Closing Date,
at the Closing Place (i) Seller shall have executed and delivered the
assignments relating to the KQQK FCC Licenses and the Permits and all
applications therefor, together with any renewals, extensions, additions or
modifications thereof, (ii) Seller shall have executed and delivered to Buyer
all bills of sale, endorsements, assignments and other instruments of conveyance
and transfer reasonably satisfactory in form and substance to Buyer and its
counsel, effecting the sale, transfer, assignment and conveyance of the
Purchased Assets to Buyer. Without limiting the generality of the foregoing,
Seller shall have executed and delivered (or caused to be executed and
delivered) or shall have transferred or performed, as applicable, the following:
9.1.1 One or more bills of sale conveying to LBI all of the
Tangible Personal Property and Intellectual Property to be acquired
by Buyer hereunder;
9.1.2 An assignment assigning to LBI Sub the KQQK FCC Licenses
from Seller;
9.1.3 An assignment assigning to LBI each of the Assumed Contracts
together with the Required Consents and the original copies of the
Assumed Contracts;
9.1.4 To the extent not previously transferred pursuant to Section
6.1.10, the data, documents, copies, files, records and logs
referred to in Section 2.1.4 and Seller shall have transferred data
from Seller's computer systems to Buyer's computer systems on or
prior to the KQQK Final Grant Day;
9.1.5 Proof of payment of prepaid expenses made by Seller for
services to be provided to Station KQQK, after the KQQK Closing
Date under the Assumed Contracts;
9.1.6 Seller shall have paid LBI an amount equal to the aggregate
advance payments by advertisers and other advance payments for
services to be provided
34
by Station KQQK after the KQQK Closing Date under the Assumed
Contracts (calculated as of 5 days before, and updated as of, the
KQQK Closing Date);
9.1.7 Opinions of Seller's counsel, Seller's Texas counsel and
Seller's FCC counsel, each dated as of the KQQK Closing Date
substantially in the form of Exhibits "B-1", "B-2" and "C";
9.1.8 Copies of resolutions of the Board of Directors of EDC, EDC
Sub and EDC License Sub, in each case certified by the Party's
Secretary, authorizing the execution, delivery and performance of
this Agreement and the transaction contemplated hereby;
9.1.9 A certificate, dated as of the KQQK Closing Date, executed
by the President and Chief Executive Officer of Seller, to the
effect that, (i) the representations and warranties of Seller
contained in this Agreement are true and complete in all material
respects on and as of the KQQK Closing Date as though made on and
as of the KQQK Closing Date, except as specifically contemplated by
this Agreement; (ii) Seller has complied in all material respects
with or performed in all material respects all terms, covenants,
agreements and conditions required by this Agreement to be complied
with or performed by it prior to and at the KQQK Closing Date;
(iii) all Required Consents have been obtained by Seller and
delivered to Buyer; (iv) except for matters affecting the radio
broadcasting industry generally and except for such litigation
described in the proviso in Section 8.1.6, each of which has been
disclosed in writing to Buyer, no litigation, action, suit,
judgment, proceeding or investigation is pending or outstanding or,
to the knowledge of Seller, threatened, before any forum, court, or
governmental body, department or agency of any kind, relating to
the operation of Station KQQK or which has the stated purpose or
the probable effect of enjoining or preventing the consummation of
this Agreement or the transaction contemplated hereby or to recover
damages by reason thereof, or which questions the validity of any
action taken or to be taken pursuant to or in connection with this
Agreement; (v) to the knowledge of Seller, no insolvency
proceedings of any character including, without limitation,
receivership, reorganization, composition or arrangement with
creditors, voluntary or involuntary, affecting Seller or any of its
respective material assets or properties is pending, and Seller has
not taken any action in contemplation of, or which would constitute
the basis for, the institution of any such insolvency proceedings;
(vi) the aggregate amount of advance payments by advertisers and
other advance payments for services to be provided by or for
Station KQQK after the KQQK Closing Date under the Assumed
Contracts referred to in Section 2.1.2 equals the amount paid to
Buyer pursuant to Section 9.1.6, and (vii) Seller has performed the
requirements of this Section 9.1;
9.1.10 Written instructions to deliver $1,000,000 and related
interest (in the case of an FM Only Closing in which the AM Asset
Purchase Agreement has not theretofore been terminated or is not
terminated on such day) or the entire Escrow Deposit (in the case
of a Simultaneous Closing or in the case of an FM Only Closing in
which the AM Asset Purchase Agreement has theretofore been
35
terminated or is terminated on such day) to LBI Holdings executed
by EDC and, in the case where the entire Escrow Deposit is
delivered to LBI Holdings, such instructions shall also include
instructions to terminate the Escrow Agreement; and
9.1.11 Such other instruments of transfer, documents or
certificates requested by Buyer as may be necessary or appropriate
to transfer to and vest in Buyer all of Seller's right, title and
interest in and to the Purchased Assets or as reasonably may be
requested by Buyer to evidence consummation of this Agreement and
the transaction contemplated hereby.
9.2 Buyer's Performance at Closing. On the KQQK Closing Date at
the Closing Place, Buyer will execute and deliver or cause to be delivered to
Seller:
9.2.1 The monies payable as set forth in Section 3.1.1 by wire
transfer of federal funds;
9.2.2 An opinion of Buyer's counsel dated as of the KQQK Closing
Date substantially in the form of Exhibit "D";
9.2.3 Copies of resolutions of the Boards of Directors of LBI
Holdings, LBI and LBI Sub, in each case certified by its Secretary,
authorizing the execution, delivery and performance of this
Agreement and the transaction contemplated hereby;
9.2.4 A certificate, dated as of the KQQK Closing Date, executed
by the Executive Vice President of LBI Holdings and Buyer, to the
effect that (i) the representations and warranties of LBI Holdings
and Buyer contained in this Agreement are true and complete in all
material respects on and as of the KQQK Closing Date as though made
on and as of the KQQK Closing Date, except as specifically
contemplated by this Agreement; (ii) LBI Holdings and Buyer have
each complied in all material respects with or performed in all
material respects all terms, covenants, agreements and conditions
required by this Agreement to be complied with or performed by it
prior to and at the KQQK Closing Date; (iii) except for matters
affecting the radio broadcasting industry generally and except for
such litigation described in the proviso in Section 8.2.4, no
litigation, action, suit, judgment, proceeding or investigation is
pending or outstanding or, to LBI Holdings' and Buyers' knowledge,
threatened, before any forum, court or governmental body,
department or agency of any kind which has the stated purpose or
the probable affect of enjoining or preventing the consummation of
this Agreement or the transaction contemplated hereby or to recover
damages by reason thereof, or which questions the validity of any
action taken or to be taken pursuant to or in connection with this
Agreement; (iv) to the knowledge of LBI Holdings and Buyer, no
insolvency proceedings of any character including, without
limitation, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting LBI
Holdings or Buyer or any of their respective assets or properties
is pending, and neither LBI Holdings nor
36
Buyer has taken any action in contemplation of, or which would
constitute the basis for, the institution of any such insolvency
proceedings, and (v) LBI Holdings and Buyer have each performed the
requirements of this Section 9.2,
9.2.5 A writing evidencing the assumption by Buyer of each of the
Assumed Contracts consistent with the provisions of this Agreement
reasonably satisfactory in form and substance to Seller and its
counsel; and
9.2.6 Such other instruments, documents and certificates as
reasonably may be requested by Seller to consummate this Agreement
and the transaction contemplated hereby.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Seller. It is understood and agreed that
LBI Holdings and Buyer do not assume and will not be obligated to pay any
liability of Seller under the terms of this Agreement or otherwise and will not
be obligated to perform any obligations of Seller of any kind or manner, except
in connection with the Assumed Contracts and with respect thereto only to the
extent such obligations arise subsequent to the consummation of the transaction
contemplated hereby on the KQQK Closing Date. Seller, hereby agrees to
indemnify, defend and hold harmless LBI Holdings and Buyer, their successors and
assigns, for a period of eighteen months following the consummation of the
transaction contemplated hereby on the KQQK Closing Date, from and against:
10.1.1 Any and all Damages occasioned by, arising out of or
resulting from the operation of Station KQQK prior to the KQQK
Closing Date (other than such Damages arising directly from Buyer's
actions under the FM Local Marketing Agreement), including, but not
limited to, any and all claims, liabilities and obligations arising
or required to be performed prior to the KQQK Closing Date under
any of the Assumed Contracts or otherwise with respect to Seller's
ownership and operation of Station KQQK prior to the KQQK Closing
Date;
10.1.2 Any and all Damages occasioned by, arising out of or
resulting from any material misrepresentation, material breach of
warranty or covenant, or material default or material
nonfulfillment of any agreement on the part of Seller under this
Agreement, or from any material misrepresentation in or material
breach of any certificate, agreement, appendix, Schedule, or other
instrument furnished to LBI Holdings or Buyer pursuant to this
Agreement or in connection with the transaction contemplated
hereby; provided, that any breach of Section 7.8 shall be deemed
material regardless of the cash value of such breach; and
10.1.3 Any and all Damages occasioned by, arising out of or
resulting from any legal, administrative, or tax proceedings
pursuant to which Seller is or could be made liable for any taxes,
penalties, interest, or other charges and the liability for which
is extended to LBI Holdings or Buyer as transferee of the business
of
37
Station KQQK or otherwise for any transferee liability for any
taxes, penalties, or interest due or to become due from Seller.
10.2 Indemnification by LBI Holdings and Buyer. LBI Holdings and
Buyer agree to indemnify, defend and hold harmless Seller, its successors and
assigns, for a period of eighteen months following the consummation of the
transaction contemplated hereby on the KQQK Closing Date from and against:
10.2.1 Any and all Damages occasioned by, arising out of or
resulting from the operation of Station KQQK on or subsequent to
the KQQK Closing Date, including, but not limited to, any and all
claims, liabilities and obligations arising or required to be
performed on or subsequent to the KQQK Closing Date under any of
the Assumed Contracts or otherwise with respect to Buyer's
ownership and operation of Station KQQK from and after the KQQK
Closing Date; and
10.2.2 Any and all Damages occasioned by, arising out of or
resulting from any material misrepresentation, material breach of
warranty or covenant, or material default or material
nonfulfillment, of any agreement on the part of LBI Holdings or
Buyer under this Agreement, or from any material misrepresentation
in or material breach of any certificate, agreement, appendix,
Schedule or other instrument furnished to Seller pursuant to this
Agreement or in connection with the transaction contemplated
hereby; provided, that any breach of Section 7.8 shall be deemed
material regardless of the cash value of such breach.
10.3 Third-Party Claims. In the event of third party claims, each
Party ("Indemnified Party") shall give written notice to the other Party
("Indemnifying Party") as soon as practicable and in no event later than ten
business days after the Indemnified Party has knowledge of any facts which in
its opinion entitle or may entitle it to indemnification under this Section
10.3. Seller, on the one hand, and LBI Holdings and Buyer, on the other, shall
be considered a single Party for purposes of this Section 10.3 and Section 10.4.
However, failure to give such notice will not preclude the Indemnified Party
from seeking indemnification hereunder, unless, and to the extent that, such
failure adversely affects to a material degree the Indemnifying Party's ability
to defend against such a claim. The Indemnifying Party will promptly defend such
a claim by counsel approved by the Indemnified Party, which approval shall not
be unreasonably withheld, and the Indemnified Party may appear at any
proceeding, at its own cost, by counsel of its own choosing and will otherwise
reasonably cooperate in the defense of such claim, provided that the
Indemnifying Party shall promptly reimburse the Indemnified Party all reasonable
costs, expenses and attorneys' fees incurred in the course of cooperating in the
defense of such claim. The Indemnifying Party shall be responsible for all costs
and expenses of any settlement. If the Indemnifying Party within ten business
days after notice of a claim fails to defend the Indemnified Party, the
Indemnified Party will be entitled to undertake the defense, compromise or
settlement of such claim at the expense of and for the account and risk of the
Indemnifying Party. Anything in this Section to the contrary notwithstanding:
10.3.1 If LBI Holdings or Buyer is the Indemnified Party and in the
reasonable judgment of LBI Holdings or Buyer there is a reasonable
probability that a claim
38
may materially and adversely affect the Indemnified Party or its
continued operation of Station KQQK, the Indemnified Party will
have the right, at its own cost and expense, to undertake the
prosecution, compromise and settlement of such claim, and the
Indemnifying Party will cooperate with the Indemnified Party;
10.3.2 If the facts giving rise to indemnification hereunder
involve a possible claim by the Indemnified Party against a third
party, the Indemnified Party will have the right, at its own cost
and expense, to undertake the prosecution, compromise and
settlement of such claim; and
10.3.3 The Indemnifying Party will not, without the consent of the
Indemnified Party, enter into or settle or compromise any claim or
consent to any entry of judgment which (i) in the reasonable
judgment of LBI Holdings or Buyer may materially and adversely
affect LBI Holdings or Buyer or their continued operation of
Station KQQK, and (ii) does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a full and complete release from all liability
in respect to such claim.
10.4 Cap and Basket. Neither Party will be entitled to
indemnification under this Article X until Damages to such Party (combined with
any Damages to such Party under the AM Purchase Agreement) exceed $50,000 in the
aggregate (except for claims pursuant to Section 7.8 of this Agreement and
Section 7.9 of the AM Asset Purchase Agreement, which shall be reimbursed from
the first dollar for both parties). Once Damages to any Party (combined with any
Damages to such Party under the AM Purchase Agreement) exceed $50,000 in the
aggregate (excluding all claims made pursuant to Section 7.8 of this Agreement
and Section 7.9 of the AM Asset Purchase Agreement), such Party will be entitled
to recover the entire amount of the Damages to the maximum extent permitted by
this Agreement. The Parties agree that any materiality qualification set forth
in this Agreement shall not be taken into account in determining the magnitude
of Damages occasioned by any breach for purposes of calculating whether such
$50,000 threshold has been reached. The Parties agree that (i) with respect to
all claims made pursuant to Article X hereof or Article X of the AM Asset
Purchase Agreement during the period beginning on the date of consummation of
the transactions contemplated by the FM Asset Purchase Agreement on the KQQK
Closing Date and ending on the twelve month anniversary of such date, the
maximum aggregate amount for which either Buyer and LBI Holdings on the one hand
or Seller on the other hand will be responsible for pursuant to this Agreement
and, if the purchase and sale transaction contemplated by the AM Asset Purchase
Agreement occurs, the AM Asset Purchase Agreement, is $1,500,000 in the
aggregate and (ii) with respect to all claims made pursuant to Article X hereof
or Article X of the AM Asset Purchase Agreement during the period commencing on
the date after the end of the applicable period set forth in clause (i) of this
sentence and ending on the twenty four month anniversary of the consummation of
the transaction contemplated by the AM Asset Purchase Agreement (or if the
purchase and sale transaction contemplated under the AM Asset Purchase Agreement
does not occur, ending on the later of (x) the eighteenth month anniversary of
the KQQK Closing Date or (y) the date on which the AM Asset Purchase Agreement
is terminated), the maximum aggregate amount for which either Buyer and LBI
Holdings on one hand or Seller on the other hand will be responsible for
pursuant to this Agreement and, if the purchase and sale transaction
contemplated by the AM Asset Purchase Agreement occurs, the AM Asset Purchase
Agreement,
39
is $700,000 (above and beyond up to $800,000 of claims made during the period
set forth in clause (i) of this sentence) (it being understood that
notwithstanding the preceding portion of this clause (ii), neither Buyer and LBI
Holdings on the one hand nor Seller on the other hand will be responsible for
any claims made after the eighteen month anniversary of the consummation of the
transaction contemplated by this Agreeement pursuant to Article X hereof and
that the maximum aggregate amount for which either Buyer and LBI Holdings on one
hand or Seller on the other hand will be responsible for pursuant to this
Agreement with respect to claims made during the six month period between the
twelve month anniversary and the eighteen month anniversary of the consummation
of the transaction contemplated by this Agreement under this Article X is
$500,000 (above and beyond up to $1,000,000 of claims made during the period set
forth in clause (i) of this sentence)); provided that the caps set forth in this
paragraph shall not apply to any claims made under the AM Asset Purchase
Agreement prior to the consummation of the transaction contemplated thereunder
on the KEYH Closing Date.
10.5 Holdback. LBI Holdings and Buyer shall be entitled to
receive any amounts owing by Seller to LBI Holdings or Buyer pursuant to this
Agreement or the AM Asset Purchase Agreement (including Article X hereof and
thereof) from the Holdback and Seller agrees to promptly give the Holdback
Escrow Agent written instructions to immediately release such amounts from the
Holdback to LBI Holdings. Buyer agrees to promptly give the Holdback Escrow
Agent written instructions to immediately release the amounts as determined by
Sections 3.1.4(c) and 3.1.4(d) in this Agreement to the extent Seller is
entitled to receive such amounts.
10.6 Survival of Representations and Warranties. The
representations and warranties contained in this Agreement or in any Schedule or
Exhibit, or in any certificate or other instrument delivered pursuant to this
Agreement, will survive the consummation of the transaction contemplated hereby
on the KQQK Closing Date for a period of eighteen months; provided that if a
claim or notice is given under this Article X or otherwise with respect to any
such representation and warranty prior to such expiration date, such claim shall
continue (and such representation and warranty shall survive) indefinitely until
such claim is finally resolved.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Notices. All notices, demands and requests, required or
permitted to be given under the provisions of this Agreement shall be in writing
and will be deemed duly given if received on a business day by facsimile at the
facsimile numbers below and telephone notification is provided by the sending
Party to the receiving Party at the time of the facsimile that such notice is
about to be sent (it being understood that a voice mail left on answering
machines shall be deemed to satisfy the requirement of such telephone
notification):
40
If to Seller:
Roel Campos, Esq.
El Dorado Communications
1980 Post Oak Boulevard, Suite 1500
Houston, TX 77058
Phone: (713) 968-4500
Fax: (713) 968-4518
Copy (which shall not, by itself, constitute notice) to:
Allan Duboff, Esq.
Richman, Mann, Chizever, Phillips & Duboff
9601 Wilshire
Penthouse Suite
Beverly Hills, CA 90210
Phone: (310) 274-8300
Fax: (310) 274-2831
Lawrence Roberts, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Phone: (202) 371-7040
Fax: (202) 393-5760
If to LBI Holdings or Buyer:
Mr. Lenard D. Liberman
Executive Vice President
Liberman Broadcasting Inc.
1845 Empire Avenue
Burbank, California 91504
Phone: BOTH (818) 563-5722 and
(281) 493-2900
Fax: BOTH (818) 558-4244 and
(281) 759-3963
Copy (which shall not, by itself, constitute notice) to:
Joseph K. Kim, Esq.
O'Melveny & Myers LLP
400 South Hope Street, 15/th/ Floor
Los Angeles, California 90071
Phone: (213) 430-6000
Fax: (213) 430-6407
41
Or any other such facsimile numbers, telephone numbers and addresses as any
Party may from time to time supply in writing to the other Parties.
11.2 Benefit and Assignment. This Agreement will be binding upon
and inure to the benefit of the Parties, and their respective successors and
assigns. This Agreement will not be assignable by a Party without the prior
written consent of all of LBI Holdings, Buyer and Seller; provided, however,
that LBI Holdings and Buyer may assign their rights and obligations hereunder
without Seller's consent to any party that is majority owned, directly or
indirectly, by LBI Holdings and LBI Holdings and Buyer may assign their rights
hereunder, without Seller's consent, to any of their lenders (provided that such
assignment to such lenders does not violate the Communications Act and does not
delay the KQQK Closing Date).
11.3 Other Documents. The Parties will execute such other
documents as may be reasonably necessary and desirable to the implementation and
consummation of this Agreement.
11.4 Appendices. All Schedules and Exhibits are deemed to be part
of this Agreement and incorporated herein, where applicable, as if fully set
forth herein. Whenever, by the terms of this Agreement or any subsequent
agreement of the Parties, any additions or deletions are made to the Purchased
Assets shown on the Schedules, the Schedules affected shall be appropriately
modified to reflect those changes.
11.5 Construction. This Agreement will be governed, construed and
enforced in accordance with the laws of the State of Texas.
11.6 Arbitration. Any dispute, controversy or other matters as to
which the Parties disagree arising out of, relating to or in connection with the
provisions of this Agreement or the interpretation, breach or alleged breach
hereof shall be settled and decided by arbitration conducted by the Judicial
Arbitration and Mediation Service ("JAMS"), subject to the following:
11.6.1 Any arbitration as set forth above shall be held and
conducted in Houston, Texas before one arbitrator who shall be
selected by mutual agreement of the parties. If agreement is not
reached on the selection of the arbitrator within 30 days after
commencement of an arbitration by (i) submission of a matter to the
JAMS in accordance with its Commercial Arbitration Rules and (ii)
notice to the other party of the initiating party's intention to
arbitrate, then such arbitrator shall be appointed by the presiding
judge of the appropriate Houston, Texas Court.
11.6.2 The arbitrator appointed must be a former or retired judge,
or an attorney with at least 15 years experience in the broadcast
radio industry.
11.6.3 All proceedings involving the parties shall be reported by a
certified shorthand court reporter and written transcripts of the
proceedings shall be prepared and made available to the parties.
11.6.4 The prevailing party shall be awarded reasonable attorneys'
fees, expert and non-expert witness costs and expenses, and other
costs and expenses incurred
42
in connection with the arbitration unless the arbitrator, for good
cause, determines otherwise.
11.6.5 The dispute shall be heard in accordance with the rules and
procedures of JAMS and the arbitrator's decision and award shall be
final and binding.
11.6.6 Costs and fees of the arbitrator (including the cost of the
record of transcripts of the arbitration) shall be borne by the
non-prevailing party, unless the arbitrator for good cause
determines otherwise. Costs and fees payable in advance shall be
advanced equally by the parties, subject to ultimate payment by the
non-prevailing party in accordance with the preceding sentence.
11.6.7 Any Party may initiate an arbitration proceeding under this
Section 11.6 by written notice to the other Party of his or its
intention to arbitrate, specifying the dispute or controversy to be
arbitrated, the amount involved and the remedy sought, and by
filing with the Dallas, Texas office of the JAMS a copy of said
notice together with a copy of this Agreement and the fee specified
in the JAMS fee schedule. In no event shall a demand for
arbitration be made after the date when institution of legal or
equitable proceedings based on the claim, dispute or other matter
in question would be barred by the applicable statute of
limitations.
11.6.8 This agreement to arbitrate shall be specifically
enforceable under applicable law in any court of competent
jurisdiction. The award rendered by the arbitrator shall be final
and judgment may be entered in accordance with applicable law and
in any court having jurisdiction thereof.
11.6.9 Notwithstanding anything contained in this Agreement
elsewhere to the contrary, and unless modified by the arbitrator
upon a showing of good cause, the arbitration shall proceed upon
the following schedule: (i) within 30 days from the service of the
notice of the request to arbitrate, the parties shall select the
arbitrator; (ii) within 30 days after selection of the arbitrator,
the parties shall conduct a pre-arbitration conference at which a
schedule of pre-arbitration discovery shall be set, all
pre-arbitration motions scheduled and any other necessary
pre-arbitration matters decided; (iii) all discovery shall be
completed within four months following the pre-arbitration
conference; (iv) all pre-arbitration motions shall be filed and
briefed so that they may be heard no later than one month following
the discovery cut-off; (v) the arbitration shall be scheduled to
commence no later than 30 days after the decision on all
pre-arbitration motions but in any event no later than six months
following the service of the notice of arbitration; and (vi) the
arbitrator shall render his written decision within 30 days
following the submission of the matter.
11.6.10 Any monetary award of the arbitrator may include interest
at the highest prime rate, as published in the Wall Street Journal,
plus two percent, which interest shall accrue from the date the
claim, dispute or other matter in question was rightfully due and
payable under this agreement until the date the award is paid to
the prevailing party.
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11.6.11 No provision of this Section 11.6 shall limit the right of
any Party to this Agreement to exercise self-help remedies or to
obtain provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any
arbitration or other proceeding. The exercise of such remedy does
not waive the right of any party to resort to arbitration.
11.7 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument.
11.8 Headings. The headings of the Sections of this Agreement are
inserted as a matter of convenience and for reference purposes only and in no
respect define, limit or describe the scope of this Agreement or the intent of
any Section.
11.9 Entire Agreement. This Agreement, the FM Local Marketing
Agreement, the AM Asset Purchase Agreement, the AM Local Marketing Agreement,
all Schedules and Exhibits and related agreements entered into as of the date
hereof and all agreements, certificates and instruments delivered by the Parties
pursuant to the terms of this Agreement or the AM Asset Purchase Agreement
represent the entire understanding and agreement between the Parties with
respect to the subject matter hereof, supersede all prior negotiations and
agreements between the Parties, including the Letter of Intent (other than
Section 9 thereof as replaced by Exhibit J hereto, which survives), and can be
amended, supplemented, waived or changed only by an amendment in writing which
makes specific reference to this Agreement, the AM Asset Purchase Agreement, or
the amendment, as the case may be, and which is signed by the Party against whom
enforcement of any such amendment, supplement, waiver or modification is sought.
44
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed and delivered by their duly authorized officers on the day and year
first above written.
EL DORADO COMMUNICATIONS, INC.
By: /s/ Roel Campos
--------------------------------
Roel Campos
Senior Vice President
EL DORADO 108, INC.
By: /s/ Roel Campos
--------------------------------
Roel Campos
Senior Vice President
KXTJ LICENSE, INC.
By: /s/ Roel Campos
--------------------------------
Roel Campos
Senior Vice President
LBI HOLDINGS II, INC.
By: /s/ Lenard D. Liberman
--------------------------------
Lenard D. Liberman
Executive Vice President
LIBERMAN BROADCASTING OF HOUSTON, INC.
By: /s/ Lenard D. Liberman
--------------------------------
Lenard D. Liberman
Executive Vice President
and
S-1
LIBERMAN BROADCASTING OF HOUSTON
LICENSE CORP.
By: /s/ Lenard D. Liberman
--------------------------------
Lenard D. Liberman
Executive Vice President
S-2