Exhibit 10.4
ASSET PURCHASE AGREEMENT
Among
GUAJILLO INVESTMENTS, LLC
LBI HOLDINGS II, INC.
LIBERMAN BROADCASTING OF HOUSTON, INC.
AND
LIBERMAN BROADCASTING OF HOUSTON LICENSE CORP.
RELATING TO THE ACQUISITION OF KIOX-FM AND KXGJ
Dated June 21, 2002
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS ............................................................. 1
1.1 Definitions ................................................................ 1
1.2 Knowledge .................................................................. 6
ARTICLE II PURCHASE AND SALE OF ASSETS ............................................. 6
2.1 Assets to be Conveyed ...................................................... 6
2.2 Excluded Assets and Liabilities ............................................ 7
ARTICLE III PURCHASE PRICE; METHOD OF PAYMENT; ESCROW DEPOSIT ....................... 8
3.1 Purchase Price ............................................................. 8
3.2 Liabilities Assumed ........................................................ 8
3.3 Escrow Deposit ............................................................. 8
3.4 Buyer's Remedies ........................................................... 9
3.5 Allocation ................................................................. 10
3.6 Prorations ................................................................. 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES BY SELLER ................................ 10
4.1 Organization and Standing .................................................. 10
4.2 Authorization .............................................................. 10
4.3 FCC Licenses ............................................................... 11
4.4 Purchased Assets ........................................................... 12
4.5 Insurance .................................................................. 14
4.6 Litigation ................................................................. 14
4.7 Contracts .................................................................. 14
4.8 Insolvency ................................................................. 14
4.9 Reports .................................................................... 14
4.10 No Defaults ................................................................ 14
4.11 Disclosures ................................................................ 15
4.12 Environmental Compliance ................................................... 15
4.13 Intellectual Property ...................................................... 15
4.14 Brokers .................................................................... 16
4.15 Prepaid Expenses ........................................................... 16
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TABLE OF CONTENTS
(continued)
Page
ARTICLE V REPRESENTATIONS AND WARRANTIES BY BUYER AND LBI HOLDINGS .................... 17
5.1 Status ......................................................................... 17
5.2 No Defaults .................................................................... 17
5.3 Authorization. ................................................................. 17
5.4 Brokers ........................................................................ 17
5.5 Qualification as a Broadcast Licensee .......................................... 18
5.6 Litigation ..................................................................... 18
5.7 Approvals and Consents ......................................................... 18
ARTICLE VI COVENANTS OF SELLER ......................................................... 18
6.1 Affirmative Covenants of Seller ................................................ 18
6.2 Negative Covenants of Seller ................................................... 19
6.3 Financial Information. ......................................................... 20
ARTICLE VII ADDITIONAL AGREEMENTS ....................................................... 21
7.1 Application for Commission Consent; Other Consents ............................. 21
7.2 Mutual Right to Terminate ...................................................... 21
7.3 Buyer's Right to Terminate ..................................................... 22
7.4 Seller's Right to Terminate .................................................... 22
7.5 Risk of Loss ................................................................... 23
7.6 Transfer Taxes and FCC Filings; Expenses; Bulk Sales. .......................... 24
ARTICLE VIII CLOSING CONDITIONS .......................................................... 25
8.1 Conditions Precedent to Buyer's Obligations .................................... 25
8.2 Conditions Precedent to Seller's Obligations ................................... 27
ARTICLE IX ITEMS TO BE DELIVERED AT THE CLOSING ........................................ 27
9.1 Seller's Performance At Closing ................................................ 27
9.2 Buyer's Performance at Closing ................................................. 29
ARTICLE X INDEMNIFICATION ............................................................. 30
10.1 Indemnification by Seller ...................................................... 30
10.2 Indemnification by LBI Holdings and Buyer ...................................... 31
10.3 Third-Party Claims ............................................................. 32
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TABLE OF CONTENTS
(continued)
Page
10.4 Cap and Basket ................................................................. 32
10.5 Guarantee. ..................................................................... 33
10.6 Survival of Representations and Warranties ..................................... 33
ARTICLE XI MISCELLANEOUS PROVISIONS ..................................................... 33
11.1 Notices ........................................................................ 33
11.2 Benefit and Assignment ......................................................... 34
11.3 Other Documents ................................................................ 35
11.4 Appendices ..................................................................... 35
11.5 Construction ................................................................... 35
11.6 Confidentiality ................................................................ 35
11.7 Arbitration .................................................................... 35
11.8 Counterparts ................................................................... 37
11.9 Headings ....................................................................... 37
11.10 Public Announcements ........................................................... 37
11.11 Entire Agreement ............................................................... 37
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SCHEDULE 4.7 Exceptions to Contracts
SCHEDULE I Identification of Contracts to be Assumed
SCHEDULE II List of all Permits and FCC Licenses
SCHEDULE III List of Required Consents, Encumbrances and UCC-1 Filing
Statements
SCHEDULE IV Identification of Principal Items of Tangible Personal Property
SCHEDULE V Allocation of the Purchase Price
SCHEDULE VI Insurance Coverage Maintained by Seller on the Purchased Assets
SCHEDULE VII Identification of Intellectual Property
SCHEDULE VIII Schedule of Prepaid Expenses
SCHEDULE IX Excluded Assets
EXHIBIT A Form of Grant Deed
EXHIBIT B-1 Opinion of Seller's Counsel
EXHIBIT B-2 Opinion of Seller's Counsel (FCC)
EXHIBIT C Opinion of LBI Entities' Counsel
EXHIBIT D Form of Member Guarantee
EXHIBIT E Form of Lessor Estoppels
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into this 21st day
of June, 2002, by and among Guajillo Investments, LLC, a Louisiana limited
liability company ("Guajillo" or "Seller"), 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. 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 stations KIOX-FM, 96.9 FM, El Campo, Texas and KXGJ,
101.7 FM, Bay City, Texas (each a "Station" and, collectively, the "Stations")
and Seller desires to sell and assign to Buyer 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 the Stations (the "FCC Licenses"); 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 the
businesses related thereto; and
WHEREAS, LBI Sub and LBI are wholly-owned direct or indirect
subsidiaries of LBI Holdings;
WHEREAS, the FCC Licenses may not be assigned to LBI Sub without the
prior written consent of the Commission.
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.
"Assignment Applications" means the applications which Seller and
Buyer will join in and file with the Commission requesting its written
consent to the assignment of the FCC Licenses from Seller to LBI Sub.
"Assumed Contracts" means only (i) those Contracts listed on Schedule
I, (ii) any other Contract which Buyer specifically agrees 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 Closing Date which LBI
specifically agrees in writing to assume.
"Bay City Leasehold" means that certain ground lease covering certain
land located at Highway 35 East, Bay City, Texas, on which are located
Seller's Bay City Studio Building and a 90' STL tower and 6' STL
transmit dish antenna and related documents, all of which are listed
on Schedule I.
"Bay City Studio Building" means the studio building owned in fee by
Seller and located upon the land covered by the Bay City Leasehold.
"Buyer" has the meaning set forth in the first paragraph of this
Agreement.
"Closing Date" means 5:00 p.m. CST on the 10th business day following
the Final Order Day or such other time as may be mutually agreed to in
writing by the Parties.
"Closing Place" means the offices of O'Melveny & Myers LLP, 400 South
Hope Street, 15/th/ Floor, Los Angeles, California 90071, or such
other place mutually agreed to in writing by the Parties.
"Collegeport Leasehold" means, collectively, those certain ground
lease and tower lease agreements covering the land and tower located
in Collegeport, Matagorda County, Texas, on which is located Seller's
transmitter building, a 12-bay FM antenna and a 6' STL antenna and
related documents, all of which are listed on Schedule I.
"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, written policies, orders and 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 either Station 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. As used
herein, the Contracts shall include each of the Tower Subleases.
"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.
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"El Maton Leasehold" means that certain Towersite Lease Agreement in
El Maton, Matagorda County, Texas, on which are located Seller's
hop-site building, a 400' Esco tower and a 6' STL receive dish and
transmit antenna and related documents, all of which are listed on
Schedule I.
"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 a financial institution or escrow company
mutually acceptable to each Party.
"Escrow Agreement" means the Corporate Custodial Agreement Relating to
Earnest Money dated as of the date hereof executed by the Escrow
Agent, LBI Holdings and Seller.
"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.
"FCC Licenses" has the meaning set forth in the recitals hereto.
"Final Order Day" means the date on which the Initial Grants have both
become final orders, which date shall be the forty-first day following
issuance by the Commission of a public notice announcing the Initial
Grants, or the date of the later public notice announcing an Initial
Grant if both Initial Grants are not listed on the same public notice,
unless either 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 Final Order 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
Grants without any conditions materially adverse to Buyer.
"Francitas Land" shall mean the 30 acres of land in Francitas, Jackson
County, Texas on which are located Seller's 1,014' Andrews tower and
6' STL receive dish antenna.
"Grant Deed" shall mean a deed sufficient to convey to Buyer fee
simple and marketable title, consistent with the terms and conditions
of this Agreement, to
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each of the Francitas Land and the Bay City Studio Building each
substantially the form of Exhibit "A".
"Guajillo" has the meanings specified in the first paragraph of this
Agreement.
"Hazardous Substance" has the meaning set forth in Section 4.12.
"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, with respect to any Assignment Application, the
Commission's written consent to the assignment of the FCC Licenses
associated with the applicable Station to LBI Sub pursuant to such
Assignment Application (including without limitation, by the Media
Bureau by delegated authority), without any conditions materially
adverse to any Party.
"Initial Grant Day" means the day on which the Commission publishes
public notice of an Initial Grant with respect to each Assignment
Application (and if public notice of the Initial Grants are published
on different days, the day on which the Commission publishes public
notice of the later of the Initial Grants).
"Intellectual Property" has the meaning set forth in Section 4.13.1.
"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 February 26,
2002 by and among Guajillo and Liberman Broadcasting, Inc., a
California corporation and wholly owned subsidiary of LBI Holdings, as
it may be amended from time to time.
"Member Guarantee" shall have the meaning set forth in Section 8.1.9.
"Party" means any of Guajillo, 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 7.3, 7.4, 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
Stations (including the FCC Licenses) and all pending requests and
applications therefor, including without limitation those listed on
Schedule II.
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"Permitted Encumbrances" means, with respect to the Real Property
only, the Tower Subleases and those exceptions and encumbrances which
are approved in writing by Buyer as exceptions or exclusions from
coverage under the Title Policies as shown in the annotated title
commitments delivered to Seller prior to closing. Notwithstanding the
foregoing, the parties acknowledge that the title commitment for the
Bay City Leasehold and the Bay City Studio Building were not available
as of signing and that the only Permitted Encumbrances on such Real
Property shall be consistent with those encumbrances similar to those
accepted by the Buyer in the annotated title commitments previously
delivered with respect to the other Real Property.
"Proceeds" has the meaning set forth in Section 7.5.1.
"Purchased Assets" means all the assets to be conveyed to Buyer by
Seller pursuant to the terms of this Agreement.
"Purchase Price" has the meaning set forth in Section 3.1.
"Real Property" means the Francitas Land, the Bay City Studio Building
and the Real Property Leaseholds.
"Real Property Leaseholds" means the El Maton Leasehold, the Bay City
Leasehold and the Collegeport Leasehold.
"Required Consents" means the FCC consents to the assignment of the
FCC Licenses and the other governmental consents, third-party
consents, approvals or waivers in form and substance reasonably
satisfactory to Buyer, necessary for Seller to sell, convey or
otherwise sell or assign the Purchased Assets to Buyer, including
without limitation those set forth on Schedule III.
"Seller" has the meaning set forth in the first paragraph of this
Agreement.
"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.
"Title Company" means Lawyers Title Insurance Company.
"Title Policies" means each of (1) an ALTA extended coverage owner's
policy with respect to the Francitas Land, (2) an ALTA extended
coverage owner's policy with respect to the Bay City Studio Building,
(3) an ALTA extended coverage leasehold owner's interest policy with
respect to the El Maton Leasehold, (4) an ALTA extended coverage
leasehold owner's interest policy with respect to the Bay City
Leasehold, and (5) an ALTA extended coverage leasehold owner's
interest policy with respect to the Collegeport Leasehold, each in a
form and with coverages and amounts acceptable to Buyer and showing
only Permitted Encumbrances.
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"Tower Subleases" shall mean the agreements pursuant to which Seller
leases or licenses land or tower space to third parties, all of which
are listed on Schedule I.
"Towers" means radio broadcast towers located at each applicable
Transmitter Site upon which is located the Station broadcast antenna.
"Transmitter Buildings" means studio and transmitter buildings owned
by Seller and located at the Transmitter Sites, including the Bay City
Studio Building.
"Transmitter Sites" means the transmitter and antenna sites owned or
operated by Seller located on the Real Property.
1.2 Knowledge. The terms "knowledge" or "know" as it relates to
Seller, shall mean the knowledge of Cheryl Stewart, Peter G. Scalfano, Joseph J.
Clements, Jr., and/or Tim Michaels after reasonable investigation, including due
inquiry of Seller's employees and the investigations referenced in Section 4.3.
With respect to Real Property, "Actual Knowledge" means the actual knowledge of
Cheryl Stewart, Peter G. Scalfano, Joseph E. Clements, Jr. and/or Tim Michaels,
without any duty of inquiry or investigation, and without any personal
liabilities therefor. With respect to LBI Holdings or Buyer, the terms
"knowledge" or "know" shall mean the knowledge of Jose Liberman, Lenard Liberman
and/or George Murray after reasonable investigation, including due inquiry of
LBI Holding's or Buyer's employees.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Assets to be Conveyed. On the Closing Date at the Closing
Place, subject to the terms and conditions of this Agreement, Seller will
sell, assign, convey, transfer and deliver (i) to LBI Sub, the FCC Licenses
and the Permits, and all applications therefor, together with any renewals,
extensions, additions or modifications thereof, and (ii) to LBI, all
(except the Excluded Assets) of Seller's right, title and interest in and
to the other assets, properties and rights of every kind and nature,
whether tangible or intangible, absolute or contingent, wherever located
and used or usable in connection with the operation of the Stations (which,
together with the 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 except Permitted Encumbrances. The Purchased
Assets include the following (except for the Excluded Assets):
2.1.1 All tangible personal property, furniture, fixtures,
improvements and office equipment and other equipment used or useful
in the operation of the Stations, 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, all the principal items of
which are listed on Schedule IV, together with any replacements
thereof or additions thereto made between the date hereof and the
Closing Date, less any retirements made in the
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ordinary and usual course of either Station's business (collectively,
the "Tangible Personal Property");
2.1.2 The transmitter facilities located at the Transmitter Sites;
2.1.3 Seller's interest, be it fee interest or leasehold interest, in
the Real Property;
2.1.4 All prepaid expenses made by Seller under the Assumed
Contracts;
2.1.5 The Assumed Contracts and all of Seller's rights thereunder
relating to periods and events occurring on and after the Closing
Date;
2.1.6 Such files, records and logs pertaining to the operation of
the Stations as Buyer may reasonably require, including each of the
Station's public inspection files and other records relating to the
FCC Licenses and other filings with the Commission, but excluding the
corporate and accounting records of Seller to the extent not described
above (notwithstanding this conveyance, Buyer agrees to allow Seller
copies of (upon written request) and reasonable access to such records
of the Stations as Seller may reasonably require from and after the
Closing Date); and
2.1.7 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 or useful
in the operation of the Stations, the name Guajillo, the current post
office box, all supplies on hand that are used in connection with
station billings, certain personal items of Cheryl Stewart as listed
on Schedule IX, cash (other than the amounts described in Section
2.1.4), cash equivalents, deposits made by Seller under any Contracts
(other than the amounts described in Section 2.1.4), and accounts and
notes receivable, causes of action, tax refunds, insurance claims or
proceeds (except as provided in Sections 6.1.6 and 7.5), in each case
(for such accounts and notes receivable, causes of action, tax refunds
and insurance claim and proceeds) accruing prior to the Closing (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 the Stations, Seller's employees or otherwise.
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ARTICLE III
PURCHASE PRICE; METHOD OF PAYMENT; ESCROW DEPOSIT
3.1 Purchase Price. Subject to Section 7.5.3, the purchase price to
be paid to Seller by Buyer for the Purchased Assets will be Three Million One
Hundred Fifty Thousand Dollars ($3,150,000) plus the aggregate amount of prepaid
expenses made by Seller for services to be provided to the Stations after the
Closing Date under the Assumed Contracts as set forth on Schedule VIII less any
accrued liabilities of Seller agreed to be assumed by Buyer and consented to by
Seller (the "Purchase Price").
3.1.1 Payment of Purchase Price. Subject to the terms and conditions
set forth in this Agreement, on the Closing Date, LBI Holdings or
Buyer will pay to Seller an amount equal to the Purchase Price by wire
transfer of immediately available funds in accordance with wire
transfer instructions to be provided by Seller to Buyer not less than
five business days prior to the Closing Date.
3.1.2 Release of Escrow Deposit. Also on the Closing Date,
concurrently with the wire transfer of the Purchase Price to Seller,
Seller 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 Closing Date, the Parties
shall determine and make the prorations called for in Section 3.5.
3.2 Liabilities Assumed. As of the Closing Date, Buyer will assume
and agree to pay, discharge and perform insofar as they relate to the time
period on and after the Closing Date, and arise out of events occurring on or
after the Closing Date, all the obligations and liabilities of Seller under the
Assumed Contracts.
3.3 Escrow Deposit. Concurrently with the execution and delivery of
this Agreement, LBI Holdings has deposited One Hundred Fifty Seven Thousand Five
Hundred Dollars ($157,500) 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 and of the Escrow Agreement,
with the terms of the Escrow Agreement controlling in the event of any conflict.
The Escrow Deposit will be disbursed as follows:
3.3.1 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 representations, warranties or covenants hereunder in
any material respect (it being understood and agreed by the Parties
hereto that for purposes of this Section 3.3.1, that for purposes of
determining such breach of Seller's representations, warranties and
covenants, all knowledge qualifications in the representations and
warranties of Seller contained in Section 4.3.3 shall be disregarded
and such representation or warranty shall not be qualified in any
respect by such knowledge qualification), then, the Escrow Deposit,
including accrued interest, will be
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delivered to Seller, it being understood and agreed that payment to
Seller of the full amount of the Escrow Deposit, including accrued
interest, 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.
THE PARTIES ACKNOWLEDGE AND AGREE IN ADVANCE BY INITIALING THIS
AGREEMENT IN THE SPACES PROVIDED [LBI HOLDINGS' INITIALS LDL, BUYER'S
INITIALS LDL AND LDL, AND SELLER'S INITIALS CLS], THAT THE ACTUAL
DAMAGES THAT SELLER WOULD SUFFER AS A RESULT OF BUYER'S FAILURE TO
CONSUMMATE THE PURCHASE AND SALE OF THE ASSETS WOULD BE EXTREMELY
DIFFICULT OR IMPOSSIBLE TO CALCULATE; THAT THE FULL AMOUNT OF THE
ESCROW DEPOSIT 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
UNDER THE CIRCUMSTANCES STATED IN THIS SECTION 3.3.1; AND THAT THIS
SECTION 3.3.1 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 PURCHASED ASSETS UNDER THE CIRCUMSTANCES STATED IN THIS SECTION
3.3.1.
3.3.2 Delivery to LBI Holdings. The Escrow Deposit shall be delivered
to LBI Holdings if (i) the transaction contemplated by this Agreement
is consummated, or (ii) the purchase and sale contemplated by this
Agreement is not consummated and Seller is not entitled to receive the
Escrow Deposit in accordance with Section 3.3.1.
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 in any material respects (it being
understood and agreed by the Parties hereto that for purposes of this Section
3.4, that for purposes of determining such breach of Seller's representations,
warranties and covenants, all knowledge qualifications in the representations
and warranties of Seller contained in Section 4.3.3 shall be disregarded and
such representation or warranty shall not be qualified in any respect by such
knowledge qualification), and Buyer is not in breach of its representations,
warranties or covenants hereunder in any material respects, Seller agrees that,
in addition to any other rights and remedies available at law or in equity, LBI
Holdings and Buyer shall have the 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 in an amount not to exceed $50,000 in the aggregate related
to such specific performance; (ii) LBI Holdings shall have the right to the
return of the Escrow Deposit (and associated interest); and (iii) LBI Holdings
and Buyer shall have the right to recover monetary damages for breach of this
Agreement in an amount equal to $157,500 and the right to be reimbursed for all
reasonable fees and expenses
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(including reasonable legal expenses) incurred by LBI Holdings and Buyer in
connection with the transactions contemplated hereby; provided, that if Buyer
obtains 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), it being understood and agreed that obtaining full remedies under clause
(iii) will constitute full payment for any and all damages suffered by Buyer by
reason of Seller's failure to consummate the purchase and sale contemplated by
this Agreement. 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 allocation will be determined by
Buyer with the consent of Seller and set forth on Schedule V.
3.6 Prorations. The operation of the Stations and all income,
expenses and liabilities attributable thereto through 11:59 p.m. on the day
immediately preceding the Closing Date will be for the account of Seller and
thereafter for the account of LBI, and all income and expenses, including such
items as power and utilities charges, rents and other deferred items 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 Closing Date, with a final settlement sixty days after the
Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY SELLER
Seller hereby represents and warrants to LBI Holdings and Buyer as
follows:
4.1 Organization and Standing. Seller is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of its formation. Seller has the requisite power and authority to
enter into and complete the transactions contemplated by this Agreement. The
only members of Seller are Cheryl Stewart, Peter Scalfano and Joseph Clements,
Jr. ("Members"). As of the date hereof, Cheryl Stewart holds a 30% interest in
the Seller, Peter Scalfano holds a 65% interest in the Seller and Joseph
Clements, Jr. holds a 5% interest in the Seller. As of the Closing Date, Cheryl
Stewart will hold a 40% interest in the Seller, Peter Scalfano will hold a 45%
interest in the Seller and Joseph J. Clements, Jr. will hold a 15% interest in
the Seller.
4.2 Authorization. All necessary limited liability company actions
and proceedings to duly approve the execution, delivery and performance of this
Agreement, the Escrow 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,
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. As of the Closing, the Member Guarantee shall have been duly
executed and delivered by each Member and the Member
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Guarantee shall constitute the legal, valid and binding obligation of each
Member, enforceable against each Member in accordance with and subject to its
terms.
4.3 FCC Licenses.
4.3.1 The FCC Licenses (all of which are listed on Schedule II,
together with any pending applications for FCC Licenses) constitute
all the licenses, permits and other authorizations required for and
used in connection with the operation of the Stations as presently
operated. No waiver of the Communications Act is necessary in order to
permit Seller's operation of the Stations. Seller is the holder of all
the FCC Licenses. Other than the Initial Grants of the Assignment
Applications, no additional order or grant is required from the FCC in
order to consummate the assignment of the FCC Licenses to LBI Sub.
Schedule II correctly sets forth the respective expiration date of
each FCC License. Each FCC License is validly issued and in full force
and effect. Seller has taken all actions and performed all of its
obligations that are necessary to maintain the FCC Licenses without
adverse modification or impairment, and complete and correct copies of
the FCC Licenses and any pending applications therefor have been
delivered to Buyer. No event has occurred 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 FCC License or (ii) to
Seller's knowledge, materially and adversely affects or in the future
would (so far as Seller can now reasonably foresee) materially and
adversely affect any rights of Seller or any of its assignees or
transferees thereunder. None of the 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 has no knowledge of, any
investigation, notice of apparent liability, violation, forfeiture,
notice of violation, order to show cause or other order or complaint
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 would in
any manner threaten or adversely affect, in either case, the validity
or continued effectiveness of, or result in the adverse modification
of, any of the 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 commercially reasonable measures to contest in good
faith or seek removal or rescission of such action, order, notice or
complaint. To Seller's knowledge, each Station is now operating at its
licensed power and antenna height, in accordance with the FCC
Licenses, as confirmed by the investigation of Tim Michaels performed
June 19, 2002. Seller has no reason to believe that the FCC Licenses
will not be renewed in the ordinary course.
4.3.3 To Seller's knowledge, the Stations are in compliance with the
Communications Act, including, without limitation, rules governing the
location of the Stations' respective main studios and rules governing
the required contents of the Stations' respective public inspection
files.
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4.3.4 To Seller's Actual Knowledge, none of the facilities used in
connection with the radio broadcasting operations of Seller relating
to the Stations (including the Transmitter Buildings, the Transmitter
Sites and the Towers) violates in any material respect 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 adversely affect the continued, uninterrupted
operation of the Stations 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 either Station 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 any Tower) except 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.
4.3.5 Seller is qualified to sell both Stations and to assign the FCC
Licenses in accordance with the terms of this Agreement and in
compliance with the Communications Act. Seller does not know of any
party who has expressed any intention to oppose FCC approval of the
assignment of the FCC Licenses to LBI Sub, nor does Seller know of any
reason why FCC consent to such assignment might be denied or
inordinately delayed.
4.3.6 To Seller's knowledge, 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 either Station and any other filing relating to either Station, was
timely filed, and was at the time of filing true, correct and complete
in all respects. There have been no changes in the ownership of the
Stations since the filing of the most recent such ownership reports or
certifications and those ownership reports and certificates are true,
correct and complete in all respects.
4.3.7 To Seller's knowledge, operation of the Stations by the 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. (S) 1.1310 as confirmed by the
investigation of Tim Michaels performed June 4, 2002.
4.4 Purchased Assets. All material items as of the date hereof used
in the operation of the Stations are listed and described in Schedule IV to this
Agreement. Schedule III sets forth each release and UCC Termination Statements
that are required in order to release any Encumbrances (other than Permitted
Encumbrances) on the Closing Date. Schedule III also sets forth all UCC
Financing Statements that have been filed against any Purchased Asset. There is
no pending or, to the knowledge of Seller, threatened action, event, transaction
or proceeding
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that would reasonably be expected to interfere with the quiet enjoyment or
operation of the Purchased Assets (including the Real Property) by Seller or, on
and after the Closing Date, by Buyer. The Purchased Assets include all the
personal property and assets necessary to conduct the operation of the Stations
as now conducted.
4.4.1 Real Property. On the Closing Date, Seller will have good and
valid title to the Real Property, free and clear of all Encumbrances,
other than (i) the Permitted Encumbrances, and (ii) the Encumbrances
described in Schedule III, which Encumbrances will be released on the
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 Real Property, free and clear of all Encumbrances
(other than liens granted to Buyer's lenders and the Permitted
Encumbrances) but otherwise "AS IS" except for the representations,
warranties and assurances specifically set forth in this Agreement.
Upon issuance of the Title Policies, which Title Policies will show
only the Permitted Encumbrances, Buyer agrees to look solely to the
Title Policies with respect to assurances of title to the Real
Property except to the extent there occurs a breach by Seller of the
specific representations and warranties of Seller set forth in this
Agreement. Seller has received no notice of noncompliance with any
restriction or encumbrance encumbering the Real Property, except the
Permitted Encumbrances. To Seller's Actual Knowledge, Seller has
maintained and has operated the Real Property under and in accordance
in all material respects with the terms of all applicable regulations.
Seller has maintained and has operated each Transmitter Site, each
Tower, each Transmitter Building and each Station under and in
accordance in all material respects with the terms of all applicable
regulations. To Seller's knowledge, there are no complaints regarding
the Transmitter Sites, the Towers, the Transmitter Buildings, the
antennas, the radio transmitters or the studio facilities. Except for
the licensees or tenants under the Tower Subleases listed on Schedule
I, there are no other persons which have any rights to use the Towers
or Transmitter Sites or to occupy or use the Transmitter Buildings or
the Real Property, whether by sublease, easement, license or other
instrument. Buyer will have following Closing reasonable access to
each of the Transmitter Sites, and a continuous means of ingress and
egress thereto from public roads.
4.4.2 Personal Property. On the Closing Date, Seller will have good
and valid title to the Purchased Assets (other than Real Property),
free and clear of all Encumbrances, other than the Encumbrances
described in Schedule III, which Encumbrances will be released on the
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 (other than Real Property), free
and clear of all Encumbrances (other than liens granted to Buyer's
lenders). The items of Tangible Personal Property are "AS IS, WHERE
IS" except for the representations, warranties and assurances
specifically set forth in this Agreement. To Seller's knowledge, the
technical equipment, constituting a part of the Tangible Personal
Property, has been maintained in accordance with the applicable
Station's past practice and is operating and complies in all material
13
respects with all applicable rules and regulations of the FCC and the
terms of the FCC Licenses and Permits.
4.5 Insurance. Seller now has in force insurance on the Purchased
Assets as set forth in Schedule VI and Seller will continue the present
insurance at the present limits in full force and effect up through the Closing
Date.
4.6 Litigation. No litigation, action, suit, judgment, proceeding
or, to the knowledge of Seller after inquiry, investigation relating to either
Station is pending or outstanding before any forum, court, or governmental body,
department or agency of any kind to which Seller or such Station is a party and,
to the knowledge of Seller, no such litigation or proceeding is threatened, in
each case where a determination thereof would have an adverse effect on the
Purchased Assets.
4.7 Contracts. Seller has delivered to Buyer true and complete
copies of all 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. To Seller's knowledge, 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.
Except as set forth on Schedule 4.7, 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. The
information set forth in Schedule I with respect to each of the Tower Subleases
is true, correct and complete as of the date hereof and will continue to be
true, correct and complete as of closing. Schedule I sets forth all the relevant
documents to which Seller is a party with respect to the Real Property
Leaseholds, true, correct and complete copies of which have been delivered to
Buyer.
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
governmental authorities having jurisdiction over the Stations and their
respective operations.
4.10 No Defaults. Neither the execution, delivery and performance by
Seller of this Agreement nor the consummation by Seller of the transaction
contemplated hereby nor the execution, delivery and performance by each Member
of the Member Guarantee 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 Organization or Operating Agreement of Seller, (ii) (with respect to
performance on or after the Closing Date, subject to the Required Consents)
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 contract,
14
mortgage, indenture, agreement, lease, license or other instrument to which
Seller or any Member 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) (with respect to performance on or after the Closing Date, subject
to the Required Consents) violate any judgment, decree, order, statute, rule or
regulation applicable to Seller or any Member or (iv) (with respect to
performance on or after the Closing Date, subject to the Required Consents)
violate or constitute a breach of any Assumed Contract. The execution, delivery
and performance of this Agreement by Seller and the execution, delivery and
performance of the Member Guarantee do not require the consent of any third
party other than the consent of the FCC to the Assignment Applications.
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. To Seller's Actual Knowledge, (i)
Seller has not, in connection with its business or assets, generated, used,
transported, treated, stored, released or disposed of, or has suffered or
permitted anyone else to generate, use, transport, treat, store, release or
dispose of any Hazardous Substance (as defined below) in material violation of
any applicable environmental law; (ii) 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, to the
knowledge of Seller, 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) 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) 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
"Guajillo" and programming and its contents used but not owned by
Seller) which are material to the operation of either Station,
including the call letters
15
"KIOX-FM" and "KXGJ" and any other call signs (together with the
goodwill associated therewith, the "Intellectual Property"). Seller
does not represent or warrant that it has good and marketable title to
any of the Intellectual Property. None of such Intellectual Property
has been duly registered in, filed in or issued by the United States
Copyright Office or the United States Patent and Trademark Office, as
appropriate, the appropriate offices in the various states of the
United States or the appropriate offices of such other jurisdictions
where such registration, filing or issuance is necessary to protect
such Intellectual Property from infringement and for the conduct of
the business of Seller.
4.13.2 Except as set forth on Schedule VII, Seller has received no
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, to its knowledge,
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.
4.13.4 Except as set forth on Schedule VII, (i) Seller has not granted
any license or other rights and, to Seller's knowledge, 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 to Seller's knowledge there
is no basis for the making of any such claim.
4.13.5 Except as set forth on Schedule VII, to Seller's knowledge,
there are no proceedings, either pending or threatened, in the United
States Copyright Office, the United States Patent and Trademark Office
or any Federal, state or local court or before any other governmental
agency or tribunal, relating to any pending application with respect
to any Intellectual Property.
4.14 Brokers. No agent, broker, investment or commercial banker,
person or firm acting on behalf of Seller or under the authority 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 John Saunders, whose fee
shall be paid by Seller.
4.15 Prepaid Expenses. All prepaid expenses made by Seller for
services to be provided to the Stations after the Closing Date under the Assumed
Contracts are set forth on Schedule VIII.
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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 has the requisite
corporate power to enter into and complete the transaction contemplated by this
Agreement.
5.2 No Defaults. Neither the execution, delivery and performance by
LBI Holdings or Buyer of this Agreement 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) (with
respect to performance on or after the Closing Date, subject to item 2 of the
consents set forth in Schedule III, which the Buyer, Seller and LBI Holdings
acknowledge is not a condition to Closing) 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
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) (with respect to
performance on or after the Closing Date, subject to item 2 of the consents set
forth in Schedule III, which the Buyer, Seller and LBI Holdings acknowledge is
not a condition to Closing) violate any judgment, decree, order, statute, rule
or regulation applicable to LBI Holdings or Buyer, or (iv) (with respect to
performance on or after the Closing Date, subject to item 2 of the consents set
forth in Schedule III, which the Buyer, Seller and LBI Holdings acknowledge is
not a condition to Closing) result in the creation or imposition of any
Encumbrance on either Station 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 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 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
17
similar fee directly or indirectly in connection with the transaction
contemplated by this Agreement.
5.5 Qualification as a Broadcast Licensee. Excluding all facts
arising from changes between the date hereof and the 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 the FCC Licenses or
to which Buyer belongs as the holder of its existing FCC licenses, neither LBI
Holdings nor Buyer knows of any fact that would, under the Communications Act,
disqualify Buyer from being the assignee of the FCC Licenses or the owner,
operator and licensee of the Stations. Excluding all facts arising from changes
between the date hereof and the 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 the FCC Licenses or to which Buyer
belongs as the holder of its existing FCC licenses, no waivers of the
Communications Act are necessary in order to permit assignment of the FCC
Licenses to Buyer.
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 the knowledge after inquiry of LBI
Holdings and 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 Closing Date, except as disclosed in this Agreement:
6.1.1 Maintenance. Seller will continue to operate each Station in
conformity with the FCC Licenses and the Communications Act.
6.1.2 Preserve Relations. Seller will use its best efforts to
preserve good relations with the lessor under any Assumed Contract,
with owners of property adjacent to or in the area of the Transmitter
Sites, the Transmitter Buildings, the Towers and others having
business relations with either Station.
6.1.3 Reasonable Access. After the Assignment Applications have been
filed with the FCC and following reasonable advance written
notification and subject to the provisions of Section 11.6, Seller
will provide Buyer and representatives of Buyer with reasonable access
during normal business hours to Seller's properties, titles,
contracts, books, files, logs, records and affairs of each Station,
and Seller
18
will furnish such additional information concerning each Station as
Buyer may from time to time reasonably request.
6.1.4 Obtain Consents. Seller will use reasonable commercial efforts
to procure the Required Consents.
6.1.5 Books and Records. Seller will maintain the books and records
of each Station 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.
Subject to the provisions of Section 7.5, 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 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 threat of
filing of any complaint with the FCC or with either Station (to the
extent that such complaints are required to be filed in that Station's
public inspection file) or against Seller in connection with either
Station, occurring between the date hereof and the Closing Date, and
respond to any action, order, notice or complaints, and implement
procedures to ensure that any valid complaints or violations will not
recur. Without limiting the generality of the foregoing, Seller will
also promptly upon learning of the same notify Buyer of any complaint
being made against either Station 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) and of any
invoice unpaid by either Station or by Seller in connection with
either Station that remains unpaid 60 days after the applicable due
date of such invoice.
6.1.8 Transition Assistance. Seller will use reasonable commercial
efforts to assist Buyer in transitioning third party provided services
such as utilities, phone service, etc.
6.2 Negative Covenants of Seller. From the date hereof through
consummation of the transaction contemplated hereby on the 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 (other than Permitted Encumbrances on the Real
Property), whether now owned or hereafter acquired, unless discharged
or terminated and fully released prior to the Closing Date;
19
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 either Station's call letters or modify
either Station's facilities in any material respect;
6.2.4 Modification of Contracts. Amend or terminate any of the
Assumed Contracts (or waive any substantial right thereunder);
6.2.5 Change in Format or Business; Except as required by Section
7.1.3, change either Station's format (including but not limited to
genre of music, demographic or language) or otherwise materially
change either Station's business model or advertising sales strategy;
provided, however, that nothing in this Section 6.2.5 is intended to
constitute an impermissible delegation of licensee's responsibilities
under the Communications Act to maintain control of the operation of
the Stations;
6.2.6 Rights. Cancel or compromise any material claim or waive or
release any material right of Seller relating to the Purchased Assets,
except in the ordinary course of business consistent with past
practice;
6.2.7 FCC Licenses and Permits. Cause or permit, by any act or
failure on its part, the FCC Licenses or Permits to expire or to be
surrendered or modified, 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 FCC
Licenses or Permits, or fail to prosecute with due diligence any
pending applications to any governmental authority in connection with
the operation of either Station, or take any other action within
Seller's control which would result in either Station being in
non-compliance with the requirements of the Communications Act or any
other applicable law material to the operation of either Station; or
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.
6.3 Financial Information. From the date hereof until 4 months
after the consummation of the transactions contemplated by this Agreement,
Seller agrees to cooperate with, and provide reasonable assistance to, Buyer in
connection with any filings or registration statements or reports under the
Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934,
as amended, including, without limitation making available on a timely basis
such financial information of Seller as may reasonably be required in connection
with any such registration statement or report (including but not limited to
that information necessary for the Buyer or any such affiliate to prepare and
file the financial statements required by Rule 3.05 of Regulation S-X). Seller
shall not be required to pay any out-of-pocket expenses in connection with the
cooperation and assistance required under this Section 6.3, including without
limitation
20
for the cost of any audited financial statement of Seller, and no reference
shall be made to Seller or any of its financial information in any such
registration statement or report unless Seller and its independent auditor, if
any, has previously consented.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Application for Commission Consent; Other Consents.
7.1.1 FCC Consent. Buyer and Seller agree to proceed as expeditiously
as practical, and in no event later than ten business days after the
execution hereof by Buyer and Seller, to file or cause to be filed the
Assignment Applications requesting FCC consent to the transaction
contemplated by this Agreement. The Parties agree that the Assignment
Applications 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 Assignment
Applications may have to be amended from time to time at Buyer's sole
expense prior to the date they are granted to reflect any changes
resulting from Buyer's financing and related arrangements.
7.1.2 Other Governmental Consents. Promptly, but not later than ten
business days following the filing of the Assignment Applications, the
Parties will 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 FCC Licenses, 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 are less than $50,000,000.
7.1.3 Control of the Stations. This Agreement shall not be
consummated until after the Initial Grant Day. Between the date of
this Agreement and the Closing Date, Buyer, its employees or its
agents, shall not directly or indirectly control, supervise or direct
or attempt to control, supervise or direct the operation of the
Stations, but such operation will be the sole responsibility and in
the complete discretion of Seller
7.2 Mutual Right to Terminate. Subject to the provisions of Section
7.5.2, if the closing of the purchase and sale transactions contemplated by this
Agreement has not occurred on or before the six month anniversary of the date
hereof, either Buyer or Seller, if such Party is not materially in default
hereunder in a manner which has delayed the occurrence of such closing, may
terminate this Agreement upon five days' written notice to the other Party;
provided, however, that Buyer at any time prior to the expiration of the sixth
month's
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anniversary can extend such time period by three months by depositing an
additional amount with the Escrow Agent sufficient to increase the Escrow
Deposit to $315,000.
7.3 Buyer's Right to Terminate. Buyer, at its option, upon written
notice to Seller, 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:
7.3.1 The FCC Licenses or other Permits are modified or their terms
substantially modified, resulting in a material adverse change in
Buyer's ability to operate either Station in the manner in which they
have been operated prior to the date hereof;
7.3.2 Either Assignment Application is designated for a hearing
before an administrative law judge;
7.3.3 The FCC institutes revocation of license proceedings against
either Station;
7.3.4 Seller is in material breach of this Agreement ten (10)
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 (it being understood and agreed by the Parties
hereto that for purposes of this Section 7.3, that for purposes of
determining such breach of Seller's representations, warranties and
covenants, all knowledge qualifications in the representations and
warranties of Seller contained in Section 4.3.3 shall be disregarded
and such representation or warranty shall not be qualified in any
respect by such knowledge qualification); or
7.3.5 Within ninety (90) days of the date of this Agreement, Buyer is
not satisfied, in its sole discretion, with the condition of the Real
Property or the Tangible Personal Property, subject to the terms of
Section 8.1.6 below and further subject to Buyer's right to terminate
if title defects not previously disclosed to Buyer are discovered
following the expiration of such 90 day period.
If the Agreement is terminated pursuant to Sections 7.3.1, 7.3.2,
7.3.3 or 7.3.5 and Seller is not in breach of its representations, warranties
and covenants in any material respects (it being understood and agreed by the
Parties hereto that for purposes of this Section 7.3, that for purposes of
determining such breach of Seller's representations, warranties and covenants,
all knowledge qualifications in the representations and warranties of Seller
contained in Section 4.3.3 shall be disregarded and such representation or
warranty shall not be qualified in any respect by such knowledge qualification),
the Escrow Deposit shall be returned to Buyer and Buyer shall have no further
rights and remedies against Seller.
7.4 Seller's Right to Terminate. Seller, at its option, upon
written notice to Buyer, 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:
7.4.1 Either Assignment Application is designated for a hearing
before an administrative law judge; or
22
7.4.2 Buyer is in material breach of this Agreement ten (10) 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.
If the Agreement is terminated pursuant to Sections 7.4.1 and Seller
is not in breach of its representations, warranties and covenants in any
material respects (it being understood and agreed by the Parties hereto that for
purposes of this Section 7.4, that for purposes of determining such breach of
Seller's representations, warranties and covenants, all knowledge qualifications
in the representations and warranties of Seller contained in Section 4.3.3 shall
be disregarded and such representation or warranty shall not be qualified in any
respect by such knowledge qualification), the Escrow Deposit shall be returned
to Buyer and Buyer shall have no further rights and remedies against Seller.
7.5 Risk of Loss.
7.5.1 The risk of loss and damage, whether by force majeure or for
any other reason, to the Purchased Assets or the operation of the
Stations between the date of this Agreement and the Closing Date will
be on Seller. To the extent permitted by security agreements for
borrowed money, 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), and that Buyer's
sole remedies if Seller elects not to fully repair, replace or restore
will be (i) to terminate this Agreement, in which case the Escrow
Deposit will be delivered to LBI Holdings, or (ii) to close in
accordance with Section 7.5.3 below.
7.5.2 In the event of any damage or event that prevents broadcast
transmissions of either Station in the normal and usual manner and
substantially in accordance with the 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 Closing Date until
transmission in accordance with the FCC Licenses has been resumed. The
postponed Closing Date will be any date within the effective period of
the FCC's consent to assignment of the FCC Licenses to LBI Sub and no
later than ten business days after Seller has given written notice to
Buyer that transmission in accordance with the FCC Licenses has been
resumed, which Buyer shall 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 FCC
Licenses cannot be resumed within the effective period of the FCC's
consent to assignment of the FCC Licenses to LBI Sub, the Parties will
join in an application or applications requesting the FCC to 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 FCC Licenses has not been resumed so that the Closing Date does
not occur within such extended period, or any agreed extension
thereof, Buyer will
23
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 forthwith
without any further obligation, in which case the Escrow Deposit will
be delivered to LBI Holdings.
7.5.3 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 Closing Date and full repair, replacement or restoration of all
Purchased Assets has not been made on or before the Closing Date (as
the Closing Date may be extended as provided in Section 7.5.2), or the
cost thereof is greater than the Proceeds (plus any applicable
deductible), then Buyer will be entitled, but not obligated, 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 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.
7.6 Transfer Taxes and FCC Filings; Expenses; Bulk Sales.
7.6.1 Transfer Taxes; FCC Filings. All federal, state or local
excise, sales or use taxes, or similar taxes and other 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 by Seller. Except as otherwise expressly
provided in the last sentence of Section 7.1.1, all FCC filing fees
will be shared equally by Buyer and Seller.
7.6.2 Title, Survey, Escrow, Recordation, and other Real Property
Costs. The costs of issuing the Title Policies and any survey that
might be required in order to issue such Title Policies shall be borne
by Seller as shall the costs of recording the Grant Deed. The costs of
any real estate escrow shall be borne equally by Buyer and Seller and
any other costs with respect to the transfer of the Real Property
shall be borne by Buyer and Seller in accordance with the custom and
practice of such county in which such Real Property is located.
7.6.3 Expenses. Except as otherwise provided herein, Buyer and Seller
shall each pay its own expenses incident to the negotiation,
preparation and 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.
7.6.4 Compliance With Bulk Sales Laws. Any loss, liability,
obligation or cost suffered by Seller or Buyer as the result of the
failure of Seller 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 by Seller.
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7.6.5 Software. Seller shall have the right to remove its software
from the computers and retain all billing supplies then on hand after
Seller has fully complied with the requirements on Section 2.1 of this
Agreement.
7.6.6
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 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 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 Closing Date as if
made on the Closing Date except as specifically contemplated by this
Agreement (it being understood and agreed by the Parties hereto that
for purposes of this Section 8.1.2, that for purposes of determining
such breach of Seller's representations and warranties, all knowledge
qualifications in the representations and warranties of Seller
contained in Section 4.3.3 shall be disregarded and such
representation or warranty shall not be qualified in any respect by
such knowledge qualification).
8.1.3 Performance. Seller shall 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 on the Closing Date, including without limitation the
provisions of Section 9.1. There shall not have been any material
adverse change in either Station or the Purchased Assets, or any
damage, destruction or loss materially and adversely affecting the
Purchased Assets or the operation of either Station.
8.1.4 FCC Licenses. Seller shall be the holder of the FCC Licenses,
and there shall not have been any modification of any of the FCC
Licenses or any modification of FCC rules, regulations or policies
affecting the class of holders of FCC licenses to which Seller belongs
as the holder of the FCC Licenses, that has or is reasonably likely to
have a material adverse effect on either Station or, after the Closing
Date, the conduct of its operations by Buyer in the manner in which
they are currently being operated. 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 FCC Licenses specifically or
such class of holders generally.
8.1.5 Consents. All Required Consents shall have been obtained and
delivered to Buyer. Such Required Consents shall include, without
limitation, executed
25
consents and releases in form and substance reasonably satisfactory to
Buyer from Westburg Media Capital, L.P., the Terminal Marketing Co.,
Inc. and other creditors of Seller 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). In addition, the lessors under
the leases for the Transmitter Sites shall have executed and delivered
to Buyer estoppels and consents 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)
in the forms attached as Exhibit E.
8.1.6 Real Property. The Title Company shall be irrevocably committed
to issue Title Policies, in form and content reasonably satisfactory
to Buyer. Prior to the execution and delivery hereof (except as
otherwise described in the definition of Permitted Encumbrances),
Buyer has delivered to Seller a set of the title commitments issued by
the Title Company with respect to the Title Policies to be issued
hereunder, which commitments have been annotated to reflect the issues
that Buyer will require to be cleared prior to Closing. Seller and
Buyer will work together to clear any title problems identified by
such markups as soon as possible. Within ninety (90) days following
the date hereof Buyer will confirm in writing its satisfaction with
the state of title to the properties, as reflected in revised
commitments, as appropriate. Following the expiration of such 90 day
period, Buyer will not object to any title issues unless new issues
are identified by the Title Company, or are otherwise identified by
Buyer (but were not shown on the commitments issued by the Title
Company).
8.1.7 Litigation and Insolvency. Except for matters affecting the
radio broadcasting industry generally, no litigation, action, suit,
judgment, proceeding 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 either Station 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. 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, 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.
8.1.8 Member Guarantee. Each person who is a member of Seller shall
have executed the Member Guarantee in the form attached hereto as
Exhibit D (the "Member Guarantee").
26
8.1.9 Financial Information. To the extent requested prior to the
Closing Date, Seller shall have provided all information required to
be provided pursuant to Section 6.3 on or prior to the Closing Date.
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 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 Closing
Date as if made on the 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 Closing Date, including without
limitation the provisions of Section 9.2 and payment of the Purchase
Price in accordance with Article III of this Agreement.
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. 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 Closing Date by
facsimile or overnight courier to the Closing Place, 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 and consistent with the terms of this
Agreement, effecting the sale, transfer, assignment and conveyance of the
Purchased Assets to Buyer including, without limitation, the following:
27
9.1.1 The Grant Deed for each of the Francitas Land and the Bay City
Studio Building shall have been approved and accepted for recording by
the Title Company and Title Company shall have issued the Title Policy
for each of the Francitas Land and the Bay City Studio Building, each
in the form referenced in Section 8.1.6 above (it being acknowledged
that such Title Policies will be issued prior to the actual recording
of the Grant Deeds for such Real Property and that Buyer shall have no
responsibility with respect to the "gap" period between Closing and
the date the Grant Deeds are actually recorded in the appropriate
counties);
9.1.2 Such other instruments or documents as Buyer may reasonably
request, or as may reasonably be required by title insurers or escrow
holders or required for the issuance of the Title Policies, in
connection with the transfer and assignment of the Real Property,
including with certifications of non-foreign status and such other
documents and instruments customary and appropriate with the transfer
and assignment of the Real Property in each of the counties in which
such Real Property is located;
9.1.3 One or more bills of sale conveying to LBI all of the Tangible
Personal Property and Intellectual Property to be acquired by Buyer
hereunder;
9.1.4 An assignment assigning to LBI Sub the FCC Licenses;
9.1.5 An assignment and assumption agreement assigning to LBI each of
the Assumed Contracts together with the Required Consents and the
original copies of the Assumed Contracts;
9.1.6 The data, documents, copies, files, records and logs referred
to in Section 2.1.6 and Seller shall have transferred data from
Seller's computer systems to Buyer's computer systems to the extent
provided in Section 2.1.6;
9.1.7 Proof of payment of prepaid expenses made by Seller for
services to be provided to the Stations after the Closing Date under
the Assumed Contracts;
9.1.8 Opinions of Seller's counsel dated as of the Closing Date
substantially in the forms of Exhibit "B-1" and Exhibit "B-2" together
with such changes, if any, as Buyer's lenders shall have requested and
to which Seller's counsel has agreed;
9.1.9 Copies of resolutions of Guajillo and all the members of
Guajillo, certified by an officer of Guajillo, authorizing the
execution, delivery and performance of this Agreement, the Escrow
Agreement and the transaction contemplated hereby;
9.1.10 A certificate, dated as of the Closing Date, executed by the
Managing Member 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 Closing Date as
though made on and as of the Closing Date, except as specifically
contemplated by this Agreement (it being understood and
28
agreed by the Parties hereto that for purposes of this Section 9.1.10,
that for purposes of determining such breach of Seller's
representations and warranties, all knowledge qualifications in the
representations and warranties of Seller contained in Section 4.3.3
shall be disregarded and such representation or warranty shall not be
qualified in any respect by such knowledge qualification); (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 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, 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 any Station 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
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; and (vi) Seller
has performed the requirements of this Section 9.1;
9.1.11 Written instructions to terminate the Escrow Agreement and
deliver the entire Escrow Deposit to LBI Holdings executed by Seller;
9.1.12 The Member Guarantee shall have been delivered to Buyer
executed by each of the parties thereto; and
9.1.13 Such other instruments of transfer, documents or certificates
reasonably 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 Closing Date via
facsimile or overnight mail to such place as may be designated by Seller in
writing at least five days in advance of the Closing, 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 Closing Date
substantially in the form of Exhibit "C";
29
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 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 Closing Date as though made on and as of the
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 Closing Date;
(iii) to LBI Holdings' and Buyer's knowledge, except for matters
affecting the radio broadcasting industry generally, no litigation,
action, suit, judgment, proceeding or investigation is pending or
outstanding or 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 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;
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 Closing Date. Seller hereby agrees to indemnify,
defend and hold harmless LBI Holdings and Buyer, their successors and assigns,
for a period of twelve (12)
30
months following the consummation of the purchase and sale transaction
contemplated hereby on the Closing Date, from and against:
10.1.1 Any and all Damages, occasioned by, arising out of or resulting
from the operation of either Station prior to the Closing Date,
including, but not limited to, any and all claims, liabilities and
obligations arising or required to be performed prior to the Closing
Date under any of the Assumed Contracts or otherwise with respect to
Seller's ownership and operation of either Station prior to the
Closing Date; and
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 (it being understood and agreed by the
Parties hereto that for purposes of this Section 10.1.2, that for
purposes of determining such breach of Seller's representations,
warranties and covenants, all knowledge qualifications in the
representations and warranties of Seller contained in Section 4.3.3
shall be disregarded and such representation or warranty shall not be
qualified in any respect by such knowledge qualification); provided
further, however, that if LBI Holdings or Buyer or any of their
respective agents discovers facts from a source other than the Seller
or any of its agents or representatives prior to the Closing Date and
such facts constitute a breach of any of the representations and
warranties hereof on the part of Seller and if, in spite of the
existence of such breach, Buyer elects to consummate the transactions
contemplated hereby without an additional written agreement by Seller
to indemnify Buyer with respect to such breach, then LBI Holdings and
Buyer shall not have a right to indemnification with respect to such
breach of such representation and warranty to the extent that the
severity of such breach is known to LBI Holdings or Buyer prior to
Closing
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 twelve (12) months following the consummation of the
purchase and sale transaction contemplated hereby on the Closing Date from and
against:
10.2.1 Any and all Damages occasioned by, arising out of or resulting
from the operation of either Station on or subsequent to the 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 Closing Date under any of the Assumed Contracts or otherwise
with respect to Buyer's ownership and operation of either Station from
and after the 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
31
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.
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, or the discovery, 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
or 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 may materially and adversely affect the
Indemnified Party or its continued operation of either Station, 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 (which consent shall not unreasonably be withheld,
conditioned or delayed), 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 either Station,
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.
32
10.4 Cap and Basket. Neither Party will be entitled to indemnification
under this Article X until Damages to such Party exceed $10,000 in the
aggregate. Once Damages to either Party exceed $10,000 in the aggregate, 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 $10,000 threshold has been reached. The
Parties agree that with respect to all claims made pursuant to Article X hereof
during the period beginning on the date of consummation of the purchase and sale
transaction contemplated by this Agreement on the 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 is $800,000 in the aggregate.
10.5 Guarantee. LBI Holdings and Buyer shall be entitled to receive
any amounts owing by Seller to LBI Holdings or Buyer pursuant to this Article X
not only from Seller but also from the members of Seller as guarantors under the
Member Guarantee. Under no circumstances will LBI Holdings and Buyer be entitled
to receive from any guarantor more money under the Member Guarantee than that
guarantor received from the sale of the Stations, which amounts are hereby
agreed to be $360,000, $320,000 and $120,000, for Peter Scalfano, Cheryl Stewart
and Joseph Clements, Jr., respectively.
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 purchase and sale transaction contemplated by
this Agreement on the Closing Date for a period of twelve (12) 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 and effective upon receipt or, if received on a day other
than a business day, the next business day following the day of receipt, if sent
by (i) certified mail, (ii) delivery by messenger or in person or (iii) by
facsimile at the facsimile numbers below and telephone notification is provided
by the sending Party to the receiving Party at or following the time the
facsimile is sent (it being understood that a voice mail left on answering
machines shall be deemed to satisfy the requirement for such telephone
confirmation):
If to Seller:
33
Ms. Cheryl Stewart
Guajillo Investments, LLC
Highway 35 East
Big City, Texas 77414
Phone: (979) 245-4642
Fax: (979) 245-6463
Copy (which shall not, by itself, constitute notice) to:
Charles L. Spencer, Esq.
Hebert, Spencer, Cusimano & Fry
701 Laurel Street
Baton Rouge, LA 70802
Phone: (225) 344-2601
Fax: (225) 387-1714
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
or any other such facsimile 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 Closing Date). Any assignment contrary to this
34
Section 11.2 is void. LBI Holdings and Buyer shall use reasonable efforts to
give prior written notice of such assignment to Seller and such information as
Seller may reasonably request.
11.3 Other Documents. The Parties will execute such other documents
as may reasonably be 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 Confidentiality. The Parties will keep confidential any
non-public information of the other Parties, subject to required disclosure of
such terms in connection with the filing of the Assignment Applications,
obtaining necessary approvals of third parties to the consummation of the
transaction, disclosures to advisors and financing sources of each Party so long
as they are directed by Buyer and LBI Holdings to treat the information
confidentially and disclosures required in connection with FCC approvals or
financing transactions.
11.7 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:
11.7.1 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 United States Court for the Northern District of Texas.
11.7.2 The arbitrator appointed must be a former or retired judge, or
an attorney with at least 15 years experience in the broadcast radio
industry.
11.7.3 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.
11.7.4 The prevailing party shall be awarded reasonable attorneys'
fees, expert and non-expert witness costs and expenses, and other
costs and expenses incurred in connection with the arbitration unless
the arbitrator, for good cause, determines otherwise.
35
11.7.5 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.
11.7.6 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.
11.7.7 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.
11.7.8 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.
11.7.9 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.
11.7.10 Any monetary award of the arbitrator may include interest at
the highest prime rate, as published in the Wall Street Journal, plus
two percent, but in no event shall the total interest exceed the
maximum amount allowed by Texas law 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.
36
11.7.11 No provision of this Section 11.7 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.
11.8 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.
11.9 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.
11.10 Public Announcements. LBI Holdings and Buyer, on the one hand,
and Seller on the other, will consult with, and obtain the approval of (such
approval not to be unreasonably withheld or delayed) each other before issuing,
and provide each other the opportunity to review, comment upon and concur with,
any press release or other public statement with respect to the transactions
contemplated by this Agreement, and shall not issue any such press release or
make any such public statement prior to such consultation and approval, except
as may be required by applicable law, court process or by obligations pursuant
to any listing agreement with any national securities exchange or the National
Association of Securities Dealers, Inc or disclosures to advisors and financing
sources of each Party and disclosures required in connection with FCC approvals
or financing transactions.
11.11 Entire Agreement. This Agreement, all Schedules and Exhibits
and all agreements, certificates and instruments delivered by the Parties
pursuant to the terms of this 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, and can be amended, supplemented, waived or changed only
by an amendment in writing which makes specific reference to this 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.
37
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.
GUAJILLO INVESTMENTS, LLC
By: /s/ Cheryl Stewart
-------------------------------
Cheryl Stewart
Managing Member
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
LIBERMAN BROADCASTING OF HOUSTON LICENSE CORP.
By: /s/ Lenard D. Liberman
-------------------------------
Lenard D. Liberman
Executive Vice President
S-1 Asset Purchase Agreement
SCHEDULE 4.7
Relating to the Station Lease Agreement dated July 29, 1991, between North Star
(KIOX-FM) and Cue Paging Corporation ("Cue") Cue failed to make its June 2002
payment and information received indicates that on June 17, 2002 Cue made a
general assignment for the benefit of creditors.
Schedule 4.7-1
SCHEDULE I
Identification of Contracts to be Assumed
A. STUDIO LOCATION- HIGHWAY 35 EAST BAY CITY, TEXAS (LAND LEASE; BUILDING
IS OWNED IN FEE)
1. Lease Agreement between Cathryn Long Clark, now deceased, former
independent Executrix of the Estate of John G. Long, Deceased, and
James M. Allen, Independent Administrator of the Estate of Mary Adams
Long, Deceased, collectively, as Lessor and North Star Communications,
Inc. ("North Star"), as Lessee dated August 22, 1988
B. STL LOCATION - EL MATON, MATAGORDA COUNTY, TEXAS (LAND LEASE)
1. Tower Site Lease Agreement dated August 22, 1990, between Rebecca
Jo Taska, Trustee for Amy Taska Osina under the Taska Trust
Agreement dated June 15, 1988, as Lessor, and North Star, as
Lessee
2. Letter from Landrum Enterprises, Inc. dated April 17, 1996
regarding Tower Site Lease Agreement
3. Bill of Sale and Assignment Agreement dated June 1, 1996 between
Landrum Enterprises, Inc. and Guajillo Investments, L.L.C.
4. Assignment of Leases dated June 1, 1996 between Landrum
Enterprises, Inc. and Guajillo Investments, L.L.C.
C. LAND AND TOWER LEASE IN COLLEGEPORT, TEXAS
1. a) Tower Lease Agreement between Tiner Associates, Inc., as
Lessor, and KXGJ Radio Station & John Wiggins, as Lessee
dated June 26, 1995
b) Tower Lease Modification Agreement dated _________, 2000
c) Letter to Tenant from James L. Tiner ("Tiner") regarding
Tower Lease dated February 18, 2001
2. Assignment of Leases by and between 5 Star Radio, L.L.C., as
Assignor, and Guajillo LLC, as Assignee, dated June 11, 1999
3. a) Lease Agreement dated June 1, 1995, between O.B. Stanley
("Stanley") and KXGJ Radio Station and John Wiggins
b) Land Lease Assignment dated _________, 2000
4. Lease Confirmation and Modification Agreement dated as of
________, 2002 by and among Guajillo, Tiner and Stanley with
respect to the Land Lease and the Tower Lease to be delivered by
Closing.
ALSO SEE SCHEDULE I - CONT. (TOWER SUBLEASES)
Schedule I-1
SCHEDULE II
List of all Permits and FCC Licenses
--------------------------------------------------------------------------------------------
FCC Licenses and Permits Expiration
Date
--------------------------------------------------------------------------------------------
Federal Communications Commission Radio Broadcast Station License 8/1/05
for KIOX-FM, File No. BLH 19910221KA, as renewed pursuant to
Application for Renewal of License No. BRH19970403WF, together
with the following auxiliary licenses: WHM943 (STL), WME985
(STL), WLQ250 (STL) and KB97120 (RPU).
The ASR for the tower used for this station is 1047127. The tower
is registered to Guajillo Investments, LLC.
--------------------------------------------------------------------------------------------
Federal Communications Commission Radio Broadcast Station License 8/1/05
for KXGJ, File No. BLH 19951012KA, as renewed pursuant to
Application for Renewal of License, No. BRH 19970401ZS, together
with the following auxiliary license: WPNJ956 (STL).
The ASR for the tower used for this station is 1028576. The tower
is registered to Tiner Communications Service Inc. (parties
acknowledge that this name is different than the name on the
lease with Tiner, as amended)
--------------------------------------------------------------------------------------------
Schedule II-1
SCHEDULE III
List of Required Consents, Encumbrances
and UCC-1 Filing Statements
Required Consents (Seller)
1. Federal Communications Commission consents to the Assignment Applications
which Seller and Buyer will file with the Federal Communications Commission
requesting its written consent to the assignment of the FCC Licenses from Seller
to LBI Sub.
2. An Estoppel and Memorandum of Lease and Consent from each of the landlords
under the leasehold interests in the Real Property, all in the forms attached as
Exhibit E.
3. A Consent and Release from Westburg Media Capital, L.P.
4. A Consent and Release from the Terminal Marketing Co., Inc.
5. 2/nd/ Modification to Tower Lease by and among Guajillo and Tiner Tower LLC,
as successor to Tiner Associates, Inc.
Required Consents (Buyer)
1. Federal Communications Commission consents to the Assignment Applications
which Seller and Buyer will file with the Federal Communications Commission
requesting its written consent to the assignment of the FCC Licenses to LBI Sub.
2. Consent from Buyer's lenders.
Encumbrances
Schedule III-1
None, other than the following: (a) the Encumbrances resulting from the filing
of the UCC-1 filing statements described in the section in this Schedule
entitled "UCC Financing Statements" and (b) the leases that are set forth in
Schedule I (to the extent that a lease is considered to be an Encumbrance).
UCC Financing Statements
====================================================================================================================================
TYPE OF DATE
DEBTOR NAME JURISDICTION SECURED PARTY FILING FILED FILE NO.
- ------------------------------------------------------------------------------------------------------------------------------------
Guajillo Investments, LLC East Baton Rouge Parish Westburg Media Capital, L.P. UCC-1 01/14/02 17-1226519
(LA)
====================================================================================================================================
Guajillo Investments, LLC East Baton Rouge Parish Textron Financial Corporation UCC-3 02/20/02 17-1228134
(LA)
- ------------------------------------------------------------------------------------------------------------------------------------
Guajillo Investments, LLC Secretary of State (TX) Westburg Media Capital, L.P. UCC-1 06/07/99 99-114641
- ------------------------------------------------------------------------------------------------------------------------------------
Guajillo Investments, LLC Secretary of State (TX) The Terminal Marketing Co., UCC-1 07/25/00 00-549370
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Guajillo Investments, LLC Matagorda County (TX) Westburg Media Capital, L.P. UCC-1 06/08/99 5148
- ------------------------------------------------------------------------------------------------------------------------------------
Guajillo Investments, LLC Matagorda County (TX) The Terminal Marketing Co., UCC-1 07/31/00 5318
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
UCC Termination Statements
None, other than UCC release or termination statements releasing or terminating
the UCC-1 Financing statements set forth in the section in this Schedule
entitled "UCC Financing Statements" (the scope of release in such UCC release
statements to be satisfactory to Buyer).
Schedule III -2
SCHEDULE IV
Identification of Principal Items
of Tangible Personal Property
Location:
Main studio and Office building, Bay City, Matagorda County, Texas
Highway 35 East, Bay City, Texas
**KXGJ-FM Control Room**
1) Mini-Mix 8A stereo console
1) Electro Voice RE-20 microphone
1) Radioshack SCT-86 cassette deck
2) Tascam D-501 CD PB with remote control
1) Sony MDR-7506 headphones
2) Pioneer three-way speaker system
1) OPTIMUS SCT-53 dual cassette deck
1) Automax automation system, including Pentium 200 CPU, monitor,
keyboard, mouse, and Automax Pro Radio software
1) Wall mounted CD/Record storage rack
1) Radioshack telephone flasher
1) TM Century jingle package
1) Mike Carta Liner (Air and Production) package
1) Holly Anne EAS receiver
1) TM Century Classic Country Music Library
1) lot approximately 500 Classic Country CDs
1) G.E. 13" color TV with remote
1) Symetric 420 stereo power amplifier
1) Broadcast tools 8x2 stereo switcher
1) 750 watt uninterruptible power supply
1) Audiolab TD1B bulk eraser
1) Gentner SPH-10 telephone hybrid
1) Sony MES 705 mini-disc recorder/player
**KIOX-FM Control Room**
1) Arrakis 12,000 Series 12 channel audio console
2) JBL studio monitors
1) Curtis Mathis 13" color television with remote
1) Edcor headphone amplifier
2) Technics compact disc players
1) BTS computer keyboard
2) ElectroVoice microphones
1) Optimus digital AM-FM stereo receiver
1) CRL Systems stereo gain controller
1) CRL Systems spectral energy compressor
1) CRL Systems FM stereo modulation processor
Schedule IV-1
1) Scott Studios automation system with touch screen and PB & SS servers
1) Sony mini-disc R/P system
1) 750 watt uninterruptible power supply
1) TFT EAS controller
1) TFT EAS system
1) Crown stereo amplifier
1) Gentner Digital Hybrid II telephone interface
1) Broadcast tools 3x2 stereo switcher
**Production Room**
1) Sony MDS-JE500 Minidisc R/PB unit
1) TM Century 102 CD Production package, music beds and sound effects
1) Arrakis Systems 12 channel audio console
1) Electro-Voice microphone
1) Senheiser microphone
1) Pioneer 6-disc compact disc player
1) Technics dual cassette deck
1) Scott Systems production computer with PB server
2) JBL studio monitors
1) Fidelipac Dynamax stereo record/play cart machine
1) Otari 2-track reel-to-reel tape recorder
1) Edcor Sound, headphone amplifier
40) Sound Ideas sound effects compact disc
25) FirstComm production music library
1) Crown stereo amplifier
1) Gentner phone interface, Digital Hybrid II
1) UREI 10 band stereo equalizer
1) Eventide ultra-harmonizer
2) Aphex compeller/aural exciter
1) Production computer with 4 track audio card, cool edit pro software,
and 16x CD burner
1) Arrakis Systems; console power supply
1) Sony portable mini-disc recorder/player
**Engineering Room**
1) Audiolabs TD-1 bulk tape eraser
1) Cerwin Vega three-way speaker systems
2) Technics SL-1200 MKII turntable
2) PD-M30 6-pak CK PB units
1) Broadcast Electronics stereo generator
1) TFT STL transmitter (not working)
1) Norstar phone system
15) Norstar phones throughout building
1) voicemail system
1) Marti remote pick-up transmitter frequencies 450.65 and 450.80
1) Marti RPU transmitter and receiver
2) Gentner Microtel remote phone interface
1) Radioshack 12VDC to 115VAC portable power inverter
Schedule IV-2
1) Kowler 8KW back-up generator, LP gas powered with auto transfer switch
5) Miscellaneous cartridge playback machines
**STL Rack**
1) TFT 884 FM Modulation Monitor (not working)
1) Moseley Associates STL Transmitter, 6000 Series
1) Orban Optimod FM 8100
Location:
STL hop site building and tower, El Maton, Matagorda County, Texas
12 mi. south of Bay City on Hwy. 35 to FR 1095 South
1.7 mi. south on FR 1095
**Outside Building**
1) 400' Esco tower
1) 6' STL receive dish antenna (on tower)
1) 6' STL transmit dish antenna (on tower)
1) 650' 7/8" coaxial cable to STL dishes
**Inside Building**
1) TFT STL Receiver
1) TFT STL transmitter, 949.6375 Mhz
1) Uninterruptable power supply
Location:
FM main transmitter & generator building and FM tower, Francitas, Jackson
County, Texas
16.5 mi. south of Bay City on Hwy. 35 to FR 616 west (Blessing)
7.8 mi. west on FR 616 to CR 446
3 mi. north on CR 446
**Outside Building**
1) 1,014' Andrews tower-solid rod utility guyed tower
1) Broadcast Electronics 8-bay antenna (on tower)
1) 1,000' 4" helix cable-nitrogen pressurized (to antenna)
1) 6' STL receive dish antenna (on tower)
1) 300' 7/8" coaxial cable (to dish)
1) 200 gallon steel diesel gas tank for generator (full)
**Inside Building**
1) Broadcast Electronics FM-30B transmitter, 96,9 Mhz, 208 A/C, 60 hz, 3
phase
1) Broadcast Electronics FX-50 exciter
1) Broadcast Electronics MVDS microprocessor video diagnostic system
1) Broadcast Electronics APC automatic power control
1) Extra power tube for FM-30B
Schedule IV-3
1) TFT STL receiver, 949.6375 Mhz
2) Gentner VRC interconnection
1) Gentner VRC command relay
1) Gentner data interface
1) Belar FM modulation monitor
1) Belar stereo monitor
1) Gates FM10H3 FM transmitter (Standby) (Nonoperational)
1) Flash Technology Corp. high Intensity tower strobe system FAA spec. No.
L0856
1) 45 KW low pass filter, P/N 339-005-1
1) Dielectric 3 1/8" rotary coaxial switch
1) Kohler automatic power transfer switch, 120/240 volt, 225 Amp, 60 Hz, 3
phase
1) Detroit diesel engine with Kohler 100 amp 3-phase generator
1) 5-ton Carrier A/C unit
1) 3-ton Carrier A/C unit
**KXGJ-FM Tower Location**
Location:
FM transmitter and building, Collegeport, Matagorda County, Texas
Rt. 1 Robbins Slough Road
12.6 kilometers east of Palacios
**Outside Building**
1) 6 foot marked grid STL antenna
1) 12 Bay FM antenna-Jampro
1) 500 feet 41" tower with tapered section at antenna (leased)
1) 200 feet1/2" helix
1) 480 feet 3" helix
2) Central air conditioning units (smaller unit needs a blower motor)
1) Metal transmitter building approximately 10'x20'
1) Wire fence enclosure around building and tower
**Inside Building**
1) Moseley Associates Stereo SLT receiver, 6000 Series
1) Sine Systems remote control system
1) Broadcast Electronics FM-20T transmitter with BE FX50 exciter
Office Equipment
1) Binding machine
1) Paper cutter
5) Business calculators
5) Miscellaneous office computers with keyboards, monitors, and network
hub
5) HP color printers
1) Ebsen wide-carriage printer
1) Xerox copy machine
1) Paper shredder
1) Smith Corona electric typewriter
Schedule IV-4
1) HP plain paper fax machine
Office Furniture
1) Executive wooden desk
1) Executive wooden credenza
1) Executive wooden file cabinet
1) Executive gray desk
1) Executive gray credenza
1) Executive gray 2-drawer file cabinet
1) 8' wooden conference table and 8 chairs
1) 5' double door metal supply cabinet
7) Upholstered decorative chairs
3) Highback desk chairs
8) Wooden desks
13) Desk chairs
1) Large double chair with center table
6) Utility tables
4) Computer stations
2) Partitions in sales area
1) Wooden sofa table
1) Glass coffee table
9) 2-drawer file cabinets
8) 4-drawer file cabinets
5) Southwestern framed prints in lobby
1) Wooden bookcase
2) Bar stools
2) Wall clocks
5) Plastic shelving units
4) Literature racks
Office Fixtures
1) Refrigerator
1) Microwave
1) lot waste baskets
1) 5' artificial plant
Schedule IV-5
SCHEDULE V
Allocation of the Purchase Price
- ----------------------------------------------------------------------------------------------------------------
Method to be Used to Determine the Allocated Amounts as
Broadcasting Asset Allocation of Purchase Price as of the of the Closing Date
------------------ -------------------
Closing Date
------------
- ----------------------------------------------------------------------------------------------------------------
Property, plant and equipment
- ----------------------------------------------------------------------------------------------------------------
Goodwill and FCC License
- ----------------------------------------------------------------------------------------------------------------
Purchase Price
- ----------------------------------------------------------------------------------------------------------------
Schedule V-1
SCHEDULE VI
Insurance Coverage Maintained
by Seller on the Purchased Assets
See attached pages
Schedule VI-1
SCHEDULE VII
Identification of Intellectual Property
KIOX-FM Slogans
Gulf Coast Best Country X-97
Today's Hottest Country 96.9, X97-FM
Your Home for 20 in a Row, X-97
KIOX-FM Frequency
96.9 FM
KXGJ-FM Slogans:
Your Home for Continuous Country Classics, Pure Country, 101.7 FM
5 Decades of Back to Back Country, Pure Country 101.7 FM
KXGJ-FM Frequency
101.7 FM
Schedule VII-1
SCHEDULE VIII
Prepaid Expenses
1. Terminal Finance - one month advance on phone system ($523).
2. Estate of Cathryn Clark -Studio Site Lease ($754.70).
3. Upon Closing, Buyer will reimburse Seller for up to $2,750 for the annual
FCC regulatory fee.
Schedule VIII-1
SCHEDULE I (CONT.)
Tower Subleases
- ------------------------------------------------------------------------------------------------------------------
TENANT NAME CURRENT RENTAL
EXPIRATION AMOUNT
DATE
- ------------------------------------------------------------------------------------------------------------------
A. STUDIO BUILDING, BAY CITY, TEXAS
- ------------------------------------------------------------------------------------------------------------------
1. [TOWER SITE LEASED TO CHAMELEON (3 AM TOWERS)] Month to $750.00 per
Month month ($9,000
Oral Lease Agreement between Guajillo, as Owner, and Chameleon Radio per year)
Corporation, as Lessee
- ------------------------------------------------------------------------------------------------------------------
B. STL LOCATION, EL MATON, TEXAS (MATAGORDA COUNTY)
- ------------------------------------------------------------------------------------------------------------------
1. [GUAJILLO OWNS TOWER; SPACE ON TOWER LEASED TO LBR ENTERPRISES] April 12, 2004 $6,000.00 per
year
Simple letter agreement between Guajillo and LBR Enterprises, Inc.
dated March 28, 2001
- ------------------------------------------------------------------------------------------------------------------
C. MAIN TRANSMITTER SITE, FRANCITAS, TEXAS
- ------------------------------------------------------------------------------------------------------------------
1. [GUAJILLO OWNS LAND; LAND LEASED FOR AGRICULTURE PURPOSES] February 28, $10.00 per year
2003;
Surface Lease Agreement effective as of March 1, 2000 between Guajillo, automatic 1-
as Lessor, and Alan P. Swenson, Brian M. Swenson and Sharon Swenson dba year renewals
Coastal Farms, as Lessee to February 28,
2009
- ------------------------------------------------------------------------------------------------------------------
2. [GUAJILLO OWNS TOWER; LEASES TOWER SPACE TO CENTRAL & SOUTH WEST Lease expired $1,782.00 per
SERVICES] April 30, 2000 year
- Tenant
A) Tower Lease Agreement dated April 4, 1995, between Landrum currently
Enterprises, Inc. ("Landrum"), as Landlord and Central and South West occupying on a
Services Inc, ("Central and South"), as Tenant hold-over basis
B) Assignment of Leases dated May 31, 1996 by Landrum, as Assignor,
Guajillo, as Assignee and Central and South, Lessee
- ------------------------------------------------------------------------------------------------------------------
3. [GUAJILLO OWNS TOWER; LEASES TOWER SPACE TO CENTRAL POWER AND LIGHT] June 1, 2004 $1,461.50
A) Tower Lease Agreement dated July 11, 1994, between North Star
Communications, Inc. ("North Star"), as Landlord, and Central Power and
Light Company ("Central Power"), as Tenant
B) Assignment of Leases between North Star, as Assignor, Landrum, as
Assignee, and Central Power, as Lessee, dated as of December 22, 1994
C) Assignment of Leases by and between Landrum, as Assignor, Guajillo,
as Assignee, and Central Power, as Lessee, dated as of May 31, 1996
- ------------------------------------------------------------------------------------------------------------------
4. [GUAJILLO OWNS TOWER; LEASES SPACE ON TOWER TO CUE PAGING] July 28, 2006 $1,005.89 per
month
A) Station Lease Agreement dated July 29, 1991, between North Star ($12,070.68 per
(KIOX-FM) and Cue Paging Corporation ("Cue") (See Schedule 4.7) year)
B) First Amendment to Station Lease Agreement dated July 29, 1991,
between North Star and Cue
C) Assignment of Leases dated December 22, 1994, between North Star, as
Assignor, Landrum, as Assignee and Cue, as Lessee
D) Assignment of Leases between Landrum, as Assignor, Guajillo LLC, as
Assignee, and Cue as Lessee, dated as of May 31, 1996
- ------------------------------------------------------------------------------------------------------------------
Schedule I (cont.)-1
- ------------------------------------------------------------------------------------------------------------------
D. TRANSMITTER SITE, COLLEGEPORT, TEXAS
- ------------------------------------------------------------------------------------------------------------------
1. [Guajillo leases space on tower from Tiner; Tiner holds ground
leasehold from Stanley; Guajillo owns transmitter building located on
land owned by Stanley]
- ------------------------------------------------------------------------------------------------------------------
Schedule I (cont.)-2
SCHEDULE IX
EXCLUDED ASSETS
CHERYL STEWART'S PERSONAL ITEMS AT
STUDIO SITE IN BAY CITY, TX
I. Cheryl's Office:
1) wood and glass hutch
18) decorative items in hutch
5) framed prints
1) decorative lamp
1) rectangular wooden table
1) plant stand
1) artificial plant
1) floral swag
1) crystal clock
1) crystal paperweight
10) framed pictures
1) computer and software
1) computer printer
1) computer monitor
1) computer keyboard and mouse
II. Lobby:
1) framed print
III. Breakroom:
1) wood and glass cabinet
1) green table with 2 chair
IV. Conference Room:
2) framed Western print
V. KXGJ Studio:
1) bar stool
Schedule IX-1
EXHIBIT A
FORM OF GRANT DEED
Exhibit A-1
EXHIBIT B-1
Legal Opinion of Seller's Counsel
[Closing Date]
LBI Holdings II, Inc.
Liberman Broadcasting of Houston, Inc.
Liberman Broadcasting of Houston License Corp.
1845 Empire Avenue
Burbank, California 91504
[Buyer's various lenders]
Re: Sale of Certain Assets of Guajillo Investments, LLC
Ladies and Gentlemen:
We have acted as counsel to Guajillo Investments, LLC, a Louisiana
limited liability company ("Guajillo" or the "Seller"), in connection with the
sale by the Seller and the purchase by Liberman Broadcasting of Houston, Inc.
("LBI"), and Liberman Broadcasting of Houston License Corp., a California
corporation ("LBI Sub," and together with LBI, the "Buyers" and each
individually a "Buyer") of certain assets which are used or held for use in
connection with the operation of radio stations KIOX-FM (96.9 FM, El Campo,
Texas) and KXGJ (101.7 FM, Bay City, Texas) and related assets, license, permits
and authorizations issued by the Federal Communications Commission pursuant to
the Asset Purchase Agreement dated as of June 21, 2002 (the "Asset Purchase
Agreement"), by and among the Buyers, LBI Holdings II, Inc., a California
corporation ("LBI Holdings") and the Seller. We have also reviewed, among other
things, (i) the Corporate Custodial Agreement Relating to Earnest Money dated
June 21, 2002 executed by [a financial institution or escrow company approved by
all parties], as escrow agent, LBI Holdings and Guajillo (the "Escrow
Agreement"), (ii) one or more bills of sale conveying to one or both Buyers all
of the Tangible Personal Property and Intellectual Property, (iii) one or more
assignments assigning to one or both Buyers the FCC Licenses and each of the
Assumed Contracts and Required Consents, and (iv) [list other agreements and
documents] (the agreements and documents contained in clauses (i) through (iv)
above, together with the Asset Purchase Agreement, are collectively referred to
herein as the "Agreements"). We are providing this opinion to you at the request
of the Seller pursuant to Section 9.1.8 of the Asset Purchase Agreement. All
capitalized terms used in this opinion and not defined herein will have the
meanings given in the Asset Purchase Agreement.
We have also acted as counsel to each member of the Seller (each a
"Member" and collectively "Members") in connection with the Member Guarantee.
In our capacity as such counsel, we have examined originals or
copies of those limited liability company and other records and documents we
considered appropriate.
Exhibit B-1-1
As to certain matters of fact related to the opinions hereafter
expressed, we have relied solely upon representations of Guajillo in the Asset
Purchase Agreement. Seller's factual representations in the Certificate of
Seller, dated __________, 2002 (the "Certificate of Seller"), and each Member's
factual representations in the Certificate of Members, dated ___________, 2002
(the "Certificate of Members"), a copy of each of which is attached hereto as
Exhibit A. In addition, we have obtained and relied upon those certificates of
public officials we considered appropriate.
We have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity with originals
of all documents submitted to us as copies. With respect to each natural person
who is a party to the transaction, we have assumed such person has sufficient
legal capacity to carry out his or her obligations under the Agreements to which
any such person is a party. To the extent the Seller's obligations under the
Agreements to which Seller is a party depend on the due authorization, execution
and delivery of the Agreements by the other parties to the Agreements (other
than Seller), we have assumed that the Agreements have been so authorized,
executed and delivered.
On the basis of such examination, our reliance upon the assumptions
in this opinion and our consideration of those questions of law we considered
relevant, and subject to the limitations and qualifications in this opinion, we
are of the opinion that:
(a) Seller is a limited liability company validly existing under
the laws of the State of Louisiana with the limited liability company power to
own its properties and assets and to conduct any activity that a limited
liability company organized under the Louisiana Limited Liability Law may
conduct.
(b) Seller has appropriate power to enter into and to perform its
obligations under the Agreements to which Seller is a party.
(c) The execution, delivery and performance by Seller of the
Agreements to which Seller is a party have been duly authorized by all necessary
limited liability company action on the part of Seller, and the Agreements to
which Seller is a party have been duly executed and delivered by Seller. The
Member Guarantee has been duly executed and delivered by each Member.
(d) The Agreements to which Seller is a party and the Member
Guarantee constitute the legally valid and binding obligations of Seller or each
Member, as applicable, enforceable against Seller or each Member, as applicable,
in accordance with their respective terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally (including, without limitation, fraudulent
conveyance laws) and by general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether considered in a proceeding in equity or at law.
(e) Seller's and each Member's execution and delivery of, and
performance of its, his or her obligations on or prior to the date of this
opinion under, the Agreements to which Seller is a party and the Member
Guarantee, as the case may be, do not and will not (i) violate such Seller's
organizational documents and operating agreement, (ii) violate, breach, or
result in
Exhibit B-1-2
a default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the assets of Seller or any Member, under any existing
obligation of or restriction on Seller or any Member under any agreement to
which it, he or she is a party identified in the Certificate of Seller or the
Certificate of Members as being a material agreement of the Seller or any
Member, or (iii) breach or otherwise violate any existing obligation of or
restriction on Seller or any Member under any order, judgment or decree of any
Louisiana or federal court or governmental authority binding on Seller or any
Member which is identified in the Certificate of Seller.
(f) The execution and delivery by Seller or any Member of, and
performance of its, his or her obligations on or prior to the date of this
opinion under, the Agreements to which Seller is a party or the Member
Guarantee, as the case may be, do not conflict with or violate any statute, law,
regulation or rule of the United States or the State of Louisiana known to us,
recognizing that we have not undertaken, with your consent, any due diligence
investigation or research, recognized as applicable to Seller or any Member or
to transactions of the type contemplated by the Agreements or the Member
Guarantee.
(g) Except as set forth on Schedule __ hereto, no order, consent,
permit or approval of any Louisiana or federal government authority known to us,
recognizing that we have not undertaken, with your consent, any due diligence
investigation or research, recognized as applicable to Seller or any Member or
to transactions of the type contemplated by the Agreements to which Seller is a
party or the Member Guarantee is required on the part of Seller or any Member
for the execution and delivery of, and performance of its, his or her
obligations on or prior to the date of this opinion under, the Agreements to
which Seller is a party or the Member Guarantee.
(h) Except for the matters described in Schedule __ to the Asset
Purchase Agreement, we have not given substantive attention on behalf of Seller
or represented Seller or any Member in connection with any action, suit or
proceeding pending or threatened against Seller or any Member before any court,
arbitrator or governmental agency.
Our opinion in paragraph (d) above as to the enforceability of the
Agreements is subject to:
(i) public policy considerations, statutes or court decisions
that may limit the rights of a party to obtain indemnification
against its own negligence, willful misconduct or unlawful conduct;
(ii) the unenforceability under certain circumstances of broadly
or vaguely stated waivers or waivers of rights granted by law where
the waivers are against public policy or prohibited by law;
(iii) the unenforceability under certain circumstances of
provisions imposing penalties and liquidated damages; and
(iv) the unenforceability under certain circumstances of choice of
law provisions.
Exhibit B-1-3
We express no opinion with respect to the creation, attachment or
priority of any security interests, or your ability to collect attorney's fees
and costs in an action involving the Agreements if you are not the prevailing
party in that action.
We express no opinion as to any provision of any Agreement
requiring written amendments or waivers of such Agreement insofar as it suggests
that oral or other modifications, amendments or waivers could not be effectively
agreed upon by the parties or that the doctrine of promissory estoppel might not
apply.
For purposes of the opinion expressed in paragraphs (e), (f) and
(g), we have assumed that the Seller will not in the future take any
discretionary action (including a decision not to act) permitted by the
Agreements that would cause the performance of the Agreements to constitute a
violation or breach of or default under any of the orders, judgments or decrees
referred to in clause (iii) of paragraph (e) or violate any Louisiana or federal
statute, rule or regulation, require an order, consent, permit or approval to be
obtained from a Louisiana or federal governmental authority.
We express no opinion concerning (i) federal or state antitrust,
unfair competition or trade practice laws or regulations, (ii) pension and
employee benefit laws and regulations, (iii) federal or state environmental laws
and regulations, (iv) federal or state land use or subdivision laws or
regulations or (v) federal or state laws and regulations relating to
communications.
In rendering the opinion set forth in paragraph (a) above with
respect to the good standing of Guajillo under the laws of the State of
Louisiana, we have relied solely upon the certificate dated [_______] from the
Secretary of State of the State of Louisiana.
The law covered by this opinion is limited to the present federal
law of the United States and the present law of the State of Louisiana. We
express no opinion as to the laws of any other jurisdiction and no opinion
regarding the statutes, administrative decisions, rules, regulations or
requirements of any county, municipality, subdivision or local authority of any
jurisdiction. Insofar as the opinions rendered herein relate to documents
governed by the laws of the State of Texas, we have advised you that we are
members of the bar of the State of Louisiana and are not familiar with the laws
of the State of Texas and render no opinion about them. For the purpose of these
opinions, we have assumed, with your consent, that the laws of the State of
Texas are identical in all respects to the laws of the State of Louisiana.
Our use of the terms "known to us," "to our knowledge," or similar
phrase to qualify a statement in this opinion means that those attorneys in this
firm who have given substantive attention to the representation described in the
introductory paragraph of this opinion do not have current actual knowledge that
the statement is inaccurate. Such terms do not include any knowledge of other
attorneys within our firm (regardless of whether they have represented or are
representing the Seller and the Members in connection with any other matter) or
any constructive or imputed notice of any matters or items of information. We
have not undertaken any independent investigation to determine the accuracy of
the statement, and any limited inquiry undertaken by us during the preparation
of this opinion should not be regarded as such an investigation. No inference as
to our knowledge of any matters bearing on the accuracy of any such statement
should be drawn from the fact of our representation of the Seller and the
Members in connection with this opinion or in other matters.
Exhibit B-1-4
We have made no examination or investigation to verify the accuracy or
completeness of any financial, accounting, tax or statistical information
furnished to you or with respect to any other financial, accounting, tax or
statistical matters and express no opinion with respect thereto. Further, no
opinions are expressed herein with respect to any federal or state securities
laws or federal, state or local tax laws.
This opinion is expressed as of the above date and we do not undertake
to provide any opinion as to matters, or to advise any person or entity with
respect to any events or changes of laws or conditions, occurring subsequently
to the date hereof.
The foregoing expresses our legal opinion as to the matters set forth
above based upon our professional knowledge and judgment. This opinion should
not be construed as a guaranty that a court considering such matters would not
rule in a manner contrary to the opinion set forth above.
This opinion is (i) solely for your information in connection with the
Agreements, (ii) not to be relied upon by any other person or entity for any
reason whatsoever, (iii) not to be quoted in whole or in part or otherwise
referred to in any document except as directly a part of and related to such
transactions contemplated by the Agreements, and (iv), except as required by
applicable law, not to be filed with any government agency or any other entity
or person whatsoever. We have, however, delivered a copy of this opinion to
[names of Buyers' various lenders] under [list of Buyers' credit documents],
each of which lenders (together with any actual or prospective participants,
assignees and successors thereunder from time to time party thereto) may rely on
this opinion as if it were addressed and had been delivered to it on the date of
this opinion.
Respectfully submitted,
Exhibit B-1-5
EXHIBIT B-2
Legal Opinion of Seller's Counsel (FCC)
[The Closing Date]
LBI Holdings II, Inc.
Liberman Broadcasting of Houston, Inc.
Liberman Broadcasting of Houston License Corp.
1845 Empire Avenue
Burbank, California 91504
Gentlemen:
We have acted as special communications law counsel for Guajillo
Investments, L.L.C., a Louisiana limited liability company ("Seller"), and we
have been asked to render our opinion concerning certain matters relating to the
Asset Purchase Agreement dated the 21st day of June, 2002 (the "Agreement") by
and among Seller, 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, providing for the
sale of assets used or useful in the operation of Stations KIOX-FM, 96.9 FM, El
Campo, Texas and KXGJ-FM, 101.7 FM, Bay City, Texas (the "Stations").
This opinion is limited strictly to matters arising under the
Communications Act of 1934, as amended, and the published rules, regulations and
policies promulgated thereunder by the FCC (as defined below) (collectively, the
"Communications Laws"), and we express no opinion on any other matter
whatsoever. Furthermore, this opinion addresses matters only as of the date of
this opinion, and we specifically disclaim all responsibility for advising you,
your successors or assigns, and your counsel of changes in matters addressed
herein occurring after such date.
We have examined such records of and related to the Stations that are
routinely available for public inspection at the Federal Communications
Commission ("FCC"), as we have deemed appropriate or necessary as the basis for
the opinions hereinafter set forth, including a review of the files available in
the FCC's public reference room on _______, 2002 [Note: Date to be within five
(5) business days of the Closing Date]. We also have reviewed the Agreement, one
or more assignments assigning to one or both Buyers the FCC Licenses, and the
files of this firm with respect to our representation of Seller before the FCC.
Whenever the opinions herein with respect to the existence or absence of facts
is indicated to be based on our knowledge or awareness, it is intended to
indicate that during the course of our representation, no information has come
to our attention, which would give us actual knowledge of such facts. For
purposes of this opinion, the definition of the term "actual knowledge" as such
term relates to this firm is based solely upon the actual conscious knowledge of
attorneys who are currently members or employees of this firm who are directly
involved in representation of Seller; and to the extent not inconsistent with
such actual conscious knowledge, reliance on representations as to factual
Exhibit B-2-1
matters, including representations contained in the Agreement or in one or more
certificates of Seller or of a member or members of Seller, without
investigation or special inquiry on our part to verify the accuracy of such
representations except as expressly provided otherwise herein; and a review of
the Agreement and other documents specifically identified herein as examined in
connection with the rendering of this opinion including the review of the
routinely available public records of the FCC and the files of this firm with
respect to our representation of Seller before the FCC, in each case, as
described above. Other than the review described in this paragraph, with your
consent we have not undertaken any independent investigation to determine the
existence or absence of such facts, nor have we inspected the Stations, and no
inference as to our knowledge of the existence or absence of such facts should
be drawn from our serving as special communications counsel to Seller.
In making such examinations, we have assumed the (i) genuineness of all
signatures, (ii) legal capacity of all natural persons, (iii) authenticity of
all documents submitted to us as originals, and (iv) conformity to originals of
all documents submitted to us as certified or photostatic copies. Furthermore,
we have assumed the completeness of the public files maintained by the FCC and
the accuracy and authenticity of all documents contained therein.
Based on the foregoing, and subject to the assumptions, qualifications
and exceptions contained herein, we are of the opinion that:
1. The licenses listed in the Attachment (the "FCC Licenses") are
in full force and effect and Seller is the holder of such
licenses. Seller has obtained all consents from the FCC
necessary to assign the licenses for the Stations to LBI Sub. To
the best of our knowledge, the FCC Licenses are all the licenses
necessary to operate a Class C1 FM radio station on 96.9 MHz and
a Class C1 FM radio station on 101.7 MHz at El Campo and Bay
City, Texas, respectively, in the manner presently operated by
Seller.
2. The order of the FCC granting its consent for the assignment of
the FCC Licenses to LBI Sub (the "FCC Consent") was issued on
_____________ and public notice of the FCC Consent was given on
____________. The time provided by the Communications Laws
within which a party in interest other than the FCC may seek
administrative reconsideration or review of the FCC Consent has
expired, and to our knowledge, and based upon our review of the
FCC's files, no petition for reconsideration or application for
review was filed within such time with the FCC. The time
provided by the Communications Laws within which the FCC may
review the FCC Consent on its own motion has expired, and the
FCC did not give public notice of its intent to review the FCC
Consent on its own motion and, to our knowledge, the FCC has not
otherwise stated an intent to review the FCC Consent on its own
motion. With respect to our opinion in this paragraph 2., we
advise you that in extraordinary circumstances, the FCC and the
courts have held that petitions for review or reconsideration
may be considered even if filed after the period prescribed by
rule or statute for such submissions. Additionally, in previous
cases where the FCC discovered procedural irregularities, it has
reconsidered its prior action well after the standard time for
such reconsideration had expired.
Exhibit B-2-2
3. To our knowledge, except for proceedings of general
applicability to the broadcast industry, we have not been
notified of, and the FCC has not issued any public notice
announcing, any formal investigative proceeding or claim, and we
are not aware of any other legal or administrative proceeding
pending before the FCC against the Stations or Seller with
respect to the Stations which could reasonably be expected to
result in the revocation, nonrenewal or suspension of the FCC
Licenses, the imposition of any fine or forfeiture, reporting
requirements or other sanction against the Stations or Seller
with respect to the Stations by the FCC, or the adverse material
modification of the FCC Licenses.
4. The execution, delivery and consummation of the Agreement by
Seller do not violate the Communications Laws.
This opinion is (i) solely for your information in connection with the
consummation of the assignment of the FCC Licenses by Seller to LBI Sub, (ii)
not to be relied upon by any other person or entity for any reason whatsoever,
(iii) not to be quoted in whole or in part or otherwise referred to in any
document except as directly a part of and related to transactions contemplated
by the Agreements, and (iv), except as required by applicable law, not to be
filed with any government agency or any other entity or person whatsoever. We
have, however, delivered a copy of this opinion to [names of Buyers' various
lenders] under [list of Buyers' credit documents], each of which lenders
(together with any actual or prospective participants, assignees and successors
thereunder from time to time party thereto) may rely on this opinion as if it
were addressed and had been delivered to it on the date of this opinion.
Sincerely,
HEBERT, SPENCER, CUSIMANO & FRY, L.L.P.
Charles L. Spencer
CLS/bsb
Exhibit B-2-3
ATTACHMENT
FCC LICENSES
Call Sign Type Expiration
- --------- ---- ----------
KIOX-FM Main Station 08/01/2005
KXGJ-FM Main Station 08/01/2005
WME985 STL 08/01/2005
WLQ250 STL 08/01/2005
WPNJ956 STL 08/01/2005
Exhibit B-2-4
EXHIBIT C
Legal Opinion of LBI Entities' Counsel
[Closing Date]
Guajillo Investments, LLC
[Address]
[Buyer's various lenders]
Re: Purchase of Certain Assets of Guajillo Investments, LLC
Ladies and Gentlemen:
We have acted as counsel to 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", and together with LBI Holdings and
LBI, the "LBI Entities" and each individually an "LBI Entity"), in connection
with the acquisition by the LBI Entities of certain assets which are used or
held for use in connection with the radio stations KIOX-FM (96.9 FM, El Campo,
Texas) and KXGJ (101.7 FM, Bay City, Texas) and related assets, license, permits
and authorizations issued by the Federal Communications Commission to Guajillo
Investments, LLC, a Louisiana limited liability company (the "Seller") pursuant
to the Asset Purchase Agreement dated as of June 21, 2002 (the "Asset Purchase
Agreement"), by and among the LBI Entities and the Seller. We have also
reviewed, among other things, the Corporate Custodial Agreement Relating to
Earnest Money dated June 21, 2002 executed by [a financial institution or escrow
company approved by all parties], as escrow agent, LBI Holdings and Seller (the
"Escrow Agreement" and together with the Asset Purchase Agreement, the
"Agreements"). We are providing this opinion to you at the request of the LBI
Entities pursuant to Section 9.2.2 of the Asset Purchase Agreement. All
capitalized terms used in this opinion and not defined herein will have the
meanings given in the Asset Purchase Agreement.
In our capacity as such counsel, we have examined originals or copies
of those corporate and other records and documents we considered appropriate.
As to relevant factual matters, we have relied upon, among other
things, the LBI Entities' factual representations in the Certificates of LBI
Entity, dated __________, 2002 (the "Certificates of LBI Entity"), a copy of
each of which is attached hereto as Exhibit A. In addition, we have obtained and
relied upon those certificates of public officials we considered appropriate.
We have assumed the genuineness of all signatures, the authenticity of
all documents submitted to us as originals and the conformity with originals of
all documents
Exhibit C-1
submitted to us as copies. With respect to each natural person who is a party to
the transaction, we have assumed such person has sufficient legal capacity to
carry out his or her obligations under the Agreements to which any such person
is a party. To the extent the LBI Entities' obligations under the Agreements to
which each LBI Entity is a party depend on the due authorization, execution and
delivery of the Agreements by the other parties to the Agreements (other than
any of the LBI Entities), we have assumed that the Agreements have been so
authorized, executed and delivered.
On the basis of such examination, our reliance upon the assumptions in
this opinion and our consideration of those questions of law we considered
relevant, and subject to the limitations and qualifications in this opinion, we
are of the opinion that:
(a) Each LBI Entity is a corporation validly existing under the laws of
the State of California with the corporate power to own its properties and
assets and to conduct any activity that a corporation organized under the
California General Corporation Law may conduct (other than the banking,
insurance or trust company business or the rendering of "professional services"
as defined in Subdivision (a) of Section applicable 13401 of the California
Corporations Code).
(b) Each LBI Entity has corporate power to enter into and to perform
its obligations under the Agreements to which such LBI Entity is a party.
(c) The execution, delivery and performance by any LBI Entity of the
Agreements to which such LBI Entity is a party have been duly authorized by all
necessary corporate action on the part of such LBI Entity, and the Agreements to
which such LBI Entity is a party have been duly executed and delivered by such
LBI Entity.
(d) The Agreements to which any LBI Entity is a party constitute the
legally valid and binding obligations of such LBI Entity, enforceable against
such LBI Entity in accordance with their respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally (including, without
limitation, fraudulent conveyance laws) and by general principles of equity,
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing, regardless of whether considered in a proceeding in
equity or at law.
(e) The execution and delivery by any LBI Entity of, and performance of
its obligations on or prior to the date of this opinion under, the Agreements to
which such LBI Entity is a party, do not and will not (i) violate such LBI
Entity's Articles of Incorporation or Bylaws, (ii) violate, breach, or result in
a default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the assets of such LBI Entity under, any existing
obligation of or restriction on such LBI Entity under any agreement to which it
is a party identified in the applicable Certificate of LBI Entity as being a
material agreement of such LBI Entity, or (iii) to our knowledge, breach or
otherwise violate any existing obligation of or restriction on such LBI Entity
under any order, judgment or decree of any California or federal court or
governmental authority binding on such LBI Entity.
(f) The execution and delivery by any LBI Entity of, and performance of
its obligations on or prior to the date of this opinion under, the Agreements to
which such LBI
Exhibit C-2
Entity is a party do not violate any current California or federal statute or
regulation that we have, in the exercise of customary professional diligence,
recognized as applicable to such LBI Entity or to transactions of the type
contemplated by the Agreements.
(g) Except as set forth on Schedule __ hereto, no order, consent,
permit or approval of any California or federal government authority that we
have, in the exercise of customary professional diligence, recognized as
applicable to any LBI Entity or to transactions of the type contemplated by the
Agreements to which such LBI Entity is a party is required on the part of such
LBI Entity for the execution and delivery of, and performance of its obligations
on or prior to the date of this opinion under, the Agreements to which such LBI
Entity is a party.
Our opinion in paragraph (d) above as to the enforceability of the
Agreements is subject to:
(i) public policy considerations, statutes or court decisions that
may limit the rights of a party to obtain indemnification against its
own negligence, willful misconduct or unlawful conduct;
(ii) the unenforceability under certain circumstances of broadly or
vaguely stated waivers or waivers of rights granted by law where the
waivers are against public policy or prohibited by law;
(iii) the unenforceability under certain circumstances of provisions
imposing penalties and liquidated damages; and
(iv) the unenforceability under certain circumstances of choice of law
provisions.
We express no opinion with respect to the creation, attachment or
priority of any security interests, or your ability to collect attorney's fees
and costs in an action involving the Agreements if you are not the prevailing
party in that action (we call your attention to the effect of Section 1717 of
the California Civil Code, which provides that where a contract permits one
party thereto to recover attorney's fees, the prevailing party in any action to
enforce any provision of the contract shall be entitled to recover its
reasonable attorney's fees).
We express no opinion as to any provision of any Agreement requiring
written amendments or waivers of such Agreement insofar as it suggests that oral
or other modifications, amendments or waivers could not be effectively agreed
upon by the parties or that the doctrine of promissory estoppel might not apply.
For purposes of the opinion expressed in paragraphs (e), (f) and (g),
we have assumed that the Buyer will not in the future take any discretionary
action (including a decision not to act) permitted by the Agreements that would
cause the performance of the Agreements to constitute a violation or breach of
or default under any of the orders, judgments or decrees referred to in clause
(iii) of paragraph (e) or violate any California or federal statute, rule or
regulation, require an order, consent, permit or approval to be obtained from a
California or federal governmental authority.
In rendering the opinion set forth in paragraph (a) above with respect
to the good standing of each LBI Entity under the laws of the State of
California, we have relied solely upon
Exhibit C-3
a certificate dated [_______] from the Secretary of State of the State of
California as to each LBI Entity's good standing in the State of California.
We express no opinion concerning (i) federal or state antitrust, unfair
competition or trade practice laws or regulations, (ii) pension and employee
benefit laws and regulations, (iii) federal or state environmental laws and
regulations, (iv) federal or state land use or subdivision laws or regulations
or (v) federal or state laws and regulations relating to communications.
The law covered by this opinion is limited to the present federal law
of the United States and the present law of the State of California. We express
no opinion as to the laws of any other jurisdiction and no opinion regarding the
statutes, administrative decisions, rules, regulations or requirements of any
county, municipality, subdivision or local authority of any jurisdiction.
Insofar as the opinions rendered herein relate to documents governed by the laws
of the State of Texas, we have advised you that we are members of the bar of the
State of California and are not familiar with the laws of the State of Texas and
render no opinion about them. For the purposes of these opinions, we have
assumed, with your consent, that the laws of the State of Texas are identical in
all respect to the laws of the State of California.
Our use of the terms "known to us," "to our knowledge," or similar
phrase to qualify a statement in this opinion means that those attorneys in this
firm who have given substantive attention to the representation described in the
introductory paragraph of this opinion do not have current actual knowledge that
the statement is inaccurate. Such terms do not include any knowledge of other
attorneys within our firm (regardless of whether they have represented or are
representing the LBI Entities in connection with any other matter) or any
constructive or imputed notice of any matters or items of information. We have
not undertaken any independent investigation to determine the accuracy of the
statement, and any limited inquiry undertaken by us during the preparation of
this opinion should not be regarded as such an investigation. No inference as to
our knowledge of any matters bearing on the accuracy of any such statement
should be drawn from the fact of our representation of the LBI Entities in
connection with this opinion or in other matters.
This opinion is (i) solely for your information in connection with the
Agreements, (ii) not to be relied upon by any other person or entity for any
reason whatsoever, (iii) not to be quoted in whole or in part or otherwise
referred to in any document except as directly a part of and related to such
transactions contemplated by the Agreements, and (iv), except as required by
applicable law, not to be filed with any government agency or any other entity
or person whatsoever. We have, however, delivered a copy of this opinion to
[names of Buyers' various lenders] under [list of Buyers' credit documents],
each of which lenders (together with any actual or prospective participants,
assignees and successors thereunder from time to time party thereto) may rely on
this opinion as if it were addressed and had been delivered to it on the date of
this opinion.
Respectfully submitted,
Exhibit C-4
EXHIBIT D
MEMBER GUARANTEE
This Guarantee is entered into as of ______________ by Cheryl Stewart,
Peter Scalfano, and Joseph Clements, Jr., each an individual (each a "Guarantor"
and collectively the "Guarantors"), in favor of and for the benefit of LBI
Holdings II, Inc., a California corporation, LBI Broadcasting of Houston, Inc.,
a California corporation and LBI Broadcasting of Houston License Corp.
(collectively the "Guarantied Parties"), party to that certain Asset Purchase
Agreement dated June 21, 2002 by and among Guajillo Investments, LLC, a
Louisiana limited liability company, (the "Seller") and the Guarantied Parties (
the "Asset Purchase Agreement"; capitalized terms defined therein and not
otherwise defined herein being used herein as therein defined).
1. Guarantee; Limit. Guarantors jointly and severally, irrevocably and
unconditionally guarantee, as primary obligors and not merely as sureties, the
due and punctual payment in full of all Guarantied Obligations (as hereinafter
defined) when the same shall become due, whether at stated maturity, by
acceleration, demand or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. (S) 362(a)). The term "Guarantied Obligations" is used herein in
its most comprehensive sense and includes any and all obligations of Seller,
including all Seller's indemnities and liabilities of whatsoever nature, now or
hereafter made, incurred or created in connection with the Asset Purchase
Agreement, including but not limited to the indemnification obligations set
forth in Article X.
In consideration of the Seller receiving funds from the Guarantied
Parties, which funds will be distributed to the Guarantors as the only members
of the Seller, each Guarantor knowingly, voluntarily and intentionally agrees
and acknowledges receipt of full and complete consideration.
Any interest on any portion of the Guarantied Obligations that accrues
after the commencement of any proceeding, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Seller (or, if interest on any portion of the Guarantied
Obligations ceases to accrue by operation of law by reason of the commencement
of said proceeding, such interest as would have accrued on such portion of the
Guarantied Obligations if said proceeding had not been commenced) shall be
included in the Guarantied Obligations because it is the intention of Guarantors
and the Guarantied Parties that the Guarantied Obligations should be determined
without regard to any rule of law or order that may relieve Seller of any
portion of such Guarantied Obligations.
In the event that all or any portion of the Guarantied Obligations is
paid by Seller, the obligations of the Guarantors hereunder shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) is rescinded or recovered directly
or indirectly from a Guarantied Party as a preference, fraudulent transfer or
otherwise, and any such payments that are so rescinded or recovered shall
constitute Guarantied Obligations.
Exhibit D-1
Subject to the other provisions of this Section 1, upon
failure of Seller to pay any of the Guarantied Obligations when and as the same
shall become due, Guarantors will upon demand pay, or cause to be paid, in cash,
to such Guarantied Party entitled to the Guarantied Obligation, an amount equal
to the aggregate of the unpaid Guarantied Obligations. This obligation is joint
and several, so that each Guarantor will be liable up to the full amount of the
unpaid Guarantied Obligations; provided, however, notwithstanding anything else
in the Guarantee, that in no case shall (1) any Guarantor individually be liable
for an amount in excess of the proceeds such Guarantor has received from the
sale of the Stations (as defined in the Asset Purchase Agreement) which amounts
are agreed to be $360,000, $320,000 and $120,000, for Peter Scalfano, Cheryl
Stewart and Joseph Clements, Jr., respectively and (2) the Guarantors be liable
for an amount in aggregate exceeding $800,000.
2. Guarantee Absolute; Continuing Guarantee. The obligations of
Guarantors hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than payment in full of the
Guarantied Obligations. In furtherance of the foregoing and without limiting the
generality thereof, each Guarantor agrees that: (a) this Guarantee is a
Guarantee of payment when due and not of collectibility; (b) any Guarantied
Party may enforce this Guarantee upon the occurrence of an indemnifiable loss or
Damage under the Asset Purchase Agreement notwithstanding the existence of any
dispute between Seller and the Guarantied Party with respect to the existence of
such event; (c) the obligations of each Guarantor hereunder are independent of
the obligations of Seller under the Asset Purchase Agreement and a separate
action or actions may be brought and prosecuted against any or all Guarantors
whether or not any action is brought against Seller or any of such other
guarantors and whether or not Seller is joined in any such action or actions;
and (d) Guarantor's payment of a portion, but not all, of the Guarantied
Obligations shall in no way limit, affect, modify or abridge such Guarantor's
liability for any portion of the Guarantied Obligations that has not been paid.
This Guarantee is a continuing Guarantee and shall be binding upon each
Guarantor and his or her successors and assigns, and each Guarantor irrevocably
waives any right to revoke this Guarantee as to future transactions giving rise
to any Guarantied Obligations.
3. Actions by Guarantied Parties. Any or all Guarantied Parties
may from time to time, without notice or demand and without affecting the
validity or enforceability of this Guarantee or giving rise to any limitation,
impairment or discharge of Guarantor's liability hereunder, (a) renew, extend,
accelerate or otherwise change the time, place, manner or terms of payment of
the Guarantied Obligations, (b) settle, compromise, release or discharge, or
accept or refuse any offer of performance with respect to, or substitutions for,
the Guarantied Obligations or any agreement relating thereto and/or subordinate
the payment of the same to the payment of any other obligations, (c) request and
accept other guaranties of the Guarantied Obligations and take and hold security
for the payment of this Guarantee or the Guarantied Obligations, (d) release,
exchange, compromise, subordinate or modify, with or without consideration, any
security for payment of the Guarantied Obligations, any other guaranties of the
Guarantied Obligations, or any other obligation of any person with respect to
the Guarantied Obligations, (e) enforce and apply any security now or hereafter
held by or for the benefit of a Guarantied Party in respect of this Guarantee or
the Guarantied Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that a Guarantied Party may have against any
such security, as such Guarantied Party in its discretion may determine
consistent with the Asset
Exhibit D-2
Purchase Agreement, and (f) exercise any other rights available to the
Guarantied Party under the Asset Purchase Agreement.
4. No Discharge. This Guarantee and the obligations of the
Guarantors hereunder shall be valid and enforceable and shall not be subject to
any limitation, impairment or discharge for any reason (other than payment in
full of the Guarantied Obligations), including without limitation the occurrence
of any of the following, whether or not such Guarantor shall have had notice or
knowledge of any of them: (a) any failure to assert or enforce or agreement not
to assert or enforce, or the stay or enjoining, by order of court, by operation
of law or otherwise, of the exercise or enforcement of, any claim or demand or
any right, power or remedy with respect to the Guarantied Obligations or any
agreement relating thereto, or with respect to any other Guarantee of or
security for the payment of the Guarantied Obligations, (b) any waiver or
modification of, or any consent to departure from, any of the terms or
provisions of the Asset Purchase Agreement or any agreement or instrument
executed pursuant thereto, or of any other Guarantee or security for the
Guarantied Obligations, (c) the application of payments received from any source
to the payment of indebtedness other than the Guarantied Obligations, even
though a Guarantied Party might have elected to apply such payment to any part
or all of the Guarantied Obligations, (d) any defenses, set-offs or
counterclaims which Seller may assert against a Guarantied Party in respect of
the Guarantied Obligations, including but not limited to failure of
consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury, and (e) any other act or thing
or omission, or delay to do any other act or thing, which may or might in any
manner or to any extent vary the risk of a Guarantor as an obligor in respect of
the Guarantied Obligations.
5. Waivers. Each Guarantor waives, for the benefit of the
Guarantied Parties: (a) any right to require any Guarantied Party, as a
condition of payment or performance by Guarantor, to (i) proceed against Seller,
the other Guarantors, or any other person, (ii) proceed against or exhaust any
security held from Seller, the other Guarantors or any other person, (iii)
proceed against or have resort to any balance of any deposit account or credit
on the books of such Guarantied Party in favor of Seller or any other person, or
(iv) pursue any other remedy in the power of a Guarantied Party; (b) any defense
arising by reason of the incapacity, lack of authority or any disability or
other defense of Seller including, without limitation, any defense based on or
arising out of the lack of validity or the unenforceability of the Guarantied
Obligations or any agreement or instrument relating thereto or by reason of the
cessation of the liability of Seller from any cause other than payment in full
of the Guarantied Obligations; (c) any defense based upon any statute or rule of
law which provides that the obligation of a surety must be neither larger in
amount nor in other respects more burdensome than that of the principal; (d) any
defense based upon a Guarantied Party's errors or omissions in the
administration of the Guarantied Obligations, except behavior that amounts to
bad faith; (e) (i) any principles or provisions of law, statutory or otherwise,
that are or might be in conflict with the terms of this Guarantee and any legal
or equitable discharge of such Guarantor's obligations hereunder, (ii) the
benefit of any statute of limitations affecting a Guarantor's liability
hereunder or the enforcement hereof, and (iii) any rights to set-offs,
recoupments and counterclaims; (f) notices, demands, presentments, protests,
notices of protest, notices of dishonor and notices of any action or inaction,
including acceptance of this Guarantee, notices of default under the Asset
Purchase Agreement or any agreement or instrument related thereto, notices of
any modification of the Guarantied Obligations or any agreement related thereto,
notices of any extension of credit to Seller and notices of any of the matters
referred to in the
Exhibit D-3
preceding paragraph and any right to consent to any thereof; (g) to the
fullest extent permitted by law, any defenses or benefits that may be derived
from or afforded by law which limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms of this Guarantee and (h) each
right to which any of them may be entitled by virtue of the laws of the State of
Texas governing suretyship and guaranties, including, without limitation, any
rights under Rule 31, Texas Rules of Civil Procedure, Section 17.001 of the
Texas Civil Practice and Remedies Code and Chapter 34 of the Texas Business and
Commerce Code, as any or all of the same may be amended or construed from time
to time, or the common law of the State of Texas at all relevant times.
6. Guarantor's Rights of Subrogation, Contribution, Etc.;
Subordination of Other Obligations. Each Guarantor waives any claim, right or
remedy, direct or indirect, that such Guarantor now has or may hereafter have
against Seller or any of its assets in connection with this Guarantee or the
performance by Guarantor of his or her obligations hereunder, in each case
whether such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise and including without limitation (a) any
right of subrogation, reimbursement or indemnification that a Guarantor now has
or may hereafter have against Seller, (b) any right to enforce, or to
participate in, any claim, right or remedy that a Guarantied Party now has or
may hereafter have against Seller, and (c) any benefit of, and any right to
participate in, any collateral or security now or hereafter held by the
Guarantied Party. Each Guarantor further agrees that, to the extent the waiver
or agreement to withhold the exercise of his or her rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification Guarantor may have
against Seller or against any collateral or security, shall be junior and
subordinate to any rights any Guarantied Party may have against Seller, to all
right, title and interest any Guarantied Party may have in any such collateral
or security, and to any right any Guarantied Party may have against such other
guarantor.
Any indebtedness of Seller now or hereafter held by a Guarantor
is subordinated in right of payment to the Guarantied Obligations, and any such
indebtedness of Seller to a Guarantor collected or received by such Guarantor
after an indemnifiable loss for which a Guarantied Party is entitled to
indemnification under the Asset Purchase Agreement has occurred and has not yet
been recovered, and any amount paid to such Guarantor on account of any
subrogation, reimbursement, indemnification or contribution rights referred to
in the preceding paragraph when all Guarantied Obligations have not been paid in
full, shall be held in trust for Guarantied Party and shall forthwith be paid
over to Guarantied Party to be credited and applied against the Guarantied
Obligations.
7. Expenses. The Guarantors jointly and severally agree to pay,
or cause to be paid, on demand, and to save each and every Guarantied Party
harmless against liability for, any and all costs and expenses (including fees
and disbursements of counsel and allocated costs of internal counsel) incurred
or expended by such Guarantied Party in connection with the enforcement of or
preservation of any rights under this Guarantee.
8. Amendments and Waivers. No amendment, modification,
termination or waiver of any provision of this Guarantee, and no consent to any
departure by Guarantor therefrom, shall in any event be effective without the
written concurrence of each and all
Exhibit D-4
Guarantied Parties and, in the case of any such amendment or modification, each
and all Guarantors. Any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given.
9. Miscellaneous. It is not necessary for a Guarantied Party to
inquire into the capacity or powers of any Guarantor or Seller or the officers,
directors or any agents acting or purporting to act on behalf of any of them.
The rights, powers and remedies given to the Guarantied Party by
this Guarantee are cumulative and shall be in addition to and independent of all
rights, powers and remedies given to the Guarantied Party by virtue of any
statute or rule of law or in the Asset Purchase Agreement. Any forbearance or
failure to exercise, and any delay by a Guarantied Party in exercising, any
right, power or remedy hereunder shall not impair any such right, power or
remedy or be construed to be a waiver thereof, nor shall it preclude the further
exercise of any such right, power or remedy.
In case any provision in or obligation under this Guarantee shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
THIS GUARANTEE AND THE RIGHTS AND OBLIGATIONS OF THE GUARANTORS
AND THE GUARANTIED PARTIES SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
This Guarantee shall inure to the benefit of each Guarantied
Party and their successors and assigns.
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:
(a) 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 United States Court for the Northern District of Texas.
(b) The arbitrator appointed must be a former or retired judge,
or an attorney with at least 15 years experience in the broadcast radio
industry.
Exhibit D-5
(c) 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.
(d) The prevailing party shall be awarded reasonable attorneys'
fees, expert and non-expert witness costs and expenses, and other costs and
expenses incurred in connection with the arbitration unless the arbitrator, for
good cause, determines otherwise.
(e) 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.
(f) 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.
(g) Any Guarantied Party or any Guarantor may initiate an
arbitration proceeding under this Section 9 by written notice to the other party
of his, her 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 Guarantee 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.
(h) 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.
(i) Notwithstanding anything contained in this Guarantee
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.
(j) Any monetary award of the arbitrator may include interest at
the highest prime rate, as published in the Wall Street Journal, plus two
percent but in no event shall the total interest exceed the maximum amount
allowed by Texas law, which interest shall accrue from the
Exhibit D-6
date the claim, dispute or other matter in question was rightfully due and
payable under this Guarantee until the date the award is paid to the prevailing
party.
(k) No provision of this Section 9 shall limit the right of any
Guarantied Party or any Guarantor 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.
EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF,
GUARANTIED PARTY EACH AGREES TO WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTEE AND INSTEAD
AGREES TO ARBITRATION AS SET FORTH ABOVE. The scope of this waiver is intended
to be all-encompassing of any and all disputes that may be filed in any court
and that relate to the subject matter of this transaction, including without
limitation contract claims, tort claims, breach of duty claims and all other
common law and statutory claims. The Guarantors and, by its acceptance of the
benefits hereof, all Guarantied Parties (i) acknowledge that the Guarantors and
the Guarantied Parties have already relied on this waiver in entering into this
Guarantee or accepting the benefits thereof, as the case may be, and that each
will continue to rely on this waiver in their related future dealings, and (ii)
further warrant and represent for itself that it has reviewed this waiver with
its legal counsel and that each knowingly and voluntarily waives its rights
following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF
THIS GUARANTEE.
[remainder of page intentionally left blank]
Exhibit D-7
IN WITNESS WHEREOF, Guarantors have executed this Guarantee as of
the date first written above.
________________________________________
Cheryl Stewart
Home Address: ____________________________
____________________________
____________________________
________________________________________
Peter Scalfano
Home Address: ____________________________
____________________________
____________________________
________________________________________
Joseph Clements, Jr.
Home Address: ____________________________
____________________________
____________________________
Exhibit D-8
EXHIBIT E
FORM OF LESSOR ESTOPPELS
SEE FOLLOWING PAGES WHICH CONTAIN THE FOLLOWING DOCUMENTS:
CONFIRMATION OF LEASE TERMS AND CONSENT (Studio Location, Highway 35 East - Bay
City, Matagorda County, Texas)
CONFIRMATION OF LEASE TERMS AND CONSENT (STL Location - Matagorda County, Texas)
CONFIRMATION OF LEASE TERMS AND CONSENT (Tower Lease - Collegeport, Matagorda
County, Texas) with Stanley
CONFIRMATION OF LEASE TERMS AND CONSENT (Tower Lease - Collegeport, Matagorda
County, Texas) with Tiner
Exhibit E-1