Exhibit 2.1
EXECUTION COPY
================================================================================
MERGER AGREEMENT
By and Among
RADIO ONE, INC.
as the "Parent"
BLUE CHIP MERGER SUBSIDIARY, INC.
as the "Merger Subsidiary"
L. ROSS LOVE
CHERYL H. LOVE
LRC LOVE LIMITED PARTNERSHIP
LOVE FAMILY LIMITED PARTNERSHIP
J. KENNETH BLACKWELL
WINDINGS LANE PARTNERSHIP, LTD.
LOVIE L. ROSS
CALVIN D. BUFORD
BUFORD FAMILY LIMITED PARTNERSHIP
C. HOWARD BUFORD
THOMAS REVELY, III
VADA HILL
STEVEN R. LOVE
STEPHEN E. KAUFMANN
GEORGE C. HALE, SR.
R. DEAN MEISZER
EGI-FUND (99) INVESTORS, L.L.C.
TORCHSTAR COMMUNICATIONS, LLC
BLUE CHIP VENTURE FUNDS PARTNERSHIP
TREBUCHET CORPORATION
and
QUETZAL/J. P. MORGAN PARTNERS, L.P.
as the "Stockholders"
and
BLUE CHIP BROADCASTING, INC.
as the "Company"
FEBRUARY 7, 2001
================================================================================
TABLE OF CONTENTS
Page
1. Definitions..............................................................................................2
2. Basic Transaction.......................................................................................18
2.1. The Merger.....................................................................................18
2.2. Escrow Deposit.................................................................................18
2.3. The Closing....................................................................................18
2.4. Actions at the Closing.........................................................................19
2.5. Effect of Merger...............................................................................19
(a) General...............................................................................19
(b) Certificate of Incorporation..........................................................19
(c) Bylaws................................................................................19
(d) Directors and Officers................................................................19
(e) Conversion of Company Shares..........................................................19
2.6. Post-Closing Escrow Arrangement................................................................20
2.7. The Merger Consideration Adjustment............................................................23
2.8. Payment of Liabilities.........................................................................25
2.9. Company Options................................................................................25
3. Representations and Warranties Concerning the Transaction...............................................25
3.1. Representations and Warranties of the Stockholders.............................................25
(a) Organization of Certain Stockholders..................................................25
(b) Authorization of Transaction..........................................................25
(c) Noncontravention......................................................................25
(d) Brokers' Fees.........................................................................26
(e) Company Shares........................................................................26
(f) Investment Representations............................................................26
(g) Reorganization........................................................................27
3.2. Representations and Warranties of the Parent...................................................27
(a) Organization of the Parent and the Merger Subsidiary..................................27
(b) Authorization of Transaction..........................................................27
(c) Noncontravention......................................................................27
(d) Brokers' Fees.........................................................................27
(e) Capitalization........................................................................28
(f) Continuity of Business Enterprise.....................................................28
(g) Reorganization........................................................................28
(h) Qualification.........................................................................29
(i) Reports and Financial Statements......................................................29
(j) No Undisclosed Liabilities............................................................30
(k) No Violation of Law...................................................................30
(l) Absence of Certain Changes or Events..................................................30
(m) Investigations; Litigation............................................................30
(i)
Page
4. Representations and Warranties Concerning the Company and Its Subsidiaries..............................30
4.1. Organization, Qualification, and Corporate Power...............................................30
4.2. Capitalization.................................................................................30
4.3. Noncontravention...............................................................................30
4.4. Brokers' Fees..................................................................................32
4.5. Subsidiaries...................................................................................32
4.6. Financial Statements...........................................................................32
4.7. Events Subsequent to Most Recent Fiscal Month End..............................................33
4.8. Undisclosed Liabilities........................................................................35
4.9. Legal Compliance...............................................................................35
4.10. Tax Matters....................................................................................35
4.11. Real Property..................................................................................36
4.12. Intellectual Property..........................................................................38
4.13. Title to and Condition of Tangible Personal Property...........................................39
4.14. Contracts......................................................................................40
4.15. FCC Authorizations.............................................................................41
4.16. Notes and Accounts Receivable..................................................................42
4.17 Powers of Attorney.............................................................................42
4.18. Insurance......................................................................................43
4.19. Litigation.....................................................................................43
4.20. Employees......................................................................................43
4.21. Employee Benefits..............................................................................43
4.22. Guaranties.....................................................................................46
4.23. Environment, Health, and Safety Matters........................................................46
4.24. Disclosure.....................................................................................47
4.25. Continuity of Business Enterprise..............................................................47
4.26. Continuity of Stockholder Interest.............................................................47
4.27. Reorganization.................................................................................47
4.28. Insolvency Proceedings.........................................................................48
4.29. Certain Interests and Related Parties..........................................................48
4.30. Assets of Certain Subsidiaries.................................................................48
5. Pre-Closing Covenants...................................................................................48
5.1. General........................................................................................48
5.2. Notices and Consents...........................................................................48
5.3. Operation of Business..........................................................................49
5.4. Preservation of Business.......................................................................49
5.5. FCC Compliance.................................................................................49
5.6. Full Access....................................................................................50
5.7. Notice of Developments.........................................................................50
5.8. Broadcast Transmission Interruption............................................................50
5.9. Exclusivity....................................................................................50
5.10. Title Insurance................................................................................50
5.11. Surveys........................................................................................52
(ii)
Page
5.12. Waiver of Rights...............................................................................52
5.13. Agreement to Vote..............................................................................53
5.14. Delivery of Preliminary Adjustment Statement...................................................53
5.15. Substantially All of the Company's Assets......................................................53
5.16. Reorganization.................................................................................53
5.17. Delivery of Financial Information..............................................................53
5.18. Reports........................................................................................54
5.19. Environmental Survey...........................................................................54
5.20. The Parent's Actions...........................................................................54
5.21. Company Sale of Certain Stations...............................................................54
(a) Louisville Station....................................................................54
(b) Lexington Stations....................................................................54
(c) Cincinnati Station....................................................................55
5.22. Termination of the Company's 401(k) Plan.......................................................55
5.23. Love HSR Filing................................................................................55
5.24. Exercise of WBLO Option........................................................................55
6. Post-Closing Covenants..................................................................................55
6.1. General........................................................................................55
6.2. Litigation Support.............................................................................56
6.3. Transition.....................................................................................56
6.4. Confidentiality................................................................................56
6.5. Delivery of Final Adjustment Statement.........................................................56
6.6 Cooperation....................................................................................56
6.7. Reorganization.................................................................................57
6.8. Benefit Plan Continuation......................................................................57
6.9. Employee Award Payments........................................................................57
6.10. Sale of Lexington Stations and Louisville Station..............................................57
(a) Enforcement of Louisville Contract....................................................57
(b) Brokered Sale of the Louisville Station or the Lexington Stations.....................58
(c) Post-Closing Operation of the Lexington Stations and the Louisville
Station...............................................................................59
(d) Sale Proceeds and Expenses............................................................61
6.11. Directors' and Officers' Liability.............................................................61
6.12. WDBZ LMA.......................................................................................63
7. Conditions to Obligation to Close.......................................................................63
7.1. Conditions to Obligation of the Parent.........................................................63
7.2. Conditions to Obligation of the Company and the Stockholders...................................65
8. Remedies for Breaches of This Agreement.................................................................67
8.1. Survival of Representations and Warranties.....................................................67
8.2. Indemnification Provisions for Benefit of the Parent...........................................67
8.3. Indemnification Provisions for Benefit of the Stockholders.....................................69
(iii)
Page
8.4. Matters Involving Third Parties................................................................69
8.5. Determination of Adverse Consequences..........................................................70
8.6. Exclusive Remedy...............................................................................70
9. Tax Matters.............................................................................................70
9.1. Tax Periods Ending on or Before the Closing Date...............................................70
9.2. Tax Periods Beginning Before and Ending After the Closing Date.................................70
9.3. Cooperation on Tax Matters.....................................................................71
9.4. Tax Sharing Agreements.........................................................................72
9.5. Certain Taxes..................................................................................72
10. Termination.............................................................................................72
10.1. Termination of Agreement.......................................................................72
10.2. Effect of Termination..........................................................................73
11. Miscellaneous...........................................................................................73
11.1. Nature of Certain Obligations..................................................................73
11.2. Press Releases and Public Announcements........................................................73
11.3. No Third-Party Beneficiaries...................................................................74
11.4. Entire Agreement...............................................................................74
11.5. Succession and Assignment......................................................................74
11.6. Counterparts...................................................................................74
11.7. Headings.......................................................................................74
11.8. Notices........................................................................................74
11.9. Stockholders' Representatives..................................................................76
(a) Appointment and Authority.............................................................76
(b) Successors............................................................................76
11.10. Governing Law..................................................................................77
11.11. Amendments and Waivers.........................................................................77
11.12. Severability...................................................................................77
11.13. Expenses.......................................................................................77
11.14. Construction...................................................................................77
11.15. Incorporation of Exhibits, Annexes, and Schedules..............................................77
(iv)
EXHIBITS AND SCHEDULES
Exhibit A - Form of Deposit Escrow Agreement
Exhibit B - Certificate of Merger
Exhibit C - Form of Post-Closing Escrow Agreement
Exhibit D - Historical Financial Statements
Exhibit E - Louisville Contract
Exhibit F - Cincinnati Contract
Exhibit G-1 - Form of Local Programming and Marketing Agreement
Exhibit G-2 - Sublease Term Sheet
Exhibit H - Form of Non-Competition Agreement with L. Ross Love
Exhibit I - Form of Mutual Release
Exhibit J - Form of Graydon, Head & Ritchey LLP Tax Opinion
Exhibit K - Form of Registration Rights Agreement
Schedule 1(b)(i) - Knowledge - Company
Schedule 1(b)(iii) - Knowledge - Parent
Schedule 3.2(e) - Parent Capitalization
Schedule 4.23(b) - Environmental Safety Permits Schedule
Schedule 4.23(b) - Environmental Safety Matters Schedule
Disclosure Schedule - Exceptions to Representations and Warranties
Concerning Blue Chip Broadcasting, Inc.
(v)
MERGER AGREEMENT
Agreement entered into on February 7, 2001, by and among Radio One,
Inc., a Delaware corporation (the "Parent"), Blue Chip Merger Subsidiary, Inc.,
a Delaware corporation ("Merger Subsidiary"), L. Ross Love, Cheryl H. Love, LRC
Love Limited Partnership, Love Family Limited Partnership, J. Kenneth Blackwell,
Windings Lane Partnership, Ltd., Lovie L. Ross, Calvin D. Buford, Buford Family
Limited Partnership, C. Howard Buford, Thomas Revely, III, Vada Hill, Steven R.
Love, Stephen E. Kaufmann, George C. Hale, Sr., R. Dean Meiszer (each, a "Series
A Stockholder"), EGI-Fund (99) Investors, L.L.C., Torchstar Communications, LLC,
Blue Chip Venture Funds Partnership, Trebuchet Corporation (each a "Series B
Stockholder"), and Quetzal/J. P. Morgan Partners, L.P. (the "Series D
Stockholder" and, together with the Series A Stockholders and the Series B
Stockholders, the "Stockholders"), and Blue Chip Broadcasting, Inc., a Delaware
corporation (the "Company"). The Parent, Merger Subsidiary, the Company and the
Stockholders are each referred to herein as a "Party" or collectively referred
to as the "Parties."
The Stockholders in the aggregate own all of the outstanding capital
stock of the Company. The Company owns all of the issued and outstanding capital
stock of Blue Chip Broadcast Company, an Ohio corporation ("BCBC"), and is the
sole member of Blue Chip Broadcasting Licenses II, Ltd, a Nevada limited
liability company ("Licenses II LLC"). BCBC is the sole member of Blue Chip
Broadcasting, Ltd., an Ohio limited liability company ("Broadcasting LLC").
Broadcasting LLC is the sole member of Blue Chip Broadcasting Licenses, Ltd, an
Ohio limited liability company ("Licenses LLC," and, together with Broadcasting
LLC and Licenses II LLC, the "Station Subs").
The Station Subs own and operate the following radio broadcast stations
(the "Blue Chip Stations") pursuant to certain licenses, permits and
authorizations issued by the Federal Communications Commission (the "FCC"):
LICENSE HOLDER STATION
---------------- -----------------------------------
Licenses II LLC: WIZF-FM, Erlanger, Kentucky;
WMJM-FM, Jeffersontown, Kentucky;
WFIA (AM), Louisville, Kentucky
WGZB-FM, Corydon, Indiana;
WGZB-FM1, Louisville, Kentucky;
WDJX-FM, Louisville, Kentucky;
WULV-FM, Louisville, Kentucky;
WLRS-FM, Shepherdsville, Kentucky;
WLXO-FM, Stamping Ground, Kentucky;
WBTF-FM, Midway, Kentucky; and
KTTB-FM, Glencoe, Minnesota;
Licenses LLC: WING (AM), Dayton, Ohio;
WING-FM, Springfield, Ohio;
WGTZ-FM, Eaton, Ohio;
WKSW-FM, Urbana, Ohio;
WJYD-FM, London, Ohio;
WCKX-FM, Columbus, Ohio;
WXMG-FM, Upper Arlington, Ohio; and
WDBZ (AM), Cincinnati, Ohio.
This Agreement contemplates a transaction in which the Merger
Subsidiary will acquire, subject to FCC approval, all of the assets of the
Company in exchange for a combination of cash and capital stock of the Parent,
through a forward subsidiary merger of the Company with and into the Merger
Subsidiary (the "Merger").
For federal income tax purposes, it is intended that the Merger will
qualify as a reorganization under the provisions of ss.368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Adjusted Consideration" means the Total Consideration less the
Consolidated Liabilities and less the Working Capital Deficit.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, penalties, fines, costs, reasonable amounts
paid in settlement, liabilities, obligations, taxes, liens, losses, expenses,
and fees, including court costs and reasonable attorneys' fees and expenses,
excluding indirect, consequential and special damages, including lost profits.
"Affiliate(s)" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code ss.1504(a) or any similar group defined under a similar provision of state,
local, or foreign law.
"Aggregate Cash Merger Consideration" means cash in an amount to be
determined by the Parent in its sole discretion, up to Fifty Million Dollars
($50,000,000.00); provided, however, that the Aggregate Cash Merger
Consideration shall not be less than Twenty-Five Million Dollars
($25,000,000.00); and, provided further, that the Aggregate Cash Merger
Consideration shall be less than the amount that would cause the Merger not to
qualify as a reorganization under ss.368(a) of the Code as determined in the
reasonable opinion of Graydon, Head & Ritchey LLP. The Parent shall notify the
Company and the Stockholders of the amount of the Aggregate Cash Merger
Consideration not later than two (2) business days prior to the Closing Date.
"Aggregate Series A Cash Merger Consideration" means cash in an amount
determined pursuant to the following formula:
-2-
A
------- x C = D
A + B
where:
"A" equals the Series A Pro Rata Share;
"B" equals the Series D Pro Rata Share;
"C" equals the amount, if any, by which the Aggregate Cash Merger
Consideration exceeds the Aggregate Series B Cash Merger
Consideration; and
"D" equals the amount of cash constituting the Aggregate Series A
Cash Consideration.
"Aggregate Series A Stock Merger Consideration" means the number of
Parent Class D Shares determined pursuant to the following formula:
(A x B) - C = E
------------
D
where:
"A" equals the Adjusted Consideration;
"B" equals the Series A Pro Rata Share;
"C" equals the Aggregate Series A Cash Merger Consideration;
"D" equals the Applicable Class D Value; and
"E" equals the number of Parent Class D Shares constituting the
Aggregate Series A Stock Merger Consideration.
"Aggregate Series B Cash Merger Consideration" means cash in an amount
equal to the lesser of (a) the Aggregate Cash Merger Consideration and (b) an
amount determined by multiplying (i) the Adjusted Consideration by (ii) the
Series B Pro Rata Share.
"Aggregate Series B Stock Merger Consideration" means the number of
Parent Class D Shares determined pursuant to the following formula:
(A x B) - C = E
-------------
D
-3-
where:
"A" equals the Adjusted Consideration;
"B" equals the Series B Pro Rata Share;
"C" equals the Aggregate Series B Cash Merger Consideration;
"D" equals the Applicable Class D Value; and
"E" equals the number of Parent Class D Shares constituting the
Aggregate Series B Stock Merger Consideration.
"Aggregate Series D Cash Merger Consideration" means cash in an amount
determined pursuant to the following formula:
A
------- x C = D
A + B
where:
"A" equals the Series D Pro Rata Share;
"B" equals the Series A Pro Rata Share;
"C" equals the amount, if any, by which the Aggregate Cash Merger
Consideration exceeds the Aggregate Series B Cash Merger
Consideration; and
"D" equals the amount of cash constituting the Aggregate Series D
Cash Consideration.
"Aggregate Series D Stock Merger Consideration" means the number of
Parent Class D Shares determined pursuant to the following formula:
(A x B) - C
------------- = E
D
where:
"A" equals the Adjusted Consideration;
"B" equals the Series D Pro Rata Share;
"C" equals the Aggregate Series D Cash Merger Consideration;
-4-
"D" equals the Applicable Class D Value; and
"E" equals the number of Parent Class D Shares constituting the
Aggregate Series D Stock Merger Consideration.
"Aggregate Stock Merger Consideration" means a number of Parent Class D
Shares determined pursuant to the following formula:
A - B = D
-------
C
where:
"A" equals the Adjusted Consideration;
"B" equals the Aggregate Cash Merger Consideration;
"C" equals the Applicable Class D Value; and
"D" equals the number of Parent Class D Shares constituting the
Aggregate Stock Merger Consideration.
"Applicable Class D Value" means Fourteen Dollars ($14.00).
"Applicable Rate" means the corporate base rate of interest publicly
announced from time to time by Bank of America, N.A. plus 1% per annum.
"Barter Balance" on a given date means the difference between the value
of air time (based upon the Blue Chip Stations' then prevailing rates) to be
provided and the fair market value of goods or services to be received therefor
pursuant to trade, barter or similar agreements for the sale of time for goods
or services.
"BCBC" has the meaning set forth in the preface hereof.
"Blue Chip Companies" means the Company and its Subsidiaries,
collectively.
"Blue Chip Stations" has the meaning set forth in the preface hereof.
"Broadcasting LLC" has the meaning set forth in the preface hereof.
"Broker" has the meaning set forth in Section 6.10(b) hereof.
"Certificate of Merger" has the meaning set forth in Section 2.4
hereof.
"Cincinnati Contract" has the meaning set forth in Section 5.21(c)
hereof.
-5-
"Closing" has the meaning set forth in Section 2.3 hereof.
"Closing Date" has the meaning set forth in Section 2.3 hereof.
"Closing Date Net Working Capital" means an amount, which may be
positive or negative, equal to Consolidated Current Assets minus Consolidated
Current Liabilities, in each case determined as of the Closing Date.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code ss.4980B and of similar state law.
"Code" has the meaning set forth in the preface hereof.
"Communications Act" means the Communications Act of 1934, as amended.
"Company" has the meaning set forth in the preface hereof.
"Company Accountant" means PricewaterhouseCoopers.
"Company Options" has the meaning set forth in Section 2.9 hereof.
"Company Registration Rights Agreement" means the First Amended and
Restated Registration Rights Agreement dated as of May 18, 2000, among the
Company and the Investors (as defined therein).
"Company Share(s)" means any share of the Company's Series A Common
Stock, Series B Common Stock, Series C Common Stock, or Series D Common Stock.
"Company's 401k Plan" has the meaning set forth in Section 4.21(e)
hereof
"Confidential Information" means any information concerning the
business and affairs of the Company and its Subsidiaries that is not already
generally available to the public.
"Consolidated Current Assets" means all amounts which, in accordance
with GAAP, would be included as current assets on a consolidated balance sheet
of the Blue Chip Companies as of the date of determination.
"Consolidated Current Liabilities" means all amounts which, in
accordance with GAAP, would be included as current liabilities on a consolidated
balance sheet of the Blue Chip Companies as of the date of determination,
excluding current maturities of Consolidated Liabilities paid at Closing
pursuant to Section 2.8 of this Agreement.
"Consolidated Liabilities" means all Indebtedness of the Blue Chip
Companies for borrowed money other than Consolidated Current Liabilities, the
amount of any negative Barter Balance, the amount necessary to exercise the
option with respect to the purchase of radio broadcast station WBLO, the
Employee Award Payments, and Transaction Fees and Costs.
-6-
"Costs" has the meaning set forth in Section 6.11(b) hereof
"Deposit Escrow Agent" has the meaning set forth in Section 2.2(a)
hereof.
"Deposit Escrow Agreement" has the meaning set forth in Section 2.2(a)
hereof.
"Disclosure Schedule" has the meaning set forth in Section 4 hereof.
"Effective Time" has the meaning set forth in Section 2.5(a) hereof.
"Employee Award Payments" means the amounts to become payable by the
Surviving Corporation to certain of the Company's employees as a result of the
Closing of the Merger as set forth in Section 1(a) of the Disclosure Schedule.
"Employee Benefit Plan" means (i) any plan for which the Company is or
was the plan sponsor (as defined in section 3(16)(B) of ERISA) or any plan
maintained by the Company or to which the Company has contributed or is or was
obligated to make payments, in each case with respect to any present or former
employees of the Company and (ii) any benefit arrangement, obligation, custom,
or practice, whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present or former directors,
employees or agents, including, without limitation, employment agreements,
severance agreements, executive policies, plant closing benefits, salary
continuation for disability, consulting or other compensation arrangements,
workers' compensation, retirement, deferred compensation, bonus, stock option or
purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, any plans providing benefits or payments
in the event of a change of control, change in ownership or sale of a
substantial portion (including all or substantially all) of the assets of any
business or portion thereof, in each case with respect to any present or former
employees, directors or agents of the Company before the Closing Date.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
(S)3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
(S)3(1).
"Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as
now or hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
-7-
"ERISA Affiliate" means each entity which is treated as a single
employer with the Company for purposes of Code (S)414.
"Escrow Agent" has the meaning set forth in Section 2.6 hereof.
"Escrowed Cash" means the Escrowed Series A Cash Merger Consideration
and the Escrowed Series B Cash Merger Consideration.
"Escrow Deposit" has the meaning set forth in Section 2.2(b) hereof.
"Escrowed Property" means the Escrowed Cash and the Escrowed Stock.
"Escrowed Series A Cash Merger Consideration" means cash to be
deposited by the Parent into a post-Closing escrow account in accordance with
Section 2.6 of this Agreement in an amount equal to the lesser of (i) the
Aggregate Series A Cash Merger Consideration and (ii) an amount determined
pursuant to the following formula:
( A )
( --------- ) x C = D
( (A + B) )
where:
"A" equals the Series A Pro Rata Share;
"B" equals the Series B Pro Rata Share;
"C" equals Five Million Dollars ($5,000,000.00); and
"D" equals the Escrowed Series A Cash Merger Consideration.
"Escrowed Series A Stock Merger Consideration" means a number of Parent
Class D Shares (which shall not be less than zero) determined pursuant to the
following formula, which shall be deposited by the Parent into a post-Closing
escrow account in accordance with Section 2.6 of this Agreement:
((( A ) ) )
((( ----------- ) x C ) - D )
((( (A + B) ) ) ) = F
-------------------------------
E
where:
"A" equals the Series A Pro Rata Share;
"B" equals the Series B Pro Rata Share;
-8-
"C" equals Five Million Dollars ($5,000,000.00);
"D" equals the Escrowed Series A Cash Merger Consideration;
"E" equals the Applicable Class D Value; and
"F" equals the number of Parent Class D Shares constituting the
Escrowed Series A Stock Merger Consideration.
"Escrowed Series B Cash Merger Consideration" means cash in an amount
(which shall not be less than zero) determined pursuant to the following
formula, which shall be deposited by the Parent into a post-Closing escrow
account in accordance with Section 2.6 of this Agreement:
(( A ) )
(( --------- ) x C ) - (D x E) = F
(( (A + B) ) )
where:
"A" equals the Series B Pro Rata Share;
"B" equals the Series A Pro Rata Share;
"C" equals Five Million Dollars ($5,000,000.00);
"D" equals the Escrowed Series B Stock Merger Consideration;
"E" equals the Applicable Class D Value; and
"F" equals the Escrowed Series B Cash Merger Consideration.
"Escrowed Series B Stock Merger Consideration" means a number of Parent
Class D Shares equal to the lesser of (i) the Aggregate Series B Stock Merger
Consideration and (ii) a number of Parent Class D Shares determined pursuant to
the following formula:
( A )
( --------- ) x C
( (A + B) ) = E
------------------
D
where:
"A" equals the Series B Pro Rata Share;
"B" equals the Series A Pro Rata Share;
-9-
"C" equals Five Million Dollars ($5,000,000.00);
"D" equals the Applicable Class D Value; and
"E" equals the number of Parent Class D Shares to be determined
pursuant to this clause (ii).
"Escrowed Stock" means a number of Parent Class D Shares, which shall
be deposited by the Parent into a post-Closing escrow account in accordance with
Section 2.6 of this Agreement, equal to the sum of (i) the Escrowed Series A
Stock Merger Consideration and (ii) the Escrowed Series B Stock Merger
Consideration.
"Expenses" has the meaning set forth in Section 6.11(b) hereof.
"FCC" has the meaning set forth in the preface hereof.
"FCC Applications" has the meaning set forth in Section 5.2(b) hereof.
"FCC Authorizations" means all of the FCC authorizations issued with
respect to the Blue Chip Stations, including without limitation all rights in
and to the Blue Chip Stations' call letters and any variations thereof, all of
those FCC authorizations listed and described on Section 4.15(a) of the
Disclosure Schedule, together with any renewals or extensions thereof and
additions thereto and all applications or petitions for action by the FCC.
"FCC Consent" has the meaning set forth in Section 5.2(b) hereof.
"Fiduciary" has the meaning set forth in ERISA (S)3(21).
"Final Adjustment Statement" has the meaning set forth in Section
2.7(b) hereof.
"Final Closing Date" has the meaning set forth in Section 2.3 hereof.
"Final Order" means an action as to which (a) no request for a stay is
pending, no stay is in effect, and any deadline for filing such request that may
be designated by statute or regulation has passed, (b) no petition for rehearing
or reconsideration or application for review is pending and the time for the
filing of any such petition or application has passed, (c) the FCC has not
reconsidered the action on its own motion and the time within which it may
effect such reconsideration has passed, and (d) no appeal is pending or in
effect and any deadline for filing any such appeal that may be designated by
statue or rule has passed.
"Financial Statements" has the meaning set forth in Section 4.6 hereof.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
-10-
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Income Tax" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Indebtedness" means all indebtedness, liabilities and obligations of
every kind and nature, both current and long term, which are vested, absolute,
and accrued, including but not limited to, all indebtedness for borrowed money
(and interest thereon and prepayment penalties incurred as a result of prepaying
such indebtedness, if any, pursuant to Section 2.8 of this Agreement) of the
Blue Chip Companies, all determined in accordance with GAAP on a consolidated
basis.
"Indemnifiable D&O Claim" has the meaning set forth in Section 6.11(b)
hereof.
"Indemnification Claim" has the meaning set forth in Section 2.6(b)
hereof.
"Indemnified Party" has the meaning set forth in Section 8.4 hereof.
"Indemnifying Party" has the meaning set forth in Section 8.4 hereof.
"Indemnitees" has the meaning set forth in Section 6.11(b) hereof.
"Indemnity Agreement" has the meaning set forth in Section 6.11(a)
hereof.
"Independent Accounting Firm" means KPMG LLP.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all domain names and the websites and e-mail
service associated therewith, (g) all computer software and licenses thereto
(including data and related documentation), (h) all other proprietary rights,
and (i) all copies and tangible embodiments thereof (in whatever form or
medium).
-11-
"IRS" means the Internal Revenue Service.
"Knowledge" means, (i) if in reference to the Company, with respect to
the matter in question, if any of the officers of the Company or its
Subsidiaries listed on Schedule 1(b)(i) hereof has actual knowledge, after
reasonable investigation, of such matter, (ii) if in reference to any of the
Blue Chip Stations, with respect to the matter in question, if the general
manager of such Blue Chip Station or any of the officers listed on Schedule
1(b)(i) hereof has actual knowledge, after reasonable investigation, of such
matter, and (iii) if in reference to the Parent, with respect to the matter in
question, if any of the officers of the Parent or its Subsidiaries listed on
Schedule 1(b)(iii) hereof has actual knowledge, after reasonable investigation,
of such matter.
"Lexington Contract" has the meaning set forth in Section 5.21(b)
hereof.
"Lexington Escrowed Cash" means cash in an amount equal to the maximum
cash amount that the Company may be obligated to pay in claims for
indemnification pursuant to the Lexington Contract, or any other contract for
the sale of the Lexington Stations entered into prior to the twenty- four (24)
month anniversary of the Closing Date, such amount to be delivered to the Escrow
Agent in accordance with Section 2.6 of this Agreement as follows: (i) by the
Company if the sale of the Lexington Stations occurs prior to the Closing Date
hereunder, such amount to be less the amount, if any, paid by the Company or its
Subsidiaries to the purchaser of the Lexington Stations for any indemnification
claims resolved prior to the Closing Date, or (ii) pursuant to Section
6.10(d)(i) hereof if the sale of the Lexington Stations is consummated after the
Closing Date.
"Lexington Indemnification Claim" has the meaning set forth in Section
2.6(e) hereof.
"Lexington Operating Losses" has the meaning set forth in Section
6.10(c) hereof.
"Lexington Stations" has the meaning set forth in Section 5.21(b)
hereof.
"Licenses II LLC" has the meaning set forth in the preface hereof.
"Licenses LLC" has the meaning set forth in the preface hereof.
"Louisville Contract" has the meaning set forth in Section 5.21(a)
hereof.
"Louisville Escrowed Cash" means cash in an amount equal to the maximum
amount that the Company may be obligated to pay in claims for indemnification
pursuant to the Louisville Contract, or any other contract for the sale of the
Louisville Station entered into prior to the twenty- four (24) month anniversary
of the Closing Date, such amount to be delivered to the Escrow Agent in
accordance with Section 2.6 of this Agreement as follows: (i) by the Company if
the sale of the Louisville Station occurs prior to the Closing Date hereunder,
such amount to be less the amount, if any, paid by the Company or its
Subsidiaries to the purchaser of the Louisville Station for any indemnification
claims resolved prior to the Closing Date, or (ii) pursuant to Section
6.10(d)(ii) hereof if the sale of the Louisville Stations is consummated after
the Closing Date.
"Louisville Indemnification Claim" has the meaning set forth in Section
2.6(f) hereof.
-12-
"Louisville Station" has the meaning set forth in Section 5.21(a)
hereof.
"Material Adverse Effect" means a material adverse effect on the
business, assets, liabilities, financial condition or results of operations of
the Company and its Subsidiaries or of the Parent and its Subsidiaries
(whichever is applicable), taken as a whole, provided that no Material Adverse
Effect shall be deemed to have occurred by reason of a general deterioration in
the economy or in the broadcasting industry after the date of this Agreement.
"Material Leases" has the meaning set forth in Section 5.10(b) hereof.
"Merger" has the meaning set forth in the preface hereof.
"Merger Consideration" has the meaning set forth in Section 2.5(e)
hereof.
"Merger Subsidiary" has the meaning set forth in the preface hereof.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
4.6 hereof.
"Most Recent Fiscal Month End" has the meaning set forth in Section 4.6
hereof.
"Multiemployer Plan" has the meaning set forth in ERISA (S)3(37).
"Newco" has the meaning set forth in Section 5.21(c) hereof.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice of the Company (including with respect
to quantity and frequency).
"Parent" has the meaning set forth in the preface hereof.
"Parent Capital Stock" has the meaning set forth in Section 3.2(e)
hereof.
"Parent Class D Shares" means shares of the Parent's class D common
stock, par value $.001 per share.
"Parent SEC Reports" has the meaning set forth in Section 3.2(i)
hereof.
"Parent's Accountant" means Arthur Andersen LLP.
"Party" and "Parties" has the meaning set forth in the preface hereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
-13-
"Person" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Post-Closing Escrow Agreement" has the meaning set forth in Section
2.6 hereof.
"Preliminary Adjustment Statement" has the meaning set forth in Section
2.7(a) hereof.
"Prohibited Transaction" has the meaning set forth in ERISA (S)406 and
Code ss.4975.
"Reportable Event" has the meaning set forth in ERISA (S)4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable imposed with
respect to each owned parcel of real property as of the Closing Date or for
taxes that the taxpayer is contesting in good faith through appropriate
proceedings and for which adequate reserves have been established in the
Company's financial statements, and (c) purchase money liens and liens securing
rental payments under capital lease arrangements.
"Senior Lenders" means the several lenders party with the Parent to the
Second Amended and Restated Credit Agreement dated as of July 17, 2000, as such
Second Amended and Restated Credit Agreement may be further amended, modified,
restated, supplemented, renewed, extended, increased, rearranged and/or
substituted from time to time.
"Series A Common Stock" means Company's Series A Common Stock, par
value $.01 per share.
"Series A Common Stock Outstanding" means the number of shares of
Series A Common Stock (including fractional shares) outstanding immediately
prior to the Effective Time.
"Series A Merger Consideration" means (a) cash in an amount determined
by dividing (i) the Aggregate Series A Cash Merger Consideration by (ii) the
Series A Common Stock Outstanding, and (b) the number of Parent Class D Shares
determined by dividing (i) the Aggregate Series A Stock Merger Consideration by
(ii) the Series A Common Stock Outstanding.
"Series A Pro Rata Share" means a decimal fraction determined pursuant
to the following formula:
A + (B x C)
------------------
D
where:
-14-
"A" equals Forty Million Five Hundred Thousand Dollars
($40,500,000.00);
"B" equals (i) the Series A Common Stock Outstanding divided by
(ii) the sum of (A) the Series A Common Stock Outstanding plus (B)
the Series B Common Stock Outstanding;
"C" equals (i) the Adjusted Consideration minus (ii) the sum of
(A) Forty Million Five Hundred Thousand Dollars ($40,500,000.00),
(B) Thirty-One Million Dollars ($31,000,000.00), and (C) the
Series D Preference; and
"D" equals the Adjusted Consideration.
"Series A Stockholder" has the meaning set forth in the preface hereof.
"Series A Stockholders' Representative" has the meaning set forth in
Section 11.9(a) hereof.
"Series B Common Stock" means the Company's Series B Common Stock, par
value $.01 per share.
"Series B Common Stock Outstanding" means the number of shares of
Series B Common Stock (including fractional shares) outstanding immediately
prior to the Effective Time.
"Series B Merger Consideration" means (a) cash in an amount determined
by dividing (i) the Aggregate Series B Cash Merger Consideration by (ii) the
Series B Common Stock Outstanding, and (b) the number of Parent Class D Shares
determined by dividing (i) the Aggregate Series B Stock Merger Consideration by
(ii) the Series B Common Stock Outstanding.
"Series B Pro Rata Share" means a decimal fraction determined pursuant
to the following formula:
A + (B x C)
------------------
D
where:
"A" equals Thirty-One Million Dollars ($31,000,000.00);
"B" equals (i) the Series B Common Stock Outstanding divided by
(ii) the sum of (A) the Series A Common Stock Outstanding plus (B)
the Series B Common Stock Outstanding;
"C" equals (i) the Adjusted Consideration minus (ii) the sum of
(A) Forty Million Five Hundred Thousand Dollars ($40,500,000.00),
-15-
(B) Thirty-One Million Dollars ($31,000,000.00), and (C) the
Series D Preference; and
"D" equals the Adjusted Consideration.
"Series B Stockholder" has the meaning set forth in the preface hereof.
"Series B Stockholders' Representative" has the meaning set forth in
Section 11.9(a) hereof.
"Series C Common Stock" means the Company's Series C Common Stock, par
value $.01 per share.
"Series D Common Stock" means the Company's Series D Common Stock, par
value $.01 per share.
"Series D Common Stock Outstanding" means the number of shares of
Series D Common Stock (including fractional shares) outstanding immediately
prior to the Effective Time.
"Series D Merger Consideration" means (a) cash in an amount determined
by dividing (i) the Aggregate Series D Cash Merger Consideration by (ii) the
Series D Common Stock Outstanding, and
(b) the number of Parent Class D Shares determined by dividing (i) the Aggregate
Series D Stock Merger Consideration by (ii) the Series D Common Stock
Outstanding.
"Series D Preference" means an amount determined pursuant to the
following formula:
A x (1 + RR)/N/
where:
"A" equals Thirty Million Dollars ($30,000,000.00);
"RR" equals (i) if the Closing Date is on or before May 18, 2001,
0.18 or (ii) if the Closing Date is after May 18, 2001, 0.15; and
"N" equals (i) the number of days elapsing between May 18, 2000
and the Closing Date divided by (ii) 365.
"Series D Pro Rata Share" means a decimal fraction determined pursuant
to the following formula:
A
-------
B
where:
"A" equals the Series D Preference; and
-16-
"B" equals the Adjusted Consideration.
"Series D Stockholder" has the meaning set forth in the preface hereof.
"Series D Stockholders' Representative" has the meaning set forth in
Section 11.9(a) hereof.
"Shareholders Agreement" means the First Amended and Restated
Shareholders Agreement dated as of May 18, 2000, among the Company and the
Stockholders.
"Station Subs" has the meaning set forth in the preface hereof.
"Stockholders" has the meaning set forth in the preface hereof.
"Stockholders' Representatives" has the meaning set forth in Section
11.9(a) hereof.
"Subsidiary" means any entity with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Survey" has the meaning set forth in Section 5.11 hereof.
"Surviving Corporation" has the meaning set forth in Section 2.1
hereof.
"Tax(es)" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code (S)59A),
customs, duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return(s)" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8.4 hereof.
"Time Sales Agreements" means those obligations of the Company and its
Subsidiaries that exist on the Closing Date for the sale of air time on the Blue
Chip Stations for cash, for barter sales and paid programming, each to the
extent entered in the ordinary course of business, at customary rates for the
periods in question and cancelable on 30 days' notice or less without penalty.
"Title Company" has the meaning set forth in Section 5.10(a) hereof.
"Total Consideration" means the sum of One Hundred Ninety Million
Dollars ($190,000,000.00).
-17-
"Transaction Fees and Costs" means (a) fees and costs incurred by the
Blue Chip Companies in connection with the transactions contemplated by this
Agreement for outside legal and accounting services and disbursements and (b)
fifty percent (50%) of the Taxes, fees and expenses described in Section 9.5
hereof.
"Updated Financial Statements" has the meaning set forth in Section
5.17 hereof.
"Working Capital Deficit" means the amount, if any, by which (a) Five
Million Dollars ($5,000,000.00) exceeds (b) Closing Date Net Working Capital.
2. Basic Transaction.
2.1. The Merger. On and subject to the terms and
conditions of this Agreement, the Merger will become effective at the Effective
Time. The Merger Subsidiary shall be the corporation surviving the Merger (the
"Surviving Corporation").
2.2. Escrow Deposit.
(a) Within one (1) business day of the execution and delivery
of this Agreement, the Parent, the Company and Wilmington Trust Company, as
Escrow Agent (the "Deposit Escrow Agent"), shall enter into a Deposit Escrow
Agreement in the form of Exhibit A hereto (the "Deposit Escrow Agreement")
pursuant to which the Parent shall deposit an amount equal to the Escrow
Deposit. Such amounts held in escrow shall be applied as set forth herein and in
the Deposit Escrow Agreement.
(b) The Parent shall wire transfer immediately available
funds, or deliver a letter of credit issued by a financial institution, such
letter of credit and financial institution to be satisfactory to the Company, in
the amount of Five Million Dollars ($5,000,000) to the Deposit Escrow Agent's
trust account pursuant to the Deposit Escrow Agreement (the "Escrow Deposit"),
and at the Closing, the Escrow Deposit, including any interest, shall be paid or
returned to the Parent, and the Parties agree jointly to instruct the Deposit
Escrow Agent accordingly. As more fully described in the Deposit Escrow
Agreement: (i) in the event this Agreement is terminated solely because of the
Parent's material breach of this Agreement and neither the Company nor any of
the Stockholders shall at such time be in material breach of this Agreement, the
Escrow Deposit and any accrued interest, or the proceeds upon drawing upon any
letter of credit that had constituted the Escrow Deposit, shall be paid to the
Company as liquidated damages as provided in Sections 10.1 and 10.2 hereof for
the Parent's material breach of this Agreement, and the Parties agree jointly to
instruct the Deposit Escrow Agent accordingly; and (ii) in the event this
Agreement is terminated under any circumstances other than those set forth in
the immediately preceding clause (i), the Escrow Deposit and the interest
accrued thereon shall be paid or returned to the Parent, and the Parties agree
jointly to instruct the Deposit Escrow Agent accordingly.
2.3. The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Kirkland &
Ellis in Washington, DC, at a date and time designated by the Parent after the
date the FCC Consent is granted by initial order, but in no event later than the
earliest of: (a) twelve (12) months after the date the FCC gives public notice
of
-18-
the acceptance for filing of the FCC Applications (the "Final Closing Date"),
(b) ten (10) business days after the date the FCC Consent becomes a Final Order,
or thereafter at the Parent's election, at any time on or before August 15,
2001, or (c) at the Parent's election, upon ten (10) business days' notice after
the date the FCC Consent is granted by initial order, in each case subject to
the satisfaction or waiver of the last of the conditions required to be
satisfied or waived pursuant to Section 7.1 or 7.2 hereof (other than those
requiring a delivery of a certificate or other document, or the taking of other
action, at the Closing). Alternatively, the Closing may take place at such other
place, time or date as the parties may mutually agree upon in writing. The date
on which the Closing is to occur is referred to herein as the "Closing Date."
2.4. Actions at the Closing. At the Closing, (a) each of the
Stockholders will deliver to the Parent and the Merger Subsidiary the various
certificates, instruments, and documents required to be delivered by such
Stockholder pursuant to Section 7.1 hereof, (b) the Parent and the Merger
Subsidiary will deliver to the Stockholders the various certificates,
instruments, and documents referred to in Section 7.2 hereof, (c) the Company
and the Merger Subsidiary will file with the Secretary of State of the State of
Delaware a Certificate of Merger in the form attached hereto as Exhibit B (the
"Certificate of Merger"), (d) the Parent will cause the Surviving Corporation to
deliver to each of the Stockholders (or the Escrow Agent, as provided in Section
2.6 hereof) the Merger Consideration, and (e) each of the Stockholders will
deliver to the Parent stock certificates representing all of his, her, or its
Company Shares, endorsed in blank or accompanied by duly executed assignment
documents.
2.5. Effect of Merger.
(a) General. The Merger shall become effective at the
time (the "Effective Time") the Company and the Merger Subsidiary file the
Certificate of Merger with the Secretary of State of the State of Delaware. The
Merger shall have the effect set forth in the Delaware General Corporation Law.
The Surviving Corporation may, at any time after the Effective Time, take any
action (including executing and delivering any document) in the name and on
behalf of either the Company or the Merger Subsidiary in order to carry out and
effectuate the transactions contemplated by this Agreement.
(b) Certificate of Incorporation. The Certificate of
Incorporation of the Merger Subsidiary shall be the Certificate of Incorporation
of the Surviving Corporation.
(c) Bylaws. The Bylaws of the Merger Subsidiary shall
be the Bylaws of the Surviving Corporation.
(d) Directors and Officers. The directors and
officers of the Merger Subsidiary shall be the directors and officers of the
Surviving Corporation.
(e) Conversion of Company Shares. At and as of the
Effective Time, (i) each share of Series A Common Stock shall be converted into
the right to receive the Series A Merger Consideration, (ii) each share of
Series B Common Stock shall be converted into the right to receive the Series B
Merger Consideration, and (iii) each share of Series D Common Stock shall be
converted into the right to receive the Series D Merger Consideration (the
consideration described
-19-
in this Section 2.5(e), the "Merger Consideration"). The Merger Consideration
shall be subject to post-Closing adjustment pursuant to Section 2.7 hereof. No
Company Share shall be deemed to be outstanding or to have any rights other than
those set forth in this Section 2.5(e) after the Effective Time.
2.6. Post-Closing Escrow Arrangement. As of the Effective
Time, the Parent, the Series A Stockholders, the Series B Stockholders and
Wilmington Trust Company, as escrow agent (the "Escrow Agent") shall enter into
a post-closing escrow agreement in the form of Exhibit C hereto (the
"Post-Closing Escrow Agreement"), and pursuant to the terms of such Post-Closing
Escrow Agreement, the Escrowed Property, and the Lexington Escrowed Cash and the
Louisville Escrowed Cash as applicable, shall be delivered to the Escrow Agent
as an indemnification and adjustment fund (without limiting the Parent's other
rights under this Agreement). The Escrowed Property, the Lexington Escrowed Cash
and Louisville Escrowed Cash shall be distributed as follows (and the parties to
the Post-Closing Escrow Agreement agree jointly to instruct the Escrow Agent
accordingly):
(a) if after Closing the Merger Consideration is adjusted
in favor of the Parent under Section 2.7 hereof, then the Parent shall be
entitled to withdraw Escrowed Property in the amount of such adjustment;
(b) if after Closing the Parent is entitled to receive
indemnification in accordance with Section 8.2(a), Section 8.2(b) or Section
8.2(c) hereof (an "Indemnification Claim"), then the Parent shall be entitled to
withdraw Escrowed Property in the amount of such Indemnification Claim;
provided, however, that the Parent shall be entitled to withdraw Escrowed
Property to satisfy Indemnification Claims arising under Sections 8.2(b) and
8.2(c) hereof only if and to the extent Escrowed Property has been withheld from
the Stockholder against which such Indemnification Claim is made pursuant to
Section 2.6(c)(iii) hereof;
(c) on the twelve (12) month anniversary of the Closing
Date, the Escrow Agent shall release to the Series A Stockholders and the Series
B Stockholders, on a pro rata basis less any deductions noted below, Escrowed
Property in excess of Two Million Dollars ($2,000,000.00) remaining after the
permitted redemptions and withdrawals hereunder, provided that the Parent, the
Series A Stockholders' Representative and the Series B Stockholders'
Representative shall jointly direct the Escrow Agent to (i) retain Escrowed
Property in excess of Two Million Dollars ($2,000,000.00) in an amount equal to
the amount necessary to satisfy any pending Indemnification Claims made under
Section 8.2(a) hereof (other than Indemnification claims arising from the breach
of the representations and warranties contained in Sections 4.10 and 4.23
hereof), (ii) retain Escrowed Property in an amount equal to the amount
necessary to satisfy any pending or unsatisfied Indemnification Claims made
under Section 8.2(b) or Section 8.2(c) hereof with respect to a breach by the
applicable Series A Stockholder or Series B Stockholder and reduce such
Stockholder's pro rata distribution by such amount, (iii) distribute to the
Parent an amount of Escrowed Property equal to the amount by which Lexington Net
Operating Losses exceed the proceeds of the sale of the Lexington Stations and
have not been reimbursed to the Parent by the Series A Stockholders and Series B
Stockholders pursuant to Section 2.6(e) or Section 6.10(c) hereof, and (iv)
distribute to the Parent an amount of Escrowed Property equal to the amount by
which Louisville Net Operating Losses exceed the proceeds of the sale of the
Louisville Station and
-20-
have not been reimbursed to the Parent by the Series A Stockholders and Series B
Stockholders pursuant to Section 2.6(f) or Section 6.10(c) hereof, and, provided
further, that any such additional Escrowed Property retained pursuant to the
preceding provisos shall be promptly distributed to the Series A Stockholders
and Series B Stockholders on a pro-rata or individual basis, as applicable,
after such pending Indemnification Claims are satisfied or resolved;
(d) on the thirty-six (36) month anniversary of the
Closing Date, the Escrow Agent shall release to the Series A Stockholders and
the Series B Stockholders, on a pro rata basis less any deductions noted below,
any Escrowed Property, including accrued interest, remaining after the permitted
redemptions and withdrawals hereunder, provided that the Parent, the Series A
Stockholders' Representative and the Series B Stockholders' Representative shall
jointly direct the Escrow Agent to (i) retain Escrowed Property in an amount
equal to the amount necessary to satisfy any pending Indemnification Claims made
under Section 8.2(a) hereof and arising from the breach of the representations
and warranties contained in Sections 4.10 and 4.23 hereof, (ii) retain Escrowed
Property in an amount equal to the amount necessary to satisfy any pending or
unsatisfied Indemnification Claims made under Section 8.2(b) or Section 8.2(c)
hereof with respect to a breach by the applicable Series A Stockholder or Series
B Stockholder and reduce such Stockholder's pro rata distribution by such
amount, (iii) distribute to the Parent an amount of Escrowed Property equal to
the amount by which Lexington Net Operating Losses exceed the proceeds of the
sale of the Lexington Stations and have not been reimbursed to the Parent by the
Series A Stockholders and the Series B Stockholders pursuant to Section 2.6(e)
or Section 6.10(c) hereof, and (iv) distribute to the Parent an amount of
Escrowed Property equal to the amount by which Louisville Net Operating Losses
exceed the proceeds of the sale of the Louisville Station and have not been
reimbursed to the Parent by the Series A Stockholders and the Series B
Stockholders pursuant to Section 2.6(f) or Section 6.10(c) hereof, and, provided
further, that any such additional Escrowed Property retained pursuant to the
preceding provisos shall be promptly distributed to the Series A Stockholders
and the Series B Stockholders on a pro-rata or individual basis, as applicable,
after such pending Indemnification Claims are satisfied or resolved;
(e) if after the Closing (i) the Parent is entitled to
receive indemnification in accordance with Section 8.2(d) hereof with respect to
the sale of the Lexington Stations (a "Lexington Indemnification Claim") or (ii)
the Lexington Net Operating Losses exceed the net cash proceeds from the sale of
the Lexington Stations and have not been reimbursed to the Parent by the Series
A Stockholders and the Series B Stockholders pursuant to Section 6.10(c) hereof,
then the Parent shall be entitled to withdraw an amount of the Lexington
Escrowed Cash equal to the amount of such Lexington Indemnification Claim or the
amount by which Lexington Net Operating Losses exceed the net cash proceeds of
the sale of the Lexington Stations and have not been reimbursed to the Parent by
the Series A Stockholders and the Series B Stockholders, as the case may be. On
the expiration of the indemnification period under the Lexington Contract or any
other contract for the sale of the Lexington Stations, the Escrow Agent shall
release to the Series A Stockholders and the Series B Stockholders, on a pro
rata basis less any deductions noted below, the Lexington Escrowed Cash
remaining after the permitted withdrawals hereunder, provided that the Parent,
the Series A Stockholders Representative and the Series B Stockholders'
Representative shall jointly direct the Escrow Agent to (A) retain an amount of
the Lexington Escrowed Cash equal to the amount necessary to satisfy any pending
Lexington Indemnification Claims made under Section 8.2(d), and (B) distribute
to the Parent an amount equal to the amount by which Lexington Net Operating
Losses
-21-
exceed the net cash proceeds of the sale of the Lexington Stations and have not
been reimbursed to the Parent by the Series A Stockholders and the Series B
Stockholders pursuant to Section 6.10(c) hereof or previously withdrawn from the
Lexington Escrowed Cash, and, provided further, that any such additional
Lexington Escrowed Cash retained pursuant to the preceding provisos shall be
promptly distributed to the Series A Stockholders and the Series B Stockholders
on a pro-rata basis after such pending Lexington Indemnification Claims are
satisfied or resolved; and
(f) if after the Closing (i) the Parent is entitled to
receive indemnification in accordance with Section 8.2(d) hereof with respect to
the sale of the Louisville Station (a "Louisville Indemnification Claim") or
(ii) the Louisville Net Operating Losses exceed the net cash proceeds from the
sale of the Louisville Station and have not been reimbursed to the Parent by the
Series A Stockholders and the Series B Stockholders pursuant to Section 6.10(c)
hereof, then the Parent shall be entitled to withdraw an amount of the
Louisville Escrowed Cash equal to the amount of such Louisville Indemnification
Claim or the amount by which Louisville Net Operating Losses exceed the net cash
proceeds of the sale of the Louisville Station and have not been reimbursed to
the Parent by the Series A Stockholders and the Series B Stockholders, as the
case may be. On the expiration of the indemnification period under the
Louisville Contract or any other contract for the sale of the Louisville
Station, the Escrow Agent shall release to the Series A Stockholders and the
Series B Stockholders, on a pro rata basis less any deductions noted below, the
Louisville Escrowed Cash remaining after the permitted withdrawals hereunder,
provided that the Parent, the Series A Stockholders' Representative and the
Series B Stockholders' Representative shall jointly direct the Escrow Agent to
(A) retain an amount of the Louisville Escrowed Cash equal to the amount
necessary to satisfy any pending Louisville Indemnification Claims made under
Section 8.2(d), and (B) distribute to the Parent an amount equal to the amount
by which Louisville Net Operating Losses exceed the net cash proceeds of the
sale of the Louisville Station and have not been reimbursed to the Parent by the
Series A Stockholders and the Series B Stockholders pursuant to Section 6.10(c)
hereof or previously withdrawn from the Lexington Escrowed Cash, and, provided
further, that any such additional Louisville Escrowed Cash retained pursuant to
the preceding provisos shall be promptly distributed to the Series A
Stockholders and the Series B Stockholders on a pro-rata basis after such
pending Louisville Indemnification Claims are satisfied or resolved.
If applicable, Escrowed Property withdrawn or retained by
the Parent pursuant to Sections 2.6(a), 2.6(b), 2.6(c) or 2.6(d) hereof shall
consist of portions of Escrowed Cash and Escrowed Stock in the same ratio as the
Escrowed Cash and Escrowed Stock bear to each other, with the value of each
Parent Class D Share comprising such Escrowed Stock being deemed to be the
Applicable Class D Value for purposes of such determination; provided, however,
that Escrowed Property so withdrawn or retained with respect to Indemnification
Claims made under Sections 8.2(b) or 8.2(c) hereof shall consist of portions of
Escrowed Cash and Escrowed Stock in the same ratio as would be distributable to
the applicable Stockholder pursuant to the following sentence. Escrowed Property
distributed to the Stockholders pursuant to Sections 2.6(c) and 2.6(d) hereof
shall consist of portions of Escrowed Cash and Escrowed Stock determined as
follows: (1) Escrowed Cash and Escrowed Stock shall be distributed to Series A
Stockholders in the same ratio as the Escrowed Series A Cash Merger
Consideration and Escrowed Series A Stock Consideration bear to each other; and
(2) Escrowed Cash and Escrowed Stock shall be distributed to Series B
Stockholders in the same ratio as the Escrowed Series B Cash Merger
Consideration and the Escrowed Series B Stock Merger Consideration bear to each
other, in each case with the value
-22-
of each Parent Class D Share comprising such Escrowed Stock being deemed to be
the Applicable Class D Value for such purposes. For the avoidance of doubt (i)
the Escrowed Cash deposited into the post-Closing escrow pursuant to this
Section 2.6 shall consist of cash in an amount equal to the Escrowed Series A
Cash Consideration withheld from the Aggregate Series A Cash Consideration, and
cash in an amount equal to the Escrowed Series B Cash Consideration withheld
from the Aggregate Series B Cash Consideration, (ii) the Escrowed Stock
deposited into the post-Closing escrow pursuant to this Section 2.6 shall
consist of a number of Parent Class D Shares equal to the Escrowed Series A
Stock Merger Consideration which shall be withheld from the Aggregate Series A
Stock Merger Consideration, and a number of Parent Class D Shares equal to the
Escrowed Series B Stock Merger Consideration which shall be withheld from the
Aggregate Series B Stock Merger Consideration, and (iii) no portion of the
Aggregate Series D Stock Merger Consideration or Aggregate Series D Cash Merger
Consideration shall be deposited into the post-Closing escrow, and no Series D
Stockholder shall have any rights with respect to the Escrowed Property.
(g) As of the Effective Time, the Series A
Stockholders shall have the right to modify the Escrowed Series A Stock Merger
Consideration and the Escrowed Series A Cash Merger Consideration as follows:
(i) the Series A Stockholders shall have the right to reduce the amount of the
Escrowed Series A Cash Merger Consideration by directing the Parent to increase
the Parent Class D Shares that will constitute the Escrowed Series A Merger
Consideration by that number of shares equal to the amount of the desired cash
reduction divided by the Applicable Class D Value; and/or (ii) the Series A
Stockholders shall have the right to deliver, in lieu of any or all Parent Class
D Shares that would constitute the Escrowed Series A Stock Merger Consideration,
a sum of immediately available funds equal to the Applicable Class D Value
multiplied by the number of Parent Class D Shares being substituted as set forth
in Section 2(c) of the Post-Closing Escrow Agreement. Any and all Parent Class D
Shares so substituted shall be distributed immediately to the Stockholder(s) who
elect to deliver cash pursuant to this Section 2.6(g). The Parties agree that,
notwithstanding any modifications to the post-Closing escrow pursuant to this
Section 2.6(g), the aggregate value of the cash and the Parent Class D Shares
(valued at the Applicable Class D Value) deposited into the post-Closing escrow
at the Effective Time shall be Five Million Dollars ($5,000,000.00).
2.7. The Merger Consideration Adjustment.
(a) Not later than five (5) business days before
Closing, the Company shall deliver to the Parent a statement (the "Preliminary
Adjustment Statement") that sets forth a good faith estimate of the amount of
the Closing Date Net Working Capital and the Consolidated Liabilities (including
the unpaid Transaction Fees and Costs) at Closing and the Company's calculation
of the Adjusted Consideration and Merger Consideration for each Stockholder. The
Preliminary Adjustment Statement shall show the Company's calculations in
reasonable detail and shall be accompanied by a good faith, estimated balance
sheet of the Company (as of the date of the Preliminary Adjustment Statement)
prepared by the Company Accountant in accordance with GAAP and other supporting
documentation.
(b) Not later than 90 days after Closing, the Parent
shall deliver to the Series A Stockholders' Representative and the Series B
Stockholders' Representative a statement (the "Final Adjustment Statement") that
sets forth the amount of the Closing Date Net Working
-23-
Capital and the Consolidated Liabilities at Closing and the Parent's calculation
of the Adjusted Consideration and the Merger Consideration for each Stockholder.
The Final Adjustment Statement shall show the Parent's calculations in
reasonable detail and shall be accompanied by a balance sheet of the Company (as
of the Closing Date) prepared by the Parent's Accountant in accordance with GAAP
and other supporting documentation and shall explain in reasonable detail any
differences between the Preliminary Adjustment Statement and the Final
Adjustment Statement.
(c) If the Series A Stockholders' Representative or
the Series B Stockholders' Representative disputes any item in the Final
Adjustment Statement, such Stockholders' Representative shall notify the Parent
in writing thereof (specifying the amount of each item in dispute and setting
forth in reasonable detail the basis for each item in dispute) within fifteen
(15) business days of receipt by such Stockholders' Representative of the Final
Adjustment Statement. If the Series A Stockholders' Representative or the Series
B Stockholders' Representative does not notify the Parent of any such dispute
within such time, then the Final Adjustment Statement shall be deemed to be
final and binding on the parties. In the event of such a dispute, the parties
shall negotiate in good faith to attempt to reconcile their differences. If such
dispute has not been resolved within twenty (20) business days, the parties
shall submit the items remaining in dispute for resolution to the Independent
Accounting Firm, which shall, as promptly as practicable but in any event within
twenty (20) business days, resolve the disputed items and report to the parties,
and such report shall have the effect of an arbitral award and shall be final
and binding on the parties. The fees and disbursements of the Independent
Accounting Firm shall be allocated equally between the Parent and the Series A
Stockholders and the Series B Stockholders.
(d) If the Merger Consideration as determined in
accordance with this Section 2.7 differs from the amount calculated at the
Effective Time, then within five (5) business days of such determination, the
parties shall make appropriate settlement thereof. If such settlement is in
favor of the Stockholders, the Parent shall promptly deliver additional Parent
Class D Shares to the Series A Stockholders and the Series B Stockholders, on a
pro rata basis, in an amount equal to such settlement, or in the Parent's sole
discretion, the Parent may pay all or a portion of such settlement in cash up to
such amount as will not, when aggregated with the Aggregate Cash Merger
Consideration paid at Closing, exceed Fifty Million Dollars ($50,000,000.00);
provided, however, that the aggregate amount of cash paid at Closing and
pursuant to this Section 2.7 shall in all events be less than the amount that
would cause the Merger not to qualify as a reorganization under (S)368(a) of the
Code as determined in the reasonable opinion of Graydon, Head & Ritchey LLP ;
and, further provided, however, that if the Parent pays such amount in a
combination of cash and stock, then the cash portion shall be delivered first to
the Series B Stockholders until either (i) the amount payable to the Series B
Stockholders is satisfied in full, in which case any remaining cash and all of
the stock shall then be delivered to the Series A Stockholders, or (ii) no cash
remains, in which case the balance of the amount payable to the Series B
Stockholders shall be paid in stock and the amount payable to the Series A
Stockholders shall be payable entirely in stock. In any such settlement, the
number of Parent Class D Shares subject to settlement shall be determined by
dividing the amount of the settlement by the Applicable Class D Value. If such
settlement is in favor of the Parent, the Parent shall be entitled to withdraw
such settlement amount from the Escrowed Property as provided in Section 2.6
hereof; provided that within fourteen (14) days of such settlement, each Series
A Stockholder and Series B Stockholder shall be required to deliver to the
Escrow Agent an amount
-24-
equal to that Stockholder's pro rata share of the amount of Escrowed Property
withdrawn by the Parent in connection with such settlement.
2.8. Payment of Liabilities. Simultaneously with Closing on
the Closing Date, the Blue Chip Companies long term indebtedness payable to
Fleet and Blue Chip Venture and all other Blue Chip Companies' financial
institutions and banks, the Transaction Fees and Costs and that portion of the
Employee Award Payments that become payable on the Closing Date, shall be paid
and satisfied by the Parent and in connection with such satisfactions, the
Company shall cause the Blue Chip Companies' lenders to release and discharge
any and all security interests, stock pledges, mortgage, liens, claims and
encumbrances whatsoever that they may have or possess against and in respect of
the Blue Chip Companies' assets, including, without limitation, the execution,
delivery and filing of mortgage satisfactions and UCC termination statements in
all required jurisdictions.
2.9. Company Options. The Company shall take all actions
necessary and appropriate to provide that, upon the Effective Time, each
outstanding option and related rights to purchase Company Shares or other
similar interest (collectively, the "Company Options") granted under any of the
Company's stock option plans or under any other plan or arrangement, whether or
not then exercisable or vested, shall be canceled and all rights of all
optionees thereunder shall be terminated.
3. Representations and Warranties Concerning the Transaction.
3.1. Representations and Warranties of the Stockholders. Each
of the Stockholders represents and warrants to the Parent that the statements
contained in this Section 3.1 are correct and complete in all material respects
as of the date of this Agreement with respect to himself, herself or itself.
(a) Organization of Certain Stockholders. If such
Stockholder is a corporation, a partnership, or a limited liability company,
such Stockholder is duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation or formation, as the case may
be.
(b) Authorization of Transaction. Such Stockholder has
full power and authority (including, if the Stockholder is a corporation, a
partnership or a limited liability company, full corporate, partnership or
limited liability company power and authority) to execute and deliver this
Agreement and to perform his, her or its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of such Stockholder,
enforceable in accordance with its terms and conditions. Such Stockholder need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Stockholder is
subject or, if such Stockholder is a corporation, a partnership or a limited
liability company, any provision
-25-
of its charter or bylaws, partnership agreement, operating agreement or other
organization document or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
material agreement, contract, lease, license, instrument, or other arrangement
to which the Stockholder is a party or by which he, she or it is bound or to
which any of his, her or its assets is subject.
(d) Brokers' Fees. Such Stockholder has no liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the Parent
or any of its Subsidiaries or the Surviving Corporation or any of its
Subsidiaries could become liable or obligated.
(e) Company Shares. Such Stockholder holds of record and
owns beneficially the number of Company Shares set forth next to his, her or its
name in Section 4.2 of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the Securities Act
and state securities laws), taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. With the
exception of the Shareholders Agreement, (i) such Stockholder is not a party to
any option, warrant, purchase right, or other contract or commitment that could
require such Stockholder to sell, transfer, or otherwise dispose of any capital
stock of the Company and (ii) such Stockholder is not a party to any voting
trust, proxy, or other agreement or understanding with respect to the voting of
any capital stock of the Company.
(f) Investment Representations. Such Stockholder:
(i) is either (A) an "accredited investor" within the
meaning of Rule 501 of the Securities Act, or (B) either alone or with
such Stockholder's purchaser representative (as such term is defined in
Rule 501 of the Securities Act) has such knowledge and experience in
financial and business matters that such Stockholder is capable of
evaluating the merits and risks of investing in Parent Class D Shares;
(ii) has received certain information concerning the
Parent and has had the opportunity to obtain additional information in
order to evaluate the merits and risks inherent in holding the Parent
Class D Shares; and
(iii) is acquiring the Parent Class D Shares acquired
pursuant hereto for such Stockholder's own account with the present
intention of holding such securities for purposes of investment, and
that he, she or it has no intention of selling such securities in a
public distribution in violation of the federal securities laws or any
applicable state securities laws. Each certificate for Parent Class D
Shares issued pursuant to this Agreement shall be imprinted with a
legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR
SOLD UNLESS THEY HAVE BEEN REGISTERED UNDER THE
-26-
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
(g) Reorganization. Such Stockholder has no plan or
intention to take any action that would cause the Merger not to qualify
and continue to qualify as a reorganization under ss. 368(a) of the
Code. Such Stockholder will pay its own expenses incurred in connection
with the Merger. The Parent Class D Shares issued to such Stockholder
as part of the Merger Consideration are being received solely in
consideration of such Stockholder's Company Shares.
3.2 Representations and Warranties of the Parent. The
Parent represents and warrants to the Stockholders that the statements contained
in this Section 3.2 are correct and complete as of the date of this Agreement.
(a) Organization of the Parent and the Merger
Subsidiary. Each of the Parent and the Merger Subsidiary is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. Each of the Parent
and the Merger Subsidiary has full power and authority (including full corporate
power and authority) to execute and deliver this Agreement and to perform its
obligations hereunder. All actions and approvals required by the respective
boards of directors and stockholders of each of the Parent and Merger Subsidiary
have been taken and obtained as of the date of this Agreement and no further
actions or approvals are necessary to consent to the Merger and the transactions
contemplated hereby. This Agreement constitutes the valid and legally binding
obligation of the Parent and the Merger Subsidiary, enforceable in accordance
with its terms and conditions. Except for the FCC Applications and filings
required pursuant to the Hart-Scott-Rodino Act, the Parent and the Merger
Subsidiary need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Parent or the
Merger Subsidiary is subject or any provision of its charter or bylaws or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Parent or the Merger Subsidiary is
a party or by which it is bound or to which any of its assets is subject, except
for such conflicts as will be waived and such notices that will be given prior
to the Closing Date.
(d) Brokers' Fees. Neither the Parent nor the Merger
Subsidiary has any liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to
-27-
the transactions contemplated by this Agreement for which any Stockholder could
become liable or obligated.
(e) Capitalization. The entire authorized capital
stock of the Parent consists of: (i) 30,000,000 shares of Class A Common Stock,
par value $.001 per share, of which 22,302,586 shares are issued and outstanding
as of the date of this Agreement; (ii) 150,000,000 shares of Class B Common
Stock, par value $.001 per share, of which 2,867,463 shares are issued and
outstanding as of the date of this Agreement; (iii) 150,000,000 shares of Class
C Common Stock, par value $.001 per share, of which 3,132,458 shares are issued
and outstanding as of the date of this Agreement; (iv) 150,000,000 shares of
Class D Common Stock, par value $.001 per share, of which 58,498,041 shares are
issued and outstanding as of the date of this Agreement; and (v) 1,000,000
shares of Convertible Preferred Stock, par value $.001 per share, of which
310,000 shares are issued and outstanding as of the date of this Agreement (all
such shares of capital stock are referred to herein as the "Parent Capital
Stock"). All of the issued and outstanding shares of Parent Capital Stock have
been duly authorized, and are validly issued, fully paid, and nonassessable.
Except as described above, as provided in the Parent's Amended and Restated
Certificate of Incorporation as amended through the date hereof, and as set
forth on the attached Schedule 3.2(e), as of the date of this Agreement, there
are no outstanding or authorized options (other than options issued or reserved
for issuance to employees of the Parent and its Subsidiaries pursuant to that
certain Stock Option Plan ratified by the Parent's stockholders on September 15,
2000), warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the Parent
to issue, sell, or otherwise cause to become outstanding any of its capital
stock. There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the Parent. Except for
the Stockholders Agreement dated as of March 2, 1999, among Alfred C. Liggins,
III and Catherine L. Hughes, there are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock of
the Parent.
(f) Continuity of Business Enterprise. It is the
present intention of the Parent to continue at least one significant historic
business line of the Company, or to use at least a significant portion of the
Company's historic assets in a business, in each case within the meaning of
Treasury Regulations (S)1.368-1(d). In addition, the Parent has no plan or
intention to transfer the stock of the Surviving Corporation following the
Merger to (i) a corporation that is not a member of the Parent's "qualified
group" within the meaning of Treasury Regulations (S)1.368-1(d)(4)(ii), or (ii)
a partnership (including any entity classified as such for federal income tax
purposes).
(g) Reorganization. The Parent has no plan or
intention to take any action that would cause the Merger not to qualify and
continue to qualify as a reorganization under (S)368(a) of the Code. The Parent
has no plan or intention to reacquire any of the stock of the Parent that will
be issued in connection with the Merger. There is no intercorporate indebtedness
existing between the Parent and the Company or between the Merger Subsidiary and
the Company that was issued, acquired or will be settled at a discount. Neither
the Parent nor the Merger Subsidiary is an investment company, as defined in
(S)368(a)(2)(F)(iii) and (iv) of the Code. Prior to and through the
Effective Time of the Merger, the Parent will be in control of the Merger
Subsidiary within the meaning of (S)368(c) of the Code. Following the Merger,
the Parent does not have a present plan or intention to cause the Surviving
Corporation to issue additional shares of stock that would result in
-28-
the Parent losing control of the Surviving Corporation within the meaning of
(S)368(c) of the Code. The Parent has no plan or intention to: (i) liquidate the
Surviving Corporation, (ii) merge the Surviving Corporation with and into
another corporation, (iii) sell or otherwise dispose of the stock of the
Surviving Corporation, or (iv) cause the Surviving Corporation to sell or
otherwise dispose of any of the assets of the Company acquired in the Merger,
except for (A) dispositions made in the ordinary course of business or (B)
transfers described in (S)368(a)(2)(C) of the Code. Following the Merger, the
Parent will cause the Surviving Corporation to continue the historic business of
the Company or to use a significant portion of the Company's business assets in
a business. The Parent and the Surviving Corporation will each pay its own
expenses incurred in connection with the Merger.
(h) Qualification. The Parent is legally, financially
and otherwise qualified to be the licensee of, acquire, own and operate the Blue
Chip Stations under the Communications Act and the rules and regulations of the
FCC. There are no facts that would, under existing law and the existing rules
and regulations of the FCC, disqualify the Parent as an assignee of the FCC
Licenses or as the owner and operator of the Blue Chip Stations. No waiver of
any FCC rule on behalf of the Parent is necessary for the FCC Consent to be
obtained. There is no action, suit or proceeding pending or, to the Knowledge of
the Parent, threatened against the Parent which questions the legality or
propriety of the transactions contemplated by this Agreement or could materially
adversely affect the Parent's ability to perform its obligations hereunder,
other than rule- making proceedings affecting the broadcasting industry in
general. The Parent will have available on the Closing Date sufficient
consideration to enable it to consummate the transactions contemplated hereby.
(i) Reports and Financial Statements. The Parent has
previously made available to the Company true and complete copies of:
(i) the Parent's Annual Reports on Form 10-K
filed with the SEC for each of the years ended December 31, 1998 and
1999;
(ii) the Parent's Quarterly Reports on Form 10-Q
filed with the SEC for the quarters ended March 31, 2000, June 30, 2000
and September 30, 2000;
(iii) each definitive proxy statement filed by
the Parent with the SEC since December 31, 1998;
(iv) each final prospectus filed by the Parent
with the SEC since December 31, 1998, except any final prospectus on
Form S-8; and
(v) all Current Reports on Form 8-K filed by
the Parent with the SEC since December 31, 1998.
As of their respective dates, such reports, proxy statements
and prospectuses filed on or prior to the date hereof (collectively, "Parent SEC
Reports") (A) complied as to form in all material respects with the applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations promulgated thereunder and (B) did not contain any untrue statement
of a
-29-
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided that the foregoing clause (B)
shall not apply to the financial statements included in the Parent SEC Reports
(which are covered by the following sentence). The audited consolidated
financial statements and unaudited consolidated interim financial statements
included in the Parent SEC Reports (including any related notes and schedules)
fairly present in all material respects the financial position of the Parent and
its consolidated Subsidiaries as of the dates thereof and the results of their
operations and their cash flows for the periods or as of the dates then ended
(subject, where appropriate, to normal year-end adjustments), in each case in
accordance with GAAP consistently applied during the periods involved (except as
otherwise disclosed in the notes thereto and except that the unaudited financial
statements therein do not contain all of the footnote disclosures required by
GAAP). Since January 1, 1999, the Parent has timely filed all material reports,
registration statements and other filings required to be filed by it with the
SEC under the rules and regulations of the SEC.
(j) No Undisclosed Liabilities. The Parent does not
have any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, of a type required by GAAP to be reflected on a
consolidated balance sheet except (a) liabilities or obligations reflected in
any of the Parent SEC Reports and (b) liabilities or obligations which would not
in the aggregate have a Material Adverse Effect on the Parent.
(k) No Violation of Law. The business of the Parent
is not being conducted in violation of any law, ordinance or regulation of any
governmental body or authority except (a) as described in any of the Parent SEC
Reports and (b) for violations or possible violations which would not in the
aggregate have a Material Adverse Effect on the Parent.
(l) Absence of Certain Changes or Events. Other than
as disclosed in the Parent SEC Reports, since September 30, 2000, the business
of the Parent has been conducted in all material respects in the ordinary course
and there has not been any event, occurrence, development or set of
circumstances or facts that has had a Material Adverse Effect on the Parent.
(m) Investigations; Litigation. Except as described
in any of the Parent SEC Reports or previously disclosed in writing to the
Company:
(i) no investigation or review by any
governmental body or authority with respect to the Parent which would
in the aggregate have a Material Adverse Effect on the Parent is
pending nor has any governmental body or authority notified the Parent
of an intention to conduct the same; and
(ii) there are no actions, suits or proceedings
pending or, to the Knowledge of the Parent, threatened against or
affecting Parent, or any of its respective properties, or before any
federal, state, local or foreign governmental body or authority which
in the aggregate is reasonably likely to have a Material Adverse Effect
on the Parent.
4. Representations and Warranties Concerning the Company and Its
Subsidiaries. The Company represents and warrants to the Parent that the
statements contained in this Section 4 are
-30-
correct and complete as of the date of this Agreement, except as set forth in
the disclosure schedule delivered by the Company to the Parent on the date
hereof (the "Disclosure Schedule"). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4.
4.1. Organization, Qualification, and Corporate Power. Each of
the Company and its Subsidiaries is a corporation or a limited liability company
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or formation, as the case may be. Each of the
Company and its Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a Material
Adverse Effect. Each of the Company and its Subsidiaries has full corporate or
limited liability company power and authority to carry on the businesses in
which it is engaged and to own and use the properties owned and used by it.
Section 4.1 of the Disclosure Schedule lists the directors and officers of each
of the Company and its Subsidiaries.
4.2. Capitalization. The entire authorized capital stock of
the Company consists of: (a) 1,031,429.29 shares of Series A Common Stock, of
which 1,015,063.29 shares are issued and outstanding; (b) 776,962.03 shares of
Series B Common Stock, all of which are issued and outstanding; (c) 199,113.9244
shares of Series C Common Stock, none of which are issued or outstanding; and
(d) 398,794 shares of Series D Common Stock, all of which are issued and
outstanding. All of the issued and outstanding Company Shares have been duly
authorized, are validly issued, fully paid, and nonassessable. Except for the
Kandu Investments, LLC option exercisable for 16,366 shares of Series A Common
Stock and options granted to certain employees exercisable for 41,900 shares of
Series C Common Stock, there are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Company other than the Shareholders
Agreement. There are no agreements pursuant to which the Company is, or shall
become, required to register shares of its capital stock other than the Company
Registration Rights Agreement. Section 4.2 of the Disclosure Schedule sets forth
(i) the name of each beneficial owner of Series A Common Stock, Series B Common
Stock and Series D Common Stock and the number of shares beneficially owned by
each such Stockholder and (ii) the name of each Person that holds an option to
acquire Series C Common Stock and the number of shares of such Series C Common
Stock for which such option is exercisable.
4.3. Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company and its Subsidiaries is
subject or any provision of the charter or bylaws of the Company and its
Subsidiaries or (b) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract,
-31-
lease, license, instrument, or other arrangement to which the Company and its
Subsidiaries is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets), except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice, or Security
Interest would not have a Material Adverse Effect on the Company nor have a
material adverse effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement. Neither the Company or its
Subsidiaries needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement, except for the FCC Consent and the filing of a pre-merger
notification under the Hart-Scott Rodino Act or except where the failure to give
notice, to file, or to obtain any authorization, consent, or approval would not
have a Material Adverse Effect on the Company.
4.4. Brokers' Fees. Neither the Company or its Subsidiaries
has any liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
4.5. Subsidiaries. Section 4.5 of the Disclosure Schedule sets
forth for each Subsidiary of the Company (a) its name and jurisdiction of
incorporation or organization, (b) the number of shares of authorized capital
stock of each class of its capital stock or the number of authorized units of
each class of its units, (c) the number of issued and outstanding shares of each
class of its capital stock or units of each class of its units, the names of the
holders thereof, and the number of shares or units held by each such holder, and
(d) the number of shares of its capital stock held in treasury. All of the
issued and outstanding shares of capital stock of each Subsidiary of the Company
have been duly authorized and are validly issued, fully paid, and nonassessable.
The Company or its Subsidiaries holds of record and owns beneficially all of the
outstanding shares or units of each Subsidiary of the Company, free and clear of
any restrictions on transfer (other than restrictions under the Securities Act
and state securities laws), taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Company and its Subsidiaries to sell,
transfer, or otherwise dispose of any capital stock or units of any of its
Subsidiaries or that could require any Subsidiary of the Company to issue, sell,
or otherwise cause to become outstanding any of its own capital stock or units.
There are no outstanding stock or unit appreciation, phantom stock or unit,
profit participation, or similar rights with respect to any Subsidiary of the
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock or units of any
Subsidiary of the Company. Neither the Company or its Subsidiaries controls
directly or indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not a
Subsidiary of the Company.
4.6. Financial Statements. Attached hereto as Exhibit D are
the following financial statements (collectively the "Financial Statements"):
(a) audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1997, December 31, 1998 and December 31, 1999 for the Company and
its Subsidiaries; and (b) unaudited consolidated balance sheets and statements
of income,
-32-
changes in stockholders' equity, and cash flow (the "Most Recent Financial
Statements") as of and for the eleven (11) months ended November 30, 2000 (the
"Most Recent Fiscal Month End"), for the Company and its Subsidiaries. The
Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and present fairly the financial condition of the Company and
its Subsidiaries as of such dates and the results of operations of the Company
and its Subsidiaries for such periods; provided, however, that the Most Recent
Financial Statements are subject to normal year-end adjustments (which will not
be material individually or in the aggregate) and lack footnotes and other
presentation items.
4.7. Events Subsequent to Most Recent Fiscal Month End. Since
the Most Recent Fiscal Month End, the Company has not incurred a Material
Adverse Effect. Without limiting the generality of the foregoing, since that
date:
(a) neither the Company or its Subsidiaries has sold,
leased, transferred, or assigned any material assets, tangible or
intangible, outside the Ordinary Course of Business other than:
(i) the Company's pending disposition of WFIA(AM) in
Louisville, Kentucky to Salem Communications Corporation or a
subsidiary thereof; and
(ii) the Company's pending disposition of WDBZ(AM) in
Cincinnati, Ohio to the Series A Stockholders pursuant to
Section 5.21(c) hereof;
(b) neither the Company or its Subsidiaries has entered
into any material agreement, contract, lease, or license outside the
Ordinary Course of Business;
(c) no party (including the Company and its Subsidiaries)
has accelerated, terminated, made material modifications to, or
canceled any material agreement, contract, lease, or license to which
the Company and its Subsidiaries is a party or by which any of them is
bound;
(d) neither the Company or its Subsidiaries has imposed
any material Security Interest upon any of its assets, tangible or
intangible;
(e) neither the Company or its Subsidiaries has made any
material capital expenditures outside the Ordinary Course of Business;
(f) neither the Company or its Subsidiaries has made any
material capital investment in, or any material loan to, any other
Person outside the Ordinary Course of Business;
(g) the Company and its Subsidiaries have not created,
incurred, assumed, or guaranteed more than $15,000 in aggregate
indebtedness for borrowed money and capitalized lease obligations;
-33-
(h) neither the Company or its Subsidiaries has granted
any license or sublicense of any material rights under or with respect
to any Intellectual Property;
(i) the Company has not delayed or postponed the payment
of accounts payable and other liabilities outside the Ordinary Course
of Business;
(j) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $5,000 or outside the Ordinary Course of
Business;
(k) there has not been any discharge or satisfaction of
any obligation or liability owed by the Company which is outside the
Ordinary Course of Business or which is inconsistent with past business
practices;
(l) there has been no change made or authorized in the
charter or bylaws of the Company and its Subsidiaries;
(m) neither the Company or its Subsidiaries has issued,
sold, or otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including
upon conversion, exchange, or exercise) any of its capital stock;
(n) neither the Company or its Subsidiaries has declared,
set aside, or paid any dividend or made any distribution with respect
to its capital stock (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of its capital stock;
(o) neither the Company or its Subsidiaries has
experienced any material damage, destruction, or loss (whether or not
covered by insurance) to its property;
(p) neither the Company or its Subsidiaries has made any
loan to, or entered into any other transaction with, any of its
directors, officers, and employees outside the Ordinary Course of
Business;
(q) neither the Company or its Subsidiaries has entered
into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement;
(r) neither the Company or its Subsidiaries has granted
any increase in the base compensation of any of its directors,
officers, and employees outside the Ordinary Course of Business;
(s) neither the Company or its Subsidiaries has adopted,
amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of
any of its directors, officers, and employees (or taken any such action
with respect to any other Employee Benefit Plan);
-34-
(t) neither the Company or its Subsidiaries has made any
other material change in employment terms for any of its directors,
officers, and employees outside Ordinary Course of Business;
(u) the Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business; and
(v) there has not been any other material transaction
involving the Company, any action taken by the Company or any failure
to act by the Company, nor has there been any occurrence, event or
incident involving the Company that would have a Material Adverse
Effect on the Company; and
(w) neither the Company or its Subsidiaries has committed
to any of the foregoing.
4.8. Undisclosed Liabilities. Neither the Company or its
Subsidiaries has any material liability of a type required to be disclosed as a
liability on its balance sheet according to generally accepted accounting
principles (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including, without limitation,
any liability for taxes, unused vacation and sick time earned to date, bonuses
and personal benefits earned to date, severance liabilities, sales commissions,
commission expense due to representation firms, music licensing fees and other
such liabilities), except for (a) liabilities set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and (b) liabilities
which have arisen after the Most Recent Fiscal Month End in the Ordinary Course
of Business.
4.9. Legal Compliance. Each of the Company and its
Subsidiaries has complied in all respects with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply, except
where the failure to comply would not have a Material Adverse Effect on the
Company.
4.10. Tax Matters.
(a) Each of the Company and its Subsidiaries has filed
all Tax Returns that it was required to file. All such Tax Returns were correct
and complete in all material respects. All Taxes owed by the Company and its
Subsidiaries (whether or not shown on any Tax Return) have been paid. Neither
the Company or its Subsidiaries currently is the beneficiary of any extension of
time within which to file any Tax Return.
(b) There is no material dispute or claim concerning any
Tax liability of the Company and its Subsidiaries as to the Company's Knowledge
based upon personal contact with any agent of any authority.
-35-
(c) Section 4.10 of the Disclosure Schedule lists all
federal, state, local, and foreign Income Tax Returns filed with respect to the
Company and its Subsidiaries for taxable periods ended on or after December 31,
1994, indicates those Income Tax Returns that have been audited, and indicates
those Income Tax Returns that currently are the subject of audit. The Company
has delivered to the Parent correct and complete copies of all federal Income
Tax Returns, examination reports, and statements of deficiencies assessed
against, or agreed to by the Company and its Subsidiaries since December 31,
1994. Neither the Company or its Subsidiaries has waived any statute of
limitations in respect of Income Taxes or agreed to any extension of time with
respect to an Income Tax assessment or deficiency.
(d) None of the Company or its Subsidiaries has filed a
consent under Code (S)341(f) concerning collapsible corporations. None of the
Company or its Subsidiaries has made any material payments, is obligated to make
any material payments, or is a party to any agreement that under certain
circumstances could obligate it to make any material payments that will not be
deductible under Code (S)280G. None of the Company and its Subsidiaries (i) has
been a member of an Affiliated Group filing a consolidated federal Income Tax
Return (other than a group the common parent of which was the Company) or (ii)
has any liability for the taxes of any Person (other than the Company and its
Subsidiaries) under Reg.(S)1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise.
(e) The unpaid Taxes of the Company and its Subsidiaries
(i) did not, as of the Most Recent Fiscal Month End, exceed by any material
amount the reserve for Tax liability (rather than any reserve for deferred taxes
established to reflect timing differences between book and tax income) set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (ii) will not exceed by any material amount that reserve as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and practice of the Company and its Subsidiaries in filing their Tax
Returns.
4.11. Real Property.
(a) Section 4.11(a) of the Disclosure Schedule lists and
describes briefly all real property that any of the Company and its Subsidiaries
owns. With respect to each such parcel of owned real property:
(i) the identified owner has good and marketable,
indefeasible fee simple title to such parcel of real property, free and
clear of any Security Interest, easement, covenant, or other
restriction, except for installments of special assessments which are
not yet due and payable as of the Closing Date, recorded easements,
covenants, conditions and other restrictions of record affecting title
to such parcel of owned real property which do not or would not
materially impair the use or occupancy of such parcel of owned real
property in the operation of the business conducted thereon, and
building codes and zoning restrictions regulating the use or occupancy
of such owned real property which are imposed by any government
authority having jurisdiction over such owned real property which are
not violated by the current use or occupancy of such owned real
property;
-36-
(ii) there are no pending or, to the Company's
Knowledge, threatened condemnation proceedings, lawsuits, or
administrative actions relating to the property or other matters
affecting materially and adversely the current use, occupancy, or value
thereof;
(iii) the legal description for the parcel contained
in the deed thereof describes such parcel fully and adequately, the
buildings and improvements are located within the boundary lines of the
described parcels of land, are not in material violation of applicable
setback requirements, zoning laws, and ordinances (and none of the
properties or buildings or improvements thereon are subject to
"permitted non-conforming use" or "permitted non-conforming structure"
classifications), and do not encroach on any easement which may burden
the land;
(iv) all facilities have received all approvals of
governmental authorities (including material licenses and permits)
required in connection with the construction, ownership or operation
thereof, and have been operated and maintained in accordance with
applicable laws, rules, and regulations in all material respects;
(v) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any portion of the
parcel of real property;
(vi) there are no outstanding options or rights of
first refusal to purchase the parcel of real property, or any portion
thereof or interest therein;
(vii) there are no parties (other than the Company
and its Subsidiaries) in possession of the parcel of real property,
other than tenants under any leases disclosed in Section 4.11(a) of the
Disclosure Schedule who are in possession of space to which they are
entitled.
(b) Section 4.11(b) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to the Company and its
Subsidiaries. The Company has delivered to the Parent correct and complete
copies of the leases and subleases listed in Section 4.11(b) of the Disclosure
Schedule (as amended to date). With respect to each material lease and sublease
listed in Section 4.11(b) of the Disclosure Schedule:
(i) the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect in all respects;
(ii) to the Company's Knowledge, no party to the
lease or sublease is in breach or default, and no event has occurred
which, with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
(iii) to the Company's Knowledge, no party to the
lease or sublease has repudiated any provision thereof;
-37-
(iv) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(v) neither the Company or its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold or interest
therein except for any subleases to which the Company or its
Subsidiaries is a party, each of which is listed and described in
Section 4.11(b) of the Disclosure Schedule;
(vi) to the Company's Knowledge, all facilities
leased or subleased thereunder have received all approvals of
governmental authorities (including material licenses and permits)
required in connection with the operation thereof, and have been
operated and maintained in accordance with applicable laws, rules, and
regulations in all respects; and
(vii) there are no liens or encumbrances on the
estate or interest by any lease.
4.12. Intellectual Property.
(a) To the Company's Knowledge, neither the Company or
its Subsidiaries have received any notice that the Company or its Subsidiaries
have interfered with, infringed upon, misappropriated, or violated any material
Intellectual Property rights of third parties in any material respect, and to
the Company's Knowledge, neither the Company nor its Subsidiaries have received
any charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Company and its Subsidiaries must license or refrain from using any Intellectual
Property rights of any third party). To the Company's Knowledge, no third party
has interfered with, infringed upon, misappropriated, or violated any material
Intellectual Property rights of the Company and its Subsidiaries in any material
respect.
(b) Section 4.12(b) of the Disclosure Schedule
identifies each patent or registration which has been issued to the Company and
its Subsidiaries with respect to any of its Intellectual Property, identifies
each pending patent application or application for registration which the
Company and its Subsidiaries has made with respect to any of its Intellectual
Property, and identifies each material license, agreement, or other permission
which the Company and its Subsidiaries has granted to any third party with
respect to any of its Intellectual Property (together with any exceptions). The
Company has delivered to the Parent correct and complete copies of all such
patents, registrations, applications, licenses, agreements, and permissions (as
amended to date). Section 4.12(b) of the Disclosure Schedule also identifies
each material trade name or unregistered trademark used by the Company and its
Subsidiaries in connection with any of its businesses. With respect to each item
of Intellectual Property required to be identified in Section 4.12(b) of the
Disclosure Schedule:
(i) the Company and its Subsidiaries possess all
right, title, and interest in and to the item, free and clear of any
Security Interest, license, or other restriction;
-38-
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to
the Company's Knowledge, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(iv) neither the Company and its Subsidiaries has
ever agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to the
item.
(c) Section 4.12(c) of the Disclosure Schedule identifies each
material item of Intellectual Property that any third party owns and that any of
the Company and its Subsidiaries uses pursuant to license, sublicense,
agreement, or permission. The Company has delivered to the Parent correct and
complete copies of all such licenses, sublicenses, agreements and permissions
(as amended to date). With respect to each item of Intellectual Property
required to be identified in Section 4.12(c) of the Disclosure Schedule:
(i) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable, and
in full force and effect in all material respects;
(ii) no party to the license, sublicense,
agreement, or permission is in material breach or default, and no event
has occurred which with notice or lapse of time would constitute a
material breach or default or permit termination, modification, or
acceleration thereunder;
(iii) no party to the license, sublicense,
agreement, or permission has repudiated any material provision thereof;
and
(iv) neither the Company or its Subsidiaries has
granted any sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
4.13. Title to and Condition of Tangible Personal Property.
Section 4.13 of the Disclosure Schedule lists all material items of the
Company's tangible personal property. The tangible personal property listed in
Section 4.13 of the Disclosure Schedule comprises all material items of tangible
personal property necessary to conduct the business and operations of the Blue
Chip Stations as now conducted. Except as described in Section 4.13 of the
Disclosure Schedule, the Company owns and has good title to each item of
tangible personal property, and none of the tangible personal property owned by
the Company is subject to any security interest, mortgage, conditional sales
agreement, or other lien or encumbrance, except for liens for current taxes not
yet due and payable. Each item of tangible personal property is available for
immediate use in the business and operations of the Blue Chip Stations. All
items of transmitting and studio equipment included in the tangible personal
property (a) have been maintained in a manner consistent with generally accepted
standards of good engineering practice, (b) are in good condition and repair
consistent with their use, ordinary wear and tear excepted, and (c) will permit
the Blue Chip Stations and any associated auxiliary broadcast stations to
operate in accordance with the terms of the FCC
-39-
Authorizations and the rules and regulations of the FCC, and in material
compliance with all other applicable federal, state, and local statutes,
ordinances, rules, and regulations.
4.14. Contracts. Section 4.14 of the Disclosure Schedule lists
the following contracts and other agreements to which the Company and its
Subsidiaries is a party:
(a) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for
lease payments in excess of $15,000 per annum, provided that the
aggregate amount of annual lease payments for all agreements omitted
from Section 4.14 of the Disclosure Schedule due to the annual lease
payment threshold of this provision shall not exceed $100,000;
(b) any agreement (or group of related agreements) other
than Times Sales Agreements, for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which will extend
over a period of more than one year or involve consideration in excess
of $15,000, provided that the aggregate amount of consideration for all
agreements omitted from Section 4.14 of the Disclosure Schedule due to
the consideration threshold of this provision shall not exceed
$100,000;
(c) any agreement for the sale of air time on the Blue
Chip Stations other than Time Sales Agreements;
(d) any agreement concerning a partnership or joint
venture;
(e) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$15,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible, provided that the aggregate amount of
indebtedness or capitalized lease obligations for all agreements
omitted from Section 4.14 of the Disclosure Schedule due to the
indebtedness and capitalized lease obligation threshold of this
provision shall not exceed $100,000;
(f) other than contained in agreements with employees,
any material agreement concerning confidentiality or non-competition;
(g) any agreement with any of the Stockholders and their
Affiliates (other than the Company and its Subsidiaries);
(h) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other material
plan or arrangement for the benefit of its current or former directors,
officers, and employees;
(i) any collective bargaining agreement;
-40-
(j) any agreement for the employment of any individual
on a full-time, part-time, consulting, or other basis providing annual
compensation in excess of $25,000 or providing severance benefits in
excess of $10,000, provided that the aggregate amount of annual
compensation and severance benefits for all agreements omitted from
Section 4.14 of the Disclosure Schedule due to the compensation and
severance benefits thresholds of this provision shall not exceed
$100,000;
(k) any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees;
(l) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect on the
Company; and
(m) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $10,000,
provided that the aggregate amount of consideration for all agreements
omitted from Section 4.14 of the Disclosure Schedule due to the
consideration threshold of this provision of this provision shall not
exceed $100,000.
The Company has delivered to the Parent a correct and complete copy of
each written agreement listed in Section 4.14 of the Disclosure Schedule (as
amended to date) and a written summary setting forth the material terms and
conditions of each oral agreement referred to in Section 4.14 of the Disclosure
Schedule. With respect to each such agreement: (i) the agreement is legal,
valid, binding, enforceable, and in full force and effect in all material
respects; and (ii) the Company is not and, to the Company's Knowledge, no other
party is in material breach or default, and no event has occurred which with
notice or lapse of time would constitute a material breach or default, or permit
termination, modification, or acceleration, under the agreement which would have
a Material Adverse Effect on the Company.
4.15. FCC Authorizations.
(a) Section 4.15(a) of the Disclosure Schedule sets
forth the FCC Authorizations held by the Station Subs (including the licensee
name, call sign, FCC file number, community of license, type of license, and
expiration date). Such FCC Authorizations include all of the licenses and
authorizations required under the Communications Act, or the rules, regulations
and policies of the FCC for the operation of the Blue Chip Stations as currently
conducted. The FCC Authorizations are in full force and effect and have not been
revoked, suspended, canceled, rescinded or terminated and have not expired.
There is not pending or, to the Company's Knowledge, threatened, any action by
or before the FCC to revoke, suspend, cancel, rescind or modify any of the FCC
Authorizations (other than proceedings to amend FCC rules of general
applicability), and there is not now issued or outstanding, or pending or, to
the Company's Knowledge, threatened, by or before the FCC, any order to show
cause, notice of violation, notice of apparent liability or notice of
forfeiture. To the Company's Knowledge, there is not now before the FCC any
pending or threatened complaint, or other adverse or potentially adverse action
against the Blue Chip Companies or the Blue Chip Stations.
-41-
(b) All material reports and filings required to be
filed with, and all regulatory fees required to be paid to, the FCC by the Blue
Chip Companies with respect to the Blue Chip Stations have been timely filed and
paid, and all such reports and filings are accurate and complete in all material
respects. The Blue Chip Companies maintain public files for the Blue Chip
Stations which are in material compliance with FCC rules. With respect to FCC
licenses, permits and authorizations, the Blue Chip Companies are operating only
those facilities for which an appropriate FCC Authorization has been obtained
and is in effect, and the Blue Chip Companies are meeting all of the material
conditions of each such FCC Authorization. The Blue Chip Stations are operating
in compliance in all material respects with the FCC Authorizations, the
Communications Act, and the rules, regulations and policies of the FCC.
(c) The Company is not aware of any facts indicating
that the Stockholders, the Blue Chip Companies or the Blue Chip Stations are not
in compliance with all rules, regulations, policies, and other requirements of
the FCC, the Communications Act, or any other applicable federal, state and
local statutes, regulations and ordinances. The Company is not aware of any
facts and the Company has received no notice or communication, formal or
informal, indicating that the FCC is considering revoking, suspending,
canceling, rescinding or terminating any FCC Authorization.
(d) The operation of the Blue Chip Stations does not
cause or result in exposure of workers or the general public to levels of radio
frequency radiation in excess of the "Radio Frequency Protection Guides"
recommended in "American National Standard Safety Levels with Respect to Human
Exposure to Radio Frequency Electromagnetic Fields 3 kHz to 300 GHz" (ANSI/IEEE
C95.1-1992) issued by the American National Standards Institute, adopted by the
FCC effective October 15, 1997, and described in OET Bulletin No. 65. Renewal of
the FCC Authorizations would not constitute a "major action" within the meaning
of (S)1.1301, et seq., of the FCC's rules.
(e) Each communications tower structure used in the
operation of the Blue Chip Stations has (to the Company's Knowledge with respect
to leased communications tower structures) been registered under the rules and
regulations of the FCC, and the Federal Aviation Administration has issued a
determination of no hazard to air navigation with respect to each such tower for
which such a determination is required.
4.16. Notes and Accounts Receivable. All notes and accounts
receivable of the Company and its Subsidiaries are reflected properly on their
books and records, are valid receivables subject to no setoffs or counterclaims,
are current and collectible, and will be collected in accordance with their
terms at their recorded amounts, subject only to the reserve for bad debts set
forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Company and its
Subsidiaries.
4.17 Powers of Attorney. To the Company's Knowledge, there
are no material outstanding powers of attorney executed on behalf of the Company
and its Subsidiaries.
-42-
4.18. Insurance. Section 4.18 of the Disclosure Schedule lists
each material insurance policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and surety arrangements)
with respect to which any of the Company and its Subsidiaries is a party.
Section 4.18 of the Disclosure Schedule describes any material self-insurance
arrangements affecting the Company and its Subsidiaries. With respect to each
such insurance policy: (i) the policy is legal, valid, binding, enforceable, and
in full force and effect in all material respects; (ii) neither the Company and
its Subsidiaries nor, to the Company's Knowledge, any other party to the policy
is in material breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a material breach or default, or
permit termination, modification, or acceleration, under the policy; and (iii)
no party to the policy has repudiated any material provision thereof.
4.19. Litigation. Section 4.19 of the Disclosure Schedule sets
forth each instance in which any of the Company and its Subsidiaries (a) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (b) is a party or, to the Company's Knowledge, is threatened to be
made a party to any action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.
4.20. Employees. To the Company's Knowledge, no executive, key
employee, or significant group of employees plans to terminate employment with
the Company and its Subsidiaries during the next 12 months. Neither the Company
or its Subsidiaries is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strike or material grievance,
claim of unfair labor practices, or other collective bargaining dispute within
the past three years. Neither the Company or its Subsidiaries has committed any
material unfair labor practice. To the Company's Knowledge, there is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company and its Subsidiaries. The
Company has delivered to the Parent a true and correct copy of all written
policies of any of the Blue Chip Companies provided to employees of any of the
Blue Chip Companies.
4.21. Employee Benefits.
(a) Section 4.21 of the Disclosure Schedule lists each
Employee Benefit Plan that any of the Company and its Subsidiaries maintains or
to which any of the Company and its Subsidiaries contributes or has any
obligation to contribute.
(b) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) has been maintained, funded and administered
in accordance with the terms of such Employee Benefit Plan and complies in form
and in operation in all material respects with the applicable requirements of
ERISA, the Code, and other applicable laws.
(c) Except as set forth in Section 4.21(c) of the
Disclosure Schedule, all required reports and descriptions (including annual
reports (IRS Form 5500), summary annual reports, and summary plan descriptions)
have been timely filed and/or distributed in accordance with the applicable
requirements of ERISA and the Code with respect to each such Employee Benefit
-43-
Plan. The requirements of COBRA have been met in all material respects with
respect to each such Employee Benefit Plan which is an Employee Welfare Benefit
Plan subject to COBRA.
(d) Except as set forth in Section 4.21(d) of the
Disclosure Schedule, all contributions (including all employer contributions and
employee salary reduction contributions) which are due have been made within the
time period prescribed by ERISA to each such Employee Benefit Plan which is an
Employee Pension Benefit Plan and all contributions for any period ending on or
before the Closing Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with the past custom and
practice of the Company and its Subsidiaries. All premiums or other payments for
all periods ending on or before the Closing Date have been made with respect to
each such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(e) The Blue Chip Broadcasting, Inc. 401(k) & Profit
Sharing Plan (the "Company's 401(k) Plan") is the only employee benefit plan
maintained by the Company that is intended to meet the requirements of a
"qualified plan" under Code (S)401(a). The Company's 401(k) Plan was originally
established effective May 1, 1997 by adoption of a standardized prototype
document, and the Company was entitled to rely on the favorable opinion letter
issued by the IRS to the prototype plan sponsor. The Company's 401(k) Plan was
amended and restated effective May 1, 1997 by adoption on June 26, 2000 of a
volume submitter document. The Company intends to file the Company's 401(k) Plan
as amended and restated for a determination letter prior to the end of the
remedial amendment period for compliance with the Uruguay Round Agreements Act
of 1994, the Uniformed Services Employment and Reemployment Rights Act of 1994,
the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997
and the Internal Revenue Service Restructuring and Reform Act of 1998. The
Company does not maintain any Employee Benefit Plans for the benefit of retired
employees, other than the Company's 401(k) Plan and COBRA group health
continuation coverage.
After receipt of a favorable determination letter on
plan termination, distributions will be made to participants in the Company's
401(k) Plan, and such participants who continue in the employment with the
Parent, the Surviving Corporation or any successor thereto shall be permitted to
make a direct rollover of such distributions to a qualified retirement plan
sponsored by the Parent, the Surviving Corporation or any successor thereto,
including the direct rollover of any outstanding plan loan obligations. Prior to
assumption of such loans, the Parent shall take such actions as are necessary
with respect to its payroll to assure that the loans of such participants may
continue to be repaid and do not go into default.
(f) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all vested and
nonvested liabilities thereunder (determined in accordance with then current
funding assumptions).
(g) The Company has delivered to the Parent correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the most
recent annual report (IRS Form 5500, with all
-44-
applicable attachments), and all related trust agreements, insurance contracts,
and other funding arrangements which implement each such Employee Benefit Plan.
(h) With respect to each Employee Benefit Plan that any
of the Company, its Subsidiaries, and any ERISA Affiliate maintains or to which
any of them contributes, or has any obligation to contribute, or with respect to
which any of them has any liability or potential liability:
(i) no such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer Plan) has
been completely or partially terminated or been the subject of a
Reportable Event as to which notices would be required to be filed with
the PBGC. No proceeding by the PBGC to terminate any such Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been
instituted or, to the Company's Knowledge, threatened;
(ii) except as set forth in Section 4.21(h) of the
Disclosure Schedule, to the Company's Knowledge, there have been no
Prohibited Transactions with respect to any such Employee Benefit Plan.
No Fiduciary has any liability for material breach of fiduciary duty or
any other material failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any
such Employee Benefit Plan (other than routine claims for benefits) is
pending or, to the Company's Knowledge, threatened; and
(iii) neither the Company nor any of its
Subsidiaries has incurred any material liability (whether known or
unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) to the PBGC (other than
with respect to PBGC premium payments not yet due) or otherwise under
Title IV of ERISA (including any withdrawal liability as defined in
ERISA (S)4201) or under the Code with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan, or under COBRA
with respect to any such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(i) Neither the Company, its Subsidiaries, or any ERISA
Affiliate contributes to or has any obligation to contribute to, or has any
material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due), including any withdrawal
liability (as defined in ERISA (S)4201), under or with respect to any
Multiemployer Plan.
(j) Neither the Company or its Subsidiaries maintains,
contributes to or has an obligation to contribute to, or has any material
liability or potential liability with respect to, any Employee Welfare Benefit
Plan providing medical, health, or life insurance or other welfare-type benefits
for current or future retired or terminated employees, their spouses, or their
dependents (other than in accordance with COBRA).
(k) The Company has complied in all material respects
with all applicable federal and state employment laws, including, but not
limited to, the Family and Medical Leave Act
-45-
of 1993, the Americans with Disabilities Act of 1990, the Age Discrimination in
Employment Act of 1967, the Older Workers Benefit Protection Act of 1990, the
National Labor Relations Act, the Pregnancy Discrimination Act of 1978, all
applicable civil rights acts, the Uniformed Services Employment and Reemployment
Rights Act of 1994, the Worker Adjustment and Retraining Notification Act and
all rules and regulations established by the Occupational Health and Safety
Administration and the Equal Employment Opportunity Commission.
4.22. Guaranties. Neither the Company or its Subsidiaries is a
guarantor or otherwise is responsible for any liability or obligation (including
indebtedness) of any other Person.
4.23. Environment, Health, and Safety Matters.
(a) Except as disclosed on Schedule 4.23, each of the
Company, its Subsidiaries, and their respective predecessors and Affiliates has
complied and is in compliance, in each case in all material respects, with all
Environmental, Health, and Safety Requirements.
(b) Except as disclosed on Schedule 4.23, without
limiting the generality of the foregoing, each of the Company, its Subsidiaries,
and their respective Affiliates, has obtained, has complied, and is in
compliance with, in each case in all material respects, all material permits,
licenses and other authorizations that are required pursuant to Environmental,
Health, and Safety Requirements for the occupation of its facilities and the
operation of its business; a list of all such material permits, licenses and
other authorizations is set forth on the attached Schedule 4.23(b).
(c) Except as disclosed on Schedule 4.23, neither the
Company, its Subsidiaries, or their respective Affiliates has received any
written or oral notice, report or other information regarding any actual or
alleged material violation of Environmental, Health, and Safety Requirements, or
any material liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any material
investigatory, remedial or corrective obligations, relating to any of them or
its facilities arising under Environmental, Health, and Safety Requirements.
(d) Except as set forth on the attached Schedule
4.23(d), none of the following exists at any property or facility owned or
operated by the Company or its Subsidiaries in violation of Environmental,
Health and Safety Requirements so as to create a Material Adverse Effect: (i)
underground storage tanks; (ii) asbestos-containing material in any friable and
damaged form or condition; (iii) materials or equipment containing
polychlorinated biphenyls; or (iv) landfills, surface impoundments, or disposal
areas.
(e) Neither the Company, its Subsidiaries, nor, to the
Company's Knowledge, any of their respective predecessors or Affiliates has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation
any hazardous substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a manner
that has given or would give rise to liability under any Environmental, Health,
and Safety Requirements except any such liability that would not have a Material
Adverse Effect.
-46-
(f) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any material
obligations for site investigation or cleanup, or notification to or consent of
government agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.
(g) All representations and warranties applicable to
Environmental, Health and Safety Requirements, hazardous substances, materials
or waste, pollutants, contaminants or other environmental matters are contained
solely in this Section 4.23.
4.24. Disclosure. The representations and warranties contained
in this Section 4 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
4.25. Continuity of Business Enterprise. The Company operates
at least one significant historic business line, or owns at least a significant
portion of its historic business assets, in each case within the meaning of
Treasury Regulations (S)1.368-1(d).
4.26. Continuity of Stockholder Interest. Prior to the Merger,
the Stockholders neither had portions of their Company Shares redeemed by the
Company, nor received extraordinary distributions with respect to their Company
Shares, and no corporation related to the Company within the meaning of Treasury
Regulations ss.1.368-1(e)(3)(i)(B) acquired any Company stock, where such
dispositions or acquisitions would reduce the aggregate fair market value of the
Parent Class D Shares to be received by the Stockholders as a group (with such
fair market value measured as of the Effective Time) to an amount less than
fifty percent (50%) of the aggregate fair market value of the Company's stock
determined immediately before any of such distributions, dispositions, or
acquisitions.
4.27. Reorganization.
(a) The Company has no plan or intention to take any
action that would cause the Merger not to qualify and continue to qualify as a
reorganization under (S)368(a) of the Code. The Company liabilities assumed by
the Surviving Corporation and liabilities to which the Company assets are
subject were incurred by the Company in the Ordinary Course of Business; and the
Company is not an "investment company" as defined in (S) 368(a)(2)(F)(iii) and
(iv) of the Code. The Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of (S)368(a)(3)(A) of the Code. The
fair market value of the assets of the Company transferred to the Merger
Subsidiary will equal or exceed the sum of the liabilities assumed by the Merger
Subsidiary, plus the amount of the liabilities, if any, to which the transferred
assets are subject.
(b) The Merger Subsidiary will acquire at least ninety
percent (90%) of the fair market value of the net assets, and at least seventy
percent (70%) of the fair market value of the gross assets, held by the Company
immediately prior to the Merger. For purposes of this representation, the
Company assets used to pay the Company's expenses of the Merger, and all
redemptions and distributions made by the Company in contemplation of the
Merger, will be included as assets of the Company held immediately prior to the
Merger.
-47-
4.28. Insolvency Proceedings. No insolvency proceedings of any
character, including bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting the Company, are
pending or, to the Company's Knowledge, threatened. The Company has not made an
assignment for the benefit of creditors.
4.29. Certain Interests and Related Parties. Except as set
forth in Section 4.29 of the Disclosure Schedule, (a) no Stockholder has any
material interest in any assets used in or pertaining to the Company, nor are
any Stockholders indebted or otherwise obligated to the Company; (b) the Company
is not indebted or otherwise obligated to any Stockholder except for amounts due
under normal arrangements as to salary or reimbursement of ordinary business
expenses not unusual in amount or significance; (c) to the Company's Knowledge,
no Stockholder, nor any officer or director of the Company has any material
interest in any corporation, firm, partnership or other business enterprise
which has had any business transactions with the Company relating to the Blue
Chip Stations; and (d) no Stockholder has entered into any transaction with the
Company relating to the Blue Chip Stations.
4.30. Assets of Certain Subsidiaries. Licenses LLC and
Licenses II LLC have no businesses, assets, liabilities or operations other than
those related to the ownership of FCC licenses.
5. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing.
5.1. General. Each of the Parties will use his, her or its
reasonable efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
Closing conditions set forth in Section 7 hereof), it being understood and
agreed that each Stockholder makes this covenant only as to those actions
applicable to him, her or it and has no power or authority individually to cause
the Company to take any such actions as may be required by this Section 5.
5.2. Notices and Consents. The Company and its Subsidiaries
will give any notices to third parties, and will use reasonable efforts to
obtain any third party consents, that the Parent may reasonably request in
connection with matters referred to in Section 4.3 hereof. Each of the Parties
will give any notices to, make any filings with, and use its reasonable efforts
to obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with any matters pertaining to such Party
and referred to in Sections 3.1(b), 3.2(b), and 4.3 hereof. Without limiting the
generality of the foregoing:
(a) prior to the date hereof, the Parent and the Company
filed Notification and Report Forms and related materials with the
Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Hart-Scott-Rodino Act in
connection with the transactions contemplated by this Agreement, and,
subsequent to the date hereof, the Parent and the Company will make any
further filings pursuant thereto that may be necessary, proper, or
advisable in connection therewith; and
-48-
(b) as soon as possible (but in no event later than ten
(10) business days after the date of this Agreement) the Parent and the
Company shall file applications with the FCC (the "FCC Applications")
requesting the FCC's written consent to the transactions contemplated
by this Agreement. The Parent and the Company shall diligently take all
steps that are necessary, proper or desirable to expedite the
prosecution of the FCC Applications to a favorable conclusion. No Party
by commission or omission shall put in jeopardy its qualifications as
an FCC licensee, or impair the routine processing of the FCC
Applications. The Company and the Parent shall promptly provide each
other with a copy of any pleading, order or other document served on it
relating to the FCC Applications, shall furnish all information
required by the FCC, and shall be represented at all meetings or
hearings scheduled to consider the FCC Applications. The Company will
use its reasonable efforts and otherwise cooperate with the Parent, and
the Stockholders shall likewise use their reasonable efforts and
otherwise cooperate with the Parent in responding to any information
requested by the FCC related to the FCC Applications and in defending
against any petition, complaint or objection which may be filed against
the FCC Applications. In the event any FCC Application as tendered is
rejected or found deficient for any reason, the Party liable for the
rejection or deficiency shall take all reasonable steps to cure the
basis for rejection or finding for deficiency and, if necessary, the
Parent and the Company shall jointly resubmit such FCC Application. The
FCC's pubic notice or other written consent to the FCC Applications is
referred to herein as the "FCC Consent."
5.3. Operation of Business. The Company will not and will
cause its Subsidiaries not to engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of Business. Without limiting
the generality of the foregoing, the Company will not (a) declare, set aside, or
pay any dividend or make any distribution with respect to its capital stock or
redeem, purchase, or otherwise acquire any of its capital stock or (b) otherwise
engage in any practice, take any action, or enter into any transaction of the
sort described in Section 4.7 hereof, without the Parent's prior written
approval, not to be unreasonably withheld.
5.4. Preservation of Business. The Company shall and shall
cause its Subsidiaries to keep its business and properties substantially intact,
including its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and employees.
5.5. FCC Compliance. The Company and its Subsidiaries shall:
(a) operate their business in all material respects in
accordance with the terms of the FCC Authorizations and in compliance
in all material respects with the Communications Act, FCC rules,
regulations and policies, and all other applicable laws, rules and
regulations, and maintain the FCC Authorizations in full force and
effect and timely file and prosecute any necessary applications for
renewal of the FCC Authorizations; and
(b) cure any exceptions to FCC compliance, including,
without limitation, those described in Section 4.15(b) of the
Disclosure Schedule as promptly as, and to the extent, possible and
prior to the Closing Date.
-49-
5.6. Full Access. The Company and its Subsidiaries shall
permit representatives of the Parent to have full access at all reasonable times
and upon reasonable request, and in a manner so as not to interfere with the
normal business operations of the Company and its Subsidiaries, to all premises,
properties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to the Company and its Subsidiaries. The Parent and
the Company hereby reaffirm that the Confidentiality Agreement entered into
between the Parent and the Company dated October 31, 2000 is still in full force
and effect, and shall remain in full force and effect under the terms of such
agreement.
5.7 Notice of Developments. The Company will give prompt
written notice to the Parent of any material adverse development causing a
breach of any of the representations and warranties in Section 4 hereof. Each
Party will give prompt written notice to the others of any material adverse
development causing a breach of any of his or its own representations and
warranties in Section 3 hereof. No disclosure by any Party pursuant to this
Section 5.7, however, shall be deemed to amend or supplement the Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
5.8. Broadcast Transmission Interruption. The Company shall
give prompt written notice to the Parent if the regular broadcast transmission
of any of WIZF-FM, WGZB-FM, WDJX-FM, KTTB-FM, WING-FM, WGTZ-FM, WCKX-FM or
WXMG-FM in the normal and usual manner is interrupted for a period of
forty-eight (48) consecutive hours or more, and in such event, the Parent shall
then have the right, by giving written notice, to postpone (and if necessary re-
postpone) the Closing to a date that is fifteen (15) days after the end of any
such interruption.
5.9. Exclusivity. Neither the Stockholders nor the Company or
any of its Subsidiaries will (a) solicit, initiate, or encourage the submission
of any proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of the
assets, of the Company and its Subsidiaries (including any acquisition
structured as a merger, consolidation, or share exchange) or (b) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing, other than the
Company's disposition of radio stations WLXO-FM in Stamping Ground, Kentucky,
and WBTF-FM in Midway, Kentucky, WFIA(AM) in Louisville, Kentucky and/or
WDBZ(AM) in Cincinnati, Ohio. None of the Stockholders will vote their Company
Shares in favor of any such acquisition.
5.10. Title Insurance. No later than fourteen (14) business
days prior to the Closing, the Parent, in its discretion, may obtain the
following title insurance commitments, policies, and riders in preparation for
the Closing:
(a) with respect to each parcel of real estate that any
of the Company and its Subsidiaries owns, an ALTA Owner's Policy of
Title Insurance 1992 Form (or equivalent policy reasonably acceptable
to the Parent if the real property is located in a state in which an
ALTA Owner's Policy of Title Insurance 1992 Form is not available)
issued by a title insurer (the "Title Company") reasonably satisfactory
to the Parent (and, if requested by the Parent, reinsured in whole or
in part by one or more insurance companies and pursuant to a direct
access agreement reasonably acceptable to the Parent), in such amount
as the Parent
-50-
reasonably may determine to be the fair market value of such real
property (including all improvements located thereon), insuring title
to such real property to be in the Company or its Subsidiary as of the
Closing (subject only to (i) the title exceptions described in Sections
4.11(a) and 4.11(b) of the Disclosure Schedule and (ii) any exceptions
which do not cause a breach of the representations and warranties
contained in Section 4 of this Agreement), together with a copy of all
documents referenced therein; and
(b) with respect to each parcel of real estate that any
of the Company and its Subsidiaries leases or subleases and which is
listed on Section 4.11(b) of the Disclosure Schedule as a property for
which a title insurance policy is to be procured, an ALTA Leasehold
Owner's Policy of Title Insurance-1992 (or equivalent policy reasonably
acceptable to the Parent if the real property is located in a state in
which an ALTA Leasehold Owner's Policy of Title Insurance-1992 is not
available) issued by a title insurer reasonably satisfactory to the
Parent (and, if requested by the Parent, reinsured in whole or in part
by one or more insurance companies and pursuant to a direct access
agreement reasonably acceptable to the Parent) in such amount as the
Parent reasonably may determine (taking into account the time cost of
money using the Applicable Rate as the discount rate and such other
factors as whether the fair market rental value of the premises exceeds
the stipulated consideration in the lease or sublease, whether the
tenant or subtenant has any option to renew or extend, whether the
tenant or subtenant owns any improvements located on the premises,
whether the tenant or subtenant is permitted to sublease, and whether
the tenant or subtenant would owe any amount under the lease or
sublease if evicted), insuring title to the leasehold or subleasehold
estate to be in the Company or its Subsidiary as of the Closing
(subject only to (i) the title exceptions described in Sections 4.11(a)
and 4.11(b) of the Disclosure Schedule and (ii) any exceptions which do
not cause a breach of the representations and warranties contained in
Section 4 of this Agreement).
Each title insurance policy delivered under Sections 5.10(a)
and 5.10(b) hereof shall (A) have the creditor's right exception deleted, (B)
insure title to the real property and all recorded easements benefitting such
real property, (C) contain an "extended coverage endorsement" insuring over the
general exceptions contained customarily in such policies, (D) contain an ALTA
Form Zoning Endorsement 3.1 (with parking and loading docks) (or equivalent),
(E) contain an endorsement insuring that the real property described in the
title insurance policy is the same real estate as shown on the Survey delivered
with respect to such property, (F) contain an endorsement insuring that at least
one street adjacent to the real property is a public street and that there is
direct and unencumbered pedestrian and vehicular access to such street from the
real property, (G) contain an inflation endorsement providing for annual
adjustments in the amount of coverage corresponding to the annual percentage
increase, if any, in the United States Department of Commerce Composite
Construction Cost Index (Base Year = 2001), (H) if the real property consists of
more than one record parcel, contain a "contiguity" endorsement insuring that
all of the record parcels are contiguous to one another, (I) contain a
"non-imputation" endorsement to the effect that title defects known to the
officers, directors, and stockholders of the owner prior to the Closing shall
not be deemed "facts known to the insured" for purposes of the policy, and (J)
all other endorsements reasonably requested by the Parent. The Parent shall pay
all fees, expenses and costs with respect to the title insurance pursuant to
this Section 5.10.
-51-
At the Parent's request, the Company shall use its reasonable
best efforts to obtain and deliver to the Parent an estoppel certificate with
respect to each of leases or subleases which are listed on Section 4.11(b) of
the Disclosure Schedule and marked with an asterisk (the "Material Leases"),
from the other party to such lease, in form and substance satisfactory to the
Parent.
5.11. Surveys.
(a) With respect to each parcel of real property that
the Company and its Subsidiaries owns, leases, or subleases, and as to
which a title insurance policy is to be procured pursuant to Section
5.10 hereof, the Parent may, in its discretion, procure prior to the
Closing a current survey of the real property certified to the Parent,
prepared by a licensed surveyor and conforming to current 1999 ALTA
Minimum Detail Requirements for Urban Land Title Surveys, including
standards as the Title Company requires as a condition to the removal
of any survey exceptions from the title policies certified to the
Parent, disclosing the location of all improvements, easements, party
walls, sidewalks, roadways, utility lines, and other matters shown
customarily on such surveys, and showing access affirmatively to public
streets and roads (the "Survey"). The Survey shall not disclose any
survey defect or encroachment from or onto the real property which has
not been cured or insured over to the Parent's reasonable satisfaction
prior to the Closing Date, subject to (i) the defects or encroachments
described in Sections 4.11(a) and 4.11(b) of the Disclosure Schedule
and (ii) any defect or encroachment which does not cause a breach of
the representations and warranties contained in Section 4 of this
Agreement. The Parent shall pay all fees, costs and expenses with
respect to the surveys.
(b) If the title policies obtained by the Parent
pursuant to Section 5.10 hereof and/or the surveys obtained by the
Parent pursuant to Section 5.11(a) hereof disclose any material title
defects, the Parent shall so notify the Company within no later than
ten (10) business days prior to the Closing and the amount of money
reasonably required to cure such defects shall be deducted from the
Adjusted Consideration, provided that if the cost of curing such
defects would reasonably require expenditures in excess of $500,000,
the Company shall not be obligated to reduce the Adjusted Consideration
by such excess. If the amount reasonably required to cure such title
defects would exceed $500,000, then the Parent shall have the right at
its option to terminate this Agreement unless the Company agrees to
further reduce the Adjusted Consideration by the amount in excess of
$500,000 required to effect the cures desired by the Parent; provided,
however, that such right to terminate shall expire if not exercised
before the date on which the Parent elects to delay the Closing Date as
provided in clause (b) of Section 2.3 hereof.
5.12. Waiver of Rights. Each Stockholder hereby (a) waives and
relinquishes his, her or its rights under Article 3 of the Shareholders
Agreement triggered by the execution of this Agreement with respect to the
transactions contemplated by this Agreement and agrees that the Shareholders
Agreement will terminate and be of no further force or effect upon the Closing,
and (b) waives and relinquishes any and all registration and other rights
granted to him, her or it pursuant to the Company Registration Rights Agreement
and agrees that the Company Registration Rights Agreement will terminate and be
of no further force or effect upon the Closing; provided that, if this
-52-
Agreement is terminated pursuant to Section 10 hereof, the waivers,
relinquishments and agreements by the Stockholders contained in this provision
shall be of no further force and effect.
5.13. Agreement to Vote. Each Stockholder will vote their
Company Shares in favor of the Merger.
5.14. Delivery of Preliminary Adjustment Statement. The
Company shall prepare and deliver to the Parent the Preliminary Adjustment
Statement in accordance with the provisions of Section 2.7(a) hereof.
5.15. Substantially All of the Company's Assets. None of the
Parties will take any action (other than as contemplated by this Agreement) that
would cause, following the Merger, the Surviving Corporation not to hold at
least ninety percent (90%) of the fair market value of the net assets and at
least seventy percent (70%) of the fair market value of the gross assets held by
the Company immediately prior to the Merger. For this purpose, amounts, if any,
paid by or on behalf of the Company for expenses of the Merger, amounts, if any,
paid by the Company to dissenters or to stockholders who receive cash or other
property and all redemptions and distributions (except for regular, normal
distributions) made by the Company immediately preceding or in contemplation of
the Merger will be included as assets of the Company immediately prior to the
Merger.
5.16. Reorganization. None of the Parties will take any action
that would cause the Merger not to qualify and continue to qualify as a
reorganization under (S)368(a) of the Code.
5.17. Delivery of Financial Information. The Company shall
deliver to the Parent (a) not later than March 31, 2001, audited consolidated
balance sheets and statements of income, changes in stockholders' equity and
cash flow as of and for the fiscal year ended December 31, 2000, for the Company
and its Subsidiaries, (b) not later than thirty (30) days after the end of each
calendar month beginning with December 2000, unaudited consolidated balance
sheets and statements of income, changes in stockholders' equity and cash flow
as of and for the monthly period then ended and the year to date, for the
Company and its Subsidiaries (the financial statements described in clauses (a)
and (b), the "Updated Financial Statements") and (c) not later than five (5)
days after the end of each calendar week beginning with the first such week
ending after the date of this Agreement, revenue pacing reports for each of the
Blue Chip Stations. The Updated Financial Statements (including the notes
thereto) will be prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby and will present fairly the financial
condition of the Company and its Subsidiaries as of such date and the results of
operations of the Company and its Subsidiaries for such periods; provided,
however, that the monthly financial statements described in clause (b) of the
preceding sentence may be subject to normal year-end adjustments (which will not
be material individually or in the aggregate) and may lack footnotes and other
presentation items. The Parent may disclose any financial statements of the
Company and its Subsidiaries provided or created hereunder in reports filed by
the Parent with any governmental or regulatory authority, including the
Securities and Exchange Commission, and the Company and its Subsidiaries shall
cooperate, and shall cause their respective accountants to cooperate, with the
Parent to facilitate such disclosure.
-53-
5.18. Reports. Promptly upon preparation, the Company shall
furnish to the Parent any other report relating to the Company regularly
prepared by the Company.
5.19. Environmental Survey. The Parent may, at its option and
expense, retain an environmental consultant to be selected by the Parent to
perform a Phase I environmental survey and if necessary, a Phase II
environmental survey of the real property of the Company within forty-five (45)
days of the date hereof. The Company shall be provided with copies of any and
all such survey reports at the Company's request only. If the survey discloses
any material environmental hazard or liability for environmental damages or
clean-up costs, the Parent shall so notify the Company within fifty (50) days of
the date of this Agreement and the amount of money reasonably required to cure
such environmental hazards or damages shall be deducted from the Adjusted
Consideration, provided that if the remediation of all such hazards or damages
under this Agreement would reasonably require expenditures in excess of
$500,000, the Company shall not be obligated to reduce the Adjusted
Consideration by such amount. If the amount reasonably required to effect such
remediation would exceed $500,000, then the Parent shall have the right at its
option to terminate this Agreement unless the Company agrees to further reduce
the Adjusted Consideration by the amount in excess of $500,000 reasonably
required to effect the remediation desired by the Parent; provided, however,
that such right to terminate shall expire if not exercised before the date on
which the Parent elects to delay the Closing Date as provided in clause (b) of
Section 2.3 hereof. The Parent shall indemnify and hold harmless the Company,
its Subsidiaries and the Stockholders from any and all losses, expenses or
damages resulting from the Parent's inspections, including, but not limited to,
environmental inspections and surveys.
5.20. The Parent's Actions. The Parent agrees that it shall
not knowingly take any action or actions, including but not limited to the
acquisition of any broadcast radio station(s), which would cause any delay of
the granting of FCC consent, or expiration of any applicable waiting period or
early termination under the Hart-Scott-Rodino Act.
5.21. Company Sale of Certain Stations.
(a) Louisville Station. The Company agrees that it shall
use its reasonable efforts to consummate the sale of the assets of WFIA(AM),
located in Louisville, Kentucky (the "Louisville Station"), prior to the
Effective Time pursuant to the terms of the contract attached hereto as Exhibit
E (the "Louisville Contract"), and that the Company shall apply all cash
proceeds received under the Louisville Contract to reduce the Company's
indebtedness for borrowed money. If for any reason the Louisville Contract does
not close prior to the Effective Date, the Parent shall use its commercially
reasonable efforts to consummate the closing of the Louisville Contract after
the Effective Date. The cash proceeds, if any, payable under the Louisville
Contract after the Effective Time shall be applied in accordance with the
provisions of Section 6.10 hereof.
(b) Lexington Stations. The Company agrees that it shall
use its best efforts to negotiate and enter into a contract (the "Lexington
Contract"), which shall be in form and substance reasonably acceptable to the
Parent, with a third party for the sale of the assets of WLXO- FM, located in
Stamping Ground, Kentucky, and WBTF-FM, located in Midway, Kentucky
(collectively, the "Lexington Stations"), prior to the Effective Time. The cash
proceeds, if any, received by the Company under the Lexington Contract prior to
the Effective Time shall be used to
-54-
reduce the Company's indebtedness for borrowed money. The cash proceeds, if any,
payable under the Lexington Contract after the Effective Time shall be applied
in accordance with the provisions of Section 6.10 hereof.
(c) Cincinnati Station. The Company agrees that, at or
prior to the Effective Time, (i) it shall cause Broadcasting LLC and Licenses
LLC to complete the transfer of the assets and station contract liabilities of
WDBZ(AM), located in Cincinnati, Ohio, to a newly formed corporation ("Newco")
in exchange for 100% of the stock of Newco pursuant to the terms of a contract
to be substantially in the form attached hereto as Exhibit F (the "Cincinnati
Contract"), with the description of the assets set forth on the schedules to the
Cincinnati Contract to be subject to the prior written approval of the Parent,
not to be unreasonably withheld, (ii) Broadcasting LLC will immediately make a
distribution of 100% of the stock of Newco to the Company, and (iii) the Company
will declare and pay a special dividend of the stock of Newco to the Series A
Stockholders.
5.22. Termination of the Company's 401(k) Plan. The Company
shall terminate the Company's 401(k) Plan before the Closing Date, in accordance
with the termination procedures of the Company's 401(k) Plan. Other than as
provided in this Section 5.22, the Company agrees not to make any material
amendments to any Employee Benefit Plan through the Closing Date and agrees not
to adopt any new Employee Benefit Plans, unless such amendments or new plans are
agreed to by the Parent.
5.23. Love HSR Filing. If required in order to consummate the
transactions contemplated by this Agreement, L. Ross Love shall, not later than
thirty-five (35) days prior to the date reasonably estimated by the Parent to be
the Closing Date, file any Notification and Report Forms that may be required to
be filed with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice under the Hart-Scott-Rodino Act.
5.24. Exercise of WBLO Option. The Parties hereby acknowledge
and agree that notwithstanding anything to the contrary contained herein, prior
to the Closing the Company shall be permitted to take such actions as it
determines to be reasonably necessary and appropriate in order to exercise its
option to purchase WBLO-FM.
6. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing.
6.1. General. In case at any time after the Closing any
further action is necessary to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 8
hereof). The Stockholders acknowledge and agree that, from and after the
Closing, the Parent will be entitled to possession of all documents, books,
records (including tax records), agreements, and financial data of any sort
relating to the Company and its Subsidiaries.
-55-
6.2. Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(a) any transaction contemplated under this Agreement or (b) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of the Company and its Subsidiaries, each of
the other Parties will cooperate with him, her or it and his, her or its counsel
in the contest or defense, make available their personnel, and provide such
testimony and access to their books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8 hereof); provided that in
the event that one Party hereto initiates any action, suit, proceeding, hearing,
investigation, charge, complaint, or claim against another Party hereto, neither
such Party shall be obligated to provide the cooperation otherwise required by
this provision.
6.3. Transition. None of the Stockholders will take any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of the Company
and its Subsidiaries from maintaining the same business relationships with the
Company and its Subsidiaries after the Closing as it maintained with the Company
and its Subsidiaries prior to the Closing.
6.4. Confidentiality. Each of the Stockholders, severally and
not jointly, agree to treat and hold as such all of the Confidential
Information, refrain from using any of the Confidential Information except in
connection with this Agreement, and deliver promptly to the Parent or destroy,
at the request and option of the Parent, all tangible embodiments (and all
copies) of the Confidential Information which are in his, her or its possession.
In the event that any of the Stockholders is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, that Stockholder will notify the Parent
promptly of the request or requirement so that the Parent may seek an
appropriate protective order or waive compliance with the provisions of this
Section 6.4. If, in the absence of a protective order or the receipt of a waiver
hereunder, any of the Stockholders is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, that Stockholder may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Stockholder shall use his, her
or its reasonable efforts to obtain, at the reasonable request of the Parent, an
order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the Parent
shall designate.
6.5. Delivery of Final Adjustment Statement. The Parent shall
prepare and deliver to the Stockholders the Final Adjustment Statement in
accordance with the provisions of Section 2.7(b) hereof.
6.6. Cooperation. From the date of Closing and for a period
of three (3) years thereafter, the Stockholders shall provide the Parent with
such cooperation and information as the Parent shall reasonably request in the
Parent's: (i) analysis and review of Financial Statements or information
provided or created hereunder, or (ii) preparation of any reports or analyses
prepared by the Parent relating to the Company's activities prior to the Closing
Date. At the Parent's expense,
-56-
the Company and the Stockholders shall also make their respective accountants
available, including any opinions and financial statements relating to the
Company, to provide explanations of any documents or information provided
hereunder and to permit disclosure of such information by the Parent, including
disclosure to any governmental authority, including the Securities and Exchange
Commission.
6.7. Reorganization. None of the Parties will take any action
that would cause the Merger not to qualify and continue to qualify as a
reorganization under (S)368(a) of the Code.
6.8. Benefit Plan Continuation.
(a) The Parent agrees that it shall continue the Company
health plans in effect immediately prior to the Closing for a period to be
determined by the Parent, in its sole discretion. The Parent acknowledges and
agrees that it or the Surviving Corporation is responsible for making COBRA
continuation coverage (as described in Section 601 of ERISA) available to all
persons who are classified as M & A qualified beneficiaries (as such term is
defined in final Treasury Regulation section 54.4980B-9) as a result of the sale
contemplated by this Agreement.
(b) The Parent shall cause the Surviving Corporation to
provide similar benefit arrangements, plans, practices, policies and programs to
employees of the Company and its Subsidiaries (as of the Closing Date) as those
provided by the Parent and its Subsidiaries to similarly situated employees of
the Parent and its Subsidiaries (as of the Closing Date). Each employee of the
Company or its Subsidiaries that becomes a participant in any employee benefit
plan, practice or policy of the Parent, any of its Subsidiaries, or the
Surviving Corporation that is in effect on the Closing Date shall be given
credit under such employee benefit plan, practice or policy, including, without
limitation, short-term and long-term disability benefits, severance benefits,
vacation benefits and benefits under any retirement plans, for all service prior
to the Effective Time with the Company and its Subsidiaries, for all purposes
(including eligibility, vesting and determination of benefits) for which such
service is either taken into account or recognized.
6.9. Employee Award Payments. The Parent shall, or shall
cause the Surviving Corporation to, pay each Employee Award Payment when due to
the employee entitled thereto. In the event that the Surviving Corporation does
not pay all or part of any Employee Award Payment, then the aggregate amount of
all such unpaid Employee Award Payments shall be paid in cash to the Series A
Stockholders and the Series B Stockholders in proportion to the Merger
Consideration received by each of them within fifteen (15) days of the six month
anniversary of the Closing.
6.10. Sale of Lexington Stations and Louisville Station.
(a) Enforcement of Louisville Contract and Lexington
Contract.
(i) In the event that the Louisville Contract, as
set forth in Section 5.21(a) hereof, has not been consummated prior to
Closing Date, the Parent shall use its reasonable efforts to cause the
sale of the Louisville Station to be consummated in accordance with the
terms of the Louisville Contract after the Closing Date. In the event
that the sale of the Louisville Station contemplated by the Louisville
Contract is consummated
-57-
prior to Closing Date and, pursuant to the terms of the Louisville
Contract, any portion of the proceeds are due to the Company after the
Closing Date, the Parent shall use its reasonable efforts to collect
such proceeds in accordance with the terms of the Louisville Contract.
If the Parent is unable to collect all such proceeds in accordance with
the terms of the Louisville Contract, the Series A Stockholders and the
Series B Stockholders shall have the right to pursue and retain the
collection of any or all such proceeds.
(ii) In the event that the Company shall have
entered into a Lexington Contract pursuant to Section 5.21(b) hereof on
or prior to the Closing Date and the sale of the Lexington Stations
contemplated by such Lexington Contract has not been consummated prior
to Closing Date, the Parent shall use its reasonable efforts to cause
the sale of the Lexington Stations to be consummated in accordance with
the terms of the Lexington Contract after the Closing Date. In the
event that the sale of the Lexington Stations contemplated by the
Lexington Contract is consummated prior to Closing Date and, pursuant
to the terms of the Lexington Contract, any portion of the proceeds are
due to the Company after the Closing Date, the Parent shall use its
reasonable efforts to collect such proceeds in accordance with the
terms of the Lexington Contract. If the Parent is unable to collect all
such proceeds in accordance with the terms of the Lexington Contract,
the Series A Stockholders and the Series B Stockholders shall have the
right to pursue and retain the collection of any or all such proceeds.
(b) Brokered Sale of the Louisville Station or the
Lexington Stations.
(i) In the event that the Louisville Contract has
been terminated and the Company shall not have entered into a new
agreement for the sale of the Louisville Station prior to the Closing
Date, the Parent shall within thirty (30) days of the Closing Date,
engage a broker (the "Broker"), reasonably acceptable to the Series A
Stockholders and the Series B Stockholders, to arrange for the sale of
the Louisville Station to one or more unaffiliated third parties in an
arm's-length transaction on reasonable terms and conditions. If such
Broker finds a willing buyer for the Louisville Station within
twenty-four (24) months of the Closing Date, the Parent shall take all
actions reasonably necessary to consummate the sale of the Louisville
Station to such buyer, and the Stockholders shall raise no objection to
such sale. If, on the twenty-four (24) month anniversary of the Closing
Date, a contract for the sale of the Louisville Station has not been
executed, the Broker's engagement shall be terminated, and the Parent
shall thereafter have no further liability or obligation to the
Stockholders with respect to the Louisville Station.
(ii) In the event that the Company shall not have
entered into a Lexington Contract pursuant to Section 5.21(b) hereof on
or prior to the Closing Date, the Parent shall within thirty (30) days
of the Closing Date, engage a Broker reasonably acceptable to the
Series A Stockholders and the Series B Stockholders, to arrange for the
sale of the Lexington Stations to one or more unaffiliated third
parties in an arm's-length transaction on reasonable terms and
conditions. If such Broker finds a willing buyer for the Lexington
Stations within twenty-four (24) months of the Closing Date, the Parent
shall take all actions reasonably necessary to consummate the sale of
the Lexington Stations to such buyer, and the Stockholders shall raise
no objection to such sale. If, on the twenty-four (24)
-58-
month anniversary of the Closing Date, a contract for the sale of the
Lexington Stations has not been executed, the Broker's engagement shall
be terminated, and the Parent shall thereafter have no further
liability or obligation to the Stockholders with respect to the
Lexington Stations.
(c) Post-Closing Operation of the Lexington Stations and
the Louisville Station.
(i) In the event that a sale of the Lexington
Stations has not been consummated on or prior to the Closing Date, the
Parent shall assume operational responsibility for the Lexington
Stations on the Closing Date and shall use its reasonable efforts to
operate such Lexington Stations in an orderly, efficient and
businesslike manner until the Lexington Stations are sold or otherwise
transferred in accordance with the provisions of Section 6.10(a) or
Section 6.10(b) hereof. The revenue and expenses associated with the
post-Closing operation of the Lexington Stations shall be for the
account of the Parent, provided that the Parent shall deduct from the
net cash proceeds from the sale of the Lexington Stations any net
operating losses (the "Lexington Operating Losses") incurred by the
Parent in connection with its operation of the Lexington Stations
during the period commencing on the Closing Date and ending on the
earlier of (A) the sale of the Lexington Stations to an unrelated third
party by the Parent or (B) the date that is twenty-four (24) months
after the Closing Date. The Series A Stockholders and the Series B
Stockholders agree to reimburse the Parent, on a pro rata basis, for
any Lexington Operating Losses incurred by the Parent in connection
with its operation of the Lexington Stations which exceed the net cash
proceeds of the sale of the Lexington Stations or are not recovered by
the Parent from the Lexington Escrowed Cash.
(ii) In the event that a sale of the Louisville
Station has not been consummated on or prior to the Closing Date, the
Parent shall assume operational responsibility for the Louisville
Station on the Closing Date and shall use its reasonable efforts to
operate such Louisville Station in an orderly, efficient and
businesslike manner until the Louisville Station is sold or otherwise
transferred in accordance with the provisions of Section 6.10(a) or
Section 6.10(b) hereof. The Parent shall deduct from the proceeds from
the sale of the Louisville Station any net operating losses (the
"Louisville Operating Losses") incurred by the Parent in connection
with its operation of the Louisville Station during the period
commencing on the Closing Date and ending on the earlier of (A) the
sale of the Louisville Station to an unrelated third party by the
Parent or (B) the date that is twenty-four (24) months after the
Closing Date. The Series A Stockholders and the Series B Stockholders
agree to reimburse the Parent, on a pro rata basis, for any Louisville
Operating Losses incurred by the Parent in connection with its
operation of the Louisville Station which exceed the net cash proceeds
of the sale of the Louisville Station or are not recovered by the
Parent from the Louisville Escrowed Cash.
(iii) The Parent shall provide, upon reasonable
request from the Series A Stockholders' Representative and the Series B
Stockholders' Representative, appropriate documentation and records to
allow the Series A Stockholders' Representative and the Series B
Stockholders' Representative to perform a reasonable audit of the
Lexington
-59-
Net Operating Losses prior to the deduction of such losses from the
proceeds of the sale of the Lexington Stations or the satisfaction of
the Series A Stockholders and the Series B Stockholders' obligation to
reimburse the Parent for such losses pursuant to Section 6.10(c)(i)
above. If the Series A Stockholders' Representative and the Series B
Stockholders' Representative dispute any item in the Lexington Net
Operating Losses, the Series A Representative and the Series B
Stockholders' Representative shall notify the Parent in writing thereof
(specifying the amount of each item in dispute and setting forth in
reasonable detail the basis for each item in dispute) within fifteen
(15) business days of receipt by the Series A Stockholders'
Representative and the Series B Stockholders' Representative of the
documentation and records provided to the Series A Representative and
the Series B Stockholders' Representative. If the Series A
Stockholders' Representative and the Series B Stockholders'
Representative do not notify the Parent of any such dispute within such
time, then the Lexington Net Operating Losses shall be deemed to be
final and binding on the parties. In the event of such a dispute, the
parties shall negotiate in good faith to attempt to reconcile their
differences. If such dispute has not been resolved within twenty (20)
business days, the parties shall submit the items remaining in dispute
for resolution to the Independent Accounting Firm, which shall, as
promptly as practicable but in any event within twenty (20) business
days, resolve the disputed items and report to the parties, and such
report shall have the effect of an arbitral award and shall be final
and binding on the parties. The fees and disbursements of the
Independent Accounting Firm shall be allocated equally between the
Parent and the Series A Stockholders and the Series B Stockholders.
(iv) The Parent shall provide, upon reasonable
request from the Series A Stockholders' Representative and the Series B
Stockholders' Representative, appropriate documentation and records to
allow the Series A Stockholders' Representative and the Series B
Stockholders' Representative to perform a reasonable audit of the
Louisville Net Operating Losses prior to the deduction of such losses
from the proceeds of the sale of the Louisville Station or the Series A
Stockholders and the Series B Stockholders' satisfaction of the
obligation to reimburse the Parent for such losses pursuant to Section
6.10(c)(ii) above. If the Series A Stockholders' Representative and the
Series B Stockholders' Representative dispute any item in the
Louisville Net Operating Losses, the Series A Stockholders'
Representative and the Series B Stockholders' Representative shall
notify the Parent in writing thereof (specifying the amount of each
item in dispute and setting forth in reasonable detail the basis for
each item in dispute) within fifteen (15) business days of receipt by
the Series A Stockholders' Representative and the Series B
Stockholders' Representative of the documentation and records provided
to the Series A Stockholders' Representative and the Series B
Stockholders' Representative. If the Series A Stockholders'
Representative and the Series B Stockholders' Representative do not
notify the Parent of any such dispute within such time, then the
Louisville Net Operating Losses shall be deemed to be final and binding
on the parties. In the event of such a dispute, the parties shall
negotiate in good faith to attempt to reconcile their differences. If
such dispute has not been resolved within twenty (20) business days,
the parties shall submit the items remaining in dispute for resolution
to the Independent Accounting Firm, which shall, as promptly as
practicable but in any event within twenty (20) business days, resolve
the disputed items and report to the parties, and such report shall
have the effect of an arbitral award and shall be final and binding on
the parties. The fees and disbursements of the Independent Accounting
Firm shall
-60-
be allocated equally between the Parent and the Series A Stockholders
and the Series B Stockholders.
(d) Sale Proceeds and Expenses.
(i) Promptly upon the receipt by the Surviving
Corporation of any cash proceeds for the sale of the Lexington Stations
under Sections 6.10(a) and 6.10(b) (including, without limitation, any
cash payments made by the purchaser under any non- competition or
consulting agreements executed in connection with such sale), the
Parent shall distribute to the Series A Stockholders and the Series B
Stockholders, on a pro rata basis, such proceeds, provided that the
Parent may, at its option, first deduct from such proceeds (i) the
reasonable costs and expenses incurred by the Parent in connection with
such sale, to the extent such costs and expenses are not otherwise
included in the calculation of the Lexington Operating Losses
(including fees and expenses of the Broker, if applicable), (ii) the
documented Lexington Operating Losses owed to the Parent pursuant to
Section 6.10(c), and (iii) the Lexington Escrowed Cash to be delivered
to the Escrow Agent pursuant to Section 2.6 if such amount has not yet
been delivered.
(ii) Promptly upon the receipt by the Surviving
Corporation of any cash proceeds for the sale of the Louisville Station
under Sections 6.10(a) and 6.10(b) (including, without limitation, any
cash payments made by the purchaser under any non- competition or
consulting agreements executed in connection with such sale), the
Parent shall distribute to the Series A Stockholders and the Series B
Stockholders, on a pro rata basis, such proceeds, provided that the
Parent may, at its option, first deduct from such proceeds (i) the
reasonable costs and expenses incurred by the Parent in connection with
such sale, to the extent such costs and expenses are not otherwise
included in the calculation of the Louisville Operating Losses
(including fees and expenses of the Broker, if applicable), (ii) the
documented Louisville Operating Losses owed to the Parent pursuant to
Section 6.10(c), and (iii) the Louisville Escrowed Cash to be delivered
to the Escrow Agent pursuant to Section 2.6 if such amount has not yet
been delivered.
6.11. Directors' and Officers' Liability.
(a) The Parent, the Merger Subsidiary and the Company
agree that all rights to indemnification and all limitations on liability
existing in favor of any Indemnitee (as defined below) as provided in the
Certificate of Incorporation or By-laws of the Company and the applicable
organizational documents of its Subsidiaries or any Indemnity Agreement (as
defined below) shall survive the Merger and continue in full force and effect.
To the extent permitted by (i) the Delaware General Corporation Law (or the
applicable state corporation or limited liability company laws as to any
Subsidiary that is not formed under the laws of the State of Delaware), (ii) the
organizational documents of the Company or the Subsidiary, as applicable, or
(iii) any agreement providing for indemnification by the Company or any
Subsidiary of the Company of any Indemnitee in effect on the date of this
Agreement (including any indemnity provisions contained in any agreement
providing for the registration of securities) (each, an "Indemnity Agreement"),
advancement of Expenses (as defined below) pursuant to this Section 6.11 shall
be mandatory rather than permissive, and the Surviving Corporation and the
Parent shall advance Costs (as defined
-61-
below) in connection with such indemnification. The Parent shall, and shall
cause the Surviving Corporation to, expressly assume and honor in accordance
with their terms all Indemnity Agreements.
(b) In addition to the other rights provided for in this
Section 6.11 and not in limitation thereof, for six years from and after the
Effective Time, the Parent shall, and shall cause the Surviving Corporation to,
to the fullest extent permitted by applicable law, (i) indemnify and hold
harmless the individuals who on or prior to the Effective Time were officers,
directors, managers or employees of the Company or any of its Subsidiaries, and
the heirs, executors, trustees, fiduciaries and administrators of such officers,
directors, managers or employees (collectively, the "Indemnitees") against all
losses, Expenses (as hereinafter defined), claims, damages, liabilities,
judgments, or amounts paid in settlement (collectively, "Costs") in respect to
any threatened, pending or completed claim, action, suit or proceeding, whether
criminal, civil, administrative or investigative based on, or arising out of or
relating to the fact that such person is or was a director, officer, manager or
employee of the Company or any of its Subsidiaries and arising out of acts or
omissions occurring on or prior to the Effective Time (excluding acts or
omissions in connection with this Agreement and the transactions contemplated
hereby) (an "Indemnifiable D&O Claim") and (ii) advance to such Indemnitees all
Expenses incurred in connection with any Indemnifiable D&O Claim promptly after
receipt of reasonably detailed statements therefor; provided, that, except as
otherwise provided pursuant to any Indemnity Agreement, the person to whom
Expenses are to be advanced provides an undertaking to repay such advances if it
is ultimately determined that such person is not entitled to indemnification
from the Parent or the Surviving Corporation. In the event any Indemnifiable D&O
Claim is asserted or made within such six-year period, all rights to
indemnification and advancement of Expenses in respect of any such Indemnifiable
D&O Claim shall continue until such Indemnifiable D&O Claim is disposed of or
all judgments, orders, decrees or other rulings in connection with such
Indemnifiable D&O Claim are fully satisfied; provided, however, that the Parent
shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld or delayed). Except as
otherwise may be provided pursuant to any Indemnity Agreement, the Indemnitees
as a group may retain only one law firm with respect to each related matter
except to the extent there is, in the opinion of counsel to an Indemnitee, under
applicable standards of professional conduct, a conflict on any significant
issue between positions of any two or more Indemnitees. For the purposes of this
Section 6.11, "Expenses" shall include reasonable attorneys' fees and all other
costs, charges and expenses paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Indemnifiable D&O
Claim.
(c) Notwithstanding any other provisions hereof, the
obligations of the Company, the Surviving Corporation and the Parent contained
in this Section 6.11 shall be binding upon the successors and assigns of the
Parent and the Surviving Corporation. In the event the Company or the Surviving
Corporation or any of their respective successors or assigns (i) consolidates
with or merges into any other Person or (ii) transfers all or substantially all
of its properties or assets to any Person, then, and in each case, proper
provision shall be made so that successors and assigns of the Company or the
Surviving Corporation, as the case may be, honor the indemnification obligations
set forth in this Section 6.11.
-62-
(d) The obligations of the Company, the Surviving
Corporation, and the Parent under this Section 6.11 shall survive the
consummation of the Merger and shall not be terminated or modified in such a
manner as to adversely affect any Indemnitee to whom this Section 6.11 applies
without the consent of such affected Indemnitee (it being expressly agreed that
the Indemnitees to whom this Section 6.11 applies shall be third party
beneficiaries of this Section 6.11, each of whom may enforce the provisions of
this Section 6.11).
(e) The Parent shall, and shall cause the Surviving
Corporation to, advance all Expenses to any Indemnitee incurred enforcing the
indemnity or other obligations provided for in this Section 6.11.
6.12. WDBZ LMA. Effective as of the Closing Date, the Parent
will (a) enter into a Local Programming and Marketing Agreement with Newco,
substantially in the form attached hereto as Exhibit G-1, provided, however,
that the Licensee's Station Expenses set forth on Schedule A to such agreement
shall be subject to the mutual agreement of the Parent and Newco, and (b) cause
the Surviving Corporation to enter into a sublease with Newco substantially on
the terms set forth in the attached Exhibit G-2.
7. Conditions to Obligation to Close.
7.1. Conditions to Obligation of the Parent. The obligation
of each of the Parent and the Merger Subsidiary to consummate the transactions
to be performed by it in connection with the Closing is subject to satisfaction
of the following conditions:
(a) the representations and warranties set forth in
Sections 3.1 and 4 hereof shall be true and correct in all material
respects at and as of the Closing Date;
(b) the Stockholders and the Company shall have
performed and complied with all of their respective covenants hereunder
in all material respects through the Closing;
(c) the Company and its Subsidiaries shall have procured
all of the material third party consents required pursuant to Section
5.2 hereof;
(d) the Parent shall have been able to procure all title
insurance commitments, policies, and riders specified in Section 5.10
hereof, and all of the surveys specified in Section 5.11 hereof, that
the Parent has sought to procure, provided that the Parent's
obligations hereunder shall only be excused if the Parent is unable to
procure any such title insurance commitments, policies, riders or
surveys after using its reasonable commercial efforts;
(e) the Parent shall not have exercised its right to
postpone the Closing pursuant to Section 5.8 hereof, or if the Parent
has exercised its right to postpone the Closing pursuant to Section 5.8
hereof, the permitted postponement period(s) shall have expired;
(f) no action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or
-63-
before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (i) prevent consummation of any
of the transactions contemplated by this Agreement, (ii) cause any of
the transactions contemplated by this Agreement to be rescinded
following consummation, (iii) materially adversely affect the right of
the Parent to own the Company Shares and to control the Company and its
Subsidiaries, or (iv) affect materially and adversely the right of any
of the Company and its Subsidiaries to own its assets and to operate
its businesses (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect);
(g) the Stockholders shall have delivered to the Parent
a certificate to the effect that each of the conditions specified in
Sections 7.1(a) and 7.1(b) hereof is satisfied as to the
representations, warranties and covenants made by the Stockholders, and
the Company shall have delivered to the Parent a certificate to the
effect that each of the conditions specified in Sections 7.1(a) and
7.1(b) hereof is satisfied;
(h) the FCC Consent shall have granted by the FCC by
Final Order, without any conditions materially adverse to the Parent,
and such FCC Consent shall be in full force and effect, all applicable
waiting periods (and any extensions thereof) under the
Hart-Scott-Rodino Act shall have expired or otherwise been terminated,
and the Parties, the Company, and its Subsidiaries shall have received
all other material authorizations, consents, and approvals of
governments and governmental agencies referred to in Sections 3.1(b),
4.3 and 5.23 hereof;
(i) the Parent shall have received from each Stockholder
that is not a natural person (i) a copy of resolutions duly adopted by
such Stockholder's board of directors or equivalent governing body, if
any, if the Stockholder is not a corporation, authorizing such
Stockholder to enter into this Agreement and consummate the
transactions contemplated hereby, certified by the secretary or
assistant secretary of such Stockholder as being complete and correct
and in full force and effect as of the Closing Date, and (ii) an
incumbency certificate dated as of the Closing Date with respect to the
officer executing this Agreement on behalf of such Stockholder;
(j) all actions to be taken by the Company in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Parent;
(k) L. Ross Love shall have entered into a
non-competition agreement with the Parent in substantially the form
attached hereto as Exhibit H;
(l) all of the Company's Options granted to its
employees shall have been cancelled and the rights of all optionees
thereunder shall have been terminated;
(m) the option for Series A Common Stock of the Company
held by Kandu Investments, LLC shall have been exercised, and Kandu
Investments, LLC shall have
-64-
become a party to this Agreement as a Series A Stockholder, or such
option shall have expired in accordance with its terms;
(n) each of the officers and directors of the Blue Chip
Companies shall have resigned from their respective positions as such
in writing effective as of the Effective Time;
(o) all regulatory fees due to the FCC from the Blue
Chip Companies, including penalties and interest, shall have been paid
for the fiscal years 1994-2001;
(p) the Parent shall have received good standing
certificates for the relevant Blue Chip Companies from the State of
Delaware, the State of Ohio, the State of Minnesota, the State of
Nevada and the Commonwealth of Kentucky;
(q) the Parent shall have received from Graydon, Head &
Ritchey LLP and/or Dinsmore & Shohl LLP, corporate counsel for the
Company, and Wiley, Rein, and Fielding, FCC counsel for the Company,
opinions dated as of the Closing Date, in form and substance reasonably
satisfactory to the Parent; and
(r) each of L. Ross Love, Cheryl H. Love, LRC Love
Limited Partnership, Love Family Limited Partnership, Steven R. Love,
EGI-Fund (99) Investors, L.L.C., and Quetzal/J. P. Morgan Partners,
L.P. shall have executed and delivered to the Parent, and the Company
shall have used its reasonable efforts to cause Torchstar
Communications, L.L.C., and Blue Chip Venture Funds Partnership to
deliver to the Parent, a release for the benefit of the Parent, the
Company, the Surviving Corporation and their respective Subsidiaries,
stockholders, officers, directors, agents, promoters and employees in
the form attached hereto as Exhibit I.
The Parent may waive any condition specified in this Section
7.1 if it executes a writing so stating at or prior to the Closing; provided,
however, that, if the Parent elects to delay the Closing Date to a date not
later than August 15, 2001 as provided in clause (b) of Section 2.3 hereof, the
Parent shall be deemed to have waived the conditions set forth in Sections
7.1(a) (as it relates to representations and warranties set forth in Section 4
hereof), 7.1(d), 7.1(e), 7.1(f) and 7.1(g) hereof, to the extent Section 7.1(g)
relates to Section 7.1(a) hereof (as it relates to representations and
warranties set forth in Section 4 hereof).
7.2. Conditions to Obligation of the Company and the
Stockholders. The tobligation of the Company to consummate the transactions to
be performed by it in connection with the Closing is subject to satisfaction of
the following conditions:
(a) the representations and warranties set forth in
Section 3.2 hereof shall be true and correct in all material respects
at and as of the Closing Date;
(b) each of the Parent and the Merger Subsidiary shall
have performed and complied with all of its covenants hereunder in all
material respects through the Closing;
-65-
(c) no action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (i) prevent consummation of any of the transactions
contemplated by this Agreement or (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation
(and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(d) the Parent shall have delivered to the Company a
certificate to the effect that each of the conditions specified in
Sections 7.2(a) through 7.2(c) hereof is satisfied in all respects;
(e) the FCC Consent shall have been granted by the FCC
by initial order and such FCC Consent shall be in full force and
effect, all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated, and the Parties, the Company, and its Subsidiaries shall
have received all other material authorizations, consents, and
approvals of governments and governmental agencies referred to in
Sections 3.1(b), 3.2(b), and 4.3 hereof;
(f) the Company shall have received from the Parent and
the Merger Subsidiary (i) a true, correct and complete copy of such
Party's Amended and Restated Articles of Incorporation as amended
through the Closing Date, certified by the secretary of state of
Delaware, (ii) a certificate of good-standing with respect to such
Party issued by the secretary of state of Delaware not more than ten
(10) business days prior to the Closing Date, (iii) a copy of
resolutions duly adopted by such Party's board of directors authorizing
such Party to enter into this Agreement and consummate the transactions
contemplated hereby, certified by the secretary or assistant secretary
of such Party as being complete and correct and in full force and
effect as of the Closing Date, and (iv) an incumbency certificate dated
as of the Closing Date with respect to the officer executing this
Agreement on behalf of such Party;
(g) each of the Stockholders shall have received from
Kirkland & Ellis, counsel for the Company, opinions dated as of the
Closing Date, in form and substance reasonably satisfactory to the
Company;
(h) all actions to be taken by the Parent and the Merger
Subsidiary in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and
other documents required to effect the transactions contemplated hereby
will be reasonably satisfactory in form and substance to the Company;
(i) the Stockholders shall have received a tax opinion
from Graydon, Head & Ritchey LLP confirming that the Merger will
constitute a "reorganization" within the meaning of Section 368(a) of
the Code, substantially in the form attached hereto as Exhibit J; and
-66-
(j) the Parent and each of the Stockholders shall
have entered into a Registration Rights Agreement in form and substance
as set forth in Exhibit K.
The Company may waive any condition specified in this Section
7.2 if it executes a writing so stating at or prior to the Closing. The
Stockholders agree that they are obligated to consummate the transactions to be
performed by him, her or it in connection with the Closing upon determination by
the Company that the foregoing conditions, to the extent not waived by the
Company, have been satisfied.
8. Remedies for Breaches of This Agreement.
8.1. Survival of Representations and Warranties. Except as
specifically provided herein, all of the representations and warranties of the
Parties contained in Section 3 hereof shall survive the Closing (even if the
damaged Party knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect forever
thereafter (subject to any applicable statutes of limitations); provided,
however, that the representations made by each Stockholder pursuant to Section
3.1(d) hereof shall survive the Closing only for a period of twelve (12) months
and shall thereafter be of no further force or effect. The representations and
warranties of the Company contained in Section 4 hereof (other than Sections
4.10 and 4.23 hereof) shall survive the Closing hereunder (even if the Parent
knew or had reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect for a period of twelve
(12) months thereafter. The representations and warranties contained in Sections
4.10 and 4.23 hereof shall survive the Closing hereunder (even if the Parent
knew or had reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect for a period of
thirty-six (36) months thereafter.
8.2. Indemnification Provisions for Benefit of the Parent.
(a) In the event of any breach of the representations,
warranties and covenants contained in Sections 4 and 5 hereof, and if there is
an applicable survival period pursuant to Section 8.1 hereof, provided that the
Parent makes a written claim for indemnification against the Stockholders
pursuant to Section 11.8 hereof within such survival period, then the
Stockholders agree to indemnify the Parent from and against the entirety of any
Adverse Consequences the Parent may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences the Parent may
suffer after the end of any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the breach, provided,
however, that, with respect to breaches of the representations and warranties
contained in Section 4 hereof, (i) the Stockholders shall have no liability to
the Parent hereunder until, and only to the extent that, the Parent's aggregate
Damages exceed Two Hundred Fifty Thousand Dollars ($250,000); provided further,
however, that the limitation of this clause (i) shall not apply to the
Stockholders' liability to indemnify the Parent for Adverse Consequences arising
from any breach of the representation and warranty set forth in Section 4.3
hereof (determined without regard to any qualification for materiality or
Material Adverse Effect, or for any disclosure in the Disclosure Schedule) as a
result of the lessor under the lease described in item 4(b) of Schedule 4.3 of
the Disclosure Schedule not having received notice of, or not consenting to, the
transactions contemplated by this Agreement, (ii) the maximum aggregate
liability of the Stockholders hereunder shall be Five Million Dollars
-67-
($5,000,000), and (iii) the Series D Stockholders shall have no liability with
respect to such breaches, as to which the Series A Stockholders and the Series B
Stockholders shall be jointly and severally liable. Claims for indemnification
under this Section 8.2(a) shall be the Parent's sole remedy for any breach of
the representations, warranties contained in Section 4 hereof.
(b) In the event any Stockholder breaches any of his,
her or its representations and warranties contained in Section 3.1 herein,
provided that the Parent makes a written claim for indemnification against such
Stockholder pursuant to Section 11.8, then that Stockholder severally and not
jointly agrees to indemnify the Parent from and against the entirety of any
Adverse Consequences the Parent may suffer through and after the date of the
claim for indemnification resulting from, arising out of, relating to, in the
nature of, or caused by the breach. The Parent shall be entitled to satisfy such
claim from amounts of Escrowed Property withheld from distributions to be made
to such Stockholder pursuant to Section 2.6(c)(iii) hereof, and otherwise, the
Parent shall proceed directly against any Stockholder with respect to any claim
for indemnification under this Section 8.2(b).
(c) In the event any of the Stockholders breaches any of
his, her or its covenants set forth in this Agreement, such Stockholder
severally and not jointly agrees to indemnify the Parent from and against the
entirety of any Adverse Consequences the Parent may suffer through and after the
date of the claim for indemnification resulting from, arising out of, relating
to, in the nature of, or caused by the breach. The Parent shall be entitled to
satisfy such claim from amounts of Escrowed Property withheld from distributions
to be made to such Stockholder pursuant to Section 2.6(c)(iii) hereof, and
otherwise, the Parent shall proceed directly against any Stockholder with
respect to any claim for indemnification under this Section 8.2(c).
(d) (i) The Series A Stockholders and the Series B
Stockholders agree to indemnify the Parent from and against any Adverse
Consequences the Parent may suffer through and after the date of the claim for
indemnification arising directly out of the indemnification provisions of the
Louisville Contract and the Lexington Contract (or the indemnification
provisions of any other sale contract with respect to the Lexington Stations or
the Louisville Station).
(ii) The Series A Stockholders agree to
indemnify the Parent from and against any Adverse Consequences the Parent may
suffer through and after the date of the claim for indemnification arising
directly out of the indemnification provisions of the Cincinnati Contract,
including any adverse tax consequences arising from the transactions
contemplated by the Cincinnati Contract.
(e) Any indemnification claim arising under Section
8.2(a) hereof (other than any such claim arising from the breach of a covenant
set forth in Section 5 hereof) shall be paid out of the Escrowed Property (and
the accrued interest thereon), provided that, to the extent that the Escrowed
Property (and the accrued interest thereon) is insufficient to cover such claim
as a result of the adjustment set forth in Section 2.6(a) hereof, each Series A
Stockholder and Series B Stockholder shall be obligated to pay to the Parent
his, her or its pro rata portion of the amount by which such claim exceeds the
Escrowed Property (and accrued interest thereon).
-68-
8.3. Indemnification Provisions for Benefit of the
Stockholders. In the event the Parent breaches any of its representations,
warranties, and covenants contained herein, and, if there is an applicable
survival period pursuant to Section 8.1 hereof, provided that any of the
Stockholders makes a written claim for indemnification against the Parent
pursuant to Section 11.8 hereof within such survival period, then the Parent
agrees to indemnify each of the Stockholders from and against the entirety of
any Adverse Consequences the Stockholder may suffer through and after the date
of the claim for indemnification (including any Adverse Consequences such
Stockholder may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by the
breach.
8.4. Matters Involving Third Parties.
(a) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to assume
the defense of the Third Party Claim with counsel of his, her or its choice
reasonably satisfactory to the Indemnified Party at any time within 15 days
after the Indemnified Party has given notice of the Third Party Claim; provided,
however, that the Indemnifying Party must conduct the defense of the Third Party
Claim actively and diligently thereafter in order to preserve its rights in this
regard; and, provided further, however, that the Indemnified Party may retain
separate co-counsel at its sole cost and expense and participate in the defense
of the Third Party Claim.
(c) So long as the Indemnifying Party has assumed and is
conducting the defense of the Third Party Claim in accordance with Section
8.4(b) hereof, (i) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be withheld
unreasonably) unless the judgment or proposed settlement involves only the
payment of money damages by one or more of the Indemnifying Parties and does not
impose an injunction or other equitable relief upon the Indemnified Party and
(ii) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be withheld
unreasonably).
(d) In the event none of the Indemnifying Parties
assumes and conducts the defense of the Third Party Claim in accordance with
Section 8.4(b) hereof, however, (i) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner he or it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith) and (ii) the
Indemnifying Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising
-69-
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Section 8.
8.5. Determination of Adverse Consequences. The Parties shall
make appropriate adjustments for tax consequences and insurance coverage and
take into account the time cost of money (using the Applicable Rate as the
discount rate) in determining Adverse Consequences for purposes of this Section
8.
8.6. Exclusive Remedy. The remedies provided in Sections 8.1
through 8.5 hereof are intended to be the sole remedies of the Parties as to the
other Parties subsequent to the Closing Date as to all matters arising out of
the breach of any representations, warranties or covenants contained in this
Agreement, except as expressly specified to the contrary in this Section 8.6. In
the event that all conditions set forth in Section 7 hereof are satisfied on or
before the Final Closing Date and the Closing of the transactions is not
consummated as a result of actions taken by the Company or Stockholders, the
Parent shall be entitled to seek as against the Company and Stockholders all
remedies normally available to a party for breach of a contract, including but
not limited to specific performance and damages proximately caused by the
breach. In the event that all conditions set forth in Section 7 hereof are
satisfied on or before the Final Closing Date and the Closing of the
transactions is not consummated as a result of actions taken by the Parent, the
Company's and the Stockholders' sole and exclusive remedy shall be as set forth
in Section 10.2 hereof. Each of the Stockholders hereby agrees that he, she or
it will not make any claim for indemnification against the Company and its
Subsidiaries by reason of the fact that he, she or it was a director, officer,
employee, or agent of any such entity or was serving at the request of any such
entity as a partner, trustee, director, officer, employee, or agent of another
entity (whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses, or otherwise and whether such
claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, complaint, claim, or
demand for indemnification by such Stockholder pursuant to this Section 8
brought by the Parent against such Stockholder (whether such action, suit,
proceeding, complaint, claim, or demand is pursuant to this Agreement,
applicable law, or otherwise).
9. Tax Matters. The following provisions shall govern the
allocation of responsibility as between the Parent and the Stockholders for
certain tax matters following the Closing Date:
9.1. Tax Periods Ending on or Before the Closing Date. The
Parent shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the Company and its Subsidiaries for all periods ending on or
prior to the Closing Date which are filed after the Closing Date. The
Stockholders shall reimburse the Parent for (a) Taxes of the Company and its
Subsidiaries with respect to such periods within fifteen (15) days after payment
by the Parent or the Company and its Subsidiaries of such Taxes to the extent
such Taxes are not reflected in the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Final Adjustment Statement, and
(b) for all cost and expenses incurred by the Parent in connection with the
Parent's preparation of Tax Returns pursuant to this Section 9.1.
-70-
9.2. Tax Periods Beginning Before and Ending After the
Closing Date. The Parent shall prepare or cause to be prepared and file or cause
to be filed any Tax Returns of the Company and its Subsidiaries for Tax periods
which begin before the Closing Date and end after the Closing Date. The
Stockholders shall pay to the Parent within fifteen (15) days after the date on
which Taxes are paid with respect to such periods an amount equal to the portion
of such Taxes which relates to the portion of such Tax period ending on the
Closing Date to the extent such Taxes are not reflected in the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) shown on the face of the Final
Adjustment Statement. For purposes of this Section 9, in the case of any Taxes
that are imposed on a periodic basis and are payable for a Tax period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such Tax period ending on the Closing Date shall (a)
in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Tax period
multiplied by a fraction the numerator of which is the number of days in the Tax
period ending on the Closing Date and the denominator of which is the number of
days in the entire Tax period, and (b) in the case of any Tax based upon or
related to income or receipts be deemed equal to the amount which would be
payable if the relevant Tax period ended on the Closing Date. Any credits
relating to a Tax period that begins before and ends after the Closing Date
shall be taken into account as though the relevant Tax period ended on the
Closing Date. All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with prior practice of the
Company and its Subsidiaries.
9.3. Cooperation on Tax Matters.
(a) The Parent, the Company and its Subsidiaries and the
Stockholders shall cooperate fully, as and to the extent reasonably requested by
the other Party, in connection with the filing of Tax Returns pursuant to this
Section 9 and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other Party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. The Stockholders agree (i) to retain all
books and records in their possession with respect to Tax matters pertinent to
the Company and its Subsidiaries relating to any taxable period beginning before
the Closing Date until the expiration of the statute of limitations (and, to the
extent notified by the Parent, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority, and (ii) to give the Parent reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if the
other party so requests, the Stockholders shall allow the Parent to take
possession of such books and records.
(b) The Parent and the Stockholders further agree, upon
request, to use their best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(c) The Parent and the Stockholders further agree, upon
request, to provide the other party with all information that either party may
be required to report pursuant to ss.6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
-71-
9.4. Tax Sharing Agreements. All tax sharing agreements or
similar agreements with respect to or involving the Company and its Subsidiaries
shall be terminated as of the Closing Date and, after the Closing Date, the
Company and its Subsidiaries shall not be bound thereby or have any liability
thereunder.
9.5. Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement, shall be paid equally by
the Stockholders and the Parent when due. The Stockholders will file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, the Parent will, and will cause its Affiliates to,
join in the execution of any such Tax Returns and other documentation. The
expense of such filings (including fees payable in connection with Section 5.23
hereof) shall be borne equally by the Stockholders and the Parent.
10. Termination.
10.1. Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(a) the Parent and the Company may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) the Parent may terminate this Agreement by giving
written notice to the Company and to the Stockholders' Representatives
at any time prior to the Closing (i) in the event any of the
Stockholders or the Company has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Parent has notified the Company and the Stockholders'
Representatives in writing of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach, (ii)
if the Parent has the right to terminate this Agreement pursuant to
Sections 5.8, 5.11 or 5.19 hereof, or (iii) if the Closing shall not
have occurred on or before the Final Closing Date by reason of the
failure of any condition precedent under Section 7.1 hereof (unless the
failure results primarily from the Parent itself breaching any
representation, warranty, or covenant contained in this Agreement); and
(c) the Company may terminate this Agreement by giving
written notice to the Parent at any time prior to the Closing (i) in
the event the Parent has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Company has notified the Parent of the breach, and the
breach has continued without cure for a period of 30 days after the
notice of breach or (ii) if the Closing shall not have occurred on or
before the Final Closing Date by reason of the failure of any condition
precedent under Section 7.2 hereof (unless the failure results
primarily from any of the Stockholders or the Company breaching any
representation, warranty, or covenant contained in this Agreement;
provided, however, that if the Closing has not occurred solely as the
result of the condition set forth in Section 7.2(i) hereof not having
been satisfied, and the Closing has not been delayed by the Parent
pursuant to clause (b) of Section 2.3 hereof, the Parent shall have the
right, at its option, to increase the number of Parent Class D Shares
-72-
constituting the Aggregate Stock Merger Consideration so as to cause
such condition to be satisfied), and, further provided, however, that
if the Closing has not occurred solely as a result of the condition set
forth in Section 7.2(i) hereof not having been satisfied and the
Closing has been delayed by the Parent pursuant to clause (b) of
Section 2.3 hereof, the Parent shall increase the number of Parent
Class D Shares constituting the Aggregate Merger Consideration so as to
cause such condition to be satisfied. In the event that additional
Parent Class D Shares are issued pursuant to the preceding sentence,
then such shares shall be issued to the Series A Stockholders, the
Series B Stockholders and the Series D Stockholders in the same
proportions as the Parent Class D Shares were to be issued to them as
if the additional shares were not being issued.
10.2. Effect of Termination.
(a) If this Agreement is terminated pursuant to Sections
10.1(a), 10.1(b)(ii), 10.1(b)(iii) or 10.1(c)(ii) hereof, all rights and
obligations of the Parties hereunder shall terminate without any liability of
any Party to any other Party (except for any liability of any Party then in
breach).
(b) If the Parent has the right to terminate this
Agreement pursuant to Section 10.1(b)(i) hereof, then, at the Parent's election,
in addition to any other remedy available to it, the Parent shall be entitled to
an injunction restraining any such breach or threatened breach and, subject to
obtaining any requisite approval of the FCC, to enforcement of this Agreement by
a decree of specific performance requiring the Company and the Stockholders to
fulfill their respective obligations under this Agreement, in each case without
the necessity of showing economic loss or other actual damage and without any
bond or other security being required. The remedies provided the Parent in this
Agreement shall be cumulative and shall not preclude the assertion by the Parent
of any other rights or the seeking of any other remedies against the
Stockholders.
(c) If the Company terminates this Agreement pursuant to
Section 10.1(c)(i) hereof, then, the Company shall be entitled to the liquidated
damages as set forth in Section 2.2(b) hereof; provided, however, that, if the
Company terminates this Agreement pursuant to Section 10.1(c)(i) hereof after
the Closing has been delayed by the Parent pursuant to clause (b) of Section 2.3
hereof, the Parent shall pay to the Company, in addition to the liquidated
damages set forth in Section 2.2(b) hereof, cash in the amount of Ten Million
Dollars ($10,000,000.00).
11. Miscellaneous.
11.1. Nature of Certain Obligations. The representations and
warranties of each of the Stockholders in Section 3.1 hereof concerning the
transaction are several obligations. This means that the particular Stockholder
making the representation or warranty will be solely responsible to the extent
provided in Section 8 hereof for any Adverse Consequences the Parent may suffer
as a result of any breach thereof.
11.2. Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to
-73-
the Closing without the prior written approval of the Parent and the
Stockholders; provided, however, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other
Parties prior to making the disclosure).
11.3. No Third-Party Beneficiaries. Except as set forth in
Sections 6.8, 6.9 and 6.11 hereof, this Agreement shall not confer any rights or
remedies upon any Person other than the Parties and their respective successors
and permitted assigns.
11.4. Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the Parties
and supersedes any prior negotiations, understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof.
11.5. Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of his, her or its rights, interests, or obligations hereunder
without the prior written approval of the Parent and the Stockholders; provided,
however, that the Parent may (a) assign any or all of its rights and interests
hereunder to (i) one or more of its Affiliates or (ii) the Senior Lenders as
collateral, and (b) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Parent nonetheless shall
remain responsible for the performance of all of its obligations hereunder), but
in no event shall such an assignment be permitted if it would result in delaying
the Closing.
11.6. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.7. Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.8. Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
to the Company: Mr. L. Ross Love
Chairman, CEO & President
Blue Chip Broadcasting, Inc.
1821 Summit Road, Suite 401
Cincinnati, OH 45237
-74-
with a copy to: Paul F. Solomon, Esq.
General Counsel
Blue Chip Broadcasting, Inc.
1821 Summit Road, Suite 401
Cincinnati, OH 45237
Richard G. Schmalzl, Esq.
Graydon, Head & Ritchey LLP
1900 Fifth Third Center
511 Walnut Street
Cincinnati, Ohio 45202
to the Stockholders: L. Ross Love (as the Series A
Stockholders' Representative)
Blue Chip Broadcasting, Inc.
1821 Summit Road, Suite 401
Cincinnati, OH 45237
Nils Larsen (as the Series B
Stockholders' Representative)
Equity Group Investments, LLC
Two North Riverside Plaza,
6th Floor
Chicago, IL 60606
Lauren Tyler (as the Series D
Stockholders' Representative)
Quetzal/J. P. Morgan Capital
Partners, L.L.C.
1221 Avenue of the Americas,
40th Floor
New York, NY 10020
to the Parent: Alfred C. Liggins, III
CEO/President
Radio One, Inc.
5900 Princess Garden Parkway,
8th Floor
Lanham, MD 20706
with copies to: Linda J. Eckard Vilardo, Esquire
General Counsel
Radio One, Inc.
5900 Princess Garden Parkway,
8th Floor
Lanham, MD 20706
and
Scott R. Royster
Chief Financial Officer/Executive
Vice President
Radio One, Inc.
5900 Princess Garden Parkway,
8th Floor
Lanham, MD 20706
-75-
or to such other address as any party may have furnished to the other in
writing, in accordance herewith.
Any Party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
11.9. Stockholders' Representatives.
(a) Appointment and Authority. The Series A
Stockholders, for themselves and their personal representatives and other
successors, hereby constitute and appoint L. Ross Love (the "Series A
Stockholders' Representative"), the Series B Stockholders, for themselves and
their personal representatives and other successors, hereby constitute and
appoint Nils Larsen (the "Series B Stockholders' Representative") and the Series
D Stockholders, for themselves and their personal representatives and other
successors, hereby constitute and appoint Lauren Tyler (the "Series D
Stockholders' Representative") (each, a "Stockholders' Representative" and,
collectively, the "Stockholders' Representatives") with full power and authority
(including power of substitution), except as otherwise expressly provided in
this Agreement, in the name of and for and on behalf of the Stockholders or in
their own name as Stockholders' Representatives, to take all actions required or
permitted to be taken by the Stockholders, or any of them, under this Agreement
(including the giving and receiving of all reports, notices and consents
hereunder). Any action taken or document executed by the Stockholders'
Representatives shall be valid and binding only if agreed to in writing or
executed by all of the Stockholders' Representatives. The authority conferred
under this Section 11.9 is an agency coupled with an interest, and all authority
conferred hereby is irrevocable and not subject to termination by the
Stockholders, or by any of them, or by operation of law, whether by the death or
incapacity of any Stockholder, the termination of any trust or estate, or the
occurrence of any other event. If any Stockholder should die or become
incapacitated, if any trust or estate should terminate, or if any other such
event should occur, any action taken by the Stockholders' Representatives
pursuant to this Section 11.9 shall be as valid as if such death or incapacity,
termination or other event had not occurred, regardless of whether or not the
Stockholders' Representatives or the Parent shall have received notice of such
death, incapacity, termination or other event. Any notice given to the
Stockholders' Representatives pursuant to Section 11.8 hereof shall constitute
effective notice to all Stockholders, and the Parent or any other person may
rely on any notice, consent, election or other communication received from the
Stockholders' Representatives as if it had been received from all Stockholders
on whose behalf it was given.
(b) Successors. A Stockholders' Representative may
resign upon twenty (20) days' prior written notice to the Parent and each other
Stockholder. Upon the death, resignation, removal or incapacity of a
Stockholders' Representative, the Stockholders of the series of the Company's
Common Stock who appointed such Stockholders' Representative shall appoint a
successor Stockholders' Representative, by written consent of the holders of a
majority of the
-76-
outstanding shares of such series immediately prior to the Effective Time, and
any successor Stockholders' Representative so appointed shall, with the
surviving Stockholders' Representative, constitute the Stockholders'
Representatives to the same effect as if originally named in this Section 11.9.
The Stockholders of the series of the Company's Common Stock who appointed such
Stockholders' Representative may remove its Stockholders' Representative at any
time, by written consent of the holders of a majority of the outstanding shares
of such series immediately prior to the Effective Time. The remaining
Stockholders' Representatives shall give the Parent written notice of the
appointment or removal of any Stockholders' Representative pursuant to this
Section 11.9, including a copy of the written consent of the Stockholders having
the power to so appoint or remove such Stockholders' Representative relating
thereto, as soon as practicable after any such appointment or removal, and such
appointment or removal shall not be effective as against the Parent or the other
Stockholders until such notice shall have been given, unless the Parent or the
other Stockholders shall have actual knowledge of such appointment or removal.
11.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.
11.11. Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by the Parent and the Stockholders. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
11.12. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
11.13. Expenses. Each of the Parties will bear its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby.
11.14. Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
11.15. Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
-77-
[Signature Page Follows]
-78-
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
date first above written.
RADIO ONE, INC.
By: /s/ Alfred C. Liggins, III
---------------------------------------
Name: Alfred C. Liggins, III
Title: President
BLUE CHIP MERGER SUBSIDIARY, INC.
By: /s/Alfred C. Liggins, III
---------------------------------------
Name: Alfred C. Liggins, III
Title: President
BLUE CHIP BROADCASTING, INC.
By: /s/ L. Ross Love
---------------------------------------
Name: L. Ross Love
Title: Chairman, CEO and President
SERIES A STOCKHOLDERS:
/s/ L. Ross Love
--------------------------------------------
L. Ross Love
/s/ Cheryl H. Love
--------------------------------------------
Cheryl H. Love
/s/ Lovie L. Ross
--------------------------------------------
Lovie L. Ross
LRC LOVE LIMITED PARTNERSHIP
By: /s/ L. Ross Love
---------------------------------------
Name: L. Ross Love
Title: General Partner
LOVE FAMILY LIMITED PARTNERSHIP
By: /s/ L. Ross Love
---------------------------------------
Name: L. Ross Love
Title: General Partner
WINDINGS LANE PARTNERSHIP, LTD
By: /s/ J. Kenneth Blackwell
---------------------------------------
Name: J. Kenneth Blackwell
Title: General Partner
/s/ J. Kenneth Blackwell
--------------------------------------------
J. Kenneth Blackwell
/s/ Calvin D. Buford
--------------------------------------------
Calvin D. Buford
BUFORD FAMILY LIMITED PARTNERSHIP
By: /s/ Calvin D. Buford
--------------------------------------
Name: Calvin D. Buford
Title: General Partner
/s/ Thomas Revely, III
--------------------------------------------
Thomas Revely, III
/s/ C. Howard Buford
--------------------------------------------
C. Howard Buford
/s/ Vada Hill
--------------------------------------------
Vada Hill
/s/ George C. Hale, Sr.
--------------------------------------------
George C. Hale, Sr.
/s/ Steven R. Love
--------------------------------------------
Steven R. Love
/s/ Stephen E. Kaufmann
--------------------------------------------
Stephen E. Kaufmann
/s/ R. Dean Meiszer
--------------------------------------------
R. Dean Meiszer
SERIES B STOCKHOLDERS:
TREBUCHET CORPORATION
By: /s/ Frank E. Wood
-----------------------------------------
Name: Frank E. Wood
Title: President
TORCHSTAR COMMUNICATIONS, LLC
By: /s/ Peter C. B. Bynoe
-----------------------------------------
Name: Peter C. B. Bynoe
Title: Manager
BLUE CHIP VENTURE FUNDS PARTNERSHIP
By: /s/ John H. Wyant
-----------------------------------------
Name: John H. Wyant
Title: Managing Director
EGI-FUND (99) INVESTORS, L.L.C.
By: /s/ Donald J. Liebentritt
-----------------------------------------
Name: Donald J. Liebentritt
Title: Vice President
SERIES D STOCKHOLDERS:
QUETZAL/J. P. MORGAN PARTNERS, L.P.
By: /s/ Reginald J. Hollinger
-----------------------------------------
Name: Reginald J. Hollinger
Title: Managing Member
DISCLOSURE SCHEDULE
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
CONCERNING BLUE CHIP BROADCASTING, INC.
Schedule 1(b)(i)
to Merger Agreement
KNOWLEDGE - COMPANY
L. Ross Love -- Chief Executive Officer and President
Paul F. Solomon -- Vice President - General Counsel and Secretary
Geoffrey Morgan -- Chief Financial Officer and Treasurer
Cheryl Love -- Vice President - Human Resources, Administration and
Information Technology
Schedule 1(b)(iii)
to Merger Agreement
KNOWLEDGE - PARENT
Alfred C. Liggins
Scott R. Royster
Linda Eckard Vilardo
Schedule 3.2(e) to
Merger Agreement
PARENT CAPITALIZATION
Options exercisable for 237,027 shares of class A common stock.
Options exercisable for 1,028,633 shares of class D common stock.