EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 14, 2001
TABLE OF CONTENTS
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<Caption>
PAGE
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ARTICLE 1. DEFINITIONS................................................. 1
1.1. Definitions................................................. 1
ARTICLE 2. PURCHASE AND SALE; MERGERS.................................. 7
2.1. Purchased Assets............................................ 7
2.2. Excluded Assets............................................. 9
2.3. Assumed Liabilities and Assumed Commitments................. 9
2.4. Excluded Liabilities........................................ 10
2.5. Mt. Juliet Merger........................................... 11
2.6. Phoenix Merger.............................................. 11
2.7. Effective Time.............................................. 11
2.8. Effects of the Mergers...................................... 11
2.9. Certificates of Incorporation and By-Laws................... 11
2.10. Directors and Officers...................................... 11
2.11. Tax Consequences............................................ 11
ARTICLE 3. PURCHASE PRICE.............................................. 12
3.1. Purchase Price.............................................. 12
3.2. Determination of Final Balance Sheet........................ 12
3.3. Payment of Purchase Price and Agreed Adjustment Amounts..... 13
3.4. Allocation of Purchase Price and Assumed Liabilities........ 14
3.5. Confirmation of Assumed Liabilities......................... 14
3.6. Payment of Certain Taxes and Expenses....................... 15
3.7. Limit on Buyer Obligation................................... 15
ARTICLE 4. CLOSING..................................................... 16
4.1. Closing..................................................... 16
4.2. Documents to be Delivered to Buyer.......................... 16
4.3. Documents to be Delivered to Seller......................... 18
4.4. Form of Documents........................................... 19
ARTICLE 5. REPRESENTATIONS AND WARRANTIES REGARDING SELLER............. 19
5.1. Organization; Authority; Agreement Binding.................. 19
5.2. Organization and Operation of Merged Companies and Phoenix
of Hendersonville........................................... 19
5.3. Ownership Interests and Related Matters..................... 20
5.4. Absence of Conflicts........................................ 20
5.5. No Violation, Litigation or Regulatory Action............... 21
5.6. Financial Statements........................................ 21
5.7. No Undisclosed Liabilities.................................. 22
5.8. Operations Since December 31, 2000.......................... 22
5.9. Taxes....................................................... 23
5.10. Title to and Condition of Assets............................ 24
5.11. Real Property............................................... 25
5.12. Personal Property........................................... 26
5.13. Personal Property Leases.................................... 26
5.14. Governmental Permits........................................ 26
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<Table>
<Caption>
PAGE
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5.15. Intellectual Property....................................... 27
5.16. Employees and Related Agreements............................ 28
5.17. Employee Relations.......................................... 30
5.18. Contracts................................................... 31
5.19. Status of Contracts......................................... 32
5.20. Environmental Matters....................................... 32
5.21. No Advisor.................................................. 33
5.22. Bank Accounts, Guarantees and Powers........................ 33
5.23. Insurance................................................... 33
5.24. Indebtedness of Insiders.................................... 33
5.25. Compliance with FCC Requirements............................ 33
5.26. Books and Records........................................... 34
5.27. DBBC's Investment Intent.................................... 34
5.28. Disclosure.................................................. 34
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF BUYER..................... 34
6.1. Organization of Buyer....................................... 34
6.2. Authority of Buyer; Agreement Binding....................... 34
6.3. Capitalization.............................................. 34
6.4. Absence of Buyer Conflicts.................................. 35
6.5. No Litigation............................................... 35
6.6. No Advisor.................................................. 35
6.7. Disclosure.................................................. 35
ARTICLE 7. ACTION PRIOR TO THE CLOSING DATE............................ 35
7.1. Investigation of Seller by Buyer............................ 35
7.2. Preserve Accuracy of Representations and Warranties......... 36
7.3. Consents of Third Parties................................... 36
7.4. Operations Prior to the Closing Date........................ 36
7.5. Antitrust Law Compliance.................................... 37
7.6. FCC Consent and Control of Stations......................... 38
7.7. Other Governmental Approvals................................ 38
7.8. Environmental Audits........................................ 38
7.9. Shareholder Meeting; SEC Filings............................ 39
ARTICLE 8. CONDITIONS TO CLOSING....................................... 39
8.1. Conditions to the Obligations of Buyer...................... 39
8.2. Conditions to the Obligations of Seller..................... 41
8.3. Reimbursement of Expenses................................... 42
ARTICLE 9. ADDITIONAL AGREEMENT OF THE PARTIES......................... 42
9.1. Conveyance and Transfer of Owned Real Property.............. 42
9.2. Taxes....................................................... 43
9.3. Business Employees and Employee Benefit Plans............... 44
9.4. Post-Closing Remittances.................................... 45
9.5. Insurance After Closing..................................... 45
9.6. Financial, Sales and FCC Reports............................ 45
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<Table>
<Caption>
PAGE
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9.7. Public Announcement......................................... 45
9.8. Fees of Buyer's Counsel..................................... 46
ARTICLE 10. TERMINATION................................................. 46
10.1. Termination................................................. 46
10.2. Notice of Termination....................................... 46
10.3. Effect of Termination....................................... 46
ARTICLE 11. INDEMNIFICATION............................................. 47
11.1. Indemnification by Seller................................... 47
11.2. Indemnification by Buyer.................................... 47
11.3. Notice of Claims............................................ 48
11.4. Third Person Claims......................................... 48
11.5. Indemnification Funds....................................... 49
11.6. Exclusive Remedy............................................ 49
11.7. Subrogation................................................. 49
11.8. Adjustment to the Purchase Price............................ 49
ARTICLE 12. GENERAL PROVISIONS.......................................... 49
12.1. Notices..................................................... 49
12.2. Confidential Nature of Information.......................... 50
12.3. Entire Agreement; Amendments................................ 50
12.4. Successors and Assigns...................................... 51
12.5. Interpretation.............................................. 51
12.6. Waivers..................................................... 51
12.7. Expenses.................................................... 51
12.8. Partial Invalidity.......................................... 51
12.9. Execution in Counterparts................................... 52
12.10. Governing Law............................................... 52
12.11. Submission to Jurisdiction; Specific Performance............ 52
12.12. Further Assurances.......................................... 52
12.13. Access to Records after Closing............................. 52
12.14. Survival of Covenants and Agreements........................ 52
12.15. Actions of Buyer............................................ 53
</Table>
EXHIBITS
<Table>
A -- Assumption Agreement
B -- Escrow Agreement
C -- Registration Rights Agreement
D -- Stock Warrant Agreement
</Table>
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of December, 14, 2001 (the
"Agreement") is executed by and among CUMULUS MEDIA INC., a corporation
incorporated under the laws of the State of Illinois ("Buyer"); MT. JULIET INC.,
a corporation incorporated under the laws of the State of Delaware ("MJI");
PHOENIX BROADCASTING INC., a corporation incorporated under the laws of the
State of Delaware ("PBI"); PHOENIX COMMUNICATIONS GROUP, INC., a corporation
incorporated under the laws of the State of Delaware ("Phoenix"); MT. JULIET
BROADCASTING, INC., a corporation incorporated under the laws of the State of
Tennessee ("Mt. Juliet"); and DBBC, L.L.C., a limited liability company formed
under the laws of the State of Georgia and the sole shareholder of Phoenix and
Mt. Juliet ("DBBC" or "Seller").
WHEREAS, DBBC is engaged in the business of radio broadcasting and
presently owns, among other things, (i) the assets of commercial radio broadcast
station WRQQ(FM) in Goodlettsville, Tennessee ("WRQQ"), (ii) all of the shares
of stock of Mt. Juliet, which owns and operates commercial radio broadcast
station WNPL(FM) in Belle Meade, Tennessee ("WNPL"), and (iii) all of the shares
of stock of Phoenix;
WHEREAS, Phoenix presently owns all of the shares of stock of Phoenix of
Hendersonville, Inc., a corporation incorporated under the laws of the State of
Tennessee ("Phoenix of Hendersonville"), which owns and operates commercial
radio broadcast station WQQK(FM) in Hendersonville, Tennessee ("WQQK", and
together with WRQQ and WNPL, are collectively referred to as the "Stations");
WHEREAS, the acquisition of the Stations is subject to the prior approval
of the FCC and the other conditions set forth in this Agreement;
WHEREAS, Buyer, MJI and PBI desire to acquire the Stations (collectively
referred to as the "Business") in a series of transactions contemplated by this
Agreement, viz. (i) the purchase by Buyer from DBBC of substantially all of the
assets and assumption of certain liabilities related to the ownership and
operation of WRQQ; and (ii) the merger of Mt. Juliet with and into MJI; and
(iii) the merger of Phoenix with and into PBI, all on the terms and subject to
the conditions set forth herein; and
WHEREAS, DBBC desires to sell to Buyer the assets described in the
preceding paragraph, to merge Mt. Juliet with and into MJI, and to merge Phoenix
with and into PBI, on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, Buyer and Seller agree as follows:
ARTICLE 1
DEFINITIONS
1.1. Definitions. In this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1 and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"Action" means any claim, action, lawsuit, arbitration, or other judicial,
administrative or other legal proceeding or action, whether at law or in equity.
"Additional Accounting Firm" has the meaning specified in Section 3.2(d).
"Additional Accounting Firm Adjustments" has the meaning specified in
Section 3.2(d)(ii).
"Adjustment Escrowed Shares" has the meaning specified in Section 3.3(a).
"Advertising Agreements" has the meaning specified in Section 2.1(f).
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"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"Affiliate Indebtedness" has the meaning specified in Section 2.3(b).
"Agreed Adjustments" has the meaning specified in Section 3.2(d).
"Agreed GAAP Exceptions" has the meaning specified in Section 3.2(a).
"Agreement" has the meaning specified in the first paragraph of this
Agreement.
"Assumed Commitments" has the meaning specified in Section 2.3(c).
"Assumed Liabilities" has the meaning specified in Section 2.3.
"Assumption Agreement" means the Assumption Agreement in the form of
Exhibit A between Buyer and DBBC.
"Average Cumulus Stock Price" means the volume weighted average of the
closing prices for Cumulus Common Stock on the NASDAQ National Market for the
fifteen (15) full trading days ending on the fifth full trading day prior to the
Closing Date.
"Balance Sheet Net Book Value" means Four Million, Six Hundred Fifty Eight
Thousand, Six Hundred Twenty Eight and 00/100 United States Dollars
(US$4,658,628.00).
"Bill of Sale and Assignment Agreement" means the Bill of Sale and
Assignment in form and substance reasonably acceptable to Seller and Buyer.
"Business" has the meaning specified on the first page in the fifth
paragraph of this Agreement.
"Business Employees" has the meaning specified in Section 9.3(a).
"Business Agreements" has the meaning specified in Section 5.19.
"Buyer" has the meaning specified in the first paragraph on the first page
of this Agreement.
"Buyer Ancillary Agreements" means all agreements, instruments and
documents being or to be executed and delivered by Buyer under this Agreement or
in connection herewith.
"Buyer Group Member" means Buyer and its Affiliates, directors, officers,
employees, agents, attorneys and consultants and their respective successors and
assigns.
"Buyer Proxy Statement" has the meaning specified in Section 7.9.
"Buyer Shareholders Meeting" has the meaning specified in Section 7.9.
"Buyer Tax Opinion Certificate" has the meaning specified in Section
4.3(i).
"Buyer's Accounting Report" has the means specified in Section 3.2(b).
"Buyer's Audited Closing Date Balance Sheet" has the meaning specified in
Section 3.2(b).
"Capped Amount" has the meaning specified in Section 3.7.
"Certificates of Merger" has the meaning specified in Section 2.7.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. sec.sec. 9601 et seq., any amendments thereto, any
state analogs thereto, and any regulations promulgated thereunder.
"CIT Indebtedness" has the meaning specified in Section 2.3(b).
"CIT Loan Documents" has the meaning specified in Section 5.18(d).
"Claim" has the meaning specified in Section 11.3.
"Claim Notice" has the meaning specified in Section 11.3.
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"Clean Air Act" means the Clean Air Act, 42 U.S.C. sec. 7401 et seq., any
amendments thereto, including the Clean Air Act Amendments of 1990, any state
analogs thereto, and any regulations promulgated thereunder.
"Clean Water Act" means the Federal Water Pollution Control Act, 33 U.S.C
sec.sec. 1251 et seq., any amendments thereto, any state analogs thereto, and
any regulations promulgated thereunder.
"Closing" has the meaning specified in Section 4.1(a).
"Closing Date" has the meaning specified in Section 4.1(a).
"COBRA Obligations" has the meaning specified in Section 9.3(f).
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" has the meaning specified in Section 12.2.
"Contaminant" means any waste, pollutant, hazardous or toxic substance or
waste, petroleum, petroleum-based substance or waste, special waste, or any
constituent of any such substance or waste and any material the exposure to,
presence, use, generation, treatment, storage, release, disposal, handling,
clean-up or remediation of which is regulated by any Environmental Law.
"Contracts" has the meaning specified in Section 2.1(g).
"Controlled Group" has the meaning specified in Section 5.16(b).
"Court Order" means any judgment, order, award or decree of any federal,
state, local or other court or tribunal and any award in any arbitration
proceeding.
"Cumulus Common Stock" means each share of Class A Common Stock, $.01 par
value per share, of Buyer.
"December 31, 2000 Balance Sheet" has the meaning specified in Section
5.6(a).
"Delaware Secretary" has the meaning specified in Section 2.7.
"DBBC" has the meaning specified in the first paragraph on the first page
of this Agreement.
"DGCL" has the meaning specified in Section 2.5.
"Dickey Brothers" has the meaning specified in Section 5.3.
"Disclosure Schedule" means any of the Schedules to Article 5 of this
Agreement.
"DSMO" has the meaning specified in Section 3.6(a).
"Effective Time" has the meaning specified in Section 2.7.
"EEOC" has the meaning specified in Section 5.5(e).
"Employee Plan" has the meaning specified in Section 5.16(b).
"Encumbrance" means any lien, claim, charge, security interest, mortgage,
pledge, easement, conditional sale or other title retention agreement, defect in
title, covenant, assessment, imperfection, exception or other restriction of any
kind, but excluding any matter which has been or will be insured over by Buyer's
title insurance company.
"Environmental Audits" has the meaning specified in Section 7.8.
"Environmental Encumbrance" means an Encumbrance in favor of any
Governmental Body for (i) any liability under any Environmental Law, or (ii)
damages arising from, or costs incurred by such Governmental Body in response
to, a Release or threatened Release of a Contaminant into the indoor or outdoor
environment.
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"Environmental Law" means all Requirements of Law derived from or relating
to all foreign, federal, state and local laws or regulations relating to or
addressing protection of human health or the environment, including but not
limited to common law, CERCLA, Clean Air Act, Clean Water Act, EPCRA, OSHA,
RCRA, NEPA and TSCA and any state analogs thereto, and any applicable foreign or
international laws, regulations, policies or treaties.
"EPCRA" means the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. sec.sec. 11001 et seq., any amendments thereto, any state
analogs thereto, and any regulations promulgated thereunder.
"ERISA" has the meaning specified in Section 5.16(b).
"Escrow Account" has the meaning specified in Section 3.3(a).
"Escrow Agent" has the meaning specified in Section 3.3(a).
"Escrow Agreement" has the meaning specified in Section 3.3(a).
"Escrowed Shares" has the meaning specified in Section 3.3(a).
"Estimated Assumed Liabilities Balance Sheet" has the meaning specified in
Section 2.3.
"Excluded Assets" has the meaning specified in Section 2.2.
"Excluded Liabilities" has the meaning specified in Section 2.4.
"Expenses" means any and all reasonable expenses incurred in connection
with investigating, defending or asserting any Action (including, without
limitation, court filing fees, court costs, arbitration fees or costs, witness
fees, and the reasonable fees and disbursements of legal counsel, investigators,
expert witnesses, accountants and other professionals, costs or expenses
associated with activities of employees necessitated by such Action (excluding
indirect or overhead costs or expenses associated with such employees)).
"FCC" means the Federal Communications Commission.
"FCC Consent" means action by the FCC granting its consent to the
assignment or transfer of control of the FCC Licenses from Seller to Buyer.
"FCC Licenses" means all licenses, construction permits and authorizations
issued by the FCC and used or usable for the operation of the Stations.
"Final Balance Sheet" has the meaning specified in Section 3.2(c).
"Final Net Book Value" means the total assets of the Business less the
total liabilities of the Business as determined in accordance with GAAP, in each
case as set forth in the Final Balance Sheet.
"Final Order" means an FCC Consent, with respect to which no action,
request for stay, petition for rehearing or reconsideration, appeal or review by
the FCC on its own motion is pending and as to which the time for filing or
initiation of any such request, petition, appeal or review has expired.
"GAAP" means United States generally accepted accounting principles.
"Governmental Body" means any, federal, state, local or other governmental
authority, agency, commission, administrative body or regulatory body.
"Governmental Permits" has the meaning specified in Section 5.14(a).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"IRS" means the Internal Revenue Service.
"Improvements" has the meaning specified in Section 5.11(e).
"Indemnified Party" has the meaning specified in Section 11.3.
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"Indemnitor" has the meaning specified in Section 11.3.
"Indemnity Obligation Escrowed Shares" has the meaning specified in Section
3.3(a).
"Intellectual Property" has the meaning specified in Section 2.1(d).
"IRS" means the Internal Revenue Service.
"Knowledge of Seller" (or similar phrases) means matters known to any of
the officers and directors of the Seller, the Merged Companies or Phoenix of
Hendersonville, Lewis Dickey, David Dickey, John Dickey, Michael Dickey, after
due inquiry.
"Kraft" has the meaning specified in Section 3.6(a).
"Leased Real Property" has the meaning specified in Section 5.11(b).
"Losses" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, assessments, penalties, damages,
expenses, deficiencies or other charges actually and reasonably incurred, but
shall not include consequential or incidental damages.
"Material Adverse Effect" means a material adverse effect on (i) the
assets, consolidated results of operations or consolidated financial position of
the Business as a whole, or (ii) the value or condition of the Business taken as
a whole, or (iii) the availability of assets necessary to operate the Business
as a whole, in each case, other than by reason of one or more events,
circumstances, changes, developments, impairments or conditions that adversely
affect the radio broadcasting industry generally or any change in a Requirement
of Law or accounting principles.
"Maximum Assumed DBBC Liability Amount" means Twenty-one Million United
States Dollars (US$21,000,000), minus the Subsidiary Company Liabilities.
"Mergers" has the meaning specified in Section 2.6.
"Merged Company(ies)" means has the meaning specified in Section 2.6.
"Merged Company Tax Opinion Certificate" has the meaning specified in
Section 4.2(ee).
"Mid-TN Indebtedness" has the meaning specified in Section 2.3(b).
"MJI" has the meaning specified in the first paragraph of this Agreement.
"Mt. Juliet" has the meaning specified in the first paragraph of this
Agreement.
"Mt. Juliet Merger" has the meaning specified in Section 2.5.
"Negative Adjustment Amount" has the meaning specified in Section 3.1(c).
"NEPA" means the National Environmental Policy Act, any amendments thereto,
any state analogs thereto, and any regulations promulgated thereunder.
"Objection Period" has the meaning specified in Section 3.2(c).
"October 31, 2001 Balance Sheet" has the meaning specified in Section
5.6(a).
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C. sec.sec. 651
et seq., any amendments thereto, any state analogs thereto, and any regulations
promulgated thereunder.
"Owned Real Property" has the meaning specified in Section 5.11(a).
"Owned Real Property Permitted Encumbrances" means the Encumbrances
specifically set forth on Schedule 1.1(A) hereto.
"PBGC" has the meaning specified in Section 5.16(i).
"PBI" has the meaning specified in the first paragraph of this Agreement.
"Pension Plan" has the meaning specified in Section 5.16(b).
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"Permitted Encumbrances" means the Encumbrances specifically set forth on
Schedule 1.1(B) hereto.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or Governmental Body.
"Phoenix" has the meaning specified in the first paragraph on the first
page of this Agreement.
"Phoenix of Hendersonville" has the meaning specified in the third
paragraph on the first page of this Agreement.
"Phoenix Merger" has the meaning specified in Section 2.6.
"Positive Adjustment Amount" has the meaning specified in Section 3.1(b).
"Preliminary Balance Sheet" has the meaning specified in Section 3.2(a).
"Purchase Price" has the meaning specified in Section 3.1(a).
"Purchased Assets" has the meaning specified in Section 2.1.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C
sec.sec. 6901 et seq., any amendments thereto, any state analogs thereto, and
any regulations promulgated thereunder.
"Real Property" has the meaning specified in Section 5.11(b).
"Receivables" has the meaning specified in Section 2.1(c).
"Records" means files and records, including schematics, technical
information and engineering data, programming information, correspondence, books
of account, employment records, customer files, purchase and sales records and
correspondence, advertising records, files and literature, and FCC logs, files
and records and other written materials of Seller relating to the Business.
"Registration Rights Agreement" has the meaning specified in Section
4.3(g).
"Release" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of a Contaminant
into the environment or into, on or out of any real property, including the
movement of Contaminants through or in the air, soil, surface water, groundwater
or any real property.
"Remedial Action" means actions required to (i) clean up, remove, treat or
in any other way address Contaminants in the environment; (ii) prevent the
Release or threatened Release or minimize the further Release of Contaminants or
(iii) investigate and determine if a remedial response is needed and to design
such a response and post-remedial investigation, monitoring, operation and
maintenance and care.
"Requirements of Law" means any federal, state or local laws, statutes,
regulations, rules, rulings, codes or ordinances enacted, adopted, issued or
promulgated by any Governmental Body or court.
"Resolution Period" has the meaning specified in Section 3.2(d).
"Rules and Regulations" means the rules of the FCC as set forth in Title 47
of the Code of Federal Regulations and all policies of the FCC.
"SEC" has the meaning specified in Section 7.9.
"Seller" has the meaning specified in the first paragraph of this
Agreement.
"Seller Ancillary Agreements" means all agreements, instruments and
documents being or to be executed and delivered by Seller under this Agreement
or in connection herewith.
"Seller Financial Statements" has the meaning specified in Section 5.6(a).
"Seller Group Member" means Seller and its attorneys, consultants, members,
and permitted assigns.
"Seller Tax Opinion Certificate" has the meaning specified in Section
4.2(ff).
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"Stations" has the meaning specified in the third paragraph on the first
page of this Agreement.
"Stock Warrant Agreement" has the meaning specified in Section 4.3(h).
"Straddle Period" means any taxable year or period beginning before the
Closing and ending after the Closing.
"Subsidiary Company Liabilities" shall mean the liabilities of Mt. Juliet,
Phoenix, and Phoenix of Hendersonville as of the Closing Date as reflected on
the Final Balance Sheet.
"Surveys" has the meaning specified in Section 9.1(a).
"Surviving Corporations" has the meaning specified in Section 2.6.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means any
federal, state, county, local or foreign income, alternative or add-on minimum,
gross income, gross receipts, property, sales, use, transfer, license,
franchise, employment, payroll, withholding or minimum tax, ad valorem,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty or fine, addition to tax or additional
amount imposed by any Governmental Body.
"Tax Return" means any return, report or similar statement required to be
filed with respect to any Taxes (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return and
declaration of estimated Tax.
"TBCA" has the meaning specified in Section 2.5.
"Tennessee Secretary" has the meaning specified in Section 2.7.
"Transaction Costs" has the meaning specified in Section 3.6(a).
"Transaction Taxes" has the meaning specified in Section 3.6(b).
"Treasury Regulations" means the regulations promulgated under the Code as
in effect on the Closing Date.
"TSCA" means The Toxic Substance Control Act of 1976, 15 U.S.C.
sec.sec. 2601 et seq., any amendments thereto, any state analogs thereto, and
any regulations promulgated thereunder.
"Undisclosed Liabilities" has the meaning specified in Section 5.7.
"Warrant" shall be a warrant granted by Buyer to Seller for 250,000 shares
of Cumulus Common Stock, exercisable at any time from the Closing Date to the
date falling six (6) months after the Closing Date at $12.00 per share.
"Welfare Plan" has the meaning specified in Section 5.16(b).
"WNPL" has the meaning specified on the first page in the second paragraph
of this Agreement.
"WRQQ" has the meaning specified on the first page in the second paragraph
of this Agreement.
"WQQK" has the meaning specified on the first page in the third paragraph
of this Agreement.
ARTICLE 2
PURCHASE AND SALE; MERGERS
2.1. Purchased Assets. Upon the terms and subject to the conditions of
this Agreement, on the Closing Date, DBBC shall sell, transfer, assign, convey
and deliver to Buyer, and Buyer shall purchase from DBBC, free and clear of all
Encumbrances (except for Permitted Encumbrances and Owned Real Property
Encumbrances), all of the assets and properties of DBBC of every kind and
description, wherever located, real, personal or mixed, tangible or intangible,
used or usable in the operation of WRQQ, but
7
excluding the Excluded Assets (herein collectively called the "Purchased
Assets"). The Purchased Assets shall include, without limitation, all of DBBC's
right, title and interest in and to:
(a) Real Property. All Real Property and interests therein, including all
land, office facilities and other improvements and fixtures attached to said
Real Property and including specifically but without limitation all interest in
the Leased Real Property described in Schedule 5.11(B).
(b) Tangible Personal Property. All equipment, parts, supplies, furniture,
fixtures, motor vehicles and other tangible personal property of every kind and
description now or hereafter owned, leased or held by DBBC and used or useful in
the operation of WRQQ, including but not limited to the transmitting towers and
other improvements and fixtures (except to the extent they are deemed real
property, in which event the same shall constitute part of the Real Property),
transmission equipment and studio equipment of WRQQ, together with such
modifications, replacements, improvements and additional items, and subject to
such deletions therefrom, made or acquired between the date hereof and the
Closing Date in accordance with the terms and provisions of this Agreement,
including specifically but without limitation those items listed and described
in Schedule 5.12 and Schedule 5.13.
(c) Receivables. All accounts receivable of WRQQ as the same may exist on
the Closing Date (the "Receivables").
(d) Proprietary Rights. All goodwill, patents, patent applications, patent
disclosures and inventions; slogans, promotions, jingles, trademarks, service
marks, trade dress, trade names, corporate names, domain names and the goodwill
associated therewith, as well as any applications to register any of the
foregoing; copyrights and copyright registrations; trade secrets, know-how and
confidential business information, computer software, data or documentation, and
other proprietary rights or any licenses to and from any Person with respect to
any of the foregoing developed by or for DBBC or employed by or utilized in the
conduct of WRQQ, WQQK and WNPL; all of the rights of DBBC in and to the call
letters "WRQQ", "WQQK" and "WNPL"; all programming concepts developed by DBBC or
its employees, whether presently being broadcast or not; all other ideas,
designs, processes or other characteristics relating to any inter or intranet
web site of DBBC or WRQQ; and all other proprietary information and rights
employed by or utilized in the conduct of WRQQ, including without limitation,
those items listed on Schedule 5.15(A) (the "Intellectual Property").
(e) FCC Licenses and Governmental Permits. The FCC Licenses and
Governmental Permits, including without limitation those listed on Schedule
5.14(A) (including any renewals, extensions, amendments or modifications thereof
or applications therefor) now held by DBBC or hereafter obtained by DBBC between
the date hereof and the Closing Date, to the extent such FCC Licenses and
Governmental Permits pertain to or are used or held for use in the operation of
the Business.
(f) Advertising Agreements. Agreements for the sale of time on WRQQ
entered into in the ordinary course of business and consistent with WRQQ's past
pricing policies and other practices existing on the date hereof, and those made
or entered into between the date of this Agreement and the Closing Date in
accordance with the terms and provisions of this Agreement ("Advertising
Agreements").
(g) Other Station Agreements. All agreements listed on Schedule 5.18(A)
and all agreements relating to the operation of WRQQ (other than Advertising
Agreements); any renewals, extensions, amendments or modifications of any such
agreements which are made in the ordinary course of business by DBBC consistent
with DBBC's past practices and in accordance with the terms and provisions of
this Agreement; and any additional agreement (including any renewals,
extensions, amendments or modifications thereof), other than for the sale of
time on WRQQ, which is made or entered into between the date of this Agreement
and the Closing Date in accordance with the terms and provisions of this
Agreement (collectively, "Contracts"), and, to the extent transferable, all of
DBBC's rights and manufacturers' and vendors' warranties relating to items
included in the Purchased Assets and all similar rights against third parties
relating to items included in the Purchased Assets.
(h) Public Inspection File. Complete sets of all documents required to be
maintained in WRQQ's public inspection file pursuant to the Rules and
Regulations.
8
(i) Station Logs and Business Records. The operating and maintenance logs
of WRQQ, and any program logs that may be retained in accordance with DBBC's
usual practice, together with such copies of such files and records pertaining
to the operation of WRQQ as currently exist, including advertiser lists,
advertising studies, consulting reports, sales correspondence, promotional
materials, credit and sales reports, advertising agreements and all other
agreements to be assigned under the terms of this Agreement, programming
information and studies, engineering studies or reports, technical information,
engineering data, and any records required to be maintained by the FCC or
related to the FCC Licenses.
(j) Insurance Policies. All insurance policies and claims thereunder
pertaining to WRQQ, except to the extent the same insure liabilities and
obligations included in Excluded Liabilities.
(k) Cash. All cash, cash equivalents, bank accounts, certificates of
deposit, investment securities, commercial paper and any other marketable
securities or similar investments of DBBC pertaining to WRQQ;
(l) Certain Rights of DBBC. All claims, rights and causes of action of
DBBC against third Persons pertaining to WRQQ, including claims, rights and
causes of action against third Persons arising under warranties from vendors and
others.
(m) Other Assets. All other assets of DBBC pertaining to WRQQ, except for
Excluded Assets, whether real, personal, tangible, intangible or mixed,
including books, records and files (including all personnel files), any prepaid
expenses, and any utility deposits, all except as specifically excluded in
Section 2.2.
2.2. Excluded Assets. Notwithstanding the provisions of Section 2.1, the
Purchased Assets shall not include the following (herein referred to as the
"Excluded Assets"):
(a) All corporate minute books and limited liability interest transfer
books of DBBC.
(b) All refunds of any Taxes paid with respect to periods ending on or
before the Closing Date, and all claims therefor.
(c) All agreements and all claims, rights and causes of action relating to
Excluded Assets including, without limitation, claims for Tax refunds and
refunds of fees paid to the FCC, or relating to liabilities and obligations not
included in Assumed Liabilities.
(d) All Governmental Permits not lawfully transferable or assignable.
(e) All rights of DBBC under this Agreement.
(f) DBBC's ownership interest in 1259.6 Class A units of CML Holdings, LLC.
2.3. Assumed Liabilities and Assumed Commitments.
(a) Prior to the Closing Date, Seller shall deliver to Buyer an unaudited
consolidated balance sheet of DBBC dated as of a date not more than five (5)
days prior to the Closing Date (the "Estimated Assumed Liabilities Balance
Sheet"). The Estimated Assumed Liabilities Balance Sheet shall fairly present
the assets and liabilities of DBBC as of the date thereof. On the Closing Date,
Buyer shall deliver to DBBC the Assumption Agreement, pursuant to which (subject
to the adjustment contemplated by Section 3.5 hereof and subject to Section
2.3(b)) Buyer shall assume and agree to discharge only the liabilities of DBBC
that (i) have been incurred as of the Closing Date in the ordinary course of
business consistent with past practice, and (ii) are reflected on the Estimated
Assumed Liabilities Balance Sheet (the "Assumed Liabilities"). The Assumed
Liabilities shall be subject to confirmation in connection with the preparation
of the Final Balance Sheet, as contemplated by Section 3.5 hereof. Buyer will
assume the Assumed Liabilities in accordance with their respective terms and
subject to the respective conditions thereof.
(b) The Buyer shall pay the following liabilities of Seller at the Closing
by wire transfer of immediately available funds: (i) the Loan and Security
Agreement dated December 31, 1997, as amended, to The CIT Group/Equipment
Financing, Inc. (the "CIT Indebtedness"); (ii) the promissory notes in
9
favor of John Heidelberg, Ronald T. Bledsoe, Charles W. Bone, Michael Norton,
William E. Benns, III, D. Whit Adamson and Eleanor T. Mead (the "Mid-TN
Indebtedness"); and (iii) the promissory notes in favor of Dickey Broadcasting
Company, Stratford Research Company, Inc. and Michael Dickey (the "Affiliate
Indebtedness"). The CIT Indebtedness, the Mid-TN Indebtedness and the Affiliate
Indebtedness shall be deemed to be Assumed Liabilities for purposes of (i) the
preparation of the Preliminary Balance Sheet, the Buyer's Audited Closing Date
Balance Sheet, and the Final Balance Sheet, and (ii) Section 3.7 hereof;
provided, however, that Buyer shall not assume such liabilities. The CIT
Indebtedness does not include any indebtedness that may be incurred by the
Seller in connection with the purchase of real property contemplated by Section
2.3(c), and such indebtedness that may be incurred by the Seller in connection
with the purchase of real property shall not be deemed to be part of the Assumed
Liabilities.
(c) In addition to the Assumed Liabilities, Buyer will assume and agree to
perform the Contracts, the Advertising Agreements, and will agree to pay
indebtedness incurred in connection with Seller's exercise of an option to
purchase certain real property located at 10 Music Circle, Nashville, Tennessee
pursuant to a purchase option set forth in a lease agreement between Seller and
Partners on the Row, L.L.C. dated June 16, 2000 (collectively, the "Assumed
Commitments"); provided, however, that (i) any liabilities incurred by Seller
under the Contracts or Advertising Agreements prior to the Closing Date will be
reflected on the Final Balance Sheet, and (ii) the Buyer's obligation to pay
indebtedness incurred in connection with the exercise of the real estate
purchase option shall not exceed US$1,750,000, consisting of a purchase price of
US$1,600,000 and actual transaction costs associated with the purchase not
exceeding US$150,000.
(d) Except as expressly set forth in this Section 2.3, in no event shall
Buyer assume any other liabilities of Seller whatsoever.
2.4. Excluded Liabilities. Buyer shall not assume or be obligated to pay,
perform or otherwise discharge any liability or obligation of DBBC, direct or
indirect, known or unknown, absolute or contingent, not expressly included in
the Assumed Liabilities and Assumed Commitments (all such liabilities and
obligations not being assumed being herein called the "Excluded Liabilities").
Without limiting the foregoing, each of the following shall be Excluded
Liabilities for purposes of this Agreement:
(a) Liabilities in respect of suits, claims, proceedings or investigations
described in Schedule 5.5.
(b) Liabilities and obligations incurred under or imposed by any
Environmental Law, relating to, associated with or arising out of (i) the
occupancy, operation, use or control of any of the Real Property or any real
property formerly owned, occupied, operated, used or otherwise controlled by
DBBC or its predecessors on or prior to the Closing Date, or (ii) the operation
of WRQQ on or prior to the Closing Date.
(c) Except as provided in Section 9.3(f), debts, obligations or
liabilities, whether absolute, accrued, contingent or otherwise, relating to any
plan or arrangement under which benefits are provided to employees of Seller,
the Merged Companies or Phoenix of Hendersonville, including but not limited to,
any Employee Plan; and, except as provided in Section 9.3(d), any debts,
obligations, claims or liabilities with respect to wages, overtime pay, fees,
expense reimbursements, vacation pay, commissions, bonuses and any other
payments whatsoever based on services provided by any employee or independent
contractor to Seller, the Merged Companies or Phoenix of Hendersonville prior to
the Closing Date.
(d) Any Taxes levied against Seller, the Merged Companies or Phoenix of
Hendersonville or for which Seller, the Merged Companies or Phoenix of
Hendersonville are liable for any period or portion thereof ending on or prior
to the Closing Date or for any period or portion thereof beginning subsequent to
the Closing Date but relating to operations and activities of Seller, the Merged
Companies or Phoenix of Hendersonville prior to Closing, but only insofar as
such Taxes have not been reflected or reserved against in Seller Financial
Statements (as defined in Section 5.6(a)); provided, however, that this Section
2.4(d) is not intended to limit Buyer's agreement to pay to the members of DBBC
the amount of certain taxes as contemplated by Section 3.6(b) hereof.
(e) Undisclosed Liabilities.
10
(f) Liabilities or obligations in respect of any Excluded Assets.
(g) Any liabilities otherwise categorized as Assumed Liabilities under
Section 2.3 hereof that are deemed to be Excluded Liabilities pursuant to the
terms of Section 3.5.
(h) Any liabilities of, pertaining to, or arising from, Phoenix of
Nashville, Inc. or from Phoenix's ownership or disposition thereof.
2.5. Mt. Juliet Merger. Upon the terms and subject to the conditions of
this Agreement, and in accordance with the Tennessee Business Corporation Act
("TBCA") and the Delaware General Corporation Law (the "DGCL"), at the Effective
Time, Mt. Juliet shall merge by statutory merger with and into MJI (the "Mt.
Juliet Merger"). MJI shall be the surviving corporation in the Mt. Juliet Merger
and shall continue its corporate existence under the laws of the State of
Delaware under the name "Mt. Juliet Inc." Upon consummation of the Mt. Juliet
Merger, the separate corporate existence of Mt. Juliet shall terminate.
2.6. Phoenix Merger. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the DGCL, at the Effective Time, Phoenix shall
merge by statutory merger with and into PBI (the "Phoenix Merger"). PBI shall be
the surviving corporation in the Phoenix Merger and shall continue its corporate
existence under the laws of the State of Delaware under the name "Phoenix
Broadcasting Inc." Upon consummation of the Phoenix Merger, the separate
corporate existence of Phoenix shall terminate. Mt. Juliet and Phoenix are
sometimes collectively referred to herein as the "Merged Companies". The Mt.
Juliet Merger and the Phoenix Merger are sometimes collectively referred to
herein as the "Mergers". MJI and PBI are sometimes collectively referred to as
the "Surviving Corporations."
2.7. Effective Time. On the Closing Date, the parties shall cause (a)
certificates of merger (the "Certificates of Merger") in respect of the Mergers
to be properly executed and filed with the Secretary of State of the State of
Delaware (the "Delaware Secretary") as provided in Section 252 of the DGCL, and
(b) a certified copy of the Certificates of Merger to be properly filed with the
Secretary of State of the State of Tennessee (the "Tennessee Secretary") and the
Delaware Secretary as provided in Section 48-21-107 of the TBCA and in Section
252 of the DGCL as soon as practicable after the filing of the Certificates of
Merger (but in no event longer than six (6) months after the Closing Date). The
Mergers shall become effective upon the filing of the Certificates of Merger
with the Delaware Secretary, or at such later time as may be mutually agreed to
by the parties and specified in the Certificate of Merger (the time that the
Mergers become effective is referred to as the "Effective Time").
2.8. Effects of the Mergers. At and after the Effective Time, the Mergers
shall have the effects set forth in the DGCL and the TBCA and this Agreement.
2.9. Certificates of Incorporation and By-Laws. At the Effective Time,
the certificates of incorporation and by-laws of MJI and PBI shall be the
certificate of incorporation and by-laws of the Surviving Corporations until
thereafter amended in accordance with the certificates of incorporation, the
by-laws and applicable law.
2.10. Directors and Officers. The respective directors and officers of
MJI and PBI immediately prior to the Effective Time shall continue as the
respective officers and directors of the Surviving Corporations, unless and
until thereafter changed in accordance with the DGCL and the Surviving
Corporations' respective certificates of incorporation and by-laws.
2.11. Tax Consequences. The parties intend that the Mergers shall each
constitute a reorganization within the meaning of Section 368(a)(2)(D) of the
Code and that this Agreement shall constitute a "plan of reorganization" within
the meanings of sections 1.368-2(g) and 1.368-3(a) of the Treasury Regulations.
In addition, the parties agree that they will prepare or cause to be prepared
all Tax Returns or other governmental filings and reports and applicable books
and records in a manner consistent with such intent, unless otherwise required
by law.
11
ARTICLE 3
PURCHASE PRICE
3.1. Purchase Price.
(a) The consideration payable as provided herein for the Purchased Assets
and in respect of the Mergers (the "Purchase Price") shall be Five Million, Two
Hundred Fifty Thousand (5,250,000) shares of Cumulus Common Stock, plus the
Assumed Liabilities, plus the Warrant, plus the Positive Adjustment Amount or
minus the Negative Adjustment Amount, as the case may be.
(b) If the Final Net Book Value is greater than the Balance Sheet Net Book
Value, the "Positive Adjustment Amount" shall be equal to the amount of such
excess, provided, however, that if such excess is Five Hundred Thousand United
States Dollars (US$500,000) or less, then the Positive Adjustment Amount shall
be zero.
(c) If the Balance Sheet Net Book Value is greater than the Final Net Book
Value (as set forth on the Final Balance Sheet), the "Negative Adjustment
Amount" shall be equal to the amount of such excess, provided, however, that if
such excess is Five Hundred Thousand United States Dollars (US$500,000) or less,
then the Negative Adjustment Amount shall be zero.
3.2. Determination of Final Balance Sheet.
(a) As promptly as practicable following the Closing Date (but not later
than thirty (30) days after the Closing Date), Seller shall prepare a
consolidated balance sheet as of the Closing Date setting forth in reasonable
detail the total assets and total liabilities of the Business (the "Preliminary
Balance Sheet"), and deliver same to Buyer and Buyer's accountant (who shall not
have been retained by DBBC in connection with the transactions contemplated
hereby). The Preliminary Balance Sheet shall be prepared in accordance with GAAP
and in accordance with past practices, provided, however, that the parties
acknowledge and agree that for purposes of determining certain values as set
forth on the Preliminary Balance Sheet (i) the amount of depreciation expense on
property, building and equipment which relates to the period from October 31,
2001 through the Closing Date will not be reflected, (ii) the amount of
amortization expense on broadcast licenses which relates to the period from
October 31, 2001 through the Closing Date will not be reflected, (iii) the
amount of amortization expense on debt issuance costs which relates to the
period from October 31, 2001 through the Closing Date will not be reflected,
(iv) the amount of Transaction Costs incurred and paid for by Seller prior to
the Closing Date will be reflected as an asset, and (v) any liability of Seller
that is paid by Buyer at the Closing pursuant to Section 2.3(b) will be
reflected as a liability on the Preliminary Balance Sheet. The foregoing
exceptions from GAAP are sometimes referred to herein as the "Agreed GAAP
Exceptions."
(b) Promptly following delivery of the Preliminary Balance Sheet to Buyer
and its accountant, Buyer shall cause its accountant to conduct a special audit
of the Preliminary Balance Sheet, which special audit shall be completed on or
before the date falling ninety (90) days after delivery of the Preliminary
Balance Sheet to Buyer and its accountant. Upon completion of the special audit,
and upon having made any necessary adjustments to the Preliminary Balance Sheet
to cause it to be prepared in a manner consistent with the accounting policies
used in the December 31, 2000 Balance Sheet, Buyer shall cause its accountant to
deliver to DBBC:
An audit report stating (without qualification as to GAAP) that, in
Buyer's accountant's opinion, the Preliminary Balance Sheet has been
prepared in accordance with GAAP consistently applied except as to the
Agreed GAAP Exceptions (such summary and audit report are herein referred
to as the "Buyer's Accounting Report").
The Preliminary Balance Sheet, as so determined, is herein referred to as the
"Buyer's Audited Closing Date Balance Sheet" for purposes of this Agreement.
(c) Promptly following receipt of the Buyer's Accounting Report, Seller may
review the same and, within sixty (60) days after the date of such receipt by
Seller (the "Objection Period"), Seller may deliver
12
to Buyer a certificate setting forth Seller's objections to the Buyer's Audited
Closing Date Balance Sheet as set forth in the Buyer's Accounting Report,
together with a summary of the reasons therefor and calculations which, in
Seller's view, are necessary to eliminate such objections. In the event Seller
does not so object within the Objection Period, the Buyer's Audited Closing Date
Balance Sheet set forth in the Buyer's Accounting Report shall be final and
binding as the "Final Balance Sheet" for purposes of this Agreement but shall
not limit the representations, warranties, covenants and agreements of the
parties set forth elsewhere in this Agreement.
(d) In the event Seller objects within the Objection Period, then within
thirty (30) days following Seller's delivery to Buyer of the certificate
referenced in Section 3.2(c) (the "Resolution Period"), DBBC and Buyer shall use
their reasonable efforts to resolve by written agreement (the "Agreed
Adjustments") Seller's objections as to the Buyer's Audited Closing Date Balance
Sheet. In the event that DBBC and Buyer so resolve any such objections, the
Buyer's Audited Closing Date Balance Sheet set forth in the Buyer's Accounting
Report shall be adjusted by the Agreed Adjustments and, if all such objections
have been resolved by Agreed Adjustments, the Buyer's Audited Closing Date
Balance Sheet set forth in the Buyer's Accounting Report, as adjusted by the
Agreed Adjustments, shall be final and binding as the Final Balance Sheet for
purposes of this Agreement but shall not limit the representations, warranties,
covenants and agreements of the parties set forth elsewhere in this Agreement.
In the event any objections raised by Seller are not resolved by Agreed
Adjustments during the Resolution Period, then within five (5) days following
the end of the Resolution Period DBBC and Buyer shall jointly select a national
accounting firm acceptable to both DBBC and Buyer (or if they cannot agree on
such selection, a national accounting firm will be selected by lot from the
following firms: Andersen LLP, PricewaterhouseCoopers, Ernst & Young LLP and
Deloitte & Touche (the "Additional Accounting Firm") and jointly direct such
firm to review and resolve any remaining objections as to which Buyer and DBBC
have not reached Agreed Adjustments. The procedures to be employed by the
Additional Accounting Firm in resolving any such remaining objections shall be
mutually agreed upon by Buyer and DBBC. Buyer and DBBC shall jointly direct the
Additional Accounting Firm to deliver, within sixty (60) days following the end
of the Resolution Period, written notice to each of Buyer and DBBC setting forth
its determination of:
(i) Such remaining objections; and
(ii) The adjustments to the Buyer's Audited Closing Date Balance Sheet
(the "Additional Accounting Firm Adjustments").
The Buyer's Audited Closing Date Balance Sheet as so determined but after giving
effect to the Agreed Adjustments and to the Additional Accounting Firm
Adjustments shall be final and binding as the Final Balance Sheet for purposes
of this Agreement but shall not limit the representations, warranties, covenants
and agreements of the parties set forth elsewhere in this Agreement.
(e) The Preliminary Balance Sheet, the Buyer's Audited Closing Date Balance
Sheet, and the Final Balance Sheet shall each present the assets and liabilities
of DBBC and the subsidiaries on a consolidated and consolidating basis.
(f) The parties hereto shall make available to Seller's accountant and, if
applicable, the Additional Accounting Firm, without further indemnification or
undertakings, such books, records and other information (including work papers)
as such firms may reasonably request to audit or review the Buyer's Accounting
Report. The fees and expenses of the Additional Accounting Firm, if any, shall
be borne by Buyer.
3.3. Payment of Purchase Price and Agreed Adjustment Amounts. The Buyer
shall pay the Purchase Price as follows:
(a) The Buyer shall pay that portion of the Purchase Price to be paid in
Cumulus Common Stock by issuing Five Million Two Hundred Fifty Thousand
(5,250,000) shares of Cumulus Common Stock. The shares described in the
preceding sentence shall be issued to Seller as follows: (i) 5,250,000 shares of
Cumulus Common Stock, less the Indemnity Escrowed Shares (as defined below) and
the Adjustment Escrowed Shares (as defined below) shall be issued to Seller on
the Closing Date; and (ii) the Indemnity
13
Escrowed Shares and the Adjustment Escrowed Shares shall be deposited into an
escrow account ("Escrow Account") established pursuant to an Escrow Agreement
among Buyer, DBBC and Sun Trust Bank, as escrow agent (the "Escrow Agent"), in
the form attached hereto as Exhibit B (the "Escrow Agreement"). The Cumulus
Common Stock placed into the Escrow Account (the "Escrowed Shares") will be
distributed pursuant to the terms and conditions of the Escrow Agreement, which
will provide, among other terms, that (i) the number of shares of Cumulus Common
Stock priced at Average Cumulus Stock Price representing ten percent (10%) of
total value of the Purchase Price (the "Indemnity Obligation Escrowed Shares")
will be held to support DBBC's indemnity obligations as provided in Article 11
hereof, and (ii) the number of shares of Cumulus Common Stock priced at the
Average Cumulus Stock Price representing one hundred fifty percent (150%) of the
total value of the estimated Negative Adjustment Amount, if any, calculated by
comparing the Estimated Assumed Liabilities Balance Sheet and the October 31,
2001 Balance Sheet (giving effect to the US$500,000 collar contemplated by
Section 3.1), but not fewer than ten thousand (10,000) shares (the "Adjustment
Escrowed Shares") will be distributed to DBBC or to Buyer, as the case may be,
upon determination of the Positive Adjustment Amount or the Negative Adjustment
Amount as provided herein.
(b) In the event there is a Positive Adjustment Amount calculated pursuant
hereto, the Escrow Agent shall distribute to DBBC the Adjustment Escrowed
Shares, and Buyer shall issue to Seller an additional number of shares of
Cumulus Common Stock equal in value (valued at the Average Cumulus Stock Price)
to the Positive Adjustment Amount.
(c) In the event there is a Negative Adjustment Amount calculated pursuant
hereto, the Escrow Agent shall distribute (i) to Buyer, that number of
Adjustment Escrowed Shares calculated by dividing the Negative Adjustment Amount
by the Average Cumulus Stock Price, and (ii) to Seller, the balance, if any, of
the Adjustment Escrowed Shares. If the value of the Adjustment Escrowed Shares
(valued at the Average Cumulus Stock Price) is less than the Negative Adjustment
Amount, then all of the Adjustment Escrowed Shares shall be distributed to
Buyer, and the remaining shortfall in the Negative Adjustment Amount shall be
paid immediately by Seller to Buyer in cash or Cumulus Common Stock (valued at
the Average Cumulus Stock Price).
3.4. Allocation of Purchase Price and Assumed Liabilities.
(a) The amount of money denominated in United States Dollars represented by
Five Million, Two Hundred Fifty Thousand (5,250,000) shares of Cumulus Common
Stock valued at the Average Cumulus Stock Price, the value of the Assumed
Liabilities and the value of the Warrant (as determined by Houlihan, Lokey,
Howard & Zukin in connection with the preparation of its fairness opinion to be
issued in connection with the transactions contemplated hereby) shall be
allocated among the Purchased Assets and as consideration in exchange for the
stock of the Merged Companies as set forth on Schedule 3.4(A) attached hereto.
The parties agree that the consideration paid for the Purchased Assets as set
forth in Schedule 3.4(A) shall be composed first of the Assumed Liabilities and,
only if the amount paid for the Purchased Assets exceeds the amount of the
Assumed Liabilities shall any portion of the Cumulus Common Stock or the Warrant
be allocated to the Purchased Assets. The parties agree that the allocation set
forth on Schedule 3.4(A), as amended and reissued pursuant to Section 3.4(b),
will be used by them and respected for all income tax purposes, and that the
parties shall follow such allocation for all tax reporting purposes, including
the preparation and filing of Internal Revenue Service Form 8594 pursuant to
Section 1060 of the Code and the Treasury Regulations promulgated thereunder.
(b) Promptly following the determination of the Final Balance Sheet and the
calculation of the Positive Adjustment Amount or the Negative Adjustment Amount,
Buyer shall cause KPMG to prepare a revised purchase price allocation
(determined in a manner consistent with the allocation on Schedule 3.4(A)),
which will be attached hereto as amended Schedule 3.4(A).
3.5. Confirmation of Assumed Liabilities. Upon the issuance of the Final
Balance Sheet, Buyer shall confirm the amount of the Assumed Liabilities by
reference to the consolidating DBBC balance sheet included with the Final
Balance Sheet. If the amount of the Assumed Liabilities reflected on the Final
Balance Sheet is greater than the Maximum Assumed DBBC Liability Amount, the
Buyer shall revise the
14
Assumption Agreement to reduce the amount of the liabilities assumed pursuant
thereto to the Maximum Assumed DBBC Liability Amount nunc pro tunc. Any
liabilities that are eliminated from the Assumed Liabilities pursuant to this
Section 3.5 are Excluded Liabilities. If the Assumed Liabilities are greater
than the Maximum Assumed DBBC Liability Amount, then Buyer shall have no
obligation to pay Transaction Costs or Transaction Taxes as provided in Section
3.6.
3.6. Payment of Certain Taxes and Expenses.
(a) Subject to Section 3.7, and to the Closing, Buyer agrees that it will
pay any and all outstanding fees and expenses due and owing by DBBC in
connection with the negotiation, documentation and closing of the transactions
contemplated hereby to Dickstein, Shapiro, Morin & Oshinsky, LLP ("DSMO"), Marie
Swinford, Kraft Bros., Esstman, Patton & Harrell ("Kraft"), and Media Services
Group. The foregoing costs and expenses, as well as fifty percent (50%) of the
FCC filing fees and those monies previously paid by DBBC to the above-specified
parties in connection with the negotiation, documentation and closing of the
transactions contemplated hereby are referred to herein as the "Transaction
Costs". At the Closing, DBBC will deliver to Buyer written notification of the
estimated amount of the Transaction Costs (including such amounts previously
paid by DBBC hereunder), along with reasonable documentation of the estimated
Transaction Costs. DBBC will afford Buyer the opportunity to verify and confirm
such amounts to Buyer's reasonable satisfaction. No later than thirty (30) days
after Closing, DBBC will deliver to Buyer written notification of the final
amount of the Transaction Costs, along with reasonable documentation of the
final Transaction Costs. DBBC will afford Buyer the opportunity to verify and
confirm such amounts to Buyer's reasonable satisfaction. Any Transaction Costs
outstanding at the Closing Date will be paid by Buyer not more than ten (10)
days after the determination of the Final Balance Sheet.
(b) Subject to Section 3.7, upon the Closing, Buyer agrees that it will pay
all federal and state income taxes incurred by DBBC or by the members of DBBC as
a result of the completion of the transactions contemplated hereby ("Transaction
Taxes"); provided, however, that the Transaction Taxes will not include any
additional taxes incurred by the DBBC members as a result of Buyer's payment of
the Transaction Taxes. The Transaction Taxes will be calculated by the members
of DBBC. At the Closing, Seller will deliver to Buyer written notice of the
amount of the Transaction Taxes and the date(s) upon which the Transaction Taxes
are due, together with such supporting documentation and work papers as are
reasonably necessary for Buyer to confirm such amounts and date(s). Such amounts
and due dates shall be subject to confirmation by Buyer. The Transaction Taxes,
as so confirmed, will be paid by Buyer to the members of DBBC in the amounts so
calculated and on the date(s) not less than ten (10) days before the date(s)
upon which the Transaction Taxes are due.
3.7. Limit on Buyer Obligation. Notwithstanding anything else in this
Agreement to the contrary, in no event will the aggregate amount of the
Subsidiary Company Liabilities, the Assumed Liabilities, the Transaction Costs
and the Transaction Taxes (the "Capped Amount") exceed Twenty One Million United
States Dollars (US$21,000,000); provided, however, that the indebtedness related
to the exercise of the real property purchase option described in Section 2.3(c)
shall not be included in the Capped Amount. If the Capped Amount exceeds Twenty
One Million United States Dollars (US$21,000,000), then the components of the
Capped Amount will be reduced or eliminated (and Buyer's obligations with
respect thereto reduced or eliminated) to the extent necessary to reduce the
Capped Amount to Twenty One Million United States Dollars (US$21,000,000). The
components of the Capped Amount will be reduced or eliminated in the following
order: (1) Transaction Taxes and (2) Transaction Costs. Any components of the
Capped Amount that are so reduced or eliminated shall remain liabilities of DBBC
or its members, as the case may be.
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ARTICLE 4
CLOSING
4.1. Closing.
(a) The closing of (i) the purchase and sale of the Purchased Assets and
(ii) the Mergers (the "Closing") shall be consummated at 10:00 a.m. local time,
on a date in accordance with Section 4.1(b) that is mutually acceptable to the
parties at the offices of Gardner, Carton & Douglas at 321 North Clark Street,
Chicago, Illinois, or at such other time or place as shall be agreed upon by
Buyer and Seller. The time and date on which the Closing is actually held is
referred to herein as the "Closing Date." The Closing shall be effective as of
the close of business on the Closing Date.
(b) The Closing shall occur no later than ten (10) business days after the
occurrence of both of the following conditions: (i) the date on which the grant
of the FCC Consent shall have become a Final Order and (ii) the expiration or
termination of the applicable waiting period under the HSR Act; provided,
however, that Buyer may in its sole discretion, after the FCC's issuance of the
FCC Consent approving the transactions contemplated hereby, waive the condition
set forth in (i) upon the execution by Buyer and Seller of a rescission
agreement in a form mutually acceptable to Buyer and Seller.
4.2. Documents to be Delivered to Buyer. At the Closing, Seller will
deliver or cause to be delivered to Buyer the following documents:
(a) Copy of the certification of organization of DBBC, certified as of a
recent date by the Secretary of State of the State of Georgia.
(b) Copy of the articles of incorporation of Mt. Juliet, certified as of a
recent date by the Tennessee Secretary.
(c) Copy of the articles of incorporation of Phoenix, certified as of a
recent date by the Delaware Secretary.
(d) Copy of the articles of incorporation of Phoenix of Hendersonville,
certified as of a recent date by the Tennessee Secretary.
(e) Certificate of good standing of DBBC, issued as of a recent date by the
Secretary of State of Georgia.
(f) Certificate of good standing of Phoenix, issued as of a recent date by
the Delaware Secretary.
(g) Certificate of good standing of Mt. Juliet, issued as of a recent date
by the Tennessee Secretary.
(h) Certificate of good standing of Phoenix of Hendersonville, issued as of
a recent date by the Tennessee Secretary.
(i) Certificate of the secretary or an assistant secretary of DBBC, dated
the Closing Date, in form and substance reasonably satisfactory to Buyer, as to
(i) no amendments to DBBC's certificate of organization since a specified date;
(ii) DBBC's Operating Agreement; (iii) the resolutions of DBBC's Members
authorizing the execution and performance of this Agreement and the transactions
contemplated hereby; and (iv) incumbency and signatures of DBBC's managers
executing this Agreement and any Seller Ancillary Agreement.
(j) Certificate of the secretary or an assistant secretary of Phoenix,
dated the Closing Date, in form and substance reasonably satisfactory to Buyer,
as to (i) no amendments to Phoenix's certificate of incorporation since a
specified date; and (ii) Phoenix's bylaws.
(k) Certificate of the secretary or an assistant secretary of Phoenix of
Hendersonville, dated the Closing Date, in form and substance reasonably
satisfactory to Buyer, as to (i) no amendments to Phoenix of Hendersonville's
articles of incorporation since a specified date; and (ii) Phoenix of
Hendersonville's bylaws.
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(l) Certificate of the secretary or an assistant secretary of Mt. Juliet,
dated the Closing Date, in form and substance reasonably satisfactory to Buyer,
as to (i) no amendment to Mt. Juliet's articles of incorporation since a
specified date; and (ii) Mt. Juliet's bylaws.
(m) Certificate of DBBC in form and substance reasonably acceptable to
Buyer certifying as to the accuracy of DBBC's representations and warranties at
and as of the Closing and that DBBC has performed and complied with all of the
terms, provisions and conditions to be performed and complied with by DBBC at or
before the Closing.
(n) An opinion of DSMO, counsel to Seller, in form and substance reasonably
acceptable to Buyer.
(o) Certificates of title or origin (or like documents) with respect to any
vehicles or other equipment included in the Purchased Assets for which a
certificate of title or origin is required in order to transfer title.
(p) All consents, waivers or approvals obtained by Seller with respect to
the Purchased Assets, the Merged Companies or the Business or the consummation
of the transactions contemplated by this Agreement.
(q) An instrument assigning to Buyer all right, title and interest of
Seller in the FCC Licenses and any pending applications relating to the Business
before the FCC.
(r) A special warranty deed with respect to each of the parcels of Owned
Real Property, duly executed by DBBC and in form and substance reasonably
satisfactory to Buyer, as provided in Section 9.1(b) hereof.
(s) An assignment with respect to each of the leases of real estate
described in Schedule 5.11(B), duly executed by DBBC and in form and substance
reasonably satisfactory to Buyer.
(t) The standard 1992 Form B ALTA fee owner's title insurance policy or
marked-up unconditional binder for such insurance including all required
endorsements, dated as of the Closing Date and showing title to the Owned Real
Property in the name of Buyer, all as provided in Section 9.1(c) hereof.
(u) All required real estate transfer declaration or exemption certificates
and any other documents as may be otherwise necessary to transfer title of the
Owned Real Property to Buyer.
(v) All affidavits and other statements as may be reasonably required by
the title insurance company in order to issue the title insurance policies
contemplated by Section 9.1(c) and (d) hereof.
(w) Affidavit of Seller stating, under penalty of perjury, Seller's United
States taxpayer identification number and that the Seller is not a foreign
person, in the form required by Section 1445(b)(2) of the Code and the Treasury
Regulations thereunder.
(x) The Bill of Sale and Assignment Agreement duly executed by DBBC.
(y) Business and personnel records related to the Business Employees.
(z) The resignations of each member of Phoenix's board of directors and
officers effective as of the Closing.
(aa) The resignations of each member of Mt. Juliet's board of directors and
officers effective as of the Closing.
(bb) The resignations of each member of Phoenix of Hendersonville's board
of directors and officers effective as of the Closing.
(cc) The Escrow Agreement among Buyer, Seller and the Escrow Agent
substantially in the form attached hereto as Exhibit B.
(dd) Evidence, satisfactory to Buyer in its sole discretion, that all liens
encumbering the assets of the Merged Companies and Phoenix of Hendersonville
have been released or will be released upon payment of the CIT Indebtedness, the
Mid-TN Indebtedness or the Affiliate Indebtedness.
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(ee) Certificates in customary form of each of the Merged Companies (each,
a "Merged Company Tax Opinion Certificate") signed by an officer of the
respective Merged Company, setting forth factual representations and covenants
that will serve as the basis for the tax opinions required pursuant to Sections
4.2(gg) and 4.3(j) of this Agreement.
(ff) A Certificate in customary form (the "Seller Tax Opinion Certificate")
signed by an officer of Seller, setting forth factual representations and
covenants that will serve as a basis for the tax opinions required pursuant to
Sections 4.2 and 4.3 of this Agreement.
(gg) An opinion of Jones, Day, Reavis & Pogue, counsel to Buyer, that the
Mergers will each qualify as a reorganization within the meaning of Section
368(a)(2)(D) of the Code. In providing such opinion, Jones, Day, Reavis & Pogue
may rely upon the Merged Company Tax Opinion Certificates, the Seller Tax
Opinion Certificate and the Buyer Tax Opinion Certificate.
(hh) If necessary, an update of the Disclosure Schedules attached hereto
pursuant to Section 12.3.
(ii) The respective Certificates of Merger in respect of the Mergers.
(jj) Such other assignments and other instruments of transfer or
conveyance, and other certificates and documents as Buyer or its counsel may
reasonably request or as may be otherwise necessary to evidence and effect the
sale, assignment, transfer, conveyance and delivery of the Purchased Assets to
Buyer or to evidence and effect the Mergers.
In addition to the above deliveries, Seller shall take all steps and
actions as Buyer may reasonably request or as may otherwise be necessary to put
Buyer in actual possession or control of the Purchased Assets or to evidence and
effect the Mergers.
4.3. Documents to be Delivered to Seller. At the Closing, Buyer will
deliver to Seller the following documents:
(a) Copy of Buyer's certificate of incorporation certified as of a recent
date by the Illinois Secretary.
(b) Certificate of good standing of Buyer issued as of a recent date by the
Illinois Secretary.
(c) Certificate of the secretary or an assistant secretary of Buyer, dated
the Closing Date, in form and substance reasonably satisfactory to Seller, as to
(i) no amendments to the certificate of incorporation of Buyer since a specified
date; (ii) the by-laws of Buyer; (iii) the resolutions of the board of directors
of Buyer authorizing the execution and performance of this Agreement and the
transactions contemplated hereby; and (iv) incumbency and signatures of the
officers executing this Agreement and any Buyer Ancillary Agreement.
(d) Certificate of Buyer in form and substance reasonably acceptable to
Seller certifying as to the accuracy of Buyer's representations and warranties
at and as of the Closing and that Buyer has performed and complied with all of
the terms, provisions and conditions to be performed and complied with by Buyer
at or before the Closing.
(e) Certificate in the name of DBBC evidencing ownership of the Cumulus
Common Stock issued pursuant to Section 3.1 hereof in form ready for transfer
and duly endorsed for transfer to DBBC.
(f) The Assumption Agreement duly executed by Buyer.
(g) The Registration Rights Agreement between Seller and Buyer (the
"Registration Rights Agreement") substantially in the form attached hereto as
Exhibit C.
(h) The Stock Warrant Agreement between Seller and Buyer (the "Stock
Warrant Agreement") substantially in the form attached hereto as Exhibit D.
(i) A certificate (the "Buyer Tax Opinion Certificate"), signed by an
officer of Buyer setting forth factual representations and covenants that will
serve as a basis for the tax opinions required pursuant to Sections 4.2 and 4.3
of this Agreement.
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(j) An opinion of DSMO in customary form that the Mergers will each qualify
as a reorganization within the meaning of Section 368(a)(2)(D) of the Code. In
providing such opinion, DSMO may rely upon the Merged Company Tax Opinion
Certificates, the Seller Tax Opinion Certificate and the Buyer Tax Opinion
Certificate.
(k) Stock powers, executed in blank by DBBC, sufficient to permit the
disbursement of the Escrowed Shares from the Escrow Account as contemplated by
the Escrow Agreement.
(l) The respective Certificates of Merger in respect of the Mergers.
(m) Such other certificates and documents as Seller or its counsel may
reasonably request or as may be otherwise necessary to evidence and effect the
sale, assignment, transfer, conveyance and delivery of the Purchased Assets to
Buyer or to evidence and effect the Mergers.
In addition to the above deliveries, Buyer shall take all steps and actions as
Seller may reasonably request or as may otherwise be necessary to put Buyer in
actual possession or control of the Purchased Assets or to evidence and effect
the Mergers.
4.4. Form of Documents. The documents and instruments referred to in
Sections 4.2 and 4.3 shall be satisfactory as to form to counsel for the party
to whom they are delivered.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES REGARDING SELLER
Seller represents and warrants to Buyer as follows:
5.1. Organization; Authority; Agreement Binding. DBBC is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Georgia. DBBC has delivered to Buyer complete and
correct copies of DBBC's certificate of organization, operating agreement and
other organizational documents and amendments thereto as in effect on the date
hereof. Such certificate of organization, operating agreement and other
organizational documents, as amended, are in full force and effect. DBBC is not
in violation of any provision of its certificate of organization, operating
agreement or other organizational documents. DBBC is duly qualified or licensed
to do business and is in good standing as a limited liability company in the
jurisdictions specified in Schedule 5.1. DBBC is not required to be qualified or
licensed to do business as a foreign limited liability company in any
jurisdiction other than those specified in Schedule 5.1, except for those
jurisdictions where the failure to so qualify is not likely to have a Material
Adverse Effect on DBBC's business or financial condition, or the ability of DBBC
to lawfully consummate the transactions contemplated by this Agreement in all
material respects. DBBC has all requisite corporate or other power and authority
to own or lease and to operate and use the Purchased Assets as now employed and
to operate WRQQ as currently conducted and as proposed to be conducted. DBBC has
the corporate or other power and authority to execute and deliver this Agreement
and all Seller Ancillary Agreements and to perform its obligations hereunder and
thereunder. DBBC's execution, delivery and performance of this Agreement and the
Seller Ancillary Agreements has been duly authorized by all necessary member
actions, and will not violate any provision of DBBC's operating agreement. This
Agreement has been duly executed and delivered by DBBC, and assuming due
authorization, execution and delivery by the other parties thereto, is the
legal, valid and binding obligation of DBBC enforceable in accordance with its
terms, subject to general principles of equity and except as enforceability may
be limited by applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws of general application relating
to creditor's rights generally.
5.2. Organization and Operation of Merged Companies and Phoenix of
Hendersonville. Each of the Merged Companies and Phoenix of Hendersonville is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation. Seller has delivered to Buyer complete
and correct copies of the Merged Companies' and Phoenix of Hendersonville's
respective articles of incorporation, bylaws and other organizational documents
and amendments thereto as in effect on the date hereof. Such articles of
incorporation, bylaws and other organizational documents, as amended, are in
full
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force and effect. None of the Merged Companies or Phoenix of Hendersonville is
in violation of any provision of its articles of incorporation, bylaws or other
organizational documents. Each of the Merged Companies and Phoenix of
Hendersonville is duly qualified or licensed to do business and is in good
standing as a corporation in the jurisdictions specified in Schedule 5.2. None
of the Merged Companies or Phoenix of Hendersonville is required to be qualified
or licensed to do business as a foreign corporation in any jurisdiction other
than those specified in Schedule 5.2, except for those jurisdictions where the
failure to so qualify is not likely to have a material adverse effect on the
Merged Companies' or Phoenix of Hendersonville's business or financial
condition. None of the Merged Companies or Phoenix of Hendersonville is liable
for or has guaranteed any liabilities or obligations of DBBC.
5.3. Ownership Interests and Related Matters. Each of Michael W. Dickey,
Lewis D. Dickey, Jr., David W. Dickey, John W. Dickey (the "Dickey Brothers")
and Quaestus Management Corporation own, in the aggregate, one hundred percent
(100%) of the limited liability company interests of DBBC as follows: each of
the Dickey Brothers owns twenty-four percent (24%) of DBBC and Quaestus
Management Corporation owns four percent (4%) of DBBC. DBBC owns all of the
issued and outstanding shares of stock of Mt. Juliet and Phoenix, in each case
free and clear of any lien, charge or encumbrance. Phoenix owns all of the
issued and outstanding shares of stock of Phoenix of Hendersonville, free and
clear of any lien, charge or encumbrance. The authorized capital stock of Mt.
Juliet consists of 200 shares with 61 shares of common voting stock and 139
shares of common non-voting stock, no par value, of which 61 shares of common
voting stock are issued and outstanding. The authorized capital stock of Phoenix
consists of 1,000,000 shares of common stock, par value $.01 per share, of which
750,000 are issued and outstanding. The authorized capital stock of Phoenix of
Hendersonville consists of 20,000 shares of common stock, par value $.05 per
share, of which 1,000 are issued and outstanding. All of the outstanding shares
of stock of each of the Merged Companies and Phoenix of Hendersonville have been
duly authorized and are validly issued. Except as set forth on Schedule 5.3,
there are no rights, subscriptions, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise acquire any shares
of stock of any of the Merged Companies or Phoenix of Hendersonville or
securities or obligations of any kind convertible into or exchangeable for any
shares of stock of any of the Merged Companies or Phoenix of Hendersonville. The
Mergers contemplated by this Agreement shall vest in Buyer all right, title and
interest in the Merged Companies, free and clear of all adverse claims (as
defined under U.C.C. sec. 8-302(2)), other than adverse claims created by or
through or suffered by Buyer. Phoenix's only subsidiary is Phoenix of
Hendersonville. Neither Mt. Juliet nor Phoenix of Hendersonville has any
subsidiaries.
5.4. Absence of Conflicts. Except as set forth in Schedule 5.4, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, will not:
(a) Conflict with, result in a violation or breach of the terms, conditions
or provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation, or a loss of
rights under, or result in the creation or imposition of any Encumbrance upon
any of the Purchased Assets or the assets of any of the Merged Companies or
Phoenix of Hendersonville under (i) any material term or provision of the
certificate of organization or operating agreement of DBBC or the articles of
incorporation or bylaws of any of the Merged Companies or Phoenix of
Hendersonville; (ii) any contract, agreement, indenture, lease or other
commitment to which any of DBBC, Phoenix, Phoenix of Hendersonville or Mt.
Juliet is a party or by which any of DBBC, Phoenix, Phoenix of Hendersonville or
Mt. Juliet is bound or to which any of the Purchased Assets, the Merged
Companies, Phoenix of Hendersonville or the Business is subject; (iii) any Court
Order by which any of DBBC, Phoenix, Phoenix of Hendersonville or Mt. Juliet are
bound or any of the Purchased Assets or the Business is subject; or (iv) any
material Requirements of Law affecting Seller, the Purchased Assets, the Merged
Companies, Phoenix of Hendersonville or the Business.
(b) Require the approval, consent, authorization or act of, or the making
by Seller of any declaration, notification, filing or registration with any
Person or public agency or other authority other than the FCC, the Federal Trade
Commission or the Antitrust Division of the Department of Justice.
20
5.5. No Violation, Litigation or Regulatory Action. Except as set forth
in Schedule 5.5:
(a) DBBC, Phoenix, Phoenix of Hendersonville and Mt. Juliet each has (since
their respective acquisitions by DBBC) complied and each is in substantial
compliance with all Court Orders and all Requirements of Law, including all
court or administrative orders or processes, including but not limited to FCC,
OSHA, EEOC, National Labor Relations Board and Environmental Protection Agency
and with all applicable statutes, rules and regulations pertaining to equal
employment opportunity, which are applicable to DBBC, Phoenix, Phoenix of
Hendersonville and Mt. Juliet, the Purchased Assets or the Business.
(b) There are no Actions or investigations pending or, to the Knowledge of
Seller, threatened against DBBC, Phoenix, Phoenix of Hendersonville and Mt.
Juliet which could have a Material Adverse Effect.
(c) There is no Action pending or, to the Knowledge of Seller, threatened
which questions the legality or propriety of the transactions contemplated by
this Agreement.
(d) Except for FCC rulemaking proceedings generally affecting the radio
broadcasting industry, there is no decree, judgment, order, investigation,
litigation at law or in equity, arbitration proceeding or proceeding before or
by any Governmental Body or authority pending or, to the Knowledge of Seller,
threatened, to which any of DBBC, Phoenix, Phoenix of Hendersonville or Mt.
Juliet is a party or otherwise relating to the Business or the Purchased Assets.
(e) Seller owns and operates and, since the date Seller purchased the
Merged Companies or Phoenix of Hendersonville, has owned and operated, the
Business, the Purchased Assets, and the Merged Companies and Phoenix of
Hendersonville and carries on and conducts, and has carried on and conducted,
the business and affairs of the Business in substantial compliance with all
Requirements of Law, and all court or administrative orders or processes,
including but not limited to FCC, OSHA, Equal Employment Opportunity Commission
("EEOC"), National Labor Relations Board and Environmental Protection Agency
with all applicable statutes, rules and regulations pertaining to equal
employment opportunity, including, without limitation, those of the EEOC and the
FCC.
5.6. Financial Statements.
(a) Schedule 5.6(A) contains correct and complete copies of the following
documents, (which are collectively referred to herein as the "Seller Financial
Statements"):
(i) The audited consolidated balance sheet of DBBC and its
subsidiaries as of December 31, 2000 (the "December 31, 2000 Balance
Sheet") and the related audited consolidated statements of income, cash
flows and changes in members' equity for the year then ended, together with
the notes thereto, reported on by Kraft, whose unqualified reports thereon
are included therewith;
(ii) The unaudited consolidated balance sheet of DBBC and its
subsidiaries as of October 31, 2001 (the "October 31, 2001 Balance Sheet")
and the related unaudited consolidated statements of income, cash flows and
changes in members' equity for the period then ended.
(iii) The audited consolidated balance sheet of DBBC and its
subsidiaries as of December 31, 1999 and the related audited consolidated
statements of income, cash flows and changes in members' equity for the
year then ended, together with the notes thereto, reported on by Kraft,
whose unqualified reports thereon are included therewith;
(iv) The audited consolidated balance sheet of DBBC and its
subsidiaries as of December 31, 1998 and the related audited consolidated
statements of income, cash flows and changes in members' equity for the
year then ended, together with the notes thereto, reported on by Kraft,
whose unqualified reports thereon are included therewith;
(b) The Seller Financial Statements have been prepared in accordance with
GAAP consistently applied and fairly present the financial condition, assets,
liabilities (whether accrued, absolute, contingent or otherwise) and members'
equity of Seller as of their dates. The related statements have been prepared in
accordance with GAAP consistently applied (except with respect to the October
31, 2001 Balance Sheet which reflects the Agreed GAAP Exceptions and which does
not include accompanying notes) and
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fairly present the results of operations and changes in cash flow and members'
equity of the Seller for the periods covered thereby.
5.7. No Undisclosed Liabilities. The Seller has no liabilities or
obligations (direct or indirect, contingent or absolute, matured or unmatured)
of any nature whatsoever, whether arising out of contract, tort, statute or
otherwise which are not reflected, reserved against or given effect to in the
Seller Financial Statements or the Final Balance Sheet except: (i) liabilities
and obligations which are disclosed specifically in Schedule 5.7; (ii)
liabilities and obligations under executory contracts; (iii) liabilities and
obligations under Employee Plans; (iv) liabilities and obligations which are the
subject matter of another representation of this Article V; or (v) liabilities
and obligations incurred in the ordinary course of business since the date of
the Seller Financial Statements and which are of the same nature and general
amounts as those set forth on the Seller Financial Statements ("Undisclosed
Liabilities"). There is no basis for assertion against Seller of any liabilities
or obligations not adequately reflected, reserved against or given effect to in
the Seller Financial Statements or the Final Balance Sheet or in Schedule 5.7
except for liabilities and obligations described in clause (ii) of this Section
5.7.
5.8. Operations Since December 31, 2000.
(a) Except as set forth in Schedule 5.8(A), since December 31, 2000, there
has been no Material Adverse Effect in the Purchased Assets or in the Business,
operations, workforce, prospects or financial condition of Seller, the Merged
Companies or Phoenix of Hendersonville.
(b) Except as set forth in Schedule 5.8(B), since December 31, 2000,
Seller, the Merged Companies and Phoenix of Hendersonville have conducted the
Business only in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing, since December 31, 2000, except as set
forth in such Schedule, Seller, the Merged Companies and Phoenix of
Hendersonville have not:
(i) Sold, leased (as lessor), transferred or otherwise disposed of, or
mortgaged or pledged, or imposed or suffered to be imposed any Encumbrance
on, any of the assets reflected on the December 31, 2000 Balance Sheet or
any assets acquired by Seller, the Merged Companies or Phoenix of
Hendersonville since December 31, 2000, except for inventory and immaterial
amounts of personal property sold or otherwise disposed of in the ordinary
course of business and except for Permitted Encumbrances;
(ii) canceled any debts owed to or claims held by them (including the
settlement of any claims or litigation) other than in the ordinary course
of business;
(iii) created, incurred, assumed or guaranteed, or agreed to create,
incur, assume or guaranty, any indebtedness for borrowed money or entered
into, as lessee, any capitalized lease obligations (as defined in Statement
of Financial Accounting Standards No. 13);
(iv) accelerated or delayed collection of notes or accounts receivable
generated by Seller, the Merged Companies or Phoenix of Hendersonville in
advance of or beyond their regular due dates or the dates when the same
would have been collected in the ordinary course of business, other than
accelerations and delays of such notes or accounts receivable in amounts
not exceeding US$25,000 individually, which are necessary or desirable in
light of the financial condition of the maker of the note or the account
party may be made with Buyer's prior written consent thereto;
(v) delayed or accelerated payment of any account payable or other
liability of Seller, the Merged Companies or Phoenix of Hendersonville
beyond or in advance of its due date or the date when such liability would
have been paid in the ordinary course of business (other than accelerations
and delays necessary or desirable in light of the financial condition of
the maker of the note on the account party);
(vi) instituted any increase in any compensation payable to any
employee of Seller, the Merged Companies or Phoenix of Hendersonville or in
any profit-sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement, medical, hospital, disability, welfare or other
benefits made available to employees of Seller, the Merged Companies or
Phoenix of Hendersonville (other
22
than any such increase or payment paid or to become payable in the ordinary
course of business consistent with past practice);
(vii) declared or paid any distributions or dividends other than
distributions to provide funds for the payment of federal and state income
tax liabilities of the members of DBBC resulting from the attribution to
such members of the income of DBBC, which distributions are disclosed in
Schedule 5.8(A) or Schedule 5.8(B) and which have been made in the ordinary
course of business consistent with past practice; or
(viii) agreed to do any of the foregoing.
5.9. Taxes.
(a) The Seller, the Merged Companies and all members of any consolidated,
affiliated or unitary group of which a Merged Company is a member have, since
the date Seller purchased the Merged Companies or Phoenix of Hendersonville,
accurately prepared and in all material respects timely filed (including all
extensions) all federal, state, county, municipal and local income, sales, use,
transfer, business, property and other Tax Returns required to be filed by them
on or prior to the Closing Date and have paid (or have accrued or will accrue,
prior to the Closing Date, amounts for the payment of) all Taxes shown as owing
on all such Tax Returns on or prior to the Closing Date. Except as set forth on
the attached Schedule 5.9(A):
(i) All Tax Returns prepared and filed by Seller, the Merged Companies
and Phoenix of Hendersonville (since Seller's formation or Seller's
acquisition of Phoenix of Hendersonville, as the case may be) are true and
correct in all material respects and properly reflect the Taxes due for the
periods covered thereby.
(ii) To the Knowledge of Seller, there has been no intentional
disregard of any statute, regulation, rule or revenue ruling in the
preparation of any Tax Return applicable to Seller, the Merged Companies or
Phoenix of Hendersonville.
(iii) There are no tax liens on any of the Purchased Assets of Seller
or on the assets or the stock of the Merged Companies or Phoenix of
Hendersonville, except for liens for current Taxes not yet due and payable
and the Purchased Assets or the assets or stock of the Merged Companies are
not subject to claims for income taxes of any Person.
(iv) Since the date Seller purchased the Merged Companies or Phoenix
of Hendersonville, none of the Seller, the Merged Companies or Phoenix of
Hendersonville has waived any law or regulation fixing, or consented to the
extension of, any period of time for assessment of any Taxes, which waiver
or consent is currently in effect.
(v) No Tax Return of Seller, the Merged Companies or Phoenix of
Hendersonville (since the date of their acquisition by Seller) has been
audited by any taxing authority or other Governmental Body, and to the
Knowledge of Seller, there are no unresolved questions, claims or disputes
asserted by any taxing authority or other Governmental Body concerning
liability for Taxes of Seller or the Merged Companies.
(vi) Neither the Merged Companies nor Phoenix of Hendersonville have
received a written ruling of a taxing authority relating to Taxes, or
entered into a written agreement with a taxing authority relating to Taxes,
that would have a continuing adverse effect after the Closing Date.
(vii) None of the Merged Companies or Phoenix of Hendersonville have
filed, and will not file on or prior to the Closing Date, a consent under
Section 341(f) of the Code.
(viii) None of the Merged Companies or Phoenix of Hendersonville are
parties to any agreement, contract or arrangement that would result,
individually or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
23
(ix) None of the Seller, any of the Merged Companies or Phoenix of
Hendersonville is a United States real property holding corporation as
defined in Section 897 of the Code nor has been a United States real
property holding corporation at any time during the five-year period ending
on the Closing Date.
(x) None of the Merged Companies or Phoenix of Hendersonville (since
their acquisition by Seller) has made or received any distribution of stock
or other securities that would cause Section 355(e) of the Code to apply to
any of the Merged Companies or Phoenix of Hendersonville.
(xi) Seller has delivered to Buyer correct and complete copies of all
federal income tax returns of Seller, the Merged Companies and Phoenix of
Hendersonville, and all examination reports and statements of deficiencies
assessed against or agreed to by any of the Seller, Merged Companies or
Phoenix of Hendersonville, for all years since 1998.
(xii) All Taxes which Seller, the Merged Companies or Phoenix of
Hendersonville are obligated to withhold from amounts owing to any
employee, former employee, creditor or third Person have been fully paid or
properly accrued.
(xiii) All tax deficiencies asserted or assessed since the date Seller
purchased the Merged Companies or Phoenix of Hendersonville against Seller,
the Merged Companies or Phoenix of Hendersonville have been paid or finally
settled and no amounts with respect thereto remain unpaid.
(xiv) There are no outstanding waivers, executed or requested by
Seller, the Merged Companies, Phoenix of Hendersonville or any tax
authority, of any statute of limitations with respect to the assessment of
any Tax.
(xv) There are no material elections (including but not limited to an
election by Seller pursuant to Section 301.7701-3(c) of the Treasury
Regulations to be classified as a corporation for federal income tax
purposes), consents or agreements with tax authorities other than those
reflected on Tax forms filed with Tax authorities.
(xvi) No withholding of Taxes by Buyer will be required in connection
with the purchase and sale contemplated herein under Section 1445 of the
Code or any other provision of the Code or any provision of foreign, state
or local law.
5.10. Title to and Condition of Assets.
(a) DBBC is the owner of and has good and marketable title to, or valid and
enforceable leasehold, license or similar interest in, all of the Purchased
Assets (provided that title to the Owned Real Property is addressed solely in
Section 5.11), and the Merged Companies and Phoenix of Hendersonville have good
and marketable title to, or valid enforceable leasehold, license or similar
interests in, all of the assets necessary to operate their respective
businesses, including without limitation those assets and properties reflected
in the Seller Financial Statements (other than those properties and assets
disposed of since the date of the Seller Financial Statements in the ordinary
course of business for fair value) in the amounts and categories reflected
therein, and all properties and assets acquired after the date of the Seller
Financial Statements, free and clear of all Encumbrances, other than Permitted
Encumbrances, or other third Person interests of any nature whatsoever, except
for: (a) the lien of current taxes not yet due and payable, (b) the security
interests and deeds of trust listed in Schedule 5.10(A), and (c) other title
exceptions disclosed in Schedule 5.10(A). Except as disclosed in Schedule
5.10(A), all of the tangible properties and assets owned by DBBC, except for the
Excluded Assets, are included in the Purchased Assets.
(b) Except for the Excluded Assets and except as set forth on Schedule
5.10(B), the Purchased Assets and the assets of the Merged Companies and Phoenix
of Hendersonville constitute all of the assets necessary to operate the Business
at and after Closing in a manner substantially similar to the operations of the
Business prior to Closing. All the rights, properties and assets which are used
in connection with the carrying on and conduct of the Business, are either (i)
owned by Seller, the Merged Companies or Phoenix of Hendersonville, (ii)
granted, leased or licensed to Seller, the Merged Companies or Phoenix of
Hendersonville under one of the contracts, agreements, arrangements, commitments
or plans listed in the
24
Schedules hereto to the extent required to be disclosed therein or (iii)
disclosed on Schedule 5.10(B) pursuant to this Section 5.10.
(c) The Purchased Assets and the other assets owned by Seller, the Merged
Companies or Phoenix of Hendersonville that are currently used in connection
with the Business are in good operating condition and repair, ordinary wear and
tear only excepted, are useable in the ordinary course of business and conform
in all material respects to all applicable statutes, ordinances, and regulations
relating to their construction, use and operation.
5.11. Real Property.
(a) Schedule 5.11(A) contains (i) a list of the parcel of real property
owned by any of the Seller, the Merged Companies or Phoenix of Hendersonville
and required for the operation of the Business (the "Owned Real Property")
(showing any indebtedness secured by a mortgage or other Encumbrance thereon),
and (ii) a brief description of each option held by any of the Seller, the
Merged Companies or Phoenix of Hendersonville to acquire any real property.
(b) Schedule 5.11(B) sets forth a list of each lease or similar agreement
under which any of the Seller, the Merged Companies or Phoenix of Hendersonville
is a lessee of, or holds or operates, any real property owned by any third
Person (the "Leased Real Property"). The Owned Real Property and the Leased Real
Property are collectively referred to herein as the "Real Property."
(c) Schedule 5.11(C) contains a list of each parcel of real property (i)
that has been used in the respective conduct of the businesses of Seller, the
Merged Companies or Phoenix of Hendersonville during the period in which the
members of DBBC directly or indirectly owned all of the outstanding membership
interests or capital stock of such entities, and (ii) is not described, listed
or set forth in Schedule 5.11(A) or Schedule 5.11(B) hereto.
(d) Each of the Seller, the Merged Companies and Phoenix of Hendersonville,
as the case may be, has good, valid and marketable title to the Owned Real
Property owned by it as disclosed in Schedule 5.11(A), free and clear of all
Encumbrances whatsoever except for Owned Real Property Permitted Encumbrances.
The occupation, possession and use of the Leased Real Property by Seller, the
Merged Companies or Phoenix of Hendersonville is not disturbed and, to the
Knowledge of Seller, has not been disturbed since the date Seller purchased the
Merged Companies or Phoenix of Hendersonville. Since the date Seller purchased
the Merged Companies or Phoenix of Hendersonville, no claim has been asserted
or, to the Knowledge of Seller, threatened, which is adverse to the rights of
Seller, the Merged Companies or Phoenix of Hendersonville to the continued
occupation, possession and use of the Leased Real Property, as currently
utilized.
(e) All buildings, structures, improvements, fixtures, facilities,
equipment, and all components of all buildings, structures and other
improvements included within the Real Property, including but not limited to the
roofs and structural elements thereof and the heating, ventilation, air
conditioning, plumbing, electrical, mechanical, sewer, waste water, storm water,
paving and parking equipment, systems and facilities included therein
(collectively, the "Improvements"), are in good operating condition and repair,
subject to normal wear and maintenance and are usable in the regular and
ordinary course of business, and no material maintenance, repair or replacement
thereof has been deferred. No Person other than Seller, the Merged Companies or
Phoenix of Hendersonville owns any Improvements, except for leased Improvements
disclosed on Schedule 5.11(B) or Schedule 5.13.
(f) There is no pending, or to the Knowledge of Seller, threatened
condemnation, eminent domain or similar proceeding with respect to, or which
could affect, any Real Property or any Improvements included within such Real
Property.
(g) None of the Seller, the Merged Companies or Phoenix of Hendersonville
has been notified in writing since the date Seller purchased the Merged
Companies or Phoenix of Hendersonville of any contemplated improvements to the
Real Property by public or governmental authority, the cost of which is to be
assessed as special taxes against the Real Property in the future.
25
(h) There are no rights of possession, use or otherwise, outstanding in
third Persons by reason of unrecorded leases, land contracts, sales contracts,
options or other comparable instruments.
(i) Except for the Jerry Daum payable identified on Schedule 5.5, all labor
and work performed upon and all machinery, materials and fuel delivered or
furnished to the Real Property for the improvement thereof have been paid for or
accrued in the Final Balance Sheet, and no unpaid-for Improvements, including
without limitation costs of construction of any Improvements, have been or will
be made to the Real Property prior to the Closing unless the same are accrued
for in the Final Balance Sheet. To the Knowledge of Seller, except for the Jerry
Daum payable, there are no parties entitled to assert a mechanics lien claim
with respect to the Owned Real Property.
(j) To the Knowledge of Seller, there are no off record or undisclosed
legal or equitable interests in any part of the Real Property owned by any other
Person.
(k) None of the Seller's, the Merged Companies' or Phoenix of
Hendersonville's use of, and the Improvements included within the Real Property,
conflicts with any zoning ordinance applicable to such Real Property and each of
Seller, the Merged Companies and Phoenix of Hendersonville, as the case may be,
has obtained all zoning permits required for its use of the Owned Real Property
and the Leased Real Property and any operations conducted thereon.
5.12. Personal Property. Schedule 5.12 contains a detailed list of all
machinery, equipment, vehicles, furniture and other personal property owned by
Seller, the Merged Companies and Phoenix of Hendersonville having an original
cost of Twenty-Five Thousand United States Dollars (US$25,000) or more per item.
5.13. Personal Property Leases. Schedule 5.13 contains a list of each
lease or other agreement or right, whether written or oral, under which any of
the Seller, the Merged Companies or Phoenix of Hendersonville is a lessee of, or
holds or operates, any machinery, equipment, vehicle or other tangible personal
property owned by a third Person, except those which are terminable by Seller,
the Merged Companies or Phoenix of Hendersonville without cost or penalty on
thirty (30) days' or less notice or which provide for annual rentals of less
than Twenty-Five Thousand United States Dollars (US$25,000).
5.14. Governmental Permits.
(a) The Seller, the Merged Companies or Phoenix of Hendersonville hold or
possess all FCC Licenses from the FCC to operate the Stations as radio broadcast
stations and all auxiliary facilities licensed by the FCC for operation in
connection with the Business, and all licenses, franchises, permits, privileges,
immunities, approvals and other authorizations from another Governmental Body
which are necessary to entitle Seller, the Merged Companies or Phoenix of
Hendersonville to own or lease, operate and use the Purchased Assets and the
Business and conduct their operations as currently operated (herein collectively
called "Governmental Permits"). Schedule 5.14(A) sets forth a list of each
Governmental Permit, including but not limited to Final Orders, which has been
issued as of the date of this Agreement. Complete and correct copies of all of
the Governmental Permits listed in Schedule 5.14(A) have heretofore been
delivered or made available to Buyer by Seller, the Merged Companies or Phoenix
of Hendersonville. The public inspection files of the Business are in compliance
with Section 73.3526 of the Rules and Regulations.
(b) Except as set forth in Schedule 5.14(B), (i) Seller and the Merged
Companies and Phoenix of Hendersonville are in compliance in all material
respects with their respective obligations under each of the Governmental
Permits, and since the date Seller purchased the Merged Companies or Phoenix of
Hendersonville no event has occurred or condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would constitute a breach
or default under any such Governmental Permit or which permits or, after notice
or lapse of time or both, would permit revocation or termination of any such
Governmental Permit; (ii) no written notice of cancellation, of default or of
any dispute concerning any Governmental Permit, or of any event, condition or
state of facts described in clause (i) of this Section 5.14(b), has been
received by Seller, the Merged Companies or Phoenix of Hendersonville; (iii) no
action or proceeding is pending or, to the Knowledge of Seller, threatened
before the FCC or any
26
other Governmental Body to revoke, refuse to renew or modify such Governmental
Permits or other authorizations of the Business; and (iv) each of the
Governmental Permits is valid, subsisting and in full force and effect and,
except as otherwise set forth in Sections 7.5 and 7.6, each Governmental Permit
may be assigned and transferred to Buyer in accordance with this Agreement and
will be, immediately after the Closing, in full force and effect, in each case
without (x) the occurrence of any breach, default or forfeiture of rights
thereunder, or (y) the consent, approval, or act of, or the making of any filing
with, any Governmental Body. Except as set forth on Schedule 5.14(B), neither
the Seller, the Merged Companies nor Phoenix of Hendersonville have any reason
to believe that any of the Governmental Permits would not be renewed for a full
term with no adverse conditions by the FCC or other granting authority in the
ordinary course, or that the Stations are in violation of any FCC rules or
policies.
(c) The Business is being operated in accordance with the terms and
conditions of the Governmental Permits applicable to it and in accordance with
the Rules and Regulations, no proceedings or investigations are pending or, to
the Knowledge of Seller, are threatened which may result in the revocation,
cancellation, suspension, rescission, modification or non-renewal of any of the
Governmental Permits, the denial of any pending application, the issuance of any
cease and desist order or the imposition of any fines, forfeitures or other
administrative actions by the FCC with respect to the Business or its operation,
other than proceedings that are not likely to have a Material Adverse Effect on
the Business. There is not on the date of this Agreement pending before the FCC
any issued or outstanding, nor to the Knowledge of Seller is there on the date
of this Agreement threatened, any application, complaint, petition or proceeding
with respect to any Station. Seller, the Merged Companies and Phoenix of
Hendersonville have complied in all material respects with all requirements to
file reports, applications and other documents with the FCC with respect to the
Business, and with all such reports and applications. The Seller has no
Knowledge of any matters (i) which would result in the revocation of or the
refusal to renew any of the Governmental Permits, or (ii) against Seller, the
Merged Companies or Phoenix of Hendersonville which would result in the FCC's
refusal to grant the FCC Consent. The operation and maintenance by Seller, the
Merged Companies or Phoenix of Hendersonville of the towers, antenna systems and
other facilities relating to the Business or used in connection with the
transmission of their respective signals do not violate any Requirements of Law
or rights of any Person in any respect which have had or would have a Material
Adverse Effect on the Business. Seller, the Merged Companies and Phoenix of
Hendersonville have registered the towers owned by Seller, the Merged Companies
or Phoenix of Hendersonville to the extent required by applicable Requirements
of Law. None of the Stations is causing objectionable interference to the
transmissions of any other broadcast station or communications facility nor have
any of the Stations received any complaints with respect thereto, and to the
Knowledge of Seller no other broadcast stations or communications facility is
causing objectionable interference to respective transmissions of any Station.
The operation of the Business, the Merged Companies, Phoenix of Hendersonville
and all of the Purchased Assets is in compliance with ANSI Radiation Standards
C95.1-1992.
5.15. Intellectual Property.
(a) Except as described in Section 2.1(d) and as set forth on Schedule
5.15(A), there is no Intellectual Property.
(b) Each item constituting part of the Intellectual Property has been, to
the extent indicated in Schedule 5.15(B), duly registered, filed or issued, as
the case may be, to the extent as is indicated in Schedule 5.15(B) and such
registrations, filings and issuances remain in full force and effect.
(c) Except as set forth on Schedule 5.15(C), the Seller, the Merged
Companies or Phoenix of Hendersonville own and possess all right, title and
interest in and to the Intellectual Property, and except as set forth in
Schedule 5.15(C), no written claim by any Person contesting the validity,
enforceability, use, or ownership of any Intellectual Property has been received
by the Seller, the Merged Companies or Phoenix of Hendersonville or is currently
outstanding and none of the Seller, the Merged Companies or Phoenix of
Hendersonville has received any notices of any threatened claim by any Person
contesting the validity, enforceability, use, or ownership of any Intellectual
Property.
27
(d) Except as set forth on Schedule 5.15(D), none of the Seller, the Merged
Companies or Phoenix of Hendersonville has received any written notices of, nor
are there any facts which indicate a likelihood of, any infringement or
misappropriation by, or conflict with, any Person with respect to any
Intellectual Property.
(e) Except as set forth on Schedule 5.15(E), to Seller's Knowledge, neither
the Seller, the Merged Companies nor Phoenix of Hendersonville has infringed,
misappropriated or otherwise been in conflict with any rights of any Person.
(f) Except as set forth in Schedule 5.15(F), neither the Seller, the Merged
Companies nor Phoenix of Hendersonville has received any written notice of, nor
are there any facts indicating a likelihood of, the invalidity or
unenforceability of any Intellectual Property.
(g) None of the former or present employees, agents, independent
contractors, officers, directors, members or managers of Seller, the Merged
Companies or Phoenix of Hendersonville holds any right, title or interest,
directly or indirectly, in whole or in part, in or to any Intellectual Property.
Neither the Seller, the Merged Companies nor Phoenix of Hendersonville license
from any present or former employees, officers, members, managers or directors
of Seller, the Merged Companies or Phoenix of Hendersonville any Intellectual
Property relating to the Business as currently conducted or as currently
proposed to be conducted. None of the Seller, the Merged Companies or Phoenix of
Hendersonville is a party to any employment contract, patent disclosure
agreement or any other contract or agreement with any employee of Seller, the
Merged Companies or Phoenix of Hendersonville relating to any Intellectual
Property. Schedule 5.15(G) describes all Intellectual Property that has been or
is licensed to any Person and all Intellectual Property that has been or is
licensed from any Person, and identifies the Person to whom or from whom such
rights have been or are licensed. All Intellectual Property has been assigned or
licensed to Seller, the Merged Companies or Phoenix of Hendersonville free and
clear of any Encumbrance. The transactions contemplated by this Agreement will
have no Material Adverse Effect on Seller's or the Merged Companies' or Phoenix
of Hendersonville's right, title and interest in and to any Intellectual
Property. Except as set forth in Schedule 5.15(B), the Seller, the Merged
Companies and Phoenix of Hendersonville have taken all commercially reasonable
action necessary or desirable to protect the Intellectual Property and will
continue to use commercially reasonable efforts to maintain those rights prior
to Closing so as to not materially adversely affect the validity or enforcement
of the Intellectual Property.
5.16. Employees and Related Agreements.
(a) Except as described in Schedules 5.16(A) and 5.16(B), neither Seller
nor any member of Seller's Controlled Group is a party to or bound by any
implied, oral or written collective bargaining agreement, employment agreement,
severance agreement, consulting, advisory, independent contractor or service
agreement, deferred compensation agreement, confidentiality agreement or
covenant not to compete, or other contract or agreement relating to employment
or compensation which, individually or in the aggregate, is material to the
Business. There are no material controversies pending, or, to the Knowledge of
Seller, threatened between Seller or any member of its Controlled Group and its
employees or former employees.
(b) For purposes of this Agreement, (i) "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended, and any regulations
promulgated thereunder; (ii) the term "Employee Plan" includes any written
pension, retirement, savings, disability, medical, dental, health, life
(including, without limitation, any individual life insurance policy under which
an employee or former employee of Seller or any member of its Controlled Group
is the named insured and as to which Seller or any member of its Controlled
Group makes premium payments, whether or not Seller or any member of its
Controlled Group is the owner, beneficiary or both of such policy), incentive,
severance pay, death benefit, group insurance, profit-sharing, deferred
compensation, stock option, stock purchase, bonus, vacation pay, trust,
contract, agreement or policy, including without limitation any pension plan as
defined in Section 3(2) of ERISA ("Pension Plan") and any written welfare plan
as defined in Section 3(1) of ERISA ("Welfare Plan") whether or not any of the
foregoing is funded or insured, which is intended to provide or does in fact
provide benefits to any current or former employee of Seller or its Controlled
Group, and to which Seller
28
or any member of its Controlled Group is a party or by which they (or any of
their rights, properties or assets) are bound; and (iii) the term "Controlled
Group" includes, with respect to Seller, any corporation, partnership,
proprietorship, company, individual, organization, Person or other entity that
with Seller is required to be treated as a single employer under Section 414(b),
(c) or (m) of the Code. Except as described in Schedule 5.16(B), (i) neither
Seller nor any member of the Controlled Group maintains, or is required to
contribute to, either directly or through any other Person or entity, any
Employee Plan on behalf of its current or former employees; (ii) no current or
former employees of Seller or any member of its Controlled Group are covered
under any Employee Plan; and (iii) each Employee Plan that is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS (copies of which have been furnished to Buyer)
stating that the plan meets the requirements of the Code and that the trust
associated with the plan is tax-exempt under Section 501(a) of the Code.
(c) Neither Seller nor any member of its Controlled Group has ever
contributed to, been obligated to contribute to, or has any liability under any
Multiemployer plan (as described in Section 4001(a)(3) of ERISA) with respect to
its current or former employees.
(d) Each Welfare Plan maintained by Seller or any member of its Controlled
Group which is a group health plan (within the meaning of Section 5000(b)(1) of
the Code) complies in all material respects with, and has been maintained and
operated in accordance with, each of the health care continuation requirements
of Section 162(k) of the Code as in effect for years beginning prior to 1989,
Section 4980B of the Code for years beginning after December 31, 1988, Part 6 of
Title I, Subtitle B of ERISA, and the requirements of the Health Insurance
Protection and Portability Act of 1996.
(e) Except as disclosed in Schedule 5.16(E), neither Seller nor any member
of its Controlled Group has any liabilities for post-retirement welfare
benefits, including retiree medical benefits.
(f) Each Employee Plan, the administrator and fiduciaries of each Employee
Plan and Seller and all members of Seller's Controlled Group have at all times
complied with the applicable requirements of ERISA (including, but not limited
to, the fiduciary responsibilities imposed by Part 4 of Title I, Subtitle B of
ERISA), the Code and any other applicable Requirements of Law governing each
Employee Plan, and (ii) each Employee Plan has at all times since the date
Seller purchased the Merged Companies or Phoenix of Hendersonville been properly
administered in all material respects in accordance with all such Requirements
of Law, and in accordance with its terms to the extent not inconsistent with any
such Requirements of Law.
(g) Except as disclosed on Schedule 5.16(G), neither Seller nor any member
of its Controlled Group is delinquent as to contributions or payments to or in
respect of any Employee Plan as to which Seller or any member of its Controlled
Group is in any way obligated to make contributions or payments, nor has Seller
or any member of its Controlled Group failed to pay any assessments made with
respect to any such Employee Plan. All contributions and payments with respect
to Employee Plans that are required to be made by Seller or any of its
Controlled Group with respect to periods ending on or before the Closing Date
(including periods from the first day of the then-current plan or policy year to
and including the Closing Date) have been made or will be accrued before the
Closing Date by Seller or any member of Seller's Controlled Group in accordance
with the appropriate actuarial valuation report or insurance contracts or
arrangements.
(h) With respect to each Employee Plan, there has not occurred since the
date Seller purchased the Merged Companies or Phoenix of Hendersonville, nor is
any Person contractually bound to enter into, any non-exempt "prohibited
transaction" within the meaning of Section 4975 of the Code or Section 406 of
ERISA.
(i) Neither Seller or any member of its Controlled Group either maintains
or contributes to, and during the seven (7) years immediately preceding the
Closing Date, neither Seller nor any member of its Controlled Group has
maintained or contributed to any Employee Plan that is subject to the provisions
of Title IV of ERISA. No Pension Plan maintained by Seller or any member of its
Controlled Group has been the subject of a "reportable event" (within the
meaning of Section 4043 of ERISA) as to which
29
notices would be required to be filed with the Pension Benefit Guaranty
Corporation ("PBGC"), other than events reportable on IRS Form 5310 or 5310-A
and no proceeding by the PBGC to terminate any Employee Plan sponsored or
maintained by Seller or any member of Seller's Controlled Group has been
instituted or threatened.
(j) Neither Seller nor any member of its Controlled Group has any current
or potential liabilities with respect to any defined benefit Pension Plan that
has ever been maintained by Seller or any member of its Controlled Group.
(k) No lawsuits, claims (other than routine claims for benefits) or
complaints to, or by, any Person have been filed since the date Seller purchased
the Merged Companies or Phoenix of Hendersonville, are pending or, to the
Knowledge of Seller, have been threatened, and to the Knowledge of Seller, no
facts or contemplated events exist that reasonably could be expected to give
rise to any such lawsuit, claim (other than a routine claim for benefits) or
complaint, with respect to any Employee Plan.
(l) Neither Seller nor any member of Seller's Controlled Group has any
formal plan or commitment to create or amend any Employee Plan.
5.17. Employee Relations.
(a) Except as set forth in Schedule 5.17(A), Seller, the Merged Companies
and Phoenix of Hendersonville are in compliance in all material respects with
all applicable Requirements of Law with respect to employment, employment
practices, employment verifications, recordkeeping and reporting, terms and
conditions of employment and wages, overtime pay, and hours. Neither Seller, the
Merged Companies nor Phoenix of Hendersonville has engaged in any unfair labor
practice or illegally discriminated with regard to any aspect of employment on
the basis of age, color, national origin, race, religion, gender, disability or
on the basis of any other legally protected category or classification. With
respect to employees and former employees who rendered services to, or
participated in conduct or activities in connection with, Seller, the Merged
Companies or Phoenix of Hendersonville, Seller, the Merged Companies and Phoenix
of Hendersonville have since the date Seller purchased the Merged Companies or
Phoenix of Hendersonville withheld all amounts required by law from the wages,
salaries and other payments to employees and former employees and are not liable
for any arrears of wages, overtime pay, commissions, bonuses and other payments
or any taxes or any penalty based on failure to comply with any of the
foregoing.
(b) Except as set forth in Schedule 5.17(B), there are no: (i) unfair labor
practice charges or complaints pending or, to the Knowledge of Seller,
threatened against Seller, the Merged Companies or Phoenix of Hendersonville
before the National Labor Relations Board; (ii) discrimination, harassment or
retaliation charges or complaints pending or, to the Knowledge of Seller,
threatened against Seller, the Merged Companies or Phoenix of Hendersonville
under any federal, state or local law, rule, regulation or order; (iii)
complaints, charges or citations pending or, to the Knowledge of Seller,
threatened against Seller, the Merged Companies or Phoenix of Hendersonville
under OSHA or any state or local occupational safety law, rule, regulation or
order; or (iv) other employment-related legal or administrative proceedings,
governmental investigations, compliance reviews, lawsuits, audits or enforcement
proceedings of any kind pending or, to the Knowledge of Seller, threatened
against Seller, the Merged Companies or Phoenix of Hendersonville.
(c) Except as set forth in Schedule 5.17(C), Seller, the Merged Companies
and Phoenix of Hendersonville are in compliance in all material respects with
all Requirements of Law requiring periodic reports and disclosures with regard
to the employees of Seller, the Merged Companies or Phoenix of Hendersonville,
and all such reports have been filed or furnished in a timely manner and in
accordance in all material respects with applicable laws.
(d) There are no unions representing or claiming to represent any employees
of Seller, the Merged Companies or Phoenix of Hendersonville, or strikes,
grievances, controversies or other similar disputes pending, or to the Knowledge
of Seller, threatened against Seller, the Merged Companies or Phoenix of
Hendersonville. There are no pending, or to the Knowledge of Seller, threatened
claims of representation
30
by any labor union or other employee group involving an attempt to organize
Seller's or the Merged Companies' or Phoenix of Hendersonville's employees.
5.18. Contracts.
(a) Except as set forth in Schedule 5.18(A), none of Seller, the Merged
Companies or Phoenix of Hendersonville is a party to or bound by:
(i) Any contract for the purchase or sale of real property.
(ii) Any distributor, dealer, sales agency, advertising representative
or advertising or public relations contract, agreement or commitment which
will involve the payment of more than Fifty Thousand United States Dollars
(US$50,000) during Seller's current fiscal year, or which extends beyond
July 31, 2002.
(iii) Any contract, subscription, agreement, option, warrant, right or
other commitment regarding the purchase, sale or issuance of limited
liability interests or shares of stock, as applicable (or interests
therein) of Seller, the Merged Companies or Phoenix of Hendersonville.
(iv) Any contract, agreement or commitment regarding the testing of
any product designed by, or the rights to which are held by, Seller, the
Merged Companies or Phoenix of Hendersonville.
(v) Any contract, agreement or commitment regarding the sale or other
disposition of products or services by the Seller or any of the Merged
Companies or Phoenix of Hendersonville, or for the purchase of products or
services by the Seller or any of the Merged Companies or Phoenix of
Hendersonville, which will involve the receipt or payment of more than
Fifty Thousand United States Dollars (US$50,000) during Seller's current
fiscal year, or which extends beyond July 31, 2002.
(vi) Any guarantee or indemnification agreement for the benefit of any
Person.
(vii) Any Tax sharing agreements.
(viii) Any contract, agreement or commitment providing for the
incurrence by the Seller or any of the Merged Companies of indebtedness for
borrowed money.
(ix) Any partnership or joint venture agreement.
(x) Any contract, agreement or commitment pursuant to which any Person
is granted a general or special power of attorney by the Seller or any of
the Merged Companies or Phoenix of Hendersonville.
(xi) Any other contract, agreement, commitment, understanding or
instrument (A) involving payment or receipt after the date hereof of more
than Fifty Thousand United States Dollars (US$50,000) in the aggregate
during the current fiscal year of Seller that is not terminable without
cost or penalty by the Seller or any of the Merged Companies or Phoenix of
Hendersonville on sixty (60) days' or less notice, or (B) that is otherwise
material to Seller, the Merged Companies or Phoenix of Hendersonville.
(b) To Seller's Knowledge, except as set forth in Schedule 5.18(B), none of
the other parties to any contracts, leases, agreements, commitments, plans or
licenses described in Schedule 5.18(A) has provided notice to Seller, the Merged
Companies or Phoenix of Hendersonville that it intends to terminate or
materially alter the provisions of such contracts, leases, agreements,
commitments, plans or licenses.
(c) All of the Advertising Agreements have been entered into in the
ordinary course of business, consistent with past practice.
(d) All of the agreements, documents, schedules, and amendments pertaining
to the CIT Indebtedness (the "CIT Loan Documents") have been provided to the
Buyer by the Seller prior to the Closing Date.
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(e) The CIT Indebtedness, the Mid-TN Indebtedness and the Affiliate
Indebtedness may be paid by the Buyer as contemplated by Section 2.3(b) without
giving notice to, obtaining the consent of, or paying any fee or penalty to any
third party, in each case including, without limitation, the parties to the CIT
Indebtedness, the Mid-TN Indebtedness and the Affiliate Indebtedness,
5.19. Status of Contracts. Except as set forth in Schedule 5.19 or in any
other Schedule hereto, each of the leases, contracts and other agreements of
Seller, the Merged Companies or Phoenix of Hendersonville listed in Schedules
5.11(B), 5.13, 5.15, 5.16 and 5.18(A) (collectively, the "Business Agreements")
constitutes a legal, valid and binding obligation of the Seller, the Merged
Companies or Phoenix of Hendersonville and, to Seller's Knowledge, the other
parties thereto (subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws of general application relating to or affecting creditors'
rights and to general equity principles) and is in full force and effect. Except
as set forth in Schedule 5.19, the Seller, the Merged Companies or Phoenix of
Hendersonville are not, or, to Seller's Knowledge, alleged to be in, material
breach or material default under, any of the Business Agreements and, to
Seller's Knowledge, no other party to the Business Agreements is in material
breach or material default thereunder, and, to Seller's Knowledge, no event has
occurred and no condition or state of facts exists which, with the passage of
time or the giving of notice or both, would constitute such a default or breach
by Seller, the Merged Companies or Phoenix of Hendersonville, or, to Seller's
Knowledge, by any such other party. True and complete copies of all Business
Agreements, including any amendments thereto, have been delivered to Buyer.
5.20. Environmental Matters. Except as set forth on Schedule 5.20:
(a) The Seller, the Merged Companies and Phoenix of Hendersonville have
been since the date Seller purchased the Merged Companies or Phoenix of
Hendersonville and are in compliance in all material respects with all
applicable Environmental Laws with respect to the operation of the Business.
(b) The Seller, the Merged Companies or Phoenix of Hendersonville own, hold
or possess all Governmental Permits required under Environmental Laws for the
operation of the Business as currently conducted, and all such Governmental
Permits are listed on Schedule 5.14(A).
(c) The Seller, the Merged Companies or Phoenix of Hendersonville have not
been since the date Seller purchased the Merged Companies or Phoenix of
Hendersonville or are not subject to any pending or, to Seller's Knowledge,
threatened investigation by, order from, claim or notice by or agreement with
any Person (including without limitation any prior owner or operator of the Real
Property or any other real property) respecting: (i) any Environmental Law, (ii)
any Remedial Action or (iii) any claim of Losses and Expenses arising from the
Release or threatened Release of a Contaminant into the indoor or outdoor
environment or the presence of any Contaminant on, in, at or beneath any Real
Property.
(d) None of the Seller, the Merged Companies or Phoenix of Hendersonville
is subject to any pending or, to Seller's Knowledge, threatened judicial or
administrative investigation, proceeding, order, judgment, decree or settlement
alleging or relating to a violation of or liability under any Environmental Law.
(e) The Seller, the Merged Companies and Phoenix of Hendersonville have
not, and to Seller's Knowledge, no predecessor of Seller, the Merged Companies
or Phoenix of Hendersonville, has Released, disposed or arranged for disposal of
any Contaminants on, at, in, or beneath: (i) the Real Property, or (ii) except
in material compliance with all applicable Environmental Laws, any other site or
location including, without limitation, any third party disposal site and any
real property formerly leased, owned, operated or otherwise used by Seller, the
Merged Companies or Phoenix of Hendersonville.
(f) No Environmental Encumbrance has attached to the Real Property.
(g) To the Knowledge of Seller, there are no underground storage tanks
located at, in, or beneath the Real Property. No underground storage tanks have
been operated or otherwise used by Seller, the Merged Companies or Phoenix of
Hendersonville at the Real Property.
32
(h) To the Knowledge of Seller, no asbestos or asbestos containing material
is present on any Real Property.
(i) The Seller, the Merged Companies and Phoenix of Hendersonville have
delivered or made available to Buyer all environmental audits, assessments,
studies, sampling results, inspections, and reports arising from or relating to
the past or present operations of Seller, the Merged Companies or Phoenix of
Hendersonville or any of their predecessors and any real property associated
therewith.
(j) The operation of the Business is in compliance with standards
concerning radio frequency radiation exposure recommended in ANSI Standards
C95.1-1992 or any subsequently adopted standards to the extent required to be
met under applicable Rules and Regulations, OSHA or other applicable
Requirements of Law.
5.21. No Advisor. Except for the retention of Media Services Group, whose
fees are included in the Transaction Costs, none of the Seller, the Merged
Companies, Phoenix of Hendersonville or any Person acting on their behalf, has
retained any advisor, broker, investment banker or financial advisor in
connection with this Agreement or any transaction contemplated hereby for which
Buyer may be liable.
5.22. Bank Accounts, Guarantees and Powers. Schedule 5.22 sets forth a
list of all accounts and deposit boxes maintained by any of the Seller, the
Merged Companies or Phoenix of Hendersonville at any bank or other financial
institution and the names of the persons authorized to effect transactions in
such accounts and with access to such boxes.
5.23. Insurance. Schedule 5.23 contains a list of all insurance policies
(specifying (i) the insurer, (ii) the amount of the coverage, (iii) the type of
insurance, (iv) the policy number and (v) any currently pending claims
thereunder or any claims asserted thereunder or under similar policies since
December 31, 1999 maintained by or on behalf of Seller, the Merged Companies or
Phoenix of Hendersonville in connection with the Business. All such policies are
in full force and effect, and Seller, the Merged Companies and Phoenix of
Hendersonville are not in default with respect to any provision contained in any
insurance policy. None of the Seller, the Merged Companies or Phoenix of
Hendersonville has failed since the date Seller purchased the Merged Companies
or Phoenix of Hendersonville to give any notice or present any claim under any
insurance policy in due and timely fashion.
5.24. Indebtedness of Insiders. Except as set forth on Schedule 5.24, no
member, manager, officer or employee of Seller, the Merged Companies or Phoenix
of Hendersonville are indebted to Seller, the Merged Companies or Phoenix of
Hendersonville other than for ordinary employee business-related expenses in
excess of One Thousand Five Hundred United States Dollars (US$1,500) per such
person.
5.25. Compliance with FCC Requirements. Except as set forth on Schedule
5.25, the Stations, their physical facilities, electrical and mechanical systems
and transmitting and studio equipment are being and have been operated in
material compliance with the specifications of the applicable Governmental
Permits and with each document submitted in support of such Governmental
Permits, and Seller, the Merged Companies, Phoenix of Hendersonville and the
Stations are in compliance in all material respects with all Rules and
Regulations. Seller, the Merged Companies and Phoenix of Hendersonville have
complied in all material respects with all requirements of the FCC and the
Federal Aviation Administration with respect to the construction and/or
alteration of Seller's or the Merged Companies' or Phoenix of Hendersonville's
antenna structures, and "no hazard" determinations for each antenna structure
have been obtained, where required, and if required by the Rules and
Regulations, such structures are registered with the FCC. Except as set forth on
Schedule 5.25, all material reports and other filings required by the FCC with
respect to the Stations, including without limitation items required to be
placed in the Stations' public inspection file have been duly and currently
filed as of the date hereof, and are true and complete in all material respects
and, after the Closing Date, Seller shall furnish to Buyer all information
required by the FCC relating to the operation of the Stations prior to the
Closing Date. To Seller's Knowledge, there are no facts or circumstances
primarily relating to Seller or the Stations which could reasonably be expected
to cause the FCC to deny or to materially delay approval of the FCC Consent.
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5.26. Books and Records. The Seller's, the Merged Companies' and Phoenix
of Hendersonville's books, accounts and records have been maintained in
accordance with GAAP, are true, correct and complete in all material respects
and all material transactions to which Seller, the Merged Companies or Phoenix
of Hendersonville are or have been a party are properly recorded therein.
5.27. DBBC's Investment Intent. The Cumulus Common Stock being acquired
in connection with the transactions contemplated herein by DBBC is being
acquired by DBBC solely for DBBC's own account, for investment purposes only,
and is not being purchased with a view to or for the resale, distribution or
fractionalization thereof. DBBC has no agreement or other arrangement, formal or
informal, with any person (with the exception of the Dickey Brothers and
Quaestus Management Corporation) to sell, transfer, pledge or subject to any
lien any part of the Cumulus Common Stock being acquired or which would
guarantee DBBC any profit or protect DBBC against any loss with respect to the
Cumulus Common Stock and DBBC has no plans to enter into any such agreement or
arrangement. Each of the members of DBBC is an "accredited investor" as defined
in Rule 501 promulgated under the Securities Act of 1933, as amended.
5.28. Disclosure. No representation or warranty of Seller made herein or
in the Schedules or in any certificate delivered by or on behalf of Seller
herein contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. Copies of all documents referred to herein or in the
Schedules that have been delivered or made available to Buyer, are correct and
complete copies thereof, and include all amendments, supplements or
modifications thereto or waivers thereunder.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to DBBC as follows:
6.1. Organization of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois.
Buyer is duly qualified to do business and is in good standing as a foreign
corporation in each of the jurisdictions in which Buyer's operations require
that it qualify to transact business as a foreign corporation, except for those
jurisdictions where the failure to so qualify is not likely to have a Material
Adverse Effect on Buyer's business or financial condition, or the ability of
Buyer to lawfully consummate the transactions contemplated by this Agreement in
all material respects. Buyer has all requisite corporate power and authority to
conduct its operations as currently conducted.
6.2. Authority of Buyer; Agreement Binding. Buyer has the corporate power
and authority to execute and deliver this Agreement and all Buyer Ancillary
Agreements and to perform its obligations hereunder. Buyer's execution, delivery
and performance of this Agreement has been duly authorized and approved by
Buyer's board of directors. This Agreement has been duly executed and delivered
by Buyer, and assuming due authorization, execution and delivery by the other
parties thereto, is the legal, valid and binding obligation of Buyer enforceable
in accordance with its terms, subject to general principles of equity and except
as enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar laws of general
application relating to creditor's rights generally.
6.3. Capitalization. As of November 8, 2001, 35,219,416 shares of Cumulus
Common Stock consisting of (i) 27,775,796 shares of Class A Common Stock, $.01
par value, (ii) 5,914,343 shares of Class B Common Stock, $.01 par value, and
(iii) 1,529,277 shares of Class C Common Stock were issued and outstanding. In
addition, as of November 8, 2001, 130,141 shares of 13 3/4% Series A Cumulative
Redeemable Exchangeable Preferred Stock, and 280 shares of 12% Series B
Cumulative Preferred Stock of Buyer were issued and outstanding. All of the
issued and outstanding shares of Cumulus Common Stock have been duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. The
shares of Cumulus
34
Common Stock to be issued as the Purchase Price will be duly authorized and
validly issued and, on the Closing Date, all such shares will be fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. The shares of Cumulus Common Stock issued
upon the exercise of the Warrant will be duly authorized for issuance and, if
and when issued and delivered by Buyer, will be validly issued, fully paid and
non-assessable.
6.4. Absence of Buyer Conflicts. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, does
not:
(a) Conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event creating
rights of acceleration, termination or cancellation, or result in the creation
or imposition of any Encumbrance under: (i) any term or provision of the amended
and restated articles of incorporation or amended and restated bylaws of Buyer,
(ii) any material note, instrument, agreement, mortgage, lease, license,
franchise, permit or other authorization, right, restriction or obligation to
which Buyer is a party or any of its properties is subject, (iii) any Court
Order to which Buyer is a party or by which it is bound, or (iv) any
Requirements of Law.
(b) Require the approval, consent, authorization or act of, or the making
by Buyer of any declaration, notification, filing or registration with, any
Person, other than the FCC Consent or a notification required to be filed under
the HSR Act, except in each case, for any of the foregoing individually or in
the aggregate which would not be reasonably be expected to have a material
adverse effect on the (i) assets, results of operations or consolidated
financial position of the Buyer as a whole, (ii) the value or condition of the
Buyer taken as a whole, or (iii) the availability of assets necessary to operate
the Buyer as a whole (in each case, other than by reason of one or more events,
circumstances, changes, developments, impairments or conditions that adversely
affect the radio broadcasting industry generally or any change in a Requirement
of Law or accounting principles or materially hinder or impair the consummation
of the transactions contemplated hereby.
6.5. No Litigation. There is no Action pending or, to the knowledge of
Buyer, threatened which questions the legality or propriety of the transactions
contemplated by this Agreement.
6.6. No Advisor. Neither Buyer nor any Person acting on its behalf has
retained any advisor, broker, investment banker or financial advisor in
connection with this Agreement or any transaction contemplated hereby for which
Seller may be liable.
6.7. Disclosure. No representation or warranty of Buyer made herein, or
in the certificates of Buyer delivered pursuant to Section 4.3(c) and Section
4.3(d) contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
representations, warranties, and certificates not misleading.
ARTICLE 7
ACTION PRIOR TO THE CLOSING DATE
Buyer and Seller covenant and agree to take the following actions, or to
cause the following actions to be taken, between the date hereof and the Closing
Date:
7.1. Investigation of Seller by Buyer. The Seller, the Merged Companies
and Phoenix of Hendersonville shall afford to the officers, employees and
authorized representatives of Buyer (including, without limitation, independent
public accountants, consultants and attorneys) reasonable access during normal
business hours upon reasonable advance notice to the offices, properties,
employees and business and financial records (including computer files,
retrieval programs and similar documentation) of Seller, the Merged Companies
and Phoenix of Hendersonville to the extent Buyer shall reasonably deem
necessary or desirable and shall furnish to Buyer or its authorized
representatives such additional information concerning the Purchased Assets, the
Merged Companies, Phoenix of Hendersonville and the Business as shall be
reasonably requested. Buyer agrees that such investigation shall be conducted in
such
35
a manner as not to interfere unreasonably with the operations of Seller, the
Merged Companies and Phoenix of Hendersonville.
7.2. Preserve Accuracy of Representations and Warranties. Each of the
parties hereto shall refrain from taking any action which they know, or in the
exercise of reasonable diligence should know, would render any representation or
warranty contained in this Agreement inaccurate as of the Closing Date;
provided, that this Section shall not prohibit Seller from conducting the
Business in the ordinary course or from taking actions reasonably deemed to be
in the best interest of the Business. Each party shall promptly notify the
others of any Action that shall be instituted or threatened against such party
to restrain, prohibit or otherwise challenge the legality of any transaction
contemplated by this Agreement. The Seller shall promptly notify Buyer of any
Action or investigation that may be threatened, brought, asserted or commenced
against Seller, the Merged Companies or Phoenix of Hendersonville which would
have been listed in Schedule 5.5 if such Action or investigation had arisen
prior to the date hereof.
7.3. Consents of Third Parties. Seller and Buyer shall act diligently and
use reasonable efforts to secure, before the Closing Date, the consent, approval
or waiver, in form and substance reasonably satisfactory to Buyer, from any
party to any Business Agreement required to be obtained to assign or transfer
any such Business Agreements to Buyer or to otherwise satisfy the conditions set
forth in Section 8.1(d); provided, however, that Seller shall not make any
agreement or understanding affecting the Purchased Assets, the Merged Companies,
Phoenix of Hendersonville or the Business as a condition for obtaining any such
consents, approvals or waivers except with the prior written consent of Buyer
(which consent shall not be unreasonably withheld or delayed).
7.4. Operations Prior to the Closing Date.
(a) During the period prior to the Closing Date, Seller, the Merged
Companies and Phoenix of Hendersonville shall operate and carry on the Business
only in the ordinary course and substantially as presently operated. Consistent
with the foregoing, Seller, the Merged Companies and Phoenix of Hendersonville
shall use their reasonable efforts consistent with good business practice to
preserve the goodwill of the suppliers, contractors, licensors, employees,
customers, distributors and others having business relations with Seller, the
Merged Companies and Phoenix of Hendersonville.
(b) Notwithstanding Section 7.4(a), except as set forth in Schedule 7.4(B),
except as expressly contemplated by this Agreement, or except with the express
prior written consent of Buyer, none of the Seller, any of the Merged Companies
or Phoenix of Hendersonville will:
(i) Make any material change in Seller's or the Merged Companies' or
Phoenix of Hendersonville's operations.
(ii) Cease to operate the Business in substantial accordance with the
FCC Licenses and applicable FCC requirements, Rules and Regulations.
(iii) Apply to the FCC for any construction permit or modification of
license which would alter the Business' present operation in any materially
adverse manner.
(iv) Transfer any of the Governmental Permits.
(v) Make any capital expenditure or enter into any contract or
commitment therefor in excess of Twenty-Five Thousand United States Dollars
(US$25,000), except to the extent necessary to comply with Requirements of
Law or the Governmental Permits with Buyer's prior written consent thereto.
(vi) Enter into any contract, agreement, undertaking or commitment
which would have been required to be set forth in Schedule 5.18(A) if in
effect on the date hereof or enter into any contract, agreement,
undertaking or commitment which cannot be assigned to Buyer or a permitted
assignee of Buyer under Section 12.4.
(vii) Enter into any contract for the purchase of real property or for
the sale of any Owned Real Property or exercise any option to purchase real
property listed in Schedule 5.11(A) or any option to extend a lease listed
in Schedule 5.11(B).
36
(viii) Sell, lease (as lessor), transfer or otherwise dispose of
(including any transfers to any of their Affiliates), or mortgage or
pledge, or impose or suffer to be imposed any Encumbrance on, any of the
Purchased Assets or the Merged Companies or Phoenix of Hendersonville other
than inventory and other immaterial amounts of personal property sold or
otherwise disposed of in the ordinary course of business and other than
Permitted Encumbrances.
(ix) Cancel any debts owed to or claims held by them (including the
settlement of any Action) other than in the ordinary course of business.
(x) Create, incur, guarantee or assume, any indebtedness for borrowed
money or enter into, as lessee, any capitalized lease obligation (as
defined in Statement of Financial Accounting Standards No. 13).
(xi) Accelerate or delay collection of any notes or accounts
receivable generated by Seller, the Merged Companies or Phoenix of
Hendersonville in advance of or beyond their regular due dates or the dates
when the same would have been collected in the ordinary course of business.
(xii) Accelerate or delay payment of any account payable or other
liability (including but not limited to trade payables) of Seller, the
Merged Companies or Phoenix of Hendersonville beyond or in advance of its
due date or the date when such liability would have been paid in the
ordinary course of business, unless such acceleration or delay is necessary
or desirable in light of the financial condition of the maker of the note
or the account party and Buyer's prior written consent thereto has been
obtained.
(xiii) Make any payment of cash or distribution of assets to any
Person other than pursuant to contracts and agreements relating to the
Business that have been entered into in the ordinary course of business
(other than distributions to provide funds for the payment of federal and
state income tax liabilities of the members of DBBC resulting from the
attribution to such members of the income of DBBC).
(xiv) Make any change in the accounting policies applied in the
preparation of the Seller Financial Statements, except as required by GAAP
or with respect to the Agreed GAAP Exceptions.
(xv) Make any changes in current wages, bonuses, benefits or other
terms or conditions of employment outside the ordinary course of business.
(xvi) In the case of the Merged Companies and Phoenix of
Hendersonville, guaranty, agree to pay or otherwise become liable for any
debts or obligations of the Seller.
(xvii) Declare or pay any distributions other than distributions to
provide funds for the payment of federal and state income tax liabilities
of the members of DBBC resulting from the attribution to such members of
the income of DBBC, which distributions are disclosed in writing to Buyer.
(xviii) Agree to take any action specified in subsections (i) through
(xvii) of this Section 7.4(b).
7.5. Antitrust Law Compliance. Buyer and Seller shall each file or cause
to be filed with the Federal Trade Commission and the Department of Justice any
notifications required to be filed under the HSR Act with respect to the
transactions contemplated hereby, and Buyer shall bear the costs and expenses of
their respective filings and shall pay their respective filing fees in
connection therewith. Buyer and Seller shall use their respective reasonable
best efforts to make such filings promptly (and in any event within ten (10)
business days) following the date hereof, to respond to any requests for
additional information made by either of such agencies and to cause the waiting
periods under the HSR Act to terminate or expire at the earliest possible date.
Each party warrants that all such filings by it will be, as of the date filed,
true and accurate and in accordance with the requirements of the HSR Act and any
rules and regulations promulgated thereunder. Buyer and Seller agree to make
available to each other such information as any of them may reasonably request
relative to the business, assets and property of each of them (or of the Merged
Companies or Phoenix of Hendersonville) as may be required of any of them to
37
file any additional information requested by the above-referenced federal
agencies under the HSR Act and any rules and regulations promulgated thereunder.
7.6. FCC Consent and Control of Stations.
(a) It is specifically understood and agreed by Buyer and Seller that the
Closing shall be in all respects subject to, and conditioned upon, the receipt
of prior FCC Consent. Buyer and Seller shall prepare and file with the FCC as
soon as practicable but in no event later than ten (10) business days after the
execution of this Agreement, all requisite applications and other necessary
instruments and documents to request the FCC Consent. After the aforesaid
applications, instruments and documents have been filed with the FCC, Buyer and
Seller shall prosecute such applications with all reasonable diligence and take
all steps reasonably necessary to obtain the requisite FCC Consent. No party
hereto or the Merged Companies or Phoenix of Hendersonville shall take any
action that such party knows or should know would adversely affect obtaining the
FCC Consent, or adversely affect the FCC Consent becoming a Final Order. Buyer
shall pay all FCC filing or transfer fees relating to the transactions
contemplated hereby irrespective of whether the transactions contemplated by
this Agreement are consummated and irrespective of whether such fees are
assessed before or after the Closing; provided, that fifty percent (50%) of such
filing or transfer fees shall be deemed to be Transaction Costs.
(b) Between the date hereof and the Closing Date, Buyer shall not directly
or indirectly control, supervise or direct, or attempt to control, supervise or
direct, the operation of the Stations. Such operation, including complete
control and supervision of all programs, employees and policies, shall be the
sole responsibility of Seller, the Merged Companies and Phoenix of
Hendersonville. Neither title nor right to possession of the Purchased Assets or
the Merged Companies shall pass to Buyer until the Closing, but Buyer shall,
however, be entitled to reasonable inspection of the Stations, the Business, the
Merged Companies, Phoenix of Hendersonville and the Purchased Assets (upon
reasonable prior notice) during normal business hours with the purpose that an
uninterrupted and efficient transfer of the assets and business of the Stations
may be accomplished. After the Closing, the Seller shall not have the right to
control the Stations, and the Seller shall not have reversionary rights in the
Stations.
7.7. Other Governmental Approvals. Promptly following the execution of
this Agreement, Buyer and Seller shall proceed to prepare and file with the
appropriate governmental authorities any other requests for approvals or
waivers, if any, that are required from other governmental authorities in
connection with the Closing, and shall diligently and expeditiously prosecute,
and shall cooperate fully with each other in the prosecution of, such requests
for approvals or waivers and all proceedings necessary to secure such approvals
and waivers.
7.8. Environmental Audits. Within thirty (30) days of the execution of
this Agreement, Buyer shall initiate a Phase 1 environmental study, which may
include a review of compliance with Environmental Laws, and, within fifteen (15)
days after the Phase I audit report is delivered to Buyer, if appropriate or
necessary, a Phase 2 environmental audit of the Owned Real Property conducted by
an environmental firm selected by Buyer (the "Environmental Audits"). A Phase 2
audit will only be deemed to be necessary or appropriate if, in Buyer's sole
judgment, the Phase 1 audit reveals evidence of material non-compliance or a
material breach of the representations and warranties set forth in Section 5.20,
the scope of which cannot be assessed without conducting a Phase 2 audit. If
either of the Environmental Audits reveals a condition of material
non-compliance with any Environmental Law or a material breach of the
representations and warranties set forth in Section 5.20, then (i) if such
remedy is capable of completion prior to Closing, Seller shall remedy the
condition of material non-compliance or material breach of representations and
warranties prior to Closing, or (ii) if such remedy is not capable of completion
prior to Closing, Seller shall provide to Buyer an agreement reasonably
acceptable to Buyer among Buyer, Seller and a third party contractor approved by
Buyer, which agreement provides for the completion of the remedy at Seller's
expense within a reasonable time after Closing and for the payment by Seller of
any penalties required by any Governmental Bodies. Notwithstanding anything in
this Section 7.8 to the contrary, if the cost of such remedy exceeds Twenty-Five
Thousand United States Dollars (US$25,000), then Seller may decline to undertake
the remedy, in which case Buyer shall have
38
the unrestricted right to terminate this Agreement immediately, and, in the
event of such termination, no party shall have any liability to any other party
under this Agreement. If Buyer elects to terminate this Agreement as provided in
the preceding sentence, then Buyer shall have no obligation to reimburse Seller
as contemplated in Section 8.3.
7.9. Shareholder Meeting; SEC Filings. Buyer shall duly call and hold a
meeting of its shareholders (the "Buyer Shareholders Meeting") as soon as
reasonably practicable for the purpose of approving the payment of the Purchase
Price, including the issuance of the shares of Cumulus Common Stock pursuant to
Article 3 and the transactions contemplated by this Agreement. Buyer shall
include in the proxy statement issued to its shareholders (the "Buyer Proxy
Statement") the recommendation of the Special Committee of its Board of
Directors that its shareholders vote in favor of the issuance of the Cumulus
Common Stock as consideration for the Purchase Price, subject to the duties of
the Special Committee of the Board of Directors of the Buyer to make any further
disclosure to the shareholders (which shall not, unless expressly stated,
constitute a withdrawal or adverse modification of such recommendation). Buyer
shall give Seller a reasonable opportunity to review and comment on the Buyer
Proxy Statement before it is filed with the Securities and Exchange Commission
("SEC"). In connection with such meeting and the transactions contemplated
hereunder, Buyer will (i) prepare and file with the SEC, use reasonable efforts
to have cleared by the SEC and thereafter mail to its shareholders as promptly
as is practical the Buyer Proxy Statement and any and all amendments or
supplements thereto and all other materials appropriate for such meeting; (ii)
use its reasonable best efforts to obtain the necessary shareholders vote to
approve the transactions contemplated hereby; and (iii) otherwise comply with
all legal requirements applicable to such meeting.
ARTICLE 8
CONDITIONS TO CLOSING
8.1. Conditions to the Obligations of Buyer. The obligations of Buyer
under this Agreement shall, at the option of Buyer, be subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
(a) No Misrepresentation or Breach of Covenants and Warranties. There
shall have been no material breach by Seller in the performance of any of its
covenants and agreements herein which shall not have been remedied or cured;
each of the representations and warranties of Seller contained in this Agreement
shall be true and correct on the Closing Date as though made on the Closing Date
(except to the extent that they expressly relate to an earlier date), except for
changes therein specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Buyer, provided, that for this
purpose all qualifications and exceptions contained in such representations and
warranties relating to materiality or any similar standards or qualifications
shall be disregarded, provided, further, however, that notwithstanding the
foregoing, this condition shall be deemed to be satisfied if all breaches of
such representation and warranties, without giving effect to such qualifications
and exceptions relating to materiality or any similar standards or
qualifications, would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; and there shall have been delivered to
Buyer a certificate to such effect, dated the Closing Date, signed on behalf of
Seller by a Manager of Seller.
(b) Opinion of Seller's Counsel. The Buyer shall have received from DSMO,
counsel to Seller, an opinion in form and substance reasonably acceptable to
Buyer.
(c) No Material Adverse Effect. Between the date hereof and the Closing
Date, there shall have been no Material Adverse Effect; and there shall have
been delivered to Buyer a certificate to such effect, dated the Closing Date,
signed by Seller.
(d) Necessary Consents. Seller shall have received consents, in form and
substance reasonably satisfactory to Buyer, to the assignments of the Business
Agreements specified in Schedule 8.1(D) (being all material Business Agreements
which require the consent of any person to the assignment thereof).
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(e) Absence of Investigations and Proceedings. Except for governmental
investigations relating to the broadcast industry generally, or as set forth on
Schedule 8.1(E), there shall be no Action or investigation pending before any
Governmental Body or by any Person, and no proceeding before or by any
commission, agency or other administrative or regulatory body or authority
pending to which Seller, the Merged Companies or Phoenix of Hendersonville are a
party or to which the Business or the Purchased Assets are subject, including
any with respect to condemnation, zoning, use or occupancy, whose resolution
would have a Material Adverse Effect on the ability of Buyer to operate the
Business or to use or acquire the Purchased Assets, the Merged Companies or
Phoenix of Hendersonville in the same manner as operated and used by Seller, the
Merged Companies or Phoenix of Hendersonville or as currently proposed to be
used by Seller, the Merged Companies or Phoenix of Hendersonville. Without
limiting the generality of the foregoing, no Action or proceeding or formal
investigation by any Person or Governmental Agency shall be pending with the
object of challenging or preventing the Closing and no other proceedings shall
be pending with such object or to collect damages from Buyer on account thereof
and for which Buyer is not indemnified hereunder. No Action or proceeding shall
be pending before the FCC or any governmental authority to revoke, modify in any
material respect or refuse to renew any of the Governmental Permits. No suit,
action or other proceeding shall be pending before any court or governmental
authority in which it is sought to restrain or prohibit, or obtain damages or
other relief in connection with, this Agreement or the consummation of the
transactions contemplated hereby.
(f) No Restraint. The waiting period under the HSR Act shall have expired
or been terminated and no Court Order shall have been issued and be in effect
which restrains or prohibits any material transaction contemplated hereby.
(g) Instruments of Assignment, Transfer and Conveyance. Seller shall have
executed and delivered to Buyer the Bill of Sale and Assignment Agreement in
form and substance reasonably acceptable to Buyer and Seller and such other
Closing documents as shall have been reasonably requested by Buyer, all in form
and substance reasonably acceptable to Buyer's counsel.
(h) Real Property. Seller shall have delivered to Buyer the documents
specified in Section 4.2(r)-(w).
(i) No Amendment to Disclosure Schedules. There shall have been no
amendment to the Schedules delivered to Buyer by Seller as of the date of this
Agreement, except as permitted by Section 12.3.
(j) Governmental Consents. The FCC Consent shall have been issued, and
shall, at Closing, be a Final Order and in full force and effect and shall
contain no provision materially adverse to Buyer. All other authorizations,
consents and approvals of any and all Governmental Bodies necessary in
connection with the consummation of the transactions contemplated by this
Agreement specified in Schedule 8.1(J) (being those which Buyer is required by
applicable law or regulation to operate the Business) shall have been obtained
and be in full force and effect, unless Buyer in writing agrees otherwise.
(k) Governmental Permits. Seller, the Merged Companies or Phoenix of
Hendersonville shall be the holders of the Governmental Permits and there shall
not have been any modification of any of such Governmental Permits which would
have an adverse effect on the Stations or the conduct of the Business. The
Business shall be operating in substantial compliance with the FCC Licenses and
all FCC requirements, rules and regulations and no proceeding shall be pending
or, to Seller's Knowledge, threatened, the effect of which would be to revoke,
cancel, fail to renew, suspend or modify adversely any of the Governmental
Permits.
(l) Fairness Opinion. The Board of Directors of Buyer shall have received
an unqualified opinion of Houlihan Lokey Howard & Zukin, in form and substance
acceptable to the Special Committee of the Board of Directors of the Buyer, in
its sole discretion, to the effect that the transactions contemplated by this
Agreement are fair to the shareholders of Buyer (i) as of the signing date of
this Agreement and (ii) as of a date not earlier than sixty (60) days prior to
the Closing of the transactions contemplated hereby.
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(m) Financing. Buyer shall have obtained the necessary financing to
complete the transactions contemplated by this Agreement on terms and conditions
satisfactory to Buyer in its sole discretion.
(n) Shareholder Approval. The shareholders of Buyer shall have approved
the transactions contemplated by this Agreement.
(o) Merger Opinion. Buyer shall have received the opinion of Jones, Day,
Reavis & Pogue.
(p) Environmental Audits. Pursuant to Section 7.8 hereof, Seller shall
have corrected any material non-compliance with any Environmental Law and any
material breaches of the Environmental Matters representations and warranties
set forth in Section 5.20.
Notwithstanding the failure of any one or more of the foregoing conditions,
Buyer may, at its option, proceed with the Closing without satisfaction, in
whole or in part, of any one or more of such conditions and without written
waiver. To the extent that at the Closing Seller delivers to Buyer a written
notice specifying in reasonable detail the failure of any such conditions or the
breach by Seller of any of the representations or warranties of Seller herein,
and nevertheless Buyer proceeds with the Closing, Buyer shall be deemed to have
waived for all purposes any rights or remedies it may have against Seller by
reason of the failure of any such conditions or the breach of any such
representations or warranties to the extent described in such notice.
8.2. Conditions to the Obligations of Seller. The obligations of Seller
shall, at the option of Seller, be subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions:
(a) No Misrepresentation or Breach of Covenants and Warranties. There
shall have been no material breach by Buyer in the performance of any of its
covenants and agreements herein which shall not have been remedied or cured;
each of the representations and warranties of Buyer contained in this Agreement
shall be true and correct on the Closing Date as though made on the Closing Date
(except to the extent that they expressly relate to an earlier date), except for
changes therein specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Seller, provided, that for this
purpose all qualifications and exceptions contained in such representations and
warranties relating to materiality or any similar standards or qualifications
shall be disregarded, provided, further, however, that notwithstanding the
foregoing, this condition shall be deemed to be satisfied if all breaches of
such representation and warranties, without giving effect to such qualifications
and exceptions relating to materiality or any similar standards or
qualifications, would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; and there shall have been delivered to
Seller a certificate to such effect, dated the Closing Date and signed on behalf
of Buyer by the President or any Vice President of Buyer.
(b) No Suit. No Action or investigation shall be pending before or by any
Governmental Body or by any Person questioning the legality of this Agreement or
the consummation of the transactions contemplated hereby in whole or in part.
(c) No Restraint. The waiting period under the HSR Act shall have expired
or been terminated, and no Court Order shall have been issued and be in effect
which restrains or prohibits any material transaction contemplated hereby.
(d) Assumption Agreement. Buyer shall have executed and delivered to
Seller the Assumption Agreement in the form of Exhibit A hereto.
(e) Governmental Consents. The FCC Consent shall have been issued, and
shall, at Closing be in full force and effect and shall contain no provision
materially adverse to Seller. All other authorizations, consents and approvals
of any and all Governmental Bodies necessary in connection with the consummation
of the transactions contemplated by this Agreement shall have been obtained and
be in full force and effect, unless Seller in writing agrees otherwise.
(f) No Buyer Material Adverse Effect. Between the date hereof and the
Closing Date, there shall have been no material adverse effect on the value of
the Cumulus Common Stock as a whole (other than
41
by reason of one or more events, circumstances, changes, developments,
impairments or conditions (political, regulatory or otherwise) that adversely
affect the radio broadcasting industry generally or any change in a Requirement
of Law or accounting principles; and there shall have been delivered a
certificate to such effect, dated the Closing Date, signed by Buyer.
(g) Shareholder Approval. The shareholders of Buyer shall have approved
the transactions contemplated by this Agreement.
(h) Merger Opinion. Seller shall have received the opinion of DSMO.
Notwithstanding the failure of any one or more of the foregoing conditions,
Seller may, at its option, proceed with the Closing without satisfaction, in
whole or in part, of any one or more of such conditions and without written
waiver. To the extent that at the Closing Buyer delivers to Seller a written
notice specifying in reasonable detail the failure of any of such conditions or
the breach by Buyer of any of the representations or warranties of Buyer herein,
and nevertheless Seller proceeds with the Closing, Seller shall be deemed to
have waived for all purposes any rights or remedies it may have against Buyer by
reason of the failure of any such conditions or the breach of any such
representations or warranties to the extent described in such notice.
8.3. Reimbursement of Expenses. If all of the conditions set forth in
Section 8.1 have been satisfied, and Buyer fails to consummate the transactions
contemplated by this Agreement in breach hereof, then Buyer shall promptly
reimburse Seller for all of the expenses actually incurred by Seller in
connection with the transactions contemplated by this Agreement; provided,
however, that this reimbursement shall not exceed Two Hundred Fifty Thousand
United States Dollars (US$250,000). DBBC will provide reasonable documentation
of such expenses and will afford Buyer the opportunity to verify and confirm
such expenses.
ARTICLE 9
ADDITIONAL AGREEMENT OF THE PARTIES
9.1. Conveyance and Transfer of Owned Real Property.
(a) Not less than fifteen (15) days prior to Closing, Seller shall deliver
to Buyer surveys (the "Surveys") of the Owned Real Property made by a registered
land surveyor bearing a certificate addressed to Buyer and Buyer's title
insurance company, signed by the surveyor, certifying that the survey was
actually made on the ground and that there are no Encumbrances reasonably
capable of being shown on a physical survey except as shown on the surveys, and
complying with the 1990 minimum detail requirements for ALTA/ACSM Land Title
Surveys, or a lesser standard provided that Buyer's title insurance company
accepts the Surveys for purposes of deleting any title exception for Survey
matters.
(b) At the Closing, Seller shall deliver a special warranty deed to the
Owned Real Property in form reasonably acceptable to Buyer and its counsel with
good and marketable title, free and clear of all mortgages, liens, charges or
other Owned Real Property Encumbrances except for Permitted Encumbrances and
such other matters that do not materially adversely affect the use and operation
of the Owned Real Property.
(c) At the Closing, Seller shall deliver to Buyer a standard 1992 Form B
ALTA fee owner's title insurance policy insuring title to the parcel of the
Owned Real Property in the name of Buyer evidencing that Buyer has good and
marketable title, free and clear of all Encumbrances except for Owned Real
Property Permitted Encumbrances, in the amount of US$500,000, to be issued by
Chicago Title Insurance Company or another reputable title insurance company
qualified to conduct title insurance business in Tennessee and acceptable to
Buyer, covering fee simple title to the Owned Real Property and showing title in
Buyer, containing a zoning 3.1 endorsement, an extended coverage endorsement, an
access endorsement and a tax parcel identification endorsement.
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(d) If the title policy or policies contemplated by Section 9.1(c) hereof
cannot be issued at Closing, DBBC shall cause to be delivered to Buyer at
Closing a marked-up unconditional binder(s) for such insurance dated as of the
Closing Date, in a form approved by Buyer and otherwise in accordance with the
conditions described hereinabove.
(e) Buyer shall pay all premiums and other expenses relating to the Surveys
and title insurance policies and/or commitments contemplated by this Section
9.1, including, without limitation, the title insurance premiums and all charges
for endorsements.
(f) At the Closing, Buyer shall pay all transfer taxes applicable to the
conveyance of the Owned Real Property.
9.2. Taxes.
(a) Buyer shall prepare and file or cause to be prepared and filed all Tax
Returns for the Merged Companies and their subsidiaries for all periods ending
on or prior to the Closing Date which are due after the Closing Date. Buyer
shall permit Seller to review and approve such Tax Returns prior to their
filing, which approval shall not be unreasonably withheld. Seller shall be
liable for and shall pay all Taxes (whether assessed or unassessed) reported on
such Tax Returns, and shall reimburse Buyer for such Taxes, except to the extent
such Taxes are reflected as a liability or accrued on the Final Balance Sheet.
With respect to any Straddle Period, Buyer shall prepare and file or cause to be
prepared and filed any Tax Returns for the Merged Companies and their
subsidiaries. Buyer shall permit Seller to review and approve such Tax Returns
prior to their filing, which approval shall not be unreasonably withheld. Buyer
shall be liable for and shall pay (i) all Taxes reflected as a liability on the
Final Balance Sheet; and (ii) all Taxes (whether assessed or unassessed)
applicable to the operation of the Business, in each case attributable to
periods beginning after the Closing Date and, with respect to any Straddle
Period, the portion of such Straddle Period beginning immediately after the
Closing. For purposes of this Section 9.2(a), any Straddle Period shall be
treated on a "closing of the books" basis as two partial periods, one ending on
the Closing Date and the other beginning after the Closing Date, provided,
however, that Taxes (such as property Taxes) imposed on a periodic basis shall
be allocated on a daily basis.
(b) Notwithstanding Section 9.2(a), any Tax attributable to the sale,
transfer or delivery of the Purchased Assets or the Merged Companies (but in no
event including any income Tax) shall be borne and paid by Buyer. Buyer and
Seller agree to timely sign and deliver such certificates or forms as may be
necessary or appropriate to establish an exemption from (or otherwise reduce),
or file Tax Returns with respect to, such Taxes.
(c) Seller or Buyer, as the case may be, shall provide reimbursement for
any Tax paid by one party all or a portion of which is the responsibility of the
other party in accordance with the terms of this Section 9.2. Within a
reasonable time prior to the payment of any said Tax, the party paying said Tax
shall give notice to the other party of the Tax payable and the portion which is
the liability of each party, although failure to do so will not relieve the
other party from its liability hereunder.
(d) Buyer shall promptly notify Seller in writing upon receipt by Buyer or
any of its Affiliates of notice of any pending or threatened federal, state,
local or foreign Tax audits, examinations or assessments which may materially
affect the Tax liabilities for which Seller would be required to indemnify Buyer
pursuant to paragraph (a) of this Section 9.2. Seller shall have the sole right
to control any Tax audit or administrative or court proceeding relating to
taxable periods ending at the time of or before the Closing, and to employ
counsel of its choice at its sole expense. In the case of any Straddle Period,
Seller shall be entitled to participate at its sole expense in any Tax audit or
administrative or court proceeding relating in whole or in part to Taxes
attributable to the portion of such Straddle Period ending at the time of the
Closing and, with the written consent of Buyer, and at Seller's sole expense,
may assume the entire control of such audit or proceeding. Neither Buyer nor any
of its Affiliates may settle any Tax claim for any taxable year or period ending
at or before the time of the Closing (or for the portion of any taxable year or
period ending on the Closing) which may be the subject of indemnification by
Seller under
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Section 9.2(a) without the prior written consent of the Seller, which consent
shall not be unreasonably withheld.
(e) After the Closing, Seller and Buyer shall (and cause their respective
Affiliates to):
(i) Make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to
Taxes relating to the Business, the Purchased Assets or the Merged
Companies.
(ii) Provide timely notices to the other in writing of any pending or
threatened Tax audits or assessments relating to the Business, the
Purchased Assets or the Merged Companies for taxable periods for which the
other may have a liability under this Section 9.2.
(iii) Furnish the other with copies of all correspondence received
from any taxing authority in connection with any Tax audit or information
request with respect to any such taxable period.
9.3. Business Employees and Employee Benefit Plans.
(a) Prior to Closing, Seller will provide Buyer a list of all employees
employed by DBBC, the Merged Companies or Phoenix of Hendersonville ("Business
Employees") as of a date not more than sixty-five (65) business days before the
Closing. DBBC shall also provide Buyer reasonable access to its personnel
records for Business Employees. After notification of the FCC Consent and as of
the Closing Date, Seller will terminate, and Buyer will offer at-will employment
to the Business Employees employed by Seller upon terms and conditions of
employment that are no less favorable in the aggregate to the terms of such
employees' employment by Seller before Closing. Seller shall allow Buyer
reasonable access to Business Employees for purposes of extending offers of
employment.
(b) Seller will bear the cost and expense of all workers' compensation
claims asserted and arising out of any injury sustained by Business Employees on
or before the Closing Date.
(c) Seller shall be responsible for, and shall indemnify and hold Buyer
harmless from, the payment of any severance pay or unemployment compensation, or
other claims made by any Business Employee who is terminated by Seller before
Closing and who does not accept employment with Buyer.
(d) Seller, the Merged Companies and Phoenix of Hendersonville shall be
responsible for, and shall indemnify and hold Buyer harmless from, any and all
Losses and Expenses relating to claims asserted by any Business Employees under
the WARN Act and any similar state or local law, rule, regulation or order
respecting notice of termination with respect to employment actions taken by
Seller after the Closing Date.
(e) Except as provided otherwise in Section 9.3(f) and Section 9.3(g)
effective as of Closing, Buyer shall not assume the sponsorship of any of
Seller's or the Merged Companies' or Phoenix of Hendersonville's Employee Plans
under which benefits are provided to Business Employees. Prior to Closing,
Seller shall terminate any and all Pension Plans covering employees or former
employees of Seller. Within sixty (60) days after the Closing Date, Seller shall
file with the IRS, at Seller's expense, an application for determination upon
termination of each Pension Plan under this subsection. Upon receipt of a
favorable determination from the IRS with respect to such termination, Seller
shall cause, at the election of a transferred employee, the direct rollover of
such transferred employee's benefit under the Pension Plan terminated to an
eligible retirement plan of Buyer. Seller shall use commercially reasonable
efforts to secure such favorable determination by the IRS within two hundred
seventy (270) days after the Closing Date.
(f) Except as expressly provided in this Section 9.3(f), Seller shall
retain all responsibility and liability for any health care continuation
coverage required to be provided under Section 4980 of the Code and Part 6 of
Subtitle B of Title I of ERISA ("COBRA Obligations") to Business Employees (and
their spouses and dependents) terminated by Seller prior to the Closing Date.
Notwithstanding the preceding sentence, Buyer shall assume all liability and
responsibility for any COBRA Obligations to any Business Employee who accepts
employment with Buyer as of the Closing Date and whose employment is terminated
by Buyer after the Closing Date. Seller agrees to indemnify and hold Buyer
harmless as to any
44
and all Losses and Expenses that may be incurred by Buyer as a consequence of
the failure of Seller, the Merged Companies or Phoenix of Hendersonville to
fulfill their COBRA Obligations arising prior to the Closing Date with respect
to any Business Employee or former employee of Seller, the Merged Companies or
Phoenix of Hendersonville or any qualified beneficiary of any such employee (as
defined in Section 4980B(g)(1) of the Code).
(g) Effective as of the Closing Date, each Business Employee who accepts
Buyer's offer of employment as of the Closing Date shall be eligible to
participate in the various employee benefit plans maintained by or on behalf of
Buyer including any retirement, health, disability, dental and life insurance
plans, subject to the terms and conditions of each applicable plan. With respect
to such plans, Buyer shall (i) waive any waiting period for Business Employees
and their dependents, and (ii) waive any pre-existing condition exclusion or
limitation for Business Employees and their dependents except to the extent that
such exclusion or limitation applied to such individual under the Employee Plans
of Seller and members of Seller's Controlled Group immediately prior to the
Closing; provided, that notwithstanding such exclusions or limitations, solely
for the purpose of eligibility and vesting and not for accruals of benefits,
Business Employees shall be credited with time elapsed and/or hours of service
under the Employee Plans of Seller. Seller shall retain all liability with
respect to any and all medical, dental, or disability claims and expenses due to
the illness or injury of any Business Employees terminated prior to the Closing
Date which illness or injury occurs prior to the Closing Date; provided,
however, that Buyer shall assume liability with respect to such claims and
expenses for which proper accruals or reserves are included in the Final Balance
Sheet, but any such liability shall be limited to the extent of such accruals or
reserves. Claims for long-term disability benefits by Business Employees arising
out of occurrences prior to the Closing Date shall be covered by the applicable
Employee Plans of Seller and members of Seller's Controlled Group in accordance
with the terms of such Plans, and not by Buyer or any of Buyer's plans. Neither
Buyer nor any member of its Controlled Group shall be liable for payment of any
disability benefit due to disabled employees of Seller (such employees listed in
Schedule 9.3(G)) who, prior to the Closing Date, are in the waiting or
qualifying period for disability benefits. After the Closing, Seller shall be
responsible for disability benefits payable to such employees under the
applicable disability plan maintained or sponsored by Seller.
9.4. Post-Closing Remittances. If, after the Closing Date, Seller shall
receive any remittance from any account debtors with respect to any accounts or
notes receivable included in the Purchased Assets, Seller shall endorse such
remittance to the order of Buyer and forward it to Buyer promptly following
receipt thereof.
9.5. Insurance After Closing. After the Closing, Buyer will maintain
insurance coverage against risk arising from its operation of the Business,
which coverage is substantially similar to the coverage maintained by Buyer with
respect to its other assets and operations.
9.6. Financial, Sales and FCC Reports. Within thirty (30) days after the
end of each month ending after the date hereof, Seller will furnish Buyer with a
copy of Seller's operating statements (updated from, and substantially in, the
form of operating statement attached hereto as Schedule 9.6), together with any
monthly sales, collection or pacing reports, and will furnish to Buyer within
ten (10) days after filing all reports filed with the FCC with respect to the
Business or the Merged Companies after the date hereof. Seller will furnish to
Buyer within five (5) business days of receipt copies of any correspondence,
Actions, filings, or complaints filed by any Person with, or received from, the
FCC. All of the foregoing financial statements shall comply with the
requirements concerning financial statements set forth in Section 5.6. In
addition, Seller will furnish upon request Buyer with copies of regular
management reports, if any, concerning the operation of the Business or the
Merged Companies within ten (10) days after such reports are prepared. The
operating statements and other reports required by this Section 9.6 include all
assets, liabilities, income, expense and cash flow related to the Business, the
Merged Companies and Phoenix of Hendersonville.
9.7. Public Announcement. Seller will cause each Station to publish and
broadcast a public notice concerning the filing of the application for
assignment of the Governmental Permits in accordance with the
45
requirements of the FCC's Rules. As to any other announcements, no party hereto
shall issue any press release or public announcement or otherwise divulge the
existence of this Agreement or the transactions contemplated hereby without the
prior approval of the other parties hereto which shall not be unreasonably
withheld except as and to the extent that such party shall be obligated by law,
rule or regulation, in which case the other party shall be so advised and the
parties shall use their best efforts to cause a mutually agreeable release or
announcement to be issued.
9.8. Fees of Buyer's Counsel. Buyer shall pay all fees and expenses then
owed to Gardner, Carton & Douglas by Buyer in connection with the transactions
contemplated by this Agreement immediately prior to Closing by wire transfer in
immediately available funds. In no event shall Seller be responsible for any
such fees or expenses. Buyer and Seller agree that for the purposes of this
Section 9.8, Gardner, Carton & Douglas shall be considered to be a third party
beneficiary to this Agreement, notwithstanding Section 12.4(b). In no event will
Seller be liable for the fees of Buyer's counsel.
ARTICLE 10
TERMINATION
10.1. Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Closing Date:
(a) By the mutual consent of Buyer and Seller.
(b) By Buyer or Seller if the Closing shall not have occurred on or before
December 31, 2002 (or such later date as may be mutually agreed to by Buyer and
Seller).
(c) By Buyer or Seller if a Final Order (unless waived by Buyer) shall not
have been issued on or before December 31, 2002.
(d) By Buyer in the event of any material breach by the Seller of its
agreements, representations or warranties contained herein and the failure of
Seller to cure such breach within fourteen (14) days after receipt of notice
from Buyer requesting such breach to be cured.
(e) By Seller in the event of any material breach by Buyer of any of
Buyer's agreements, representations or warranties contained herein and the
failure of Buyer to cure such breach within fourteen (14) days after receipt of
notice from Seller requesting such breach to be cured.
(f) By Buyer or Seller if any court shall have issued a Court Order or if
any Governmental Body shall have issued a decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby.
10.2. Notice of Termination. Any party desiring to terminate this
Agreement pursuant to Section 10.1 shall give written notice of such termination
to the other parties to this Agreement.
10.3. Effect of Termination. In the event that this Agreement shall be
terminated pursuant to this Article 10, all further obligations of the parties
under this Agreement (other than Sections 12.2, and 12.7) shall be terminated
without further liability of any party to the other, provided that nothing
herein shall relieve any party from liability for its willful breach of this
Agreement.
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ARTICLE 11
INDEMNIFICATION
11.1. Indemnification by Seller.
(a) Notwithstanding any investigation made by or on behalf of Buyer, Seller
agrees to indemnify and hold each Buyer Group Member harmless from and against
any and all Losses and Expenses incurred by such Buyer Group Member in
connection with or arising from:
(i) Any breach or failure by Seller of any of its respective
covenants, agreements or obligations arising under this Agreement or any
Seller Ancillary Agreement.
(ii) Any breach of any warranty or the inaccuracy of any
representation of Seller contained or referred to in this Agreement or any
certificate delivered by or on behalf of Seller pursuant hereto.
(iii) Any Excluded Liability.
(iv) Seller's ownership, use or operation of the Business prior to the
Closing Date.
(v) The operation of DBBC, the Merged Companies or Phoenix of
Hendersonville prior to the Closing Date pertaining but not limited to,
compliance with any Requirements of Law, Environmental Laws, Governmental
Permits, Tax Returns, ownership, occupation, possession and use of any real
property or Employee Plans.
(b) Notwithstanding anything to the contrary contained herein:
(i) Seller shall be required to indemnify and hold Buyer harmless for
any claims asserted solely pursuant to clauses (i) and (ii) of Section
11.1(a) with respect to any Losses and Expenses incurred by a Buyer Group
Member only to the extent that the aggregate amount of such Claim exceeds
Two Hundred and Fifty Thousand United States Dollars (US$250,000); and
(ii) The aggregate amount required to be paid by Seller pursuant to
clauses (i) and (ii) of Section 11.1(a) shall not exceed the amount
represented by the Indemnity Obligation Escrowed Shares (except to the
extent the indemnification obligation is based on Seller's intentional
fraud).
(c) The indemnification provided for in this Section 11.1 shall terminate
eighteen (18) months after the Closing Date (and no claims shall be made by any
Buyer Group Member under this Section 11.1 thereafter), except that the
indemnification by Seller shall continue as to any event, fact or circumstance
of which any Buyer Group Member has notified Seller in accordance with the
requirements of Section 11.3 on or prior to the date such indemnification would
otherwise terminate in accordance with this Section 11.1, with respect to which
the indemnification obligation of Seller shall continue until the liability of
Seller shall have been determined pursuant to this Article 11, and Seller shall
have reimbursed all Buyer Group Members for the full amount of such Losses and
Expenses in accordance with this Article 11.
11.2. Indemnification by Buyer.
(a) Buyer agrees to indemnify and hold harmless each Seller Group Member
from and against any and all Losses and Expenses incurred by such Seller Group
Member in connection with or arising from:
(i) Any breach or failure by Buyer of any of its covenants,
agreements, or obligations arising under this Agreement or any Buyer
Ancillary Agreement.
(ii) Any breach of any warranty or the inaccuracy of any
representation of Buyer contained or referred to in this Agreement or in
any certificate delivered by or on behalf of Buyer pursuant hereto.
(iii) Buyer's ownership, use or operation of the Business after the
Closing Date.
(iv) Any Assumed Liability or Assumed Commitment.
47
(b) Notwithstanding anything to the contrary contained herein:
(i) Buyer shall be required to indemnify and hold Seller harmless for
any claims asserted solely pursuant to clauses (i) and (ii) of Section
11.2(a) with respect to any Losses and Expenses incurred by a Seller Group
Member only to the extent that the aggregate amount of such Claim exceeds
Two Hundred and Fifty Thousand United States Dollars (US$250,000); and
(ii) The aggregate amount required to be paid by Buyer pursuant to
clauses (i) and (ii) of Section 11.2(a) shall not exceed Five Million
United States Dollars (US$5,000,000).
(c) The indemnification provided for in this Section 11.2 shall terminate
eighteen (18) months after the Closing Date (and no claims shall be made by any
Seller Group member under this Section 11.2 thereafter), except that the
indemnification by Buyer shall continue as to any event, fact or circumstance of
which any Seller Group Member has notified Buyer in accordance with the
requirements of Section 11.3 on or prior to the date such indemnification would
otherwise terminate in accordance with this Section 11.2, with respect to which
the indemnification obligation of Buyer shall continue until the liability of
Buyer shall have been determined pursuant to this Article 11, and Buyer shall
have reimbursed all Seller Group Members for the full amount of such Losses and
Expense in accordance with this Article 11.
11.3. Notice of Claims. Any Buyer Group Member or Seller Group Member
seeking indemnification hereunder (the "Indemnified Party") shall give to the
party obligated to provide indemnification to such Indemnified Party (the
"Indemnitor") a notice (a "Claim Notice") describing in reasonable detail the
facts giving rise to any claim for indemnification hereunder ("Claim") and shall
include in such Claim Notice (if then known) each item of actual or prospective
Loss (including the amount thereof if reasonably ascertainable), the date on
which such Loss is or will be incurred (if reasonably ascertainable), the amount
or the method of computation of the amount of each such Loss, and a reference to
the provision of this Agreement or any other agreement, document or instrument
executed hereunder or in connection herewith upon which such claim is based;
provided, that a Claim Notice in respect of any Action by or against a third
Person as to which indemnification will be sought shall be given within fourteen
(14) days after the Indemnified Party receives summons, process, or other notice
of such Action.
11.4. Third Person Claims. In any third Person Action against the
Indemnified Party as to which indemnification will be sought from the Indemnitor
hereunder, the Indemnitor may elect, but shall not be required, to conduct and
control, through counsel of its choosing, the defense of any such third Person
Action only if the Indemnitor has, within fourteen (14) days after Indemnitor's
receipt of the Claim Notice, agreed in writing to undertake such defense at its
expense. If the Indemnitor so assumes the defense and subsequently determines in
good faith that the Claim is not subject to indemnification hereunder, the
Indemnitor may withdraw from the defense of the Indemnified Party, provided that
the Indemnitor shall, at Indemnitor's expense, take all actions reasonably
necessary (and shall instruct its counsel to take all actions reasonably
necessary) to transition the defense of the matter to other counsel, and
provided further, that the Indemnitor shall have no claim against the
Indemnified Party for recovery of fees, costs and expenses incurred prior
thereto. In any case in which the Indemnitor elects to exercise its option
hereunder, the Indemnified Party shall cooperate in connection therewith and
shall furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested by the Indemnitor in connection therewith; provided, that
the Indemnified Party may participate, through counsel chosen by it and at its
own expense, in the defense of any such claim, action or suit as to which the
Indemnitor has elected to conduct and control the defense thereof. The
Indemnitor shall not, without the written consent of the Indemnified Party which
consent will not be unreasonably withheld or delayed, pay, compromise or settle
any such third Person Action; provided, that the Indemnified Party shall be
obligated to provide its consent if such compromise or settlement includes a
release for the Indemnified Party of all liability with respect to the matter
being compromised or settled, a reimbursement of the Indemnified Party's Losses
and Expenses incurred in connection with the Third Party Action, and a provision
that denies any liability for the claim asserted in the Third Party Action.
Notwithstanding anything to the contrary contained herein, the failure of the
48
Indemnitor to agree in writing as provided pursuant to the first sentence of
this Section 11.4 shall not affect the Indemnified Party's rights against such
Indemnitor hereunder.
11.5. Indemnification Funds. The Indemnity Obligation Escrowed Shares
shall constitute the sole source of assets for satisfaction of any liabilities
of DBBC arising under this Article 11 (other than indemnity obligations arising
out of intentional fraud). Any Claim by Buyer shall be increased by an amount
equal to the reasonable costs of registering and liquidating the Indemnity
Obligation Escrowed Shares necessary to satisfy the Claim, irrespective of when
or if such registration is undertaken.
11.6. Exclusive Remedy. The indemnification provided by this Article 11
constitutes the parties' exclusive remedies for any and all post-Closing matters
with respect to the transactions contemplated by this Agreement; provided, that
this Article shall not prohibit any causes of action that may exist for fraud or
the remedies of specific performance or declaratory relief; and provided
further, that any monetary or other claims joined with a claim for specific
performance, rescission or declaratory relief shall be subject to all of the
terms, conditions and limitations contained in this Agreement.
11.7. Subrogation. To the extent that an Indemnitor has discharged any
Claim for indemnification hereunder, the Indemnitor shall be subrogated to all
rights of the Indemnified Party against any Person to the extent of the Losses
and Expenses that relate to such Claim; provided, however, the Indemnitor shall
not be subrogated to any claim against any Person who would have recourse
therefor against the Indemnified Party. The Indemnified Party shall, upon
written request by the Indemnitor following the discharge of such claim, execute
an instrument necessary to evidence such subrogation rights.
11.8. Adjustment to the Purchase Price. Any payment made pursuant to this
Article 11 shall be net of any cash tax benefit attributed to the Losses and
Expenses that have actually been realized by the Indemnified Party and shall be
treated as an adjustment to the Purchase Price.
ARTICLE 12
GENERAL PROVISIONS
12.1. Notices. Any notice, request, instruction or other document to be
given hereunder shall be in writing and (a) delivered personally; (b) sent by
reputable overnight courier (including Federal Express); or (c) transmitted by
facsimile, according to the instructions set forth below. Such notices shall be
sent to the following addresses and/or facsimile numbers and shall be deemed
given: (x) if delivered personally, at the time delivered; or (y) if transmitted
by facsimile, at the time when receipt is confirmed by the sending facsimile
machine.
If to Buyer, MJI or PBI, to:
Cumulus Media Inc.
3235 Piedmont Road
Building 14, Floor 4
Atlanta, Georgia 30305
Attention: President
Phone: 404-949-0700
Facsimile: 404-443-0742
with a copy to:
<Table>
Prior to December 31, 2002: From January 1, 2003
Gardner, Carton & Douglas Gardner, Carton & Douglas
321 North Clark Street, Suite 3300 191 N. Wacker Drive, Suite 3700
Chicago, Illinois 60610 Chicago, Illinois 60601
Attention: Mr. Robert J. Wilczek Attention: Mr. Robert J. Wilczek
Phone: 312-245-8424 Phone: 312-245-8424
Facsimile: 312-644-3381 Facsimile: 312-644-3381
</Table>
49
Jones, Day, Reavis & Pogue
3500 Sun Trust Plaza
303 Peachtree Street
Atlanta, Georgia 30308-3242
Attention: John E. Zamer
Phone: 404-521-3939
Facsimile: 404-581-8330
If to Seller, Phoenix, or Mt. Juliet, to:
DBBC, L.L.C.
10 Music Circle East
Nashville, Tennessee 37203
Attention: Lewis W. Dickey, Jr.
Phone: 615-321-1067
Facsimile: 615-321-5808
with a copy to:
Dickstein, Shapiro, Morin & Oshinsky, LLP
2101 L Street, N.W.
Washington, DC 20037-1526
Attention: Mr. Lewis J. Paper
Phone: 202-828-2265
Facsimile: 202-887-0689
or to such other address as such party may indicate by a notice delivered to the
other parties hereto in accordance with the provisions of this Section 12.1.
12.2. Confidential Nature of Information. Each party agrees that it will
treat in confidence all documents, materials and other information which it
shall have obtained regarding any of the other parties during the course of the
negotiations leading to the consummation of the transactions contemplated hereby
(whether obtained before or after the date of this Agreement), the investigation
provided for herein and the preparation of this Agreement and other related
documents ("Confidential Information"), and, in the event the transactions
contemplated hereby shall not be consummated, each party will return to such
other parties all copies of Confidential Information which have been furnished
in connection therewith. Confidential Information shall not be communicated to
any third Person (other than the parties' respective counsel, accountants,
financial advisors, or environmental consultants). No party shall use any
Confidential Information in any manner whatsoever except solely for the purpose
of evaluating the proposed transaction. Notwithstanding the foregoing, after the
Closing, Buyer may use or disclose any Confidential Information related to
Seller, the Merged Companies or Phoenix of Hendersonville. The obligation of
each party to treat Confidential Information in confidence shall not apply to
any Confidential Information which (i) is or becomes available to such party
from a source other than such party, so long as such source is not under any
obligation to treat the Confidential Information confidentially, (ii) is or
becomes available to the public other than as a result of disclosure by such
party or its agents, (iii) is required to be disclosed under applicable law or
judicial process, but only to the extent it must be disclosed, or (iv) such
party reasonably deems disclosure necessary to obtain any of the consents or
approvals contemplated hereby.
12.3. Entire Agreement; Amendments. This Agreement and the Exhibits and
Schedules referred to herein and the documents and agreements delivered pursuant
hereto contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all prior written or
oral agreements, understandings or letters of intent between or among any of the
parties hereto. This Agreement shall not be amended, modified or supplemented
except by a written instrument signed by an authorized representative of each of
the parties hereto. Notwithstanding the foregoing, until ten (10) days prior to
the Closing Date, Seller may amend the Disclosure Schedules attached hereto to
reflect only changes and developments arising after the date hereof that,
individually or in the aggregate, do not or will not reasonably be expected to
adversely affect the value to Buyer of the Business or results of operations of
the Business in any material manner.
50
12.4. Successors and Assigns.
(a) The rights of the parties under this Agreement shall not be assignable
without the written consent of the other parties, except that some or all of the
rights of Buyer under this Agreement may be assigned, without the consent of the
Seller, to any Affiliate of Buyer, provided that (i) the assignee shall assume
in writing all of Buyer's obligations to Seller hereunder, and (ii) Buyer shall
not be released from any of its obligations hereunder by reason of such
assignment, but shall continue to be obligated hereunder jointly and severally
with the assignee.
(b) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successors and permitted assigns. The successors and
permitted assigns hereunder shall include without limitation, in the case of
Buyer, any permitted assignee as well as the successors in interest to such
permitted assignee (whether by merger (including successive mergers) or
otherwise). Nothing in this Agreement, expressed or implied, is intended or
shall be construed to confer upon any Person other than Gardner, Carton &
Douglas, Counsel to Buyer, pursuant to Section 9.8, and the parties and
successors and assigns permitted by this Section 12.4 any right, remedy or claim
under or by reason of this Agreement.
12.5. Interpretation.
(a) Article titles and headings to sections herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement. The Schedules and Exhibits
referred to herein shall be construed with and as an integral part of this
Agreement to the same extent as if they were set forth herein.
(b) This Agreement and the Schedules and Exhibits hereto have been mutually
prepared, negotiated and drafted by each of the parties hereto and thereto. The
parties agree that the terms of this Agreement shall be construed and
interpreted against each party in the same manner and that no such provisions
shall be construed or interpreted more strictly against one party on the
assumption that an instrument is to be construed more strictly against the party
which drafted the agreement.
12.6. Waivers. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, only pursuant to a written action
by the party or parties entitled to the benefit thereof. Any such waiver shall
be validly and sufficiently authorized for purposes of this Agreement if, as to
any party, it is authorized in writing by an authorized representative of such
party. The failure of any party hereto to enforce at any time any provision of
this Agreement shall not be construed to be a waiver of such provision, nor in
any way to affect the validity of this Agreement or any part hereof or the right
of any party thereafter to enforce each and every such provision. No waiver of
any breach of this Agreement shall be held to constitute a waiver of any other
or subsequent breach.
12.7. Expenses. Subject to the provisions of Article 10, in the event
that the transactions provided for in this Agreement are not consummated, each
party hereto will pay its own costs and expenses incident to the negotiation,
preparation and performance of this Agreement, including the fees, expenses and
disbursements of its counsel, financial advisors, and accountants, with the
exception set forth in Section 8.3. Any license, transfer or other fees required
to be paid to any Person to transfer to Buyer the right to use, operate or enjoy
the Business, the Purchased Assets or the Merged Companies in the manner
currently used by Seller, the Merged Companies or Phoenix of Hendersonville
shall be borne by Buyer. Any fees assessed by the FCC in connection with the
filings contemplated hereby shall be paid by Buyer.
12.8. Partial Invalidity. Wherever possible, each provision hereof shall
be interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
51
12.9. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be considered an original instrument, and
shall become binding when one or more counterparts have been signed by each of
the parties hereto and delivered to Seller and Buyer.
12.10. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Illinois, without giving
effect to any choice of law provisions which may direct the application of the
laws of another jurisdiction.
12.11. Submission to Jurisdiction; Specific Performance. The Seller and
Buyer hereby: (a) agree that any Action arising out of or related to this
Agreement or any of the transactions contemplated hereby or thereby shall be
filed and shall proceed exclusively in the United States District Court for the
Northern District of Georgia; (b) irrevocably consent to jurisdiction in such
courts; and (c) waive any and all objections to jurisdiction in such courts that
they may have under the federal or state laws of the United States. Seller
agrees that, if Seller refuses to close the transactions contemplated by this
Agreement in breach of this Agreement, in addition to any other remedies
available to Buyer, Buyer shall be entitled to specific performance of this
Agreement.
12.12. Further Assurances. On the Closing Date, Seller shall (i) deliver
to Buyer such other bills of sale, deeds, endorsements, assignments and other
good and sufficient instruments of conveyance and transfer, in form reasonably
satisfactory to Buyer and its counsel, as Buyer may reasonably request or as may
be otherwise reasonably necessary to vest in Buyer all the right, title and
interest of Seller in, to or under any or all of the Purchased Assets and the
Merged Companies, and (ii) take all steps as may be reasonably necessary to put
Buyer in actual possession and control of all the Purchased Assets, the Merged
Companies and Phoenix of Hendersonville. From time to time following the
Closing, Seller shall execute and deliver, or cause to be executed and
delivered, to Buyer such other instruments of conveyance and transfer as Buyer
may reasonably request or as may be otherwise necessary to more effectively
convey and transfer to, and vest in, Buyer and put Buyer in possession of, any
part of the Purchased Assets, the Merged Companies and Phoenix of
Hendersonville, and, in the case of licenses, certificates, approvals,
authorizations, agreements, contracts, leases, easements and other commitments
included in the Purchased Assets which cannot be transferred or assigned
effectively without the consent of third Persons which consent has not been
obtained prior to the Closing, to cooperate with Buyer at its request in
endeavoring to obtain such consent promptly. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not constitute an agreement to
assign any license, certificate, approval, authorization, agreement, contract,
lease, easement or other commitment included in the Purchased Assets if an
attempted assignment thereof without the consent of a third Person thereto would
constitute a breach thereof.
12.13. Access to Records after Closing. For a period of five (5) years
after the Closing Date, Seller and its representatives shall have reasonable
access to all of the books and records of Seller transferred to Buyer hereunder
to the extent that such access may reasonably be required by Seller in
connection with matters relating to or affected by the operations of Seller
prior to the Closing Date. Such access shall be afforded by Buyer upon receipt
of reasonable advance notice, during the Stations' normal business hours and
shall not constitute Seller exercising control over the Stations under FCC
rules, regulations or guidelines. The Seller shall be solely responsible for any
costs or expenses incurred by them pursuant to this Section 12.13. If Buyer
shall desire to dispose of any of such books and records prior to the expiration
of such five (5) year period, Buyer shall, prior to such disposition, give
Seller a reasonable opportunity, at Seller's expense, to segregate and remove
such books and records as Seller may select. At the expiration of such five (5)
year period, Seller shall have a reasonable opportunity, at Seller's expense, to
segregate and copy such books and records as it may elect.
12.14. Survival of Covenants and Agreements. Notwithstanding anything to
the contrary contained herein, the obligations of the parties under Sections
9.2, 9.3(b), (c), (d), (f), (g), 9.4, 11, 12.4, 12.7, 12.12 and 12.13 shall
survive the Closing.
52
12.15. Actions of Buyer. Any actions required or capable of being taken
by Buyer with respect hereto may only be taken by action of, or upon the
authorization of, the Special Committee of the Board of Directors of Buyer
created by the resolution of the Board of Directors of Buyer dated July 2, 2001.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
BUYER:
CUMULUS MEDIA INC.
By: /s/ MARTIN R. GAUSVIK
------------------------------------
Name: Martin R. Gausvik
----------------------------------
Title: Executive Vice President, Chief
Financial Officer and Treasurer
-----------------------------------
MT. JULIET INC.
By: /s/ MARTIN R. GAUSVIK
------------------------------------
Name: Martin R. Gausvik
----------------------------------
Title: Executive Vice President, Chief
Financial Officer and Treasurer
-----------------------------------
PHOENIX BROADCASTING INC.
By: /s/ MARTIN R. GAUSVIK
------------------------------------
Name: Martin R. Gausvik
----------------------------------
Title: Executive Vice President, Chief
Financial Officer and Treasurer
-----------------------------------
SELLER:
DBBC, L.L.C.
By: /s/ LEWIS W. DICKEY, JR.
------------------------------------
Name: Lewis W. Dickey, Jr.
----------------------------------
Title: President
-----------------------------------
54
PHOENIX COMMUNICATIONS GROUP, INC.
By: /s/ LEWIS W. DICKEY, JR.
----------------------------------
Name: Lewis W. Dickey, Jr.
----------------------------------
Title: President
-----------------------------------
MT. JULIET BROADCASTING, INC.
By: /s/ LEWIS W. DICKEY, JR.
------------------------------------
Name: Lewis W. Dickey, Jr.
----------------------------------
Title: President
-----------------------------------
55