Exhibit 10.1
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ASSET PURCHASE AGREEMENT
among
FRANKLIN CAPITAL CORPORATION
("Franklin")
EXCELSIOR RADIO NETWORKS, INC.
(the "Purchaser")
and
DIAL COMMUNICATIONS GROUP, INC.
and
DIAL COMMUNICATIONS GROUP LLC
(collectively, the "Sellers")
As of April 1, 2002
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, is entered into as of April 1, 2002, by
and among Dial Communications Group, Inc., a New York corporation ("DCGI"), and
Dial Communications Group LLC, a New York limited liability company ("DCGLLC"
and, together with DCGI, the "Sellers"), Franklin Capital Corporation, a
Delaware corporation ("Franklin"), and Excelsior Radio Networks, Inc., a
Delaware corporation (the "Purchaser" and, together with Franklin, the
"Purchaser Parties").
RECITALS
WHEREAS, Sellers are engaged in the business of selling advertising
relating to radio programming (the "Business"); and
WHEREAS, Sellers have concluded that it would be in their collective
best interests if Sellers sold all of their assets to Purchaser other than their
Excluded Assets (as defined herein); and
WHEREAS, Purchaser is engaged in the businesses of selling advertising
relating to radio programming and the production and distribution of radio
programming; and
WHEREAS, Purchaser is a majority-owned subsidiary of Franklin; and
WHEREAS, Purchaser desires to purchase from Sellers, and Sellers desire
to sell to Purchaser, substantially all of Sellers' assets, subject to the terms
and conditions set forth in this Agreement; and
WHEREAS, immediately prior to the closing of the transactions
contemplated herein, Purchaser will assign, along with certain other assets and
liabilities as contemplated hereby, all of its rights and obligations hereunder
to a newly formed wholly-owned subsidiary of Purchaser.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, AGREE AS FOLLOWS:
1. Definitions.
"Additional Consideration" shall have the meaning set forth in Section
3.2 hereof.
"Affiliate" shall mean, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person.
"Agreement" shall mean this Asset Purchase Agreement, including all
amendments, modifications and supplements hereto and any appendices, exhibits
and schedules hereto or thereto, and shall refer to such agreement as the same
may be in effect at the time such reference becomes operative.
"Assets" shall have the meaning set forth in Section 2 hereof.
"Assumed Contracts" shall have the meaning set forth in Section 6.10
hereof.
"Assumed Liabilities" shall have the meaning set forth in Section 4
hereof.
"Basket" shall have the meaning set forth in Section 16.4 hereof.
"Business" shall have the meaning set forth in the recitals to this
Agreement.
"Business' 2002 EBITDA" shall have the meaning set forth in Section
3.2.1 hereof.
"Change" shall mean Change Technology Partners, Inc.
"Change in Control" shall mean (a) any merger or consolidation (x)
involving either Purchaser Party (or any Affiliate of either Purchaser Party if
such Affiliate owns all or substantially all of the assets of Purchaser Parties
broadcast radio business) and (y) in which more than fifty percent (50%) of the
voting stock or other voting equity securities of the surviving entity following
such merger or consolidation is beneficially owned by a Person or Persons other
than the holders of voting stock or other voting equity securities of such
Purchaser Party or Affiliate immediately prior to such merger or consolidation,
(b) the sale, transfer or other disposition, in a single transaction or series
of related transactions, of all or substantially all of the broadcast radio
assets of such Purchaser Party or such Affiliate specified in clause (a) to a
Person of which more than fifty percent (50%) of the voting stock or other
voting securities is beneficially owned by a Person or Persons other than
Franklin or an Affiliate of Franklin, or (c) the sale, transfer or other
disposition, in a single transaction or series of related transactions, by a
holder or holders of the voting stock or other voting securities (i) of Franklin
of greater than fifty percent (50%) of Franklin's aggregate voting stock or
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other voting securities then outstanding or (ii) of Purchaser or Newco of such
number of shares of Purchaser's or Newco's, as the case may be, voting stock or
other voting securities such that Franklin, Change, Sunshine or any of their
respective Affiliates no longer owns a majority of Purchaser's voting stock or
other voting securities then outstanding, in the case of Franklin to a Person or
Persons other than Franklin or an Affiliate of Franklin, and in the case of
Purchaser or Newco to a Person or Persons other than Franklin, Change, Sunshine
or any of their respective Affiliates; provided, however, that in no event shall
the transactions contemplated by that certain Agreement and Plan of Merger,
dated as of December 4, 2001, between Franklin and Change, constitute a Change
of Control for purposes of this Agreement.
"Closing" shall have the meaning set forth in Section 9.1 hereof.
"Closing Date" shall mean the date on which the Closing occurs.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean Franklin's common stock, $1.00 par value, or
such other securities into which such Franklin common stock may have been
changed or converted after the date hereof or for which such Franklin common
stock may have been exchanged as a result of any merger, consolidation,
recapitalization, reorganization, reclassification or other like event involving
Franklin.
"DCGI" shall have the meaning set forth in the first paragraph of this
Agreement.
"DCGLLC" shall have the meaning set forth in the first paragraph of
this Agreement.
"EBITDA" shall mean earnings before interest, taxes, depreciation and
amortization.
"EBITDA Factor" shall mean the Business' 2002 EBITDA divided by the sum
of (a) the Business' 2002 EBITDA and (b) (i) Newco's EBITDA for the year ended
December 31, 2002 minus (ii) the Business' 2002 EBITDA after the Closing Date.
"Employee Benefit Plans" shall have the meaning set forth in Section
6.16.1 hereof.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall have the meaning set forth in Section 6.16.1
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Assets" means Sellers' accounts receivables relating to
xxxxxxxx for advertising which has aired on or prior to March 31, 2002, security
deposits in respect of its Facilities, DCGI's membership interest in DCGLLC and
any other assets listed on Schedule 1.
"Facilities" shall mean the Sellers' facilities.
"Financial Calculations" shall have the meaning set forth in Section
3.2.3 hereof.
"Financial Statements" shall have the meaning set forth in Section 6.11
hereof.
"Franklin" shall have the meaning set forth in the first paragraph of
this Agreement.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Global Media" shall mean that portion of Purchaser's business
dedicated to the sale of advertising relating to radio programming.
"Governmental Authority" shall mean any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency or instrumentality thereof, or any court
or arbitrator (public or private).
"Indemnified Party" shall have the meaning set forth in Section 17
hereof.
"Indemnifying Party" shall have the meaning set forth in Section 17
hereof.
"Initial Calculations" shall have the meaning set forth in Section
3.2.3 hereof.
"Initial Consideration" shall have the meaning set forth in Section 3.1
hereof.
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"Law" shall mean any federal, state, local or foreign law (including
common law), statute, code, ordinance, rule or regulation.
"Legal Proceeding" shall mean any judicial, administrative or arbitral
action, suit, investigation, proceeding (public or private), claim, dispute,
grievance or governmental proceeding.
"Liability" shall mean any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Lien" shall mean any lien, pledge, mortgage, hypothecation, preemptive
right, assignment, deposit arrangement, deed of trust, security interest, claim,
lease, option, right of first refusal, easement, or preference, or other real
estate declaration, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever, restriction or servitude, transfer
restriction under any shareholder or similar agreement, encumbrance or any other
restriction or limitation whatsoever.
"Losses" shall have the meaning set forth in Section 16.1 hereof.
"Material Adverse Change" shall mean, with respect to any party, any
material adverse change in the business, properties, results of operations or
financial condition of such party and its consolidated subsidiaries taken as a
whole.
"Minimum Share Price" over a specified time period shall mean the
average per share closing price of the Common Stock over such period; provided,
that in the event of any change in the shares of capital stock of Franklin by
reason of any stock dividend, stock split, recapitalization, reorganization,
merger, consolidation, split-up, combination, exchange of shares or similar
change affecting the shares, the Minimum Share Price shall be appropriately
adjusted consistent with such change in such manner as is equitable to carry out
the intent of the parties hereunder.
"Newco" shall have the meaning set forth in Section 11.2.7 hereof.
"Objection Notice" shall have the meaning set forth in Section 3.2.3
hereof.
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"Order" shall mean any order, injunction, judgment, decree, ruling,
writ, assessment or arbitration award.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" shall mean any approval, authorization, consent, franchise,
license, permit or certificate by any Governmental Authority.
"Person" shall mean any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, limited liability company, Governmental Authority or other entity.
"Pre-Closing Period" shall have the meaning set forth in Section 5
hereof.
"Principals" shall mean Xxxxxxx Xxxxxx, Xxxxx Xxxxxx and Xxx Xxxxxxxx.
"Purchase Price" shall have the meaning set forth in Section 3 hereof.
"Purchaser" shall have the meaning set forth in the first paragraph of
this Agreement.
"Purchaser Parties" shall have the meaning set forth in the first
paragraph of this Agreement.
"Purchaser Parties' Disclosure Schedule" shall have the meaning set
forth in Section 7 hereof.
"Purchaser Party Indemnified Parties" shall have the meaning set forth
in Section 16.1 hereof.
"Recalculated 2002 Earnout" shall have the meaning set forth in Section
3.2.2 hereof.
"Recalculated 2003 Earnout" shall have the meaning set forth in Section
3.2.2 hereof.
"Retained Liabilities" shall have the meaning set forth in Section 5
hereof.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Report" shall have the meaning set forth in Section 7.5 hereof.
"Seller Indemnified Parties" shall have the meaning set forth in
Section 16.2 hereof.
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"Sellers" shall have the meaning set forth in the first paragraph of
this Agreement.
"Sellers' Disclosure Schedule" shall have the meaning set forth in
Section 6 hereof.
"Sunshine" shall mean Sunshine II, LLC.
"Supporting Documents" shall have the meaning set forth in Section
3.2.3 hereof.
"Taxes" shall mean all taxes, charges, fees, imposts, levies or other
assessments, including all net income, gross receipts, capital, sales, use, ad
valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, together with any
interest and any penalties, fines, additions to tax or additional amounts
imposed by any Governmental Authority and shall include any transferee liability
in respect of Taxes.
"Transfer Taxes" shall have the meaning set forth in Section 18.3
hereof.
"Working Capital Amount" shall have the meaning set forth in Section
11.1.2 hereof
"Working Capital Statement" shall have the meaning set forth in Section
11.1.2 hereof.
"2002 Earnout" shall have the meaning set forth in Section 3.2.1
hereof.
"2003 Earnout" shall have the meaning set forth in Section 3.2.2
hereof.
"2004 Calculation" shall have the meaning set forth in Section 3.2.2
hereof.
"2004 Payment" shall have the meaning set forth in Section 3.2.2
hereof.
The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the promissory notes
referred to in Article 3, and any schedules and exhibits hereto, as the same may
from time to time be amended, modified or supplemented, and not to any
particular section, subsection or clause contained in this Agreement. The words
"includes" or "including" and other words of similar import shall mean
"including, without limitation."
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Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
2. The Purchase and Sale of Assets. Subject to the terms and conditions of this
Agreement, at the Closing, Purchaser shall purchase and accept from Sellers, and
Sellers shall sell, assign, transfer, convey and deliver to Purchaser, all of
Sellers' respective rights, title and interest in all assets of Sellers (the
"Assets"), including the following:
2.1 Sellers' accounts receivables, security deposits, and prepayments;
2.2 The contracts between any Seller and the producers, advertisers,
employees, and independent contractors listed on Schedule 2.2;
2.3 All cash and bank accounts of each Seller;
2.4 All of Sellers' furniture and fixtures located at the Facilities
and listed on Schedule 2.4;
2.5 All of Sellers' computers, printers, software and communications
equipment listed on Schedule 2.5;
2.6 The office leases and phone systems listed on Schedule 2.6;
2.7 All intellectual property owned by Sellers that is associated with
the Business or the Assets of Sellers, including all of Sellers' right, title
and interest in and to Sellers' logo, the name "Dial" or any trademark owned by
Sellers; and
2.8 All of the capital stock of any Person owned beneficially or of
record by any Seller listed on Schedule 2.8.
Notwithstanding the foregoing, in no event is Purchaser purchasing and accepting
from Sellers, nor are Sellers selling, assigning, transferring, conveying or
delivering, the Excluded Assets.
Anything contained herein to the contrary notwithstanding, this Agreement will
not constitute an assignment, an attempted assignment or an agreement to assign
any of the Assets if an assignment or attempted assignment of the same without
the consent of any other party or parties thereto would constitute a breach
thereof or in any way impair the rights of Sellers or Purchaser thereunder. Each
Seller will use its commercially reasonable efforts (at such Seller's expense),
and Purchaser will cooperate in all reasonable respects with such Seller to
obtain prior to the Closing Date all consents and to resolve all
impracticalities of assignments or transfers necessary to sell, assign, convey,
transfer and deliver to Newco the Assets. If any such consent is not obtained or
if an attempted assignment would be ineffective or would impair such Seller's or
Newco's rights under any such Asset so that Newco would not receive all such
rights, then (1) such Seller will (x) ensure that the full benefits of any such
Asset are provided or caused to be provided to Newco, and (y) pay promptly or
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cause to be paid promptly to Newco when received all monies and other properties
received by such Seller with respect to any Asset of which Newco would have been
entitled to receive such monies and other properties if such consent had been
obtained; and (2) in consideration of Sellers providing or causing to be
provided to Newco the full benefits thereof, Newco will perform and discharge on
behalf of such Seller all of such Seller's Liabilities thereunder which are
Assumed Liabilities in accordance with the provisions thereof. In addition, such
Seller will take such other actions (at such Seller's expense) as may reasonably
be requested by Purchaser in order to place Newco, insofar as reasonably
possible, in the same position as if such Asset had been transferred as
contemplated hereby and so that all the benefits relating thereto, including
possession, use, potential for gain and dominion, control and command, shall
inure to Newco, subject to the assumption by Newco of any Assumed Liabilities
with respect to such Asset. Notwithstanding the foregoing, if any such consent
is not obtained prior to the Closing Date, such Seller will continue to use its
commercially reasonable efforts (at such Seller's expense) to obtain all such
consents (and, if and when such consents are obtained, the transfer of the
applicable Asset will be effected in accordance with the terms of this
Agreement).
3. Purchase Price. The purchase price for the Assets shall be the aggregate of
the amounts detailed in this Section 3 (the "Purchase Price").
3.1 Initial Consideration. On the Closing Date, Purchaser will pay
Sellers, and Franklin shall cause Purchaser to pay Sellers, as follows (the
"Initial Consideration"):
3.1.1 $6,500,000 by wire transfer in immediately available
funds or by certified check, as directed by Sellers in writing
to Purchaser; and
3.1.2 Purchaser shall execute and deliver a promissory note in
the aggregate amount of $460,000 in favor of Sellers and in
substantially the form attached hereto as Exhibit A, which
shall be convertible into Common Stock on the terms set forth
therein.
3.2 Additional Consideration. Purchaser shall pay Sellers additional
consideration ("Additional Consideration") as follows:
3.2.1 The greater of (A) $1,000,000 and (B) the lower of (x)
$3,000,000 and (y) an amount equal to 20.8% of the product of
6 and the EBITDA of the Business (the "Business' 2002 EBITDA")
for the year ended December 31, 2002 (such amount, the "2002
Earnout"). Payment pursuant to this Section 3.2.1 shall be
made within 10 business days after the completion of
Purchaser's 2002 audit, but in no event later than April 10,
2003; provided, however, that if the parties remain in dispute
over the calculation of the 2002 Earnout on April 10, 2003,
Purchaser shall pay to Sellers the amount not in dispute, if
any, with final payment, if any, to be made within 10 days of
resolution of such dispute as contemplated in Section 3.2.3.
Purchaser shall pay Sellers (I) the amount of such payment
equal to the product of 50% of such payment and 0.885 by the
terms of a promissory note in substantially the form attached
hereto as Exhibit B, which principal amount shall be subject
to increase as set forth therein and shall be convertible into
Common Stock on the terms set forth therein, and (II) 50% of
the 2002 Earnout shall be payable by wire transfer in
immediately available funds or by certified check, as directed
by Sellers in writing to Purchaser; provided, however, that if
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the Minimum Share Price over the 60-day period ending December
31, 2002 is equal to or greater than $5.00 per share Sellers
may elect to accept shares of Common Stock valued at the
average per share closing price of the Common Stock over such
60-day period in lieu of the cash portion of the Additional
Consideration described in (II) above, provided that Purchaser
has received written notice from Sellers of such election on
or before December 31, 2002.
3.2.2 The greater of (A) $1,000,000 and (B) the lower of (x)
$4,000,000 and (y) an amount equal to 20.8% of the product of
(i) 6, (ii) the EBITDA Factor and (iii) Newco's EBITDA for the
year ended December 31, 2003 (such amount, the "2003
Earnout"). In addition, if (i) the 2003 Earnout is $4,000,000
and (ii) the 2002 Earnout was less than 3,000,000, the amount,
if any, of Newco's EBITDA for the year ended December 31, 2003
that exceeded the minimum amount that would have been required
to obtain a 2003 Earnout of $4,000,000 shall be added to the
Business' 2002 EBITDA and the 2002 Earnout shall be
recalculated (the "Recalculated 2002 Earnout") in accordance
with Section 3.2.1 hereof. The Purchaser shall pay to Sellers
the difference between the Recalculated 2002 Earnout and the
2002 Earnout. Alternatively, if (i) the 2003 Earnout is less
than $4,000,000 and (ii) 20.8% of the product of (x) 6, (y)
the EBITDA Factor and (z) Newco's EBITDA for the year ended
December 31, 2004 (such amount, the "2004 Calculation") is
greater than $4,200,000, the amount, if any, of Newco's EBITDA
for the year ended December 31, 2004 that exceeded the minimum
amount that would have been required to obtain a 2004
Calculation of $4,200,000 shall be added to Newco's 2003
EBITDA and the 2003 Earnout shall be recalculated (the
"Recalculated 2003 Earnout") in accordance with this Section.
The Purchaser shall pay to Sellers the difference between the
Recalculated 2003 Earnout and the 2003 Earnout (the "2004
Payment"). Payment pursuant to the first two sentences of this
Section 3.2.2 shall be made within 10 business days after
completion of Purchaser's 2003 audit, but in no event later
than April 10, 2004; provided, however, that if the parties
remain in dispute over the calculation of the 2003 Earnout on
April 10, 2004, Purchaser shall pay to Sellers the amount not
in dispute, if any, with final payment, if any, to be made
within 10 days of resolution of such dispute as contemplated
in Section 3.2.3. If the Purchaser is required to pay the 2004
Payment to Sellers, such 2004 Payment shall be made no later
than April 10, 2005; provided, however, that if the parties
remain in dispute over the calculation of the 2004 Payment on
April 10, 2005, Purchaser shall pay to Sellers the amount not
in dispute, if any, with final payment, if any, to be made
within 10 days of resolution of such dispute as contemplated
in Section 3.2.3. Purchaser shall pay Sellers (I) the amount
of any such payments equal to the product of 50% of such
payment and 0.885 by the terms of a promissory note in
substantially the form attached hereto as Exhibit C, which
principal amount shall be subject to increase as set forth
therein and shall be convertible into Common Stock on the
terms set forth therein; and (II) 50% of any such payments by
wire transfer in immediately available funds or by certified
check, as directed by Sellers in writing to Purchaser;
provided, however, that if the Minimum Share Price over the
60-day period ending December 31, 2003 (or December 31, 2004
in the case of the 2004 Payment) is equal to or greater than
$6.00 per share (or $7.00 per share in the case of the 2004
Payment) Sellers may elect to accept shares of Common Stock
valued at the average per share closing price of the Common
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Stock over such 60-day period in lieu of the cash portion of
the Additional Consideration described in (II) above, provided
that Purchaser has received written notice from Sellers of
such election on or before December 31, 2003 (or December 31,
2004 in the case of the 2004 Payment).
3.2.3 All financial calculations (the "Financial
Calculations") needed to compute the amount of Additional
Consideration due to Sellers under Section 3.2 shall be made
by Purchaser, and Purchaser shall deliver, within five (5)
business days of completion thereof, the Financial
Calculations to Sellers in writing (the "Initial
Calculations"), along with all work papers and other
information or documents used by Purchaser in the preparation
thereof (collectively, the "Supporting Documents"). Purchaser
shall also upon the written request of Sellers timely furnish
such additional information and documents as Sellers shall
reasonably request as necessary to compute the amount of
Additional Consideration. Sellers shall review the Initial
Calculations and within ten (10) business days following
receipt thereof and any such additional information and
documents, either accept or object to the Financial
Calculations set forth in the Initial Calculations. If Sellers
object to the Initial Calculations, Sellers shall notify
Purchaser in writing (the "Objection Notice"), specifying in
reasonable detail the nature of such objections. If no
Objection Notice is received by Purchaser within such 10
business-day period, Purchaser's Initial Calculations shall be
deemed the final and binding determination of the Financial
Calculations. If Sellers timely deliver an Objection Notice,
then Purchaser and Sellers shall, within ten (10) business
days of such delivery, appoint an accounting firm (the
"Accountants"), mutually satisfactory to Purchaser and
Sellers, to determine the Financial Calculations. The
Accountants shall have thirty (30) days to determine the
Financial Calculations. Purchaser shall promptly provide the
Accountants with the Objection Notice and all Supporting
Documents and additional information and documents as shall be
reasonably requested, and shall direct the Accountants to
determine the Financial Calculations within such thirty (30)
day period. The Accountants shall simultaneously deliver in
writing to Purchaser and Sellers its determination of the
Financial Calculations and such Financial Calculations shall
be deemed to be final and binding. The costs of the
Accountants shall be borne equally by the parties; provided,
however, that if the Additional Consideration payable for any
year as a result of such Financial Calculations is more than
10% above the Additional Consideration calculated by Purchaser
for such year, the costs of the Accountants shall be borne
solely by Purchaser and if the Additional Consideration
payable for any year as a result of such Financial
Calculations is more than 10% less the Additional
Consideration calculated by Purchaser for such year, the costs
of the Accountants shall be borne solely by Sellers.
For purposes of calculating the Additional Consideration,
EBITDA will be determined in accordance with GAAP, on a basis
consistent with those principles set forth in Schedule 3.2.3
and as applied by Sellers' accountants to the Financial
Statements as of and for the fiscal year ended December 31,
2001; provided, however, that in such calculation of
Additional Consideration (A) with respect to Section 3.2.1 (i)
any personnel cost savings of the combined operations of
Sellers and Purchaser shall be added back to the determination
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of EBITDA and (ii) the Business' 2002 EBITDA for the period
through the Closing Date shall be equal to the Sellers' EBITDA
for such period, and the Business' 2002 EBITDA for the period
after the Closing Date shall be equal to the pro forma EBITDA
of the business of Sellers purchased and sold hereunder;
provided that, subject to clause (i) above, the aggregate
expenses for the line items identified on Schedule 3.2.3(a)
relating to the Business shall be $2,601,586 and (B) with
respect to Section 3.2.2 (i) annual compensation in excess of
$750,000 in the aggregate paid to the Principals shall not be
deducted in determining EBITDA and the methodology used to
calculate EBITDA shall be consistent during the periods in
which the Additional Consideration is paid and (ii) the costs
of any allowance provided to any of the Principals for a car,
parking or country club membership shall be deducted in
determining EBITDA.
3.3 Change in Control; Termination of Employment. In the event of a
Change in Control or if the employment of any of the Principals terminates
without Cause or for Good Reason (as such terms are defined in each of the
Principals' respective employment agreement with the Purchaser entered into on
the Closing Date hereof), all unpaid Additional Consideration shall be paid to
Sellers in accordance with the manner of payment specified in Sections 3.2.1 and
3.2.2 upon the consummation of and as a condition to such Change in Control or
upon termination of employment, as applicable (such unpaid Additional
Consideration to be deemed to be $3,000,000 under Section 3.2.1 and $4,000,000
under Section 3.2.2).
4. Assumption of Liabilities. Upon Closing, Purchaser shall assume all
Liabilities related primarily to the operation of the Business and first
incurred or arising after the Closing Date, including any and all costs relating
to the termination of any employee after the Closing Date and all Liabilities
arising after the Closing Date in respect of Assumed Contracts (the "Assumed
Liabilities").
Purchaser is not assuming any Liability of any Seller or of the
Business, except as expressly provided in this Section 4.
5. Retained Liabilities. Sellers shall retain all Liabilities related to the
Business and Assets other than the Assumed Liabilities, including (i) any and
all Liabilities related to the Excluded Assets and any and all costs or
Liabilities relating to any employee of either Seller who is not hired by
Purchaser, including any Liability relating to or arising under COBRA, (ii) any
claims for any injury to person or property attributable to any services
rendered by any Seller prior to the Closing, regardless of whether such claims
are asserted prior to or after the Closing, (iii) any third party claims with
respect to occurrences or events which occurred on or prior to the Closing Date
and relate to any Seller and/or its employees and (iv) all Liabilities for any
Taxes of the Sellers, and all Liabilities for Taxes that relate to the Assets or
the Business for periods (or portions thereof) up to an including the Closing
Date (the "Retained Liabilities").
All property or other ad valorem Taxes for a taxable period that
includes but does not end on the Closing Date that are not paid prior to the
Closing Date shall be prorated as of the Closing Date based on the ratio of the
number of days in the portion of the taxable period that ends on the Closing
Date (the "Pre-Closing Period) and the number of days in the entire period. To
the extent that property taxes attributable to the Pre-Closing Period have not
be paid on or prior to the Closing Date, Sellers shall pay such amount to
Purchaser on the Closing Date (or thereafter, promptly after request by
Purchaser if not identified by Sellers on the Closing Date).
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6. Sellers' Representations. Except as set forth on Sellers' disclosure schedule
attached hereto ("Sellers' Disclosure Schedule"), which Sellers' Disclosure
Schedule shall identify the specific sections of this Section 6 as to which the
exception or disclosure applies, each Seller, jointly and severally, represents
and warrants to Purchaser Parties as follows:
6.1 Organization. Such Seller is a duly and validly organized limited
liability company or corporation, as applicable, in good standing under the laws
of the State of New York, has all requisite limited liability company or
corporate, as the case may be, power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby, and has full limited
liability company or corporate, as the case may be, power and authority to own,
lease and operate its properties and to carry on its business as now conducted.
Such Seller is duly qualified or authorized to do business as a foreign
corporation or limited liability company, as the case may be, and is in good
standing under the laws of (i) each jurisdiction in which it owns or leases real
property and (ii) each other jurisdiction in which the conduct of its business
or the ownership of its properties requires such qualification or authorization,
except where the failure to be so qualified would not result in a Material
Adverse Change in such Seller. Except as set forth in Section 6.1 of Sellers'
Disclosure Schedule, neither Seller is qualified or authorized to do business as
a foreign corporation or limited liability company, as the case may be, in any
jurisdiction.
6.2 Authority. Such Seller has duly and validly taken all limited
liability company or corporate, as the case may be, action necessary to
authorize the execution, delivery and performance of this Agreement and all
other agreements and instruments to be delivered by such Seller in connection
with the transactions contemplated hereby, and this Agreement and such other
agreements and instruments required to be executed and delivered by such Seller
have been, or when delivered, will have been, duly executed and delivered by
such Seller.
6.3 Binding. Subject to the terms and conditions hereof, this Agreement
constitutes the valid, binding and enforceable obligations of such Seller,
enforceable in accordance with its terms, except as enforceability may be
limited or barred by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or similar laws of general application now or
hereafter in effect affecting the rights and remedies of creditors and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
6.4 No Conflicts. None of the execution and delivery of this Agreement
by such Seller or any other agreements or instruments to be delivered by such
Seller in connection with the transactions contemplated hereby, or the
consummation by such Seller of the transactions contemplated hereby or thereby,
or compliance by such Seller with any of the provisions hereof or thereof will:
(a) violate or conflict with the articles of organization or certificate of
incorporation or the limited liability operating agreement or by-laws of such
Seller; (b) except as set forth on Section 6.4 of Sellers' Disclosure Schedule,
violate or conflict with, or constitute a default under, or result in a breach
of, or gives rise to any right of termination, cancellation or acceleration
under, any term or provision of any license, loan agreement, promissory note,
indenture or other material contract to which such Seller is a party or by which
such Seller or the Assets are bound; (c) violate or conflict with any Order of
any Governmental Authority by which such Seller or the Assets are bound, or
require the approval, consent, or permission of any Governmental Authority; (d)
13
constitute a violation of any Law applicable to such Seller; or (e) result in
the creation of any Lien (other than Liens created by Purchaser) upon the
Assets.
6.5 Title to Assets. Such Seller has or, at Closing will have, good
title, and at the Closing, such Seller shall deliver to Purchaser, good title to
all of the Assets owned by such Seller, free and clear of all Liens, other than
Liens in respect of equipment leases and restrictions described in Section 6.4
of Sellers' Disclosure Schedule on the transfer of certain Assumed Contracts.
6.6 Consents. Except as set forth on Section 6.6 of Sellers' Disclosure
Schedule, no consent, approval, waiver, Order, Permit or authorization of, or
declaration or filing with, or notification to or from any Person is required on
the part of such Seller in connection with the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby, or the
compliance by such Seller with any of the provisions hereof or thereof.
6.7 Litigation. There is no Legal Proceeding pending or, to such
Seller's knowledge, threatened against such Seller including by former employees
arising from such individuals' employment with such Seller, related to the
Business or the Assets and such Seller is not in default in respect of any Order
of any Governmental Authority by which such Seller or the Assets are bound.
6.8 Taxes.
6.8.1 Sellers have satisfied all Taxes due prior to Closing in
connection with the Business. All Tax returns with respect to
the Business that are required to be filed on or before the
Closing Date by each Seller have been or will be duly filed on
a timely basis and all such Tax returns were or will be true,
correct and complete in all material respects. No claim for
assessment or collection of Taxes with respect to the Business
has been asserted against either Seller. Neither Seller is a
party to any pending action, proceeding or investigation by
any Governmental Authority for the assessment or collection of
Taxes with respect to the Business, nor does any Seller have
knowledge of any such threatened action, proceeding or
investigation.
6.8.2. No waiver of statutes of limitation in respect of any
Tax return with respect to the Business has been given or
requested by either Seller nor has either Seller agreed to any
extension of time with respect to a Tax assessment or
deficiency with respect to the Business. No claim has been
made at any time during the ten-year period ending on the date
of this Agreement by a Governmental Authority in a
jurisdiction where a Seller does not currently file Tax
returns that it is or may be subject to taxation by that
jurisdiction.
6.8.3. Each Seller has withheld and paid all Taxes with
respect to the Business required to be withheld in connection
with any amounts paid or owing to any employee, creditor,
independent contractor or other third party.
6.8.4 None of the Assets is (i) "tax-exempt use property"
within the meaning of Section 168(h) of the Code, (ii)
"tax-exempt bond-financed property" within the meaning of
Section 168(g) of the Code, (iii) "limited use property"
within the meaning of Revenue Procedure 76-30, (iv) subject to
14
Section 168(g)(1)(A) of the Code or (v) property that is or
will be required to be treated as being owned by any Person
(other than any Seller) pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended,
and in effect immediately before the enactment of the Tax
Reform Act of 1986.
6.8.5. There is no contract, plan or arrangement involving any
Seller and covering any Person that, individually or
collectively, could give rise to the payment of any amount
that would not be deductible by Purchaser, any Seller or any
Affiliate of either by reason or Section 280G or Section
162(m) of the Code.
6.8.6 Notwithstanding the foregoing provisions of this Section
6.8, the representations of Sections 6.8.1, 6.8.2 and 6.8.3
shall apply only to the extent that as a result of the
purchase of the Assets (i) the Assets are made subject to any
Lien for Taxes in the hands of the Purchaser or (ii) the
Purchaser is made subject to any Liability for Taxes as a
transferee or successor of the Assets.
6.9 Accounts Receivable and Payable.
6.9.1 Section 6.9.1 of Sellers' Disclosure Schedule will be
delivered to Purchaser by Sellers at least two business days
prior to the Closing Date, which Schedule will reflect the
accounts receivable, other than accounts receivables that are
Excluded Assets, of the Business as of three business days
prior to the Closing Date and the related aging report as of
such date. The accounts receivables being sold to Purchaser
hereunder are valid and genuine accounts receivables, arising
in the ordinary course of business. Each Seller has been
paying off their respective accounts payable in the ordinary
course of business consistent with past practice. To such
Seller's knowledge, all accounts receivable reflected on
Section 6.9.1 of Sellers' Disclosure Schedule are good and
collectible at the aggregate recorded amounts thereof.
6.9.2 Section 6.9.2 of Sellers' Disclosure Schedule sets forth
a true, correct and complete list of all advance payments,
security deposits, prepaid expense items and credit of all
kinds relating to the operation of the Business as of the date
hereof, other than such items that are Excluded Assets.
6.10 Contracts. True, correct and complete copies of the contracts
contemplated in Sections 2.2 and 2.6 and any other contract or agreement
material to the Business (collectively, the "Assumed Contracts") have been
provided to Purchaser. To such Seller's knowledge, no Seller is in material
breach of or default under any of the Assumed Contracts. To such Seller's
knowledge, there has not occurred any material default by any Seller or, to the
best of Sellers' knowledge, by any other Person who is a party thereto under any
Assumed Contract. The Assumed Contracts were made in the ordinary course of
business, are to such Seller's knowledge, valid and binding agreements and are
in full force and effect and have not been revoked or cancelled by any Seller or
by any other party thereto. No Seller has received any notice, written or oral,
from a party to any Assumed Contract that such party intends to terminate such
Assumed Contract or that such Seller is in breach of such Assumed Contract.
15
6.11 Financial Information. Sellers have delivered to Purchaser correct
and complete copies of audited balance sheets for the Business for the fiscal
years ended December 31, 2000 and 2001 and the related audited statement of
income for the Business as of and for the fiscal year ended December 31, 2001
(collectively, the "Financial Statements"), copies of which are attached as
Section 6.11 of Sellers' Disclosure Schedule. The Financial Statements
(including the notes thereto) (i) have been prepared in accordance with the
books and records of Sellers and GAAP and (ii) fairly present, in all material
respects, the financial condition and the results of operations of the Business
as of and for the fiscal years ended on such dates. Since December 31, 2001,
there has been no event, occurrence or circumstance that would reasonably be
likely to result in a Material Adverse Change to either Seller.
6.12 Proprietary Rights. To such Seller's knowledge, Sellers are the
exclusive owners of the intellectual property being transferred pursuant to
Section 2.7. Sellers have not received any notices of any challenge of any kind
with respect thereto.
6.13 Insurance. Section 6.13 of Sellers' Disclosure Schedule is a true
and accurate listing of insurance policies currently in effect relating to the
Business.
6.14 No Undisclosed Liabilities. Except as disclosed in the Financial
Statements or as set forth on Section 6.14 of Sellers' Disclosure Schedule,
Sellers do not have any material indebtedness, obligation or Liability of any
kind and, to such Seller's knowledge, there is no basis for the assertion of any
such material claim or Liability against any Seller. Since December 31, 2001,
neither Seller has incurred any material indebtedness, obligations or Liability
of any kind other than (i) those incurred in the ordinary course of business
consistent with past practice, and (ii) those otherwise disclosed in Section
6.14 of Sellers' Disclosure Schedule.
6.15 Employee Matters. Set forth on Section 6.15 of Sellers' Disclosure
Schedule is a correct and complete list of each of the employees of the
Business, their current salaries and the respective dates such employees began
working for the Business. A correct and complete summary of the benefit package
that Sellers' current employees receive is set forth on Section 6.15 of Sellers'
Disclosure Schedule. No employee has notified any Seller that such employee
intends to terminate his or her employment with such Seller.
6.16 Employee Benefits.
6.16.1 Section 6.16.1 of Sellers' Disclosure Schedule sets
forth a complete and correct list of all "employee benefit
plans", as defined in Section 3(3) ERISA, and any other
employee benefit arrangements or payroll practices (including
severance pay, vacation pay, company awards, salary
continuation for disability, sick leave, deferred compensation
bonus or other incentive compensation, stock purchase
arrangements or policies) maintained by such Seller or to
which such Seller contributes or is obligated to contribute
thereunder with respect to employees of such Seller or any
subsidiary of such Seller (collectively, the "Employee Benefit
Plans"). None of such Employee Benefit Plans: (A) is an
"employee pension benefit plan", as defined in Section 3(2) of
ERISA which is subject to Title IV of ERISA, maintained, or
contributed to, by such Seller or any trade or business
(whether or not incorporated) which is under common control,
or treated as a single employer, with such Seller under
16
Sections 414(b), (c), (m) or (o) of the Code ("ERISA
Affiliate"); (B) covers persons employed outside of the United
States; (C) is subject to Section 4063 and 4064 of ERISA; (D)
is a multiemployer plan (as defined in Section 4001(a) of
ERISA); or (E) is a welfare plan providing continuing benefits
after the termination of employment (other than as required by
Section 4980B of the Code and at the former employee's own
expense).
6.16.2 Each of the Employee Benefit Plans intended to qualify
under Section 401 of the Code so qualifies, and nothing has
occurred with respect to the operation of any such plan which
could cause the loss of such qualification or the imposition
of any Liability, penalty or tax under ERISA or the Code.
6.16.3 All contributions and premiums required by Law or by
the terms of each Employee Benefit Plan or any agreement
relating thereto have been timely made (without regard to any
waivers granted with respect thereto).
6.16.4 There has been no violation in any material respect,
either individually or in the aggregate, of ERISA with respect
to the filing of applicable returns, reports, documents or
notices regarding any of the Employee Benefit Plans with the
Secretary of Labor or the Secretary of the Treasury or the
furnishing of such notices or documents to the participants or
beneficiaries of the Employee Benefit Plans.
6.16.5 True, correct and complete copies of the following
documents, with respect to each of the Employee Benefit Plans
(as applicable), have been delivered to Purchaser: (A) any
plans and related trust documents, and all amendments thereto,
(B) the most recent Forms 5500 and schedules thereto, (C) the
most recent Internal Revenue Service determination letter, (D)
the most recent summary plan description and (E) written
descriptions of all non-written agreements relating to the
Employee Benefit Plans.
6.16.6 There are no pending Legal Proceedings which have been
asserted or instituted against any of the Employee Benefit
Plans, the assets of any such plans or such Seller or any of
its subsidiaries, or the plan administrator or any fiduciary
of any of the Employee Benefit Plans with respect to the
operation of any of such plans (other than routine,
uncontested benefit claims), and there are no facts or
circumstances which could reasonably be expected to form the
basis for any such Legal Proceeding.
6.16.7 Each of the Employee Benefit Plans has been maintained,
in all material respects, in accordance with its terms and all
provisions of applicable Law. All amendments and actions
required to bring each of the Employee Benefit Plans into
conformity in all material respects with all of the applicable
provisions of ERISA and other applicable Laws have been made
or taken.
6.16.8 Such Seller and each ERISA Affiliate of such Seller has
complied with the notice and continuation requirements of
Section 4980B of the Code and the regulations thereunder.
17
6.16.9 None of such Seller, any of its ERISA Affiliates or any
organization to which any is a successor or parent
corporation, has divested any business or entity maintaining
or sponsoring a defined benefit pension plan having unfunded
benefit liabilities (within the meaning of Section 4001(a)(18)
of ERISA) or transferred any such plan to any person other
than such Seller or any ERISA Affiliate of such Seller during
the five-year period ending on the Closing Date.
6.17 Labor.
6.17.1 Such Seller is not a party to any labor or collective
bargaining agreement and there are no labor or collective
bargaining agreements which pertain to employees of such
Seller or any subsidiary of such Seller.
6.17.2 No employees of such Seller are represented by any
labor organization. No labor organization or group of
employees of such Seller or any subsidiary of such Seller has
made a pending demand against such Seller for recognition, and
there are no representation proceedings or petitions seeking a
representation proceeding presently pending against such
Seller or, to such Seller's knowledge, threatened to be
brought or filed against such Seller, with the National Labor
Relations Board or other labor relations tribunal. To such
Seller's knowledge, there is no organizing activity involving
such Seller pending or threatened by any labor organization or
group of employees of such Seller or any subsidiary of such
Seller.
6.17.3 There are no (i) strikes, work stoppages, slowdowns,
lockouts or arbitrations or (ii) material grievances or other
material labor disputes pending or, to such Seller's
knowledge, threatened against or involving such Seller or any
subsidiary of such Seller. There are no unfair labor practice
charges, grievances or complaints pending or, to such Seller's
knowledge, threatened by or on behalf of any employee or group
of employees of such Seller or any subsidiary of such Seller.
6.17.4 There are no complaints, charges or claims against such
Seller pending or, to such Seller's knowledge, threatened to
be brought or filed with any Governmental Authority based on,
arising out of, in connection with, or otherwise relating to
the employment by such Seller or any subsidiary of such Seller
of any individual, including any claim for workers'
compensation.
6.18 Compliance with Other Laws; Permits.
6.18.1 Such Seller is in compliance with all Laws and Orders
promulgated by any Governmental Authority applicable to such
Seller or to the operation of the Business or the ownership or
use of the Assets, except where any noncompliance would not
result in a Material Adverse Change to such Seller. Such
Seller has neither received nor knows of the issuance of any
notices of violation or alleged violation of any such Law or
Order by any Governmental Authority.
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6.18.2 Section 6.18.2 of Sellers' Disclosure Schedule lists
all Permits (other than those identified on another schedule
hereto) of all Governmental Authorities required by the nature
of the operations of the Business to permit the operation
thereof in the manner in which they are currently conducted,
indicating, in each case, the expiration date thereof. Such
Permits have been validly issued by the appropriate
Governmental Authorities in compliance in all material
respects with all applicable Laws, and such Seller has fully
complied with all material conditions of the Permits
applicable to it. To such Seller's knowledge, no default or
violation, or event that with the lapse of time or giving of
notice or both would become a default or such violation, has
occurred in the due observance of any such Permit. All such
Permits are in full force and effect without further consent
or approval of any Person. Such Seller has not received any
notice from any source to the effect that there is lacking any
Permit required in connection with the current operation of
the Business.
6.19 Ownership of Necessary Assets and Rights.
6.19.1 The Assets to be transferred to Purchaser on the
Closing Date comprise all of the assets, properties and rights
of every type and description, real, personal and mixed,
tangible and intangible, necessary to, or used by such Seller
in, the operation of the Business, other than the Excluded
Assets.
6.19.2 Following the Closing and after giving effect to the
transactions contemplated hereby, the Purchaser will own or
have contractual rights to use all of the Assets owned by
Sellers and used or held for use by any of them in connection
with the Business, or which are necessary for the conduct of
the Business as presently conducted, other than the Excluded
Assets. Such Assets are sufficient for the conduct of the
Business as presently conducted.
6.20 Investments of Sellers. Section 6.20 of Sellers' Disclosure
Schedule sets forth a true and correct list of all of the capital stock of any
Person owned beneficially or of record by any Seller.
6.21 Brokers. No Person has acted directly or indirectly as a broker,
finder or financial advisor for such Seller in connection with the negotiations
relating to or the transactions contemplated by this Agreement and is thereby
entitled to any fee or commission or like payment in respect thereof based in
any way on any agreement, arrangement or understanding made by or on behalf of
such Seller.
7. Purchaser Parties' Representations. Except as set forth in Purchaser Parties'
disclosure schedule attached hereto ("Purchaser Parties' Disclosure Schedule"),
which Purchaser Parties' Disclosure Schedule shall identify the specific
sections of this Section 7 as to which the exception or disclosure applies, each
Purchaser Party severally represents and warrants to Sellers as follows:
7.1 Organization. Such Purchaser Party is a duly and validly organized
corporation in good standing under the laws of the State of Delaware, has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby, and has full corporate power
and authority to own, lease and operate its properties and to carry on its
business as now conducted. Such Purchaser Party is duly qualified or authorized
19
to do business as a foreign corporation and is in good standing under the laws
of (i) each jurisdiction in which it owns or leases real property and (ii) each
other jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization, except where the
failure to be so qualified would not result in a Material Adverse Change in such
Purchaser Party.
7.2 Authority. Such Purchaser Party has duly and validly taken all
corporate action necessary to authorize the execution, delivery and performance
of this Agreement and all other agreements and instruments to be delivered by
such Purchaser Party in connection with the transactions contemplated hereby,
except that the approval of Franklin's stockholders may be required under
certain circumstances if Common Stock is to be delivered to Sellers as
contemplated hereby, and this Agreement and such other agreements and
instruments required to be executed and delivered by such Purchaser Party have
been, or when delivered, will have been, duly executed and delivered by such
Purchaser Party.
7.3 Binding. Subject to the terms and conditions hereof, this Agreement
constitutes the valid, binding and enforceable obligations of such Purchaser
Party, enforceable in accordance with its terms, except as enforceability may be
limited or barred by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or similar laws of general application now or
hereafter in effect affecting the rights and remedies of creditors and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
7.4 Shares of Common Stock. The shares of Common Stock issuable to
Sellers hereunder, when issued, shall be duly authorized, validly issued, fully
paid and nonassessable, and shall be issued free and clear of any Liens.
7.5 Reports and Financial Statements. Franklin has timely filed all
reports required to be filed with the SEC pursuant to the Exchange Act, since
January 1, 2001 (collectively, the "SEC Reports"), and has previously made
available to the Sellers true and complete copies of all the SEC Reports filed
since such date. The SEC Reports, as of their respective dates, complied in all
material respects with applicable law, and none of the SEC Reports contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Franklin included in the SEC Reports have been prepared in
accordance with GAAP consistently applied throughout the periods indicated
(except as otherwise noted therein or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments and any other
adjustments described therein) the consolidated financial position of Franklin
and its consolidated subsidiaries as at the dates thereof and the consolidated
results of operations and cash flows of Franklin and its consolidated
subsidiaries for the periods then ended. Since the date of the last SEC Report,
there has been no event, occurrence or circumstance that would reasonably be
likely to result in a Material Adverse Change to either Purchaser Party.
Purchaser has delivered to Sellers correct and complete copies of Financial
Statements for Global Media as of and for the fiscal year ended December 31,
2001, copies of which have been attached as Section 7.5 of Purchaser Parties'
Disclosure Schedule. Such Financial Statements (including the notes thereto)
fairly present, in all material respects, the financial condition and the
results of operations of Global Media as of and for the fiscal year ended on
20
such date. Since December 31, 2001, there has been no event, occurrence or
circumstance that would reasonably be likely to result in a Material Adverse
Change to Global Media.
7.6 No Undisclosed Liabilities. Except as disclosed in the financial
statements of Franklin included in the SEC Reports as of their respective dates,
neither the Purchaser Parties nor Global Media has any material indebtedness,
obligations or Liability of any kind and, to such Purchaser Party's knowledge,
there is no basis for the assertion of any such material claim or Liability
against either of the Purchase Parties or Global Media.
7.7 Brokers. Except as disclosed in Section 7.7 of Purchaser Parties'
Disclosure Schedule, no Person has acted directly or indirectly as a broker,
finder or financial advisor for such Purchaser Party in connection with the
negotiations relating to or the transactions contemplated by this Agreement and
is thereby entitled to any fee or commission or like payment in respect thereof
based in any way on any agreement, arrangement or understanding made by or on
behalf of such Purchaser Party.
7.8 No Conflicts. None of the execution and delivery of this Agreement
by such Purchaser Party or any other agreements or instruments to be delivered
by such Purchaser Party in connection with the transactions contemplated hereby,
or the consummation by such Purchaser Party of the transactions contemplated
hereby or thereby, or compliance by such Purchaser Party with any of the
provisions hereof or thereof will: (a) violate or conflict with the certificate
of incorporation or by-laws of such Purchaser Party; (b) except as set forth on
Section 7.8 of Purchaser Parties' Disclosure Schedule, violate or conflict with,
or constitute a default under, or result in a breach of, or gives rise to any
right of termination, cancellation or acceleration under, any term or provision
of any license, loan agreement, promissory note, indenture or other material
contract to which such Purchaser Party is a party or by which such Purchaser
Party is bound; (c) violate or conflict with any Order of any Governmental
Authority by which such Purchaser Party is bound, or require the approval,
consent, or permission of any Governmental Authority; or (d) constitute a
violation of any Law applicable to such Purchaser Party.
7.9 Consents. Except as set forth on Section 7.9 of Purchaser Parties'
Disclosure Schedule, no consent, approval, waiver, Order, Permit or
authorization of, or declaration or filing with, or notification to or from any
Person is required on the part of such Purchaser Party in connection with the
execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby, or the compliance by such Purchaser Party with any of the
provisions hereof or thereof.
7.10 Litigation. There is no Legal Proceeding pending or, to such
Purchaser Party's knowledge, threatened against such Purchaser Party and such
Purchaser Party is not in default in respect of any Order of any Governmental
Authority by which such Purchaser Party is bound.
7.11 Compliance with Laws. Such Purchaser Party is in compliance with
all material Laws and Orders promulgated by any Governmental Authority
applicable to such Purchaser Party or to the operation of their respective
businesses, except where any noncompliance would not result in a Material
Adverse Change to such Purchaser Party. Such Purchaser Party has neither
received nor knows of the issuance of any notices of violation or alleged
violation of any such material Law or Order by any Governmental Authority.
21
7.12 Employee Matters. Set forth on Section 7.12 of Purchaser Parties'
Disclosure Schedule is a correct and complete list of each of the employees of
Global Media, their current salaries and the respective dates such employees
began working for Global Media.
8. Purchaser's Retention of Employees. Purchaser shall have the right, but not
the obligation, to extend offers of employment to some or all of Sellers'
employees. Purchaser will consult with Sellers in connection therewith. Sellers
shall be solely responsible for any and all costs that are related with any
employee who is not hired by Purchaser, including any Liabilities relating to or
arising under COBRA. Purchaser shall be solely responsible for any and all costs
related to the termination after the Closing Date of any of Purchaser's
employees.
9. The Closing.
9.1 Closing. Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated herein (the "Closing") shall take place
at the offices of Weil, Gotshal & Xxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 at 10:00 a.m. on April 2, 2002, or at such other time, date or place
as the parties may agree upon in writing. The parties hereto agree that
notwithstanding that the Closing Date is April 2, 2002, Newco shall be deemed
for all purposes of this Agreement to have purchased the Assets and Assumed
Liabilities on April 1, 2002.
9.2 Sellers' Deliveries. At the Closing, Sellers shall deliver to
Purchaser:
9.2.1 Assignment and Assumption Agreement, in the form
attached as Exhibit D, or such other form as necessary to
convey good title to Newco, for all of the Assets.
9.2.2 All other such assignments and other instruments or
documents (including certificates of title) as shall be
necessary in the judgment of Purchaser to evidence the sale,
assignment, transfer and conveyance by Sellers to Newco of the
Assets in accordance with the terms hereof.
9.2.3 Evidence to the satisfaction of Purchaser that all of
Sellers' Permits necessary to operate the Business have been
transferred to Newco on or prior to the Closing Date to the
extent that Newco has not theretofore been issued such
necessary Permits.
9.2.4 A certificate of the Secretary or an Assistant Secretary
of each Seller attesting as to the incumbency and signature of
each officer of such Seller who shall execute this Agreement
or any other document relating to the transactions
contemplated hereby.
9.2.5 A receipt for the Initial Consideration.
9.2.6 Documentation reflecting that all Liens relating to the
Assets have been terminated, other than Liens in respect of
equipment leases.
9.2.7 A consent from any third party whose consent is required
to effect the transfer of good title to the Assets as
contemplated herein.
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9.2.8 Affidavits of non-foreign status that comply with
Section 1445 of the Code.
9.2.9. An executed Voting Agreement, in a form to be mutually
agreed to by the parties, regarding the voting of any shares
of Common Stock issued to the Sellers pursuant to the terms
hereunder.
9.3 Purchaser's Deliveries. At the Closing, Purchaser shall deliver to
Sellers:
9.3.1 Payment of the Initial Consideration as outlined in
Section 3.1 herein, including issuance of the promissory notes
referred to in Sections 3.1.2, 3.2.1 and 3.2.2.
9.3.2 A certificate of the Secretaries or Assistant
Secretaries of Purchaser Parties attesting as to the
incumbency and signature of each officer of such Purchaser
Party who shall execute this Agreement or any other document
relating to the transactions contemplated hereby.
9.4 Further Assurances. After the Closing Date, each party, at the
request of the other, shall furnish, execute, and deliver such documents,
instruments, certificates, notices, or other further assurances as the
requesting party shall reasonably request as necessary or desirable to effect
complete consummation of this Agreement.
10. Survival of Representations and Warranties and Covenants. The
representations and warranties of the parties contained in this Agreement, and
all statements contained in this Agreement, the schedules and the exhibits to
this Agreement, and any other document delivered by the parties pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement,
shall survive the Closing Date until the completion of the audit contemplated in
Section 3.2.2, other than representations contained in Section 6.5 which shall
survive indefinitely and representations contained in Sections 6.8 and 6.21
which shall survive until expiration of the applicable statutes of limitations.
11. Covenants.
11.1 Covenants of Sellers.
11.1.1 Conduct of Business. Between the date hereof and the
Closing Date, Sellers shall operate the Business only in the
usual, regular and ordinary manner as such Business was
conducted prior to the date hereof and shall use their
commercially reasonable best efforts to preserve, consistent
with past practice, their relationships with customers,
suppliers, employees, radio stations and others having
business dealings with Sellers. Notwithstanding the foregoing,
the Sellers are not obligated to maintain an amount of cash in
the bank accounts being transferred to Purchaser on the
Closing Date of more than the Working Capital Amount.
11.1.2 Working Capital Financing. Sellers have projected the
90-day working capital of the Business for the 90-day period
immediately following the Closing Date to be $500,000 (the
"Working Capital Amount"). No later than 5 days prior to the
Closing Date, Sellers shall deliver to Purchaser a statement
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(the "Working Capital Statement"), which shall detail the
specific allocations for each item of working capital. Sellers
agree that the amount of cash in the bank accounts being
transferred to Purchaser on the Closing Date pursuant to the
terms hereof will include an amount equal to at least the
Working Capital Amount.
11.1.3 Financial Matters. Between the date of this Agreement
and the Closing Date, Sellers will not shorten or lengthen the
customary payment cycles or modify the terms of any of their
receivables or payables, respectively.
11.1.4 Maintenance of Insurance. The insurance policies as
listed on Section 6.13 of Sellers' Disclosure Schedule will
remain in full force and effect between this date and the
Closing Date.
11.1.5 Monthly Financial Statements. Sellers shall provide
Purchaser as soon as they become available with certified
financial statements for each month subsequent to the calendar
year 2001 through the month ending immediately prior to the
Closing Date, together with such additional financial
information and documentation as may be reasonably requested
by Purchaser in order to perform the audit referred to in
Section 3.2.2.
11.1.6 Consents and Conditions. Each Seller will use its
reasonable best efforts to (i) obtain prior to Closing any
required third-party and governmental consents to the
transactions contemplated hereby, including those consents
necessary to transfer the Assets (including all applicable
Permits) to Purchaser pursuant to the terms of this Agreement,
and (ii) cause each of the conditions to the obligations of
Purchaser to be satisfied.
11.1.7 Non-Solicitation. Each Seller covenants that from the
date hereof through the Closing Date it will not, and will not
permit any of its representatives to, (i) make, solicit,
assist, initiate, facilitate or encourage any inquiries,
proposals, offers or bids from any other Person relating to
such Seller, the Assets or the Business, or (ii) furnish or
cause to be furnished to any Person any nonpublic information
relating to such Seller, the Assets or the Business, other
than in the ordinary course of business consistent with past
practice. Each Seller covenants that from the date hereof
through the Closing Date, it will not, directly or indirectly,
enter into, or permit any of its representatives or affiliates
to enter into, any agreement with any Person for the
acquisition of any of the Assets or the Business.
11.1.8 Maintenance of Assets. From and after the date hereof
and until the Closing, each Seller shall maintain all of the
Assets consisting of tangible property, and all replacements
thereof and improvements thereon, in good condition, normal
wear and tear excepted, and use, operate and maintain all of
such assets in a reasonable manner. In the event of damage to
or destruction prior to the Closing Date of any of the Assets,
Sellers shall repair or replace such assets in the ordinary
course of business.
11.1.9 No Breach of Representations and Warranties. Each
Seller agrees that it shall not take any action, and shall use
its reasonable best efforts not to permit any event to occur,
which would result in any of the representations and
warranties of either Seller contained in this Agreement not
24
being true and correct in any material respect on and as of
the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the
Closing Date.
11.1.10 Updating Information. Each Seller shall promptly
deliver to Purchaser any information concerning events
subsequent to the date of this Agreement which is necessary to
supplement the information contained in or made a part of the
representations and warranties contained herein, including the
schedules hereto, or delivered by any Seller pursuant to any
of the covenants contained herein, in order that the
information contained herein or so delivered be complete and
accurate in all material respects, it being understood and
agreed that the delivery of such information shall not in any
manner constitute a waiver by Purchaser of any of the
conditions precedent to the Closing hereunder, including the
conditions contained in Section 13.7.
11.2 Covenants of Purchaser and Franklin.
11.2.1 Working Capital Reimbursement. Purchaser shall
reimburse Sellers in cash for the cash in the bank accounts
transferred to Purchaser on the Closing Date within 12 months
from the Closing Date; provided, however, that if the Minimum
Share Price over the 60-day period ending on the date of
reimbursement is equal to or greater than $5.00 per share
then, at the election of Sellers, reimbursement can be in the
form of cash or shares of Common Stock valued at the average
per share closing price of the Common Stock over such 60-day
period.
11.2.2 No Breach of Representations and Warranties. Each
Purchaser Party agrees that it shall not take any action, and
shall use its reasonable best efforts not to permit any event
to occur, which would result in any of the representations and
warranties of either Purchaser Party contained in this
Agreement not being true and correct in all material respects
on and as of the Closing Date with the same force and effect
as if such representations and warranties had been made on and
as of the Closing Date.
11.2.3 Consents and Conditions. Purchaser will use its
reasonable best efforts to (i) obtain prior to Closing any
required third-party and governmental consents to the
transactions contemplated hereby and (ii) cause each of the
conditions precedent to the obligations of Sellers hereunder
to be satisfied.
11.2.4 Excluded Assets. In the event that Purchaser receives
any amount in respect of an Excluded Asset, including an
account receivable that is an Excluded Assets, Purchaser shall
promptly remit that amount to Sellers, net of any Liabilities,
other than Assumed Liabilities, that may have been paid by
Purchaser.
11.2.5 Updating Information. Each Purchaser Party shall
promptly deliver to Sellers any information concerning events
subsequent to the date of this Agreement which is necessary to
supplement the information contained in or made a part of the
representations and warranties contained herein, including the
schedules hereto, or delivered by any Purchaser Party pursuant
25
to any of the covenants contained herein, in order that the
information contained herein or so delivered be complete and
accurate in all material respects, it being understood and
agreed that the delivery of such information shall not in any
manner constitute a waiver by Sellers of any of the conditions
precedent to the Closing hereunder, including the conditions
contained in Section 14.3.
11.2.6 Common Stock. Franklin shall contribute, sell or
otherwise transfer to Purchaser that certain number of shares
of Common Stock necessary to allow Purchaser to fulfill its
obligations under this Agreement and the promissory notes
contemplated in Section 3 hereof.
11.2.7 Newco. Immediately prior to the Closing, Purchaser
shall assign all of its rights hereunder and under the
agreements, documents, certificates and the instruments
contemplated hereby to, and contribute all of the assets of
Global Media to, a newly created wholly-owned subsidiary of
Purchaser ("Newco") and cause Newco to assume all of
Purchaser's liabilities hereunder and thereunder and certain
liabilities relating to Global Media, as provided in the
Assignment and Assumption Agreement in the form attached
hereto as Exhibit E. Upon such assignment and assumption, the
Purchaser shall be fully and unconditionally released from all
obligations hereunder and thereunder and Newco shall
constitute the "Purchaser" for purposes of this Agreement.
11.2.8 Board Seat. The Principals shall be entitled to
designate one of the Principals, effective on the Closing
Date, to be appointed to the Board of Directors of Newco. The
Principals initially designate Xxxxx Xxxxxx to be appointed to
the Board of Directors of Newco. That right shall terminate on
the earlier of the date when (i) none of the Principals is an
employee of Newco and (ii) all Initial Consideration and
Additional Consideration is paid in full. As long as the
Principals are entitled to such appointment to the Board of
Directors of Newco, the Principals not so appointed to such
Board shall be entitled to attend all such Board meetings as
non-voting observers of the Board of Directors of Newco.
12. Conditions to Each Party's Obligations. The obligation of Purchaser and
Sellers to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions:
12.1 Necessary Approvals. All necessary Permits to the consummation of
the transactions contemplated hereby by Sellers and Purchaser Parties shall be
obtained from any Governmental Authority or other third party whose consent,
approval, permission or authorization is necessary.
12.2 No Proceeding or Litigation. (i) No Legal Proceeding shall have
been commenced by any Governmental Authority against Sellers or Purchaser
Parties seeking to restrain or materially and adversely alter the transactions
contemplated hereby and (ii) no Order of any Governmental Authority or Law shall
be in effect, which, in the case of each of (i) and (ii), is likely to render it
impossible or unlawful to consummate the transactions contemplated by this
Agreement.
26
13. Conditions to Obligations of Purchaser Parties. In addition to the
obligations contained in Section 12, the obligation of Purchaser to consummate
the transactions contemplated by this Agreement shall be subject to the
fulfillment, at or prior to the Closing, of each of the following conditions:
13.1 Resolutions. Purchaser shall have received true and complete
copies of resolutions duly and validly adopted by the governing body of each
Seller and of each Seller's members or shareholders, as the case may be,
evidencing their authorization of the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, accompanied by a
certificate of the Secretary or Assistant Secretary of such Seller, dated as of
the Closing Date, stating that such resolutions were duly adopted and are in
full force and effect.
13.2 Sellers' Deliveries. Sellers shall have provided to Purchaser the
items specified in Section 9.2 herein.
13.3 Termination of Liens. On or before the Closing Date, Purchaser
shall have received written evidence from Sellers satisfactory to Purchaser that
all Liens related to the Assets, other than Liens in respect of equipment
leases, have been terminated.
13.4 Certified Financial Statements. Sellers shall have provided
Purchaser with certified financial statements as soon as they become available
reflecting Sellers' operating results for the calendar year 2001 and for the
month ended January 31, 2002, together with such additional financial
information and documentation as may have been reasonably requested by
Purchaser.
13.5 Material Adverse Change. There shall have been no Material Adverse
Change of any Seller between December 31, 2001 and the Closing Date.
13.6 Representations and Warranties of Sellers. All representations and
warranties of each Seller contained in this Agreement (i) that are qualified as
to materiality or Material Adverse Change shall be true and correct in all
respects, and (ii) that are not so qualified shall be true and correct in all
material respects, in each case, as of the date of this Agreement and as of the
Closing Date, as though made on and as of the Closing Date.
13.7 Performance of Covenants. Each Seller shall have performed and
complied, in all material respects, with the covenants and provisions of this
Agreement required to be performed or complied with by it between the date
hereof and the Closing Date.
13.8 Officer's Certificate. Purchaser shall have received a certificate
from each Seller to the effect set forth in Sections 13.6 and 13.7 hereof, dated
the Closing Date, signed by a duly authorized officer of such Seller.
13.9 Working Capital. The amount of cash in the bank accounts being
transferred to Purchaser by Sellers shall include the Working Capital Amount as
set forth in the Working Capital Statement.
27
14. Conditions to Obligations of Sellers. In addition to the obligations
contained in Section 12, the obligation of Sellers to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment,
at or prior to the Closing, of each of the following conditions:
14.1 Resolutions. Seller shall have received true and complete copies
of resolutions duly and validly adopted by the Board of Directors of each
Purchaser Party evidencing their authorization of the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
accompanied by a certificate of the Secretary or Assistant Secretary of such
Purchaser Party, dated as of the Closing Date, stating that such resolutions
were duly adopted and are in full force and effect.
14.2 Purchaser Parties' Deliveries. Purchaser shall have provided to
Sellers the items specified in Section 9.3 herein.
14.3 Material Adverse Change. There shall have been no Material Adverse
Change of any Purchaser Party between December 31, 2001 and the Closing Date.
14.4 Representations and Warranties of Purchaser Parties. All
representations and warranties of each Purchaser Party contained in this
Agreement (i) that are qualified as to materiality or Material Adverse Change
shall be true and correct in all respects, and (ii) that are not so qualified
shall be true and correct in all material respects, in each case, as of the date
of this Agreement and as of the Closing Date, as though made on and as of the
Closing Date.
14.5 Performance of Covenants. Each Purchaser Party shall have
performed and complied in all material respects with the covenants and
provisions in this Agreement required herein to be performed or complied with by
it between the date hereof and the Closing Date.
14.6 Officer's Certificate. Sellers shall have received a certificate
from each Purchaser Party to the effect set forth in Sections 14.4 and 14.5
hereof, dated the Closing Date, signed by a duly authorized officer of such
Purchaser Party.
15. Termination.
15.1 Termination. This Agreement may be terminated (by delivery of
written notice) at any time prior to the Closing Date only as follows:
15.1.1 by written agreement of Sellers and Purchaser Parties
at any time;
15.1.2 by Purchaser Parties or by Sellers in the event that
any Governmental Authority shall have issued an Order or taken
any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement
and such Order or other action shall have become final and
nonappealable; provided that the terminating party has not
instigated or been instrumental in instigating the action in
which any such Order is issued;
15.1.3 by either Sellers or Purchaser Parties by written
notice given to the other at any time after May 31, 2002 if,
through no fault of the party seeking termination, the Closing
shall not have occurred;
28
15.2 Effect of Termination. In the event this Agreement is terminated
pursuant to Section 15.1, this Agreement shall forthwith be cancelled and
rendered null and void in its entirety without further Liability or obligation
of any party to another party, except that (a) if this Agreement terminates as a
result of any Seller's failure to satisfy a condition necessary for Closing, or
if any Seller otherwise refuses to complete this transaction, Sellers shall
reimburse Purchaser for its reasonable out of pocket expenses incurred to the
date of termination and (b) if this Agreement terminates as a result of any
Purchaser Party's failure to satisfy a condition necessary for Closing, or if
either Purchaser Party otherwise refuses to complete this transaction, Purchaser
Parties shall reimburse Sellers for their reasonable out of pocket expenses
incurred to the date of termination; provided, however, any termination pursuant
to Section 15.1. shall not be deemed a waiver of any rights or remedies
otherwise available under this Agreement, by operation of law or otherwise and
shall not relieve a breaching party (whether or not it is the terminating party)
from any Liability to the other party hereto arising from or related to such
breach.
16. Indemnification.
16.1 Sellers agrees to jointly and severally indemnify and hold each
Purchaser Party and its respective officers, directors, employees, agents and
advisors (collectively, the "Purchaser Party Indemnified Parties") harmless from
and against any and all Liabilities, obligations, damages, losses, deficiencies,
costs, penalties, interest and expenses (collectively, "Losses") arising out of,
based upon, attributable to or resulting from:
16.1.1 any misrepresentation, breach of warranty or
non-fulfillment of any agreement on the part of any Seller
under the terms of this Agreement;
16.1.2 the Retained Liabilities;
16.1.3 all Legal Proceedings and other actions, suits,
proceedings, demands, assessments, judgments, costs, penalties
and expenses, including reasonable attorneys' fees, incident
to the foregoing; and
16.1.4 any Transfer Taxes that are the responsibility of
Sellers pursuant to Section 18.3
16.2 Purchaser agrees to indemnify and hold each Seller, and its
respective officers, directors, employees, agents and advisors (collectively,
the "Seller Indemnified Parties") harmless from and against any and all Losses
arising out of, based upon, attributable to or resulting from:
16.2.1 any misrepresentation, breach of warranty or
non-fulfillment of any agreement on the part of any Purchaser
Party under the terms of this Agreement;
16.2.2 the Assumed Liabilities; and
16.2.3 all Legal Proceedings and other actions, suits,
proceedings, demands, assessments, judgments, costs, penalties
and expenses, including reasonable attorneys' fees, incident
to the foregoing.
29
16.3 Franklin agrees to indemnify and hold the Seller Indemnified
Parties harmless from and against any and all Losses arising out of, based upon,
attributable to or resulting from Franklin's failure to perform its obligation
under Section 11.2.6.
16.4 Neither Purchaser Parties or the Purchaser Party Indemnified
Parties, one the one hand, nor Sellers or the Seller Indemnified Parties, on the
other hand, shall be entitled to indemnification under this Agreement unless the
aggregate amount of Losses incurred by any such party exceeds $50,000 (the
"Basket"), whereupon such parties shall be entitled to indemnification under
this Agreement for the entire amount of all such Losses, subject to Section 10.
Notwithstanding the preceding sentence, the indemnification for Losses relating
to (i) Transfer Taxes that are the responsibility of the Sellers, (ii) Retained
Liabilities and (iii) Assumed Liabilities shall, in each case, not be subject to
the Basket threshold above. The parties acknowledge and agree that the remedies
set forth in this Section 16 shall be the sole and exclusive remedies for money
damages available to such parties from any Losses arising under or in connection
with this Agreement.
17. Procedures for Indemnification. Whenever a claim shall arise for
indemnification under Section 16 of this Agreement, the party entitled to
indemnification (the "Indemnified Party") shall promptly notify the party from
whom indemnification is sought (the "Indemnifying Party") of such claim and,
when known, the facts constituting the basis for such claim; provided, however,
that in the event of any claim for indemnification hereunder resulting from or
in connection with any claim or Legal Proceedings by a third party, the
Indemnified Party shall give such notice thereof to the Indemnifying Party not
later than ten (10) business days prior to the time any response to the asserted
claim is required, if possible, and in any event within five (5) business days
following receipt of notice thereof. The Indemnified Party's failure to give
notice of any claim or Legal Proceeding by a third party shall not constitute a
defense (in whole or in part) to any claim for indemnification by the
Indemnified Party, except and only to the extent that such failure shall result
in any material prejudice to the Indemnifying Party. In the event of any such
claim for indemnification resulting from or in connection with a claim or Legal
Proceeding by a third party, the Indemnifying Party may, at its sole cost and
expense, assume the defense thereof; provided, however, that the Indemnifying
Party shall first have agreed in writing that it does not and will not contest
its responsibility for indemnifying the Indemnified Party in respect of Losses,
attributable to such claim or proceeding. If an Indemnifying Party assumes the
defense of any such claim or Legal Proceeding, the Indemnifying Party shall be
entitled to select counsel and take all steps necessary in the defense thereof;
provided, however, that no settlement shall be made, other than a settlement
involving solely money damages, without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld; provided,
further, that the Indemnified Party may, at its own expense, participate in any
such proceeding with the counsel of its choice without any right of control
thereof. So long as the Indemnifying Party is in good faith defending such claim
or proceeding, the Indemnified Party shall not compromise or settle such claim
without the prior written consent of the Indemnifying Party, which consent may
be withheld in Indemnifying Party's sole discretion. If the Indemnifying Party
does not assume the defense of any such claim or litigation in accordance with
the terms hereof, the Indemnified Party may defend against such claim or
litigation in such manner as it may deem appropriate, including settling such
claim or litigation.
18. Tax Matters.
30
18.1. Allocation Schedules.
18.1.1 Initial Allocation Schedule. Purchaser shall, within 90
days after the Closing Date, prepare and deliver to DCGI, with
its consent (which consent shall not be unreasonably
withheld), a schedule allocating the Purchase Price (and any
other items required to be treated as additional Purchase
Price) among Assets in accordance with Section 1060 of the
Code and the regulations promulgated thereunder (or any
comparable provisions of state or local tax law) or any
successor provision. If DCGI raises objections, Purchaser and
DCGI will negotiate in good faith to resolve such objections.
To the extent that the Purchaser and Sellers agree on a
schedule allocating the Purchase Price, Purchaser and Sellers
shall report and file all Tax returns (including amended Tax
returns and claims for refund) consistent with the allocation,
and shall take no position contrary thereto or inconsistent
therewith (including in any audits or examinations by any
taxing authority or any other proceedings). Purchaser and
Sellers shall file or cause to be filed any and all forms
(including Form 8594), statements and schedules with respect
to such allocation, including any amendments to such forms. If
and to the extent the parties are unable to agree on such
allocation, each shall be free to make its own allocation for
tax purposes. Notwithstanding any other provisions of this
Agreement, the foregoing agreement shall survive the Closing
Date without limitation.
18.1.2 Additional Allocation Schedule. Purchaser shall, within
90 days after making a payment of Additional Consideration
under Section 3.2.1 or 3.2.2, prepare and deliver to DCGI,
with its consent (which consent shall not be unreasonably
withheld), a schedule allocating the Additional Consideration
(and any other items required to be treated as additional
Purchase Price at the time) among Assets in accordance with
Section 1060 of the Code and the regulations promulgated
thereunder (or any comparable provisions of state or local tax
law) or any successor provision. Notwithstanding the
foregoing, a portion of the Additional Consideration will be
treated as "imputed interest" to the extent required under the
Code and the applicable treasury regulations. If DCGI raises
objections, Purchaser and DCGI will negotiate in good faith to
resolve such objections. Purchaser and Sellers shall report
and file all Tax Returns (including amended Tax returns and
claims for refund) consistent with the allocation, and shall
take no position contrary thereto or inconsistent therewith
(including in any audits or examinations by any taxing
authority or any other proceedings). Purchaser and Sellers
shall file or cause to be filed any and all forms (including
Form 8594), statements and schedules with respect to such
allocation, including any amendments to such forms. If and to
the extent the parties are unable to agree on such allocation,
each shall be free to make its own allocation for tax
purposes. Notwithstanding any other provisions of this
Agreement, the foregoing agreement shall survive the Closing
Date without limitation.
18.2. Cooperation. Sellers and Purchaser shall cooperate fully with
each other and make available or cause to be made available to each other in a
timely fashion such Tax data, prior Tax returns and filings and other
information as may be reasonably required for the preparation by Sellers or
Purchaser of any Tax returns, elections, consents or certificates required to be
prepared and filed by Sellers or Purchaser and any audit or other examination by
31
any taxing authority, or judicial or administrative proceeding relating to
liability for Taxes in connection with the transactions contemplated hereby.
Sellers and Purchaser will each retain and provide to the other party all
records and other information which may be relevant to any such Tax return,
audit or examination, proceeding or determination. Without limiting the
generality of the foregoing, each of Sellers and Purchaser will retain copies of
all Tax returns, supporting work schedules and other records relating to Tax
periods or portions thereof ending prior to or on the Closing Date.
18.3. Transfer Taxes. All applicable sales and transfer Taxes
(including Taxes, if any, imposed upon the transfer of personal property) and
filing, recording, registration, stamp, documentary and other Taxes and fees
("Transfer Taxes") that are payable in connection with this Agreement, the
transactions contemplated by this Agreement or the documents giving effect to
such transactions will be paid by Sellers.
19. Miscellaneous.
19.1 Non-Disclosure. Purchaser Parties and Sellers each agree that
neither it, nor any of its affiliates, associates, officers, directors,
employees or agents, will disclose in any way to any third party (excluding
their attorneys, accountants and other representatives retained to assist in the
due diligence) any non-public information whatsoever relating to the
transactions contemplated hereby, except as required by law. Purchaser Parties
and Sellers each hereby acknowledge that, in view of the nature of the
transactions contemplated hereby, any violation of such restriction will result
in irreparable injury to the other for which damages will not be an adequate
remedy, and therefore acknowledge that if any such restrictions are violated or
threatened to be violated, the other party shall be entitled, without limiting
its other remedies, to preliminary and injunctive relief. This Section 19 shall
supplement and shall not supersede or replace any nondisclosure or
confidentiality agreement between or among the parties and/or any of their
affiliates. Moreover, except as required by law and except for the press release
in a form to be mutually agreed to by the parties, none of the parties will
issue a news release or other public announcement concerning this transaction
prior to Closing Date, and thereafter will not make any such announcement
without the prior approval of the others.
19.2 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified by hand,
the next business day after deposit with a nationally recognized overnight
courier service, upon confirmation of facsimile transmission, or five (5) days
after deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed to the party to be notified at the address
indicated for such party set forth below, or at such other address as such party
may designate by ten (10) days' advance written notice to the other parties.
19.2.1 If to any Purchaser Party:
c/o Excelsior Radio Networks, Inc.
000 Xxxx Xxxxxx, Xxxxx 0000
00
Xxx Xxxx, XX 00000
Attention: President
Telecopy No.: (000) 000-0000
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
19.2.2 If to Sellers:
Dial Communications Group
00 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx
Telecopy No: (000) 000-0000
with a copy to:
Xxxxx Peabody LLP
000 Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Telecopy No: (000) 000-0000
19.3 Waiver. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
other or subsequent breach.
19.4 Entire Agreement. Subject to Section 19.1, this Agreement
constitutes the entire agreement between the parties with respect to the subject
matter hereof. This Agreement may not be amended except by writing executed by
Sellers and Purchaser Parties.
19.5 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and, to the extent not prohibited
herein, their respective successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer any rights, remedies, obligations or
Liabilities on any Person other than the parties hereto and as provided above,
and their respective successors and assigns.
19.6 Governing Law and Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York (without
regard to choice of law provisions). Each party (i) agrees that any legal suit,
action or proceeding arising out of or relating to this Agreement shall be
33
instituted exclusively in the state or federal courts located in New York
County, New York, (ii) waives any objection to the venue of any such suit,
action or proceeding and the right to assert that such forum is not a convenient
forum, and (iii) irrevocably consents to the jurisdiction of the New York
Supreme Court, County of New York, and the United States District Court for the
Southern District of New York (as specified above) in any such suit, action or
proceeding. Each party further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or proceeding in
the New York Supreme Court, County of New York, or in the United States District
Court for the Southern District of New York and agrees that service of process
upon him or it mailed by registered mail to his or its address shall be deemed
in every respect effective service of process in any such suit, action or
proceeding.
19.7 Headings. The headings contained in this Agreement are solely for
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
19.8 Severability. The invalidity or unenforceability of any term or
provision of this Agreement in any situation or jurisdiction shall not affect
the validity or enforceability of the other terms or provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction and the remaining terms and provisions
shall remain in full force and effect, unless doing so would result in an
interpretation of this Agreement which is manifestly unjust.
19.9 Fees and Expenses. Except as set forth in Section 15.2, all costs
and expenses (including legal and financial advisory fees and expenses) incurred
in connection with, or in anticipation of, this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
19.10 Counterparts This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute a single agreement.
19.11 Assignment. Except as expressly set forth herein, this Agreement
and the rights and obligations hereunder may not be assigned by any party hereto
without the prior written consent of the other parties. This Agreement and the
rights and obligations hereunder may be assigned to any surviving entity or
transferee, as the case may be, of a merger, consolidation or sale of all or
substantially all of the assets of or with any party hereto with the prior
written consent of the other parties, which consent shall not be unreasonably
withheld. In addition, the Purchaser may assign or otherwise transfer all of its
rights and obligations hereunder to Newco and any party hereto may assign their
rights (but not their obligations) to any third party upon notice to the other
parties given 30 days prior to such assignment. No such assignment of
obligations shall release the assignor from such obligations, except that the
Purchaser shall be released from such obligations in the case of an assignment
to Newco.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf by the appropriate officers,
hereunder duly authorized on the day and year first written above:
PURCHASER:
EXCELSIOR RADIO NETWORKS, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxx
------------------------------------------
Title: Vice-President
------------------------------------------
FRANKLIN:
FRANKLIN CAPITAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxx
------------------------------------------
Title: Chairman
------------------------------------------
SELLERS:
DIAL COMMUNICATIONS GROUP, INC.
By: /s/ Xxxxxxx Xxxxxx
------------------------------------------
Name: Xxxx Xxxxxx
------------------------------------------
Title: President
------------------------------------------
DIAL COMMUNICATIONS GROUP LLC
By: /s/ Xxxxxxx Xxxxxx
------------------------------------------
Name: Xxxx Xxxxxx
------------------------------------------
Title: Manager
------------------------------------------
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