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PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
PREMIERE RADIO NETWORKS, INC.
AS BUYER
AND
PHILADELPHIA MUSIC WORKS, INC.
AS SELLER
AS OF SEPTEMBER 27, 1996
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PURCHASE AND SALE AGREEMENT
This Agreement dated this 27th day of September, 1996 is by and between Premiere
Radio Networks, Inc. ("Premiere"), a Delaware corporation, and Philadelphia
Music Works, Inc. ("PMW"), a Pennsylvania corporation.
WHEREAS, PMW desires to sell to Premiere all of the Assets (as later defined
herein) and the business and goodwill related thereto, and Premiere desires to
purchase said Assets, business and goodwill and interest from PMW.
NOW, THEREFORE, in consideration of the mutual promises and undertakings herein,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise stated in this Agreement, the following terms when used
herein shall have the meanings assigned to them below (such meanings to be
equally applicable to both the singular and plural forms of the terms defined).
"AQH LEVEL" shall mean the average quarter hour audience level for radio
listeners in the "persons 12+" demographic category as measured by the Arbitron
Ratings Company with respect to radio station affiliates under contract to
utilize the PMW Jingle Service in exchange for commercial broadcast time.
"ASSETS" shall mean the assets to be transferred to Premiere hereunder, as
more fully specified in Section 2.2.
"CLOSING" shall have the meaning set forth in Section 2. 1.
"CLOSING DATE" shall have the meaning set forth in Section 2. 1.
"INTELLECTUAL PROPERTY" shall have the meaning set forth in Section 5.5.
"MATERIAL PMW AGREEMENTS" shall have the meaning set forth in Section 5.14.
"NON-COMPETITION AGREEMENT(S)" shall mean the agreement in the form of
EXHIBIT B to be fully executed and delivered to Premiere at the Closing.
"PERSONAL PROPERTY" shall mean all tangible personal property owned, leased
or held by PMW and used or useful in the present conduct of the business and
operations of PMW.
"PHYSICAL INVENTORY" shall mean all compact discs and/or audio tape reels
of PMW jingles and miscellaneous materials including, but not limited to,
written lyrics and music all which are owned or held by PMW and are used or
useful in the present conduct of the business and operations of PMW.
"PREMIERE" shall have the meaning set forth in the introduction to this
Agreement.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.4.
"PMW" shall have the meaning set forth in the introduction to this
Agreement.
"PMW JINGLE SERVICE" shall mean the custom and customizable jingle packages
exploited to radio stations including, but not limited to, the "America's Best
Jingles Plus," the "America's Best Jingles," and the "Premiere Jingle Service"
packages.
ARTICLE 2
PURCHASE OF ASSETS
2.1. CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
occur within five business days following the fulfillment of all conditions to
Closing contained in Articles 6 and 7 hereof, unless waived by the party
entitled to do so (the "Closing Date").
2.2. TRANSFER OF ASSETS. On the Closing Date, PMW shall sell, assign,
transfer and convey to Premiere, and Premiere shall purchase all right, title
and interest in and to the assets, tangible and intangible (including the
business of PMW as a going concern), owned or held by PMW wherever located and
used in the conduct of the business and operations of PMW, includiung, but not
limited to the following (collectively, the "Assets"):
(a) all Intellectual Property;
(b) all Material PMW Agreements and other contracts or agreements
entered into by PMW in connection with the operation of PMW;
(c) all computer programs, software and programming materials of
whatever form or nature owned by PMW and used or intended for use on or by PMW,
including intellectual property contained in PMW's web page;
(d) all files, records, books of account and logs relating to the
operations of PMW reasonably requested by Premiere, including, without
limitation, programming information and studies, advertising studies or
consulting reports, marketing and demographic data, sales correspondence,
promotional materials, credit and sales reports;
(e) all Personal Property;
(f) all goodwill of PMW;
(g) all other assets of whatever kind or nature, excluding accounts
receivables and cash.
2.3. ABSENCE OF CONSENT. Notwithstanding the foregoing, there shall not be
assigned to Premiere any Material PMW Agreement or any other contract, lease or
agreement by which PMW is bound, if an attempted assignment thereof without the
consent of the other party or parties thereto would constitute a breach thereof
or in any way adversely affect the rights of PMW thereunder and such consent is
not obtained, or if an attempted assignment would be ineffective or would affect
the rights of PMW thereunder so that Premiere would not, in fact, receive the
benefits thereof. PMW covenants and agrees that the beneficial interest in and
to any such agreement shall, to the extent permitted by the relevant agreement
and/or by law, pass to Premiere, and PMW covenants and agrees: (a) that it will
hold and declare that it holds all such agreements in trust for the benefit of
Premiere, its successors and assigns, from and after the Closing Date; (b) to
use all reasonable efforts to obtain and secure any and all consents and
approvals that may be necessary to effect such assignment or assignments of the
same; (c) to make or complete such assignment or assignments as soon as
reasonably possible; and (d) to cooperate with Premiere in any other reasonable
arrangement designed to provide for actions necessary to enable PMW to fulfill
any such agreements until an effective assignment thereof to Premiere can be
obtained, and the parties agree to cooperate and take all necessary actions,
including accountings between parties, to assure that Premiere shall receive all
of such benefits, rights, obligations and duties under such agreements. The
provisions of this Section 2.3 do not constitute a waiver of the conditions to
Closing contained in Article 6 hereof.
2.4. PURCHASE PRICE. PMW hereby agrees to sell to Premiere and Premiere
hereby agrees to buy from PMW all rights, title and interest in PMW for the
purchase price of Six Hundred Thirty-five Thousand Dollars ($635,000) payable as
follows:
(a) Fifteen Thousand Dollars ($15,000) on or about September 6,
1996 as a deposit which shall be refunded to Premiere in the event this
Agreement is not consummated,
(b) Four Hundred Twenty Thousand Dollars ($420,000) on the
Closing Date by wire transfer, and
(c) Two Hundred Thousand Dollars ($200,000) in the form of a
promissoiry note (the "Promissory Note") attached hereto as Exhibit A.
2.5 ADDITIONAL PURCHASE CONSIDERATION. In addition to the $635,000
consideration payable in Section 2.4 above, up to Seven Hundred Thousand Dollars
($700,000) of additonal purchase consideration may be payable as follows (herein
the "PMW AQH Consideration"):
(a) One Hundred Twenty-Five Thousand Dollars ($125,000) upon
sustaining an AQH Level for the PMW Jingle Service of at least 600,000 for a
minimum period of three (3) months; plus
(b) One Hundred Twenty-Five Thousand Dollars ($125,000) upon
sustaining an AQH Level for the PMW Jingle Service of at least 1,200,000 for a
minumum period of three (3) months; plus
(c) One Hundred Twenty-Five Thousand Dollars ($125,000) upon
sustaining an AQH Level for the PMW Jingle Service of at least 1,800,000 for a
minimum period of three (3) months; plus
(d) One Hundred Twenty-Five Thousand Dollars ($125,000) upon
sustaining an AQH Level for the PMW Jingle Service of at least 2,400,000 for a
minimum period of three (3) months; plus
(e) One Hundred Thousand Dollars ($100,000) upon sustaining an
AQH Level for the PMW Jingle Service of at least 3,000,000 for a minimum period
of three (3) months; plus
(f) One Hundred Thousand Dollars ($100,000) upon sustaining an
AQH Level for the PMW Jingle Service of at least 3,600,000 for a minimum period
of three (3) months.
The PMW AQH Consideration shall be payable only within the first three (3)
years subsequent to Closing provided, however, that an extension of three (3)
months shall be provided only in order to facilitate sustaining by the PMW
Jingle Service of the appropriate AQH Level for the minimum three (3) month
period. For example, should the PMW Jingle Service achieve an AQH Level of
3,000,000 two years and eleven months subsequent to Closing, PMW shall be
granted two additional months (therefore, thirty-eight months in total) to allow
for the minimum "sustaining period" of three (3) months required for the PMW AQH
Consideration. Premiere shall pay the PMW AQH consideration only one time for
reaching the threshold or AQH Level set forth above.
Further, in determining the AQH Level, the parties shall at the appropriate
time, as necessary, agree to a reasonable allocation of the AQH Level in
instances where the PMW Jingle Service is sold in combination with the services
of Broadcast Results Group ("BRG"), except that the AQH Level of KIIS-FM
associated with the contract for the services of BRG dated July1, 1996, shall
be specifically excluded in determining the AQH Level.
Premiere, at its sole option, may pay to PMW up to fifty percent (50%) of
the PMW AQH Consideration, in shares of Premiere's Class A common stock having a
fair market value equal to that portion
of the PMW AQH Consideration. The fair market value of Premiere's Class A
common stock shall be equal to the average of the last reported sale price for
Premiere's Class A common stock on the exchange (i.e., NASDAQ) on which the
Class A common stock is then traded for the ten (10) trading day period ending
one (1) trading day prior to the end of the applicable minimum three (3) month
period.
2.6. AGREEMENTS REGARDING COMMON STOCK. The following terms shall apply to
any Class A common stock issued to PMW:
(a) All Class A common stock will be "restricted stock" within the
meaning of Rule 144 of the Securities Act of 1933, as amended.
(b) If PMW proposes to sell any of the Class A common stock, in the
market, PMW shall give Premiere notice that it intends to sell Class A common
stock in the market and state the minimum price at which it intends to sell such
Class A common stock. Premiere will have five (5) business days in which to
elect whether or not to purchase the Class A common stock at the price set forth
in the notice. If Premiere declines to purchase the Class A common stock, then
PMW may, for a period of thirty days, sell such Class A common stock in a market
limit order at or above the price set forth in the notice. This paragraph
2.6.(b) will again apply to any Class A common stock not sold within such thirty
day period.
(c) If PMW proposes to sell any Class A common stock in a private
sale, PMW shall give Premiere notice of its intent to sell the Class A common
stock and the price at which such Class A common stock will be sold. Premiere
will have five business days in which to elect whether or not to purchase the
Class A common stock at the price set forth in the notice. If Premiere declines
to purchase the Class A common stock, then PMW may sell such Class A common
stock in a private sale for a price no less than that set forth in such notice.
This paragraph 2.6.(c), will again apply to any Class A common stock not sold
within such thirty day period.
(d) PMW may, subject to applicable laws, use the Class A common stock
as collateral for margin loans notwithstanding paragraphs 2.6.(b) and 2.6.(c)
hereof, provided that Premiere shall have a right to purchase any Class A common
stock which might be sold by a lender.
(e) The restrictions contained in paragraphs 2.6.(b) and 2.6.(c)
hereof shall not apply to transfers by PMW to their respective shareholders,
provided that any transfers by such shareholders shall be subject to such
restrictions.
2.7. LIMITATION ON PMW AQH CONSIDERATION. The PMW AQH Consideration shall
be offset and reduced by the cumulative amounts paid by Premiere to PMW with
respect to the AVB Purchase Price, the Choice Cuts Purchase Price, the Canary
Purchase Price and/or the Prime Cuts Purchase Price (collectively, the "Library
Purchase Price") only to the extent the PMW AQH Consideration has not previously
reduced the Library Purchase Price pursuant to Section 2 of that certain amended
and restated letter agreement between Premiere and PMW dated as of September __,
1996 ("Letter Agreement"). For
example, if (a) the Adjusted Cash Flow as defined in the Letter Agreement for
the period of January 1, 1997 through December 31, 1997 is $1,500,000, (b) the
AQH Level is 550,000, (c) no PMW AQH consideration has been paid, and (d) the
Canary Purchase Price was $100.00, the following additional consideration i.e.,
(AVB Purchase Price) would be paid to PMW under Section 2.b. of the Letter
Agreement:
Adjusted Cash Flow $ 1,500,000
Multiple X 2.2
$ 3,300,000
Less:
Agreed upon amount ( 3,233,000)
Canary Purchase Price ( 100)
PMW AQH Consideration ( 0)
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Paid to PMW--AVB Purchase Price $ 66,900
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Further, if the AQH Level later equals or exceeds 600,000 (but is less than
1,200,000) for a three-month period, then the PMW AQH Consideration shall be
$58,100 ($125,000 less $66,900).
ARTICLE 3
ASSUMPTION OF LIABILITIES
3.1. ASSUMPTION OF LIABILITIES. At the Closing, Premiere shall assume and
agree to perform and discharge and indemnify PMW against any and all obligations
of PMW arising after the Closing under (i) any of the Material PMW Agreements
and (ii) under any contracts, agreements, leases, licenses and undertakings of
PMW set forth on Schedule 3.1 hereto.
3.2. LIMITATION. Except as specifically set forth in this Agreement,
Premiere shall not assume and shall have no liability or obligation whatsoever,
whether accrued, absolute, contingent or otherwise, any liabilities or
obligations of PMW whether due or to become due, with respect to the following
(collectively, "Excluded Liabilities"): (i) any federal, state, local or sales
taxes relating to periods prior to the Closing Date or to the asset sale
contemplated herein; (ii) any existing, pending or threatened litigation,
arbitrations, or other legal or administrative proceedings against PMW, whether
or not disclosed to Premiere; (iii) any liabilities, trade payables or accruals,
including any unpaid and accrued sick leave and vacation of PMW employees; (iv)
any liabilities attributable to the operations of PMW prior to the Closing; and
(v) any liabilities not specifically assumed hereunder. Further, Premiere shall
assume only PMW's allocable share of its office lease set forth on Schedule 5.14
hereto. PMW agrees to discharge, promptly when due, all of the Excluded
Liabilities.
3.3. PRORATIONS. The following items with respect to the Assets and the
business of PMW shall be prorated as of the Closing Date with PMW being
responsible for and receiving the benefit of such items
to the extent that they relate to the period ending on the Closing Date and
Premiere being responsible for and receiving the benefits of such items to the
extent that they relate to periods from and after the Closing Date:
(a) rents and other payments due under leases of real property
assigned to Premiere, as and when collected, and rents and other payments
payable by PMW under leases assumed by Premiere;
(b) real estate and personal property taxes applicable to the tax
year in which the Closing occurs which shall be prorated on the basis of a 365
day year based on the most recent real estate and personal property tax bills
received by PMW;
(c) water charges, sewer rents, electricity, steam, gas and other
like utility charges which shall be prorated based on the number of days before
and from and after the Closing Date covered by bills paid;
(d) periodically recurring governmental and quasi-governmental fees
for licenses, or permits relating to the Assets which are transferable and which
are properly transferred to Premiere in respect to the Assets, or any part
thereof;
(e) payments made in the ordinary course of business consistent with
past practice relating to leases, contracts and agreements assigned to and
assumed by Premiere;
(f) other expenses paid or due in the ordinary course of business
consistent with past practices which relate to the Assets and the business being
transferred to Premiere.
Within Ninety (90) days after the Closing Date, Premiere and PMW shall
give written notice to the other of any payment, receipt and allocation of any
of the foregoing items, and PMW shall reimburse Premiere or Premiere shall
reimburse PMW, as the case may be, the net amount owed to the other. Such
notice shall include copies of applicable invoices and, as necessary,
calculation of amount which has been prorated.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PREMIERE
Premiere represents and warrants to PMW as follows:
4.1. ORGANIZATION AND STANDING. Premiere is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite authority to own its property and assets and to conduct
its business as proposed to be conducted under this Agreement.
4.2. AUTHORIZATION AND BINDING OBLIGATION. Premiere has all necessary
power and authority to enter into and perform its obligations under this
Agreement and the transactions contemplated hereby, and Premiere's execution,
delivery and performance of this Agreement have been duly and validly authorized
by all necessary action on its part. This Agreement has been duly executed and
delivered by Premiere and constitutes its valid and binding obligation,
enforceable in accordance with its terms, except as limited by laws affecting
creditors' rights or equitable principles generally.
4.3. ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. The
execution, delivery and performance of this Agreement by Premiere: (a) do not
require the consent of any third party; (b) will not violate any provision of
Premiere's articles of incorporation or by-laws; (c) will not violate any
applicable law, judgment, order, injunction, decree, rule, regulation or ruling
of any governmental authority to which Premiere is a party or is bound; and (d)
will not, either alone or with the giving of notice or the passage of time, or
both, conflict with, constitute grounds for termination of or result in a breach
of the terms, conditions or provisions of, or constitute a default under or
accelerate or permit the acceleration of any performance required by the terms
of any agreement, instrument, license or permit to which Premiere is now
subject.
4.4. BANKRUPTCY. No insolvency proceedings of any character, including
without limitation, bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting Premiere are
pending or, to the knowledge of Premiere, threatened, and Premiere has not made
and presently does not intend to make any assignment for the benefit of
creditors or taken any action in contemplation of, the institution of such
insolvency proceedings.
4.5. LITIGATION. To the best of Premiere's knowledge, there is no claim,
litigation, proceeding or investigation pending or threatened which seeks to
enjoin or prohibit, or otherwise questions the validity of, any action taken or
to be taken in connection with this Agreement.
4.6. DISCLOSURE. To the best of Premiere's knowledge, none of this
Agreement or any certificate or other document delivered in connection with the
transactions contemplated by this Agreement contains any untrue statement of
material fact or omits any statement of material fact necessary to make any
statement contained herein or therein not misleading.
ARTICLE 5
REPRESENTATION AND WARRANTIES AND COVENANTS OF PMW
PMW represents and warrants to Premiere as follows:
5.1. ORGANIZATION AND STANDING. PMW is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has all necessary corporate power and authority to own, lease
and operate the Assets and to carry on the businesses of PMW as now being
conducted and as proposed to be conducted. PMW is duly qualified to do business
and is in good standing in any state in which the operation of PMW requires it
to be so qualified in each jurisdiction where the
ownership of its assets or the nature of its business where the failure to be
qualified and/or in good standing would have a material adverse effect on PMW.
5.2. AUTHORIZATION AND BINDING OBLIGATION. PMW has all necessary power and
authority to enter into and perform its obligations under this Agreement and the
transactions contemplated hereby, and PMW's execution, delivery and performance
of this Agreement have been duly and validly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by PMW
and constitutes its binding obligation, enforceable in accordance with its
terms, except as limited by laws affecting the enforcement of creditors' rights
or equitable principles generally.
5.3. ABSENCE OF CONFLICTING AGREEMENT OR REQUIRED CONSENTS. The execution,
delivery and performance of this Agreement by PMW (a) do not require the consent
of any third party, except as otherwise detailed on one of the Schedules (b)
will not violate any provisions of PMW's articles of incorporation or By-Laws;
(c) to PMW's knowledge will not violate any applicable law, judgment, order,
injunction, decree, rule, regulation or ruling of any governmental authority to
which PMW is a party or by which it or the Assets are bound; (d) will not,
either alone or with the giving of notice or the passage of time, or both,
conflict with, constitute grounds for termination of or result in a breach of
the terms, conditions or provisions of, or constitute a material default under
any agreement, instrument, license or permit to which PMW or the Assets are now
subject; and (e) will not result in the creation of any lien, charge or
encumbrance on any of the Assets.
5.4. PERSONAL PROPERTY. All Personal Property used or useful in the
operation of PMW shall be included as part of the Assets transferred from PMW to
Premiere, as detailed on Schedule 5.4. All Physical Inventory to be transferred
to Premiere is detailed in Schedule 5.4(a). All agreements between aff;iliated,
third-party radio stations and PMW, and all agreements between foreign
subdistributors and PMW are detailed in Schedule 5.4(b).
5.5. INTELLECTUAL PROPERTY. PMW has good and marketable title in and to
all copyrights, trademarks, trade names, service marks, licenses, permits,
jingles, privileges, and other similar intangible property rights and interests
applied for, issued to or owned by PMW, or under which PMW is licensed or
franchised, which are used or useful in the present conduct of the businesses
and operations of the PMW ("Intellectual Property"). Attached hereto as
Schedule 5.5 is a list of all such Intellectual Property rights. PMW has no
knowledge of any threatened or pending proceeding or litigation affecting or
with respect to any Intellectual Property. PMW has received no notice alleging
infringement of the rights of any third party to Intellectual Property or
unlawful use of such property. PMW has the right to use the Intellectual
Property and to conduct the business and operations of PMW as now conducted and
has not granted any licenses or other rights and has no obligation to grant
licenses or other rights with respect thereto to any party.
5.6. PERSONNEL INFORMATION.
(a) SCHEDULE 5.6 contains a true and complete list of all persons
employed at or in connection with the operation of PMW, their title or job
responsibility, and a description of all compensation arrangements (including
bonus arrangements) and employee benefit plans or arrangements applicable to
such employees. PMW has no knowledge that any employee identified on SCHEDULE
5.6 currently plans to terminate employment, whether by reason of the
transactions contemplated by this Agreement or otherwise.
(b) To its knowledge, PMW has complied in connection with the
operation of PMW in all material respects with all laws relating to the
employment of labor, including, without limitation, those laws relating to
safety, health, wages, hours, unemployment insurance, workers' compensation, and
equal employment opportunity.
(c) PMW is not a party to or bound by any employee pension benefit
plan within the meaning of Section 3(2a) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),and covering or regarding the
employees set forth on SCHEDULE 5.6 whether or not such plan is otherwise exempt
from the provisions of ERISA, and no employee or spouse of an employee
identified on SCHEDULE 5.6 is entitled to any benefits that would be payable
pursuant to any employee pension benefit plan. Except as provided on Schedule
5.6, PMW has no fixed or contingent liability or obligation to any person now or
formerly employed at PMW, including, without limitation, pension or thrift
plans, individual or supplemental pension or accrued compensation arrangements,
contributions to hospitalization or other health or life insurance programs,
incentive plans, bonus arrangements and vacation, sick leave, disability and
termination arrangements or policies, including workers compensation policies.
Premiere shall not assume or hereby become obligated to pay any debt, obligation
or liability arising from PMW's employee benefit plans, or any other employment
arrangement, and coverage under such plans and arrangements shall remain the
responsibility of PMW.
5.7. LITIGATION. Except as set forth on SCHEDULE 5.7, PMW is not subject
to any judgement, award, order, writ, injunction, arbitration decision or decree
pertaining to the operation of PMW, ownership of the Assets or the validity
thereof. Except as set forth on SCHEDULE 5.7, there is no litigation,
proceeding or investigation pending or, to the best of PMW's knowledge,
threatened against PMW or relating to PMW or the Assets in any federal, state or
local court, or before any administrative agency, arbitrator or other tribunal
authorized to resolve disputes. There is no claim, litigation, proceeding or
investigation pending or, to the best of PMW's knowledge, threatened against
PMW, which might have a material adverse effect upon the business, assets or
condition (financial or otherwise) of PMW or which seeks to enjoy or prohibit,
or otherwise questions validity of, any action taken or to be taken in
connection with this Agreement.
5.8. COMPLIANCE WITH LAWS. To the best of its knowledge PMW has operated
and is operating in material compliance with all laws, regulations and
governmental orders pertaining to the operation of PMW or ownership of the
Assets, and its present use of the Assets does not violate any law, regulation
or order in any material respect. PMW has not received any notice asserting any
noncompliance with any applicable statute, rule or regulation, in connection
with the business or operation of PMW.
5.9. BANKRUPTCY. No insolvency proceedings of any character, including
without limitation, bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting PMW or any of
the Assets, are pending or, to the knowledge of PMW, threatened, and PMW has not
made and presently does not intend to make any assignment for the benefit of
creditors or file any petition in bankruptcy and has not taken and presently
does not intend to take any action which would constitute the basis for the
institution of such insolvency proceedings. PMW is not aware of any fact or
circumstance which would cause any of the Assets or the business of PMW become
subject to the jurisdiction of any bankruptcy court or proceeding.
5.10. DISCLOSURE. None of this Agreement or any certificate of other
document delivered in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact.
5.11. OPERATION OF PMW. PMW has operated PMW in the ordinary and
normal course of business and in the manner that is customary with its past
practices from June 30, 1996 through the Closing Date.
5.12. ABSENCE OF UNDISCLOSED LIABILITIES. The unaudited cash basis
balance sheets of PMW at December 31, 1995 and June 30, 1996 and the related
unaudited, cash basis income statements (including footnotes thereto) for the
periods then ended, present fairly in all material respects the cash basis
financial position and results of operations of PMW on each such date or for the
applicable periods then ended, as the case may be. The foregoing financial
statements are sometimes referred to herein as the "Financials." Except as and
to the extent reflected or reserved against in the Financials, or disclosed in
any Schedules hereto, PMW had no liabilities or obligations as of the dates
thereof (other than obligations of continued performance under the Material PMW
Agreements and other commitments and arrangements incident to the normal conduct
of business which are terminable at will), known or unknown, secured or
unsecured (whether accrued, absolute, contingent or otherwise), including,
without limitation, tax liabilities due or to become due. Since June 30, 1996,
except as and to the extent reflected or reserved against in the Financials or
disclosed in any Schedule hereto, PMW has incurred no liabilities or obligations
other than (i) current liabilities incurred in the ordinary course of business
which in the aggregate do not have a material adverse effect on the financial
position or operations of PMW, or (ii) in connection with the transactions
contemplated hereby.
5.13. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
except as described in Schedule 5.13 hereto, there has not occurred any event or
condition which has or may be expected to have a material adverse effect on the
properties, assets, liabilities (whether absolute, contingent, accrued or
otherwise), condition (financial or otherwise), results of operations, business,
affairs or prospects of PMW concerning PMW and, without limiting the generality
of the foregoing, PMW has not (a) incurred any obligation or liability, secured
or unsecured (whether accrued, absolute, contingent or otherwise), whether due
or to become due, except current liabilities in the ordinary course of business;
(b) discharged or satisfied any lien or encumbrance, or paid any obligation or
liability, except current liabilities becoming due in the ordinary course of
business; (c) mortgaged, pledged, or subjected to lien, charge, security
interest or other
encumbrance any of the Assets; (d) sold, transferred, licensed or otherwise
disposed of any of the Assets other than in the ordinary course of business
consistent with past practice; (e) increased the compensation payable or to
become payable by it to any of its directors, officers, employees or agents
whose total compensation for services rendered after any such increase is at an
annual rate of more than $30,000, or made any bonus, percentage of compensation
or other like benefit accruing to or for the credit of any such directors,
officers, employees or agents of the PMW; (f) terminated or received any notice
of termination of any contract, lease, trademark, patent, copyright or trade
name protection or other agreement; (g) suffered any damage, destruction or loss
(whether or not covered by insurance) adversely affecting the Assets; (h)
suffered any taking or seizure of all or any part of the Assets by condemnation
or eminent domain; (i) experienced any material change in its relations with its
dealers, distributors, customers, employees, agents or consultants; acquired any
capital stock or other securities of any corporation or any interest in any
business enterprise, or otherwise made any loan or advance to or investment in
any person, firm or corporation; (k) made any capital expenditures or capital
additions exceeding $10,000 singularly or $50,000 in the aggregate; (1)
instituted, settled or agreed to settle any litigation, action or proceeding
before any court or governmental body affecting its financial condition, its
property or its business operations involving a claim in excess of $5,000; (m)
made any purchase commitment in excess of normal, ordinary and usual
requirements, or made any material change in its selling, pricing, or personnel
practices; (n) made any change in accounting principles or methods, or in the
manner of keeping books, accounts and records of the PMW; (o) entered into any
transaction other than in the ordinary course of business; (p) changed the
authorized or issued capital stock of the PMW, increased its funded
indebtedness, or made any declaration, setting aside or payment of any dividend
or any other distribution in respect of its capital stock; or (q) entered into
any agreement or made any commitment to do any of the things described in the
preceding subsections (a) through (p) of this Section 5.13.
5.14. EQUIPMENT LEASES AND CONTRACTS. Except as disclosed on Schedule
5.14 hereto, PMW is not a party to, nor are the Assets bound by, any executory
agreements (including dealer and distributor agreements), purchase orders (other
than purchase commitments for supplies in the ordinary course of business),
bailment agreements, equipment leases, commitments, contracts, employment
agreements, warranties, guarantees, understandings or other agreements (a) which
involve or may involve the annual payment of more than $2,500, (b) which are of
a duration in excess of twelve (12) months from the date of execution thereof,
or (c) to which any stockholder, officer, director or employee of PMW are a
party in any capacity, which is not being extinguished by said Closing Date
(said agreements, together with the Real Property Leases, being referred to
herein collectively as the "Material PMW Agreements"); true and correct copies
of each of the Material PMW Agreements have been delivered to Premiere and each
of them is in full force and effect, with an expiration date as set forth on
Schedule 5.14, have not been amended or modified except as set forth on Schedule
5.14, and constitute the entire agreement between the parties thereto with
respect to the subject matter thereof to the best of PMW's knowledge. No party
to any Material PMW Agreement is in material default thereunder, nor is PMW
aware of any fact or circumstances with respect to any Material PMW Agreement
which upon notice or lapse of time could give rise to a material default
thereunder.
5.15. REAL PROPERTY LEASES. The real property leases listed on
Schedule 5.15 hereto (the "Real Property Leases") constitute all leases, whether
written or oral, to which any of the PMW or their affiliates
are a party and which are necessary or required in connection with PMW
(including any real property owned by one or more of the shareholders or any
affiliate of PMW); true and correct copies of each of the written Real Property
Leases have been delivered to Premiere. PMW has valid and enforceable leasehold
interests in such real property, free and clear of all liens and encumbrances.
Each such lease affords PMW, as the case may be peaceful and undisturbed
possession of the premises covered thereby, and there exists no event of default
or event, occurrence, condition or act (including the transactions contemplated
by this Agreement) which, with the giving of notice, the lapse of time or the
happening of any further event or condition, would become a material default
under such lease, give rise to a right in the lessor to terminate the lease or
render the lessee liable to incur any expenditure under such lease. In the
event any such lease requires the lessee to exercise an option to renew in order
to continue the term thereof, PMW has properly exercised such option to renew.
To the best knowledge of PMW, each such real property and improvements thereon
may lawfully be used in connection with the business of PMW and is in compliance
with all applicable laws, rules, regulations and ordinances of all federal,
state, municipal and other governmental authorities including, but not limited
to, zoning, building, health, safety and environmental laws, and PMW has not
received any notices of violations with respect thereto.
5.16. MACHINERY AND EQUIPMENT. The machinery and equipment of PMW is
in good operating condition and in a state of good repair sufficient for the
conduct of normal operations. PMW's assets and properties (including leased
property) are adequate to enable PMW to conduct its business as now being
conducted. PMW is not aware of any major capital expenditure that will be
required within one year from the date of this Agreement that is not consistent
with past practices.
5.17. LICENSES. PMW possesses all material patents, franchises,
permits, licenses, music library rights, certificates and consents required from
any governmental authority or any other person necessary to enable PMW to carry
on its business as now conducted and to own and operate its properties
(including leased property) as now owned and operated and all such patents,
franchises, permits, licenses, certificates and consents will remain in full
force and effect following consummation of the transactions contemplated by this
Agreement. Attached hereto as Schedule 5.17 is a true and complete list of all
such patents, franchises, permits, licenses, certificates and consents. All
such patents, franchises, permits, licenses, certificates and consents are fully
transferable.
5.18. TITLE TO ASSETS. Except as disclosed on Schedule 5.18 hereto,
all of the Assets will, on the Closing Date, be owned by PMW, free and clear of
all mortgages, liens, security interests, pledges, charges and other
encumbrances whatsoever, and the sale to Premiere of the Assets will not give
rise to any lien, security interest, pledge, encumbrance or charge thereon. The
Assets constitute all of the assets necessary to operate the business as it is
now being operated.
5.19. FILINGS, ETC. PMW, to the best of its knowledge, (a) has filed
all federal, state and local tax returns required by law in the legally
prescribed time and manner, and paid all taxes, assessments and penalties due
and payable; (b) has made all payments required by any governmental program of
workers' social security or unemployment compensation; (c) has withheld and paid
over to the appropriate
governmental authority all amounts required by law to be withheld from the wages
or salaries of employees; (d) is not liable for any arrears of wages or any
taxes or penalties for failure to comply with any of the foregoing; and (e) has
paid or will pay over to the appropriate governmental authority all sales or use
taxes referable to the PMW operations due as of the Closing Date, and has made
or will make provisions for payment of all such taxes accrued as of such date,
but not yet due. There are no claims pending or, to the best knowledge of PMW,
threatened against PMW for past due taxes, nor are there any outstanding waivers
or agreements by the Company for the extension of the time for the assessment of
any tax.
5.20. INSURANCE. Attached hereto as Schedule 5.20 is a true and
complete list of all insurance policies in force with respect to the Assets and
the business of the PMW and the annual premiums payable thereon. In the opinion
of PMW, all such policies are adequate to insure the risks arising in the normal
course of business. PMW is not now, and on the Closing Date will not be, in
default in any respect under any such policy, and PMW shall continue such
policies in force and effect through the Closing Date.
ARTICLE 6
CONDITIONS PRECEDENT TO PREMIERE'S OBLIGATION TO CLOSE AND
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
The obligations of Premiere hereunder are, at its option, subject to
satisfaction or waiver, at or prior to the Closing Date, of each of the
following conditions:
6.1. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) All representations and warranties of PMW shall be true and
complete in all material respects on and as of the Closing Date as if made on
and as of that date.
(b) All of the terms, covenants and conditions to be complied with
and performed by PMW on or prior to Closing Date shall have been complied with
or performed in all material respects.
6.2. ADVERSE PROCEEDINGS. No suit, action, claim or governmental
proceeding shall be pending against, and no order, decree or judgment of any
court, agency or other governmental authority shall have been rendered against,
any party hereto which Premiere in good faith believes would render it unlawful,
as of the Closing Date, to effect the transactions contemplated by this
Agreement in accordance with its terms.
6.3. PAYMENT OF INDEBTEDNESS: FINANCING STATEMENTS. PMW shall be prepared
to deliver the Assets to Premiere at Closing free and clear of all liens or
encumbrances.
6.4. NON-COMPETITION AGREEMENT. PMW, Xxxxxx Xxxx and Xxxxxxx Xxxxx shall
have executed and delivered the Non-Competition Agreement to Premiere.
6.5. EMPLOYMENT AGREEMENT. Execution of employment agreements between
Xxxxxx Xxxx, Xxxxxx X. Xxxxxx, and Premiere, in substantially the form attached
hereto as Schedule 6.5.
ARTICLE 7
CONDITIONS PRECEDENT TO PMW'S OBLIGATION TO CLOSE
The obligations of PMW hereunder are, at their option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
7.1. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) All representations and warranties of Premiere shall be true and
complete in all material respects on and as of the Closing Date as if made on
and as of that date.
(b) All the terms, covenants and conditions to be complied with and
performed by Premiere on or prior to the Closing Date shall have been complied
with or performed in all material respects.
ARTICLE 8
DOCUMENTS TO BE DELIVERED AT THE CLOSING
8.1. DOCUMENTS TO BE DELIVERED BY PMW. At Closing, PMW shall deliver to
Premiere the following:
(a) instruments of conveyance and transfer, including all relevant
Bills of Sale, in form and substance reasonably satisfactory to counsel to
Premiere, effecting the sale, transfer, assignment and conveyance of the Assets
to Premiere, including, but not limited to, the following:
(i) assignments of all Intellectual Property; and
(ii) all books, records, logs, customer lists and similar assets
to be assigned to Premiere pursuant to Article 2;
(b) the executed Non-Competition Agreements of PMW, Xxxxxx Xxxx, and
Xxxxxxx Xxxxx;
(c) resolutions of the Board of Directors and shareholders of PMW
authorizing this Agreement, and a certificate from the Secretary stating that
such resolutions are in full force and effect and have not been rescinded as of
the Closing Date.
(d) Employment Agreements of Xxxxxx Xxxx, and Xxxxx Xxxxxx.
8.2. DOCUMENTS TO BE DELIVERED BY PREMIERE. At the Closing, Premiere shall
deliver to PMW the following:
(a) Four Hundred Fifty-FIve Thousand Dollars ($455,000) cash pursuant
to Section 2.4(b);
(b) the Promissory Note; and
(c) resolutions of the Board of Directors of Premiere or its
designee(s) authorizing this Agreement, and a certificate from the Secretary
stating further stating that such resolutions are in full force and effect and
have not been rescinded as of the Closing Date.
ARTICLE 9
FEES AND EXPENSES
9.1. EXPENSES. Each party hereto shall be solely responsible for all costs
and expenses incurred by it in connection with the negotiation, preparation and
performance of and compliance with the terms of this Agreement.
ARTICLE 10
INDEMNIFICATION
10.1. INDEMNIFICATION BY PMW. Through and including February 28,
1998, PMW shall indemnify, defend and hold Premiere harmless against and with
respect to, and shall reimburse Premiere for:
(a) any and all losses, direct and indirect, liabilities, or damages
resulting from any misrepresentation, breach of warranty, or nonfulfillment of
any covenant or obligation by PMW contained herein or in any certificate,
document, or instrument delivered to Premiere hereunder;
(b) any and all liabilities or obligations of PMW not assumed by
Premiere pursuant to the terms of this Agreement; including the Excluded
Liabilities
(c) any and all losses, liabilities, or damages resulting from the
operation or ownership of PMW by PMW prior to the Closing Date;
(d) any and all losses, liabilities or damages resulting from any
failure to comply with any "bulk sales" laws applicable to the transactions
contemplated by this Agreement;
(e) any and all actions, suits, proceedings, claims, demands,
assessments, judgements, costs, and expenses, including reasonable legal fees
and expenses incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
10.2. INDEMNIFICATION BY PREMIERE. Through and including February 28,
1998, Premiere shall indemnify and hold PMW harmless against and with respect
to, and shall reimburse PMW for:
(a) any and all losses, direct or indirect, liabilities, or damages
resulting from any misrepresentation, breach of warranty, or nonfulfillment of
any covenant or obligation by Premiere contained herein or in any certificate,
document, or instrument delivered to PMW hereunder;
(b) any and all losses, liabilities or damages arising after the
Closing Date in connection with the operations of PMW after the Closing Date;
and
(c) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable legal fees and
expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to impose the imposition thereof, or in
enforcing this indemnity.
10.3. LIMITATION ON INDEMNIFICATION. In the absence of fraud by PMW or
its officers, directors or agents, the sole method by which Premiere may satisfy
any claims for indemnification hereunder shall be to offset the amount
outstanding under the Promissory Note, or any other payments which may become
due under Section 2 or under that certain Letter Agreement between Premiere and
PMW dated September 27, 1996; and PMW shall not be liable for any amounts in
excess of the principal amount of the Promissory Note. In the event of fraud by
PMW or its officers, directors or agents, Premiere shall be entitled to all
available rights and remedies, whether legal or equitable, and the limitations
contained in the foregoing sentence shall not be applicable.
ARTICLE 11
ALLOCATION OF PURCHASE PRICE
Premiere and PMW agree that the purchase price shall be allocated as
follows, for tax purposes:
Equipment and inventory: $ 10,000
Covenant not to compete: $ 25,000
Intellectual property: $ 600,000
Premiere and PMW further agree that any PMW AQH consideration shall be
allocated entirely to intellectual property.
ARTICLE 12
TERMINATION OF AGREEMENT
12.1 EVENTS OF TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, at any time prior to the
Closing Date:
(i) by the mutual consent of PMW and Premiere;
(ii) by Premiere, if PMW breaches in any material respect any of
their representations, warranties, covenants or agreements contained in this
Agreement;
(iii)by PMW, if Premiere breaches in any material respect any of
its representations, warranties, covenants or agreements contained in this
Agreement;
(iv) by either Premiere or PMW, if any of the conditions to
Closing is not fulfilled (or waived by the party for whose benefit the
conditions exist) on or prior to the Closing Date;
(v) by either Premiere or PMW, if the Closing has not occurred
on or prior to January 1, 1997.
12.2. EFFECT OF TERMINATION. In the event that either party shall
elect to terminate this Agreement pursuant to any provision contained herein
expressly giving such party the right to terminate this Agreement, this
Agreement shall forthwith terminate and have no further effect, and neither
party shall have any further obligation or liability. Notwithstanding the
foregoing, the termination of this Agreement pursuant to any provision hereof
shall not relieve any party of any liability for a breach of any representation
or warranty, or nonperformance of any covenant or obligation hereunder, and any
such termination shall not be deemed to be a waiver of any available remedy for
any such breach or nonperformance.
ARTICLE 13
OTHER PROVISIONS
13.1. EMPLOYEE MATTERS. Immediately prior to the consummation of the
transactions contemplated hereby, PMW shall terminate all its employees.
Premiere may, but shall not be obligated to, employ any such employees following
the Closing. PMW shall be responsible for all severance, accrued vacation and
sick leave, and other payments made to employees of PMW as a result of the
transactions contemplated hereby or the termination of any employees. Any
employees hired by Premiere shall be subject to Premiere's policies, procedures
and practices.
13.2. BENEFITS AND ASSIGNMENT. This agreement shall be binding upon
and shall incur to the benefit of the parties hereto and their respective
successors and assigns. Neither Premiere or PMW may
assign this Agreement without the prior written consent of the other parties
hereto except that Premiere may assign its rights under this Agreement to
another entity under common control with Premiere without the consent of PMW.
13.3. ENTIRE AGREEMENT. This Agreement and the exhibits and schedules
hereto embody the entire agreement and understanding of the parties hereto and
supersede any and all prior agreements, arrangements and understandings relating
to the matters provided for herein. No amendment, waiver of compliance with any
provision or condition hereof, or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
13.4. ADDITIONAL AGREEMENTS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take promptly, or cause to be taken, all actions and to do promptly, or cause to
be done promptly, all things necessary, proper or advisable under applicable
laws to consummate and make effective the transactions contemplated by the
Agreement, and to satisfy all of the conditions to the Closing to be satisfied
by such waivers, consents and approvals from all applicable governmental
entities and third parties, and effecting all necessary registrations and
filings. Each of the parties hereto agrees not to take any action or fail to
take any action that would be likely to cause any representation or warranty
contained in this Agreement to cease to be true or accurate or that would be
reasonably likely to prevent the performance of any covenant or the satisfaction
of an condition contained in this Agreement.
13.5. CHOICE OF LAW. The construction and performance of this
Agreement shall be governed by the laws of the State of California without
regard to its principles of conflict of law.
13.6. ARBITRATION. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity thereof, which has not been
resolved by a meeting of the executive officers of the parties, shall be finally
settled by arbitration conducted in accordance with AAA Commercial Arbitration
Rules by three independent and impartial arbitrators, of whom each party shall
appoint one and judgment upon the award rendered by the arbitrators may be
entered by any court having jurisdiction thereof. The place of arbitration
shall be Los Angeles.
13.7. NOTICES. Any notice, demand or request required or permitted to
be given under the provisions of this Agreement shall be in writing, addressed
to the following addresses, or to such other address as any party may request,
To Premiere:
PREMIERE RADIO NETWORKS, INC.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxx
Copy to:
Xxxxxxx Xxxx, Esq.
Christensen, White, Miller, Fink, Xxxxxx, Xxxxxx & Xxxxxxx, LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
To PMW:
Philadelphia Music Works, Inc.
X.X. Xxx 000000
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Copy to:
Philadelphia Investment Banking Company:
X.X. Xxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
and shall be deemed to have been duly delivered and received (i) on the date of
personal delivery, or (ii) on the date of a signed receipt, if sent by an
overnight delivery service, but only if sent in the same manner to all persons
entitled to receive notice or a copy.
13.8. EXERCISE OF PURCHASE OPTION AND CANCELLATION OF SALES
REPRESENTATION AGREEMENT. Premiere and PMW agree that the consummation of the
transactions contemplated hereby shall terminate that certain Network Radio
Sales Representation Agreement dated August 12, 1996.
13.9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
13.10. FURTHER ASSURANCES. PMW shall at any time and from time to time
after the Closing execute and deliver to Premiere such further conveyances,
assignments and other written assurances as Premiere may reasonably request in
order to vest and confirm in Premiere (or its assigns) the title and rights to
and in all of the Assets to be intended to be transferred, assigned and conveyed
hereunder. In addition, PMW shall provide to Premiere subsequent to Closing
with the unaudited, accrual basis balance sheet and income statement at December
31, 1995 and for the twelve-month period then ended, and the unaudited, accrual
basis balance sheets and income statements as of the Closing Date and September
30, 1995, and for the periods then ended.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
PHILADELPHIA MUSIC WORKS, INC. PREMIERE RADIO NETWORKS, INC.
By: /s/ Xxxxxxx Xxxxx By: /s/ Xxxxxx X. Xxxxxx
-------------------------------- -------------------------------
Name: Xxxxxxx Xxxxx Name: Xxxxxx Xxxxxx
Title: President Title: Sr. Vice President/
Business and Legal Affairs
