1
EXHIBIT 2.2
MERGER AGREEMENT
BY AND AMONG
XXXXXX BROADCASTING, INC.,
XXX RADIO, INC.,
XXX MIAMI MERGER SUB, INC.
AND
XXXXXX BROADCASTING, LLC
RELATING TO
RADIO STATIONS
WTMI(FM), MIAMI, FLORIDA,
WCCC(AM/FM), HARTFORD, CONNECTICUT
AND
WBOQ(FM), GLOUCESTER, MASSACHUSETTS
* * *
MARCH 14, 2000
2
Section 1. DEFINITIONS............................................... 1
Section 2. Merger.................................................... 4
2.1 Merger.................................................... 4
2.2 Merger Consideration...................................... 4
2.3 Conversion and Cancellation of Shares..................... 5
Section 3. Assets and Liabilities at Closing; Adjustments to Merger
Consideration; Payment of Merger Consideration;
Escrow Funds.............................................. 5
3.1 Assets of the Company at Closing.......................... 5
3.2 Liabilities of the Company at Closing..................... 6
3.3 Adjustment to Merger Consideration at Closing............. 6
3.4 Payment; Delivery of Shares Certificates.................. 7
3.5 Lost, Stolen or Destroyed Certificates.................... 9
3.6 Escrows................................................... 9
3.7 Final Adjustment of Merger Consideration.................. 10
3.8 Dissenting Shares......................................... 12
3.9 Stock Options............................................. 12
Section 4. PURCHASE AND SALE OF WCCC/WBOQ ASSETS..................... 12
4.1 Agreement to Sell and Buy................................. 12
4.2 Retained Assets........................................... 13
4.3 Purchase Price............................................ 14
4.4 Payment of Purchase Price................................. 15
4.5 Assumption of Liabilities and Obligations................. 16
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. 17
5.1 Organization, Standing, and Authority..................... 17
5.2 Authorization and Binding Obligation...................... 17
5.3 Capitalization of the Company; Stock Ownership............ 18
5.4 Absence of Conflicting Agreements......................... 18
5.5 Governmental Licenses..................................... 18
5.6 Title to and Condition of Real Property................... 19
5.7 Title to and Condition of Tangible Personal Property...... 19
3
5.8 Contracts................................................. 19
5.9 Consents.................................................. 20
5.10 Intangibles............................................... 20
5.11 Insurance................................................. 20
5.12 Reports................................................... 20
5.13 Employee Plans and Matters................................ 20
5.14 Tax Matters............................................... 23
5.15 Claims and Legal Actions.................................. 24
5.16 Environmental Matters..................................... 25
5.17 Compliance with Laws...................................... 26
5.18 Conduct of Business in Ordinary Course.................... 26
5.19 Financial Statements...................................... 26
5.20 Transactions with Affiliates.............................. 27
5.21 Broker.................................................... 27
5.22 Full Disclosure........................................... 27
5.23 Labor Relations........................................... 27
5.24 Bank Accounts; Powers of Attorney......................... 27
5.25 Certain Statutes.......................................... 27
Section 6. REPRESENTATIONS AND WARRANTIES OF THE PARENT.............. 28
6.1 Organization, Standing, and Authority..................... 28
6.2 Authorization and Binding Obligation...................... 28
6.3 Absence of Conflicting Agreements......................... 28
6.4 Broker.................................................... 28
6.5 The Parent's Qualifications............................... 28
6.6 Full Disclosure........................................... 29
6.7 WCCC/WBOQ Sale............................................ 29
6.8 Litigation................................................ 29
Section 7. REPRESENTATIONS AND WARRANTIES OF MERGER SUB.............. 29
7.1 Organization, Standing, and Authority..................... 29
7.2 Authorization and Binding Obligation...................... 29
7.3 Absence of Conflicting Agreements......................... 29
7.4 Broker.................................................... 30
7.5 Full Disclosure........................................... 30
-ii-
4
Section 8. REPRESENTATIONS AND WARRANTIES OF THE WCCC/WBOQ BUYER..... 30
8.1 Organization, Standing, and Authority..................... 30
8.2 Authorization and Binding Obligation...................... 30
8.3 Absence of Conflicting Agreements......................... 31
8.4 Broker.................................................... 31
8.5 WCCC/WBOQ Buyer's Qualifications.......................... 31
8.6 Availability of Funds..................................... 31
8.7 Full Disclosure........................................... 31
Section 9. OPERATIONS OF THE STATION PRIOR TO CLOSING................ 31
9.1 Generally................................................. 31
9.2 Employees and Compensation................................ 31
9.3 Contracts................................................. 32
9.4 Disposition of Assets..................................... 32
9.5 Encumbrances.............................................. 32
9.6 Licenses.................................................. 32
9.7 Rights.................................................... 33
9.8 No Inconsistent Action.................................... 33
9.9 Access to Information..................................... 33
9.10 Maintenance of Assets..................................... 33
9.11 Insurance................................................. 33
9.12 Consents.................................................. 33
9.13 Books and Records......................................... 34
9.14 Notification.............................................. 34
9.15 Financial Information..................................... 34
9.16 Compliance with Laws...................................... 34
9.17 Collection of Accounts Receivable......................... 34
9.18 Capital Expenditures...................................... 34
9.19 Mergers................................................... 34
9.20 Amendments................................................ 34
9.21 Securities................................................ 34
9.22 Termination of Certain Agreements......................... 35
Section 10. SPECIAL COVENANTS AND AGREEMENTS.......................... 35
-iii-
5
10.1 FCC Consent............................................... 35
10.2 Control of the Station.................................... 35
10.3 Risk of Loss.............................................. 35
10.4 Confidentiality........................................... 35
10.5 Environmental Audit....................................... 36
10.6 Engineering Study......................................... 36
10.7 Cooperation............................................... 36
10.8 Bulk Sales Law............................................ 36
10.9 Taxes..................................................... 36
10.10 Access to Books and Records............................... 36
10.11 HSR Act Filing............................................ 36
10.12 Title Insurance and Surveys............................... 37
10.13 Employee Matters.......................................... 37
10.14 Tax Matters............................................... 39
10.15 Release of Liens.......................................... 43
10.16 Accounts Receivable....................................... 43
10.17 Insurance................................................. 43
Section 11. CONDITIONS TO OBLIGATIONS AT CLOSING...................... 44
11.1 Conditions to Obligations of the Parent, Merger Sub and the
Surviving Corporation..................................... 44
11.2 Conditions to Obligations of the Company and the WCCC/WBOQ
Buyer .................................................... 45
Section 12. CLOSING AND CLOSING DELIVERIES............................ 46
12.1 Closing................................................... 46
12.2 Deliveries by the Company................................. 47
12.3 Deliveries by the Parent.................................. 48
12.4 Deliveries by the Surviving Corporation to the WCCC/WBOQ
Buyer..................................................... 49
12.5 Deliveries by the WCCC/WBOQ Buyer to the Surviving
Corporation............................................... 49
Section 13. TERMINATION............................................... 49
13.1 Termination by the Company or the WCCC/WBOQ Buyer......... 49
13.2 Termination by the Parent................................. 50
13.3 Rights on Termination..................................... 51
13.4 Specific Performance...................................... 51
-iv-
6
Section 14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION;
CERTAIN REMEDIES.......................................... 52
14.1 Representations and Warranties............................ 52
14.2 Indemnification by the Stockholders from the Indemnification
Escrow Fund............................................... 52
14.3 Indemnification by the WCCC/WBOQ Buyer.................... 53
14.4 Indemnification by the Surviving Corporation.............. 53
14.5 Indemnification by the Parent............................. 54
14.6 Procedure for Indemnification............................. 54
14.7 Attorneys' Fees........................................... 55
Section 15. MISCELLANEOUS............................................. 56
15.1 Fees and Expenses......................................... 56
15.2 Notices................................................... 56
15.3 Benefit and Binding Effect................................ 57
15.4 Further Assurances........................................ 57
15.5 Governing Law............................................. 57
15.6 Headings.................................................. 57
15.7 Gender and Number......................................... 57
15.8 Entire Agreement.......................................... 57
15.9 Waiver of Compliance; Consents............................ 58
15.10 Press Release............................................. 58
15.11 Stockholders' Agent....................................... 58
15.12 Counterparts.............................................. 58
-v-
7
THE FOLLOWING DOCUMENTS HAVE BEEN OMITTED PURSUANT TO RULE 601(b)(2) OF
REGULATION S-K. XXX RADIO, INC. WILL FURNISH, SUPPLEMENTALLY, A COPY OF ANY
OMITTED DOCUMENTS TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST.
EXHIBITS
Exhibit A - Form of Stockholder's Transmittal Agreement
Exhibit B - Escrow Agreement
Exhibit C - Indemnification Escrow Agreement
LIST OF SCHEDULES
Schedule 2.3(b) - Allocation of Merger Consideration among
Company Stock
Schedule 3.1 - Assets not Owned by the Company
Schedule 4.1 - Internet Assets
Schedule 5.1 - Qualifications
Schedule 5.3 - Authorized & Outstanding Company Stock &
Options
Schedule 5.4 - Consents
Schedule 5.5 - Licenses
Schedule 5.6 - Real Property
Schedule 5.7 - Tangible Personal Property
Schedule 5.8 - Contracts
Schedule 5.10 - Intangibles
Schedule 5.11 - Insurance
Schedule 5.13 - Employee Matters
Schedule 5.14 - Taxes
Schedule 5.15 - Litigation
Schedule 5.19 - Financial Statements
Schedule 5.20 - Transactions with Affiliates
Schedule 5.24 - Bank Accounts; Powers of Attorney
Schedule 6.3 - The Parent Consents
Schedule 7.3 - Merger Sub Consents
Schedule 8.3 - The WCCC/WBOQ Buyer Consents
Schedule 9.18 - Capital Expenditures
Schedule 9.22 - Agreements to be Terminated
Schedule 12.2 - Form of Legal Opinion for Company's Counsel
Schedule 12.3(c) - Form of Legal Opinion of the Parent's and
Merger
Sub's Counsel
Schedule 12.5(d) - Form of Legal Opinion of the WCCC/WBOQ
Buyer's Counsel
8
MERGER AGREEMENT
This MERGER AGREEMENT is dated as of the 14th day of March, 2000, by
and among Xxxxxx Broadcasting, Inc., a Delaware corporation (the "Company"),
Xxx Radio, Inc., a Delaware corporation (the "Parent"), Xxx Miami Merger Sub,
Inc., a Delaware corporation and a wholly owned subsidiary of the Parent (the
"Merger Sub"), and Xxxxxx Broadcasting, LLC, a Delaware limited liability
company (the "WCCC/WBOQ Buyer").
RECITALS
A. The Company is the licensee of and owns and operates radio stations
WTMI(FM), Miami, Florida ("WTMI"), WCCC(AM/FM), Hartford, Connecticut ("WCCC"),
and WBOQ(FM), Gloucester, Massachusetts ("WBOQ" and together with WTMI and
WCCC, individually a "Station" and collectively, the "Stations"), pursuant to
licenses issued by the Federal Communications Commission ("FCC").
B. The respective boards of directors of each of the Parent, Merger Sub
and the Company have determined that it is in the best interests of their
respective stockholders for Merger Sub to merge with and into the Company with
the Company being the surviving corporation (the "Merger") in accordance with
the Delaware General Corporation Law (the "DGCL") upon the terms and subject to
the conditions set forth in this Agreement.
C. The parties hereto intend that the Company shall sell to the WCCC/WBOQ
Buyer, and the WCCC/WBOQ Buyer shall purchase from the Company, immediately
following the consummation of the Merger substantially all of the assets of
WCCC and WBOQ and certain other assets (the "WCCC/WBOQ Sale") for the price and
subject to the terms and conditions set forth in this Agreement.
D. The Parent intends the WCCC/WBOQ Sale to qualify, to the extent
possible, as part of a deferred exchange of like-kind assets pursuant to
Section 1031 of the Code (as defined below), on the terms and conditions set
forth herein.
E. The parties hereto desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and the WCCC/WBOQ Sale.
AGREEMENTS
In consideration of the above recitals and of the mutual agreements
and covenants contained in this Agreement, the parties hereto, intending to be
bound legally, agree as follows:
Section 1. DEFINITIONS
The following terms, as used in this Agreement, shall have the
meanings set forth in this Section:
9
"Accounts Receivable" means the rights of the Company to cash payment
for the sale of advertising time run on the Stations by the Company prior to
the Closing Date.
"Assets" means all of the tangible and intangible assets of the
Company used or useful in connection with the conduct of the business or
operations of the Stations.
"Closing" means the consummation of the Merger immediately followed
by the consummation of the WCCC/WBOQ Sale pursuant to this Agreement in
accordance with the provisions of Section 12.
"Closing Date" means the date on which the Closing occurs, as
determined pursuant to Section 12.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, or any subsequent legislative enactment thereof, as in
effect from time to time.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to consummate the Merger and the
WCCC/WBOQ Sale contemplated by this Agreement.
"Contracts" means all contracts, leases, non-governmental licenses,
and other agreements (including leases for personal or real property and
employment agreements), written or oral (including any amendments and other
modifications thereto), to which the Company is a party or which are binding
upon the Company, and (i) which are in effect on the date of this Agreement or
(ii) which are entered into by the Company between the date of this Agreement
and the Closing Date.
"FCC Consent" means actions by the FCC granting its consent to the
change of control of the Company to the Parent and to the sale of WCCC and WBOQ
to the WCCC/WBOQ Buyer as contemplated by this Agreement.
"FCC Licenses" means all Licenses issued by the FCC in connection with
the business or operations of the Stations.
"Final Order" means an action by the FCC that has not been reversed,
stayed, enjoined, set aside, annulled, or suspended, and with respect to which
no timely requests are pending for administrative or judicial review,
reconsideration, appeal, or stay, and the time for filing any such requests and
the time for the FCC to set aside the action on its own motion have expired.
"GAAP" means generally accepted accounting principles consistently
applied.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, licenses, patents, permits, jingles, proprietary
information, technical information and data, machinery and equipment
warranties, and other similar intangible property rights and interests (and any
goodwill associated with any of the foregoing) applied for, issued to, or owned
-2-
10
by the Company or under which the Company is licensed or franchised and which
are used or useful in the business and operations of the Stations, together
with any additions thereto between the date of this Agreement and the Closing
Date.
"Licenses" means all licenses, permits, and other authorizations
issued by the FCC, the Federal Aviation Administration, or any other federal,
state, or local governmental authorities in connection with the conduct of the
business or operations of the Stations, together with any additions thereto
between the date of this Agreement and the Closing Date.
"Permitted Encumbrances" means (i) liens for current taxes not yet due
and payable, (ii) easements, encroachments, encumbrances, rights of way and
other imperfections of title on the Real Property which do not materially
adversely affect the value or use of the applicable parcel of real estate for
its current purposes, (iii) security interests securing Indebtedness (as
defined below) for which the Parent receives a credit in its favor under
Section 3.3(b) except to the extent such Indebtedness is repaid in full at
Closing pursuant to the terms of Section 3.3(b) and (iv) Encumbrances
exclusively on the WCCC/WBOQ Assets (as defined below) which are assumed at
Closing by the WCCC/WBOQ Buyer and for which the Surviving Corporation (as
defined below) has no obligation following the Closing.
"Person" means any individual, partnership, corporation, limited
liability company, trust or other entity.
"Real Property" means all real property and interests in real
property, including fee estates, leaseholds and subleaseholds, purchase
options, easements, licenses, rights to access, and rights of way, and all
buildings and other improvements thereon, and other real property interests
which are used or useful in the business or operations of the Stations,
together with any additions thereto between the date of this Agreement and the
Closing Date.
"Subsidiary" means, with respect to the Company, any entity of which
the Company (either alone or through or together with any other Subsidiary),
owns directly or indirectly, stock or other equity interests constituting 50%
or more of the voting or economic interest in such entity.
"Tangible Personal Property" means all machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant,
inventory, spare parts, and other tangible personal property which is used or
useful in the conduct of the business or operations of the Stations, together
with any additions thereto between the date of this Agreement and the Closing
Date.
"Taxes" means all federal, state, local or foreign income, gross
receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, capital, transfer, employment, withholding and
other taxes and assessments, together with any interest, additions or penalties
with respect thereto and any interest in respect of such additions or
penalties.
"Tax Returns" means all federal, state, local and foreign income and
franchise Tax returns and Tax reports (including any attached schedules) and
other Tax statements and other similar filings required to be filed, including
any information return, claim for refund, amended return, extension or
declaration of estimated Tax.
-3-
11
"To Seller's knowledge" means the actual knowledge of Xxxxxx X. Xxxxxx,
Xxxx Xxxxxxxx, Xxxx Berkavage and Xxxx Xxxx after due inquiry into the
respective areas of their responsibility.
Section 2. Merger.
2.1 Merger.
(a) Structure of the Merger. Subject to the terms and conditions of this
Agreement, Merger Sub shall be merged with and into the Company in accordance
with the DGCL, the separate existence of Merger Sub shall cease and the Company
shall be the surviving corporation (the "Surviving Corporation"). Upon the
consummation of the Merger on the terms and conditions of this Agreement, the
Surviving Corporation shall succeed to all of the rights, assets, liabilities
and obligations of Merger Sub and the Company in accordance with the provisions
of the DGCL.
(b) Consummation of Merger. At the Closing, the parties hereto shall cause
the Merger to be consummated by duly filing with the Secretary of State of
Delaware a properly executed certificate of merger in accordance with the
provisions of the DGCL (the "Certificate of Merger"). In accordance with the
DGCL and the terms of the Certificate of Merger, the Merger shall be effective
at the time and date which is the date and time of the filing of the
Certificate of Merger with the Secretary of State of Delaware or such other
time and date as the Parent and the Company may agree (such time and date being
hereinafter referred to as the "Effective Time").
(c) Certificate of Incorporation and Bylaws. The certificate of
incorporation of Merger Sub, as in existence immediately prior to the Effective
Time, shall be the certificate of incorporation of the Surviving Corporation
from and after the Effective Time unless and until amended in accordance with
its terms and as provided by law. The bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation from and after the Effective Time unless and until amended in
accordance with their terms and the terms of the certificate of incorporation
of the Surviving Corporation and as provided by law.
(d) Directors and Officers. The initial directors of the Surviving
Corporation shall be from and after the Effective Time the persons that are the
directors of Merger Sub immediately prior to the Effective Time, and the
initial officers of the Surviving Corporation shall be from and after the
Effective Time the persons that are the officers of Merger Sub immediately
prior to the Effective Time, all such persons to serve as directors of or to
hold office in accordance with the certificate of incorporation and bylaws of
the Surviving Corporation until their respective successors are duly elected
and qualified.
2.2 Merger Consideration. The total consideration for the capital stock of
the Company shall be One Hundred Twenty-Five Million Dollars ($125,000,000)
(the "Merger Consideration"), as adjusted pursuant to Sections 3.3(a) and (b).
-4-
12
2.3 Conversion and Cancellation of Shares. As of the Effective Time, by
virtue of the Merger and without any action on the part of the Parent, Merger
Sub, the Company or any holder of any shares of the capital stock of Merger Sub
or the Company:
(a) Cancellation of Treasury Stock. All of the shares of the capital stock
of the Company owned by the Company or any Subsidiary, as treasury stock or
otherwise, shall automatically be cancelled and retired and shall cease to
exist and no consideration shall be delivered in exchange therefor.
(b) Conversion of Company Stock. Each share of the capital stock of the
Company (collectively, the "Company Stock") issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive the
portion of the Merger Consideration, as adjusted under Sections 3.3(a) and (b),
allocable to such share in accordance with Schedule 2.3(b). As of the Effective
Time, all of the Company Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, other than the right to receive, upon surrender of
such certificate in accordance with Section 3.4, the portion of the Merger
Consideration, as adjusted pursuant to Sections 3.3(a) and (b), allocable to
such shares pursuant to Schedule 2.3(b). As set forth in the hypothetical
calculations in Schedule 2.3(b), in no event shall the aggregate amount payable
to all of the holders of the capital stock of the Company pursuant to this
Agreement exceed $125,000,000, as adjusted under Sections 3.3(a) and (b).
(c) Conversion of Stock of Merger Sub. Each share of the capital stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into one validly issued, fully paid and nonassessable share of the
Common Stock, par value $.01 per share, of the Surviving Corporation and the
Surviving Corporation shall be a wholly-owned subsidiary of the Parent.
Section 3. Assets and Liabilities at Closing; Adjustments to Merger
Consideration; Payment of Merger Consideration; Escrow Funds.
3.1 Assets of the Company at Closing. The Assets to be owned by the Company
at the Closing, all of which shall be free and clear of any claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges
or encumbrances of any nature whatsoever (the "Encumbrances"), except for
Permitted Encumbrances, shall consist of all tangible and intangible assets,
both real and personal, used or useful in the operations of the Stations,
including the following:
(a) The Tangible Personal Property;
(b) The Real Property;
(c) The Licenses;
(d) The Contracts;
-5-
13
(e) The Intangibles and all intangible assets of the Company relating to
the Stations that are not specifically included within the Intangibles,
including the goodwill of the Stations, if any;
(f) All of the Company's proprietary information, technical information
and data, machinery and equipment warranties, maps, computer discs and tapes,
plans, diagrams, blueprints, and schematics, including filings with the FCC
relating to the business and operation of the Stations;
(g) All choses in action of the Company relating to the Stations;
(h) All books and records relating to the business or operations of the
Stations, including executed copies of the Contracts, and all records required
by the FCC to be kept by the Stations;
(i) All Accounts Receivable; and
(j) The Company's cash, cash equivalents and marketable securities on hand
as of the Closing, and all other cash in any of the Company's bank accounts,
any and all insurance policies, bonds, letters of credit or similar items, any
cash surrender value in regard thereto, and any and all claims receivable under
any and all insurance policies.
The Parent acknowledges that the "Beethoven bus" vehicle used by WTMI
and the office furnishings and assets set forth in Schedule 3.1 which have a
value not in excess of $50,000 are not owned by the Company and will not be
included among the Assets at Closing.
3.2 Liabilities of the Company at Closing. At the Closing, the Company
shall have no liabilities or obligations other than the following liabilities
or obligations:
(a) liabilities and obligations arising under the terms of the following
Contracts:
(i) Contracts listed on Schedule 5.8;
(ii) Contracts of the type described in Section 5.8 that are not required
to be listed in Schedule 5.8 pursuant to the exceptions set forth in Section
5.8; and
(iii) Contracts entered into by the Company between the date of this
Agreement and the Closing Date in compliance with the provisions of Section
9.3.
(b) Current liabilities reflected in the Working Capital adjustment made
pursuant to Section 3.3(a).
(c) Long term indebtedness for which the Parent receives an adjustment to
the Merger Consideration in its favor under Section 3.3(b).
3.3 Adjustment to Merger Consideration at Closing.
-6-
14
(a) Working Capital Adjustment. The Merger Consideration shall be reduced
by the amount by which the Working Capital of the Company as of the Closing
Date (but without regard for any assets or liabilities arising on the Closing
Date but after the Effective Time) is less than One Million Dollars
($1,000,000). "Working Capital" shall mean current assets less current
liabilities determined in accordance with GAAP. Current assets shall include,
without duplication, cash, prepaid expenses, and Accounts Receivable (except
for intercompany and related party receivables). Subject to the provisions of
the next sentence, current liabilities shall include accounts payable and
accrued expenses and shall exclude the principal and interest payable on the
Company's long-term indebtedness which shall be governed by Section 3.3(b).
Indebtedness which is long-term on the date of this Agreement shall continue to
be governed by Section 3.3(b) even if it becomes current prior to the Closing.
Trade and barter assets and liabilities will be excluded from the calculation
of the Working Capital. Accounts Receivable shall be included in current assets
net of an appropriate reserve for doubtful accounts calculated in accordance
with the accounting policies of the Company used in the preparation of the
Financial Statements (as defined below).
(b) Indebtedness Adjustment. The Merger Consideration shall be further
decreased by the aggregate amount of the Company's outstanding long-term
indebtedness as of the Closing Date (but without regard for any liabilities
arising on the Closing Date but after the Effective Time), accrued interest,
fees and expenses thereon as of the Closing Date, and the amount of any
prepayment penalty or premium payable with respect to such debt if it were
repaid in full as of the Effective Time (the "Indebtedness"). The Parent shall
pay at Closing an amount of cash equal to the Indebtedness (which is then being
deducted from the Merger Consideration pursuant to this Section 3.3(b)) to the
Company's lenders in satisfaction of such Indebtedness.
(c) Option Exercise Price. The cash proceeds of the exercise of stock
options paid at Closing as a set-off against the Merger Consideration shall not
be included in the calculation of the Working Capital but shall be treated as
indicated in Schedule 2.3(b).
(d) Adjusted Merger Consideration. The Merger Consideration, as adjusted
at Closing pursuant to Sections 3.3(a) and (b), shall be referred to herein as
the "Preliminary Adjusted Merger Consideration".
(e) Adjustment Procedures. Not later than five (5) business days before
the Closing Date, the Company shall prepare and deliver to the Parent a closing
statement of the Company (i) which shall set forth all information reasonably
necessary to determine the reductions to the Merger Consideration under
Sections 3.3(a) and (b), to the extent such adjustments can be determined or
estimated as of the date of such statement, and such other information as may
be reasonably requested by the Parent, and (ii) shall be certified by the chief
financial officer of the Company to be his best estimate of such reductions.
3.4 Payment; Delivery of Shares Certificates.
(a) The Company shall advise each holder of the Company Stock
(individually, a "Stockholder" and collectively, the "Stockholders") to deliver
at the Closing to the Parent stock certificates (the "Certificates")
representing all of such Stockholder's Company Stock together
-7-
15
with a transmittal agreement in the form of Exhibit A hereto (the "Transmittal
Agreement") duly executed by such Stockholder and any other required documents
of transfer.
(b) Pursuant to an agreement in the form and substance reasonably
acceptable to the Company to be entered into prior to Closing between the
Parent and The Bank of New York (the "Disbursement Agent") and subject to
satisfaction or waiver by the Parent of the conditions of Closing set forth in
Section 11.1, the Parent shall make available to the Disbursement Agent at
Closing the aggregate amount in cash of the Preliminary Adjusted Merger
Consideration (as reduced by the Post-Closing Escrow Funds).
(c) At least two days prior to Closing, the Company shall deliver to the
Parent a certificate setting forth a list of all of the Stockholders as of the
Closing, including Stockholders that have asserted appraisal rights, the number
of shares of the Company Stock owned by each Stockholder and the amount of the
Preliminary Adjusted Merger Consideration (as reduced by the Post-Closing
Escrow Funds) payable at Closing to each Stockholder in accordance with
Schedule 2.3(b) (subject to the exercise of any unexercised stock options
between the date of the Stockholder Statement and the Effective Time) (the
"Stockholder Statement"). The Stockholder Statement shall be duly certified by
the Chief Financial Officer of the Company as being a true and correct list of
all Stockholders and (assuming no further exercises of options) a true and
correct calculation of the portion of the Preliminary Adjusted Merger
Consideration (as reduced by the Post-Closing Escrow Funds) payable at Closing
to each of the Company's equity holders under the Company's certificate of
incorporation.
(d) Upon delivery by the Parent of the Preliminary Adjusted Merger
Consideration (as reduced by the Post-Closing Escrow Funds) to the Disbursement
Agent, the Parent and the Company shall jointly instruct the Disbursement Agent
to disburse at Closing to each Stockholder that has delivered to the Parent its
Certificates and a duly executed Transmittal Agreement with respect to such
Certificates the amount of the Preliminary Adjusted Merger Consideration (as
reduced by the Post-Closing Escrow Funds and assuming no further exercises of
options) to which such Stockholder is entitled for its surrendered Certificates
as set forth in the Stockholder Statement by wire transfer of immediately
available funds to an account designated in such Stockholder's Transmittal
Agreement. Any Stockholder that has not surrendered its Certificates and a
Transmittal Agreement with respect thereto shall not be entitled to payment for
its Certificates until such Stockholder has delivered to the Parent its
Certificates together with its Transmittal Agreement at which time, the Parent
shall instruct the Disbursement Agent to disburse to such Stockholder the
amount to which such Stockholder is entitled for its surrendered Certificates
as set forth in the Stockholder Statement by wire transfer of immediately
available funds to an account designated in such Stockholder's Transmittal
Agreement. Any amount held by the Disbursement Agent allocable to the Company
Stock owned by a Dissenting Stockholder (as defined below) shall be retained by
the Disbursement Agent until the Parent instructs the Disbursement Agent to
apply it towards any payment payable by the Parent or the Surviving Corporation
to any Dissenting Stockholder. Any amount still held by the Disbursement Agent
on the second anniversary of this Agreement shall be returned by the
Disbursement Agent to the Parent. If any stock options are exercised between
delivery of the Stockholder Statement and the Effective Time, the Company's
Chief Financial Officer shall deliver an appropriately revised Stockholder
Statement to the Parent and the Disbursement Agent and the Preliminary Adjusted
Merger Consideration (as reduced by the Post-Closing Escrow Funds) shall be
disbursed to the
-8-
16
Stockholders in accordance with such revised Stockholder Statement subject to
the terms of this Section 3.4.
(e) Neither the Parent nor the Surviving Corporation shall have any
liability or responsibility for the accuracy of the Stockholder Statement and
shall have the right to rely on the Stockholder Statement in disbursing the
Preliminary Adjusted Merger Consideration (as reduced by the Post-Closing
Escrow Funds).
3.5 Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Stockholder claiming such Certificate to be lost, stolen or
destroyed in a form reasonably required by the Parent as indemnity against any
claim that may be made against it or the Surviving Corporation with respect to
such Certificate, the Parent will pay in exchange for such lost, stolen or
destroyed Certificate the consideration to which such Stockholder is entitled
pursuant to this Agreement.
3.6 Escrows.
(a) Escrow Deposit. Simultaneously with the execution of this Agreement,
the Parent, the Company and The Bank of New York (the "Escrow Agent") shall
enter into an Escrow Agreement in the form of Exhibit B hereto (the "Escrow
Agreement") pursuant to which the Parent will deposit a Ten Million Dollar
($10,000,000) irrevocable letter of credit payable to the Escrow Agent (the
"Escrow Deposit") in escrow with the Escrow Agent to secure the performance of
the Parent and Merger Sub hereunder and to be held by the Escrow Agent pursuant
to the terms of the Escrow Agreement. The costs of obtaining and maintaining
such irrevocable letter of credit shall be split equally between the Company
and the Parent. At Closing, such letter of credit shall be returned to the
Parent or if such letter of credit has been drawn down, all proceeds of such
letter of credit and any earnings thereon shall be paid to the Parent or as the
Parent may otherwise direct.
(b) Post-Closing Escrow Deposit.
(i) At Closing, Xxxxxx X. Xxxxxx, as the Stockholder's agent (the
"Stockholders' Agent"), the Parent and the Escrow Agent shall enter into an
Escrow Agreement in the form of Exhibit C hereto (the "Post-Closing Escrow
Agreement").
(ii) At Closing, the Parent shall pay One Hundred Thousand Dollars
($100,000) of the Preliminary Adjusted Merger Consideration (the "Adjustment
Escrow Fund") to the Escrow Agent to be held in accordance with the terms of
the Post-Closing Escrow Agreement. The Adjustment Escrow Fund shall be
disbursed as provided in Section 3.7.
(iii) At Closing, the Parent shall pay Two Million Dollars ($2,000,000) of
the Preliminary Adjusted Merger Consideration (the "Indemnification Escrow
Fund" and collectively with the Adjustment Escrow Fund, the "Post-Closing
Escrow Funds") to the Escrow Agent to be held in accordance with the terms of
the Post-Closing Escrow Agreement. The Indemnification Escrow Fund shall be
retained by the Escrow Agent for a period of two (2) years to satisfy claims of
the Parent and the Surviving Corporation under Sections 3.7, 10.14 and 14.2 of
this Agreement. On the second anniversary of the Closing Date, any amount
remaining in the Indemnification Escrow Fund (less the amount of any unresolved
pending claims by the
-9-
17
Parent or the Surviving Corporation under Sections 3.7, 10.14 and 14.2) shall
be released and paid to the Stockholders' Agent for distribution to the
Stockholders in accordance with Schedule 2.3(b). Neither the Parent nor the
Surviving Corporation shall have any responsibility or liability whatsoever for
the payment or use by the Stockholders' Agent of any proceeds paid to the
Stockholders' Agent from the Post-Closing Escrow Funds.
3.7 Final Adjustment of Merger Consideration. The Preliminary Adjusted
Merger Consideration shall be subject to further adjustment after the Closing
as follows:
(a) Not later than ninety-five (95) days after the Closing Date, the
Parent will deliver to the Stockholders' Agent a Closing Balance Sheet (the
"Closing Balance Sheet") which shall be an unaudited balance sheet of the
Company as of the Effective Time and a statement setting forth the Parent's
determination of the adjustments under Sections 3.3(a) and (b) as modified with
respect to the WTMI Accounts Receivable only by Section 3.7(g). If the
Stockholders' Agent disputes the amount of the adjustments determined by the
Parent, the Stockholders' Agent shall deliver to the Parent within thirty (30)
days after its receipt of the Parent's statement a statement setting forth the
Stockholders' Agent determination of the amount of the adjustments. If the
Stockholders' Agent notifies the Parent of its acceptance of the Parent's
statement, or if the Stockholders' Agent fails to deliver his or her statement
within the thirty (30) day period specified in the preceding sentence, the
Parent's determination of the adjustments shall be conclusive and binding on
the parties as of the last day of the thirty (30) day period.
(b) The Parent and the Stockholders' Agent shall use good faith efforts to
resolve any dispute involving the determination of the adjustments under
Sections 3.3(a) and (b). If the parties are unable to resolve the dispute
within fifteen (15) days following the delivery of the Stockholders' Agent's
statement, the Parent and the Stockholders' Agent shall jointly designate an
independent certified public accountant, who shall be knowledgeable and
experienced in the operation of radio broadcasting stations, to resolve the
dispute. The accountant's resolution of the dispute shall be final and binding
on the parties, and a judgment may be entered thereon in any court of competent
jurisdiction. Any fees of this accountant shall be split equally between the
Stockholders' Agent on the one hand and the Parent on the other hand.
(c) The Merger Consideration, as reduced by the adjustments under Sections
3.3(a) and (b) as finally determined pursuant to Sections 3.7(a) and (b),shall
be referred to herein as the "Final Adjusted Merger Consideration".
(d) In the event that the Final Adjusted Merger Consideration exceeds the
Preliminary Adjusted Merger Consideration, the Parent shall pay the amount of
such excess at the direction of the Stockholders' Agent by wire transfer of
same day funds within five (5) business days of the final determination of the
Final Adjusted Merger Consideration pursuant to Sections 3.7(a) and (b) and
within such five (5) business day period, the Parent and the Stockholders'
Agent shall instruct the Escrow Agent to disburse to or at the direction of the
Stockholders' Agent the Adjustment Escrow Fund together with all earnings
thereon.
(e) In the event that the Final Adjusted Merger Consideration is less than
the Preliminary Adjusted Merger Consideration, the Parent and the Stockholders'
Agent shall
-10-
18
instruct the Escrow Agent within five (5) business days of the final
determination of the Final Adjusted Merger Consideration to disburse to the
Parent from the Adjustment Escrow Fund an amount equal to the difference
between the Final Adjusted Merger Consideration and the Preliminary Adjusted
Merger Consideration. If following such disbursement to the Parent from the
Adjustment Escrow Fund any amounts remain in the Adjustment Escrow Fund, the
Parent and the Stockholders' Agent shall direct the Escrow Agent to disburse
such remaining amount to or at the direction of the Stockholders' Agent. If the
difference between the Preliminary Adjusted Merger Consideration and the Final
Adjusted Merger Consideration exceeds the amount of the Adjustment Escrow Fund,
the Parent shall have the right to make a claim against the Indemnification
Escrow Fund in the amount of such excess.
(f) Neither the Parent nor the Surviving Corporation shall have any
responsibility or liability for the disbursement or application of any funds
paid to or at the direction of the Stockholders' Agent under this Agreement.
(g) The Parent shall indicate in the Closing Balance Sheet the amount of
the WTMI Accounts Receivable (as defined below) remitted to the Surviving
Corporation during the WTMI Collection Period (as defined below) pursuant to
Section 10.16(b). If the Working Capital as finally determined is less than
$1,000,000 (such shortfall in the Working Capital shall be referred to as the
"Working Capital Deficit") and the WTMI Accounts Receivable remitted to the
Surviving Corporation during the WTMI Collection Period is less than the amount
of the WTMI Accounts Receivable included in the Working Capital at Closing
(such shortfall is hereby referred to as the "WTMI Accounts Receivable
Deficit"), the Parent shall be entitled to either (i) retain the uncollected
WTMI Accounts Receivable and have the full right to collect and retain all
collections therefrom or (ii) receive the lesser of (a) the Working Capital
Deficit and (b) the WTMI Accounts Receivable Deficit from the Adjustment Escrow
Fund or to the extent such fund is insufficient to cover the WTMI Accounts
Receivable Deficit, from the Indemnification Escrow Fund (without taking into
account the limitation set forth in Section 14.6(f)), provided that to extent
the Parent determines to proceed under clause (ii) above, the Surviving
Corporation shall reassign to the WCCC/WBOQ Buyer the uncollected WTMI Accounts
Receivable. If the Working Capital as finally determined is more than
$1,000,000, the Surviving Corporation shall retain the uncollected WTMI
Accounts Receivable and the Surviving Corporation shall have the right to
collect such uncollected WTMI Accounts Receivable.
(h) Following Closing, the Surviving Corporation will agree to air on WTMI
up to 3,750 commercials under trade and barter arrangements entered into by the
Company prior to the Closing (the "Trade and Barter Arrangements"). If the
Surviving Corporation is required to air following the Closing on WTMI a number
of commercials under Trade and Barter Arrangements in excess of 3,750, the
Stockholders shall pay to the Surviving Corporation $80 per commercial run by
WTMI following the Closing in excess of 3,750. Such payment shall be made
exclusively out of the Indemnification Escrow Fund (without regard to any
limitation set forth in Section 14.6(f)).
(i) To the extent that the aggregate value of trade and barter liabilities
of WTMI as of the Closing, calculated in accordance with GAAP, is greater than
the aggregate value of trade and barter assets of WTMI as of the Closing,
calculated in accordance with GAAP, by an amount in excess of $100,000, then
the Parent shall be entitled to a payment in its favor equal to
-11-
19
the amount of the trade and barter deficit in excess of $100,000. The amount of
such trade and barter deficit shall be determined and paid as far as feasible
on the Closing Date as part of the adjustments to the Merger Consideration and
shall be finally determined and paid simultaneously with the other adjustments
to the Merger Consideration as provided in this Section 3.7 from the Adjustment
Escrow Fund or to the extent such fund is insufficient from the Indemnification
Escrow Fund without taking into account the limitation set forth in Section
14.6(f).
3.8 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, any issued and outstanding shares of Company Stock held by a
Stockholder who objects to the Merger and complies with all of the provisions
of the DGCL concerning the right of holders of Company Stock to dissent from
the Merger and require appraisal of its shares of Company Stock (a "Dissenting
Stockholder") shall not be converted into the right to receive the Merger
Consideration as described in Section 2.3(b), but instead shall become the
right to receive such consideration as may be determined to be due to such
Dissenting Stockholder pursuant to the DGCL; provided, however, that each share
of Company Stock issued and outstanding immediately prior to the Effective Time
of the Merger and held by a Dissenting Stockholder ("Dissenting Shares") who
shall, after the Effective Time of the Merger, withdraw its demand for
appraisal or lose its right of appraisal, in either case pursuant to the DGCL,
shall be deemed to be converted into the right to receive the Merger
Consideration in accordance with Section 2.3(b). The Company shall give the
Parent (i) prompt notice of any written demands for appraisal of shares of
Company Stock received by the Company, and (ii) the opportunity to direct all
negotiations and proceedings with respect to any such demands. The Company
shall not, without the prior written consent of the Parent, voluntarily make
any payment with respect to, or settle, or offer to settle or otherwise
negotiate, any such demands.
3.9 Stock Options. All options to acquire Company Stock, whether or not
currently vested, shall be either cancelled or exercised prior to or as of the
Closing Date, and no such stock options shall remain outstanding as of the
Closing Date. At the option of each option holder who exercises outstanding
stock options, the exercise price of such options may be set off by each option
holder against the portion of the Preliminary Adjusted Merger Consideration (as
reduced by the Post-Closing Escrow Funds) that is to become payable for such
option holder's stock at Closing and the proceeds of the exercise of stock
options shall be treated as indicated in Schedule 2.3(b).
Section 4. PURCHASE AND SALE OF WCCC/WBOQ ASSETS
4.1 Agreement to Sell and Buy. On the Closing Date immediately following
the Effective Time, the Surviving Corporation shall sell, transfer and deliver
to the WCCC/WBOQ Buyer and the WCCC/WBOQ Buyer shall purchase, all of the
Surviving Corporation's rights, title and interest in and to the following
assets:
(a) except for the Retained Assets described in Section 4.2, the tangible
and intangible assets, both real and personal, used or useful in the operations
of WCCC and WBOQ, including the current assets attributable to WCCC and WBOQ
which are included in the calculation of the Working Capital under Section
3.3(a) and all trade and barter assets relating to WCCC and WBOQ;
-12-
20
(b) the name and/or xxxx "Xxxxxx Broadcasting", the Xxxxxx logo and all
other related names or marks used by the Company immediately prior to the
Closing, including, without limitations, those marks set forth on Schedule 4.1;
(c) all Internet URLs, including, without limitation, those set forth on
Schedule 4.1 and related computer hardware and software and their related
assets owned by the Surviving Corporation described on Schedule 4.1, any
similar assets acquired between the date of this Agreement and the Closing, and
related computer hardware and software and related assets owned by the
Surviving Corporation not listed on Schedule 4.1 with a value not in excess of
$5,000 per item and $25,000 in the aggregate for all items; and
(d) certain land in Osceola County, Florida owned on the date hereof by
the Company and described on Schedule 5.6.
The assets described in Sections 4.1(a) through (d) shall be referred
to as the "WCCC/WBOQ Assets".
If on any date prior to the fifth anniversary of this Agreement less
than 75% of the daytime schedule of WTMI consists of programming relating to
classical music, then the Surviving Corporation shall transfer to the WCCC/WBOQ
Buyer at no cost to the WCCC/WBOQ Buyer the classical music library of WTMI
within 10 business days of such date. If the Surviving Corporation intends at
any time prior to the fifth anniversary of this Agreement to cease to use the
call letters "WTMI", the Surviving Corporation shall notify the WCCC/WBOQ Buyer
and at the option of the WCCC/WBOQ Buyer, the Surviving Corporation shall use
commercially reasonable efforts to assist the WCCC/WBOQ Buyer to obtain such
call letters for any station owned by the WCCC/WBOQ Buyer.
4.2 Retained Assets.
(a) Except for the assets expressly described in Sections 4.1(b), (c) and
(d), in no event shall any assets used or useful in connection with the
operations of WTMI be included in the WCCC/WBOQ Assets and except for the
assets expressly described in Sections 4.1(b), (c) and (d), the Surviving
Corporation shall retain all of the assets used or useful in connection with
the operations of WTMI, including, without limitation, the following assets:
(i) the Tangible Personal Property used or useful in connection with the
operations of WTMI;
(ii) the Real Property used or useful in connection with the operations of
WTMI;
(iii) the Licenses used or useful in connection with the operations of WTMI;
(iv) the Contracts used or useful in connection with the operations of WTMI;
-13-
21
(v) the Intangibles and all intangible assets of the Surviving Corporation
relating to WTMI that are not specifically included within the
Intangibles, including the goodwill of WTMI, if any;
(vi) all of the Surviving Corporation's proprietary information, technical
information and data, machinery and equipment warranties, maps,
computer discs and tapes, plans, diagrams, blueprints, and schematics,
including filings with the FCC, relating to the business and operation
of WTMI; and
(vii) all books and records relating to the business or operations of WTMI
and all records required by the FCC to be kept by WTMI.
(b) The WCCC/WBOQ Assets shall also exclude the following assets which
shall be retained by the Surviving Corporation:
(i) All of the Surviving Corporation's cash on hand as of the Closing and
all other cash in any of the Surviving Corporation's bank or savings
accounts; any insurance policies, letters of credit, deposits,
prepayments or other similar items and cash surrender value in regard
thereto; and any stocks, bonds, certificates of deposit and similar
investments except for any current assets attributable to WCCC and WBOQ
and included in the calculation of the Working Capital under Section
3.3(a) and any trade and barter assets relating to WCCC and WBOQ;
(ii) Accounts Receivable attributable to WTMI;
(iii) All books and records that the Surviving Corporation is required by
law to retain or that pertain to the Surviving Corporation's corporate
organization;
(iv) Except as provided in Section 10.13, any pension, profit-sharing and
employee benefit plans; and
(v) Any other current assets included in the calculation of the Working
Capital and attributable to WTMI.
The assets described in Sections 4.2(a) and (b) shall be referred to as
the "Retained Assets."
4.3 Purchase Price. The purchase price for the WCCC/WBOQ Assets
shall be Twenty-Five Million Dollars ($25,000,000) (the "Asset Purchase
Price"), adjusted and paid as provided below:
(a) Prorations. The Asset Purchase Price shall be increased by the amount
of the current assets included in the calculation of the Working Capital under
Section 3.3(a) which are attributable to WCCC and WBOQ and shall be reduced by
the amount of the current liabilities included in the calculation of the
Working Capital under Section 3.3(a) which are attributable to WCCC and WBOQ,
which liabilities shall be assumed at Closing by the WCCC/WBOQ Buyer together
with any trade and barter liabilities attributable to WCCC and WBOQ.
-14-
22
(b) Manner of Determining Adjustments. The Asset Purchase Price, taking
into account the adjustments and prorations pursuant to Section 4.3(a), will be
determined finally in accordance with the following procedures:
(i) Not later than five (5) business days before the Closing Date, the
Company shall prepare and deliver to the WCCC/WBOQ Buyer and the Parent a
preliminary statement which shall set forth the Company's good faith estimate of
the prorations to be made pursuant to Section 4.3(a) (the "Prorations
Statement"). The Prorations Statement shall contain all information reasonably
necessary to determine the adjustments to the Asset Purchase Price under Section
4.3(a) to the extent such adjustments can be determined or estimated as of the
date of such statement, and such other information as may be reasonably
requested by the WCCC/WBOQ Buyer and the Parent.
(ii) The final adjustments under Section 4.3(a) shall be equal to the
difference between the current assets and the current liabilities attributable
to WCCC and WBOQ in the calculation of the Final Adjusted Merger Consideration
under Section 3.7.
4.4 Payment of Purchase Price.
(a) Payment of Estimated Purchase Price. The WCCC/WBOQ Buyer shall make
available to the Disbursement Agent at Closing an amount in cash equal to the
Asset Purchase Price, as adjusted under Section 4.3(a) (the "Estimated Asset
Purchase Price") with instructions to the Disbursement Agent to disburse on the
Closing Date the Estimated Asset Purchase Price to the Surviving Corporation or
the Surviving Corporation's designee pursuant to Section 4.7 by wire transfer
of same day funds pursuant to wire instructions which shall be delivered by the
Parent to the Disbursement Agent at least two (2) days prior to the Closing
Date. In the event that the Asset Purchase Price exceeds the Estimated Asset
Purchase Price, the Surviving Corporation may elect to transfer to the
WCCC/WBOQ Buyer by wire transfer of same-day funds the amount of such excess,
and to direct the transfer of the entire unadjusted Asset Purchase Price to its
designee pursuant to Sections 4.6 and 4.7. At least five (5) business days
prior to the Closing, the Company, the WCCC/WBOQ Buyer and the equity holders
of the WCCC/WBOQ Buyer (the "WCCC/WBOQ Equity Holders") shall certify to Buyer
the identity of the WCCC/WBOQ Equity Holders and the amount of the Merger
Consideration payable to them at Closing that they have invested in the
WCCC/WBOQ Buyer and that they authorize the WCCC/WBOQ Buyer to make available
to the Disbursement Agent for disbursement of the Estimated Asset Purchase
Price to the Surviving Corporation or its designee.
(b) Payments to Reflect Adjustments.
(i) If the Asset Purchase Price as finally determined pursuant to Section
4.3(b)(ii) exceeds the Estimated Asset Purchase Price, the WCCC/WBOQ Buyer shall
pay to the Surviving Corporation or to the Surviving Corporation's designee
pursuant to Section 4.7, in immediately available funds within five (5) business
days after the date on which the Asset Purchase Price is finally determined
pursuant to Section 4.3(b)(ii), the difference between the Asset Purchase Price
and the Estimated Asset Purchase Price.
-15-
23
(ii) If the Asset Purchase Price as finally determined pursuant to Section
4.3(b)(ii) is less than the Estimated Asset Purchase Price, the Surviving
Corporation shall pay to the WCCC/WBOQ Buyer, in immediately available funds
within five (5) business days after the date on which the Asset Purchase Price
is finally determined pursuant to Section 4.3(b)(ii), the difference between the
Asset Purchase Price and the Estimated Asset Purchase Price; provided, that in
no event shall the Surviving Corporation be required to make any payments to the
WCCC/WBOQ Buyer under this Section 4.4(b)(ii) until the date on which the Parent
has been paid in full by the Stockholders under Section 3.7(e), and upon receipt
by the Parent of such payment from the Stockholders, the Surviving Corporation
shall immediately pay to the WCCC/WBOQ Buyer the amount owed by the Surviving
Corporation under this Section 4.4(b)(ii).
4.5 Assumption of Liabilities and Obligations. Immediately following the
consummation of the Merger and as of the Closing Date, the WCCC/WBOQ Buyer
shall assume and undertake to pay, discharge and perform (i) all obligations
and liabilities of the Surviving Corporation under the Licenses and the
Contracts which are used or useful in the operations of WCCC and WBOQ insofar
as they relate to the time on and after the Closing Date, (ii) to the extent
set forth in Section 10.13, all obligations and liabilities of the Surviving
Corporation, if any, to any employee employed at WCCC and WBOQ prior to or at
the Effective Time, (iii) all obligations and liabilities relating to the
ownership and operations of WCCC and WBOQ on and after the Closing Date, (iv)
all claims and pending litigation or proceedings relating to the operations of
WCCC or WBOQ prior to or on and after the Closing Date, (v) all obligations and
liabilities of the Surviving Corporation for which the WCCC/WBOQ Buyer gets an
adjustment in its favor under Section 4.3(a), (vi) all obligations and
liabilities relating to the operations of WCCC and WBOQ prior to the Closing
Date for which the Parent has not received a credit in its favor under Section
3.3(a), (vii) the liabilities assumed by the WCCC/WBOQ Buyer under Section
4.3(a) and (viii) all obligations and liabilities under the AAA Agreement
(collectively, the "Assumed Liabilities").
4.6 Like Kind Exchange. The WCCC/WBOQ Buyer shall reasonably cooperate
with the Parent and the Surviving Corporation, as necessary, to qualify the
transfer of the WCCC/WBOQ Assets to the WCCC/WBOQ Buyer as part of a like-kind
exchange of property within the meaning of Section 1031 of the Code, which
cooperation shall include, without limitation, the acceptance of notice of the
assignment of the Parent's and/or the Surviving Corporation's respective rights
under this Agreement, and the manner in which the Purchase Price, as adjusted,
is paid to, and the WCCC/WBOQ Assets are transferred through, a qualified
intermediary (as defined in Treas. Reg. ss. 1.1031(i)-1(g)) (a "Qualified
Intermediary").
4.7 Qualified Intermediary. The Parent desires and intends to effect the
transfers of the WCCC/WBOQ Assets held by the Surviving Corporation, pursuant
to this Agreement as part of an exchange of like-kind properties under Section
1031 of the Code (the "1031 Exchange"). To facilitate the completion of the
1031 Exchange, the Surviving Corporation may assign to a Qualified Intermediary
its rights with respect to the transfer of the WCCC/WBOQ Assets, and its rights
to receive the Asset Purchase Price, as adjusted, transferred by the WCCC/WBOQ
Buyer. The parties hereto agree to cooperate with any other party to complete
the 1031 Exchange; provided, however that (i) the WCCC/WBOQ Buyer shall not
assume responsibility for the tax consequences to the Surviving Corporation or
the Parent arising out of the 1031
-16-
24
Exchange; (ii) any assignment(s) by the Surviving Corporation to a Qualified
Intermediary shall not limit or modify any obligations or liabilities of the
assigning party, and, notwithstanding any such assignment(s), the Surviving
Corporation shall remain directly and primarily bound by all conditions,
representations, warranties and covenants contained herein and all remedies
related thereto; (iii) title to the WCCC/WBOQ Assets shall be delivered by the
Surviving Corporation directly to the WCCC/WBOQ Buyer; (iv) the Qualified
Intermediary, and not the WCCC/WBOQ Buyer, shall be solely responsible for all
actions necessary to acquire and transfer any replacement property not being
acquired pursuant to this Agreement in connection with the 1031 Exchange; (v)
the 1031 Exchange shall be consummated only if it can be consummated on what
would otherwise be the Closing Date and shall not be consummated if doing so
would delay the Closing (whether because of the need for governmental consents
involving the Qualified Intermediary or for any other reason whatsoever); and
(vi) the Parent shall indemnify the Stockholders against any loss, cost or
damage sustained by them arising out of the 1031 Exchange.
4.8 Financial and Tax Reporting. The WCCC/WBOQ Buyer, the Parent, and the
Surviving Corporation agree to use reasonable business efforts to engage in the
mutually agreeable sharing of valuation information in order to obtain mutually
consistent financial and tax reporting, to the greatest extent practicable.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and Merger Sub as
follows which representations and warranties shall be true and correct as of
the date hereof and true and correct in all material respects as of the
Closing:
5.1 Organization, Standing, and Authority. The Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and is duly qualified and in good standing as a foreign
corporation in the jurisdictions listed on Schedule 5.1 hereto. The Company is
duly qualified to conduct business and is in good standing in all jurisdictions
where the nature of its business makes such qualification necessary, except
where the failure to do so would not have a material adverse effect on the
Company. The Company has all requisite power and authority (i) to own, lease,
and use its assets and property as now owned, leased, and used, (ii) to conduct
its businesses and operations as now conducted, and (iii) to execute and
deliver this Agreement and the documents contemplated hereby and thereby, and
to perform and comply with all of the terms, covenants, and conditions to be
performed and complied with by it hereunder and thereunder. The Company is not
a participant in any joint venture or partnership with any other Person with
respect to any part of the operations of its assets. The Company does not
conduct any other business other than the operations of the Stations and an
associated website business.
5.2 Authorization and Binding Obligation. The execution, delivery, and
performance of this Agreement by the Company have been duly authorized by all
necessary actions on the part of the board of directors of the Company. This
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid, and binding obligation of the Company, enforceable against it
in accordance with its terms except as the enforceability of this Agreement
-17-
25
may be affected by bankruptcy, insolvency, or similar laws affecting creditors'
rights generally and by judicial discretion in the enforcement of equitable
remedies.
5.3 Capitalization of the Company; Stock Ownership. The authorized, issued
and outstanding capital stock of the Company is set forth on Schedule 5.3. All
issued and outstanding capital stock of the Company is owned beneficially and
of record in the manner set forth on Schedule 5.3. Schedule 5.3 also sets forth
a list of all of the outstanding options of the Company and the name of the
holders thereof. The Company Stock is validly issued, fully paid and
nonassessable. Other than this Agreement or as set forth on Schedule 5.3, there
is no subscription, option, warrant, call, right, agreement or commitment
obligating the Company to issue, deliver or sell any shares of the capital
stock of the Company or obligating the Company to grant, extend or enter into
any such option, warrant, call or other such right, agreement or commitment.
The Company has delivered to the Parent true and correct copies of the
certificate of incorporation and bylaws of the Company. Schedule 5.3 contains
the name and position of each officer and director of the Company. The Company
has no Subsidiaries and holds no equity interest in any Person.
5.4 Absence of Conflicting Agreements. Subject to obtaining the FCC
Consent, the Consents listed on Schedule 5.4, and making any filing required
under the HSR Act, the execution, delivery, and performance of this Agreement
and the documents contemplated hereby and thereby (with or without the giving
of notice, the lapse of time, or both): (i) do not require the consent of any
third party; (ii) will not conflict with any provision of the organizational
documents of the Company; (iii) will not conflict with, result in a breach of,
or constitute a default under, any law, judgment, order, ordinance, injunction,
decree, rule, regulation, or ruling of any court or governmental
instrumentality; (iv) will not conflict with, constitute grounds for
termination of, result in a breach of, 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 the Company is a
party or by which the Company may be bound; and (v) will not create any claim,
liability, mortgage, lien, pledge, condition, charge, or encumbrance of any
nature whatsoever upon any of the Assets.
5.5 Governmental Licenses. Schedule 5.5 lists for each Station all of the
Licenses of such Station. The Company has delivered to the Parent true and
complete copies of the Licenses issued with respect to WTMI (the "WTMI
Licenses") (including any amendments and other modifications thereto). The WTMI
Licenses have been validly issued, and the Company is the authorized legal
holder thereof. The WTMI Licenses listed on Schedule 5.5 comprise all of the
material licenses, permits, and other authorizations required from any
governmental or regulatory authority for the lawful conduct of the business and
operations of WTMI in the manner and to the full extent they are now conducted,
and none of the WTMI Licenses is subject to any restriction or condition that
would limit in any material respect the operation of WTMI as now operated. The
WTMI Licenses are in full force and effect, and the conduct of the business and
operations of WTMI is in accordance therewith. The Company has no reason to
believe that any of the WTMI Licenses would not be renewed by the FCC or other
granting authority in the ordinary course. The Company is the holder of the
Licenses set forth on Schedule 5.5 with respect to WCCC and WBOQ and has the
right to assign such Licenses to the WCCC/WBOQ Buyer as contemplated by this
Agreement.
-18-
26
5.6 Title to and Condition of Real Property. Schedule 5.6 lists all the
Real Property for each Station and the Company's interests therein. The Real
Property listed on Schedule 5.6 with respect to WTMI (the "WTMI Real Property")
comprises all real property interests necessary to conduct the business and
operations of WTMI as now conducted. The Company has good and marketable fee
simple title, insurable at standard rates, to all fee estates (including the
improvements thereon) included in the WTMI Real Property, free and clear of all
Encumbrances of any nature whatsoever, and without reservation or exclusion of
any mineral, timber, or other rights or interests, except for Permitted
Encumbrances. The Company is the lessee under the WTMI tower lease described on
Schedule 5.6. The WTMI tower lease is in full force and effect in accordance
with its terms. There is not under the WTMI tower lease, any default by the
Company or to the Company's knowledge, by any other party thereto or any event
that, after notice or lapse of time or both, could constitute a default. To the
Company's knowledge, all towers, guy anchors, and buildings and other
improvements used or useful in connection with the operations of WTMI are
located entirely on the WTMI Real Property listed in Schedule 5.6. The Company
has delivered to the Parent true and complete copies of all deeds and leases
pertaining to the WTMI Real Property. All WTMI Real Property (i) is in
operating condition consistent with its present use, (ii) is available for
immediate use in the conduct of the business and operations of WTMI, and (iii)
to the Company's knowledge, complies in all material respects with all
applicable building or zoning codes and the regulations of any governmental
authority having jurisdiction. To the Company's knowledge, the Company has full
legal and practical access to the WTMI Real Property. The Parent and the Merger
Sub acknowledge that the studio lease for WTMI will expire in September 2000.
5.7 Title to and Condition of Tangible Personal Property. Schedule 5.7
lists all material items of Tangible Personal Property for WTMI and all items
of Tangible Personal Property having an individual value of $50,000 or more for
each other Station. The Company owns and has good title to each item of
Tangible Personal Property used or useful in connection with the operations of
WTMI (the "WTMI Tangible Personal Property"), and none of the WTMI Tangible
Personal Property owned by the Company is subject to any Encumbrance, except
for Permitted Encumbrances. The Tangible Personal Property used in connection
with the operations of WTMI is operational so that it permits the transmission
of WTMI's signal in compliance with the FCC Licenses and applicable rules,
regulations and policies of the FCC and other applicable governmental
authorities.
5.8 Contracts. Schedule 5.8 is a true and complete list of all Contracts
except (a) Contracts with advertisers for the sale of advertising time on the
Stations for cash at prevailing rates and (b) Contracts entered into in the
ordinary course of business that do not involve liabilities at Closing in
excess of Twenty-Five Thousand Dollars ($25,000) individually and Two Hundred
Thousand Dollars ($200,000) in the aggregate for all such Contracts for WTMI
and One Hundred Thousand Dollars ($100,000) individually and Five Hundred
Thousand Dollars ($500,000) in the aggregate for the other Stations. The
Company has delivered to the Parent true and complete copies of all Contracts
listed on Schedule 5.8, true and complete memoranda of all oral Contracts
listed on Schedule 5.8 (including any amendments and other modifications to
such Contracts), and a schedule summarizing the Company's obligations under
trade and barter agreements relating to each Station. Schedule 5.8 also
includes an amortization schedule for all of the Stations' programming
Contracts prepared in accordance with the Company's normal practices and
accounting procedures. The Company has and, to the Company's knowledge, each
-19-
27
other party to the Contracts has complied in all material respects with all of
the terms and conditions of the Contracts and there is not under any Contract
any default by the Company, or to the Company's knowledge, by any party thereto
or any event that, after notice or lapse of time or both, could constitute a
default.
5.9 Consents. Except for the FCC Consent provided for in Section 10.1 and
the other Consents described in Schedule 5.4, and any filing required under the
HSR Act, no consent, approval, permit, or authorization of, or declaration to
or filing with any governmental or regulatory authority, or any other third
party is required to consummate the Merger and the WCCC/WBOQ Sale or to enable
the Surviving Corporation to conduct the business and operations of WTMI in
essentially the same manner as such business and operations are now conducted.
5.10 Intangibles. Schedule 5.10 is a true and complete list of all material
Intangibles for WTMI (exclusive of those listed in Schedule 5.5). The Company
is not infringing upon or otherwise acting adversely to any trademarks, trade
names, service marks, service names, copyrights, patents, patent applications,
know-how, methods, or processes owned by any other Person, and there is no
claim or action pending, or to the knowledge of the Company threatened, with
respect thereto.
5.11 Insurance. Schedule 5.11 is a true and complete list of all insurance
policies of the Company. All policies of insurance listed in Schedule 5.11 (i)
are adequate in amount with respect to and for the full value of the Assets,
(ii) are in full force and effect and (iii) insure the Assets and the business
of the Company against all customary and foreseeable risks.
5.12 Reports. All returns, reports, and statements that the Company is
currently required to file with the FCC or with any other governmental agency
with respect to WTMI have been filed, and all reporting requirements of the FCC
and other governmental authorities having jurisdiction over WTMI have been
complied with in all material respects. All of such returns, reports, and
statements are substantially complete and correct as filed. The Company has
timely paid to the FCC all annual regulatory fees payable with respect to the
FCC Licenses. All tower registration applications that the Company is required
to file with the FCC with respect to WTMI have been filed and the FCC has
issued registrations with respect to such towers.
5.13 Employee Plans and Matters.
(a) Schedule 5.13 includes a complete and accurate list of all employees
of the Company, their job descriptions, current compensation levels, dates of
hire and amounts and dates of last salary or wage increase as of the date of
this Agreement.
(b) All of the Company's Employee Plans and Compensation Arrangements are
listed in Schedule 5.13, and complete and accurate copies of (including any
amendments to) any such written Employee Plans and Compensation Arrangements
(or related insurance policies) have been furnished or made available to the
Parent, along with copies of any employee handbooks or similar documents
describing such Employee Plans and Compensation Arrangements. Any unwritten
Employee Plans or Compensation Arrangements also are listed in Schedule 5.13,
and complete descriptions have been furnished or made available to the Parent.
-20-
28
Except as disclosed in Schedule 5.13, the Company is not a party to and does
not have in effect or to become effective after the date of this Agreement any
plan arrangement or other scheme which will become an Employee Plan or
Compensation Arrangement (including, but not limited to, any bonus, cash or
deferred compensation, severance, medical, pension, profit sharing or thrift,
stock option, employee stock ownership, life or group insurance, death benefit,
vacation, sick leave, disability or trust agreement or arrangement), or any
amendment to an Employee Plan or Compensation Arrangement.
(c) The Company has furnished or made available to the Parent the Forms
5500 filed for each of the Company's Employee Plans (including all attachments
and schedules), actuarial reports, summaries of material modifications, summary
annual reports, and any other employer notices (including, governmental filings
and descriptions of material changes to Employee Plans and/or Compensation
Arrangements) relating to the Company's Employee Plans for the last three plan
years, and the current summary plan descriptions.
(d) Each Employee Plan and Compensation Arrangement has been administered
in compliance with its own terms in all material respects and in material
compliance with the provisions of ERISA, the Code, the Age Discrimination in
Employment Act and any other applicable Federal or state laws.
(e) Neither the Company nor any ERISA Affiliate is contributing to, is
required to contribute to, or has contributed within the last six (6) years to,
any Multiemployer Plan, and neither the Company nor any ERISA Affiliate has
incurred within the last six (6) years, or reasonably expects to incur, any
"withdrawal liability," as defined under Section 4201 et seq. of ERISA.
(f) The Company is not aware of the existence of any governmental
inspection, investigation, audit or examination of any Employee Plan or
Compensation Arrangement listed on Schedule 5.13 or of any facts which would
lead it to believe that any such governmental inspection, investigation, audit
or examination is pending or threatened. There exists no action, suit or claim
(other than routine claims for benefits) with respect to any Employee Plan or
Compensation Arrangement pending or, to the knowledge of the Company,
threatened against any of such Employee Plan or Compensation Arrangement, and
the Company possesses no knowledge of any facts which could give rise to any
such action, suit or claim.
(g) Neither the Company nor any ERISA Affiliate sponsors, maintains or
contributes to any Employee Plan or Compensation Arrangement that provides
retiree medical or retiree life insurance coverage to former employees of the
Company, except to the extent required by Section 4980B of the Code or other
applicable law.
(h) Except as described in Schedule 5.13, with respect to each Employee
Plan and, to the extent applicable, each Compensation Arrangement: (i) each
Employee Plan that is intended to be tax-qualified, and each amendment thereto,
is the subject of a favorable determination letter, and no plan amendment that
is not the subject of a favorable determination letter would affect the
validity of an Employee Plan's letter; (ii) no condition or event exists or is
expected to occur that could reasonably be expected to subject, directly or
indirectly, the Company or any ERISA Affiliate to any material liability,
contingent or otherwise, or the
-21-
29
imposition of any lien on the assets of the Company or any ERISA Affiliate
under the Code or Title IV of ERISA whether to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, or any other person; (iii) no
Employee Plan ever has incurred an "accumulated funding deficiency," as such
term is defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code,
whether or not waived, and otherwise always has fully met the funding standards
required under Title I of ERISA and Section 412 of the Code; (iv) no
"reportable event," as that term is defined in Section 4043(c)(1) through (8)
of ERISA and, to the knowledge of the Company, Section 4043(c)(9) of ERISA,
ever has occurred with respect to any Employee Plan and no reportable event
requires prior notice; (v) there are no unfunded liabilities with respect to
any tax-qualified Employee Plan, i.e., the actuarial present value of all
"benefit liabilities" (determined within the meaning of Section 401(a)(2) of
the Code) under such Employee Plan, whether or not vested, does not exceed the
current value of the assets of such Employee Plan; and (vi) no prohibited
transaction, within the definition of Section 4975 of the Code or Title 1, Part
4 of ERISA, has occurred which would subject the Company to material liability.
(i) Schedule 5.13 contains a complete and accurate list of qualified
beneficiaries as defined under Section 4980B(g)(1) of the Code, as of the
effective date of this Agreement (including qualified beneficiaries who are in
the election period for continuation coverage but who have not yet elected
continuation coverage), the date of the applicable qualifying event and the
nature of the qualifying event relating to the duration of such coverage.
Schedule 5.13 shall only contain the names of those qualified beneficiaries
whose status as such is attributable to prior employment at WTMI. There have
been no failures to provide continuation coverage as required by Section
4980B(f) of the Code that would result in any material liability to the
Company. The Company agrees to provide to the Parent prior to Closing an
updated list of such qualified beneficiaries, as described above, effective as
of the Closing Date.
(j) All contributions or premium payments with respect to Employee Plans
and Compensation Arrangements accrued for any period ending on or before the
Closing Date have been or will be timely paid by the Company before the Closing
Date or will be reflected in the computation of the Working Capital. Except as
disclosed in Schedule 5.13(j) neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, stay bonus, or
unemployment compensation) becoming due to any director or employee of the
Company, (ii) result in the acceleration of vesting under any Employee Plan or
Compensation Arrangement, or (iii) increase any benefits otherwise payable
under any Employee Plan or Compensation Arrangement; and any such payment or
increase in benefits is fully deductible by Company under the Code, including
but not limited to Sections 162, 280G and 404.
(k) All Employee Plans listed on Schedule 5.13 that provide health and
welfare benefits coverage to current and/or former employees, directors or
independent contractors of the Company or any other trade or business under
common control with the Company (within the meaning of Sections 414(b), (c),
(m) or (o) of the Code), including the Surviving Corporation, are fully
insured.
(l) For purposes of this Agreement, the following terms shall have the
meaning indicated: (i) "Employee Plan" shall mean any retirement or welfare
plan or arrangement or any other employee benefit plan as defined in Section
3(3) of ERISA to which
-22-
30
the Company or any ERISA Affiliate contributes or to which the Company or any
ERISA Affiliate sponsors, maintains or otherwise is bound; (ii) "Code" shall
mean the Internal Revenue Code of 1986, as amended, any successor thereto and
any regulations promulgated thereunder; (iii) "Compensation Arrangement" shall
mean any plan or compensation arrangement other than an Employee Plan, whether
written or unwritten, which provides to employees, former employees, officers,
directors and shareholders of the Company or any ERISA Affiliate any
compensation or other benefits, whether deferred or not, in excess of base
salary or wages, including, but not limited to, any bonus or incentive plan,
stock rights plan, deferred compensation arrangement, life insurance, stock
purchase plan, severance pay plan and any other employee fringe benefit plan;
(iv) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, any successor thereto and any regulations promulgated thereunder; (v)
"Multiemployer Plan" means a plan, as defined in ERISA Section 3(37), to which
the Company or any ERISA Affiliate has contributed, is contributing or is
required to contribute; and (vi) "ERISA Affiliate" shall mean any trade or
business related to the Company under the terms of Sections 414(b), (c), (m) or
(o) of the Code.
5.14 Tax Matters. Except as set forth on Schedule 5.14 hereof:
(a) The Company has filed or has caused to be filed in accordance with
applicable law all Tax Returns of the Company required to be filed with the
appropriate governmental authorities in all jurisdictions in which such Tax
Returns are required to be filed by the Company (except Tax Returns for which
the filing date has not expired or has been extended and such extension period
has not expired and Tax Returns which the failure to file would not,
individually or in the aggregate, have a material adverse effect on the
Company), and all Taxes shown on such Tax Returns and any other Taxes claimed
to be due by any federal or state taxing authority have been properly paid to
the extent such Taxes have become due and payable. All such Tax Returns are
correct and complete in all material respects. The Company has also paid all
Taxes required to be paid but for which no Tax Return was required to be filed,
to the extent such Taxes have become due and payable. The Company has delivered
to Parent true and complete copies of all income Tax Returns of the Company for
the tax years ended December 31, 1997, and December 31, 1998 (and will deliver
true and complete copies of all income Tax Returns of the Company for the tax
year ended December 31, 1999, and any other income Tax Returns filed after the
date hereof, within 30 days after filing unless otherwise provided in Section
10.14.) Schedule 5.14 lists all jurisdictions where Tax Returns are required to
be filed with respect to the Company except for any jurisdiction for which a
failure to file such Tax Returns, individually or in the aggregate, would not
have a material adverse effect on the Company. The Financial Statements for the
period ended January 31, 2000 reflect an adequate reserve in accordance with
GAAP (without regard to any amounts reserved for deferred taxes) for all unpaid
Taxes payable by the Company for all Tax periods and portions thereof through
the date of such Financial Statements.
(b) The Company has not executed any waiver or extension of any statute of
limitations on the assessment or collection of any Tax or with respect to any
liability arising therefrom which waiver or extension remains in effect. None
of the federal, state or local income Tax Returns filed by or on behalf of the
Company are currently being audited by any taxing authority, and there are no
other examinations, requests for information or other administrative or
judicial proceedings pending with respect to Taxes of the Company. Neither
-23-
31
the Internal Revenue Service nor any other taxing authority has asserted any
deficiency or claim for additional Taxes against, or any adjustment of Taxes
relating to the Company, and there are no proposed reassessments of any
property owned by the Company that would affect the Taxes of the Company. There
are no Tax liens on any assets of the Company, other than liens for current
Taxes not yet due and payable without penalty and liens for Taxes that are
being contested in good faith by appropriate proceedings.
(c) The Company has not been at any time a member of any partnership,
joint venture or other arrangement or contract which is treated as a
partnership for federal, state, local or foreign tax purposes or the holder of
a beneficial interest in any trust for any period for which the statute of
limitations for any Tax has not expired.
(d) As of the Closing, there will be no tax sharing agreements or similar
arrangements with respect to or involving the Company. The Company is not, and
has never been, a member of an affiliated group filing a consolidated federal
income tax return pursuant to Sections 1501 of the Code or comparable
provisions of any State or local law. The Company has no liability for the
Taxes of any Person pursuant to Section 1.1502-6 of the Treasury Regulations
promulgated under the Code or comparable provisions of any taxing authority in
respect of a consolidated, combined or unitary Tax Return, or as a transferee
or successor to any other Person.
(e) No consent under Section 341(f) of the Code has ever been filed with
respect to the Company.
(f) The Company is not, and for the five years preceding the Closing Date
has not been, a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code.
(g) Within sixty (60) days following the date of this Agreement, the
Company shall deliver to the Parent a summary setting forth: (i) the tax basis
of the assets of the Company as of December 31, 1998 and estimated as of
December 31, 1999; (ii) the net operating loss carryover, general business
credit carryover, alternative minimum tax carryover and capital loss carryover
of the Company available for federal, state and local income tax purposes as of
December 31, 1998 and estimated as of December 31, 1999; and (iii) all federal,
state and local tax elections in effect for the Company as of December 31,
1998.
(h) As of December 31, 1999, the aggregate net operating loss carryover
under Code Section 172 of the Company for all taxable years ending on or prior
to December 31, 1999 is estimated to be not less than $7,500,000, and as of the
Effective Time (assuming the exercise of all outstanding stock options and
payment of the amounts set forth in Xxxx Xxxxxxxx'x employment agreement), the
aggregate net operating loss carryover under Code Section 172 of the Company
for all taxable years ending on or prior to the taxable year ending on the
Effective Time is estimated to be not less than $14,000,000.
5.15 Claims and Legal Actions. Except for any FCC rulemaking proceedings
generally affecting the broadcasting industry and except as set forth in
Schedule 5.15, there is no claim, legal action, counterclaim, suit,
arbitration, governmental investigation or other legal,
-24-
32
administrative, or tax proceeding, nor any order, decree or judgment, in
progress or pending, or to the knowledge of the Company threatened, against or
relating to the Company nor does the Company know or have reason to be aware of
any basis for the same.
5.16 Environmental Matters. To the Company's knowledge:
(a) The Company has complied in all material respects with all laws, rules,
and regulations of all federal, state, and local governments (and all agencies
thereof) concerning the environment, public health and safety, and employee
health and safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced against the
Company alleging any material failure to comply with any such law, rule, or
regulation.
(b) The Company has no liability (and there is no basis related to the past
or present operations, properties, or facilities of the Company for any present
or future charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against the Company giving rise to any such liability) under
the Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Federal Water Pollution Control
Act, the Clean Air Act, the Safe Drinking Water Act, the Toxic Substances
Control Act, the Refuse Act, or the Emergency Planning and Community
Right-to-Know Act (each as amended) or any other law, rule, or regulation of
any federal, state, or local government (or agency thereof) concerning release
or threatened release of hazardous substances, public health and safety, or
pollution or protection of the environment.
(c) The Company has no material liability (and there is no basis for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Company giving rise to any such
liability) under the Occupational Safety and Health Act, as amended, or under
any other law, rule, or regulation of any federal, state, or local government
(or agency thereof) concerning employee health and safety.
(d) The Company has obtained and been in compliance with all of the terms
and conditions of all material permits, licenses, and other authorizations
which are required under, and has complied with all other material limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in, all federal, state, and local
laws, rules, and regulations (including all codes, plans, judgments, orders,
decrees, stipulations, injunctions, and charges thereunder) relating to public
health and safety, worker health and safety, and pollution or protection of the
environment, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes.
(e) All properties and equipment used in the business of the Company are
and have been free of asbestos and asbestos-related products, PCB's, methylene
chloride, trichloroethylene, 1, 2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous
-25-
33
Substances (as defined in Section 302 of the Emergency Planning and Community
Right-to-Know Act).
(f) No pollutant, contaminant, or chemical, industrial, hazardous, or
toxic material or waste has ever been manufactured, buried, stored, spilled,
leaked, discharged, emitted, or released by the Company at any site including
on the Real Property or by any other party on any Real Property in a manner
that could result in a material liability under any environmental laws or
regulations.
5.17 Compliance with Laws. To the Company's knowledge, the Company has
complied in all material respects with the WTMI Licenses and all federal,
state, and local laws, rules, regulations, and ordinances. To the Company's
knowledge, neither the ownership or use of the properties of the Stations nor
the conduct of the business or operations of the Company conflicts with the
rights of any other person or entity.
5.18 Conduct of Business in Ordinary Course. Since December 31, 1999, the
Company has conducted the business and operations of the Stations only in the
ordinary course and has not:
(a) Suffered any adverse change (other than changes generally affecting
the radio broadcasting industry or the Miami/Ft. Lauderdale radio broadcasting
market) in the business, assets, properties, prospects or condition (financial
or otherwise) of the Company materially and adversely affecting the valuation
of WTMI as a licensed and transmitting radio broadcasting facility without
regard to its programming format, employees or results of operations (it being
acknowledged that adverse changes having an effect on the Company's Working
Capital will be given effect through the Working Capital adjustment in Section
3.3(a)).
(b) Made any material increase in compensation payable or to become payable
to any of the employees of the Company, or any bonus payment made or promised
to any employee of the Company, or any material change in personnel policies,
employee benefits, or other compensation arrangements affecting the employees
of the Company;
(c) Made any sale, assignment, lease, or other transfer of any of WTMI's
properties other than in the normal and usual course of business with suitable
replacements being obtained therefor; or
(d) Transferred or granted any right under, or entered into any settlement
regarding the breach or infringement of, any license, patent, copyright,
trademark, trade name, franchise, or similar right, or modified any existing
right of the Company.
5.19 Financial Statements. The Company has furnished the Parent with true
and complete copies of audited balance sheets of the Company for the period
ended December 31, 1998, unaudited balance sheets of the Company for the period
ended December 31, 1999 and unaudited balance sheets of the Company for the
period ending January 31, 2000 ("Financial Statements") which are attached
hereto as Schedule 5.19. The Financial Statements have been prepared from the
books and records of the Company, have been prepared in accordance with
generally accepted accounting principles consistently applied and maintained
throughout the periods indicated, accurately reflect the books, records, and
accounts of the Company (which
-26-
34
books, records, and accounts are complete and correct), are complete and
correct in all material respects, and present fairly the financial condition of
the Company as at their respective dates. None of the Financial Statements
fails to disclose any material contingent liabilities of the Company that are
required to be disclosed in accordance with GAAP. Except for obligations and
liabilities (i) set forth in the Financial Statements or (ii) incurred in the
ordinary course of business (other than contingent liabilities) since the date
of the most recent balance sheet included in the Financial Statements, the
Company has no liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise). No dividends have been declared on any
capital stock of the Company which are unpaid.
5.20 Transactions with Affiliates. Except as disclosed in Schedule 5.20, the
Company has not been involved in any business arrangement or relationship in
connection with WTMI with any Stockholder or any affiliate of any Stockholder
or the Company, and no Stockholder or affiliate of the Company or any
Stockholder owns any property or right, tangible or intangible, which is used
in the business of WTMI. As used in this paragraph, "affiliate" has the meaning
set forth in Rule 12b-2 promulgated under the Securities and Exchange Act of
1934.
5.21 Broker. Neither the Company nor any person acting on the Company's
behalf has incurred any liability for any finders' or brokers' fees or
commissions in connection with the transactions contemplated by this Agreement.
5.22 Full Disclosure. No representation or warranty made by the Company in
this Agreement or in any certificate, document, or other instrument furnished
or to be furnished by the Company pursuant hereto intentionally, knowingly or
recklessly contains or will contain any untrue statement of a material fact, or
intentionally, knowingly or recklessly omits or will omit to state any material
fact and required to make any statement made herein or therein not misleading.
5.23 Labor Relations. The Company is not a party to or subject to any
collective bargaining agreements. The Company has no written or oral contracts
of employment other than those listed in Schedule 5.7. The Company has complied
in all material respects with all laws, rules, and regulations relating to the
employment of labor, including those related to wages, hours, collective
bargaining, occupational safety, discrimination, and the payment of social
security and other payroll related taxes, and the Company has not received any
written notice alleging that it has failed to comply with any such laws, rules,
or regulations. No controversies, disputes, or proceedings are pending or, to
the Company's knowledge, threatened, between the Company and any employee
(singly or collectively). No labor union or other collective bargaining unit
represents or claims to represent any of the employees of the Company. There is
no union campaign being conducted to represent employees of the Company or to
solicit cards from employees to authorize a union to request a National Labor
Relations Board certification election with respect to any employees of the
Company.
5.24 Bank Accounts; Powers of Attorney. All of the Company's bank accounts,
and the names of all authorized signatories on all such accounts, are set forth
on Schedule 5.24. All of the Company's powers of attorney are also set forth on
Schedule 5.24.
5.25 Certain Statutes. The Stockholders and the Company have taken all
appropriate and necessary actions to ensure that the restrictions on business
combinations in Section 203 of
-27-
35
the DGCL will not have any effect on the Merger or the other transactions
contemplated by this Agreement. No "fair price," "moratorium," "control share
acquisition" or other similar state or federal anti-takeover statute or
regulation (each a "Takeover Statute") is applicable to the Merger or the other
transactions contemplated by this Agreement.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE PARENT
The Parent represents and warrants to the Company and the WCCC/WBOQ
Buyer as follows which representations and warranties shall be true and correct
as of the date hereof and true and correct in all material respects as of the
Closing:
6.1 Organization, Standing, and Authority. The Parent is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Delaware. The Parent has all requisite power and authority to execute and
deliver this Agreement and the documents contemplated hereby and thereby, and
to perform and comply with all of the terms, covenants, and conditions to be
performed and complied with by the Parent hereunder and thereunder.
6.2 Authorization and Binding Obligation. The execution, delivery, and
performance of this Agreement by the Parent have been duly authorized by all
necessary actions on the part of the Parent. This Agreement has been duly
executed and delivered by the Parent and constitutes the legal, valid, and
binding obligations of the Parent, enforceable against the Parent in accordance
with its terms except as the enforceability of this Agreement may be affected
by bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by judicial discretion in the enforcement of equitable remedies.
6.3 Absence of Conflicting Agreements. Subject to obtaining the FCC
Consent, the Consents listed on Schedule 6.3, and making any filing required
under the HSR Act, the execution, delivery, and performance by the Parent of
this Agreement and the documents contemplated hereby and thereby (with or
without the giving of notice, the lapse of time, or both): (i) do not require
the consent of any third party; (ii) will not conflict with the organizational
documents of the Parent; (iii) will not conflict with, result in a breach of,
or constitute a default under, any law, judgment, order, injunction, decree,
rule, regulation, or ruling of any court or governmental instrumentality; or
(iv) will not conflict with, constitute grounds for termination of, result in a
breach of, 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 the Parent is a party or by which the Parent may be
bound, in each case under clauses (i) (ii), (iii) and (iv), such that the
Parent could not perform its obligations under this Agreement.
6.4 Broker. Neither the Parent nor any person acting on the Parent's behalf
has incurred any liability for any finders' or brokers' fees or commissions in
connection with the transactions contemplated by this Agreement.
6.5 The Parent's Qualifications. The Parent is in all material respects
legally, financially and otherwise qualified to acquire control of the Company
under the Communications Act of 1934, as amended (the "Act"), and the rules,
regulations and policies of the FCC.
-28-
36
6.6 Full Disclosure. No representation or warranty made by the Parent in
this Agreement or in any certificate, document, or other instrument furnished
or to be furnished by the Parent pursuant hereto intentionally, knowingly or
recklessly contains or will contain any untrue statement of a material fact, or
intentionally, knowingly or recklessly omits or will omit to state any material
fact and required to make any statement made herein or therein not misleading.
6.7 WCCC/WBOQ Sale. Following the consummation of the Merger, the Parent
hereby represents to the WCCC/WBOQ Buyer that subject to the terms and
conditions of this Agreement, the Surviving Corporation shall have the right to
assign the FCC Licenses of WCCC and WBOQ to the WCCC/WBOQ Buyer. Other than as
set forth in the previous sentence, the Company, the Surviving Corporation, the
Parent and the Merger Sub make no representations or warranties whatsoever to
the WCCC/WBOQ Buyer, whether express or implied, relating to the WCCC/WBOQ Sale
or the WCCC/WBOQ Assets.
6.8 Litigation. Except for administrative rulemaking or other proceedings
of general applicability to the radio broadcast industry, there is, as of the
date hereof, no civil, criminal or administrative action, notice of apparent
violation, notice of apparent liability, suit, demand, claim, complaint,
hearing, litigation, action, proceeding or investigation of any nature pending
or, to the Parent's knowledge, threatened against or affecting it that would
materially adversely impair the ability of the Parent to consummate the
transactions contemplated by, or to satisfy its obligations under, this
Agreement, or delay in any material respect or prevent the consummation of any
of the transactions contemplated by this Agreement.
Section 7. REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Merger Sub represents and warrants to the Company and the WCCC/WBOQ
Buyer as follows which representations and warranties shall be true and correct
as of the date hereof and true and correct in all material respects as of the
Closing:
7.1 Organization, Standing, and Authority. Merger Sub is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware. Merger Sub has all requisite power and authority to execute
and deliver this Agreement and the documents contemplated hereby and thereby,
and to perform and comply with all of the terms, covenants, and conditions to
be performed and complied with by Merger Sub hereunder and thereunder.
7.2 Authorization and Binding Obligation. The execution, delivery, and
performance of this Agreement by Merger Sub have been duly authorized by all
necessary actions on the part of Merger Sub. This Agreement has been duly
executed and delivered by Merger Sub and constitutes the legal, valid, and
binding obligations of Merger Sub, enforceable against Merger Sub in accordance
with its terms except as the enforceability of this Agreement may be affected
by bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by judicial discretion in the enforcement of equitable remedies.
7.3 Absence of Conflicting Agreements. Subject to obtaining the FCC
Consent, the Consents listed on Schedule 7.3, and making any filing required
under the HSR Act, the execution, delivery, and performance by Merger Sub of
this Agreement and the documents
-29-
37
contemplated hereby and thereby (with or without the giving of notice, the
lapse of time, or both): (i) do not require the consent of any third party;
(ii) will not conflict with the organizational documents of Merger Sub; (iii)
will not conflict with, result in a breach of, or constitute a default under,
any law, judgment, order, injunction, decree, rule, regulation, or ruling of
any court or governmental instrumentality; or (iv) will not conflict with,
constitute grounds for termination of, result in a breach of, 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 Merger Sub is a party or by which Merger Sub may be bound, in each case
under clauses (i) through (iv) such that Merger Sub could not perform its
obligations under this Agreement.
7.4 Broker. Neither Merger Sub nor any person acting on Merger Sub's
behalf has incurred any liability for any finders' or brokers' fees or
commissions in connection with the transactions contemplated by this Agreement.
7.5 Full Disclosure. No representation or warranty made by Merger Sub in
this Agreement or in any certificate, document, or other instrument furnished
or to be furnished by Merger Sub pursuant hereto intentionally, knowingly or
recklessly contains or will contain any untrue statement of a material fact, or
intentionally, knowingly or recklessly omits or will omit to state any material
fact and required to make any statement made herein or therein not misleading.
Section 8. REPRESENTATIONS AND WARRANTIES OF THE WCCC/WBOQ BUYER
The WCCC/WBOQ Buyer represents and warrants to the Parent and Merger
Sub and at Closing to the Surviving Corporation as follows which
representations and warranties shall be true and correct as of the date hereof
and true and correct in all material respects as of the Closing:
8.1 Organization, Standing, and Authority. The WCCC/WBOQ Buyer is a
limited liability company duly organized, validly existing, and in good
standing under the laws of the State of Delaware and at Closing, will be duly
qualified to conduct business as a foreign limited liability company under the
laws of the State of Connecticut and Massachusetts. The WCCC/WBOQ Buyer has all
requisite power and authority to execute and deliver this Agreement and the
documents contemplated hereby and thereby, and to perform and comply with all
of the terms, covenants, and conditions to be performed and complied with by
the WCCC/WBOQ Buyer hereunder and thereunder.
8.2 Authorization and Binding Obligation. The execution, delivery, and
performance of this Agreement by the WCCC/WBOQ Buyer have been duly authorized
by all necessary actions on the part of the WCCC/WBOQ Buyer. This Agreement has
been duly executed and delivered by the WCCC/WBOQ Buyer and constitutes the
legal, valid, and binding obligations of the WCCC/WBOQ Buyer, enforceable
against the WCCC/WBOQ Buyer in accordance with its terms except as the
enforceability of this Agreement may be affected by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally and by judicial discretion
in the enforcement of equitable remedies.
-30-
38
8.3 Absence of Conflicting Agreements. Subject to obtaining the FCC
Consent, the Consents listed on Schedule 8.3, and making any filing required
under the HSR Act, the execution, delivery, and performance by the WCCC/WBOQ
Buyer of this Agreement and the documents contemplated hereby and thereby (with
or without the giving of notice, the lapse of time, or both): (i) do not
require the consent of any third party; (ii) will not conflict with the
organizational documents of the WCCC/WBOQ Buyer; (iii) will not conflict with,
result in a breach of, or constitute a default under, any law, judgment, order,
injunction, decree, rule, regulation, or ruling of any court or governmental
instrumentality; or (iv) will not conflict with, constitute grounds for
termination of, result in a breach of, 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 the WCCC/WBOQ Buyer
is a party or by which the WCCC/WBOQ Buyer may be bound, in each case under
clauses (i) through (iv) such that the WCCC/WBOQ Buyer could not acquire or
operate the WCCC/WBOQ Assets.
8.4 Broker. Neither the WCCC/WBOQ Buyer nor any person acting on the
WCCC/WBOQ Buyer's behalf has incurred any liability for any finders' or
brokers' fees or commissions in connection with the transactions contemplated
by this Agreement.
8.5 WCCC/WBOQ Buyer's Qualifications. The WCCC/WBOQ Buyer is in all
material respects legally, financially and otherwise qualified to acquire the
WCCC/WBOQ Assets under the Act and the rules, regulations and policies of the
FCC.
8.6 Availability of Funds. The WCCC/WBOQ Buyer will have available on the
Closing Date sufficient funds to acquire the WCCC/WBOQ Assets.
8.7 Full Disclosure. No representation or warranty made by the WCCC/WBOQ
Buyer in this Agreement or in any certificate, document, or other instrument
furnished or to be furnished by the WCCC/WBOQ Buyer pursuant hereto
intentionally, knowingly or recklessly contains or will contain any untrue
statement of a material fact, or intentionally, knowingly or recklessly omits
or will omit to state any material fact and required to make any statement made
herein or therein not misleading.
Section 9. OPERATIONS OF THE STATION PRIOR TO CLOSING
9.1 Generally. The Company agrees that, between the date of this Agreement
and the Closing Date, the Company shall operate without material exception its
business in the ordinary course of business in accordance with its past
practices (except where such conduct would conflict with the following
covenants or with the Company's other obligations under this Agreement), and in
accordance with the other covenants in this Section 9.
9.2 Employees and Compensation. Except as specifically contemplated by this
Agreement, the Company shall not take any action to (i) institute any
severance, retention or termination pay practices with respect to any
directors, officers or employees of the Company or to increase the benefits
payable under its severance or termination pay practices in effect on the date
hereof and set forth in Schedule 5.13; (ii) increase the compensation payable,
or to become payable, to employees of the Company, except as required by
existing written agreements disclosed in Schedule 5.13 or increases in the
ordinary course of business consistent with past
-31-
39
practice not exceeding 5% for any individual employee; (iii) adopt any Employee
Plan or Compensation Arrangement; (iv) amend any Employee Plan or Compensation
Arrangement; (v) pay or award or agree to pay or award any pension, retirement
allowance or other incentive awards or other employee benefit not required by
this Agreement or any of the Employee Plans or Compensation Arrangements to any
current or former director, officer or employee of the Company; (vi) enter into
any collective bargaining agreement covering any employees, through negotiations
or otherwise, or make any commitments or incur any liability to any labor
organization with respect to any employees of the Company; (vii) renew,
terminate, waive or amend, except as may be required by applicable law, any
collective bargaining agreement; or (viii) voluntarily recognize any union or
other entity as the collective bargaining representative for any of the
employees of the Company.
9.3 Contracts. Without the written consent of the Parent, the Company will
not enter into any contract or commitment, or amend or terminate any Contract
(or waive any material right thereunder), or incur any obligations (including
obligations relating to the borrowing of money or the guaranteeing of
indebtedness), except for (a) cash time sales agreements made in the ordinary
course of business, (b) Contracts entered into in the ordinary course of
business and having a cost or value of Twenty-Five Thousand Dollars ($25,000) or
less individually or Two Hundred Thousand Dollars ($200,000) or less in the
aggregate, and (c) Contracts relating to WCCC and WBOQ which will be assumed at
Closing by the WCCC/WBOQ Buyer so that the Surviving Corporation will have no
liability thereunder following the Closing. Prior to the Closing Date, the
Company shall deliver to the Parent a list of all Contracts entered into between
the date of this Agreement and the Closing Date, together with copies of such
Contracts. Prior to Closing, the Company shall use its commercially reasonable
best efforts to obtain the cancellation of its agreement with Advertising Agency
Associates (the "AAA Agreement"). To the extent the Company is unable to obtain
the cancellation of the AAA Agreement prior to Closing, the WCCC/WBOQ Buyer
shall assume at Closing all obligations and liabilities of the Company under the
AAA Agreement.
9.4 Disposition of Assets. The Company shall not sell, assign, lease, or
otherwise transfer or dispose of any of the Assets used or useful in connection
with the operations of WTMI, except where no longer used or useful in the
business or operations of any Station or in connection with the acquisition of
replacement property of equivalent kind and value.
9.5 Encumbrances. The Company shall not create, assume or permit to exist
any claim, liability, mortgage, lien, pledge, condition, charge, or encumbrance
of any nature whatsoever upon the Assets used or useful in connection with the
operations of WTMI, except for Permitted Liens and Encumbrances existing on the
date hereof which shall be removed prior to or concurrently with the Closing.
9.6 Licenses. The Company shall not cause or permit, by any act or failure
to act, any of the WTMI Licenses to expire or to be revoked, suspended, or
modified adversely, or take any action that could cause the FCC or any other
governmental authority to institute proceedings for the suspension, revocation,
or adverse modification of any of the WTMI Licenses. The Company shall not fail
to prosecute with due diligence any applications to any governmental authority
in connection with the operation of WTMI.
-32-
40
9.7 Rights. The Company shall not waive any material right relating to WTMI.
The Company shall not make any Tax elections or compromise any Tax liabilities
without the Parent's prior consent.
9.8 No Inconsistent Action. Neither the Company nor the WCCC/WBOQ Buyer shall
take any action that is inconsistent with its obligations under this Agreement
or that could hinder or delay the consummation of the transactions contemplated
by this Agreement.
9.9 Access to Information. The Company shall give the Parent and its counsel,
accountants, engineers, and other authorized representatives reasonable access
to the Assets and to all other properties, equipment, books, records,
Contracts, and documents of the Company or otherwise relating to the Stations
for the purpose of audit and inspection, including inspections incident to the
environmental study described in Section 10.6 and the engineering study
described in Section 10.7, and will furnish or cause to be furnished to the
Parent or its authorized representatives all information with respect to the
affairs and business of the Stations and the Company that the Parent may
reasonably request (including any financial reports and operations reports
produced with respect to the affairs and business of the Stations). Without
limiting the generality of the foregoing, the Company shall give the Parent and
its counsel, accountants and other authorized representatives reasonable access
to the Company's financial records and the Company's employees, counsel,
accountants and other representatives for the purpose of preparing and auditing
such financial statements as the Parent determines, in its reasonable judgment,
are required or advisable to comply with federal or state securities laws and
the rules and regulations of securities markets as a result of the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
9.10 Maintenance of Assets. The Company shall use its commercially reasonable
best efforts and take all reasonable actions to maintain all of the Assets used
or useful in connection with the operations of WTMI in substantially the same
condition as such Assets are on the date hereof (ordinary wear and tear
excepted), and use, operate, and maintain all of such Assets in a reasonable
manner and in accordance with the terms of the FCC Licenses, all rules and
regulations of the FCC and generally accepted standards of good engineering
practice. The Company shall maintain inventories of spare parts and expendable
supplies for WTMI at levels consistent with past practices. If any loss,
damage, impairment, confiscation, or condemnation of or to any of the Assets
used or useful in connection with the operations of WTMI occurs, the Company
shall repair, replace, or restore such Assets to their prior condition as soon
thereafter as possible, and the Company shall use the proceeds of any claim
under any insurance policy solely to repair, replace, or restore any of such
Assets that are lost, damaged, impaired, or destroyed.
9.11 Insurance. The Company shall maintain adequate insurance policies on the
Stations and the Assets.
9.12 Consents. The Company shall use its commercially reasonable best efforts
to obtain the Consents, without any change in the terms or conditions of any
Contract that could be less advantageous to WTMI or the Surviving Corporation
than those pertaining under such Contract as in effect on the date of this
Agreement. The Company shall promptly advise the Parent of any difficulties
experienced in obtaining any of the Consents and of any conditions proposed,
considered, or requested for any of the Consents. Upon the Parent's request,
the
-33-
41
Company shall cooperate with the Parent and use its commercially reasonable
best efforts to obtain from the lessor under WTMI's tower lease such customary
estoppel certificates as the Parent may reasonably request.
9.13 Books and Records. The Company shall maintain its books and records in
accordance with past practices.
9.14 Notification. The Company shall promptly notify the Parent in writing of
any unusual or material developments with respect to the business or operations
of the Stations or the Company, and of any material change in any of the
information contained in the Company's representations and warranties contained
in Section 5 of this Agreement. The WCCC/WBOQ Buyer shall promptly notify the
Parent of any material change in any information contained in its
representations and warranties contained in Section 8 of this Agreement.
9.15 Financial Information. The Company shall furnish to the Parent such
financial information (including information on payables and receivables) as
the Parent may reasonably request. All financial information delivered by the
Company to the Parent pursuant to this Section shall accurately reflect the
books, records, and accounts of the Company, shall be complete and correct in
all material respects, and shall present fairly the financial condition of the
Company as at their respective dates. The Company shall deliver to the Parent
audited financial statements for fiscal year ended 1999 no later than March 31,
2000.
9.16 Compliance with Laws. The Company shall comply in all material respects
with all laws, rules, and regulations.
9.17 Collection of Accounts Receivable. The Company shall collect the accounts
receivable of the Stations only in the ordinary course consistent with its past
practices and will not take any action designed or likely to accelerate the
collection of its accounts receivable.
9.18 Capital Expenditures. The Company shall continue to make capital
expenditures with respect to WTMI that materially conform to the Company's
budget for fiscal 2000, as described on Schedule 9.18.
9.19 Mergers. The Company shall not permit its reorganization, liquidation,
merger or consolidation with any other entity.
9.20 Amendments. The Company shall not amend, change or modify its certificate
of incorporation or bylaws.
9.21 Securities. Except with respect to the issuance of shares of the Company
upon the exercise of stock options described on Schedule 5.3 and except with
respect to the possible issuance to employees of the Company of additional
options to acquire up to 5,000 additional shares of Company Stock, the Company
shall not issue any shares of its capital stock or any options, warrants or
other rights to acquire any shares of its capital stock. The Company shall not
declare any dividends or make any other distributions with respect to its
capital stock, split, combine or reclassify any of its capital stock or acquire
or redeem any of its capital stock or any other equity interest in the Company.
-34-
42
9.22 Termination of Certain Agreements. Prior to or at Closing, the Company
shall terminate all agreements and transactions between it, on the one hand,
and any of its affiliates, Stockholders or affiliates of Stockholders, on the
other hand, including, without limitations, the agreements listed on Schedule
9.22; provided, however, that any Stockholder may offset any amount owed by it
to the Company against the portion of the Adjusted Preliminary Merger
Consideration payable to such Stockholder at Closing. Following the Closing,
the Surviving Corporation shall have no liability under such agreements and
transactions whatsoever.
Section 10. SPECIAL COVENANTS AND AGREEMENTS
10.1 FCC Consent.
(a) The consummation of the Merger and the WCCC/WBOQ Sale pursuant to this
Agreement shall be subject to the prior consent and approval of the FCC.
(b) The Parent, the Company and the WCCC/WBOQ Buyer shall promptly prepare
appropriate applications for the FCC Consent and shall file the application
with the FCC within five (5) business days of the execution of this Agreement.
The parties shall prosecute the applications with all reasonable diligence and
otherwise use their commercially reasonable best efforts to obtain a grant of
the applications as expeditiously as practicable. Each party agrees to comply
with any condition imposed on it by the FCC Consent, except that no party shall
be required to comply with a condition to the extent it would have a material
adverse effect on it or its affiliates. The parties shall oppose any requests
for reconsideration or judicial review of the FCC Consent. If the Closing shall
not have occurred for any reason within the original effective period of the
FCC Consent, and neither party shall have terminated this Agreement under
Section 13, the parties shall jointly request an extension of the effective
period of the FCC Consent. No extension of the FCC Consent shall limit the
exercise by any party of its rights under Section 13.
10.2 Control of the Station. Prior to Closing, neither the Parent, nor the
WCCC/WBOQ Buyer shall, directly or indirectly, control, supervise, direct, or
attempt to control, supervise, or direct, the operations of the Stations; such
operations, including complete control and supervision of all of the Stations'
programs, employees, and policies, shall be the sole responsibility of the
Company until the Closing.
10.3 Risk of Loss. The risk of any loss, damage, impairment, confiscation, or
condemnation of any of the Assets from any cause whatsoever shall be borne by
the Company at all times prior to the Closing.
10.4 Confidentiality. The negotiations related to, and the information
exchanged by the parties in connection with, the execution and delivery of this
Agreement, and the transactions contemplated hereby, shall be kept in strictest
confidence and may not be disclosed by any party, or by any party's agents,
representatives, employees, consultants or agents, in whole or in part, without
the prior written consent of each other party, other than as required by
applicable laws, valid legal process, or the rules and regulations of
securities markets and except for information that is or becomes publicly known
otherwise than through a breach of this Agreement. If this Agreement is
terminated, each party will promptly return to each other party all information
-35-
43
obtained by such party from such other party in connection with the
transactions contemplated by this Agreement.
10.5 Environmental Audit. The Parent may, at its option and expense, obtain
Phase I environmental surveys of the Real Property. If such surveys disclose
any material environmental hazard or material possibility of future liability
for environmental damages or clean-up costs, the Parent shall notify the
Company and the Company shall remedy any such environmental problems prior to
the Closing.
10.6 Engineering Study. The Parent may, at its option and expense, retain an
engineering firm to conduct a proof of performance study of WTMI.
10.7 Cooperation. The parties hereto shall cooperate fully with each other and
their respective counsel and accountants in connection with any actions
required to be taken as part of their respective obligations under this
Agreement, and the parties hereto shall execute such other documents as may be
necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use their commercially reasonable best efforts to
consummate the transactions contemplated hereby and to fulfill their
obligations under this Agreement. Notwithstanding the foregoing, neither the
Company nor the Parent shall have any obligation to expend funds to obtain any
of the Consents and the Parent shall have no obligation to agree to any adverse
change in any Contract to obtain a Consent required with respect thereto.
10.8 Bulk Sales Law. The WCCC/WBOQ Buyer hereby waives compliance with any bulk
sales laws and hereby waives any claims it may have against the Company, the
Surviving Corporation, the Parent or Merger Sub with respect thereto.
10.9 Taxes. Until the Closing, the Company shall continue to file all Tax
Returns and to pay all Taxes with respect to the Stations and shall
concurrently deliver copies of all such returns to the Parent.
10.10 Access to Books and Records. The WCCC/WBOQ Buyer shall provide the
Surviving Corporation access and the right to copy for a period of three (3)
years from the Closing Date any books and records relating to the WCCC/WBOQ
Assets.
10.11 HSR Act Filing. The parties hereto agree to (a) file, or cause to be
filed, with the U.S. Department of Justice ("DOJ") and Federal Trade Commission
("FTC") all filings which are required in connection with the transactions
contemplated hereby under the HSR Act within ten (10) business days of the date
of this Agreement; (b) submit to the other party, prior to filing, their
respective HSR Act filings to be made hereunder, and to discuss with the other
any comments the reviewing party may have; (c) cooperate with each other in
connection with such HSR Act filings, which cooperation shall include
furnishing the other with any information or documents in such party's
possession that may be reasonably required in connection with such filings; (d)
promptly file, after any request by the FTC or DOJ, any information or
documents requested by the FTC or DOJ; and (e) furnish each other with any
correspondence from or to, and notify each other of any other communications
with, the FTC or DOJ which relates to the transactions contemplated hereunder,
and to the extent practicable, to permit each other to
-36-
44
participate in any conferences with the FTC or DOJ. The Parent and the Company
shall each pay one-half of all necessary HSR filing fees.
10.12 Title Insurance and Surveys.
(a) Title Insurance on Fee Property. With respect to each parcel of WTMI Real
Property that the Company owns, the Parent may obtain at its expense, at or
prior to Closing, an ALTA Owner's Policy of Title Insurance Form B-1987 (or
equivalent policy acceptable to the Parent), issued by a title insurer
satisfactory to the Parent, in an amount equal to the fair market value of the
property and any improvements thereon (as reasonably determined by the Parent),
insuring title to such parcel in the name of the Company as of the Closing,
subject only to Permitted Encumbrances.
(b) General Requirements as to Title Insurance Policies. Each title insurance
policy obtained and delivered by the Parent pursuant to this Agreement shall
(1) insure title to the WTMI Real Property described in the policy and all
recorded easements benefiting such WTMI Real Property, (2) contain an "extended
coverage endorsement" insuring over the general exceptions customarily
contained in title policies, (3) contain an endorsement insuring that the WTMI
Real Property described in the policy is the same real estate shown in the
survey, if any, obtained by the Parent with respect to such property, (4)
contain a "contiguity" endorsement with respect to any WTMI Real Property
consisting of more than one record parcel, and (5) not be subject to any survey
exception or any defect or encroachment disclosed by a survey delivered with
respect to the property, other than Permitted Encumbrances.
(c) Surveys. With respect to each parcel of WTMI Real Property, as to which a
title insurance policy is to be procured pursuant to this Agreement, the Parent
may procure at its expense a current survey of the parcel, prepared by a
licensed surveyor and conforming to current ALTA Minimum Detail Requirements
for Land Title Surveys, disclosing the location of all improvements, easements,
party walls, sidewalks, roadways, utility lines, and other matters customarily
shown on such surveys, and showing access affirmatively to public streets and
roads.
10.13 Employee Matters.
(a) Prior to the Closing Date, the Company shall terminate the employment of
all employees of the Company for whom the Parent has provided notice to the
Company that it does not intend to retain after the Closing Date, provided such
notice shall be delivered to Company in writing not less than 30 days prior to
the Closing Date. With respect to such terminated employees, Company shall
discharge in full prior to the Closing Date any and all liabilities owed by the
Company to such employees (including, but not limited to, any liability for
stay bonuses, health and welfare benefits, severance pay or deferred
compensation benefits), other than any liabilities to provide future benefits
to such employees under any tax-qualified Employee Plan or under ERISA Section
601.
(b) Effective as of the Closing Date, WCCC/WBOQ Buyer shall offer employment to
each employee of the Company who is employed at WCCC and WBOQ immediately prior
to the Closing Date. Except as otherwise provided in this Section 10.13 or as
-37-
45
required under any employment agreement between the Company and any such
employee, WCCC/WBOQ Buyer shall offer employment to such employees at the
Company's current pay rates and with benefits no less favorable as of the
Closing Date than those benefits being provided to such employees immediately
prior to the Closing Date. Each such Employee who accepts employment with the
WCCC/WBOQ Buyer as of the Closing Date is hereinafter referred to as a
"Transferred Employee." The WCCC/WBOQ Buyer shall assume all contracts of
employment with respect to any Transferred Employees that are in effect as of
the Closing Date.
(c) Prior to the Closing Date, the WCCC/WBOQ Buyer shall take any and all
action necessary or appropriate to assume all the Employee Plans and
Compensation Arrangements listed on Schedule 3.15, other than those plans or
programs terminated under the provisions of subsection (d) hereof, including
any trusts associated with any such Employee Plans; provided, that the
WCCC/WBOQ Buyer shall not assume the Employee Plan that provides health care
coverage to employees of the Company employed as of the Closing Date at WTMI.
With respect to all Employee Plans listed on Schedule 3.15 that are assumed by
the WCCC/WBOQ Buyer and that provide health and welfare benefits coverage, the
Parent and WCCC/WBOQ Buyer agree to use best faith efforts to cooperate in
securing the assumption or assignment of such Employee Plans as contemplated
herein. The WCCC/WBOQ Buyer shall hold the Surviving Corporation and the Parent
and any entity required to be combined with the Surviving Corporation and the
Parent (within the meaning of Sections 414(b), (c), (m) or (o) of the Code)
harmless from and fully indemnify them against any costs, expenses, losses,
damages and liabilities incurred or suffered by them directly or indirectly,
including, but not limited to, reasonable attorneys' fees and expenses, which
relate to the assumption by the WCCC/WBOQ Buyer of Employee Plans and
Compensation Arrangements under this Section 10.13(c) and the provision of
benefits under such Employee Plans and Compensation Arrangements.
(d) At the request of the Parent, the Company shall, prior to the Closing Date,
take any and all action necessary or appropriate (i) to terminate no later than
the Closing Date any Employee Plan or Compensation Arrangement which provides
non-qualified deferred compensation, non-qualified retirement benefits,
severance benefits, retention benefits, change in control benefits, or similar
benefits (the "Nonqualified Plans"), and (ii) to pay all liabilities accrued
for the benefit of the participants under the Nonqualified Plan (whether or not
actively employed by the Company or currently entitled to a benefit payment
under the Nonqualified Plans) and under any arrangement directly related to the
Nonqualified Plans (including, but not limited to, any promised adjustment for
taxes).
(e) The WCCC/WBOQ Buyer shall assume full responsibility and liability for
offering and providing "continuation coverage" to any "qualified beneficiary"
who is covered by a "group health plan" sponsored or contributed to by the
Company and who has experienced a "qualifying event" or is receiving
"continuation coverage" on or prior to the Closing, except for those qualified
beneficiaries whose entitlement to COBRA is attributable to their employment at
WTMI. "Continuation coverage," "Qualified beneficiary," "Qualifying event" and
"group health plan" all shall have the meanings given such terms under Section
4980B of the Code and Section 601 et seq. of ERISA. The WCCC/WBOQ Buyer shall
hold the Parent and any entity required to be combined with the Parent (within
the meaning of Sections 414(b), (c), (m) or (i) of the Code) harmless from and
fully indemnify them against any costs, expenses, losses, damages and
liabilities incurred or suffered by them directly or indirectly, including, but
not limited to,
-38-
46
reasonable attorneys' fees and expenses, which relate to continuation coverage
and arise as a result of any action or omission by the WCCC/WBOQ Buyer that is
inconsistent with the provisions of this Section 10.13 (e). (f) The WCCC/WBOQ
Buyer shall offer group health plan coverage to all of the Transferred
Employees and to the dependents of such Transferred Employees as of the Closing
Date on terms and conditions substantially comparable to the coverage generally
applicable to the Transferred Employees prior to the Closing Date. For purposes
of providing such coverage, the WCCC/WBOQ Buyer shall waive all preexisting
condition limitations for all such Transferred Employees and their dependents
covered by the Company's health care plan as of the Closing Date and shall
provide such health care coverage effective as of the Closing Date without the
application of any eligibility period for coverage. In addition, the WCCC/WBOQ
Buyer shall use commercially reasonable best efforts to credit all employee
payments toward deductible, out-of-pocket and co-payment obligation limits
under Company's health care plans for the plan year which includes the Closing
Date as if such payments had been made for similar purposes under the WCCC/WBOQ
Buyer's health care plans during the plan year which includes the Closing Date
with respect to the Transferred Employees and their dependents.
(g) The WCCC/WBOQ Buyer shall assume and be responsible for the payment of any
severance payments, if any, due to any Transferred Employee that becomes due on
account of the consummation of the transactions contemplated by this Agreement.
(h) For each Transferred Employee, the WCCC/WBOQ Buyer shall provide credit
under all of its employee benefit programs, and for all purposes thereunder,
all of the Transferred Employee's employment service with the Company prior to
the Closing Date.
(i) The WCCC/WBOQ Buyer shall grant the Transferred Employees credit for and
shall assume and be responsible for any liabilities with respect to any accrued
but unused vacation for such employees as of the Closing Date. The WCCC/WBOQ
Buyer also shall grant the Transferred Employees credit for and shall assume
and be responsible for any liabilities with respect to sick leave and personal
days accrued but unused by any WCCC/WBOQ Employees as of the Closing Date.
(j) Notwithstanding any provision of this Agreement to the contrary, the
WCCC/WBOQ Buyer shall have full freedom to change or modify at any time after
the Closing the compensation or benefits provided to its employees.
(k) The provisions of this Section 10.13 are not intended to be for the benefit
of, or otherwise enforceable by any third person including, without limitation,
any employee of the Company or WCCC/WBOQ Buyer, any collective bargaining unit,
or any employee organization.
10.14 Tax Matters.
(a) "Booked Taxes" means Taxes of the Company payable with respect to a
Reporting Period (as defined below) ending on or before the Effective Time, or
with respect to a Short Period (as defined below), that in each case are taken
into account in computing the Working Capital adjustment under Section 3.3
hereof.
-39-
47
(b) Subject to Section 10.14(i), Taxes of the Company with respect to the
period ending on (and including) the Effective Time, other than the Booked
Taxes, shall be the responsibility of the Stockholders. Taxes of the Company
with respect to the period after the Effective Time shall be the responsibility
of Parent (and the Company).
(i) In accordance with the terms of this Section 10.14, the
Stockholders agree to pay and, notwithstanding any disclosure of potential Tax
liabilities made by the Company, to indemnify, reimburse, and hold harmless
Parent, its affiliates, and the Company, and their respective successors, and
their respective officers, directors, employees, agents, and representatives,
from and against any and all Taxes of the Company payable with respect to, and
any and all claims, liabilities, losses, damages, costs and expenses (including
without limitation court costs and reasonable professional fees incurred in the
investigation, defense or settlement of any claims covered by this indemnity)
(herein referred to as "Indemnifiable Tax Damages"), arising out of or in any
manner incident, relating or attributable to Taxes of the Company payable with
respect to, or Tax Returns required to be filed by the Company on or prior to
the Closing Date with respect to, (i) any taxable year (or other applicable
reporting period) ("Reporting Period") of the Company ending on or before the
Effective Time, and (ii) any period beginning on the first day of any Reporting
Period that begins before the Effective Time but which is not completed as of
the Effective Time and ending as of the Effective Time (a "Short Period"), to
the extent that such Taxes exceed the amount of the Booked Taxes.
(ii) Parent agrees to pay and to indemnify, reimburse and hold
harmless the Stockholders, their agents and representatives, from and against
(i) any and all Booked Taxes and (ii) any and all Taxes of the Company payable
with respect to, and any and all Indemnifiable Tax Damages, arising out of or
in any manner incident, relating or attributable to, Taxes of the Company
payable with respect to, or Tax Returns required to be filed by the Company
with respect to, (A) any Reporting Period of the Company beginning after the
Effective Time; and (B) that portion of any Reporting Period that includes the
Effective Time which commences after the Effective Time.
(c) The Parent shall be responsible for preparing and filing on behalf of the
Company all Tax Returns for the Company which have not been filed as of the
Effective Time, including (i) all Tax Returns for Reporting Periods of the
Company ending on or before the Effective Time which have not been filed on or
before the Effective Time; (ii) all Tax Returns of the Company for Reporting
Periods beginning before and ending after the Effective Time; and (iii) all Tax
Returns for Reporting Periods of the Company beginning on or after the
Effective Time; provided, however, that with respect to Tax Returns described
in clauses (i) and (ii), the Parent shall consult in good faith with the
Stockholders' Agent in preparing such returns, and such Tax Returns shall not
report any item in a manner that is inconsistent with the manner in which any
corresponding item has been previously reported in any such Tax Return already
filed, unless such inconsistent treatment is (x) required by law or due to a
change in circumstances, or (y) is permitted by law, the Parent elects to make
such change in treatment, and such change would not be prejudicial to the
Stockholders or to the Company. The Parent shall provide Stockholders' Agent
with drafts of such Tax Returns for Reporting Periods ending on or prior to the
Effective Time and for Short Periods (at the Parent's election, pro forma
returns for a Short Period) at least twenty (20) days prior to the due date
(including any
-40-
48
extensions) of such Tax Return. If the Stockholders' Agent notifies the Parent
at least ten (10) days prior to the due date (including any extensions) that
the Stockholders' Agent does not approve a Tax Return provided to it pursuant
to the foregoing sentence, the Parent and the Stockholders' Agent shall consult
in good faith to resolve such dispute. If the Parent and the Stockholders'
Agent are unable to resolve such dispute, the Parent and the Stockholders'
Agent shall attempt to agree upon a suitably qualified and experienced
independent certified public accountant, which shall not have been retained by
either the Parent and the Stockholders' Agent within the past two (2) years of
the date of selection ("CPA"), to resolve such dispute. If the Parent and the
Stockholders' Agent are unable to agree upon a CPA, then the CPAs selected by
each of the Parent and the Stockholders' Agent shall jointly select a third CPA
to resolve any Tax Return dispute. If the CPA selected either by agreement of
the Parent and the Stockholders' Agent or by agreement of the CPAs selected by
the Parent and the Stockholders' Agent (the "Selected CPA") resolves all
disputes prior to the due date of the Tax Return, the Parent shall file such
Tax Return consistently with such dispute resolution. If the Selected CPA has
not resolved all such disputes prior to the due date of the Tax Return, Parent
shall file such Tax Return on the due date in such form as Parent has
determined complies with applicable law and conforms to the first sentence of
this paragraph (c); provided however, that to the extent any Indemnifiable Tax
Damage is attributable to an item of dispute between the Parent and the
Stockholders' Agent, which item is ultimately decided in favor of the
Stockholders' Agent by the Selected CPA, the Parent shall not have the right to
indemnification from the Indemnification Escrow Fund with respect to such item
to the extent Indemnifiable Tax Damages exceed Indemnifiable Tax Damages if the
Tax Return had been filed in accordance with the determination of the Selected
CPA. The cost of all CPAs including the Selected CPA shall be borne equally by
the Parent and the Stockholders. Notwithstanding the foregoing, the Parent
shall have no obligation to consult with the Stockholders' Agent regarding
matters that would not raise a claim for indemnification under this Agreement.
The Parent shall furnish the Stockholders' Agent with copies of Tax Returns
described in clauses (i) and (ii) of this paragraph (c) (in the case of (ii),
at the Parent's election, pro forma Tax Returns for the Short Period) within 30
days following the filing date.
(d) Except as otherwise provided in this Section 10.14, any amounts owed by the
Stockholders to any party under this Section 10.14 shall be paid within ten
business days of notice from such party; provided that if such party has not
paid such amounts and such amounts are being contested before the appropriate
governmental authorities in good faith, the Stockholders shall not be required
to make payment until it is determined finally by an appropriate governmental
authority or court that payment is due, provided that the Stockholders post
appropriate security as necessary to protect such party from (i) the immediate
imposition of a lien that arises or attaches from nonpayment after assessment
and demand of such amounts, or (ii) seizures of assets. Except as otherwise
provided in this Section 10.14, any amounts owed by the Parent to any party
under this Section 10.14 shall be paid within ten business days of notice from
such party; provided that if such party has not paid such amounts and such
amounts are being contested before the appropriate governmental authorities in
good faith, the Parent shall not be required to make payment until it is
determined finally by an appropriate governmental authority or court that
payment is due if the Parent posts appropriate security as necessary to protect
such party from (A) the immediate imposition of a lien that arises or attaches
from nonpayment after assessment and demand of such amounts, or (B) seizures of
assets. Any amounts that are not paid within the period provided in this
Section 10.14(d) shall accrue interest
-41-
49
at the "Underpayment Rate" under Section 6621 of the Code for the underpayment
of taxes by corporations.
(e) The Tax liabilities for each Short Period for the Company shall be
determined by closing the books and records of the Company as of the Effective
Time, by treating each such Short Period as if it were a separate Reporting
Period, and by employing accounting methods which are consistent with those
employed in preparing the Tax Returns for the Company in prior Reporting
Periods and which do not have the effect of distorting income or expenses
(taking into account the transactions contemplated by this Merger Agreement);
provided that the purchase of the WCCC/WBOQ Assets shall in all events be
allocated to the Reporting Period that commences immediately following the
Effective Time. Notwithstanding the preceding sentence, Taxes based on items
other than income or sales shall be computed for the Reporting Period beginning
on the first day of the applicable Short Period and prorated on a time basis
between the Short Period and the period beginning on the first day after the
Effective Time and ending on the last day of the Reporting Period which
includes the Effective Time; provided that with respect to any Tax which is not
in effect during the entire Short Period, the proration of such Tax shall be
based on the period during the Short Period that such Tax was in effect.
(f) The Parent shall promptly notify the Stockholders' Agent in writing of any
notice, letter, correspondence, claim, determination, decision or decree ("Tax
Claim") received by the Parent or the Company and its Subsidiaries or their
successors for any Reporting Period ending on or before the Effective Time or
any Short Period that might raise a claim for indemnification hereunder. The
Parent shall have the sole right to handle, answer, defend, compromise or
settle any Tax Claim arising from Reporting Periods ending after the Effective
Time, including periods beginning before and ending after the Effective Time.
Notwithstanding the foregoing, the Stockholders' Agent, at the cost and expense
of the Stockholders, shall have the option to handle, answer, defend,
compromise, or settle any Tax Claim arising from a Reporting Period (i) ending
on or before the Effective Time, or (ii) beginning before the Effective Time
and ending after the Effective Time, that might raise a claim for
indemnification hereunder but in the case of (ii), solely with respect to
issues not affecting the Company with respect to any Reporting Periods ending
after the Effective Time and to the extent that the Parent would be entitled to
indemnification hereunder (and not with respect to Indemnifiable Tax Damages
which would exceed the then existing balance of the Indemnification Escrow);
provided that the Parent shall have the right to (and shall promptly notify the
Stockholders' Agent as to whether it will) participate in any Tax examination,
audit, contest, or litigation in connection with such Tax Claim; and further
provided that the Stockholders' Agent may not compromise or settle any such Tax
Claim giving rise to Indemnifiable Tax Damages, determined without regard to
net operating losses of the Company, which exceed the then existing balance of
the Indemnification Escrow Fund, or which would affect the Company with respect
to any Reporting Periods ending after the Effective Time, without the written
consent of the Parent which will not be unreasonably withheld. If the
Stockholders' Agent has not notified the Parent that it elects to handle a Tax
Claim pursuant to the foregoing sentence within ten (10) days of its receipt of
notice of the respective Tax Claim, then the Parent shall have the sole right
to handle, answer, defend, compromise, or settle such Tax Claim. The Parent
shall cause the Company to give promptly to the Stockholders' Agent any
relevant information relating to such Tax Claim which may be particularly
within the knowledge of the Company and otherwise to cooperate fully with the
Stockholders' Agent in good faith with respect to such Tax Claim. If the
-42-
50
Stockholders' Agent fails within a reasonable time after notice to participate
in any Tax Claim or any examination, audit, contest or litigation as provided
herein, the Stockholders shall be bound by the results obtained by the Parent,
or its successors or assigns, in connection with such Tax Claim and such
examination, audit, contest or litigation.
(g) Each of the parties hereto will provide the other with such assistance as
may reasonably be requested by any of them in connection with the preparation
of any Tax Return (including amended Tax Returns and claims for Tax refunds),
any audit or other examination by any taxing authority, or any judicial or
administrative proceedings relating to liability for Taxes, and each will
retain until the expiration of any relevant statutes of limitations (and, to
the extent notified by the other party, any extension thereof) and provide the
other, at all reasonable times, with any work papers, records or other
information which may be relevant to such return, audit or examination,
proceeding or determination (including, but not limited to, determinations
under this Section 10.14). The party requesting assistance or documents
hereunder shall reimburse the other parties for reasonable expenses incurred in
providing such assistance or documents.
(h) The Parent shall not make any election under Section 338 of the Code with
respect to the Merger.
(i) All indemnification claims by the Parent (or the Company) pursuant to this
Section 10.14 shall be paid exclusively out of the Post-Closing Indemnification
Fund.
10.15 Release of Liens. At or prior to Closing, the Company shall obtain the
release of all Encumbrances on the Assets except for Permitted Encumbrances,
and the Company shall provide the Parent with evidence of such release
reasonably acceptable to the Parent.
10.16 Accounts Receivable.
(a) The Company shall deliver to the Parent on the Closing Date a complete and
detailed statement of all Accounts Receivable as of the Closing Date, showing
the name, amount and age of each account.
(b) At Closing, the Surviving Corporation shall assign the Accounts Receivable
for WTMI (the "WTMI Accounts Receivable") for collection purposes only to the
WCCC/WBOQ Buyer. The WCCC/WBOQ Buyer shall cause an agent reasonably acceptable
to the Parent (the "Collection Agent") to collect the WTMI Accounts Receivable
for a period of 90 days following the Closing (the "WTMI Collection Period").
At the end of each 30 day period during such collection period, the WCCC/WBOQ
Buyer shall cause the Collection Agent to remit to the Surviving Corporation
all amounts collected with respect to the WTMI Accounts Receivable during such
period.
10.17 Insurance. Prior to Closing, the Company shall obtain at its expense and
fully prepay insurance coverage for a period of six years from the Closing Date
insuring the Company for employee practices, officer and director liability,
storage tank liability, fiduciary liability and any other such claims made
insurance coverage with respect to actions, omissions or occurrences relating
to the period prior to the Closing Date and such coverage shall be on
substantially the same terms as the current insurance coverage of the Company
and with insurers reasonably acceptable to the Parent.
-43-
51
Section 11. CONDITIONS TO OBLIGATIONS AT CLOSING
11.1 Conditions to Obligations of the Parent, Merger Sub and the Surviving
Corporation. All obligations of the Parent, Merger Sub and the Surviving
Corporation at the Closing are subject at their option to the fulfillment prior
to or at the Closing Date of each of the following conditions:
(a) Representations and Warranties. All representations and warranties of the
Company and the WCCC/WBOQ Buyer contained in this Agreement shall be true and
complete in all material respects at and as of the Closing Date as though made
at and as of that time.
(b) Covenants and Conditions. The Company and the WCCC/WBOQ Buyer shall have
performed and complied in all material respects with all covenants, agreements,
and conditions required by this Agreement to be performed or complied with by
them prior to or on the Closing Date.
(c) Consents. All Consents designated as material on Schedule 5.4 shall have
been obtained and delivered to the Parent without any adverse change in the
terms or conditions of any agreement or any governmental license, permit, or
other authorization.
(d) FCC Consent. (i) The FCC Consent shall have been granted without the
imposition on the Parent, Merger Sub or the Surviving Corporation or any
affiliate thereof of any materially adverse condition, (ii) the Company and the
WCCC/WBOQ Buyer shall have complied with any conditions imposed on them by the
FCC Consent, and (iii) no timely petition, administrative pleading or notice of
appeal or other timely request for administrative or judicial review has been
filed challenging the FCC Consent within thirty (30) days following the date of
publication of a public notice announcing the FCC Consent. If there is such a
challenge within such 30-day period, counsel to each of the Parent and the
Company shall jointly select an independent and well recognized attorney
specializing in communications law to determine whether such challenge raises a
substantial and material question of fact or law. If such communications
attorney determines that such challenge does raise a substantial and material
question of fact or law, the Parent's obligation to close will be subject to
the FCC Consent becoming a Final Order and if such communications attorney
determines that such challenge does not raise a substantial and material
question of fact or law, the Parent's obligation to close will not be subject
to the FCC Consent becoming a Final Order. The costs of such communications
attorney will be shared equally by the Parent and the Company. A challenge
based only on a change in programming format of WTMI will not be considered a
substantial and material question of fact or law. The Surviving Corporation and
the Parent shall control the response to and pay the legal fees associated with
any challenge of the FCC Consent based on an alleged change in programming
format of WTMI.
(e) Governmental Authorizations. The Company shall be the holder of all WTMI
Licenses set forth on Schedule 5.5 and there shall not have been any
modification of any such WTMI License that could have a material adverse effect
on WTMI or the conduct of its business and operations. No proceeding shall be
pending or threatened the effect of which could be to revoke, cancel, fail to
renew, suspend, or modify adversely any such License.
-44-
52
(f) Deliveries. The Company shall have made or stand willing to make all the
deliveries set forth in Section 12.2 and the WCCC/WBOQ Buyer shall have made or
stand willing to make all the deliveries set forth in Section 12.5.
(g) Adverse Change. Between the date of this Agreement and the Closing Date,
there shall not have been any change (other than changes generally affecting
the radio broadcasting industry or the Miami / Ft. Lauderdale radio
broadcasting market) in the business, assets, properties, prospects or
condition (financial or otherwise) of the Company materially and adversely
affecting the valuation of WTMI as a licensed and transmitting radio
broadcasting facility without regard to its programming format, employees or
results of operations (it being acknowledged that adverse changes having an
effect on the Company's working capital will be given effect in the Working
Capital adjustment in Section 3.3(a)).
(h) HSR Act. The waiting period under the HSR Act shall have expired without
unresolved action by the DOJ or the FTC to prevent the Closing.
(i) Transmittal Agreements. Stockholders who own 95% of the Company Stock
(assuming the exercise of all options) at Closing shall have delivered to the
Parent duly executed Transmittal Agreements and the representations and
warranties of each Stockholder in each such Transmittal Agreement shall be true
and correct.
(j) Legal Action. The consummation of the Merger or the WCCC/WBOQ Sale shall
not be restrained, enjoined or prohibited by any order, judgment, decree or
ruling of any court or other governmental authority and no action or proceeding
shall be pending before any court or other governmental authority in which it
is sought to restrain or prohibit or obtain material damages or other material
relief in connection with the transactions contemplated hereby.
(k) Corporate Proceeding. All material proceedings to be taken by the Company
and its Stockholders in connection with the performance of this Agreement shall
have been taken. In particular, the execution, delivery and performance of this
Agreement by the Company shall have been duly authorized by all necessary
actions on the part of the Company and its stockholders.
(l) Stock Options. The Company shall have effected the cancellation or exercise
of all outstanding stock options of the Company.
11.2 Conditions to Obligations of the Company and the WCCC/WBOQ Buyer. All
obligations of the Company and the WCCC/WBOQ Buyer at the Closing are subject
at their option to the fulfillment prior to or at the Closing Date of each of
the following conditions:
(a) Representations and Warranties. All representations and warranties of the
Parent and Merger Sub contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though made at and as of
that time.
(b) Covenants and Conditions of the Parent and Merger Sub. The Parent and
Merger Sub shall have performed and complied in all material respects with all
covenants,
-45-
53
agreements, and conditions required by this Agreement to be performed or
complied with by them prior to or on the Closing Date.
(c) Covenants and Conditions of the Surviving Corporation. As a condition to
the obligations of the WCCC/WBOQ Buyer with respect to the WCCC/WBOQ Sale, the
Surviving Corporation shall have performed and complied in all material
respects with all covenants, agreements and conditions in regard to the
WCCC/WBOQ Sale required by this Agreement to be performed immediately following
the consummation of the Merger but prior to or on the Closing Date.
(d) Deliveries. The Parent shall have made or stand willing to make all the
deliveries set forth in Section 12.3 and the Surviving Corporation shall have
made or stand willing to make all of the deliveries set forth in Section 12.4.
(e) FCC Consent. The FCC Consent shall have been granted without the imposition
on the WCCC/WBOQ Buyer of any materially adverse condition, and the Parent or
Merger Sub shall have complied with any conditions imposed on it by the FCC
Consent.
(f) HSR Act. The waiting period under the HSR Act shall have expired without
unresolved action by the DOJ or the FTC to prevent the Closing.
(g) Legal Action. The consummation of the Merger or the WCCC/WBOQ Sale shall
not be restrained, enjoined or prohibited by any order, judgment, decree or
ruling of any court or other governmental authority and no action or proceeding
shall be pending before any court or other governmental authority in which it
is sought to restrain or prohibit or obtain material damages or other material
relief against the WCCC/WBOQ Buyer or any Stockholder in connection with the
transactions contemplated hereby.
(h) Corporate Proceedings. All material proceedings to be taken by the Parent
and the Merger Sub in connection with the performance of this Agreement shall
have been taken.
Section 12. CLOSING AND CLOSING DELIVERIES
12.1 Closing.
(a) Closing Date. Subject to the satisfaction or waiver of all of the
conditions precedent to the Closing, the Closing shall take place at 10:00 a.m.
on a date, to be set by the Parent following the date upon which the conditions
set forth in Sections 11.1(d) and (h) have been satisfied on at least five (5)
days' written notice to the Company and the WCCC/WBOQ Buyer that is not later
than ten (10) business days following the date upon which the conditions set
forth in Sections 11.1(d) and (h) have been satisfied. If the Parent fails to
specify the date for Closing prior to the fifth business day after the date
upon which the conditions set forth in Sections 11.1(d) and (h) have been
satisfied, the Closing shall take place on the tenth business day after the
date upon which such conditions have been satisfied.
-46-
54
(b) Closing Place. The Closing shall be held at the law offices of Xxxx and
Xxxx, LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, or any other place
that is agreed upon by the Parent and the Company.
12.2 Deliveries by the Company. Prior to or on the Closing Date, the Company
shall deliver to the Parent the following, in form and substance reasonably
satisfactory to the Parent and its counsel:
(a) Transmittal Agreements. Duly executed Transmittal Agreements, together with
cancelled Certificates, from Stockholders who own at least 95% of all of the
issued and outstanding capital stock of the Company (assuming the exercise of
all options) and any other documents of transfer that may be reasonably
necessary and there shall not be any material discrepancies between the
respective numbers of shares owned by such Stockholders set forth in such
Transmittal Agreements and the respective number of shares owned by such
Stockholders in the Stockholder Statement;
(b) Certificate of Merger. A Certificate of Merger duly executed by the Company
providing for the consummation of the Merger in accordance with the terms of
this Agreement;
(c) Estoppel Certificates. Estoppel certificates of the lessor of the WTMI
tower, in form and substance reasonably acceptable to the Parent;
(d) Consents. A manually executed copy of any instrument evidencing receipt of
any Consent indicated as material on Schedule 5.4 and to the extent obtained,
any other Consent;
(e) Officer's Certificate. A certificate, dated as of the Closing Date,
executed on behalf of the Company by an officer of the Company, certifying (1)
that the representations and warranties of the Company contained in this
Agreement are true and complete in all material respects as of the Closing Date
as though made on and as of that date (except those which expressly speak as of
a specified date); and (2) that the Company has in all material respects
performed and complied with all of its obligations, covenants, and agreements
set forth in this Agreement to be performed and complied with on or prior to
the Closing Date;
(f) Opinion of Counsel. An opinion of the Company's counsel dated as of the
Closing Date, substantially in the form of Schedule 12.2(f) hereto;
(g) Authorizing Resolutions. Certified copies of the resolutions of the
Company's board of directors and shareholders approving the transactions
contemplated by this Agreement;
(h) UCC, Tax, Lien and Judgment Searches. Results of a search for UCC, tax,
lien and judgment filings in the Secretary of State's records of the State of
Florida, Connecticut and Massachusetts and in the records of the county or
counties in which the Company's assets are located, such searches having been
made no earlier than fifteen (15) days prior to the Closing Date;
(i) Indemnification Escrow Agreement. The Indemnification Escrow Agreement
executed by the Stockholders' Agent;
-47-
55
(j) Secretary's Certificate. A certificate executed by the Company's Secretary
certifying as in effect as of the Closing Date: as attached to such
certificate, the Company's Certificate of Incorporation and a Certificate of
Good Standing from the State of Florida, Connecticut and Massachusetts , as
certified not more than twenty days earlier by an appropriate state official,
and the Company's Bylaws;
(k) Resignations. Written resignations, effective on the Closing Date, of the
Company's officers and directors, in which each such officer and director
waives against the Company all rights and claims to compensation, bonuses or
other obligations or liabilities of whatsoever kind, nature or description;
(l) Corporate, Financial and Tax Records. All corporate records (including
minute books and stock books and registers) and financial and tax records of
the Company;
(m) Evidence of Appointment of Stockholders' Agent. Evidence that Xxxxxx X.
Xxxxxx has been duly appointed by all of the Stockholders referred to in
Section 12.2(a) as the Stockholders' Agent pursuant to Section 15.11; and
(n) Evidence of Termination of Certain Agreement. Evidence that all agreements
to be terminated under Section 9.22 have been terminated.
12.3 Deliveries by the Parent. Prior to or on the Closing Date, the Parent
shall deliver to the Company the following, in form and substance reasonably
satisfactory to the Company and its counsel:
(a) Merger Consideration. The Preliminary Adjusted Merger Consideration, as
reduced by the Post-Closing Escrow Funds, payable to each Stockholder in the
manner provided in Section 3.4 in proportion to the stockholdings listed in the
Stockholder Statement;
(b) Certificate of Merger. A Certificate of Merger duly executed by the Merger
Sub providing for the consummation of the Merger;
(c) Officer's Certificate. A certificate, dated as of the Closing Date,
executed on behalf of the Parent and Merger Sub by an officer of the Parent and
Merger Sub, certifying (1) that the representations and warranties of the
Parent and Merger Sub contained in this Agreement are true and complete in all
material respects as of the Closing Date as though made on and as of that date,
and (2) that the Parent and Merger Sub have in all material respects performed
and complied with all of their obligations, covenants, and agreements set forth
in this Agreement to be performed and complied with on or prior to the Closing
Date;
(d) Opinion of Counsel. An opinion of the Parent's and Merger Sub's counsel
dated as of the Closing Date, substantially in the form of Schedule 12.3(c)
hereto;
(e) Authorizing Resolutions. Certified copies of the resolutions of the boards
of directors of the Parent and Merger Sub approving the transactions
contemplated by this Agreement; and
-48-
56
(f) Indemnification Escrow Agreement. The Indemnification Escrow Agreement duly
executed by the Parent.
12.4 Deliveries by the Surviving Corporation to the WCCC/WBOQ Buyer. On the
Closing Date immediately following the Merger, the Surviving Corporation shall
deliver to the WCCC/WBOQ Buyer the following, in form and substance reasonably
satisfactory to the WCCC/WBOQ Buyer and its counsel:
(a) Transfer Documents. Duly executed bills of sale, deeds, assignments of
leases, motor vehicle titles, assignments, and other transfer documents to
transfer the WCCC/WBOQ Assets to the WCCC/WBOQ Buyer, including, if applicable,
a corporate excise tax lien waiver from the Massachusetts Department of Revenue
(or an affidavit in favor of WCCC/WBOQ Buyer's title insurance company
sufficient to enable the title insurance company to issue a policy without
exception for corporate excise tax liens), without any warranty of any type on
the part of the Surviving Corporation except as set forth in Section 6.7; and
(b) Authorizing Resolutions. Certified copies of resolutions of the Surviving
Corporation's board of directors and sole shareholder approving the WCCC/WBOQ
Sale.
12.5 Deliveries by the WCCC/WBOQ Buyer to the Surviving Corporation. On the
Closing Date immediately following the Merger, the WCCC/WBOQ Buyer shall
deliver to the Surviving Corporation the following, in form and substance
reasonably satisfactory to the Surviving Corporation and its counsel:
(a) Asset Purchase Price. The Asset Purchase Price, as adjusted;
(b) Assumption Agreements. Appropriate assumption agreements pursuant to which
the WCCC/WBOQ Buyer shall assume and undertake to perform the Assumed
Liabilities;
(c) Officer's Certificate. A certificate, dated as of the Closing Date,
executed on behalf of the WCCC/WBOQ Buyer, certifying (i) that the
representations and warranties of the WCCC/WBOQ Buyer contained in this
Agreement are true and complete in all material respects as of the Closing Date
as though made on and as of that date, and (ii) that the WCCC/WBOQ Buyer has in
all material respects performed and complied with all of its obligations,
covenants, and agreements set forth in this Agreement to be performed and
complied with on or prior to the Closing Date;
(d) Opinion of Counsel. An opinion of the WCCC/WBOQ Buyer's counsel dated as of
the Closing Date, substantially in the form of Schedule 12.5(d) hereto;
(e) Authorizing Resolutions. Certified copies of the resolutions of the members
of the WCCC/WBOQ Buyer approving the transactions contemplated by this
Agreement.
Section 13. TERMINATION
13.1 Termination by the Company or the WCCC/WBOQ Buyer. This Agreement may be
terminated by the Company or the WCCC/WBOQ Buyer prior to the Closing if
neither the
-49-
57
Company nor the WCCC/WBOQ Buyer is then in material default, upon written
notice to the Parent, upon the occurrence of any of the following:
(a) Conditions. If on the date that would otherwise be the Closing Date any of
the conditions precedent to the obligations of the Company and the WCCC/WBOQ
Buyer set forth in this Agreement have not been satisfied or waived in writing
by the Company and the WCCC/WBOQ Buyer and such conditions remain unsatisfied
and unwaived 15 business days after the Company or the WCCC/WBOQ Buyer delivers
written notice to the Parent that it intends to terminate this Agreement
pursuant to this Section 13.1(a).
(b) Judgments. If there shall be in effect on the date that would otherwise be
the Closing Date any judgment, decree, or order that would prevent or make
unlawful the Closing.
(c) Upset Date. If the Closing shall not have occurred by twelve (12) months
after the date of this Agreement except that such upset date shall be extended
for an additional period of twelve (12) months if the Closing has not occurred
within twelve (12) months of this Agreement solely because of the filing of a
petition or protest against the applications for FCC Consent.
(d) Breach. Without limiting the Company's and the WCCC/WBOQ Buyer's rights
under the other provisions of this Section 13.1, if the Parent or Merger Sub
has failed to cure any material breach of any of its representations,
warranties or covenants under this Agreement within fifteen (15) days after the
Parent or Merger Sub receives written notice of such breach from the Company or
the WCCC/WBOQ Buyer.
13.2 Termination by the Parent. This Agreement may be terminated by the Parent
prior to the Closing if neither the Parent nor Merger Sub is then in material
default, upon written notice to the Company and the WCCC/WBOQ Buyer, upon the
occurrence of any of the following:
(a) Conditions. If on the date that would otherwise be the Closing Date any of
the conditions precedent to the obligations of the Parent and Merger Sub set
forth in this Agreement have not been satisfied or waived in writing by the
Parent and Merger Sub and such conditions remain unsatisfied and unwaived 15
business days after the Parent delivers written notice to the Company and the
WCCC/WBOQ Buyer that it intends to terminate this Agreement pursuant to this
Section 13.2(a).
(b) Judgments. If there shall be in effect on the date that would otherwise be
the Closing Date any judgment, decree, or order that would prevent or make
unlawful the Closing.
(c) Upset Date. If the Closing shall not have occurred by twelve (12) months
after the date of this Agreement except that such upset date shall be extended
for an additional period of twelve (12) months if the Closing has not occurred
within twelve (12) months of this Agreement solely because of the filing of a
petition or protest against the applications for FCC Consent.
(d) Interruption of Service. If any event shall have occurred that prevented
signal transmission of WTMI in the normal and usual manner or through the use
of reasonably
-50-
58
satisfactory temporary alternative transmission facilities for a continuous
period of seven (7) days.
(e) Breach. Without limiting the Parent's rights under the other provisions of
this Section 13.2, if the Company or the WCCC/WBOQ Buyer has failed to cure any
material breach of any of its representations, warranties or covenants under
this Agreement within fifteen (15) days after the Company or the WCCC/WBOQ
Buyer receives written notice of such breach from the Parent.
13.3 Rights on Termination. If this Agreement is terminated pursuant to Section
13.1 or Section 13.2 and neither party is in material breach of this Agreement,
the parties hereto shall not have any further liability to each other with
respect to this Agreement and the Escrow Deposit shall be returned to the
Parent. If this Agreement is terminated by the Company or the WCCC/WBOQ Buyer
as a result of a material breach by the Parent or Merger Sub under this
Agreement and neither the Company nor the WCCC/WBOQ Buyer is in material breach
of this Agreement, the Company shall be entitled to the Escrow Deposit as
liquidated damages and the sole and exclusive remedy of the Company and the
WCCC/WBOQ Buyer for such breach and all earnings on the Escrow Deposit shall be
returned to the Parent. The parties hereto agree that actual damages would be
difficult to ascertain and that the Escrow Deposit is a fair and equitable
amount to pay to the Company for damages sustained by the Company or the
WCCC/WBOQ Buyer due to the Parent's or Merger Sub's material breach of this
Agreement. If this Agreement is terminated for any reason other than a material
breach of this Agreement by the Parent or Merger Sub or if this Agreement is
terminated because of a material breach by the Parent or Merger Sub but the
Company or the WCCC/WBOQ Buyer is in material breach of this Agreement, the
Escrow Deposit together with all earnings thereon shall be returned to the
Parent. If this Agreement is terminated due to a breach by the Company or the
WCCC/WBOQ Buyer, the Escrow Deposit together with all earnings thereon shall be
returned to the Parent and the parties shall have no further obligation to one
another, except the Parent or Merger Sub may pursue a remedy of specific
performance under Section 13.4.
13.4 Specific Performance.
(a) The parties recognize that if the Company breaches this Agreement and
refuses to perform under the provisions of this Agreement, monetary damages
alone would not be adequate to compensate the Parent or Merger Sub for its
injury. The Parent or Merger Sub shall therefore be entitled, as its sole and
exclusive remedy (subject to Section 14.7), to obtain specific performance of
the terms of this Agreement. If any action is brought by the Parent or Merger
Sub to enforce this Agreement, the Company shall waive the defense that there
is an adequate remedy at law.
(b) The parties recognize that if the Surviving Corporation breaches this
Agreement by not selling the WCCC/WBOQ Assets to the WCCC/WBOQ Buyer in
accordance with the terms and conditions of this Agreement following the
consummation of the Merger, monetary damages would not be adequate to
compensate the WCCC/WBOQ Buyer for its injury and the WCCC/WBOQ Buyer shall
therefore be entitled, in addition to any other remedies that may be available,
including money damages pursuant to Section 13.3, to require the Surviving
Corporation to sell the WCCC/WBOQ Assets to the WCCC/WBOQ Buyer subject to the
terms
-51-
59
and conditions set forth in this Agreement. If any action is brought by the
WCCC/WBOQ Buyer to enforce this Agreement pursuant to this Section 13.4(b), the
Surviving Corporation shall waive the defense that there is an adequate remedy
at law.
Section 14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION;
CERTAIN REMEDIES
14.1 Representations and Warranties. All representations and warranties
contained in this Agreement shall be deemed continuing representations and
warranties and shall survive the Closing for a period of two (2) years. Any
investigations by or on behalf of any party hereto shall not constitute a
waiver as to enforcement of any representation, warranty, or covenant contained
in this Agreement.
14.2 Indemnification by the Stockholders from the Indemnification Escrow Fund.
Notwithstanding the Closing, and regardless of any investigation made at any
time by or on behalf of the Parent, the Merger Sub or the Surviving Corporation
or any information the Parent, Merger Sub or the Surviving Corporation may
have, the Stockholders hereby agree to indemnify and hold the Parent and the
Surviving Corporation harmless against and with respect to, and shall reimburse
the Parent and the Surviving Corporation for:
(a) Any and all losses, liabilities or damages resulting from any breach of a
representation or warranty made by the Company under Section 5 or in any
certificate, document or instrument delivered by the Company to the Parent at
the Closing under this Agreement.
(b) Any and all losses, liabilities or damages resulting from any breach by the
Company of any covenant or agreement in this Agreement before the Closing.
(c) Any and all losses, liabilities or damages resulting from any liability or
obligation of the Company in existence as of the Closing and not permitted by
Section 3.2.
(d) Any and all losses, liabilities or damages resulting from the operation of
the Company prior to the Closing which are not taken into account in
calculating the Working Capital, including any losses, liabilities or damages
resulting from any litigation or other proceeding relating to matters occurring
before the Closing.
(e) Any and all losses, liabilities or damages resulting from the breach of any
representation or warranty by any Stockholder in such Stockholder's Transmittal
Agreement.
(f) Any and all losses, liabilities or damages resulting from any payment by
the Surviving Corporation or the Parent following the Closing for severance and
related expenses to persons employed by the Company and terminated pursuant to
Section 10.13.
(g) Liabilities for Taxes and indemnification therefor in accordance with
Section 10.14.
(h) Any and all losses, liabilities or damages resulting from any
misrepresentation in the Stockholder Statement.
-52-
60
(i) Any and all obligations and liabilities relating to or arising under the
AAA Agreement.
(j) 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 oppose the imposition thereof, or in enforcing this
indemnity except to the extent any of the foregoing has been taken into account
under Sections 3.3(a) and (b) as a reduction in the Merger Consideration.
All indemnification claims by the Parent or the Surviving Corporation
pursuant to this Section 14.2 shall be paid exclusively out of the
Indemnification Escrow Fund.
14.3 Indemnification by the WCCC/WBOQ Buyer. Notwithstanding the Closing, and
regardless of any investigation made at any time by or on behalf of the
Surviving Corporation or the Parent or any information the Surviving
Corporation or the Parent may have, the WCCC/WBOQ Buyer hereby agrees to
indemnify and hold the Surviving Corporation and the Parent harmless against
and with respect to, and shall reimburse the Surviving Corporation and the
Parent for:
(a) Any and all losses, liabilities, or damages resulting from any untrue
representation, breach of warranty, or nonfulfillment of any covenant or
agreement by the WCCC/WBOQ Buyer contained in this Agreement or in any
certificate, document, or instrument delivered to the Surviving Corporation or
the Parent under this Agreement.
(b) Any obligations relating to any Assumed Liabilities.
(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 oppose the imposition thereof, or in enforcing this
indemnity.
14.4 Indemnification by the Surviving Corporation. Notwithstanding the Closing,
and regardless of any investigation made at any time by or on behalf of the
WCCC/WBOQ Buyer or any information the WCCC/WBOQ Buyer may have, the Surviving
Corporation hereby agrees to indemnify and hold the WCCC/WBOQ Buyer harmless
against and with respect to, and shall reimburse the WCCC/WBOQ Buyer for:
(a) Any and all losses, liabilities, or damages of the WCCC/WBOQ Buyer
resulting from any untrue representation, breach of warranty, or nonfulfillment
of any covenant or agreement by the Surviving Corporation in favor of the
WCCC/WBOQ Buyer contained in this Agreement or in any certificate, document or
instrument delivered to the WCCC/WBOQ Buyer under this Agreement.
(b) Any losses, liabilities or damages of the WCCC/WBOQ Buyer for preclosing
liabilities of the Company for which the Parent receives a credit in its favor
under Section 3.3 except to the extent the WCCC/WBOQ Buyer gets a credit for
such liability under Section 4.3(a).
-53-
61
(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 oppose the imposition thereof or in enforcing this
indemnity.
In no event shall the Surviving Corporation be required to indemnify
the WCCC/WBOQ Buyer for any action or omission of the Company prior to the
Closing or for breaches by the Company prior to Closing of any representation,
warranty or covenant in this Agreement.
14.5 Indemnification by the Parent. Notwithstanding the Closing, and regardless
of any investigation made at any time by or on behalf of the Stockholders'
Agent or any information the Stockholders' Agent may have, the Parent hereby
agrees to indemnify the Stockholders' Agent, on behalf of the Stockholders, and
hold the Stockholders' Agent, on behalf of the Stockholders, harmless against
and with respect to, and shall reimburse the Stockholders' Agent for:
(a) Any failure by the Parent to make any payment to the Stockholders' Agent or
give any instructions to the Escrow Agent under Sections 3.6(b)(iii) and 3.7(d)
and (e).
(b) Any losses, liabilities or damages suffered by any Stockholder for
pre-closing liabilities of the Company for which the Parent receives a credit
in its favor under Section 3.3 except to the extent the WCCC/WBOQ Buyer gets a
credit for such liability under Section 4.3(a).
(c) Liabilities for Taxes and indemnification therefor in accordance with
Section 10.14.
(d) 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 oppose the imposition thereof or in enforcing this
indemnity.
14.6 Procedure for Indemnification. The procedure for indemnification shall be
as follows:
(a) The party claiming indemnification (the "Claimant") shall promptly give
notice to the party from which indemnification is claimed (the "Indemnifying
Party") of any claim, whether between the parties or brought by a third party,
specifying in reasonable detail the factual basis for the claim. If the claim
relates to an action, suit, or proceeding filed by a third party against
Claimant, such notice shall be given by Claimant within five (5) business days
after written notice of such action, suit, or proceeding was given to Claimant.
Notice of claims by the Parent or the Surviving Corporation for indemnification
under Section 14.2 shall be given to the Escrow Agent as described in the
Indemnification Escrow Agreement and to the Stockholders' Agent.
(b) With respect to claims solely between the parties, following receipt of
notice from the Claimant of a claim, the Indemnifying Party shall have thirty
(30) days to make such investigation of the claim as the Indemnifying Party
deems necessary or desirable. For the
-54-
62
purposes of such investigation, the Claimant agrees to make available to the
Indemnifying Party and/or its authorized representatives the information relied
upon by the Claimant to substantiate the claim. If the Claimant and the
Indemnifying Party agree at or prior to the expiration of the thirty (30) day
period (or any mutually agreed upon extension thereof) to the validity and
amount of such claim, the Indemnifying Party shall immediately pay to the
Claimant the full amount of the claim. If the Claimant and the Indemnifying
Party do not agree within the thirty (30) day period (or any mutually agreed
upon extension thereof), the Claimant may seek appropriate remedy at law or
equity.
(c) With respect to any claim by a third party as to which the Claimant is
entitled to indemnification under this Agreement, the Indemnifying Party shall
have the right at its own expense, to participate in or assume control of the
defense of such claim, and the Claimant shall cooperate fully with the
Indemnifying Party, subject to reimbursement for actual out-of-pocket expenses
incurred by the Claimant as the result of a request by the Indemnifying Party.
If the Indemnifying Party elects to assume control of the defense of any
third-party claim, the Claimant shall have the right to participate in the
defense of such claim at its own expense. If the Indemnifying Party does not
elect to assume control or otherwise participate in the defense of any third
party claim, it shall be bound by the results obtained by the Claimant with
respect to such claim.
(d) If a claim, whether between the parties or by a third party, requires
immediate action, the parties will make every effort to reach a decision with
respect thereto as expeditiously as possible.
(e) The indemnification rights provided in this Section 14 shall extend to the
shareholders, directors, officers, employees, and representatives of any
Claimant although for the purpose of the procedures set forth in this Section
14.6, any indemnification claims by such parties shall be made by and through
the Claimant.
(f) No party shall be entitled to indemnification under this Section 14 unless
and until indemnifiable losses of such party exceed in the aggregate One
Hundred Thousand Dollars ($100,000); provided, however, that if such amount
exceeds $100,000, the Indemnifying Party or Parties shall be liable to the
Claimant for the entirety of the losses and not just that portion in excess of
$100,000. This limitation shall not apply to any adjustments to the Merger
Consideration or the Asset Purchase Price, any obligations of the WCCC/WBOQ
Buyer to discharge Assumed Liabilities and any losses of the Parent or the
Surviving Corporation as a result of any litigation described on Schedule 5.15.
For purposes of determining whether losses exceed $100,000, the Parent and the
Surviving Corporation shall be considered as one party.
(g) The provisions of Sections 14.6(a) and 14.6(c) shall not apply to any claim
asserted by the Internal Revenue Service or any other Tax authority, which
claim shall be subject to the provisions of Section 10.14.
14.7 Attorneys' Fees. In the event of a default by any party which results in a
lawsuit or other proceeding for any remedy available under this Agreement, the
prevailing party shall be entitled to reimbursement from the other party of its
reasonable legal fees and expenses.
-55-
63
Section 15. MISCELLANEOUS
15.1 Fees and Expenses. Any federal, state, or local sales or transfer tax
arising in connection with the Merger shall be shared by the Stockholders and
the Parent and any federal, state or local sales or transfer tax arising in
connection with the WCCC/WBOQ Sale shall be shared by the Surviving Corporation
and the WCCC/WBOQ Buyer. Except as otherwise provided in this Agreement, each
party shall pay its own expenses incurred in connection with the authorization,
preparation, execution, and performance of this Agreement, including all fees
and expenses of counsel, accountants, agents, and representatives, except that
the Company and the Parent shall each pay one-half of all filing fees required
by the FCC and the letter of credit referred to in Section 3.6(a).
15.2 Notices. All notices, demands, and requests required or permitted to be
given under the provisions of this Agreement shall be (a) in writing, (b)
delivered by personal delivery, or sent by commercial delivery service or
registered or certified mail, return receipt requested, (c) deemed to have been
given on the date of personal delivery or the date set forth in the records of
the delivery service or on the return receipt, and (d) addressed as follows:
If to the Company Xxxxxx Broadcasting, Inc.
prior to the Closing: 00 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
With a copy to: Xxxxxx Xxxxx, Esq.
Xxxx and Xxxx, LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
If to the Parent, Xxx Radio, Inc.
Merger Sub or 0000 Xxxx Xxxxx Xxxxx, X.X.
the Surviving Xxxxxxx, Xxxxxxx 00000
Corporation: Attention: Xx. Xxxxxx X. Xxxx
With a copy to: Xxxxx X. Xxxx, Esq.
Dow, Xxxxxx & Xxxxxxxxx, PLLC
0000 Xxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
If to the Xxxxxx X. Xxxxxx
Stockholders' Tanger Properties
Agent: 00 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
If to the Xxxxxx Broadcasting, LLC
XXXX/XXXX 00 Xxxxxxxxx Xxxxxx
Buyer: Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
-56-
64
With a copy to: Xxxxxx Xxxxx, Esq.
Xxxx and Xxxx, LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
or to any other or additional persons and addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
15.2.
15.3 Benefit and Binding Effect. No party hereto may assign this Agreement
without the prior written consent of the other parties hereto; provided,
however, that the Parent, Merger Sub or the WCCC/WBOQ Buyer may assign its
rights and obligations under this Agreement, in whole or in part, to one or
more subsidiaries or commonly controlled affiliates of the Parent, Merger Sub
or the WCCC/WBOQ Buyer, as applicable, without seeking or obtaining any other
party's prior approval so long as the Parent, Merger Sub or the WCCC/WBOQ
Buyer, as applicable, remain liable hereunder and provided, further, that the
Surviving Corporation, without prior written consent of any other party, may
assign its rights under this Agreement to a Qualified Intermediary in
accordance with Section 4.6. Upon any permitted assignment by any party hereto
in accordance with this Section 15.3, all references to such party herein shall
be deemed to be references to such party's assignee. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
15.4 Further Assurances. The parties shall take any actions and execute any
other documents that may be necessary or desirable to the implementation and
consummation of this Agreement, including, in the case of the Stockholders, any
additional stock powers or other transfer documents that, in the reasonable
opinion of the Parent, may be necessary to ensure, complete, and evidence the
full and effective cancellation of the Company Stock pursuant to this
Agreement.
15.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO THE
CHOICE OF LAW PROVISIONS THEREOF).
15.6 Headings. The headings in this Agreement are included for ease of
reference only and shall not control or affect the meaning or construction of
the provisions of this Agreement.
15.7 Gender and Number. Words used in this Agreement, regardless of the gender
and number specifically used, shall be deemed and construed to include any
other gender, masculine, feminine, or neuter, and any other number, singular or
plural, as the context requires.
15.8 Entire Agreement. This Agreement, the schedules hereto, and all documents,
certificates, and other documents to be delivered by the parties pursuant
hereto, collectively represent the entire understanding and agreement among the
parties hereto with respect to the subject matter hereof. This Agreement
supersedes all prior negotiations between the parties and cannot be amended,
supplemented, or changed except by an agreement in writing that makes
-57-
65
specific reference to this Agreement and which is signed by the party against
which enforcement of any such amendment, supplement, or modification is sought.
15.9 Waiver of Compliance; Consents. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement, or condition herein may be
waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, representation,
warranty, covenant, agreement, or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 15.9.
15.10 Press Release. Neither party shall publish any press release, make any
other public announcement or otherwise communicate with any news media
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other party; provided, however, that any party to
this Agreement may make public announcements and filings with governmental
authorities to the extent required under applicable laws and rules of
securities exchanges as may in that party's judgment be required or advisable
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby without the consent of the
other parties to this Agreement if such party first gives the other parties
hereto notice of its intention of so doing and a reasonable opportunity to
comment on a draft of the proposed announcement or filing.
15.11 Stockholders' Agent. The Company has appointed Xxxxxx X. Xxxxxx as the
Stockholders' Agent and each Stockholder's attorney-in-fact and representative,
to do any and all things and to execute any and all documents in such
Stockholder's name, place and stead (other than each Transmittal Agreement and
related transfer documents which shall be signed by each Stockholder
personally), in any way which such Stockholder could do if personally present,
in connection with this Agreement and the transactions contemplated hereby,
including, without limitation, to resolve issues relating to the adjustment of
the Merger Consideration on such Stockholder's behalf. The Parent, the Merger
Sub and the Surviving Corporation shall have the right to rely in all respects
on the authority of the Stockholders' Agent to act on behalf of the
Stockholders.
15.12 Counterparts. This Agreement may be signed in counterparts with the same
effect as if the signature on each counterpart were upon the same instrument.
-58-
66
IN WITNESS WHEREOF, the parties hereto have duly executed this Merger
Agreement as of the day and year first above written.
XXXXXX BROADCASTING, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and CEO
XXX RADIO, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------
Name: Xxxxxx X. Xxxxxx
Title: Secretary
XXX MIAMI MERGER SUB, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------
Name: Xxxxxx X. Xxxxxx
Title: Secretary
XXXXXX BROADCASTING, LLC
By: /s/ Xxxxxx X. Xxxxxx
------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and CEO
