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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PREMIERE RADIO NETWORKS, INC.,
AFTER MIDNITE ENTERTAINMENT, INC.
AND THE
SHAREHOLDERS OF AFTER MIDNITE ENTERTAINMENT, INC.
AS OF JANUARY 1, 1997
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") dated as of January 1,
1997 is by and among Premiere Radio Networks, Inc., a Delaware corporation
("Premiere"), After Midnite Entertainment, Inc., a California corporation (the
"Company"), and the shareholders of the Company listed on the signature pages
hereto (the "Shareholders").
R E C I T A L S
WHEREAS, the Shareholders own all the outstanding capital stock of the
Company;
WHEREAS, Premiere desires to cause a merger of the Company with a wholly
owned subsidiary to be formed by Premiere under the laws of the State of
Delaware ("Merger Sub");
WHEREAS, In such merger, the Shareholders will receive cash and Class A
Common Stock of Premiere ("Premiere Class A Stock") in accordance with the terms
hereof;
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE 1
THE MERGER
1.1. FILING THE CERTIFICATE OF MERGER. An Agreement of Merger by and
among Merger Sub and the Company, meeting the requirements of the laws of the
State of Delaware shall be executed and delivered to the Secretary of State of
Delaware for filing in accordance with the General Corporation Law of the State
of Delaware (the "GCL") on the date of the Closing (as defined herein). The
merger of the Company into Merger Sub (the "Merger") shall be given effect upon
the filing of the Agreement of Merger, and any other documents necessary to
effect the Merger in accordance with the GCL.
1.2. THE MERGER. At the Effective Time:
(a) The Company shall be merged with and into Merger Sub, and the
separate existence of Company shall cease. Merger Sub shall be the surviving
corporation (the "Surviving Corporation").
(b) By virtue of the Merger, each issued and outstanding share of
common stock of the Company (the "Company Stock") shall be converted into the
right to receive any of cash,
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promissory notes of Premiere, or shares of Premiere Class A Stock, in each case
in such amounts as are indicated on Schedule 1.2(b) (such cash, notes and
Premiere Class A Stock, the "Merger Consideration"). The parties hereto agree
that all cash included in the Merger Consideration shall be paid by wire
transfer to an account designated to Premiere as the "Shareholders Account" in
writing by Xxxx Xxxxx on or before the Closing Date (the "Shareholders
Account"), and that all obligations of Merger Sub and Premiere to pay such cash
portion of the Merger Consideration, and all other amounts of cash to be paid to
any Shareholder hereunder, shall be completely satisfied upon transfer of such
amounts to the Shareholders Account.
(c) By virtue of the Merger, each issued and outstanding share of
common stock of Merger Sub shall be converted into one share of common stock of
the Surviving Corporation.
1.3. CHARTER DOCUMENTS; DIRECTORS AND OFFICERS AFTER THE MERGER.
(a) At the Effective Time, the articles of incorporation and bylaws
of Merger Sub, as in effect immediately prior to the Effective Time, shall be
the articles of incorporation and bylaws of the Surviving Corporation until duly
altered, amended or repealed thereafter; provided that the name of the Surviving
Corporation shall be "After Midnite Entertainment, Inc."
(b) From and after the Effective Time, the members of the Board of
Directors of the Surviving Corporation shall consist of the members of the Board
of Directors of Merger Sub immediately prior to the Effective Time, each of such
individuals to serve until such individual's successor is elected and qualified,
or until such individual's earlier death, resignation or removal.
(c) From and after the Effective Time, each officer of Merger Sub
immediately prior to the Effective Time shall be an initial officer of the
Surviving Corporation in the same capacity, until such officer's successor is
duly elected and qualified or until such officer's earlier death, resignation or
removal.
1.4. EXCHANGE OF CERTIFICATES. At the Closing (as defined herein)
each Shareholder shall present his Company Stock to Premiere and Premiere shall
deliver the Merger Consideration to each Shareholder. Following the Effective
Time each share of Company Stock shall represent solely the right to receive the
Merger Consideration as provided herein, and shall have no other rights.
1.5. CLOSING.
The closing of the transactions contemplated herein (the "Closing")
shall take place at 9:00 a.m., local time on January 7, 1997, or such other date
as to which the parties shall agree (the "Closing Date"), at the offices of
Christensen, Miller, Fink, Jacobs, Xxxxxx, Weil & Xxxxxxx, LLP, 2121 Avenue of
the Stars, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 or at such other place and
on such other date as the parties shall agree.
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ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PREMIERE
Premiere represents, warrants and covenants to the Company and the Shareholders
as follows:
2.1. ORGANIZATION AND STANDING. Premiere is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite authority to own its property and assets and to
conduct its business as presently conducted.
2.2. AUTHORIZATION AND BINDING OBLIGATION. Premiere has all necessary
power and authority to enter into and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby, and Premiere's
execution, delivery and performance of this Agreement have been duly and validly
authorized by all necessary action on its part. This Agreement has been duly
executed and delivered by Premiere and constitutes its valid and binding
obligation, enforceable in accordance with its terms, except as limited by laws
affecting creditors' rights or equitable principles generally.
2.3. ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. The
execution, delivery and performance of this Agreement by Premiere: (a) do not
require the consent of any third party; (b) will not violate any provision of
Premiere's certificate of incorporation or by-laws; (c) will not violate any
applicable law, judgment, order, injunction, decree, rule, regulation or ruling
of any governmental authority to which Premiere is a party or is bound; and (d)
will not, either alone or with the giving of notice or the passage of time, or
both, conflict with, constitute grounds for termination of or result in a breach
of the terms, conditions or provisions of, or constitute a material default
under or accelerate or permit the acceleration of any performance required by
the terms of any agreement, instrument, license or permit to which Premiere is
now subject.
2.4. LITIGATION. There is no claim, litigation, proceeding or
investigation pending or, to the best of Premiere's knowledge, threatened
against Premiere which seeks to enjoin or prohibit, or otherwise questions the
validity of, any action taken or to be taken in connection with this Agreement.
2.5. PREMIERE CLASS A STOCK; FULLY PAID, ETC. The shares of Premiere
Class A Stock to be issued in the Merger will, upon issuance, be duly
authorized, validly issued, fully-paid and non-assessable, free of any pre-
emptive rights, free of any restrictions, except for restrictions on transfer
under applicable securities laws and will have been issued in compliance with
applicable securities laws.
2.6. DISCLOSURE. The Company has heretofore delivered to the
Shareholders its (i) Annual Report and any amendments thereto on Form 10-K for
the three most recent fiscal years as filed with the Commission, (ii) Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996, (iii) all proxy
statements relating to the Company's meetings of stockholders
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(whether annual or special) since December 31, 1995, and (iv) all other reports
or registration statements filed by the Company with the Commission since
December 31, 1995, 1995 (the "SEC Documents"). As of their respective dates,
the SEC Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) complied as to form in all material respects
with the Exchange Act and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not false or misleading. Premiere has no actual knowledge that any
representation or warranty of the Company or any Shareholder hereunder contains
any untrue statement of material fact or omits any statement of material fact
necessary to make any statement contained herein or therein not misleading, it
being expressly understood that Premiere shall not be charged with any such
actual knowledge on account of any due diligence investigation it may have
conducted with respect to the transactions contemplated hereby.
ARTICLE 3
REPRESENTATION AND WARRANTIES AND COVENANTS OF
THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders, jointly and severally, represent, warrant and
covenant to Premiere as follows:
3.1. ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has all necessary corporate power and authority to own, lease and
operate the assets which it owns or leases and to carry on its business as now
being conducted and as proposed to be conducted. The Company is duly qualified
to do business and is in good standing in any state in which the ownership of
its assets or the nature of its business requires it to be so qualified, except
where the failure to be qualified and/or in good standing would not have a
material adverse effect on its business.
3.2. CAPITALIZATION; OWNERSHIP OF COMPANY STOCK.
(a) The authorized capital of the Company consists of ten thousand
(10,000) shares of Company Stock, of which ten thousand (10,000) shares are
issued and outstanding. There are no outstanding options, warrants or other
agreements providing for the issuance of Company Stock. None of the shares of
Company Stock has been issued in violation of any applicable securities laws or
in violation of any rights, pre-emptive or otherwise, of any present or past
shareholder of the Company. The Company does not have any subsidiaries.
(b) Each Shareholder is the sole record and beneficial owner of the
number of shares of Company Stock set forth opposite his name on SCHEDULE 3.2
hereto and has, good and marketable title to such Company Stock, free and clear
of all liens, pledges, encumbrances, options, purchase rights or otherwise.
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3.3. AUTHORIZATION AND BINDING OBLIGATION. The Company and the
Shareholders each has all necessary power and authority to enter into and
perform its or his obligations under this Agreement and to consummate the
transactions contemplated hereby, and the execution, delivery and performance of
this Agreement have been duly and validly authorized by all necessary action.
This Agreement has been duly executed and delivered by the Company and the
Shareholders and constitutes its or his respective binding obligation,
enforceable in accordance with its terms, except as limited by laws affecting
the enforcement of creditors' rights or equitable principles generally.
3.4. ABSENCE OF CONFLICTING AGREEMENT OR REQUIRED CONSENTS. The
execution, delivery and performance of this Agreement by the Company and the
Shareholders (a) do not require the consent of any third party, except as
otherwise detailed on one of the SCHEDULES hereto (which material consents shall
be obtained prior to the Closing); (b) will not violate any provisions of the
Company's articles of incorporation or by-laws; (c) will not violate any
applicable law, judgment, order, injunction, decree, rule, regulation or ruling
of any governmental authority to which the Company or the Shareholders are a
party or by which the Company, its assets or the Shareholders are bound; (d)
except as otherwise disclosed on Schedule 3.4 hereof, will not, either alone or
with the giving of notice or the passage of time, or both, conflict with,
constitute grounds for termination of or result in a breach of the terms,
conditions or provisions of, or constitute a material default under or
accelerate or permit the acceleration of any performance required by the terms
of any material agreement, instrument, license or permit to which the Company,
its assets or the Shareholders are now subject; PROVIDED that the Company shall
deliver waivers or consents of the appropriate counter-party to each such
agreement, instrument, license or permit prior to the Closing and (e) will not
result in the creation of any lien, charge or encumbrance on any of assets of
the Company.
3.5. INTELLECTUAL PROPERTY. The Company has good and marketable title
in or otherwise has the right to use all material copyrights, trademarks, trade
names, service marks, licenses, permits, jingles, privileges, and other similar
intangible property rights and interests which are used in the present conduct
of its business and operations ("Intellectual Property"). Attached hereto as
SCHEDULE 3.5(a) is a list of all such Intellectual Property rights. Such
schedule indicates which items are owned and which are used pursuant to licenses
or other rights to use the Intellectual Property. Except as disclosed in
SCHEDULE 3.5(b), there are no pending, or to the Knowledge of the Company and
the Shareholders, threatened proceedings or litigation affecting or relating to
any Intellectual Property. Neither the Company nor any Shareholder has received
notice alleging infringement of the rights of any third party to Intellectual
Property or alleging the unlawful use of such property. As used in this
Agreement, the term the "Knowledge of the Company and the Shareholders" shall
mean (i) to the best knowledge of the Company after reasonable enquiry and
investigation, and (ii) to the actual knowledge of any Shareholder. "The best
knowledge of the Company" shall include, without limitation, knowledge of any
Company officer (including any officer who is also a Shareholder) after
reasonable enquiry and investigation to be conducted within the scope of his
responsibilities as an officer.
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3.6. PERSONNEL INFORMATION.
(a) SCHEDULE 3.6(a) contains a true and complete list of all persons
employed by, and all consultants and outside talent engaged by or under contract
with, the Company as of December 15, 1996 and a description of all compensation
arrangements (including bonus arrangements) and employee benefit plans or
arrangements applicable to such employees, consultants and talent. To the
Knowledge of the Company and the Shareholders, no employee, consultant or talent
identified on SCHEDULE 3.6(a) currently plans to terminate such person's
employment, engagement or contract, whether by reason of the transactions
contemplated by this Agreement or otherwise.
(b) Except as disclosed in SCHEDULE 3.6(b), to the Knowledge of the
Company and the Shareholders, the Company has complied in all material respects
with all laws relating to the employment of labor, including, without
limitation, those laws relating to safety, health, wages, hours, unemployment
insurance, workers' compensation, and equal employment opportunity.
(c) Other than as set forth on SCHEDULE 3.6(c), the Company is not a
party to or bound by any employee pension benefit plan within the meaning of
Section 3(2)(a) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"),and covering or regarding the employees set forth on SCHEDULE
3.6(a) whether or not such plan is otherwise exempt from the provisions of
ERISA, and no employee or spouse of an employee identified on SCHEDULE 3.6(a) is
entitled to any benefits that would be payable pursuant to any employee pension
benefit plan. Except as provided on SCHEDULE 3.6(c), the Company does not have
any fixed or contingent liability or obligation to any person now or formerly
employed by it, including, without limitation, pension or thrift plans,
individual or supplemental pension or accrued compensation arrangements,
contributions to hospitalization or other health or life insurance programs,
incentive plans, bonus arrangements and vacation, sick leave, disability and
termination arrangements or policies, including workers compensation policies.
Premiere shall not assume or hereby become obligated to pay, and the
Shareholders shall indemnify Premiere for, any debt, obligation or liability
arising from the Company's employee benefit plans, or any other employment
arrangement; provided that employees of the Company shall receive credit for
years of service for purposes of vacation and participation in Premiere's health
insurance plan and 401(k) plan; provided further, that Premiere shall not be
obligated to deposit any additional funds into its 401(k) plan in order to
provide employees of the Company with credit for years of service.
(d) Except as disclosed on SCHEDULE 3.6(d), the Company is not a
party to, or negotiating, any collective bargaining agreement, nor are there to
the Knowledge of the Company and the Shareholders, any union organizational or
representation efforts underway.
(e) Each Shareholder hereby acknowledges and represents that such
Shareholder is aware that Xxxx Xxxxx shall or may enter into consulting and
employment contracts with the Company, Premiere or their affiliates, in form and
substance acceptable to such persons in their
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sole and complete discretion (including, without limitation, the Consulting
Agreement and Transaction Agreement, each between Premiere and Xxxx Xxxxx, in
form agreed by such parties prior to the date hereof, with such variations
therefrom as such parties may agree in their sole and complete discretion may
have agreed (the "Consulting Agreement" and the "Transaction Agreement",
respectively)), and hereby consents thereto.
3.7. LITIGATION. The Company is not subject to any judgment, award,
order, writ, injunction, arbitration decision or decree pertaining to the
operation of the Company, the ownership of its assets or the validity of this
Agreement EXCEPT (i) as set forth on SCHEDULE 3.7 and (ii) for any such
judgment, award, order, writ, injunction or decision issued in litigation
arising out of a claim (if any) by MediaAmerica, Inc. ("MAI") to be the
advertising sales representative for the Company in 1997 (the "MediaAmerica
Litigation"). Except as set forth on SCHEDULE 3.7 and except as issued in the
MediaAmerica Litigation (if any), the Shareholders are not subject to any
judgment, award, writ, injunction, arbitration decision or decree pertaining to
the validity of this Agreement. Except as set forth on SCHEDULE 3.7 and except
for the MediaAmerica Litigation (if any), there is no litigation, proceeding or
investigation pending or, to the Knowledge of the Company and the Shareholders,
threatened against any of them or relating to the Company or the Shareholders in
any federal, state or local court, or before any administrative agency, referee,
arbitrator or other tribunal authorized to resolve disputes, which seeks to
enjoin or prohibit, or otherwise questions the validity of, any action taken or
to be taken in connection with this Agreement. For the avoidance of doubt, the
parties hereto have agreed that there is no basis on which MediaAmerica
Litigation may be sustained, but have provided therefor in this Section 3.7 and
elsewhere in this Agreement solely as a precautionary measure.
3.8. COMPLIANCE WITH LAWS. To the Knowledge of the Company and the
Shareholders, the Company has operated and is operating in material compliance
with all laws, regulations and governmental orders pertaining to the operation
of the Company or the ownership of its assets, and the Company's present use of
its assets and conduct of its business does not violate any law, regulation or
order in any material respect. Neither the Company nor the Shareholders has
received any notice asserting any noncompliance with any applicable statute,
rule or regulation, in connection with the business or operations of the
Company.
3.9. BANKRUPTCY. No insolvency proceedings of any character,
including without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
the Company, the Shareholders or any assets of the Company, are pending or, to
the Knowledge of the Company and the Shareholders, threatened, and neither the
Company nor the Shareholders has made and presently does not intend to make any
assignment for the benefit of creditors or file any petition in bankruptcy and
has not taken and presently does not intend to take any action which would
constitute the basis for the institution of such insolvency proceedings. To the
Knowledge of the Company and the Shareholders, there is no fact or circumstance
which would cause the Company, its assets or business or the Shareholders to
become subject to the jurisdiction of any bankruptcy court or proceeding within
90 days of the Closing Date.
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3.10. OPERATION OF THE COMPANY. Since October 31, 1996 the Company has
operated its business in the ordinary and normal course of business and in the
manner that has been customary during the period since the Shareholders acquired
the Company. Since October 31, 1996 the Company has used reasonable efforts to
preserve the business and organization of the Company, and to keep available
without entering into any binding agreement except as disclosed on SCHEDULE
3.10, the services of those employees, consultants and outside talent of the
Company the loss of which could reasonably be expected to have a material
adverse effect on the Company or its business, and to preserve the goodwill of
the Company's customers and others having business relationships with the
Company.
3.11. ABSENCE OF UNDISCLOSED LIABILITIES. The unaudited cash basis
balance sheets of the Company at October 31, 1996 and the related unaudited,
cash basis income statements (including footnotes thereto) for the periods then
ended present fairly in all material respects the cash basis financial position
and results of operations of the Company as of such date. The foregoing
financial statements, all of which have been attached as Schedule 3.11(a)
hereto, are sometimes referred to herein as the "Financials." The Company's
accrued and contingent liabilities as of October 31, 1996 which are not
reflected in the Financials are disclosed on Schedule 3.11(b), together with all
reserves taken by the Company for any thereof. Except as and to the extent
reflected or reserved against in the Financials, or disclosed in any Schedules
hereto (including, without limitation, Schedules 3.11(a) and (b)), the Company
had no liabilities or obligations which would be required to be disclosed in
financial statements prepared in accordance with Generally Accepted Accounting
Principles as of the date thereof (other than obligations of continued
performance under the Material Agreements and other commitments and arrangements
incident to the normal conduct of business which are terminable at will), known
or unknown, secured or unsecured (whether accrued, absolute, contingent or
otherwise), including, without limitation, tax liabilities due or to become due.
Since October 31, 1996, except as and to the extent reflected or reserved
against in the Financials or disclosed in any Schedule hereto (including,
without limitation, Schedule 3.11), the Company has incurred no material
liabilities or obligations other than (i) current liabilities incurred in the
ordinary course of business which in the aggregate do not have a material
adverse effect on the financial position or operations of the Company, or (ii)
in connection with the transactions contemplated hereby.
3.12. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since October 31, 1996,
except as described in SCHEDULE 3.12 hereto, there has not occurred any event or
condition which has a material adverse effect on the properties, assets,
liabilities (whether absolute, contingent, accrued or otherwise), financial
condition, results of operations, business, affairs of the Company concerning
the Company and, without limiting the generality of the foregoing, the Company
has not, except as disclosed on Schedule 3.12, (a) incurred any obligation or
liability, secured or unsecured (whether accrued, absolute, contingent or
otherwise), whether due or to become due, except current liabilities in the
ordinary course of business; (b) mortgaged, pledged, or subjected to lien,
charge, security interest or other encumbrance any of its assets; (c) sold,
transferred, licensed or otherwise disposed of any of its assets other than in
the ordinary course of business consistent with past practice; (d) increased the
compensation payable or to become payable by it
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to any of its directors, officers, employees or agents whose total compensation
for services rendered after any such increase is at an annual rate of more than
$30,000, or made any bonus, percentage of compensation or other like benefit
accruing to or for the credit of any such directors, officers, employees or
agents of the Company; (e) terminated or received any notice of termination of
any material contract, lease, trademark, patent, copyright or trade name
protection or other agreement; (f) suffered any damage, destruction or loss
(whether or not covered by insurance) adversely affecting its assets (other than
normal wear and tear); (g) suffered any taking or seizure of all or any part of
its assets by condemnation or eminent domain; (h) experienced any material
adverse change in its relations with its dealers, distributors, customers,
employees, agents or consultants; (i) acquired any capital stock or other
securities of any corporation or any interest in any business enterprise, or
otherwise made any loan or advance to or investment in any person, firm or
corporation; (j) made any capital expenditures or capital additions exceeding
$10,000 singularly or $50,000 in the aggregate; (k) instituted, settled or
agreed to settle any litigation, action or proceeding before any court or
governmental body affecting its financial condition, its property or its
business operations; (l) made any purchase commitment in excess of normal,
ordinary and usual requirements, or made any material change in its selling,
pricing, or personnel practices; (m) made any change in accounting principles or
methods, or in the manner of keeping books, accounts and records of the Company;
(n) declared, set aside or paid any dividends or distributions in respect of the
Company Stock or otherwise paid any amounts to the Shareholders except for
payment of salaries, benefits and other compensation and reimbursement of
expenses consistent with past policies; (o) repurchased any capital stock of the
Company; (p) waived or released any debts, claims, rights of value or suffered
any extraordinary loss or written down the value of any assets or written off
any receivables in excess of $5,000; (q) accelerated or deferred any items of
income or expense; (r) suffered any material adverse change in its income
business, financial condition, assets or results of operations or experienced
any occurrence or event which has had a material adverse effect upon the
revenues, business, financial condition or results of operations; (s) entered
into any agreement or made any commitment to do any of the things described in
the preceding subsections (a) through (r) of this Section 3.12.
3.13. EQUIPMENT LEASES AND CONTRACTS. Except as disclosed on SCHEDULE
3.13 hereto, the Company is not a party to, nor are its assets bound by, any
executory agreements (including dealer and distributor agreements), purchase
orders (other than purchase commitments for supplies in the ordinary course of
business), bailment agreements, equipment leases, commitments, contracts,
employment agreements, warranties, guarantees, understandings or other
agreements (a) which involve or may involve the annual payment of more than
$2,500, (b) which are of a duration in excess of twelve (12) months from the
date of execution thereof, (c) to which any stockholder, officer, director or
employee of the Company is a party in any capacity, which is not being
extinguished on or before the Closing Date, or (d) whose termination would
result in a liability of $5,000 or more (said agreements, together with the Real
Property Leases, being referred to herein collectively as the "Material
Agreements"). Each Material Agreement is listed on SCHEDULE 3.13 . True and
correct copies of each of the Material Agreements have been delivered to
Premiere and each Material Agreement is in full force and effect, has an
expiration
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date as set forth on SCHEDULE 3.13, has not been amended or modified except as
set forth on SCHEDULE 3.13, and constitutes the entire agreement between the
parties thereto with respect to the subject matter thereof. The Company is not,
and to the Knowledge of the Company and the Shareholders, no third party to any
Material Agreement is in material default thereunder, nor is the Company aware
of any fact or circumstances with respect to any Material Agreement which upon
notice or lapse of time could give rise to a material default thereunder.
3.14. REAL PROPERTY LEASES. The real property leases listed on
SCHEDULE 3.14 hereto (the "Real Property Leases") constitute all leases, whether
written or oral, to which the Company or any of its affiliates is a party and
which are necessary or required in connection with the Company's business
(including any real property owned by one or more of the Shareholders or any
affiliate of the Company); true and correct copies of each of the written Real
Property Leases have been delivered to Premiere. The Company has valid and
enforceable leasehold interests in such real property, free and clear of all
liens and encumbrances. To the Knowledge of the Company and the Shareholders
there exists no event of default or event, occurrence, condition or act
(including the transactions contemplated by this Agreement) which, with the
giving of notice, the lapse of time or the happening of any further event or
condition, would become a material default under such lease, give rise to a
right in the lessor to terminate the lease or render the lessee liable to incur
any expenditure under such lease. In the event any such lease requires the
lessee to exercise an option to renew in order to continue the term thereof, the
Company has properly exercised such option to renew. To the Knowledge of the
Company and the Shareholders each such real property and improvements thereon
may lawfully be used in connection with the business of the Company and is in
compliance with all applicable laws, rules, regulations and ordinances of all
federal, state, municipal and other governmental authorities including, but not
limited to, zoning, building, health, safety and environmental laws, and the
Company has not received any notices of violations with respect thereto.
3.15. MACHINERY AND EQUIPMENT. The machinery and equipment used in the
Company's business is in adequate operating condition, subject to normal wear
and tear, and in a state of repair sufficient for the conduct of normal
operations. The Company's assets and properties (including leased property) are
adequate to enable the Company to conduct its business as now being conducted.
Except as described in Schedule 3.15, the Company is not aware of any major
capital expenditure that will be required within one year from the date of this
Agreement that is not consistent with past practices.
3.16. LICENSES. The Company possesses all material patents,
franchises, permits, licenses, music library rights, certificates and consents
required from any governmental authority or any other person necessary to enable
the Company to carry on its business as now conducted and to own and operate its
properties (including leased property) as now owned and operated and all such
patents, franchises, permits, licenses, rights, certificates and consents will
remain in full force and effect following consummation of the transactions
contemplated by this Agreement. Attached hereto as SCHEDULE 3.16 is a true and
complete list of all such patents, franchises,
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permits, licenses, certificates and consents. All such patents, franchises,
permits, licenses, certificates and consents will remain in full force and
effect following the Merger.
3.17. TITLE TO ASSETS. Except as disclosed on SCHEDULE 3.17 hereto,
all of the Company's assets are owned free and clear of all mortgages, liens,
security interests, pledges, charges and other encumbrances whatsoever
(including, without limitation, profit and revenue sharing agreements). Except
as disclosed on SCHEDULE 3.17 hereto, immediately following the Merger the
Company's assets will be free and clear of all mortgages, liens, security
interests, pledges, charges and other encumbrances whatsoever.
3.18. TAXES The Company has at all times since its creation duly made
and maintained in effect an "S corporation" election under the Internal Revenue
Code of 1986, as amended (the "Code"), and, pursuant to such election, is and
has at all times since its creation been, an "S corporation". Without
limitation to the foregoing sentence, the Company has no "built in gain" (as
such term is used in Section 1374 of the Code). The Company (a) has filed all
federal, state and local tax returns required by law in the legally prescribed
time and manner, and paid all taxes, assessments and penalties due and payable;
(b) has made all payments required by any governmental program of workers'
social security or unemployment compensation; (c) has withheld and paid over to
the appropriate governmental authority all amounts required by law to be
withheld from the wages or salaries of employees; (d) is not liable for any
arrears of wages or any taxes or penalties for failure to comply with any of the
foregoing; and (e) has paid or will pay over to the appropriate governmental
authority all sales or use taxes referable to the Company's operations due as of
the Closing Date, and has made or will make provisions for payment of all such
taxes accrued as of such date, but not yet due. There are no claims pending or,
to the Knowledge of the Company and the Shareholders, threatened against the
Company for past due taxes, nor are there any outstanding waivers or agreements
by the Company for the extension of the time for the assessment of any tax. The
amounts reserved on the Financials, or disclosed on any Schedule hereto, for
accrued but unpaid taxes are sufficient to pay all accrued but unpaid taxes
through the Closing Date. The Company has never been audited by any federal,
state or local governmental taxing authority and has received no notice of any
future such audit, and, to the Knowledge of the Company and the Shareholders, no
such audit is pending, planned or threatened. The Company has withheld and paid
all amounts with respect to federal, state or local taxes which are required to
be made by applicable law.
3.19. INSURANCE. Attached hereto as SCHEDULE 3.19 is a true and
complete list of all insurance policies in force with respect to the Company's
business and assets and the annual premiums payable thereon. The Company is not
now, and on the Closing Date will not be, in default in any respect under any
such policy, and the Company shall continue such policies in force and effect
through the Closing Date.
3.20. ACCESS TO RECORDS. Prior to the execution of this Agreement, the
Company has made available to Premiere and its representatives for their
examination the books and records of the Company, including, without limitation,
computer data and records (the "Records"). No
11
changes or additions to the Records have been made from the date the Records
were first made available to Premiere and its representatives and nothing which
should be set forth in the Records, if prepared in the ordinary course of
business, occurred from the date such Records were first made available to
Premiere or its representatives, except for such changes, additions or events
which have been made or have occurred, as the case may be, in the ordinary
course of the business of the Company consistent with the prior practice of the
Company or which have otherwise been disclosed in writing to the Company.
3.21. SOPHISTICATED INVESTORS; INVESTMENT INTENT. Each Shareholder who
is to receive Premiere Class A Stock under this Agreement, by reason of his
business and financial experience or together with his investment
representative, has sufficient knowledge and experience in financial and
business matters to enable him to evaluate the merits and risks of this
Agreement and the transactions contemplated by this Agreement and to protect his
own interests in connection with this Agreement and the transactions
contemplated hereby. Each such Shareholder acknowledges that the Premiere Class
A Stock to be received by him has not been registered under the Securities Act
of 1933, as amended (the "Securities Act"). Each such Shareholder (i) is taking
the shares of Premiere Class A Stock to be received by him for his own account
for investment and not with a view to engage in, or for sale in connection with,
any offering or distribution thereof and otherwise without a present intent of
transferring or otherwise disposing of such shares except in compliance with
applicable securities laws; (ii) prior to the execution of this Agreement, has
received all information requested concerning the business, operations and
financial condition of Premiere in connection with his making an investment
decision to acquire the Premiere Class A Stock; and (iii) is an "accredited
investor" as defined in Regulation D of the Securities Act.
3.22. DISCLOSURE. None of this Agreement or any certificate or other
document delivered in connection with the transactions contemplated by this
Agreement contains any untrue statement of material fact or omits any statement
of material fact necessary to make any statement contained herein or therein, as
the case may be, not misleading. Neither the Company nor any Shareholder has
actual knowledge that any representation or warranty of Premiere hereunder
contains any untrue statement of material fact or omits any statement of
material fact necessary to make any statement contained herein or therein not
misleading, it being expressly understood that neither the Company nor any
Shareholder shall charged with any such actual knowledge on account of any due
diligence investigation it or he may have conducted with respect to the
transactions contemplated hereby.
3.23. NO ACCRUED EMPLOYEE VACATION TIME. No present or former employee
of the Company has accrued any unused vacation time, and the Company is not
obligated to pay any amount to any such employee with respect thereto.
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3.24. MEDIAAMERICA ADVANCE AND OTHER ACCOUNTS PAYABLES; ACCOUNTS
RECEIVABLES.
(a) The amount of the MediaAmerica Advance (defined below) is as of
the date hereof $199,206. As used herein, "MediaAmerica Advance shall mean the
aggregate remaining amount owed from time to time (including principal and
interest) to MAI under that certain Revolving Promissory Note (the "MediaAmerica
Note"), dated April 21, 1995.
(b) The Shareholders shall satisfy in a manner consistent with the
Company's prior ordinary course of business all of the Company's accounts
payable and other liabilities (i) respecting obligations to which the Company
was contractually bound to pay prior to Closing, including, without limitation,
all employee payroll, bonus and other obligations to Company employees accrued
prior to the Closing Date, (ii) for services rendered to the Company prior to
Closing, or (iii) for goods purchased, ordered or received by the Company prior
to Closing; PROVIDED, HOWEVER, that with respect to the Company's obligation to
repay the MediaAmerica Advance, all amounts collected by Premiere from MAI after
the Closing with respect to the Sales Representation Agreement dated as of April
1, 1995, as amended, between the Company and MAI, whether in cash or by way of
offsets against amounts due by the company to MAI under the Company's Revolving
Promissory Note to MAI, dated April 21, 1995, as amended, shall be deemed to be
accounts receivable collected by Premier under Section 11.1(b), and to the
extent received by Premiere, shall be remitted to the Shareholders at the time
and in the manner provided in Section 11.1(b). Premiere shall, promptly upon
receipt of statements from MAI with respect to collected Adjusted Gross
Receipts, remit true copies thereof to the Shareholders. The Shareholders shall
retain the right at any time after the Closing to designate Premiere in writing
as the party to collect Gross Receipts derived from any contracts obtained by
MAI during the Term (as such term is used in section 7.2 of the Sales
Representation Agreement). In such case, all amounts collected by Premiere
(less such sums as are due MAI under said section 7.2) shall be treated as
collected accounts receivable under Section 11.1(b) and remitted to the
Shareholders as provided therein.
(c) The parties hereto understand and agree that ordinary items of
income and operating expenses of the Company for the year 1997 (each of which is
described in the Schedules hereto) which overlap the Closing Date, including
without limitation, payroll obligation for the Company's employees, rent
obligations accrued by the Company and pre-paid satellite expenses paid by the
Company, shall be prorated as of the Closing Date, with the burdens and benefits
attributable to period before the Closing Date being attributed to the
Shareholders, and the burdens and benefits attributable to period on and after
the Closing Date being attributed to Premiere, and the parties agree that such
prorated amounts shall be calculated on or before March 1, 1997 and settled by
appropriate cash payment on that date.
(d) Shareholders jointly and severally agree to promptly pay any
amounts payable with respect to severance of any Company employee listed on
Schedule 3.6 as a "Full Time Employee" whose employment is terminated within 60
days after the Closing Date.
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ARTICLE 4
CONDITIONS PRECEDENT TO PREMIERE'S OBLIGATION TO CLOSE
The obligation of Premiere to consummate the transactions contemplated herein
are subject to the satisfaction or waiver, at or prior to the Closing, of each
of the following conditions:
4.1. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) All representations and warranties of the Company and the
Shareholders shall be, and the Company and each Shareholder shall have executed
and delivered Certificates dated the Closing Date certifying that such
representations and warranties are, true and complete in all material respects
on and as of the Closing Date as if made on and as of that date.
(b) All of the terms, covenants and conditions to be complied with
and performed by the Company and the Shareholders on or prior to Closing Date
shall have been complied with or performed in all material respects.
(c) The Company shall have obtained all material consents and
material waivers described in this Agreement, including Schedules hereto,
required to be obtained prior to the Closing; PROVIDED, HOWEVER, that the
Shareholders shall continue to use their respective best efforts to obtain each
consent and waiver described in this Agreement, including Schedules hereto,
which have not been obtained prior to the Closing, and in all events the
Shareholders jointly and severally agree to obtain and deliver to Premiere each
such consent and waiver by no later than March 1, 1997.
4.2. ADVERSE PROCEEDINGS. No suit, action, claim or governmental
proceeding shall be pending against, and no order, decree or judgment of any
court, agency or other governmental authority shall have been rendered against,
any party hereto which Premiere in good faith believes would render it unlawful
to effect the transactions contemplated by this Agreement in accordance with its
terms EXCEPT any suit, action or claim of MediaAmerica Litigation.
4.3. NON-COMPETITION AGREEMENT. The Shareholders other than Xxxx
Xxxxx shall each have executed and delivered the Non-Competition Agreement
substantially in the form attached hereto as SCHEDULE 4.4. The Shareholders
shall be paid an aggregate of $800,000 for entering into the Non-Competition
Agreements. Such amount shall be allocated as follows:
Xxxxxxx Xxxxxxx $ 50,000.00
Xxxxxxx Xxxxxxx $ 50,000.00
Xxx Xxxx $317,037.44
Xxxxx Xxxxxx $382,962.56
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The Non-Competition Agreements of Xxx Xxxx and Xxxxx Xxxxxx shall provide, among
other things, that such Shareholders shall hold the titles of "President of the
AME Division" and "Chief Creative Officer of the AME Division", respectively,
and further provide for the issuance of certain options respecting Premiere
Class A Stock, in each case on the terms and conditions provided in such Non-
Competition Agreements.
ARTICLE 5
CONDITIONS PRECEDENT TO THE COMPANY'S AND SHAREHOLDERS'
OBLIGATION TO CLOSE
The obligations of the Company and the Shareholders to consummate the
transactions contemplated herein are subject to the satisfaction or waiver, at
or prior to the Closing, of each of the following conditions:
5.1. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) All representations and warranties of Premiere shall be, and
Premiere shall have executed and delivered a Certificate dated the Closing Date
certifying that such representations and warranties are, true and complete in
all material respects on and as of the Closing Date as if made on and as of that
date.
(b) All the terms, covenants and conditions to be complied with and
performed by Premiere on or prior to the Closing Date shall have been complied
with or performed in all material respects.
5.2. REGISTRATION RIGHTS AGREEMENT. Premiere and the Shareholders
shall have entered into a Registration Rights Agreement, the form of which is
attached hereto as SCHEDULE 5.3.
5.3. CONSIDERATION. Premiere and Merger Sub shall have tendered the
Merger Consideration, subject to the terms and conditions hereof.
ARTICLE 6
DOCUMENTS TO BE DELIVERED AT THE CLOSING
6.1. DOCUMENTS TO BE DELIVERED BY THE COMPANY AND THE SHAREHOLDERS.
At Closing, the Company and the Shareholders shall deliver to Premiere the
following:
(a) An Agreement of Merger duly executed on behalf of the Company;
(b) Stock certificates representing all the outstanding shares of
Company Stock;
15
(c) Non-Competition Agreements executed by the Shareholders other
than Xxxx Xxxxx, and each of the Consulting Agreement and the Transaction
Agreement, executed by Xxxx Xxxxx;
(d) Copies of resolutions of the Board of Directors and shareholders
of the Company authorizing the execution and delivery of this Agreement, and the
performance by the Company of its obligations hereunder and a certificate of the
Secretary of the Company stating that such resolutions are in full force and
effect and have not been modified or rescinded as of the Closing Date;
(e) Uniform Commercial Code termination statements terminating any
recorded financing statement of Company respecting any factoring or credit
facility which Premiere shall have requested, other than the MediaAmerica Note,
each executed by the creditor which is beneficiary of such financing statement;
PROVIDED, HOWEVER, that the Shareholders shall continue to use their respective
best efforts to cooperate after the Closing with Premiere to obtain and file
Uniform Commercial Code termination statements terminating any recorded
financing statement of Company respecting the MediaAmerica Note;
(f) Termination agreements in form and substance satisfactory to
Premiere terminating as of the Closing Date any factoring or credit facility
which Premiere shall have requested, other than the MediaAmerica Note, each duly
executed and delivered by Company and each creditor thereunder, together with an
acknowledgement of each such creditor that amounts are outstanding thereunder;
PROVIDED, HOWEVER, that the Shareholders shall continue to use their respective
best efforts to cooperate after the Closing with Premiere to obtain and deliver
to Premiere an agreement terminating the MediaAmerica Note;
(g) A termination agreement in form and substance satisfactory to
Premiere terminating as of the Closing Date any shareholders' agreement among
the Shareholders or any of them, duly executed and delivered by each such
Shareholder and any other party thereto; and
(h) A certificate signed by the Shareholders stating the aggregate
amount, if any, of the MediaAmerica Advance as of the Closing Date;
(i) Agreements, in each case in form and substance reasonably
satisfactory to Premiere (A) duly executed and delivered by each of Xxxxx Xxxxxx
and Xxx Xxxx amending the employment agreements of each thereof with the Company
as of the Closing Date, and consenting to the assumption of such employment
agreement at any time on or after the Closing Date by Merger Sub or Premiere,
and (B) duly executed and delivered by Xxxx Xxxxx terminating any employment
agreement of Xxxx Xxxxx with the Company as of the Closing Date, and waiving any
and all benefits under such employment agreement;
(j) Duly executed letters of resignation of each officer and director
of the Company, each effective as of the Closing Date.
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6.2. DOCUMENTS TO BE DELIVERED BY PREMIERE. At the Closing, Premiere
shall deliver to the Shareholders the following:
(a) An Agreement of Merger duly executed on behalf of Merger Sub;
(b) An aggregate of Three Million Nine Hundred Thousand Dollars
($3,900,000) LESS an amount equal to the MediaAmerica Advance balance as of the
Closing date, in cash (which cash consideration includes $800,000 allocated to
the Non-Competition Agreements) and certificates representing 400,000 shares of
Premiere Class A Stock issued in the names of the Shareholders as provided in
Schedule 6.2; PROVIDED that the parties hereto agree that the withheld amount
equal to the MediaAmerica Advance balance shall be deemed delivered to the
Shareholders notwithstanding Premiere's retention thereof;
(c) The Registration Rights Agreement duly executed on behalf of
Premiere;
(d) Resolutions of the Board of Directors of Premiere (or the
Executive Committee thereof) authorizing the execution and delivery of this
Agreement and the performance by Premiere of its obligations hereunder and a
certificate of the Secretary or an Assistant Secretary of Premiere stating that
such resolutions are in full force and effect and have not been modified or
rescinded as of the Closing Date;
(e) Resolutions of the Board of Directors and Shareholder of Merger
Sub authorizing the Merger and a certificate of the Secretary or an Assistant
Secretary of Merger Sub stating that such resolutions are in full force and
effect and have not been modified or rescinded as of the Closing Date; and
(f) each of the Consulting Agreement and the Transaction Agreement,
executed by Premiere.
ARTICLE 7
FEES AND EXPENSES
7.1. EXPENSES. Each party hereto other than the Company shall be
solely responsible for all costs and expenses incurred by it in connection with
the negotiation, preparation and performance of and compliance with the terms of
this Agreement. All costs and expenses incurred by the Company in connection
with the negotiation, preparation and performance of and compliance with the
terms of this Agreement shall be paid by the Shareholders.
17
ARTICLE 8
INDEMNIFICATION
8.1. INDEMNIFICATION BY THE SHAREHOLDERS. The Shareholders shall
jointly and severally indemnify, defend and hold Premiere harmless from and
against and with respect to, and shall reimburse Premiere for the following
(collectively, the "Shareholder Indemnified Liabilities"):
(a) any and all losses, liabilities, or damages resulting from any
misrepresentation, breach or failure of any warranty or the non-fulfillment of
any agreement, covenant or undertaking on the part of the Company or the
Shareholders appearing herein; PROVIDED, that nothing appearing in this Section
8.1(a) shall be construed to create any liability of any Shareholder for breach
of or misrepresentation in any agreement (including any agreement appearing as a
Exhibit hereto) other than this Agreement;
(b) 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; and
(c) any losses, liabilities, or damages resulting from any claim or
cause of action brought by Xxxx Svenninsen or JRS & Associates arising out of or
relating to facts occurring prior to the Closing Date (collectively, "JRS
Litigation");
PROVIDED, however, that, except for Unrestricted Liabilities (as defined in
Section 8.4 below), no Shareholder shall have any obligations under this Section
8.1 with respect to any Shareholder Indemnified Liabilities of which such
Shareholder shall not receive notice on or prior to July 31, 1998 specifying
with reasonable particularity the nature of such Shareholder Indemnified
Liabilities to the extent then known by Premiere. For the avoidance of doubt,
the parties hereto have agreed that there is no basis on which JRS Litigation
may be sustained, but have provided therefor in this Section 8.1 and elsewhere
in this Agreement solely as a precautionary measure.
8.2. INDEMNIFICATION BY PREMIERE. Premiere shall indemnify, defend
and hold the Shareholders harmless from and against and with respect to, and
shall reimburse the Shareholders for the following (collectively, the "Premiere
Indemnified Liabilities"):
(a) any and all losses, liabilities or damages resulting from (i) any
misrepresentation, breach or failure of any warranty or the non-fulfillment of
any agreement, covenant or undertaking on the part of Premiere appearing herein
or (ii) the MediaAmerica Litigation (if any);
(b) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable legal fees and
expenses, incident to any of
18
the foregoing or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this indemnity; and
(c) amounts actually paid after the Closing Date by any Shareholder
under a guaranty made by such Shareholder of obligations of the Company
disclosed in Schedule 3.11 hereof as obligations guaranteed by such Shareholder;
PROVIDED, HOWEVER, that (i) Premiere shall not be required under Section 8.2(c)
or any other provision of this Agreement or law to indemnify or reimburse any
Shareholder for amounts paid or payable with respect to obligations or
guaranties not disclosed in Schedule 3.11; (ii) Premiere shall not be required
under any provision of this Agreement or law to indemnify or reimburse any
Shareholder for any losses, liabilities, damages or other amounts arising out of
or relating to the MediaAmerica Litigation (if any) if the information provided
to Premiere by the Company and the Shareholders respecting the Company's
relationship and dealings with MAI, taken as a whole, contains any untrue
statement of material fact or omits any statement of material fact necessary to
make any statement contained therein not misleading; and (iii) Premiere shall
have no obligations under this Section 8.2 with respect to any Premiere
Indemnified Liabilities of which Premiere shall not receive notice on or prior
to July 31, 1998 specifying with reasonable particularity the nature of such
Premiere Indemnified Liabilities to the extent then known by the Shareholders or
any of them.
8.3. RIGHT TO DEFEND, ETC. If the facts giving rise to any
indemnification under this Article 8 shall involve any claim or demand by any
person against any of the indemnified parties relating to the Shareholder
Indemnified Liabilities or the Premiere Indemnified Liabilities (an "Indemnified
Claim"), the indemnifying party shall be entitled to notice of such Indemnified
Claim. If the indemnified party shall fail to provide the indemnifying party
with notice of such Indemnified Claim prior to the time by which the interests
of the indemnifying party would be materially prejudiced as a result of its
failure to have received such notice, the amount of any indemnification to be
paid to such indemnified party with respect to such Indemnified Claim shall be
reduced by the amount of any loss actually sustained by the indemnifying party
as a result of such prejudice.
The indemnifying party shall be entitled (without prejudice to the right of
the indemnified party to participate at its own expense through counsel of its
own choosing in the defense or prosecution of such Indemnified Claim; PROVIDED
that such participation shall not affect the right of the indemnifying party to
control such defense or prosecution on behalf of the indemnified party) to
defend or prosecute such Indemnified Claim at its or their expense and through
counsel reasonably satisfactory to the indemnified party.
At any time following written notice from the indemnified party of an
Indemnified Claim, the indemnifying party may assume the defense or prosecution
of such Indemnified Claim by providing a written undertaking of their agreement
to assume the defense or prosecution of such Indemnified Claim at their sole
cost and expense in accordance with this Agreement; PROVIDED,
19
HOWEVER, that any indemnified party may defend or prosecute such Indemnified
Claim with reputable attorneys of its own choosing until it shall have received
the foregoing notice from the indemnifying party; PROVIDED, FURTHER, that if the
defendants in any action shall include the indemnifying party and the
indemnified party, and any such indemnified party shall have reasonably
concluded that counsel selected by the indemnifying party has a conflict of
interest which under the Rules of Professional Conduct of the California Bar
Association would prohibit the representation because of the availability of
different or additional defenses to any such indemnified party, such indemnified
party shall have the right to select separate counsel reasonably acceptable to
the indemnifying party to participate in the defense of such Indemnified Claim
on its behalf, at the expense of the indemnifying party, it being understood,
however that the indemnifying party shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys at any time for such indemnified party. The indemnified party
shall cooperate fully in the defense of any Indemnified Claim hereunder and
shall make available to the party assuming such defense pertinent information
(as determined through consultation with attorneys for the indemnified party)
under such indemnified party's control relating thereto, but shall be entitled
to be reimbursed for all costs and expenses incurred by the indemnified party in
connection therewith.
8.4. LIMITATION ON LIABILITY OF THE SHAREHOLDERS. Notwithstanding
anything contained in this Agreement to the contrary, the Shareholders shall not
be obligated to Premiere for any Shareholders Indemnified Liabilities, or for
any other liability of any kind arising under this Agreement, whether by
indemnity or otherwise, (i) until such time as the total sum of all such
liabilities shall exceed $150,000 and only then to the extent of amounts in
excess of $75,000, and (i) the maximum amount which the Shareholders shall be
obligated to Premiere for any and all such liabilities shall not exceed
$1,500,000; PROVIDED, HOWEVER, that the limitations of this Section 8.4 shall
not apply to any Shareholder Indemnified Liabilities arising out of or relating
to any claim (I) by any former or present employee of the Company or
constituting JRS Litigation, (II) by any third party relating to any asserted
interest in the Company, any of its stock or any participation in the profits of
the Company or any of its programs or businesses, and (III) for repayment of the
MediaAmerica Advance or for ordinary payables and expenses of the Company
required to be paid pursuant to the terms of Article 11 hereof (such Shareholder
Indemnified Liabilities described under clauses (I), (II) and (III) being
referred to herein as the "Unrestricted Liabilities"). Following the Merger,
the Shareholders shall not be entitled to reimbursement or contribution from the
Company for any Shareholder Indemnified Liabilities or other amounts owed to
Premiere.
8.5. RIGHT TO SETTLE OR COMPROMISE CLAIMS. No indemnifying party
will, without the prior written consent of the indemnified party, settle or
compromise any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought under this Section 8, unless such
settlement or compromise includes a full and unconditional release of each such
indemnified party from all liability arising out of such claim, action, suit or
proceeding,
20
reasonably satisfactory in form and substance to such indemnified party. No
indemnified party will, without the prior written consent of the indemnifying
party, settle or compromise any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought under this Section
8.
8.6. SUBROGATION. If any indemnified party receives payment or other
indemnification with respect to any claim or demand by any third person against
an indemnified party, the indemnifying party shall be subrogated to the extent
of such payment or indemnification to all rights in respect of the subject
matter of such claim to which the indemnified party may be entitled, to
institute appropriate action for the recovery thereof, and the indemnified party
agrees to provided reasonable levels of assistance and cooperation to such
subrogated party, in enforcing such rights.
ARTICLE 9
PREMIERE CLASS A STOCK PRICE GUARANTEE
9.1. PRICE GUARANTEE.
(a) Except as provided in Section 9.1(b), in the event that the fair
market value of the Premiere Class A Stock on the first anniversary of the
Closing Date shall be less than $16.00 per share Premiere shall pay the
Shareholders an amount per share of Premiere Class A Stock equal to the
difference between $16.00 and the fair market value of the Premiere Class A
Stock determined as of the first anniversary of the Closing. Such amount may,
at the option of Premiere, be paid in cash or in additional shares of Premiere
Class A Stock having aggregate fair market value equal to the amount required to
be paid by Premiere.
(b) In the event that prior to the first anniversary of the Closing
Date a person or group of persons shall acquire equity securities of Premiere
representing more than 50% of the voting power of Premiere and as a consequence
thereof, any Shareholder shall be obligated to and shall sell or exchange such
Shareholder's Premiere Class A Stock obtained as consideration hereunder (a
"Sale Event"), Premiere shall pay such Shareholder an amount per share of such
Premiere Class A Stock equal to the difference between the Target Price (as
defined herein) thereof and the value of the consideration obtained for such
Premiere Series A Stock on the date of the sale or exchange thereof. Following
such payment Premiere shall not be obligated to make any further payments to
such Shareholder pursuant to this Article 9 with respect to such Premiere Series
A Stock.
(c) For purposes of Section 9.1(b), the Target Price shall be an
amount equal to the sum of (i) the product of $1.00 times the number of calendar
days between the Closing Date and the date of the Sale Event divided by 365 plus
(ii) $15.00.
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(d) During each calendar month prior to the first anniversary of the
Closing Date, Premiere shall (i) reserve a number of shares of authorized and
unissued Premiere Class A Stock and (ii) maintain cash reserves or availability
under a credit facility, so that at all times during such month the sum of the
aggregate Adjusted Fair Market Value (defined below) of the Premiere Class A
Stock reserved under clause (i) and the cash reserves and credit availability
maintained under clause (ii) is at least equal to the amount which Premiere
would be required to pay under Section 9.1(a) and (b), as appropriate, hereof
assuming (A) payment were required pursuant to Section 9.1(a) and (b), as
appropriate, as of the first day of such month and (B) the fair market value of
the Premiere Class A Stock were then its Adjusted Fair Market Value. At any
time the election of and allocation between the alternatives described under
clauses (i) and (ii) above shall be made by Premiere in its sole discretion.
9.2. FAIR MARKET VALUE; ADJUSTED FAIR MARKET VALUE.
(a) For purposes of this Article 9, the fair market value of a share
of Premiere Class A Stock as of any date of determination (the "Valuation Date")
shall be equal to (i) the average of the last reported sale price of Premiere
Class A Stock as shown on NASDAQ National Market System for the 10 trading days
next preceding the Valuation Date, or (ii) if Premiere Series A Stock is not
then listed on NASDAQ National Market System, the average of the closing bid and
asked quotations on the NASDAQ Automated Quotation System for the 10 trading
days next preceding the Valuation Date, or (iii) if the Premiere Series A Stock
is not then listed on the NASDAQ Automated Quotation System or the NASDAQ
National Market System, such average of the bid and asked quotations or closing
price on the system or exchange on which the Premiere Series A Stock is then
listed for the 10 trading days next preceding the Valuation Date.
Notwithstanding the foregoing, if the fair market as determined in this Section
9.2 shall be less than $7.00 per share, the fair market value for purposes of
this Article shall be $7.00 per share.
(b) For purposes of this Article 9, "Adjusted Fair Market Value" of
any share of Premiere Class A Stock means, during any calendar month, the excess
over $4.00 of the following: (i) the last reported sale price of Premiere Class
A Stock as shown on the NASDAQ National Market System on or before the final
trading day in the calendar month immediately preceding such calendar month, or
(ii) if Premiere Series A Stock is not then listed on NASDAQ National Market
System, the average of the last closing bid and last asked quotation on the
NASDAQ Automated Quotation System on or before the final trading day in the
calendar month immediately preceding such calendar month, or (iii) if the
Premiere Series A Stock is not then listed on the NASDAQ Automated Quotation
System or the NASDAQ National Market System, such average of the last bid and
last asked quotations or last closing price on the system or exchange on which
the Premiere Series A Stock is then listed on or before the final trading day in
the calendar month immediately preceding such calendar month.
9.3. LIMITATIONS
22
(a) Premiere shall not be required to pay any amounts pursuant to
this Article 9 with respect to any Premiere Class A Stock sold by any
Shareholder prior to the date amounts would be required to be paid under this
Article 9, including, without limitation, pursuant to the Registration Rights
Agreement EXCEPT any Premiere Class A Stock sold by any Shareholder to an
assignee permitted under Section 11.5(b)(ii).
(b) In no event shall Premiere be obligated to pay the Shareholders
pursuant to this Article 9 for any shares not issued as Merger Consideration
pursuant to Section 1.2 of this Agreement.
(c) In the event (i) the Premiere Class A Stock shall be changed into
or exchanged for other securities of Premiere, (ii) additional securities of
Premiere shall be issued in respect of the Premiere Class A Stock, or (iii)
Premiere shall pay dividends on the Premiere Class A Stock the amounts "$1.00",
$4.00", "$15.00" and "$16.00" appearing in this Article 9 above shall be
correspondingly and equitably adjusted.
9.4. SETOFF.
(a) Premiere shall have the option of setting off all or any part of
any amount which Premiere finds in good faith to be payable by any Shareholder
hereunder (by way of indemnification, damages or otherwise) against amounts
payable to such Shareholder by Premiere under this Article 9. Premiere shall
notify any such Shareholder at the time such setoff is effected as to such
setoff, and as to whether Premiere has elected to effect such setoff in cash or
Premiere Class A Stock.
(b) If such setoff is effected in cash, and at any time subsequent to
such setoff, the amount against which such setoff was taken is found not to have
been payable to Premiere by a court or referee in accordance with the terms
hereof, Premiere shall pay the amount withheld together with interest on such
amount at an annual rate of 7 per cent from the date such amount would otherwise
have been payable by Premiere, and Premiere shall have no further obligations or
liabilities with respect to such setoff.
(c) If such setoff is effected in Premiere Class A Stock, then, (i)
such setoff shall be deemed to be in an amount equal to the fair market value of
the Premiere Class A Stock determined under Section 9.2(a) as of the date such
Premiere Class A Stock would otherwise have been issuable to such Shareholder,
and (ii) until such time as a court or arbitrator shall have determined in
accordance with the terms hereof whether the amount against which such setoff
was taken was payable to Premiere, such Shareholder shall retain the rights of
registration and sale under paragraphs 3 and 4 of the Registration Rights
Agreement, with respect to the withheld Premiere Class A Stock as if it had been
issued to such Shareholder and constituted Registrable Stock; PROVIDED, HOWEVER,
that the proceeds of any sale of such Premiere Class A Stock shall be held by
Premiere for its own account, without any obligation of Premiere to segregate
such funds, subject to the provisions of Section 9.4(d) below.
23
(d) If any Premiere Class A Stock with which any such setoff is
effected is sold in an offering as contemplated by Section 9.4(c) above, and at
any time subsequent to such sale the amount against which such setoff was taken
is found not to have been payable to Premiere by a court or arbitrator in
accordance with the terms hereof, Premiere shall pay to such Shareholder the
amount of proceeds received in such sale plus interest on the amount of such
proceeds at an annual rate of 7 per cent from the date of such sale, and
Premiere shall have no further obligations or liabilities with respect to such
setoff.
(e) If any Premiere Class A Stock with which any such setoff is
effected remains unsold at any time the amount against which such setoff was
taken is found not to have been payable to Premiere by a court or arbitrator in
accordance with the terms hereof, such Premiere Class A Stock shall be issued to
such Shareholder without interest, and Premiere shall have no further
obligations or liabilities with respect to such setoff, it being understood that
any appreciation in such Premiere Class A Stock shall be for the account of such
Shareholder.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1. EVENTS OF TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, at any time prior to the
Closing Date:
(i) by the mutual consent of the Shareholders, the Company and
Premiere;
(ii) by Premiere, if any Shareholder or the Company breaches in
any material respect any of their representations, warranties, covenants or
agreements contained in this Agreement;
(iii) by the Company and the Shareholders, if Premiere
breaches in any material respect any of its representations, warranties,
covenants or agreements contained in this Agreement;
(iv) by Premiere, any Shareholder or the Company, if any of the
conditions to Closing is not fulfilled (or waived by the party for whose
benefit the conditions exist) on or prior to the Closing Date; or
(v) by either Premiere or the Company, if the Closing has not
occurred on or prior to January 31, 1997.
10.2. EFFECT OF TERMINATION. In the event that this Agreement shall be
terminated pursuant to any provision contained herein expressly giving such
party the right to terminate this Agreement, this Agreement (including, without
limitation, Section 11.4) shall forthwith terminate
24
and have no further effect, and neither party shall have any further obligation
or liability. Notwithstanding the foregoing, the termination of this Agreement
pursuant to any provision hereof shall not relieve any party of any liability
for a breach of any representation or warranty, or nonperformance of any
covenant or obligation hereunder, and any such termination shall not be deemed
to be a waiver of any available remedy for any such breach or nonperformance.
ARTICLE 11
OTHER PROVISIONS
11.1. PRE-CLOSING TRANSACTIONS.
(a) On or before the Closing, the Shareholders shall cause the
Company to satisfy its obligations to Messrs. Xxxxxxx and Xxxxxxx for a
shareholder loan with an approximate balance of $1,314,000 as of the date
hereof.
(b) Immediately prior to the Closing the Company shall assign to the
Shareholders all accounts receivables relating to obligations of the Company
fully performed prior to the Closing Date, it being understood that receivables
relating to programs broadcast prior to the Closing Date shall be considered to
relate to fully performed obligations; provided, however, notwithstanding the
foregoing, the account debtors with respect to each such account receivable
shall continue to send payments to the Company (or its successor), and Premiere
shall on a monthly basis cause amounts received with respect to such receivables
to be forwarded to the Shareholders, by deposit into the Shareholders Account,
together with an accounting therefor; PROVIDED, HOWEVER, that at any time after
any such account receivable shall become more than 30 days past due, the
Shareholders may take such steps as they deem appropriate in their reasonable
discretion to collect such account receivable;
(c) Immediately prior to the Closing the Company may declare and pay
a dividend, or distribute to its Shareholders, an aggregate amount not to exceed
cash on hand on the Closing; PROVIDED, HOWEVER, that after giving effect to any
such dividend or distribution the Company shall in all events maintain cash on
hand at least equal to the amount of the MediaAmerica Advance outstanding as of
the Closing.
(d) All taxes payable by any Shareholder as a result of any of the
transactions described in (a) through (d) above or Section 3.24 shall be for the
sole account of such Shareholder; PROVIDED, HOWEVER, anything to the contrary
appearing in this Section 11.1 notwithstanding, the Shareholders shall jointly
and severally indemnify and hold harmless the Company and Premiere from and
against any liability to pay any such tax.
11.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the parties contained herein shall survive until July 31, 1998
and no claim may be made for any breach after such date. Notwithstanding the
foregoing, (i) in the event of any claim by the
25
Shareholders against Premiere under this Agreement, Premiere may use as an
affirmative defense against such claims any claim against the Shareholders
specifically relating to the subject matter of the claim by the Shareholders
which would have been barred through the application of Section 8.1 or this
Section 11.2, (ii) in the event of any claim by Premiere against any Shareholder
under this Agreement, such Shareholder may use as an affirmative defense against
such claims any claim such Shareholder may have against Premiere specifically
relating to the subject matter of the claim by Premiere which would have been
barred by application of Section 8.2 or this Section 11.2, and (Iii) nothing
appearing in this Section 11.2 shall constitute or be construed as a defense to,
or otherwise limit any Shareholder's obligations or liability with respect to,
any Unrestricted Liabilities, regardless of whether such Unrestricted
Liabilities arise by way of any claim for breach of representation, indemnity,
damages or otherwise.
11.3. ACCESS TO INFORMATION. From the date hereof through the Closing
Date, the Company shall provide Premiere and its representatives with reasonable
access to all records and information relating to the Company and its business
and will permit such persons to have access to all of the properties and records
of the Company during reasonable business hours in order that Premiere may have
full opportunity to make such investigations as it shall desire of the affairs
of the Company.
11.4. NO SOLICITATION. Prior to the Closing, the Company and the
Shareholders will not authorize or permit any of their representatives to take,
directly or indirectly, any action to solicit, encourage, receive, negotiate,
assist or otherwise facilitate (including by furnishing confidential information
with respect to the Company or permitting access to the assets or properties and
books and records of the Company) any offer or inquiry from any person
concerning any business combination involving the Company or a purchase of
securities or assets of the Company. If the Company or a Shareholder (or any
person acting for or on their behalf) receives from any person any offer,
inquiry or informational request referred to above, the Company or the
Shareholder, as applicable, shall promptly advise such person, by written
notice, of the terms of this Section and will promptly, orally and in writing,
advise Premiere of such offer, inquiry or request and delivery of a copy of such
notice to Premiere.
11.5. BENEFITS AND ASSIGNMENT. This agreement shall be binding upon
and shall incur to the benefit of the parties hereto and their respective
successors and assigns. Neither Premiere, the Company nor the Shareholders may
assign this Agreement without the prior written consent of the other parties
hereto EXCEPT THAT (i) Premiere may assign its rights under this Agreement to
another entity under common control with Premiere (including Merger Sub) without
the consent of the Company and (ii) any Shareholder may assign all or a portion
of such Shareholder's rights (but not obligations) hereunder after the Closing
Date to such Shareholder's wife or children (or inter vivos trust for the
benefit thereof), heirs or legatees, PROVIDED, in each case, that such assignee
shall execute and deliver an assumption agreement jointly and severally assuming
the obligations of "Shareholders" under Article 8 hereof up to a maximum of the
fair market value of the rights and interests assigned, which assumption shall
not release such assigning Shareholder from any obligations under this
Agreement.
26
11.6. ENTIRE AGREEMENT. This Agreement and the exhibits and schedules
hereto embody the entire agreement and understanding of the parties hereto and
supersede any and all prior agreements, arrangements and understandings relating
to the matters provided for herein. No amendment, waiver of compliance with any
provision or condition hereof, or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
11.7. ADDITIONAL AGREEMENTS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take promptly, or cause to be taken, all actions and to do promptly, or cause to
be done promptly, all things necessary, proper or advisable under applicable
laws to consummate and make effective the transactions contemplated by the
Agreement, and to satisfy all of the conditions to the Closing to be satisfied
by such waivers, consents and approvals from all applicable governmental
entities and third parties, and effecting all necessary registrations and
filings. Each of the parties hereto agrees not to take any action or fail to
take any action that would be likely to cause any representation or warranty
contained in this Agreement to cease to be true or accurate or that would be
reasonably likely to prevent the performance of any covenant or the satisfaction
of an condition contained in this Agreement.
11.8. FURTHER ACTIONS. Each of the parties hereto agrees that he or it
will, at any time, and from time to time, either before or after the Closing
Date, upon the request of the appropriate party, do, execute, acknowledge and
deliver, or will cause to be done, executed, acknowledged and delivered, all
such further acts, deeds , assignments, transfers, conveyances, powers of
attorney and assurances as may be required to complete the transactions
contemplated by this Agreement.
11.9. CHOICE OF LAW. The construction and performance of this
Agreement shall be governed by the laws of the State of California, without
regard to its principles of conflict of law.
11.10. DISPUTE RESOLUTION. Any controversy or claim arising out of or
relating to this Agreement, or any breach thereof, shall be settled by the
appointment of a retired judge of the Superior or Appellate courts of California
who shall act pursuant to Section 638(1) of the California Code of Civil
Procedure "to try any and all of the issues in an action or proceeding, whether
of fact or of law, and to report a state of decision thereon." The parties
stipulate to the use of the reference procedure and agree that the Superior
Court of Los Angeles County of the State of California may issue such orders as
are necessary to implement the parties' intent that any such controversy or
claim shall be resolved through the use of the reference procedure. THE PARTIES
EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY CONTROVERSY
OR CLAIM ARISING OUT OF THIS AGREEMENT OR THE BREACH HEREOF.
(a) The parties shall be entitled to discovery as provided in the
California Code of Civil Procedure. However, the referee may regulate the
extent and scope of such
27
discovery based upon the nature of the controversy, the amounts involved and the
expected benefits from any discovery.
(b) If the parties are unable to agree on the appointment of a
retired judge to serve as a referee, then the court shall appoint a retired
judge to act as the referee.
(c) The referee shall apply applicable substantive law and the rules
of evidence set forth in the California Evidence Code and applicable case
authority. The parties shall not be required to file formal pleadings and
shall take other steps as may be appropriate and necessary to assure that
any controversy be resolved as efficiently and expeditiously as possible.
(d) The decision reached by the referee shall be entered as a
judgment of the Superior Court appointing the referee and such decision
shall be fully appealable.
(e) All fees and expenses of the referee shall be initially borne on
a pro rata basis by the parties, but shall be recoverable by the prevailing
party. All fees and expenses of counsel to each party shall be initially
borne by such party, but the referee shall have the power to order that
reasonable fees and reasonable expenses of counsel be recovered by the
prevailing party.
11.11. NOTICES. Any notice, demand or request required or permitted to
be given under the provisions of this Agreement shall be in writing, addressed
to the following addresses, or to such other address as any party may request,
To Premiere:
Premiere Radio Networks, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Fax No.: 000-000-0000
Copy to:
Premiere Radio Networks, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000-0000
Attention: Xxxxxx Xxxxxx, Esq.
Fax No.: 000-000-0000
28
and
Christensen, Miller, Fink, Jacobs,
Xxxxxx, Xxxx & Xxxxxxx, LLP
2121 Avenue of the Stars
Xxxxxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Fax No.: 000-000-0000
To the Company:
AME Radio Networks, Inc.
0000 Xxxxxxxx Xxxxxxxxx Xxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx, Esq.
Fax No.: 000-000-0000
To Xxx Xxxx, Xxxxx Xxxxxx or Xxxx Xxxxx:
c/o AME Radio Networks, Inc.
0000 Xxxxxxxx Xxxxxxxxx Xxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx, Esq.
Fax No.: 000-000-0000
Copy to:
Xxxxx Xxxxxx, Esq.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax No.: 000-000-0000
To Xxxxxxx Xxxxxxx:
000 Xxxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
To: Xxxxxxx Xxxxxxx:
29
000 Xxxxx Xxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
cc: Bloom, Hergott, Xxxx & Xxxxxx
000 Xxxxx Xxxxx Xxxxx
0xx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Xxxxxxxx Xxxxxxx, Esq.
and shall be deemed to have been duly delivered and received (i) on the date of
personal delivery, (ii) on the date of a signed receipt, if sent by an overnight
delivery service, but only if sent in the same manner to all persons entitled to
receive notice or a copy, or (iii) when sent, if sent by confirmed facsimile to
the facsimile number provided herein.
11.12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, including by facsimile, each of which will be deemed an original
and all of which together will constitute one and the same instrument.
11.13. SHAREHOLDER CONSENT. Each Shareholder, by virtue of their
execution hereof, hereby consents to the Merger. This Agreement shall
constitute the actions of the shareholders of the Company taken without a
meeting pursuant to Section 603 of the GCL and shall be filed in the minute book
of the Company.
11.14. TAX TREATMENT OF MERGER. Each of the parties hereto shall treat
the Merger as a reorganization governed by Section 368(a)(1)(A) of the Code.
30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
AFTER MIDNITE PREMIERE RADIO
ENTERTAINMENT, INC. NETWORKS, INC.
By: \s\ Xxx Xxxx By: \s\ Xxxxxxx X. Xxxxxx
-------------------------- -------------------------
Name: Xxx Xxxx Xxxxxxx X. Xxxxxx
Title: President
\s\ Xxxxxxx Xxxxxx
-----------------------------
Xxxxxxx Xxxxxxx
\s\ Xxxxxxx Xxxxxxx
-----------------------------
Xxxxxxx Xxxxxxx
\s\ Xxx Xxxx
-----------------------------
Xxx Xxxx
\s\ Xxxxx Xxxxxx
-----------------------------
Xxxxx Xxxxxx
\s\ Xxxx Xxxxx
-----------------------------
Xxxx Xxxxx
31
