ASSET PURCHASE AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

1.1   Transfer of Assets of the Station .  Subject to the terms and conditions set forth in this Agreement, Licensee hereby agrees to sell, assign, transfer, convey and deliver to BHC on the Closing Date those items listed in subsection (a) below and Radio One hereby agrees to sell, assign, transfer, convey and deliver to BIC on the Closing Date those items listed in subsections (b) through (g) below, together with any replacements thereof and additions thereto between the date of this Agreement and the Closing Date, free and clear of all Liens, except as otherwise provided in this Agreement, but excluding the assets described in Section 1.2 (collectively, the “ Assets ”):

 

           (a)   All licenses, permits and other authorizations issued to Licensee by the FCC listed on Schedule 1.1(a) attached hereto, together with renewals or modifications thereof between the date hereof and the Closing Date (the “ FCC Licenses ”);

 

           (b)   All right, title and interest held by Sellers in and to each lease or sublease (including all amendments, modifications or supplements) under which either Seller leases or subleases an interest in any real property listed in Schedule 1.1(b) (the “ Real Property” ), including but not limited to the Station’s studio location, main transmitter site and each auxiliary or translator site (each a “Real Property Lease” and, collectively, the “Real Property Leases” ) ;

 

           (c)   The towers, transmitters, antennas, receivers, spare parts and other tangible personal property owned by Sellers and located at the Station’s main transmitter site and each auxiliary or translator site, together with all studio equipment, office equipment, office furniture, fixtures, materials and supplies, inventories, and other tangible personal property owned by Sellers and located at the Station’s studio, including the items listed on Schedule 1.1(c) , together with replacements thereof and additions thereto made between the date hereof and the Closing Date in accordance with the terms and provisions of this Agreement (collectively, the “ Personal Property ”);  

 

           (d)   All contracts (including the Real Property Leases) of Sellers listed on Schedule 1.1(d) hereto (the “ Assumed Contracts ”);

 

           (e)   The Intellectual Property listed on Schedule 1.1(e);

 

           (f)   The Station’s public inspection file, filings with the FCC relating to the Station, all records required by the FCC to be kept by the Station, all records relating to the Real Property and the Personal Property, and such technical information, engineering data, and, to the extent transferable, rights under manufacturers’   warranties as they exist at the Closing and relate to the Assets being conveyed hereunder; and

 

           (g)   Sellers’ proprietary information, technical information and data, operating manuals, books, studies, records, reports, ledgers, files, correspondence, maps, computer discs and tapes, plans, diagrams, blueprints and schematics, including filings with the FCC, relating to the technical operation of the Assets; provided, however, that Sellers may provide Buyers copies of any such items, if the original cannot be located or if it relates to Excluded Assets.

 

1.2   Excluded Assets .  Except for the Assets specifically identified above (which identification, notwithstanding anything to the contrary set forth herein, shall control in the event of any disagreement with the definition of Excluded Assets below), no other assets shall be transferred to Buyers hereunder, including the following, which shall not be included in the Assets (collectively, the “ Excluded Assets ”):

           (a)   All cash, cash equivalents or similar investments such as certificates of deposit, treasury bills and other marketable securities on hand and/or in banks and deposits of either of the Sellers;

 

           (b)   All accounts receivable of Sellers arising from the operation of the Station prior to the Operational Commencement Date (as defined below) of the Time Brokerage Agreement (as defined below) (the “ Accounts Receivable ”);

 

           (c)   Except as set forth in Section 12.12 (Casualty), any insurance policies, promissory notes, amounts due from employees, bonds, letters of credit, or other similar items, and any cash surrender value in regard thereto of either of the Sellers;

 

           (d)   Any pension, profit-sharing or cash or deferred (Section 401(k)) plans and trusts and assets thereof, or any other employee benefit plan or arrangement, and the assets thereof;

 

           (e)   Duplicate copies of such records as may be necessary to enable Sellers to prepare and file tax returns and reports, all original financial statements and supporting materials, all books and records that Sellers are required by law to retain, and all records of Sellers relating to the purchase and sale of the Assets;

 

           (f)   Any interest in and to any refunds of federal, state or local franchise, income or other taxes of the Sellers for periods prior to the Closing;

 

           (g)   All tangible and intangible personal property of Sellers related to the Station and disposed of or consumed between the date of this Agreement and the Closing in the ordinary course of business consistent with Section 7.1 hereof;

 

           (h)   The financial records, account books of original entry and general ledgers and all corporate records of each of the Sellers, including, but not limited to, tax returns and transfer books;

 

           (i)   All promotional, sales, marketing and programming agreements and materials related to the operation of the Station;

 

           (j)   All Intellectual Property used or held for use in the operation of the Station other than the Intellectual Property listed on Schedule 1.1(e) ;

 

           (k)   All assets used or held for use primarily in the operation of Sellers’ other radio stations; and

 

           (l)   Any other assets identified on Schedule 1.2(l) .

 

1.3   Assumption of Liabilities and Obligations .   Subject to obligations already assumed under the Time Brokerage Agreement, BIC shall assume and undertake to pay, discharge and perform all obligations and liabilities of Sellers (as to the Assumed Contracts and other Assets (but not as to the Licenses)) and BHC shall assume and undertake to discharge and perform all obligations and liabilities of Licensee (as to the FCC Licenses) arising or accruing after the Closing.  Buyers shall not assume (i) any obligation or liabilities under Assumed Contracts relating to the period prior to the Closing, (ii) any obligations or liabilities of Sellers which are unrelated to the Assets being sold hereunder, (iii) any obligations relating to employees of Sellers, (iv) any obligations relating to the Excluded Assets, (v) any federal, state or local franchise, income or other taxes of Sellers, or (vi) any other obligation or liability of either Seller.

 

1.4   Time Brokerage Agreement; Call Sign Change .  

 

 

 

1.5   Allocation .   The Purchase Price shall be allocated based upon the fair market value of the Assets.  Sellers and Buyers may each obtain an appraisal of the Assets prepared by Bond & Pecaro, Inc. using valuation methods of their choosing, and shall provide each other with a copy of any such appraisal, if obtained, as soon as reasonably possible following Closing and shall disclose to one another the allocation that each intends to use in their respective filings and the bases therefor.  If Sellers and Buyers plan to use allocations that are inconsistent with one another, they will discuss such allocations for a period of up to 60 days following Closing (or such shorter time period sufficient to allow the Parties to file their tax returns when due) in an effort to reach an allocation upon which both agree.  If a mutually agreeable allocation is not reached, then Buyers and Sellers shall each be free to use their own allocation in their respective filings.

 

 

 

 

2.1   Purchase Price .  The purchase price for the Assets shall be One Hundred Thirty-Seven Million Five Hundred Thousand Dollars ($137,500,000) (the “ Purchase Price ”), payable in cash at the Closing, less that portion of the Escrow Amount (as defined below) simultaneously delivered to Sellers, and subject to the prorations set forth in Section 2.3, by wire transfer of immediately available funds to one or more accounts at banks or other financial institutions pursuant to wire transfer instructions that Sellers shall deliver to Buyers at least three (3) days prior to the Closing Date.

 

2.2   Escrow of Purchase Price .  Simultaneously with the execution and delivery of this Agreement, Buyers will deposit Eleven Million Dollars ($11,000,000) (the “ Escrow Amount ”) into escrow.  The Escrow Amount shall be held and disbursed by Wilmington Trust NA (the “ Escrow Agent ”), pursuant to the terms of an Escrow Agreement in the form attached hereto as Exhibit “A” (the “ Escrow Agreement ”), which Escrow Agreement shall be signed by Sellers, Buyers and Escrow Agent simultaneously with the execution of this Agreement.  At the Closing, the Parties shall cause the Escrow Amount to be paid to the Sellers and all interest accrued on the Escrow Amount to be paid to Buyers.  Buyers and Sellers agree to give the Escrow Agent joint written instructions in accordance with the terms of this Agreement and the Escrow Agreement.

 

2.3   Prorations .    Income and Expense Prorations .  Subject to those prorations already made under the terms of the Time Brokerage Agreement, all income and expenses arising from the conduct of the business and operations of the Station shall be prorated between Buyers and Seller as of 12:01 a.m. local time on the Closing Date.  Except as specifically addressed in the Time Brokerage Agreement, such prorations shall be based upon the principle that Sellers shall be entitled to all income earned and shall be responsible for all liabilities and obligations accruing in connection with the Station’s operations until the Closing Date, and BIC shall be entitled to such income earned and be responsible for such liabilities and obligations accruing in connection with such operations thereafter.  Such prorations shall include all ad valorem and other property taxes (but excluding taxes arising by reason of the transfer of the Assets as contemplated hereby, which shall be paid as set forth in Section 12.2 of this Agreement), deposits, utility expenses, liabilities and obligations under all Assumed Contracts, rents and similar prepaid and deferred items, and all other expenses attributable to the ownership and operations of the Station.  All real estate taxes and personal property taxes, if any, shall be apportioned on the basis of the number of days that each Party owned or used the Real Property or Personal Property during the relevant tax year.   The aggregate net adjustment amount determined in accordance with this Section is referred to herein as the “ Proration Amount .”

 

           (a)   Specific Prorations .  Subject to those prorations already made under the terms of the Time Brokerage Agreement, and without limiting the generality of the foregoing Section 2.3(a):

 

                 (i)   Sellers shall receive a credit for the unapplied portion, as of the Closing, of any security deposits made by Sellers under the Assumed Contracts; and

 

                 (ii)   The Buyers shall receive a prorated credit for any FCC annual regulatory fees relating to the Station paid in arrears by the Buyers and any security deposits received by Sellers under the Assumed Contracts.

           (b)   Proration Notice .  To the extent sufficient information is available regarding proration items as of the Closing Date, proration shall be made as of the Closing Date.  Within ninety (90) days after the Closing Date, the Buyers shall deliver to Sellers in writing and in reasonable detail a good faith determination of the Proration Amount determined as of the Closing Date (the “ Proration Notice ”).  Sellers shall provide reasonable assistance as requested by the Buyers in making such determination.  Buyers shall provide Sellers backup documentation supporting the Buyers’ preparation of the Proration Amount.   If Sellers disagree with the Proration Amount determined by Buyers, Sellers shall so notify the Buyers in writing (the “ Proration Dispute Notice ”) within thirty (30) days after the date of receipt of the Proration Notice, specifying in detail any point of disagreement and providing backup documentation supporting Seller’s calculations.  After the receipt of any Proration Dispute Notice, the Buyers and Sellers shall negotiate in good faith to resolve any disagreements regarding the applicable Proration Amount.  If agreement is reached within thirty (30) days after the Buyers’ receipt of the Proration Dispute Notice, then upon reaching such agreement, Sellers shall pay to the Buyers or the Buyers shall pay to Sellers, as the case may be, the Proration Amount in the manner provided in Section 2.3(c) below.  

 

           (c)   Payment of Proration Amount . Each payment of the Proration Amount required hereunder shall be paid by wire transfer in immediately available funds to the account of the payee at a financial institution in the United States within five (5) business days of its final determination.  Any payment not received by the Party entitled thereto within this period shall bear interest from such date until paid in full at a rate per annum equal to the prime rate in effect at the end of such period (as published in the Money Rates column of Eastern Edition of The Wall Street Journal) plus four percent (4%).

 

 

 

 

3.1   Closing .  Subject to satisfaction or waiver of the conditions set forth in Sections 8.1 and 8.2 and subject to the provisions of Section 11.1, the closing (the “ Closing ”) of the sale and purchase of the Assets shall take place at a mutually agreeable location or by electronic exchange of signatures and payments on a date mutually agreeable to Buyers and Sellers no later than the fifth (5 th ) business day after the date of the FCC Consent (defined below); provided that such date shall be no later than the Upset Date (defined below) (the “ Closing Date ”).

 

 

 

 

4.1   Organization and Standing .   Each Seller (a) is duly formed, validly existing and in good standing under the laws of the State of Delaware, (b) is qualified to do business in all jurisdictions where failure to do so would have a material adverse effect on the business of the Station, and (c) has all necessary power and authority to own, operate and lease its respective Assets and carry on the business of the Station .

 

4.2   Authorization and Binding Obligation .   Each Seller has all necessary power and authority to enter into and perform its respective obligations under this Agreement and the documents contemplated hereby and to consummate the transactions contemplated hereby and thereby.  This Agreement and the Time Brokerage Agreement have been, and each of the other documents contemplated hereby at or prior to Closing will be, duly executed and delivered by Sellers, and have been approved by all necessary corporate or other action.  This Agreement constitutes (and each of the other documents contemplated hereby, when executed and delivered, will constitute) valid and binding obligations enforceable against Sellers in accordance with their terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally or the availability of equitable remedies.

 

4.3   Absence of Conflicting Agreements or Required Consents .   Except for the FCC Consents, HSR Clearance (defined below) and necessary consents to assignment indicated on Schedules 1.1(b) and 1.1(d) , the execution, delivery and performance of this Agreement and the documents contemplated hereby by each of the Sellers, respectively, do not and will not:  (a) violate any provisions of the organizational documents of such Seller; (b) violate any applicable law, judgment, order, ordinance, injunction, decree, rule, regulation or ruling of any court or governmental authority; (c) constitute a material default under, or accelerate or permit the acceleration of any performance required by the terms of any of the Assumed Contracts, assuming any necessary consents are obtained; and (d) create any claim, Lien or encumbrance upon any of the Assets, except in each of the above instances where such breach or default would not have a material adverse effect on the Assets or on the ability of the Sellers to consummate the transactions contemplated by this Agreement.

 

4.4   Litigation .  Except as disclosed on Schedule 4.4 , there are no claims, litigation, arbitrations or other legal proceedings pending or, to the Knowledge of Sellers, threatened against Sellers with respect to the Assets or operation of the Station, except where such claims, litigation, arbitrations or other legal proceedings could not reasonably be expected to have a material adverse effect on the financial condition of the Station or on the ability of the Parties to consummate the transactions contemplated by this Agreement.

 

4.5   Station Licenses .

 

           (a)   Schedule 1.1(a) contains a true and complete list of the FCC Licenses used or held for use in connection with the operation of the Station as currently operated.  Licensee is the authorized legal holder of the FCC Licenses listed on Schedule 1.1(a) .  Except as set forth on Schedule 1.1(a) , the FCC Licenses are in good standing and in full force and effect.  The Station and the facilities of the Station are being and have been operated during Sellers’ ownership and operation of the Stations in material compliance with the FCC Licenses, the Communications Act and all FCC rules and policies.  Except as set forth on Schedule 1.1(a) , the FCC Licenses are all of the FCC licenses, permits and authorizations required for the operation of the Station as presently operated.

 

           (b)   Except as set forth in Schedule 1.1(a) , and except for proceedings affecting the radio broadcasting industry generally, (i) to the Knowledge of Sellers, there are no applications, petitions, complaints, investigations, notices of violations, notice of apparent liabilities, pending license terminations, forfeitures, proceedings or other actions pending or threatened from or before the FCC relating to the Station or the FCC Licenses, (ii) Sellers have not filed with the FCC any applications or petitions relating to the Station or the FCC Licenses which are pending before the FCC and (iii) there are no tolling or similar agreements with the FCC relating to the Station.  Sellers and the Assets are in compliance with all rules and regulations of the Federal Aviation Administration applicable to the Station.  Each antenna structure that is required to be registered with the FCC has been registered with the FCC.  All material reports and other filings required by the FCC with respect to the Station have been properly and timely filed.

 

           (c)   The operation of the Station does not expose workers or others to levels of radio frequency radiation in excess of the “Radio Frequency Protection Guides” recommended in “American National Standard Safety Levels with Respect to Human Exposure to Radio Frequency Electromagnetic Fields 3 kHz to 300 GHz” (ANSI/IEEE C95.1-1992), issued by the American National Standards Institute, and renewal of the FCC Licenses would not constitute a “major action” within the meaning of Section 1.1301, et seq. , of the FCC’s rules.

 

4.6   Real Property .   The list of Real Property Leases set forth on Schedule 1.1(b) is a correct and complete list of all of the interests in real estate used in connection with the operation of the Station.  Sellers have a valid leasehold interest in and to each Real Property Lease.  Sellers have not received any notice (i) that either the whole or any portion of the Real Property is to be condemned, requisitioned or otherwise taken by any public authority, (ii) of violation by Sellers of restrictive covenants, deed restrictions or governmental requirements on the Real Property which have not been remedied,  or (iii) of any violation by Sellers of any zoning or similar land use law or restriction, or of any proceedings which would cause the change, redefinition or other modification of the zoning classification.  Sellers have not received any notice of any pending or threatened termination or impairment of access to the Real Property or discontinuation of sewer, water, electrical, gas telephone or other utilities or services to the Real Property.  To the Knowledge of Sellers, the Real Property includes sufficient access to the Station’s facilities from public roads without need to obtain any other access rights.

 

4.7   Contracts .   Schedules 1.1(b) and 1.1(d) list all agreements with respect to the Station to be conveyed hereunder.  Each of the Assumed Contracts is in full force and effect and is legally valid, binding and enforceable by Seller in accordance with their  terms, except as limited by laws affecting creditor’s rights or equitable principles generally.  Except as disclosed on Schedule 1.1(d) , neither Sellers nor, to the Knowledge of Sellers, any other party thereto is in any material respect in default under the Assumed Contracts.

 

4.8   Compliance with Laws .  Except as set forth in Schedule 4.8 , Sellers have complied in all material respects with, and are not in any material respect in violation of, applicable federal, state or local laws, statutes, rules, regulations or orders relating to the ownership and operation of the Station, except where such violation would not have a material adverse effect on the Assets or on the ability of the Parties to consummate the transactions contemplated by this Agreement.   Sellers have not received any notice asserting any material noncompliance with any applicable statute, rule or regulation, relating to the Assets or in connection with the operation of the Station. T here is no pending or , to the Knowledge of each of the Sellers, threatened investigation, audit, review or other examination of the Station, and Sellers are not subject to any order, agreement, memorandum of understanding or other regulatory enforcement action or proceeding with or by the FCC or any other federal or state governmental agency having supervisory or regulatory authority with respect to the Station or the Assets.

 

4.9   Governmental Consents .  Except for the FCC Consent and the HSR Clearance (defined below), the execution, delivery and performance by the Sellers of this Agreement and the other documents contemplated herein, and the consummation by the Sellers of the transactions contemplated hereby and thereby, do not and will not require the authorization, consent, approval, exemption, clearance or other action by or notice or declaration to, or filing with, any court, administrative or other governmental body.

 

4.10   Taxes .  All federal, state, local and other Tax returns, reports and declarations required to be filed by the Sellers have been filed or caused to be filed, and all Taxes (including, but not limited to, income, franchise, sales, use, unemployment, personal property, real property, withholding, social security and workers’ compensation taxes and estimated income and franchise tax payments, penalties and fines) reflected as due on such returns, reports or declarations (whether or not shown on such returns, reports or declarations), or pursuant to any assessment received in connection with such returns, reports or declarations have been paid, the non-filing or non-payment of which is reasonably likely to have a material adverse impact on the Assets.  To the Knowledge of the Sellers, (i) all such returns, reports and declarations are true, complete and correct in all material respects; (ii) no deficiency in payment of any Taxes related to the Assets for any period has been asserted by any taxing authority which remains unsettled as of the date hereof, no written inquiries have been received from any taxing authority with respect to possible claims for taxes or assessments on the Assets, and there is no basis for any additional claims or assessments for Taxes on the Assets, the consequences of which, in each case, is reasonably likely to have a material adverse impact on the Assets.

 

4.11   Reports .  All reports and statements that either of the Sellers are required to file with the FCC in respect of the Station have been filed, and all reporting requirements of the FCC have been complied with in all material respects.

 

4.12   Environmental Matters .  In respect of the Real Property:

 

           (a)   Neither Seller has received any notice from any governmental authority that the Sellers have ever been in violation or alleged violation of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including those arising under the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended, the Superfund Amendments and Reauthorization Act of 1986, the Federal Water Pollution Control Act, the Solid Waste Disposal Act, as amended, the Federal Clean Air Act, the Toxic Substances Control Act, or any federal, state or local statute, regulation, ordinance, order or decree relating to the environment (hereinafter collectively “ Environmental Laws ”) at the Real Property;

 

           (b)   Neither Seller has received written notice from any third party, including any federal, state or local governmental authority, that any hazardous waste, as defined by 42 U.S.C. §   6903(5), any hazardous substance, as defined by 42 U.S.C. §   9601(33), or any toxic substance, oil or hazardous material, asbestos containing material or other hazardous chemical or hazardous substance regulated by any Environmental Laws (collectively, “ Hazardous Substances ”) is or has been used or stored at the Real Property by either Seller in material violation of Environmental Laws, and the only Hazardous Substances used or stored at the Real Property by Sellers are used in connection with the Station’s transmission facilities, customary oils and fuel used in connection with the Station’s generator, if any;

 

           (c)   Neither Seller has used any portion of any of the Real Property for the handling, manufacturing, processing, storage or disposal of Hazardous Substances in material violation of applicable Environmental Laws related to the Real Property;

 

           (d)   Neither Seller has released (i.e., any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping) Hazardous Substances on, upon, into or from any of the Real Property in material violation of applicable Environmental Laws;

 

           (e)   Sellers have complied in all material respects with all Environmental Laws in respect of the Real Property; and

 

           (f)   To Seller’s Knowledge (without investigation), the Real Property is not subject to any order from or agreement with any governmental authority or private party regarding any Environmental Laws.

 

4.13   Broker’s Fees .  Neither of the Sellers, nor any person or entity acting on either of the Seller’s behalf, has agreed to pay a commission, finder’s fee or similar payment in connection with this Agreement or any matter related hereto to any person or entity, and no person or entity is entitled to any such payment from either of the Sellers in connection with the transactions contemplated by this Agreement, other than a payment owed by Sellers to Star Media Group pursuant to a separate agreement with them.  The Sellers shall indemnify and hold harmless the Buyers for any payment due to Star Media Group or any other broker claiming by, through or under Sellers in connection with the transaction contemplated by this Agreement.

 

4.14   Insurance .  Sellers maintain insurance policies or other arrangements with respect to the Station and the Assets consistent with its practices for other stations, including coverage of all buildings, towers, antennas, dishes, transmission lines, transmitters and other Assets used in the  operation of the Station, and will maintain such policies or arrangements until the Closing.  Sellers have not received notice from any issuer of such policies of its intention to cancel, terminate or refuse to renew any policy issued by it with respect to the Station and the Assets.  Set forth on Schedule 4.14 is a true and correct summary of the property insurance policies or arrangements with respect to the Station and the Station Assets.

 

4.15   Personal Property .   Schedule 1.1(c) contains a list of material items of Personal Property included in the Assets.  Sellers have good and marketable title to the Personal Property free and clear of Liens.  All items of Personal Property are in good operating condition, ordinary wear and tear excepted and are suitable for the purpose for which such items are presently used.  The Assets include all the assets necessary to conduct the broadcasting operations of the Station in all material respects as currently operated by Sellers other than personnel, Excluded Assets and agreements that are not Assumed Contracts.

 

4.16   Disclaimer of Warranties .   EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH HEREIN, THE ASSETS ARE BEING SOLD “ AS-IS, WHERE-IS ” AND SELLERS MAKE NO REPRESENTATIONS OR WARRANTY WITH REGARD TO THE SAME.  THIS DISCLAIMER OF WARRANTIES, INCLUDES, BUT IS NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

 

4.17   Buyers’ Representations and Warranties .  Sellers have not relied on or been induced to enter into this Agreement by any statement, representation or warranty other than those expressly set forth in Article 5 of this Agreement.