<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): JANUARY 10, 2000
-----------------------
CUMULUS MEDIA INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as specified in its character)
ILLINOIS 000-24525 36-4159663
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
111 EAST KILBOURN AVENUE, SUITE 2700 MILWAUKEE, WI 53202
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (414) 615-2800
---------------------
NONE
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 5. Other Events
On November 29, 1999, Cumulus Broadcasting, Inc. ("Cumulus Broadcasting"),
a wholly owned subsidiary of Cumulus Media Inc. (the "Company"), entered into an
Asset Purchase Agreement (the "Connoisseur Asset Purchase Agreement") with
Connoisseur Communications Partners, L.P., Continuity Partners, L.P.,
Connoisseur Communications of Flint, L.P., Connoisseur Communications of Mercer
County, L.P., Connoisseur Communications of Muskegon, L.P., Connoisseur
Communications of Quad Cities, L.P., Connoisseur Communications of Rockford,
L.P., Connoisseur Communications of Evansville, L.P., Connoisseur Communications
of Canton, L.P., Connoisseur Communications of Saginaw, L.P., Connoisseur
Communications of Waterloo, L.P., Connoisseur Communications of Youngstown, L.P.
and Abry Broadcast Partners III, L.P. (collectively, the "Connoisseur Sellers").
Pursuant to the terms of the Connoisseur Asset Purchase Agreement, Cumulus
Broadcasting will acquire 37 radio stations in nine Midwestern markets for a
purchase price of $242.0 million in cash.
On December 17, 1999, Cumulus Broadcasting, Cumulus Licensing Corp.
("Cumulus Licensing") and Cumulus Wireless Services Inc. ("Cumulus Wireless")
entered into two asset purchase agreements (the "McDonald Asset Purchase
Agreements") with McDonald Media Group, Inc. ("McDonald"), pursuant to which
Cumulus Broadcasting will acquire five radio stations in California (the
"California Stations") and three stations in Oregon (the "Oregon Stations") for
an aggregate purchase price of $41.0 million in cash. The asset purchase
agreement for the California Stations will become effective upon the exercise
of an option held by Cumulus Broadcasting, Cumulus Licensing and Cumulus
Wireless. The option expires March 31, 2000.
The execution of the Connoisseur Asset Purchase Agreements and the McDonald
Asset Purchase Agreements described herein requires the inclusion, under Article
11 of Regulation S-X, of the pro forma financial statements included herein and,
under Section 3-05 of Regulation S-X, of the historical financial statements
included herein, in a registration statement filed by the Company under the
Securities Act of 1933, as amended. Accordingly, the historical financial
statements included herein are incorporated by reference in the Registration
Statement on Form S-3 (Registration No. 333-94323) filed by the Company with the
SEC on January 10, 2000.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements.
Index to Financial Statements attached hereto:
(1) Connoisseur Communications Partners, L.P.
Report of Independent Accountants
Financial Statements:
Consolidated Balance Sheets as of September 30, 1999 (unaudited)
and December 31, 1998
Consolidated Statements of Operations for nine months ended
September 30, 1999 and 1998 (unaudited) and for the year ended
December 31, 1998
2
<PAGE> 3
Consolidated Statement of Partners' Capital for the year ended
December 31, 1998 and September 30, 1999 (unaudited)
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998 (unaudited) and for the year ended
December 31, 1998
Notes to Consolidated Financial Statements
(2) Radio Stations KHAY-FM, KVEN-FM, KBBY-FM, KKSB-FM and KMGQ-FM (A
Division of McDonald Media Group, Inc.)
Report of Independent Accountants
Financial Statements:
Balance Sheets as of September 30, 1999 (unaudited) and December
31, 1998
Statements of Operations for nine months ended September 30,
1999 and 1998 (unaudited) and for the year ended December 31,
1998
Statement of Divisional Control Account for the year ended
December 31, 1998
Statements of Cash Flows for the nine months ended September 30,
1999 and 1998 (unaudited) and for the year ended December 31,
1998
Notes to Financial Statements
(3) KZEL-FM Radio and KNRQ-AM/FM Radio (A Division of McDonald Media
Group, Inc.)
Report of Independent Accountants
Financial Statements:
Balance Sheets as of September 30, 1999 (unaudited) and December
31, 1998
Statements of Operations for nine months ended September 30,
1999 and 1998 (unaudited) and for the year ended December 31,
1998
Statement of Divisional Control Account for the year ended
December 31, 1998
Statements of Cash Flows for the nine months ended September 30,
1999 and 1998 (unaudited) and for the year ended December 31,
1998
Notes to Financial Statements
(b) Pro Forma Financial Information.
Cumulus Media Inc. Unaudited Pro Forma Statement of Operations for
the Year Ended December 31, 1998.
3
<PAGE> 4
Cumulus Media Inc. Unaudited Pro Forma Statement of Operations for the Nine
Months Ended September 30, 1999.
Cumulus Media Inc. Unaudited Pro Forma Balance Sheet as of September 30,
1999.
(c) Exhibits:
2.1 Asset Purchase Agreement, dated as of November 29, 1999, by and among
Cumulus Broadcasting and the Connoisseur Sellers.**
2.2 Asset Purchase Agreement, dated as of , 2000 by and among
Cumulus Broadcasting, Cumulus Licensing, Cumulus Wireless and
McDonald, with respect to the California Stations.*
2.3 Asset Purchase Agreement, dated as of December 17, 1999 by and among
Cumulus Broadcasting, Cumulus Licensing, Cumulus Wireless and
McDonald, with respect to the Oregon Stations.*
2.4 Option Agreement, dated as of December 17, 1999, by and among Cumulus
Broadcasting, Cumulus Licensing and Cumulus Wireless, with respect to
the California Stations.*
23.1 Consent of PricewaterhouseCoopers LLP.*
23.2 Consent of Ernst & Young LLP.*
* Filed herewith.
** Incorporated by reference to the Current Report on Form 8-K Filed by the
Company on December 2, 1999.
4
<PAGE> 5
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be singed on its behalf by the
undersigned hereunto duly authorized.
CUMULUS MEDIA
By: /s/ Richard W. Weening
----------------------
Richard W. Weening
Executive Chairman
and Treasurer
Date: January 18, 2000
S-1
<PAGE> 6
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ------------
2.1 Asset Purchase Agreement, dated as of November 29,
1999, by and among Cumulus Broadcasting and the
Connoisseur Sellers.**
2.2 Asset Purchase Agreement, dated as of ,
2000 by and among Cumulus Broadcasting, Cumulus
Licensing, Cumulus Wireless and McDonald, with respect
to the California Stations.*
2.3 Asset Purchase Agreement, dated as of December 17,
1999 by and among Cumulus Broadcasting, Cumulus
Licensing, Cumulus Wireless and McDonald, with respect
to the Oregon Stations.*
2.4 Option Agreement, dated as of December 17, 1999, by and among
Cumulus Broadcasting, Cumulus Licensing and Cumulus Wireless,
with respect to the California Stations.*
23.1 Consent of PricewaterhouseCoopers LLP.*
23.2 Consent of Ernst & Young LLP.*
* Filed herewith.
** Incorporated by reference to the Current Report on Form 8-K Filed by the
Company on December 2, 1999.
S-2
<PAGE> 7
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements reflect the
results of operations for the year ended December 31, 1998 and the nine months
ended September 30, 1999 and the balance sheet as of September 30, 1999 after
giving effect to the transactions described below. The information set forth
under the heading "Cumulus Historical" in the pro forma statements of operations
includes results relating to LMAs. The information set forth under the heading
"Pending Acquisitions" in the pro forma statements of operations excludes
results relating to LMAs to the extent that such activity is included in our
historical financial information.
The pro forma statements of operations for the year ended December 31,
1998 and the nine months ended September 30, 1999 give effect to:
- - the offering(s) of our Class A common stock described in the
Registration Statement on Form S-3 (333-94325) filed with the SEC on
January 10, 2000.
- - the November 1999 offering of our Class A common stock
- - the July 1999 offering of our Class A common stock
- - the completion of our 1998 and 1999 acquisitions and our pending
acquisitions,
- - our initial public offerings of our Class A common stock, our senior
subordinated notes and our Series A preferred stock,
- - the redemption of a portion of our Series A preferred stock,
- - borrowings under and the repayment of all indebtedness outstanding
under our old credit facility, and
- - borrowings under our credit facility,
in each case as if such transactions had occurred on January 1, 1998.
The information set forth under the heading "Pro Forma Adjustments for
Cumulus Historical and the 1999 Completed Acquisitions" in the pro forma
statement of operations for the year ended December 31, 1998 includes the
effects of our initial public offerings. The information set forth under the
heading "1999 Subsequent Acquisitions" in the pro forma statement of operations
for the nine months ended September 30, 1999 includes the effect of our
acquisitions completed after September 30, 1999.
The pro forma balance sheet as of September 30, 1999 gives effect to:
- - the offering(s) of our Class A common stock described in the
Registration Statement on Form S-3 (333-94325) filed with the SEC on
January 10, 2000.
- - the November 1999 offering of our Class A common stock
- - The conversion of 1,102,000 shares of Class B common stock owned by
selling shareholders to shares of Class A common stock in connection
with our November offering,
- - the redemption of a portion of our Series A preferred stock,
- - the completion of our pending acquisitions and acquisitions completed
after September 30, 1999,
in each case as if such transactions had occurred on September 30, 1999.
The information set forth under the heading "Pro Forma Adjustments for
the 1999 Subsequent Acquisitions" includes the effect of our acquisitions
completed after September 30, 1999.
The pro forma financial statements are based on our historical
consolidated financial statements and the financial statements of those entities
acquired, or from which assets were acquired, in conjunction with our completed
and pending acquisitions. The unaudited pro forma financial information reflects
the use of the purchase method of accounting for all acquisitions. For purposes
of the unaudited pro forma financial statements, the purchase prices of the
stations acquired and to be acquired in our completed acquisitions and pending
acquisitions have been allocated based primarily on information furnished by
management of the acquired stations. The final allocation of the relative
purchase prices of the stations acquired and to be acquired to our completed
acquisitions and pending acquisitions is determined a reasonable time after
consummation of such transactions and are based on complete evaluations of the
assets acquired and liabilities assumed. Accordingly the information presented
herein may differ from the final purchase price allocation; however, in the
opinion of our management, the final purchase price allocation will not differ
significantly from the information presented herein. In the opinion of our
management, all adjustments have been made that are necessary to present fairly
the pro forma data.
The unaudited pro forma information is presented for illustrative
purposes only and is not indicative of the operating results or financial
position that would have occurred if the transactions referred to above had been
consummated on the dates indicated, nor is it indicative of future operating
results or financial positions. The failure of the aforementioned transactions
to be completed would significantly alter the unaudited pro forma information.
All pro forma financial information should be read in conjunction with
our consolidated financial statements which have been incorporated by reference
in the prospectus included in our Registration Statement (No. 333-94323) filed
with the SEC on January 10, 2000. See also "Risk Factors -- Substantial
Leverage" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in such prospectus or any supplement thereto.
<PAGE> 8
CUMULUS MEDIA INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
(D)
Pro Forma
(B) Adjustments for the
Pro Forma Cumulus Historical
(A) Adjustments for (C) and the 1999
The Company Cumulus 1999 Completed Completed
Historical Historical(1)(2) Acquisitions(3) Acquisitions
----------- ---------------- --------------- -------------------
<S> <C> <C> <C> <C>
Statement of Operation Data:
Revenues $ 108,172 $ 29,250 $ 35,236 $ -
Less agency commissions (9,385) (1,934) (2,133) -
------------ ---------- ------------ ------------
Net revenues 98,787 27,316 33,103 -
Station operating expenses
excluding depreciation and
amortization 72,154 20,973 24,192 -
Depreciation and amortization 19,584 3,772 4,923 8,338 (4)
Corporate general and
administrative expenses 5,607 1,395 1,116 -
Non-cash stock compensation
expense - - - -
------------ ---------- ------------ ------------
Operating income (loss) 1,442 1,176 2,872 (8,338)
------------ ---------- ------------ ------------
Interest expense (15,551) (2,950) (3,502) (5,380) (5)
Interest income 2,373 - - (2,173) (6)
Gain (loss) on sale of asset - 21,249 (72) (21,177) (7)
Other income (expense) (2) (182) (129) -
------------ ---------- ------------ ------------
Income (loss) before income (11,738) 19,293 (831) (37,068)
taxes
Income tax (expense) benefit (126) (86) 13 -
------------ ---------- ------------ ------------
Net income (loss) before
extraordinary loss (11,864) 19,207 (818) (37,068)
Preferred stock dividends (13,591) - - (4,503) (8)
------------ ---------- ------------ ------------
Net income (loss) before
extraordinary loss
attributable to common
stockholders $ (25,455) $ 19,207 $ (818) $ (41,571)
============ ========== ============ ============
<CAPTION>
(E) + (F) = (G)
(A) + (B) + (C)+ (F) Pro Forma as
(D) = (E) Pro Forma Adjusted for the
Pro Forma as Adjustments for the Completed Offering
Adjusted for the Completed Offering the Credit Facility, and
1999 Completed and the Credit the 1999 Completed
Acquisitions Facility Acquisitions
---------------- -------------------- ------------------------
<S> <C> <C> <C>
Statement of Operation Data:
Revenues $ 172,658 $ - $ 172,658
Less agency commissions (13,452) - (13,452)
----------- --------- -----------
Net revenues 159,206 - 159,206
Station operating expenses
excluding depreciation and
amortization 117,319 - 117,319
Depreciation and amortization 36,617 - 36,617
Corporate general and
administrative expenses 8,118 - 8,118
Non-cash stock compensation
expense - - -
----------- --------- -----------
Operating income (loss) (2,848) - (2,848)
----------- --------- -----------
Interest expense (27,383) (1,397) (9) (28,780)
Interest income 200 - 200
Gain (loss) on sale of asset - - -
Other income (expense) (313) - (313)
----------- --------- -----------
Income (loss) before income
taxes (30,344) (1,397) (31,741)
Income tax (expense) benefit (199) - (199)
----------- --------- -----------
Net income (loss) before
extraordinary loss (30,543) (1,397) (31,940)
Preferred stock dividends (18,094) 6,333 (10) (11,761)
----------- --------- -----------
Net income (loss) before
extraordinary loss
attributable to common
stockholders $ (48,637) $ 4,936 $ (43,701)
=========== ========= ===========
<CAPTION>
(I)
Pro Forma
Adjustments
for the Pending (G) + (H) + (I)
(H) Acquisitions and = (J)
Pending the Current Pro Forma
Acquisitions Offering Combined (1)
------------ ----------------- ------------
<S> <C> <C> <C>
Statement of Operation Data:
Revenues $ 82,388 $ - $ 255,046
Less agency commissions (7,610) - (21,062)
---------- ---------- ------------
Net revenues 74,778 - 233,984
Station operating expenses
excluding depreciation and
amortization 57,057 - 174,376
Depreciation and amortization 10,434 14,118 (4) 61,169
Corporate general and
administrative expenses 6,478 - 14,596
Non-cash stock compensation
expense - - -
---------- ---------- -------------
Operating income (loss) 809 (14,118) (16,157)
---------- ---------- -------------
Interest expense (5,396) 5,396 (11) (28,780)
Interest income 492 (492)(6) 200
Gain (loss) on sale of asset 554 (554)(12) -
Other income (expense) 270 (43)
---------- ---------- -------------
Income (loss) before income
taxes (3,271) (9,768) (44,780)
Income tax (expense) benefit 259 - 60
---------- ---------- -------------
Net income (loss) before
extraordinary loss (3,012) (9,768) (44,720)
Preferred stock dividends - - (11,761)
---------- ---------- -------------
Net income (loss) before
extraordinary loss
attributable to common
stockholders $ (3,012) $ (9,768) $ (56,481)
========== =========== =============
Basic and diluted loss $(1.26)
per common share =============
Pro Forma weighted average
shares outstanding 44.729
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
<PAGE> 9
Support for Column(H)
Pending Acquisitions
December 31, 1998
<TABLE>
<CAPTION>
RADIO STATIONS
KHAY-FM, KNEN-
CAPE FEAR CONNOISSEUR FM, KBBY-FM, KZEL-FM RADIO PENDING
BROADCASTING C.F. RADIO, COMMUNICATIONS KKSB-FM, KMGQ- AND KNRQ-AM/FM OTHER PENDING ACQUISITIONS
COMPANY INC. PARTNERS, L.P. FM RADIO ACQUISITIONS COLUMN(H)
----------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 5,847 $ 2,040 $ 38,449 $ 5,963 $ 2,151 $ 27,938 $ 82,388
Less: agency commissions (573) (234) (3,992) (668) (232) (1,911) (7,610)
---------------------------------------------------------------------------------------- ---------
Net revenues 5,274 1,806 34,457 5,295 1,919 26,027 74,778
Station operating expenses
excluding depreciation and
amortization 3,711 1,096 23,874 3,906 1,714 22,756 57,057
Depreciation and amortization 142 355 5,340 1,542 477 2,578 10,434
Corporate General and
administrative expenses -- -- 3,488 420 75 2,495 6,478
Non-cash stock compensation
expense -- -- -- -- -- -- --
---------------------------------------------------------------------------------------- ---------
-- -- -- -- -- -- --
Operating income (loss) 1,421 355 1,755 (573) (347) (1,802) 809
---------------------------------------------------------------------------------------- ---------
Interest expense (28) (350) (4,148) -- -- (870) (5,396)
Interest Income -- -- 492 -- -- -- 492
Gain (loss) on sale of asset -- -- (527) -- -- 1,081 554
Other income (expense) 180 12 (175) -- -- 253 270
---------------------------------------------------------------------------------------- ---------
Income (loss) before income
taxes 1,573 17 (2,603) (573) (347) (1,338) (3,271)
Income tax (expense) benefit -- -- -- 175 109 (25) 259
---------------------------------------------------------------------------------------- ---------
Net income (loss) before
extraordinary loss $ 1,573 $ 17 $ (2,603) $ (398) $ (238) $ (1,363) $ (3,012)
======================================================================================== =========
</TABLE>
<PAGE> 10
NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
(1) The pro forma financial results exclude the effects of estimated cost
savings which management believes will result from the integration of
our completed and pending acquisitions.
(2) Reflects historical revenues and expenses of stations acquired by us in
1998 for the period from January 1, 1998 through the date the stations
were acquired by us.
(3) Reflects the historical revenues and expenses of stations acquired by
us in 1999 for the period from January 1, 1998 through December 31,
1998.
(4) Adjustments reflect (i) the change in depreciation and amortization
expense resulting from conforming the estimated useful lives of our
completed and pending acquisitions' assets to our policies and (ii) the
additional depreciation and amortization expense resulting from the
allocation of the purchase price to the estimated fair market value of
the assets acquired. On a pro forma basis, depreciation expense is
$15,146 and amortization expense is $46,023 after giving effect to the
completed and pending acquisitions. Depreciation expense has been
calculated on a straight line basis using a weighted average life of
seven years for property and equipment. Goodwill and other intangible
assets' amortization has been calculated on a straight line basis over
25 years. Non-compete agreements are being amortized over the lives of
the agreements which range from one to three years.
We allocate the purchase prices of the acquired stations based on
evaluations of the assets acquired and the liabilities assumed. We
believe that the excess of cost over the fair value of tangible net
assets of an acquired radio station almost exclusively relates to the
value of the FCC broadcasting license and goodwill. We believe that the
purchase price allocation method described above is consistent with
general practice in the radio broadcasting industry.
(5) Adjustment to reflect increased interest expense resulting from:
<TABLE>
<S> <C>
Interest on the $114,450 indebtedness under the old credit
facility at 8.5%.................................................. $ 9,728
Interest on our senior subordinated notes at 10.375%................. 16,600
Annual amortization of $3,102 in transaction costs associated
with the old credit facility over eight years..................... 387
Annual amortization of $6,689 in debt issue costs associated with
our senior subordinated notes over ten years...................... 668
----------
Total interest expense............................................... 27,383
Less: historical interest recorded by us and the businesses
acquired in connection with our completed acquisitions............ (22,003)
----------
Net adjustment....................................................... $ 5,380
==========
</TABLE>
(6) Adjustment to reduce historical interest income to reflect the effects
of our completed and pending acquisitions as of January 1, 1998.
<PAGE> 11
(7) Adjustment to eliminate non-recurring gains (losses) on the sale of
assets recorded by Crystal Radio Group, Inc., Midland Broadcasting,
Inc. and Savannah Communications, L.P., combined with an adjustment
recorded to eliminate the net non-recurring loss recognized by Calendar
Broadcasting, Inc. and subsidiaries. The non-recurring gain was
recognized by Crystal Radio Group, Inc., Midland Broadcasting, Inc.,
and Savannah Communications L.P. upon sale of assets to us.
(8) Adjustment to reflect additional accretion related to Series A
preferred stock dividend as if the Series A preferred stock were
outstanding for the full period from January 1, 1998 to December 31,
1998.
<TABLE>
<S> <C>
Accretion of Series A preferred stock dividend (compounded $ 18,094
quarterly at 13.75%)..............................................
Less: historical dividends recorded by us........................... (13,591)
---------
Net adjustment....................................................... $ 4,503
=========
</TABLE>
(9) Adjustment to reflect increased interest expense resulting from:
<TABLE>
<S> <C> <C>
Sources of funds from completed November offering and current
credit facility:
Amount financed by the current credit facility ($125,000 to Cumulus
net of fees of $4,000)............................................ $ 121,000
Class A common stock offered ($148,278 to Cumulus net of fees of
$8,663)........................................................... 139,615
-----------
Total........................................................ $ 260,615
===========
Uses of funds:
Repayment of the old credit facility................................. $ 62,500
Redemption of Series A preferred stock:
Redemption of original liquidation preference (35% of
$125,000)..................................................... $ 43,750
Redemption premium (13.75% of redeemed amount)................... 6,016
-----------
Total payment to Series A preferred stockholders................. 49,766
Cash on hand..................................................... 148,349
-----------
Total........................................................ $ 260,615
===========
Interest on the $125,000 indebtedness under the current credit
facility at 8.50%................................................. $ 10,625
Interest on our senior subordinated notes at 10.375%................. 16,600
Annual amortization of $7,102 in deferred transaction costs
associated with the old and current credit facilities over eight
years............................................................. 888
Annual amortization of $6,689 in debt issue costs associated with
our senior subordinated notes over ten years...................... 667
-----------
Total interest expense....................................... 28,780
Less: interest expense recorded pro forma as adjusted
for the 1999 completed acquisitions........................ (27,383)
-----------
Net adjustment............................................... $ 1,397
===========
</TABLE>
<PAGE> 12
(10) Adjustment to reflect the reduction in the dividend on the Series A
preferred stock, on a pro forma basis, as if the redemption had
occurred as of January 1, 1998:
<TABLE>
<S> <C>
Annual dividend on $81,250 Series A preferred stock at 13.75%........ $ 11,761
Less: pro forma dividend as adjusted for the 1999 completed
acquisitions...................................................... (18,094)
---------
Net adjustment....................................................... $ 6,333
=========
</TABLE>
(11) Adjustment to reflect the elimination of $ 5,396 of interest expense
recorded by sellers pursuant to our pending acquisitions.
(12) Adjustment recorded to eliminate the net non-recurring gains (losses)
on the sale of assets recorded by Anderson Broadcasting Company,
combined with an adjustment recorded to eliminate the net non-recurring
gain recognized by Savannah Valley Broadcasting Radio Properties. The
non-recurring gain was recognized by Savannah Valley Broadcasting Radio
Properties upon the sale of assets not acquired by us.
Sources of funds from the completed November offering and the current offering:
<TABLE>
<S> <C>
Class A common stock in November offering ($148,728 to Cumulus
net of fees of $8,663)........................................... $ 139,615
Class A common stock in current Offering ($473,750 to Cumulus
net of fees of $24,937).......................................... $ 448,813
Escrow funds..................................................... 14,063
-----------
Total........................................................ $ 602,491
===========
Uses of funds:
Purchase price of our pending acquisitions........................ $ 456,655
Increase in cash on hand.......................................... 145,836
-----------
Total........................................................ $ 602,491
===========
</TABLE>
The floating interest rate used to calculate pro forma interest expense
on the current credit facility is eight and one half percent (8.50%).
The rate on the current credit facility is based on our estimates,
considering current market conditions for similar securities. A
one-eighth of one percent (0.125%) change in the interest rate on the
current credit facility results in a $156 increase or decrease in the
pro forma interest expense for the twelve months ended December 31,
1998.
Upon the consummation of the Series A preferred stock redemption on
October 1, 1999, we have recorded a redemption premium of $6,016 on the
redemption of $43,750 Series A preferred stock.
<PAGE> 13
CUMULUS MEDIA INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
(D)
Pro Forma (A)+(B)+(C)+
(B) Adjustments for the (D)=(E)
Pro Forma Company Historical Pro Forma as
(A) Adjustments for (C) and the 1999 Adjusted for the
The Company the Company 1999 Completed Completed 1999 Completed
Historical (1) Historical (2) Acquisitions (3) Acquisitions Acquisitions
-------------- --------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue $ 136,341 $ 4,672 $ 8,651 $ - $ 149,664
Less, agency commissions (10,609) (351) (934) - (11,894)
-------------- --------------- --------------- -------------- -------------
Net revenues 125,732 4,321 7,717 - 137,770
Station operating expenses
excluding depreciation and
amortization 90,049 3,524 5,150 - 98,723
Depreciation and amortization 26,270 371 1,196 (3,400)(4) 24,437
Corporate general and
administrative expenses 5,150 352 733 - 6,235
Non-cash stock compensation expenses - - - - -
-------------- --------------- ---------------- -------------- -------------
Operating Income (loss) 4,263 74 638 3,400 8,375
-------------- --------------- ---------------- -------------- -------------
Interest expenses (19,362) (933) (1,091) 1,289 (5) (20,097)
Interest income 2,054 - - (1,904)(6) 150
Gain (loss) on sale of asset - 29,585 - (29,585)(7) -
Other income (expense) 759 (51) - - 708
-------------- --------------- ----------------- -------------- -------------
Income (loss) before income (12,286) 28,675 (453) (26,800) (10,864)
taxes
Income tax (expense) benefit (160) - - - (160)
-------------- --------------- ----------------- -------------- -------------
Net income (loss) before extraordinary
loss (12,446) 28,675 (453) (26,800) (11,024)
Preferred stock dividends (14,245) - - - (8) (14,245)
-------------- --------------- ----------------- -------------- -------------
Net income (loss) before extraordinary
loss attributable in common stockholders (26,691) 28,675 (453) (26,800) (25,269)
============== ================ ================= ============== =============
<CAPTION>
(E)+(F)=(G) (I)
(F) Pro Forma as Pro Forma
Pro Forms Adjusted for the Adjustments
Adjustments 1999 Completed for the Pending (G)+(H)+(I)
for the Completed Acquisitions, the (H) Acquisitions =(J)
Offering and the Completed Offering, Pending and the Current Pro Forma
Credit Facility and the Credit Facility Acquisitions Offering Combined (4)
--------------- ----------------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue $ - $ 149,664 $ 58,698 $ $ 208,362
Less: agency commissions - (11,894) (5,643) - (17,537)
--------------- ----------------------- -------------- ------------ ------------
Net revenues - 137,770 53,055 - 190,825
Station operating expenses
excluding depreciation and
amortization - 98,723 38,787 137,510
Depreciation and amortization - 24,437 7,047 11,369 (4) 42,853
Corporate general and
administrative expenses - 6,235 5,378 - 11,613
Non-cash stock compensation expense - - - - -
--------------- ----------------------- -------------- ------------- ------------
Operating income (loss) - 8,375 1,843 (11,369) (1,151)
--------------- ----------------------- -------------- ------------- ------------
Interest expense (1,489)(9) (21,586) (4,139) 4,139 (11) (21,586)
Interest income - 150 270 (270)(6) 150
Gain (loss) on sale of asset - - 34 (34)(12) -
Other income (expense) - 708 (193) 515
--------------- ----------------------- -------------- ------------- ------------
Income (loss) before income (1,489) (12,353) (2,185) (7,534) (22,072)
taxes
Income tax (expense) benefit - (160) 522 - 362
--------------- ----------------------- -------------- ------------- ------------
Net income (loss) extraordinary loss (1,489) (12,513) (1,663) (7,534) (21,710)
Preferred stock dividends 4,320 (10) (9,925) - - (9,925)
--------------- ----------------------- -------------- ------------- ------------
Net income (loss) before extraordinary
loss attributable in common
stockholders 2,831 (22,438) (1,663) (7,534) (31,635)
=============== ======================= ============== ============= ============
Basic and diluted loss
per common share $ (.71)
============
Pro forma weighted average
share outstanding 44,729
============
</TABLE>
See accompanying notes to unaudited pro forma combined statement of operations
<PAGE> 14
SUPPORT FOR COLUMN(H)
PENDING ACQUISITIONS
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
RADIO STATIONS
KHAY-FM, KNEN-
CAPE FEAR CONNOISSEUR FM, KBBY-FM, KZEL-FM RADIO PENDING
BROADCASTING C.F. COMMUNICATIONS KKSB-FM, KMGQ- AND KNRQ-AM/FM OTHER PENDING ACQUISITIONS
COMPANY RADIO, INC. PARTNERS, L.P. FM RADIO ACQUISITIONS COLUMN (H)
------------------------------------------------------------------------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 4,012 $ 1,717 $ 32,483 $ 4,146 $ 1,718 $ 14,622 $ 58,698
Less: agency commissions (467) (218) (3,473) (463) (195) (827) (5,643)
------------------------------------------------------------------------------- --------
Net revenues 3,545 1,499 29,010 3,683 1,523 13,795 53,055
Station operating expenses
excluding depreciation and
amortization 2,510 1,056 19,317 3,301 1,214 11,389 38,787
Depreciation and amortization (100) 421 4,213 1,101 297 1,115 7,047
Corporate General and
administrative expenses - - 3,300 386 42 1,650 5,378
Non-cash stock compensation expense - - - - - - -
------------------------------------------------------------------------------- --------
Operating income (loss) 1,135 22 2,180 (1,105) (30) (359) 1,843
------------------------------------------------------------------------------- --------
Interest expense 18 (357) (3,220) - - (580) (4,139)
Interest income - - 270 - - - 270
Gain (loss) on sale of asset - - (6) - - 40 34
Other income (expense) - - (71) - - (122) (193)
------------------------------------------------------------------------------- --------
Income (loss) before income 1,153 (335) (847) (1,105) (30) (1,021) (2,185)
taxes
Income tax (expense) benefit - - - 487 35 - 522
------------------------------------------------------------------------------- --------
Net income (loss) before
extraordinary loss $ 1,153 $ (335) $ (847) $ (618) $ 5 $ (1,021) $ (1,663)
------------------------------------------------------------------------------- --------
</TABLE>
<PAGE> 15
NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
(1) The pro forma financial results exclude the effects of estimated cost
savings which management believes will result from the integration of
our completed and pending acquisitions.
(2) Reflects historical revenues and expenses of stations acquired by
us in the first nine months of 1999 for the period from January 1, 1999
through the date the stations were acquired by us.
(3) Reflects the historical revenues and expenses of stations acquired
by us after September 30, 1999 for the period from January 1, 1999
through September 30, 1999.
(4) Adjustments reflect (i) the change in depreciation and amortization
expense resulting from conforming the estimated useful lives of our
completed and pending acquisitions' assets to our policies and (ii) the
additional depreciation and amortization expense resulting from the
allocation of the purchase price to the estimated fair market value of
the assets acquired. On a pro forma basis, depreciation expense is
$10,564 and amortization expense is $32,289 after giving effect to the
completed and pending acquisitions. Depreciation expense has been
calculated on a straight-line basis using a weighted average life of
seven years for property and equipment. Goodwill and other intangible
assets' amortization has been calculated on a straight-line basis over
25 years. Non-compete agreements are being amortized over the lives of
the agreements which range from one to three years.
We allocate the purchase prices of the acquired stations based on
evaluations of the assets acquired and the liabilities assumed. We
believe that the excess of cost over the fair value of tangible net
assets of an acquired radio station almost exclusively relates to the
value of the FCC broadcasting license and goodwill. We believe that the
purchase price allocation method described above is consistent with
general practice in the radio broadcasting industry.
(5) Adjustment to reflect decreased interest expense resulting from:
<TABLE>
<S> <C>
Nine months of interest on the $107,537 indebtedness under
the old credit facility at 8.5%................................... $ 6,854
Nine months of interest on our senior subordinated notes at
10.375%........................................................... 12,450
Nine months of amortization of $3,102 in transaction costs
associated with the old credit facility over eight years.......... 291
Nine months of amortization of $6,689 in debt issue costs
associated with our senior subordinated notes over ten years...... 502
--------
Total interest expense........................................... 20,097
Less: historical interest recorded by us and the businesses
acquired in connection with our completed acquisitions........ (21,386)
--------
Net adjustment................................................... $ (1,289)
========
</TABLE>
(6) Adjustments to reduce historical interest income to reflect the effects
of our completed and pending acquisitions as of January 1, 1999.
(7) Adjustment recorded to eliminate the non-recurring gain on sale of
assets recorded by HMH Broadcasting Inc. on the 1999 sales of radio
stations to us.
<PAGE> 16
(8) Adjustment to reflect additional accretion related to Series A
preferred stock dividend as if the Series A preferred stock were
outstanding for the full period from January 1, 1998 to September 30,
1999.
<TABLE>
<S> <C>
Accretion of Series A preferred stock dividend (compounded
quarterly at 13.75%).............................................. $ 14,245
Less: historical dividends recorded by us........................... (14,245)
--------
Net adjustment....................................................... $ 0
========
</TABLE>
(9) Adjustment to reflect increased interest expense resulting from:
<TABLE>
<S> <C>
Sources of funds from completed November offering and current
credit facility:
Amount financed by the current credit facility ($125,000 to
Cumulus net of fees of $4,000).................................... $ 121,000
Class A common stock offered ($148,278 to Cumulus net of
fees of $8,663)................................................... 139,615
-----------
Total........................................................ $ 260,615
===========
Uses of funds:
Repayment of the old credit facility................................. $ 107,537
Redemption of Series A preferred stock:
Redemption of original liquidation preference (35% of
$125,000)..................................................... $ 43,750
Redemption premium (13.75% of redeemed amount)................... 6,016
----------
Total payment to Series A preferred stockholders................. 49,766
Cash on hand..................................................... $ 103,312
-----------
Total........................................................ $ 260,615
===========
Nine months interest on the $125,000 indebtedness under the
current credit facility at 8.50%................................. 7,968
Nine months interest on our senior subordinated notes at
10.375%.......................................................... 12,450
Nine months amortization of $7,102 in deferred transaction
costs associated with the old and current credit facilities over
eight years...................................................... 666
Nine months amortization of $6,689 in debt issue costs
associated with our senior subordinated notes over ten years..... 502
-----------
Total interest expense....................................... 21,586
Less: interest expense recorded pro forma as adjusted
for our completed acquisitions............................ (20,097)
-----------
Net adjustment............................................... $ 1,489
===========
</TABLE>
<PAGE> 17
(10) Adjustment to reflect the redemption of Series A preferred stock,
on a pro forma basis, as if the redemption had occurred as of January
1, 1998:
<TABLE>
<S> <C> <C>
Original Series A preferred stock................................ $ 125,000
Less: redemption of original liquidation preference............. (43,750)
----------
Pro forma Series A preferred stock balance as of January 1,
1998.......................................................... 81,250
Annual dividend on Series A preferred stock at 13.75%
compounded quarterly.......................................... 11,761
----------
Pro forma Series A preferred stock balance as of
December 31, 1998.......................................... 93,011
Nine months dividend on $93,011 Series A preferred
stock at 13.75%............................................ (9,925)
Less: pro forma dividend as adjusted for the 1999
subsequent acquisitions.................................... (14,245)
----------
Net adjustment............................................... $ 4,320
==========
</TABLE>
(11) Adjustment to reflect the elimination of $4,139 of interest expense
recorded by sellers pursuant to the Pending Acquisitions.
(12) Adjustment recorded to eliminate the non-recurring gain on the sale of
assets recorded by Centroplex Communications Inc.
Sources of funds from the completed November offering and the current
offering:
<TABLE>
<S> <C>
Class A common stock offered in November offering ($148,278 to
Cumulus net of fees of $8,663).................................. $ 139,615
Class A common stock offered in current offering ($473,750 to
Cumulus net of fees of $24,937)................................. $ 448,813
Escrow funds.................................................... 14,063
-----------
Total........................................................ $ 602,491
===========
Uses of funds:
Purchase price of the pending acquisitions........................ $ 456,655
Increase in cash on hand.......................................... 145,836
-----------
Total........................................................ $602,491
===========
</TABLE>
<PAGE> 18
The floating interest rate used to calculate pro forma interest expense
on the current credit facility is eight and one half percent (8.50%).
The rate on the current credit facility is based on our estimates,
considering current market conditions for similar securities. A
one-eighth of one percent (0.125%) change in the interest rate on our
current credit facility results in a $117 increase or decrease in the
pro forma interest expense for the nine months ended September 30,
1999.
Upon the consummation of the Series A Preferred Stock redemption on
October 1, 1999, we recorded a redemption premium of $6,016 on the
redemption of $43,750 Series A preferred stock.
<PAGE> 19
CUMULUS MEDIA INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(A) + (B) +(C)=(D)
(B) PRO FORMA AS
PRO FORMA (C) ADJUSTED FOR THE
ADJUSTMENTS PRO FORMA COMPLETED OFFERINGS,
(A) FOR THE ADJUSTMENTS FOR CREDIT FACILITY AND
THE COMPANY PREFERRED STOCK THE SUBSEQUENT THE SUBSEQUENT
HISTORICAL REDEMPTION (1) ACQUISITIONS (2) ACQUISITIONS
----------- --------------- ---------------- --------------------
ASSETS:
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 202,149 $ (51,270) $ (46,386) $ 104,493
Accounts receivable 48,265 -- -- 48,265
Prepaid expenses and other current
assets 8,221 -- -- 8,221
--------- --------- --------- ----------
Total current assets 258,635 (51,270) (46,386) 160,979
Property and equipment, net 57,985 -- 4,639 62,624
Intangible assets, net 486,217 -- 48,227 534,444
Other assets 20,178 -- -- 20,178
--------- --------- --------- ----------
TOTAL ASSETS $ 823,015 $ (51,270) $ 6,480 $ 778,225
========= ========= ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other liabilities $ 15,472 $ -- $ -- 15,472
Current portion of long-term debt 20 -- -- 20
--------- --------- --------- ----------
Total current liabilities 15,492 -- -- 15,492
Long-term debt:
Credit facility - Old -- --
Credit facility - New 125,232 -- 125,232
Notes 160,000 -- -- 160,000
Other -- -- -- --
Other long-term liabilities:
Deferred tax liability 15,074 -- 6,480 21,554
Other long-term liabilities 1,934 -- -- 1,934
--------- --------- --------- ----------
Total liabilities 317,732 -- 6,480 324,212
Preferred stock subject to mandatory
redemption 147,986 $ (45,254) -- 102,732
--------- --------- --------- ----------
Stockholders' equity:
Class A Common Stock 210 -- -- 210
Class B Common Stock 79 -- -- 79
Class C Common Stock 22 -- -- 22
Additional paid in capital 386,706 -- -- 386,706
-- --
(6,016) (6,016)
Accumulated other comprehensive income 5 -- -- 5
Retained earnings (deficit) (29,725) -- -- (29,725)
--------- --------- --------- ----------
Total stockholders' equity 357,297 (6,016) -- 351,281
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 823,015 $ (51,270) $ 6,480 $ 778,225
========= ========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
(E) (F)
PRO FORMA PRO FORMA (G)
ADJUSTMENTS ADJUSTMENTS PRO FORMA
FOR THE FOR THE ADJUSTMENTS FOR (D) + (E) + (F) + (G) = H
COMPLETED CURRENT THE PENDING PRO FORMA
OFFERING (3) OFFERING (3) ACQUISITIONS (4) COMBINED
------------ ------------ ---------------- -------------------
ASSETS:
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 139,615 $ 448,813 $ (442,592) $ 250,329
Accounts receivable -- 48,265
Prepaid expenses and other current
assets -- 8,221
--------- --------- ---------- ----------
Total current assets 139,615 448,813 (442,592) 306,815
Property and equipment, net 45,666 108,290
Intangible assets, net 416,646 951,090
Other assets (14,063) 6,115
--------- --------- ---------- ----------
TOTAL ASSETS $ 139,615 $ 448,813 $ 5,657 $1,372,310
========= ========= ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other liabilities -- $ -- 15,472
Current portion of long-term debt -- -- 20
--------- --------- ---------- ----------
Total current liabilities -- -- -- 15,492
Long-term debt:
Credit facility - Old
Credit facility - New -- 125,232
Notes -- -- 160,000
Other -- -- -- --
Other long-term liabilities:
Deferred tax liability 5,657 27,211
Other long-term liabilities -- -- 1,934
--------- --------- ---------- ----------
Total liabilities -- -- 5,657 329,869
Preferred stock subject to mandatory
redemption -- -- 102,732
--------- --------- ---------- ----------
Stockholders' equity:
Class A Common Stock 48 100 -- 358
Class B Common Stock (10) -- -- 69
Class C Common Stock -- -- -- 22
Additional paid in capital 148,240 473,650 -- 968,980
(8,663) (24,937)
Accumulated other comprehensive income -- -- -- 5
Retained earnings (deficit) -- -- -- (29,725)
--------- --------- ---------- ----------
Total stockholders' equity 139,615 448,813 -- 939,709
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 139,615 $ 448,813 $ 5,657 $1,372,310
========= ========= ========== ==========
</TABLE>
See accompanying notes to the unaudited combined pro forma balance sheet.
<PAGE> 20
Support for Column (G)
Pending Acquisitions
September 30, 1999
<TABLE>
<CAPTION>
RADIO STATIONS
KHAY-FM, KNEN-
CONNOISSEUR FM, KBBY-FM, KZEL-FM RADIO
CAPE FEAR COMMUNICATIONS KKSB-FM, AND KNRQ-AM/FM
BROADCASTING,INC. C/F RADIO, INC. PARTNERS, LP. KMGQ-FM RADIO
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 1,520 $ 742 $ 1,086 $ 138 $ 60
Accounts receivable 806 327 6,862 1,793 371
Prepaid expenses and other current assets 66 38 862 1,758 -
-----------------------------------------------------------------------------
Total current assets 2,392 1,107 8,810 3,689 431
Property and equipment, net 681 1,634 18,536 753 592
Intangible assets, net 3 3,898 73,728 15,135 3,147
Other assets 3,686 567 6,372 265 39
-----------------------------------------------------------------------------
TOTAL ASSETS $ 6,762 $ 7,206 $ 107,446 $ 19,842 $ 4,209
=============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and other liabilities 459 241 3,586 500 148
Current portion of long-term debt 55 471 4,715 - -
-----------------------------------------------------------------------------
Total current liabilities 514 712 8,301 500 148
Credit Facility - - - - -
Notes - - - - -
Deferred Tax Liability - - - - -
Other long-term liabilities 300 6,720 49,723 - 17
Preferred Stock subject to long term redemption - - - - -
-----------------------------------------------------------------------------
Total liabilities 814 7,432 58,024 500 165
STOCKHOLDERS' EQUITY:
Series A Common 42 7 - - -
Series B Common - - - - -
Series C Common - - - - -
Additional paid in capital - - - - -
Accumulated other comprehensive income 347 - - - -
Retained earnings (deficit) 5,559 (233) 49,422 19,342 4,044
Cost of treasury shares - - - - -
-----------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 5,948 (226) 49,422 19,342 4,044
-----------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 6,762 $ 7,206 $ 107,446 $ 19,842 $ 4,209
=============================================================================
</TABLE>
<TABLE>
<CAPTION>
TOTAL PENDING
OTHER PENDING TOTAL PENDING PRO FORMA ACQUISITIONS AS
ACQUISITIONS ACQUISITIONS ADJUSTMENTS ADJUSTED COLUMN(G)
------------ -------------- ----------- -------------------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 2,344 $ 5,890 $ (448,482) $ (442,592)
Accounts receivable 4,197 14,356 (14,356) -
Prepaid expenses and other current assets 407 3,131 (3,131) -
-------- ---------- ----------- ------------
Total current assets 6,948 23,377 (465,969) (442,592)
Property and equipment, net 5,535 27,731 17,935 45,666
Intangible assets, net 12,977 108,888 307,758 416,646
Other assets 1,604 12,533 (26,596) (14,063)
-------- --------- ----------- ----------
TOTAL ASSETS $ 27,064 $ 172,529 $ (166,872) $ 5,657
======== ========= =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and other liabilities 3,370 8,304 (8,304) -
Current portion of long-term debt 5,216 10,457 (10,457) -
-------- --------- ---------- ----------
Total current liabilities 8,586 18,761 (18,761) -
Credit Facility - - - -
Notes - - - -
Deferred Tax Liability - - 5,657 5,657
Other long-term liabilities 13,567 70,327 (70,327) -
Preferred Stock subject to long term redemption - - - -
-------- --------- ---------- ----------
Total liabilities 22,153 89,088 (83,431) 5,657
STOCKHOLDERS' EQUITY:
Series A Common 791 840 (840) -
Series B Common - - - -
Series C Common - - - -
Additional paid in capital 4,440 4,440 (4,440) -
Accumulated other comprehensive income - 347 (347) -
Retained earnings (deficit) (320) 77,814 (77,814) -
Cost of treasury shares - - - -
-------- --------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 4,911 83,441 (83,441) -
-------- --------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 27,064 $ 172,529 $ (166,872) $ 5,657
======== ========= ========== ==========
</TABLE>
<PAGE> 21
NOTES TO THE UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
(1) To reflect: (i) the redemption of 35% of the original liquidation
preference of the Series A preferred stock in the amount of $43,750
plus a 13.75% redemption premium on the redeemed preferred stock in the
amount of $6,016;
<TABLE>
<S> <C>
Redemption of Series A preferred stock:
Redemption of original liquidation preference (35% of
$125,000)................................................. $ 43,750
Accrued and unpaid dividend on redeemed original 1,504
liquidation preference.......................................
Redemption premium (13.75% of redeemed amount)................. 6,016
--------
Total payment to Series A preferred stockholders............... 51,270
</TABLE>
(2) To record the allocation of the $46,386 purchase price paid for
transactions consummated subsequent to September 30, 1999. The pro
forma allocation of the purchase price of the 1999 subsequent
acquisitions is as follows:
<TABLE>
<S> <C>
Property and equipment............................................. $ 4,639
Intangible assets, principally broadcast licenses.................. 48,227
Deferred tax liability............................................. (6,480)
--------
$ 46,386
========
</TABLE>
(3) To reflect: (i) the net proceeds of the November offering to Cumulus of
$148,728, net of $8,663 in issuance costs (ii) the net proceeds of the
current offering of $473,750, net of $24,937 in issuance costs.
<TABLE>
<S> <C>
Class A common stock offered in November offering ($148,728 to $ 139,615
Cumulus net of fees of $8,663)................................
Class A common stock offered in current offering ($473,750 to 448,813
Cumulus net of fees of $24,937)...............................
Escrow funds.................................................. 14,063
---------
Total...................................................... $ 602,491
=========
Uses of funds:
Purchase price of the pending acquisitions...................... $ 456,655
Increase in cash on hand........................................ 145,836
---------
Total...................................................... $ 602,491
=========
</TABLE>
(4) To record the allocation of the $456,655 in purchase price to be
paid for the pending acquisitions and the recording of the related deferred
income taxes of $5,657. To record the use of cash of $442,592, and escrow
funds of $14,063 to complete the pending acquisitions. The pro forma
allocation of the purchase price of the pending acquisitions is as follows:
<TABLE>
<S> <C>
Property and equipment............................................. $ 45,666
Intangible assets, principally broadcast licenses.................. 416,646
Deferred taxes..................................................... (5,657)
----------
$ 456,655
==========
</TABLE>
<PAGE> 22
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Connoisseur Communications Partners L.P.
Report of Independent Auditors .............................................................................. F-1
Balance Sheets as of September 30, 1999 (unaudited) and December 31, 1998 ................................... F-2
Consolidated Statements of Operations for the nine months ended September 30, 1999 and 1998 (unaudited)
and for the year ended December 31, 1998 .................................................................. F-3
Consolidated Statements of Partners' capital as of December 31, 1998 and September 30, 1999 (unaudited) ..... F-4
Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 1998 (unaudited)
and for the year ended December 31, 1998 .................................................................. F-5
Notes to Financial Statements ............................................................................... F-6
Radio stations KHAY-FM, KVEN-FM, KBBY-FM, KKSB-FM and KM6Q-FM
Report of Independent Accountants ........................................................................... F-18
Consolidated Balance Sheets as of September 30, 1999 (unaudited) and December 31, 1999 ...................... F-19
Statements of Operations for the nine months ended September 30, 1999 and
1998 (unaudited) and for the year December 31, 1998 ....................................................... F-20
Statement of Divisional Control Account for the year ended December 31, 1998 ................................ F-21
Statements of Cash Flows for the nine months ended September 30, 1999 and 1998 (unaudited) and for the year
ended December 31, 1998 ................................................................................... F-22
KZEL RADIO AND KNRQ-AM/FM RADIO
Notes to Consolidated Financial Statements .................................................................. F-23
Independent Auditor's Report ................................................................................ F-27
Balance sheets as of September 30, 1999 (unaudited) and December 31, 1998 ................................... F-28
Statements of Operations for the nine months ended September 30, 1999 and 1998 (unaudited) and for the year
ended December 31, 1998 ................................................................................... F-29
Statement of Divisional Control Accounts for the year ended December 31, 1998 ............................... F-30
Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 1998 (unaudited) and
for the year ended December 31, 1998 ...................................................................... F-31
Notes to Consolidated Financial Statements .................................................................. F-32
</TABLE>
<PAGE> 23
Report of Independent Auditors
Partners
Connoisseur Communications Partners, L.P.
We have audited the accompanying consolidated balance sheet of Connoisseur
Communications Partners, L.P. at December 31, 1998, and the related consolidated
statement of operations, partners' capital, and cash flows for the year then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Connoisseur Communications
Partners, L.P. at December 31, 1998, and the results of its operations and its
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
March 10, 1999
F-1
<PAGE> 24
Connoisseur Communications Partners, L.P.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30,1999 31, 1998
-------------------------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash $ 1,085,672 $ 661,578
Accounts receivable (net of allowance for doubtful accounts of
$503,797 (unaudited) and $484,968, respectively) 6,862,175 6,827,644
Interest receivable--related parties 179,545 94,724
Assets held for sale -- 110,000
Prepaid expenses 494,878 399,498
Other current assets 187,549 253,209
------------------------------
Total current assets 8,809,819 8,346,653
Property, building and equipment (net of accumulated
depreciation of $4,910,326 (unaudited) and $3,586,376,
respectively) 18,535,861 16,903,026
Intangible assets (net of accumulated amortization of
$8,419,617 (unaudited) and $5,933,165, respectively) 73,727,864 73,388,909
Notes receivable--related parties 5,620,413 5,620,413
Other assets 751,555 348,258
------------------------------
Total assets $ 107,445,512 $ 104,607,259
==============================
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of long-term debt $ 4,715,353 $ 2,650,925
Accounts payable 991,167 1,284,088
Accrued expenses 2,020,662 1,536,892
Accrued interest 494,739 763,398
Due to related parties -- 40,625
Due to general partner 77,685 134,785
------------------------------
Total current liabilities 8,299,606 6,410,713
Long-term debt 48,431,154 47,098,469
Deferred compensation 826,678 461,273
Other liabilities 11,221 25,543
Minority interest 454,423 456,215
Partners' capital:
Partners' investment 58,381,986 58,267,058
Accumulated deficit (8,959,556) (8,112,012)
------------------------------
Total partners' capital 49,422,430 50,155,046
------------------------------
Total liabilities and partners' capital $ 107,445,512 $ 104,607,259
==============================
</TABLE>
See accompanying notes.
F-2
<PAGE> 25
Connoisseur Communications Partners, L.P.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
1999 1998 1998
-----------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Broadcast revenues:
Broadcasting $30,238,160 $ 25,782,132 $ 35,583,390
Barter 1,701,994 1,537,111 2,107,517
Less agency commissions and adjustments (3,473,263) (2,864,275) (3,992,399)
--------------------------------------------------
Net broadcast revenues 28,466,891 24,454,968 33,698,508
Rental income and other 542,655 581,802 758,067
--------------------------------------------------
Net revenue 29,009,546 25,036,770 34,456,575
Station operating expenses:
Selling 5,742,785 5,032,902 6,702,739
Programming 5,230,639 4,697,845 6,387,113
Promotions 974,203 1,221,089 1,724,153
Technical 822,184 786,353 1,040,199
General and administrative 4,835,364 4,352,124 6,000,814
Barter 1,711,997 982,875 2,018,631
Depreciation 1,324,802 1,104,447 1,568,373
Amortization 2,565,789 2,525,607 3,431,982
TBA and SRA expense 322,405 262,057 340,221
--------------------------------------------------
Total station operating expenses 23,530,168 20,965,299 29,214,225
--------------------------------------------------
Other operating expenses:
Corporate and other expenses 2,426,471 1,893,826 2,572,920
Partners' fees and expenses 42,906 124,701 158,109
General partner management fee 112,994 164,673 202,893
Consulting expense 11,250 79,734 105,881
Noncash compensation 706,625 315,960 447,771
Write-down on assets held for sale and loss
on sale of stations - - 526,569
-------------------------------------------------
Total other operating expenses 3,300,246 2,578,894 4,014,143
--------------------------------------------------
Total operating expenses 26,830,414 23,544,193 33,228,368
Operating income 2,179,132 1,492,577 1,228,207
Interest expense 3,219,594 3,068,808 4,147,961
Loss on sale of assets 5,916 158,677 -
Other expenses 70,549 118,245 175,223
Interest income from related party loans (269,369) (375,279) (466,040)
Interest income (14) (6,273) (25,565)
==================================================
Net loss $ (847,544) $ (1,471,601) $ (2,603,372)
==================================================
</TABLE>
See accompanying notes.
F-3
<PAGE> 26
Connoisseur Communications Partners, L.P.
Consolidated Statements of Partners' Capital
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
-------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1997 $ 687,748 $46,842,572 $47,530,320
Contributions, net of cost 102,958 5,304,052 5,407,010
Noncash compensation - 324,058 324,058
Distributions (9,886) (493,084) (502,970)
Net loss (26,034) (2,577,338) (2,603,372)
-----------------------------------------------------
Balance at December 31, 1998 754,786 49,400,260 50,155,046
Noncash compensation (unaudited) - 341,220 341,220
Distributions (unaudited) (4,305) (221,987) (226,292)
Net loss (unaudited) (8,476) (839,068) (847,544)
=====================================================
Balance at September 30, 1999 (unaudited) $ 742,005 $48,680,425 $49,422,430
=====================================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 27
Connoisseur Communications Partners, L.P.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
1999 1998 1998
---------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited)
<S> <C> <C> <C>
Net loss $ (847,544) $ (1,471,601) $ (2,603,372)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation 1,324,802 1,104,447 1,568,373
Amortization 2,565,789 2,525,607 3,431,982
Bad debt expense 368,409 276,550 530,319
Noncash compensation expense 706,624 315,960 447,771
Unrealized loss on assets held for sale -- -- 332,944
Other 26,532 14,785 (13,687)
Changes in assets and liabilities, net of amounts acquired:
Increase in accounts receivable (402,940) (2,088,878) (2,048,591)
Increase in prepaid expenses and other current assets (29,720) (368,925) (177,185)
Decrease (increase) in interest receivable (84,821) 534,825 661,845
(Decrease) increase in accounts payable (292,921) 17,540 4,594
Increase (decrease) in accrued expenses 185,111 (14,761) 484,294
Decrease in fees due to related parties (40,625) (78,294) (79,375)
Decrease in due to general partner (57,100) (242,442) (204,564)
---------------------------------------------------
Net cash provided by operating activities 3,421,596 524,813 2,335,348
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of radio stations (4,665,407) (11,548,412) (12,870,638)
Capital expenditures (1,520,437) (1,756,405) (2,030,162)
Proceeds from sale of assets 140,000 2,000,000 2,000,000
Repayment of loans to related parties - 4,983,490 4,983,490
Other assets (108,158) (87,237) (81,659)
---------------------------------------------------
Net cash used in investing activities (6,154,002) (6,408,564) (7,998,969)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loan 4,925,000 4,600,000 4,817,259
Payments on loans (1,527,887) (4,453,647) (4,672,144)
Deferred financed costs - - (31,851)
Other liabilities (14,322) (12,682) (18,835)
Capital contributions - 5,407,010 5,407,010
Increase in minority interest - 104,000 104,000
Distributions paid (226,291) (502,972) (502,970)
---------------------------------------------------
Net cash provided by financing activities 3,156,500 5,141,709 5,102,469
---------------------------------------------------
Net (decrease) in cash 424,094 (742,042) (561,152)
Cash at beginning of period 661,578 1,222,730 1,222,730
---------------------------------------------------
Cash at end of period $ 1,085,672 $ 480,688 $ 661,578
===================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 3,488,253 $ 2,894,912 $ 3,606,456
===================================================
</TABLE>
See accompanying notes.
F-5
<PAGE> 28
1. FORMATION AND BUSINESS ACTIVITY
Connoisseur Communications Partners, L.P. (the "Partnership"), a Delaware
limited partnership, was organized in August 1993 for the purpose of acquiring,
owning and operating radio stations in small and medium-sized markets. The
Partnership owns a 99% limited partnership interest in nine limited
partnerships: Connoisseur Communications of Flint, L.P. ("Flint"); Connoisseur
Communications of Quad Cities, L.P. ("Quad Cities"), Connoisseur Communications
of Youngstown, L.P. ("Youngstown"), Connoisseur Communications of Rockford, L.P.
("Rockford"), Connoisseur Communications of Waterloo, L.P. ("Waterloo"),
Connoisseur Communications of Evansville, L.P. ("Evansville"), Connoisseur
Communications of Canton, L.P. ("Canton"), Connoisseur Communications of
Muskegon, L.P. ("Muskegon") and Connoisseur Communications of Mercer County,
L.P. ("Western PA"). Continuity Partners, L.P. ("Continuity") is the 1% general
partner in the Partnership. In addition, Continuity is the 1% general partner in
Flint, Quad Cities, Youngstown, Rockford, Waterloo, Evansville, Canton, Muskegon
and Western PA, which is shown as minority interest for financial statement
purposes.
Information with respect to the nine month periods ended September 30, 1999 and
1998 is unaudited. The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, the unaudited interim consolidated
financial statements contain all adjustments considered necessary for a fair
presentation. Operating results for the nine months ended September 30, 1999 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1999, or for any other interim period.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of the Partnership and Flint, Quad Cities, Youngstown, Rockford,
Waterloo, Evansville, Canton, Muskegon and Western PA. All significant
intercompany accounts and transactions have been eliminated. In this report,
actions of the Partnership and its 99% owned subsidiary partnerships are
referred to collectively or individually as actions of the Partnership.
Barter Transactions: Barter transactions represent the exchange of commercial
airtime for programming, merchandise, or services. The transactions are recorded
at the fair market value of the asset or service received. Revenue is recognized
when the advertisements are broadcast; expenses are recorded when the asset or
service received is utilized.
F-6
<PAGE> 29
Connoisseur Communications Partners, L.P.
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangibles: Intangibles include goodwill, broadcast licenses, covenants
not-to-compete and deferred financing costs. Goodwill represents the excess of
cost over the fair values of the identifiable tangible net assets acquired.
Goodwill and broadcast licenses are amortized on a straight-line basis over 40
years. Covenants not-to-compete are amortized on a straight-line basis over the
term of the agreements. Deferred financing costs are amortized over the term of
the related debt agreement on a straight-line basis.
The carrying values of goodwill and broadcast licenses are reviewed periodically
to determine whether they may have become impaired. If this review indicates
that goodwill and broadcast licenses will not be recoverable, as determined
based on the undiscounted cash flows of the entity acquired over the remaining
amortization period, the Partnership's carrying value of the goodwill and
broadcast licenses would be reduced by the difference between the carrying
amount and the estimated fair value and would be recognized as a charge to
income.
Property, Building and Equipment: Property, building and equipment are stated at
cost. Depreciation of property, building and equipment is calculated using the
straight-line method over their estimated useful as follows:
<TABLE>
<S> <C>
Building and improvements 30 to 40 years
Transmitters, towers and antennas 7 to 15 years
Broadcast and related equipment 3 to 10 years
Furniture and office equipment 3 to 7 years
</TABLE>
Income Taxes: The Partnership is not subject to federal, state, or local income
taxes and, accordingly, makes no provision for income taxes in its financial
statements. The partners are responsible for reporting their respective share of
the Partnership's taxable income or loss.
Revenue Recognition: The Partnership's primary source of revenue is the sale of
airtime to local, regional and national advertisers. Revenue is recorded when
advertisements are broadcast.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-7
<PAGE> 30
Connoisseur Communications Partners, L.P.
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Time Brokerage Agreements ("TBAs")/Sales Representation Agreements ("SRAs"):
From time to time, the Partnership enters into TBAs and SRAs with respect to
radio stations owned by third parties, including radio stations which it intends
to acquire. Terms of the agreements generally require the Partnership to pay a
monthly fee in exchange for the right to provide station programming and sell
related advertising time in the case of a TBA or sell advertising on behalf of
the station in the case of a SRA. In instances in which the stations are
acquired, the agreements terminate upon the acquisition of the stations. The
fees are expensed as incurred and are classified as operating expense.
Interest Rate Swap Agreements: The Partnership entered into an interest rate
swap agreement to effectively convert a portion of its variable-rate borrowings
into a fixed-rate obligation. The differential to be paid or received as
interest rates change is accounted for on the accrual method of accounting. The
related amount payable to or receivable from counterparties is included as an
adjustment to accrued interest in accrued liabilities.
Advertising: Advertising costs are expensed as incurred. Advertising expense
totaled $779,806 in 1998.
3. ACQUISITIONS AND DISPOSITIONS
The following tables summarize the acquisition/disposition activity of the
Partnership for the year ended December 31, 1998:
<TABLE>
<CAPTION>
ACQUISITIONS
- --------------------------------------------------------------------------------------------------
DATE MARKET STATION PURCHASE PRICE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
March 1998 Evansville, IN WYNG-FM $6,000,000
September 1998 Muskegon, MI WMUS-AM/FM 5,250,000
December 1998 Mercer County, PA WLLF-FM, WWIZ-FM 1,200,000
</TABLE>
The acquisitions were financed by capital contributions and bank
debt.
F-8
<PAGE> 31
Connoisseur Communications Partners, L.P.
Notes to Consolidated Financial Statements (continued)
3. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
For financial statement purposes, all of the acquisitions described above were
accounted for using the purchase method, with the aggregate purchase price
allocated to the tangible and identifiable intangible assets based upon current
estimated fair market values. Certain of the recent transactions are based on
preliminary estimates of the fair value of the net assets acquired and subject
to final adjustment. The assets and liabilities of these acquisitions and the
results of their operations for the period from the date of acquisition have
been included in the accompanying consolidated financial statements. The
following unaudited pro forma summary presents the consolidated results of
operations for the year ended December 31, 1998, as if the acquisitions for any
given year and the preceding year had occurred at the beginning of such
preceding year after giving effect to certain adjustments, including
amortization of goodwill and interest expense on the acquisition debt. These pro
forma results do not purport to be indicative of what would have occurred had
the acquisition been made as of that date or results which may occur in the
future.
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED
DECEMBER
31, 1998
---------------------
(Unaudited)
<S> <C>
Net revenues $ 36,350,717
============
Loss before extraordinary item $ (3,006,540)
============
Net loss $ (3,006,540)
============
<CAPTION>
DISPOSITIONS
- ------------------------------------------------------------------------------------------------------
HOLDING
SALES GAIN OR PERIOD
DATE MARKET STATION PROCEEDS (LOSS) INCOME
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February 1998 Youngstown, OH WRTK-AM, $2,000,000 $(2,882,088) $ -
WBBG-FM
</TABLE>
Included in nonoperating expenses was a loss on the sale of stations of $193,625
in 1998.
F-9
<PAGE> 32
Connoisseur Communications Partners, L.P.
Notes to Consolidated Financial Statements (continued)
4. PROPERTY, BUILDING AND EQUIPMENT
Property, building and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
DECEMBER
31, 1998
--------------
<S> <C>
Land $ 1,345,545
Building and improvements 4,263,142
Transmitters, towers and antennas 7,794,120
Broadcast and related equipment 4,302,793
Furniture and office equipment 2,783,802
Construction in progress -
--------------
20,489,402
Less accumulated depreciation (3,586,376)
--------------
$ 16,903,026
==============
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER
31, 1998
--------------
<S> <C>
Broadcast licenses $ 41,213,916
Goodwill 32,154,401
Covenants not-to-compete 4,828,000
Deferred financing costs 1,125,757
--------------
79,322,074
Less accumulated amortization (5,933,165)
--------------
$ 73,388,909
==============
</TABLE>
F-10
<PAGE> 33
Connoisseur Communications Partners, L.P.
Notes to Consolidated Financial Statements (continued)
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER
31, 1998
--------------
<S> <C>
Term loan $ 23,200,000
Revolving credit facility 26,510,000
Other debt 39,394
--------------
49,749,394
Less current portion (2,650,925)
--------------
$ 47,098,469
==============
</TABLE>
In August 1997, the Partnership entered into a Credit Agreement (the "Credit
Agreement") consisting of a Term Loan of $25,000,000, borrowing under a
revolving credit facility (the "Revolving Credit Facility") of up to
$35,000,000, and additional revolving credit loans pursuant to one or more
acquisition facilities ("Acquisition Credit Facility") of up to $50,000,000.
Commencing September 30, 1999, the amount available under the Revolving Credit
Facility is reduced by $1,750,000 quarterly. Commencing January 1, 2001, the
amount available under the Acquisition Credit Facility is reduced by $10,000,000
annually.
Under the Credit Agreement, outstanding principal balances bear interest at a
floating rate based on an increment over either (a) the base rate or (b) the
Eurodollar rate (the "Eurodollar Rate"), at the choice of the Partnership. The
increment to the base rate is from 0.000% to 1.625% and the increment to the
Eurodollar Rate is from 1.000% to 2.625%. The increment is subject to change
based upon changes in the ratio of outstanding indebtedness to operating cash
flows, as defined in the Credit Agreement (the "Leverage Ratio"), on a quarterly
basis. The weighted average interest rate at December 31, 1998 was 7.88%.
The Partnership is required to pay fees based on the unused commitment under the
Revolving Credit Facility of 0.500% or 0.375% per year depending upon the
Leverage Ratio, on a quarterly basis. At December 31, 1998 the rate was 0.500%.
The Partnership will be required to pay a commitment fee on the unused portion
available under the Acquisition Credit Facility at such time that borrowings are
made, at a rate to be determined.
F-11
<PAGE> 34
Connoisseur Communications Partners, L.P.
Notes to Consolidated Financial Statements (continued)
6. LONG-TERM DEBT (CONTINUED)
The Credit Agreement is collateralized by a security interest in substantially
all of the assets of the radio stations, in addition to the Partnership's
interest in the radio stations. The Credit Agreement requires the Partnership to
maintain compliance with certain financial ratios, principally with respect to
maintaining levels of operating cash flow and debt service ratios, along with
other covenants, including limitations on certain distributions to the partners.
The Partnership amended the Credit Agreement as of December 31, 1998 with
respect to an operating cash flow covenant. Management expects to maintain the
required levels in 1999. The fair value of the amounts outstanding approximates
its recorded value.
Principal payments on the currently outstanding long-term debt are due as
follows:
<TABLE>
<S> <C>
Years ending December 31:
1999 $ 2,650,925
2000 4,799,753
2001 10,774,316
2002 10,770,000
2003 11,593,600
Thereafter 9,160,800
--------------
$ 49,749,394
==============
</TABLE>
7. INTEREST RATE SWAP
In 1998, the Partnership entered into an interest rate swap agreement that
expires in 2001 (extendible by the counterparty for another two years) to manage
its exposure to interest rate movements by effectively converting a portion of
its debt from variable to fixed rate. The swap agreement exchanges 5.6%
fixed-rate payments for LIBOR-based interest payments on a notional amount of
$50 million. The notional amount does not represent amounts exchanged with the
counterparty, and thus is not a measure of exposure of the Partnership. The
market risk associated with the agreement is mitigated because increased
interest payments under the agreement resulting from a decrease in LIBOR are
effectively offset by decreased payments under the debt obligations. The
Partnership is exposed to credit losses for the periodic settlements of amounts
due under the agreement. However, the Partnership does not anticipate
nonperformance by the counterparty, which is also a counterparty to the Credit
Agreement.
F-12
<PAGE> 35
Connoisseur Communications Partners, L.P.
Notes to Consolidated Financial Statements (continued)
8. PARTNERS' CAPITAL
On March 26, 1997, the Partnership, Continuity, affiliates of Tinicum, Jeffrey
D. Warshaw and other partners entered into an agreement with affiliates of ABRY
Broadcast Partners III, L.P. ("ABRY") whereby ABRY made a $20,000,000 investment
in the Partnership. Costs related to this transaction of $618,644 reduce the
partner's investment. As a result of this investment and repurchases from
certain limited partners, the limited partners of the Partnership are ABRY
(43%), Tinicum (32%), Putnam L. Crafts, Jr. (10%), Jeffrey D. Warshaw (8%), and
other individuals (6%). Also, Continuity, the 1% general partner, is now owned
and controlled by ABRY (35%), Tinicum D.C.R., Inc. (35%), and Connoisseur, Inc.
(30%), which is wholly-owned by Jeffrey D. Warshaw.
9. RELATED PARTY TRANSACTIONS
The Partnership was charged certain costs by partners totaling $158,109 in 1998.
These charges primarily represent accounting and managerial services provided to
the Partnership by employees of these partners.
On March 26, 1997, the Partnership loaned $20,000,000 to the limited partners
(the "Partner Loans"), excluding Jeffrey D. Warshaw and ABRY. The loans mature
on March 26, 2005, but principal may be prepaid at any time. Interest, at the
rate of 6.32% per annum, is due semi-annually. For the year ended December 31,
1998, interest income on these loans was $466,040. At December 31, 1998, the
principal balance outstanding on the loans was $5,620,413 and interest
receivable was $94,724.
On March 26, 1997, the Partnership entered into a management agreement (the
"Management Agreement") with Continuity, whereby Continuity provides certain
services to the Partnership. As defined in the Management Agreement, the fee
(the "Management Fee") is payable semiannually. Included in other operating
expenses was the Management Fee of $202,893 for the year ended December 31,
1998. At December 31, 1998, the amount due to Continuity was $134,785.
F-13
<PAGE> 36
Connoisseur Communications Partners, L.P.
Notes to Consolidated Financial Statements (continued)
10. COMMITMENTS
Future minimum lease payments under noncancellable operating leases are payable
as follows:
<TABLE>
<S> <C>
Years ending December 31:
1999 $ 460,581
2000 356,526
2001 286,399
2002 236,707
2003 141,834
Thereafter 826,458
--------------
$ 2,308,505
==============
</TABLE>
The operating leases may be subject to Consumer Price Index adjustments.
The Partnership leases office space, antenna sites, vehicles and office
equipment. For the year ended December 31, 1998, rental expense amounted to
$483,940.
At December 31, 1998, the Partnership has outstanding under the Revolving Credit
Facility a letter of credit in the amount of $125,000. The letter of credit was
canceled on January 4, 1999 in conjunction with the purchase of WTLZ-FM in
Saginaw, MI.
The Partnership and certain investors have guaranteed, up to a maximum of
$7,000,000, debt of Jeffrey D. Warshaw for investments in the Partnership. The
amount of this debt outstanding at December 31, 1998 was $5,972,341.
11. 401(K) PLAN
The Partnership sponsors a savings plan for all eligible employees, which is a
qualified plan under Sections 401(a) and 401(k) of the Internal Revenue Code.
Pursuant to the plan, eligible participants may elect to contribute up to 15% of
their annual compensation up to the statutory maximum. Beginning in 1997, the
Partnership matches 25% of the participants' contribution up to a maximum of 3%
of the participants' compensation. For the year ended December 31, 1998, the
Partnership has recognized expense of $48,852, included in station operating
expenses.
F-14
<PAGE> 37
Connoisseur Communications Partners, L.P.
Notes to Consolidated Financial Statements (continued)
12. NONCASH COMPENSATION
The Partnership has issued certain appreciation rights ("Appreciation Rights")
to the general managers of its radio stations to attract more talented
individuals and to further motivate these managers. The Appreciation Rights
allow the individuals to share in the increase in the value of an assumed
investment in the Partnership and are subject to vesting provisions. The
Partnership has included a charge for the Appreciation Rights over the vesting
period as noncash compensation in other operating expenses in 1998.
In 1997, as part of an amendment to the partnership agreement, a Class B limited
partnership interest was created to allow certain members of management,
including Jeffrey D. Warshaw, to share in future profits of the Partnership.
These interests were granted in fixed percentages to management subject to
certain repurchase rights of the Partnership which expire over time. The Class B
partnership interests entitle the holders to approximately 5% to 15% of future
profits depending on the level of profits achieved. The Partnership has recorded
a charge for these interests as noncash compensation in other operating expenses
in 1998.
Also in 1997, as part of an amendment to Continuity's partnership agreement,
certain limited partners of Continuity who were members of management had their
previously existing partnership interests converted into a fixed value of new
limited partnership interests.
Such value can be reduced by losses of Continuity, but may not be increased.
These interests are subject to a five year vesting period. The Partnership has
included a charge for the value of these limited partnership interests as
noncash compensation in other operating expenses in 1998.
The total amount charged as noncash compensation for the Appreciation Rights,
the Class B partnership interests and the Continuity interests was $447,771 in
1998.
F-15
<PAGE> 38
Connoisseur Communications Partners, L.P.
Notes to Consolidated Financial Statements (continued)
13. SUBSEQUENT EVENTS (UNAUDITED)
In September 1998, the Partnership, through its 99% owned subsidiary
Connoisseur Communications of Saginaw, L.P., entered into a Purchase Agreement
to buy radio station WTLZ-FM in Saginaw, Michigan for $1,800,000. The
acquisition closed on January 4, 1999 and was financed through borrowings under
the Revolving Credit Facility. This acquisition was accounted for as a purchase
and, accordingly, the assets and liabilities acquired have been recorded at
their fair value, and the results of operations have been included in the
Partnership's consolidated financial statements from the date of purchase. The
acquisition was financed by cash on hand and borrowings under the Revolving
Credit Facility.
In March 1999, the Partnership sold radio station WOAP-AM in Flint, Michigan for
$140,000. Closing costs are estimated at $30,000. The net book value of the
assets of the station were written down to their net realizable value at
year-end. Included in nonoperating expenses for the year ended December 31, 1998
was a loss on the write-down of assets of stations held for sale of $332,944.
In May 1999, the Partnership entered into a Purchase Agreement to buy radio
station WLUV-FM in Rockford, Indiana for $4,700,000. This acquisition will be
financed by cash on hand and through borrowings under the Revolving Credit
Facility. This acquisition is pending FCC approval.
F-16
<PAGE> 39
Connoisseur Communications Partners, L.P.
Notes to Consolidated Financial Statements (continued)
13. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
In May 1999, the Partnership entered into a Purchase Agreement to buy radio
stations WMRR-FM, WSHZ-FM and WMHG-AM in Muskegon, Michigan for $2,700,000. The
Partnership also entered into a TBA agreement at that time for a monthly fee of
$10,500. The acquisition closed on September 3, 1999 and was financed by cash
on hand and borrowings under the Revolving Credit Facility.
In October 1999, a judgment was entered against the Partnership in Flint
stemming from employment litigation which commenced in the first quarter of
1999. The Partnership intends to appeal this decision unless a settlement can
be reached. The Partnership has included $585,000 in Corporate and Other
Expenses for the nine months ended September 30, 1999 representing management's
best estimate of the ultimate liability under this litigation.
In November 1999, the Partnership entered into an agreement of sale to sell its
ownership interests in all of its radio stations to Cumulus Broadcasting, Inc.
("Cumulus"), a subsidiary of Cumulus Media, Inc., in an asset sale for
approximately $242,000,000. The expected closing date would be in the second
quarter of 2000, subject to various closing conditions, including FCC approval.
In connection with the Agreement of Sale, the Partnership has entered into a
Local Marketing Agreement ("LMA") with Cumulus. Commencing with December 1999,
for providing programming and management services the Partnership will pay
Cumulus the monthly station operating income, as adjusted per the terms of the
LMA. Cumulus will pay the Partnership a broker fee at the end of the LMA
period. The LMA expires upon closing of the agreement of sale.
F-17
<PAGE> 40
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder
McDonald Media Group, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, divisional control account, and cash flows present fairly, in all
material respects, the financial position of Radio Stations KHAY-FM, KVEN-AM,
KBBY-FM, KKSB-FM, and KMGQ-FM (a division of McDonald Media Group, Inc.) (the
Stations) at December 31, 1998, and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Stations' management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
January 12, 2000
Birmingham, AL
F-18
<PAGE> 41
RADIO STATIONS KHAY-FM, KVEN-AM, KBBY-FM, KKSB-FM AND KMGQ-FM
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Cash $ 137,722 $ 239,209
Trade accounts receivable, less allowance for doubtful accounts
of $60,267 (unaudited) at September 30, 1999 and of $43,759 at
December 31, 1998 999,637 1,133,961
Receivable from related party 793,496 701,660
Station option costs 1,758,211 1,553,705
Plant and equipment, net 752,952 853,737
Intangible assets, net 15,135,175 16,048,473
Deferred tax asset 170,010 17,435
Other assets 94,642 52,035
------------- ------------
Total assets $ 19,841,845 $ 20,600,215
============= ============
LIABILITIES AND DIVISIONAL CONTROL ACCOUNT
Accounts payable $ 82,987 $ 141,669
Accrued expenses and other liabilities 417,104 368,460
------------- ------------
Total liabilities 500,091 510,129
Divisional control account 19,341,754 20,090,086
------------- ------------
Total liabilities and divisional control account $ 19,841,845 $ 20,600,215
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE> 42
RADIO STATIONS KHAY-FM, KVEN-AM, KBBY-FM, KKSB-FM AND
KMgQ-FM
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE NINE MONTHS ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
1999 1998 1998
-------------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Gross broadcast revenues $ 3,966,482 $ 4,202,102 $ 5,715,816
Less agency commissions 463,021 490,090 668,024
------------- ----------- ------------
Net broadcast revenues 3,503,461 3,712,012 5,047,792
Net barter revenues - 25,213 10,138
Other revenues 179,837 160,172 237,307
------------- ----------- ------------
Total revenues 3,683,298 3,897,397 5,295,237
------------- ----------- ------------
Operating and general expenses:
Selling, general, and administrative 3,290,883 2,736,799 3,905,711
Corporate general and administrative 386,866 294,042 419,915
Barter expense 9,538 - -
Depreciation and amortization 1,101,424 1,210,760 1,542,488
------------- ----------- ------------
Total operating and general expenses 4,788,711 4,241,601 5,868,114
------------- ----------- ------------
Net operating loss (1,105,413) (344,204) (572,877)
Benefit from income taxes 487,320 104,578 175,351
------------- ----------- ------------
Net loss $ (618,093) $ (239,626) $ (397,526)
============= =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 43
RADIO STATIONS KHAY-FM, KVEN-AM, KBBY-FM, KKSB-FM AND
KMGQ-FM
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
STATEMENT OF DIVISIONAL CONTROL ACCOUNT
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Balance, December 31, 1997 $ 19,110,327
Deemed distribution to McDonald Media Group, Inc. - federal income tax (176,420)
Contribution for KKSB/KMGQ option costs 1,553,705
Net loss (397,526)
--------------
Balance, December 31, 1998 $ 20,090,086
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 44
RADIO STATIONS KHAY-FM, KVEN-AM, KBBY-FM, KKSB-FM AND
KMGQ-FM
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE NINE MONTHS ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
1999 1998 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (618,093) $ (239,626) $ (397,526)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Provision for depreciation and amortization 1,101,424 1,210,760 1,542,488
Deferred income tax expense (benefit) (152,575) 1,069 1,069
Deemed distribution to McDonald Media Group, Inc. (335,179) (105,959) (176,420)
Changes in:
Accounts receivable 134,324 (264,049) (53,353)
Other assets (42,607) (37,793) (36,693)
Accounts payable (58,682) 36,380 106,397
Accrued expenses 48,644 107,059 132,020
----------- ----------- -----------
Total adjustments 695,349 947,467 1,515,508
----------- ----------- -----------
Net cash provided by operating activities 77,256 707,841 1,117,982
----------- ----------- -----------
Cash flows from investing activities:
Station option costs (204,506) (1,485,090) (1,553,705)
Capital expenditures (86,907) (322,500) (514,741)
Advance to related party (91,836) - (489,809)
Payments received from related party 211,851
----------- ----------- -----------
Net cash used in investing activities (383,249) (1,595,739) (2,558,255)
----------- ----------- -----------
Cash flows from financing activities:
Divisional control account advances 204,506 1,485,090 1,553,705
Advances to management company (609,096)
----------- ----------- -----------
Net cash used in financing activities 204,506 875,994 1,553,705
----------- ----------- -----------
Increase in cash (101,487) (11,904) 113,432
Cash, beginning of period 239,209 125,777 125,777
----------- ----------- -----------
Cash, end of period $ 137,722 $ 113,873 $ 239,209
=========== =========== ===========
</TABLE>
The accompany notes are an integral part of these financial statements.
F-22
<PAGE> 45
RADIO STATIONS KHAY-FM, KVEN-AM, KBBY-FM, KKSB-FM AND
KMGQ-FM
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND OPERATION OF BUSINESS
McDonald Media Group, Inc. (MMG) owned the licenses of KHAY-FM Radio
(KHAY), KVEN-AM Radio (KVEN), and KBBY-FM Radio (KBBY) throughout 1998.
KHAY, KVEN, and KBBY are located in Ventura, California.
On June 3, 1998, MMG, the licensee of KHTY-FM Radio, (subsequently
renamed KKSB-FM Radio (KKSB)), and KMGQ-FM Radio (KMGQ) entered into an
asset purchase option agreement and a local marketing agreement (LMA). In
connection with the option agreement, MMG paid approximately $1.6 million
in certain option and legal costs during 1998. In exchange for a monthly
fee, MMG acquired from the licensee substantially all of the two
stations' broadcast air time. The results of operations since June 3,
1998 are included in the financial statements. KKSB and KMGQ are located
in Santa Barbara, California. The purchase price to be paid by MMG to the
licensee of KKSB and KMGQ as consideration for those stations' operating
assets is approximately $5.6 million.
KHAY, KVEN, KBBY, KKSB, and KMGQ are collectively referred to as "the
Stations."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Stations.
INCOME RECOGNITION - Advertising income is recognized as services are
provided. Barter transactions are reported at the estimated fair market
value of the product or service received. Barter revenue is reported when
commercials are broadcast, and merchandise or services received as
consideration are reported when used or received.
STATEMENT OF CASH FLOWS - The Stations consider all highly liquid debt
instruments purchased with an original maturity of three months or less
to be cash equivalents.
PLANT AND EQUIPMENT - Plant and equipment is stated at cost. Depreciation
is calculated using the straight-line and accelerated methods over
estimated lives of three to thirty-nine years. Expenditures for repairs
and maintenance are charged to expense as incurred; improvements which
materially prolong the lives of assets are capitalized. Any gain or loss
on disposal of plant and equipment is included in income.
F-23
<PAGE> 46
RADIO STATIONS KHAY-FM, KVEN-AM, KBBY-FM, KKSB-FM AND
KMGQ-FM
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
INTANGIBLE ASSETS - Intangible assets consist of the FCC broadcast
licenses; these amounts have been capitalized and are being amortized on
a straight-line basis over a fifteen-year period. Accumulated
amortization of these intangible assets is $2,342,886 at December 31,
1998.
LONG-LIVED ASSETS - The Stations recognize impairment losses on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by
those assets are less than the assets' carrying values. There were no
such losses recognized during 1998.
INCOME TAXES - MMG uses an asset and liability approach for financial
accounting and reporting for income taxes. Deferred tax assets are
recognized only to the extent of their anticipated realization. MMG files
federal and state income tax returns that include the operations of the
Stations. MMG has elected to allocate income tax expense (benefit) to its
divisions on a divisional contribution basis under which each component
division of MMG calculates an independent tax provision (benefit) based
upon divisional financial performance. These financial statements reflect
such an income tax provision (benefit). The income tax benefit resulting
from the Stations' current federal taxable loss utilized by MMG in its
consolidated federal income tax return to reduce its tax liability is
recorded as a deemed divisional control account distribution to MMG in
the financial statements.
CONCENTRATION OF CREDIT RISK - The Stations' revenue and accounts
receivable primarily relate to the sale of advertising within the
Stations' broadcast areas. Credit is extended based on an evaluation of
the customer's financial condition and generally collateral is not
required.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of revenues and expenses. Actual
results could differ from those estimates.
INTERIM FINANCIAL STATEMENTS - The financial statements as of September
30, 1999 and for the nine months ended September 30, 1999 and 1998, are
unaudited, but in the opinion of management, such financial statements
have been presented on the same basis as the audited financial statements
for the year ended December 31, 1998, and include all adjustments,
consisting only of normal recurring adjustments necessary for a fair
presentation of the financial position and results of operations and cash
flows for these periods.
F-24
<PAGE> 47
RADIO STATIONS KHAY-FM, KVEN-AM, KBBY-FM, KKSB-FM AND
KMGQ-FM
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
3. PLANT AND EQUIPMENT
Plant and equipment consists of the following at December 31,1998:
<TABLE>
<S> <C>
Buildings and equipment $ 190,625
Transmitters and other broadcasting equipment 1,139,615
Furniture and fixtures 148,460
Vehicles 45,260
-----------
1,523,960
Less accumulated depreciation 670,223
-----------
$ 853,737
===========
</TABLE>
4. RELATED PARTY TRANSACTIONS
In connection with an affiliated entity working capital borrowing
arrangement, the station paid to McDonald Investment Company, an affiliate
of MMG, $489,809 during the year ended December 31, 1998.
5. MANAGEMENT AGREEMENT
The Stations have employed the services of a management company to manage
and monitor certain operations of the Stations. The Stations pay a
monthly fee for these services consisting of a percentage of net broadcast
revenues plus a percentage of broadcast cash flow, as defined in the
management agreement. In addition, the management company is entitled to
a portion of distributed profits which exceed certain prescribed levels.
6. INCOME TAXES
The benefits for income taxes for the year ended December 31, 1998 is as
follows:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
----------- ---------- -----------
<S> <C> <C> <C>
Current benefit $ (176,420) $ - $ (176,420)
Deferred expense 832 237 1,069
----------- --------- -----------
Total benefit $ (175,588) $ 237 $ (175,351)
=========== ========= ===========
</TABLE>
F-25
<PAGE> 48
RADIO STATIONS KHAY-FM, KVEN-AM, KBBY-FM, KKSB-FM AND
KMGQ-FM
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Income tax benefit for the year ended December 31, 1998 differed from the
amount computed by applying the U.S. federal income tax rate of 34% to
pretax loss as a result of the following:
<TABLE>
<S> <C>
Computed tax benefit at 34% $ (194,778)
(Increased) decrease in income tax benefit
resulting from:
Meals and entertainment 2,133
State taxes (less FIT deduction) (33,112)
Valuation allowance 50,406
-----------
Income tax benefit $ (175,351)
===========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1998 arise from the
allowance for doubtful accounts. The divisional federal taxable loss and
related federal income tax benefit is utilized by MMG to offset taxable
income in its consolidated federal income tax return. The Stations have
established a valuation allowance related to state net operating loss
carryforwards which reduces the net deferred tax asset to an amount which
management believes is, more likely than not, a recoverable asset.
7. SUBSEQUENT EVENT
On November 4, 1999, MMG entered into an agreement with Cumulus
Broadcasting, Inc. (Cumulus) under which Cumulus paid MMG an $8 million
deposit for an option to purchase the operating assets of the Stations and
related operating assets of an affiliated group of radio stations. In
connection with the agreement, Cumulus also receives a certain percentage
of the monthly operating cash flows of the Stations. This agreement is
conditioned on the closing of the asset purchase agreement between MMG and
the licensee of KKSB-FM and KMGQ-FM. The purchase price to be paid to MMG
as consideration for the Stations' operating assets is $33 million, which
includes the $8 million option deposit.
F-26
<PAGE> 49
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder
McDonald Media Group, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, divisional control account, and cash flows present fairly, in all
material respects, the financial position of KZEL-FM Radio and KNRQ-AM/FM Radio
(a division of McDonald Media Group, Inc.) (the Stations) at December 31, 1998,
and the results of their operations and their cash flows for the year then ended
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Stations' management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
January 12, 2000
Birmingham, AL
F-27
<PAGE> 50
KZEL-FM RADIO AND KNRQ-AM/FM RADIO
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Cash $ 60,363 $ 107,044
Trade accounts receivable, less allowance for doubtful accounts
of $9,226 (unaudited) at September 30, 1999 and $3,318 at
December 31, 1998 370,795 323,231
Plant and equipment, net 591,768 690,974
Intangible assets, net 3,146,532 3,341,208
Deferred tax asset 28,084 1,269
Other assets 10,719 11,090
------------- -----------
Total assets $ 4,208,261 $ 4,474,816
============= ===========
LIABILITIES AND DIVISIONAL CONTROL ACCOUNT
Accounts payable $ 16,567 $ 27,775
Accrued expenses and other liabilities 130,987 129,093
------------- -----------
Liabilities to unrelated parties 147,554 156,868
Payable to related party 16,509 270,770
------------- -----------
Total liabilities 164,063 427,638
Divisional control account 4,044,198 4,047,178
------------- -----------
Total liabilities and divisional control account $ 4,208,261 $ 4,474,816
============= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 51
KZEL-FM RADIO AND KNRQ-AM/FM RADIO
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year
For the Nine Months Ended
Ended September 30, December 31,
1999 1998 1998
----------- ----------- --------------
(Unaudited)
<S> <C> <C> <C>
Gross broadcast revenues $ 1,612,085 $ 1,514,500 $ 2,008,423
Less agency commissions 195,086 175,023 231,586
----------- ----------- -----------
Net broadcast revenues 1,416,999 1,339,477 1,776,837
Barter revenues 105,624 88,092 134,666
Other revenues 831 8,279 8,391
----------- ----------- -----------
Total revenues 1,523,454 1,435,848 1,919,894
----------- ----------- -----------
Operating and general expenses,
Selling, general, and administrative 1,110,175 1,185,071 1,592,311
Corporate general and administrative 42,569 52,147 74,649
Barter expense 103,604 76,604 121,735
Depreciation and amortization 296,901 348,646 477,297
----------- ----------- -----------
Total operating and general expenses 1,553,249 1,662,468 2,265,992
----------- ----------- -----------
Net operating loss (29,795) (226,620) (346,098)
Benefit from income taxes 34,240 71,620 109,561
----------- ----------- -----------
Net income (loss) $ 4,445 $ (155,000) $ (236,537)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE> 52
KZEL-FM RADIO AND KNRQ-AM/FM RADIO
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
STATEMENT OF DIVISIONAL CONTROL ACCOUNT
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Balance, December 31, 1997 $ 4,394,345
Deemed distribution to McDonald Media Group, Inc. - federal income tax (110,630)
Net loss (236,537)
--------------
Balance, December 31, 1998 $ 4,047,178
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE> 53
KZEL-FM RADIO AND KNRQ-AM/FM RADIO
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year
For the Nine Months Ended
Ended September 30, December 31,
1999 1998 1998
------------- ------------ ---------------
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ 4,445 $ (155,000) $ (236,537)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Provision for depreciation and amortization 296,901 348,646 477,297
Deferred income tax expense (benefit) (26,815) 1,069 1,072
Deemed distribution to McDonald Media Group, Inc. (7,449) (72,689) (110,633)
Changes in:
Accounts receivable (47,564) (93,650) (35,740)
Other assets 371 10,141 9,763
Accounts payable (11,208) (1,321) 15,698
Accrued expenses 1,894 24,115 26,676
------------- ------------ --------------
Total adjustments 206,130 216,311 384,133
------------- ------------ --------------
Net cash provided by operating activities 210,575 61,311 147,596
------------- ------------ --------------
Cash flows from investing activities:
Additions to fixed assets (2,995) (24,447) (26,929)
------------- ------------ --------------
Net cash used in investing activities (2,995) (24,447) (26,929)
Cash flows from financing activities:
Cash overdraft (29,300) (29,300)
Repayments to related party (254,261) (32,048) (38,188)
------------- ------------ --------------
Net cash used in financing activities (254,261) (61,348) (67,488)
------------- ------------ --------------
Increase in cash (46,681) (24,484) 53,179
Cash, beginning of period 107,044 53,865 53,865
------------- ------------ --------------
Cash, end of period $ 60,363 $ 29,381 $ 107,044
============= ============ ==============
</TABLE>
The accompanying notes are in integral part of these financial statements.
F-31
<PAGE> 54
KZEL-FM RADIO AND KNRQ-AM/FM RADIO
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND OPERATION OF BUSINESS
McDonald Media Group, Inc. (MMG) owns the licenses of KZEL-FM Radio and
KNRQ-AM/FM Radio (the Stations) which are located Eugene, Oregon.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Stations.
INCOME RECOGNITION - Advertising income is recognized as services are
provided. Barter transactions are reported at the estimated fair market
value of the product or service received. Barter revenue is reported when
commercials are broadcast, and merchandise or services received as
consideration are reported when used or received.
STATEMENT OF CASH FLOWS - The Stations consider all highly liquid debt
instruments purchased with an original maturity of three months or less
to be cash equivalents.
PLANT AND EQUIPMENT - Plant and equipment is stated at cost. Depreciation
is calculated using the straight-line and accelerated methods over
estimated lives of five to thirty-nine years. Expenditures for repairs
and maintenance are charged to expense as incurred; improvements which
materially prolong the lives of assets are capitalized. Any gain or loss
on disposal of plant and equipment is included in income.
INTANGIBLE ASSETS - Intangible assets consist primarily of the Federal
Communications Commission broadcast licenses; these amounts have been
capitalized and are being amortized over a fifteen-year period using the
straight-line method. Accumulated amortization of intangible assets is
$540,763 at December 31, 1998.
LONG-LIVED ASSETS - The Stations recognize impairment losses on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by
those assets are less than the assets' carrying values. There were no
such losses recognized during 1998.
F-32
<PAGE> 55
KZEL-FM RADIO AND KNRQ-AM/FM RADIO
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INCOME TAXES - MMG uses an asset and liability approach for financial accounting
and reporting for income taxes. Deferred tax assets are recognized only to the
extent of their anticipated realization. MMG files federal and state income tax
returns which include the operations of the Stations. MMG has elected to
allocate income tax expense (benefit) to its divisions on a divisional
contribution basis under which each component division of MMG calculates an
independent tax provision (benefit) based upon divisional financial performance.
These financial statements reflect such an income tax provision (benefit). The
income tax benefit resulting from the Stations' current federal taxable loss
utilized by MMG in its consolidated federal income tax return to reduce its tax
liability is recorded as a deemed divisional control account distribution to MMG
in these financial statements.
CONCENTRATION OF CREDIT RISK - The Stations' revenue and accounts receivable
primarily relate to the sale of advertising within the Stations' broadcast
areas. Credit is extended based on an evaluation of the customer's financial
condition and generally collateral is not required.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the reported amounts of revenues and expenses. Actual results could differ from
those estimates.
INTERIM FINANCIAL STATEMENTS - The financial statements as of September 30, 1999
and for the nine months ended September 30, 1999 and 1998, are unaudited, but in
the opinion of management, such financial statements have been presented on the
same basis as the audited financial statements for the year ended December 31,
1998, and include all adjustments, consisting only of normal recurring
adjustments necessary for a fair presentation of a financial position and
results of operations and cash flows for these periods.
3. PLANT AND EQUIPMENT
Plant and equipment consists of the following at December 31, 1998:
<TABLE>
<S> <C>
Buildings and equipment $ 388,098
Transmitters and other broadcasting equipment 754,598
Furniture and fixtures 115,331
------------
1,258,027
Less accumulated depreciation 567,053
------------
$ 690,974
============
</TABLE>
F-33
<PAGE> 56
KZEL-FM RADIO AND KNRQ-AM/FM RADIO
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
In connection with an affiliated entity working capital borrowing
arrangement, the stations paid to McDonald Investment Company, an
affiliate of MMG, $38,188 in 1998.
5. MANAGEMENT AGREEMENT
The Stations have employed the services of a management company to manage
and monitor certain operations of the Stations. The Stations pay a
monthly fee for these services consisting of a percentage of net
broadcast revenues plus a percentage of broadcast cash flow, as defined
in the management agreement. In addition, the management company is
entitled to a portion of distributed profits which exceed certain
prescribed levels.
6. INCOME TAXES
The benefit for income taxes for the year ended December 31, 1998 is as
follows:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
-------------- ------------ --------------
<S> <C> <C> <C>
Current benefit $ (110,633) $ -- $ (110,633)
Deferred expense 888 184 1,072
-------------- ------------ --------------
Total benefit $ (109,745) $ 184 $ (109,561)
============== ============ ==============
</TABLE>
Income tax benefit for the year ended December 31, 1998 differed from the
amount computed by applying the U.S. federal income tax rate of 34% to
pretax loss as a result of the following:
<TABLE>
<S> <C>
Computed tax benefit at 34% $ (117,673)
(Increase) decrease in income tax benefit
resulting from:
Meals and entertainment 172
State taxes (less FIT deduction) (15,057)
Valuation allowance 22,997
--------------
Income tax benefit $ (109,561)
==============
</TABLE>
F-34
<PAGE> 57
KZEL-FM RADIO AND KNRQ-AM/FM RADIO
(A DIVISION OF MCDONALD MEDIA GROUP, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1998 represent
allowance for doubtful accounts. The divisional federal taxable loss and
related federal income tax benefit is utilized by MMG to offset taxable
income in its consolidated federal income tax return. The Stations have
established a valuation allowance related to state net operating loss
carryforwards which reduces the net deferred tax asset to an amount which
management believes is, more likely than not, a recoverable asset.
7. SUBSEQUENT EVENT
On November 4, 1999, MMG entered into an agreement with Cumulus
Broadcasting, Inc. (Cumulus) under which Cumulus acquired an option to
purchase the operating assets of the Stations and related operating
assets of an affiliated group of radio stations. In connection with the
agreement, Cumulus also receives a certain percentage of the monthly
operating cash flows of the Stations. The purchase price to be paid to
MMG as consideration for the Stations' operating assets is $8 million.
F-35
<PAGE> 1
EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of , 2000, by and
between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corp., a Nevada corporation ("Licensing), Cumulus Wireless
Services Inc., a Nevada corporation ("Wireless"), and McDonald Media Group,
Inc., a Delaware corporation (the "Seller"). Broadcasting, Licensing and
Wireless are referred to collectively herein as the "Buyers." The Buyers and the
Seller are referred to individually as the "Party" or collectively as the
"Parties." Capitalized terms used in this Agreement are defined in Section 8
hereof.
Seller currently owns and operates radio stations KHAY-FM, KBBY-FM,
KVEN-AM (licensed to Oxnard-Ventura, California). In addition, Seller currently
operates under a Local Marketing Agreement radio stations KKSB-FM and KMGQ-FM
(licensed to Goleta, California), and has an option to acquire such stations.
(KHAY-FM, KBBY-FM, KVEN-AM, KKSB-FM, and KMGQ-FM collectively are referred to
herein as the "Stations".) Subject to the terms and conditions of this
Agreement, the Buyers hereby agree to purchase substantially all of the assets
(and assume certain of the liabilities) of the Seller that are used or useful in
the operation of the Stations in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. BASIC TRANSACTION.
a. PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, the Seller agrees to sell, transfer, convey and
deliver to (i) Licensing, and Licensing agrees to purchase from the Seller, all
of the FCC Licenses listed in Section 2(k) of the disclosure schedule
("Disclosure Schedule"); and (ii) Seller agrees to sell, transfer convey and
deliver to Broadcasting and Wireless, and Broadcasting and Wireless agree to
purchase from the Seller, all of the Acquired Assets other than the FCC
Licenses. Both such sales shall take place at the Closing for the consideration
specified in Schedule A of this Agreement.
b. ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Seller not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Seller agrees to pay
and discharge all Liabilities and obligations of the Seller other than the
Assumed Liabilities.
c. PURCHASE PRICE. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the purchase price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to pay the money provided
in the Option Agreement entered into simultaneously with this Agreement (the
"Option Money") in the form and manner described in
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<PAGE> 2
Schedule A and more particularly in the Escrow Agreement ("Escrow Agreement")
attached hereto as Exhibit A.
d. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at a mutually agreed location, within
ten (10) days after the FCC approval of the Assignment Application becomes a
Final Order, by which date all other conditions to the obligations of the
Parties to consummate the transactions contemplated hereby will have been
satisfied, or such other date as the Parties may mutually determine (the
"Closing Date"). The Closing shall occur not earlier than August 1, 2000, or
later than October 1, 2000; provided, however, that if the parties are
proceeding with all due diligence and in good faith to close the transaction,
but the Closing has not occurred as a result of the failure of the FCC to
approve the transaction and for such approval to become a Final Order, the
Closing shall be extended for such an additional period of time for the FCC to
issue its approval and for such approval to become a Final Order, but in any
event, not later than the 360th day following the date of this Agreement.
e. DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), as is bills of sale
and statutory warranty deeds in form reasonably acceptable to the Buyers, (B)
such affidavits, transfer tax returns, memorandums of lease, and other
additional documents as may be required by the terms of the title insurance
commitments described in Section 4(o) hereof, as necessary to furnish title
insurance as required by such section or as may be necessary to convey title to
the Real Estate to the Buyers in the condition required herein or provide public
notice of existence of the Leases, and (C) such other instruments of sale,
transfer, conveyance, and assignment as the Buyers and their counsel reasonably
may request; (iv) the Buyers will execute, acknowledge (if appropriate), and
deliver to the Seller (A) an assumption in the form attached hereto as Exhibit B
and (B) such other instruments of assumption as the Seller and its counsel
reasonably may request; and (v) the Buyers will deliver to the Seller the
consideration specified in Schedule 1(c) above.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to the Buyers that the statements
contained in this Section 2 are correct and complete in all material respects as
of the date of this Agreement and will be correct and complete in all material
respects as of the Closing Date, except as set forth in the Disclosure Schedule.
a. ORGANIZATION OF THE SELLER. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
The Seller has the power and authority to own or lease its properties and to
carry on all business activities now conducted by it.
-2-
<PAGE> 3
b. AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority to execute and deliver this Agreement and all agreements and
instruments to be executed and delivered by Seller pursuant to this Agreement
(collectively, the "Ancillary Agreements") and to perform its obligations
hereunder and thereunder. Without limiting the generality of the foregoing, the
Board of Directors of the Seller has duly authorized the execution, delivery,
and performance of this Agreement and the Ancillary Agreements by the Seller.
This Agreement and the Ancillary Agreements constitute the valid and legally
binding obligation of the Seller, enforceable in accordance with their
respective terms and conditions, subject to general equitable principles,
bankruptcy, insolvency, fraudulent transfer, or similar laws generally affecting
creditors' rights.
c. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), assuming the receipt of all necessary
regulatory approvals, will (i) violate any statute, regulation, rule, judgment,
order, decree, stipulation, injunction, charge, or other restriction of any
government, governmental agency, or court to which the Seller is subject or any
provision of the charter or bylaws of the Seller; or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice or third party consent under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or other
agreement, arrangement to which the Seller is a party or by which it is bound or
to which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b) the Seller does not need to
give any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any court or government or governmental agency in order for the
Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
d. TITLE TO ACQUIRED ASSETS. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) the Seller has good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
e. FINANCIAL STATEMENTS. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal years ended December 31, 1996, December 31, 1997,
and December 31, 1998 for the Stations; and (ii) unaudited balance sheets and
statements of income, as of and for each month during 1998 and each month to
date in 1999 for the Stations. The Financial Statements have been prepared in
conformity with the Seller's normal accounting policies, practices and
procedures applied on a consistent basis (except for minor reclassification
items), throughout the periods covered thereby, are correct and complete, fairly
present the financial condition of the Stations and the results of operation of
Stations at the dates and for the periods indicated, and are consistent with the
books and records of the Seller (which books and records are correct and
complete in all material
-3-
<PAGE> 4
respects). The Financial Statements accurately state the revenues of the
Stations for the period indicated therein and include an accurate breakout of
cash and trade revenues.
f. EVENTS SUBSEQUENT TO JANUARY 1, 1999. From January 1, 1999 to
the effective date of the Management Agreement between Broadcasting and Seller
(the "MA Commencement Date"), except as set forth in Section 2(f) of the
Disclosure Schedule, there has not been any material adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, except for conditions affecting the radio industry generally.
Without limiting the generality of the foregoing and with respect to the
operation of the Stations since January 1, 1999:
(i) other than this Agreement, the Seller has not entered
into any material agreement, contract, lease, sublease, license, or
sublicense (or series of related agreements, contracts, leases,
subleases, licenses, and sublicenses) outside the Ordinary Course of
Business;
(ii) the Seller has not delayed or postponed (beyond its
normal practice in the Ordinary Course of Business) the payment of
accounts payable and other Liabilities;
(iii) the Seller has not altered its credit and collection
policies or its accounting policies;
(iv) other than in the Ordinary Course of Business, the
Seller has not entered into or terminated any employment arrangement,
employment contract, consulting contract or severance agreement or
collective bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
(v) other than in the Ordinary Course of Business, there have
been no changes and, to Seller's Knowledge, any threatened changes in
employment terms for any of its directors, officers, and employees;
(vi) there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Seller;
(vii) the Seller has not materially altered the programming,
format or call letters of the Stations, or its promotional and
marketing activities;
(viii) the Seller has not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary
to preserve the FCC Licenses and has operated the Stations in material
compliance therewith and with all FCC rules and regulations;
(ix) the Seller has not terminated or received notice of
termination for any syndicated programming; and
(x) the Seller has not committed to any of the foregoing.
-4-
<PAGE> 5
g. TAX MATTERS. With respect to the Stations, the Seller has timely
and properly filed all Tax Returns that it was required to file with respect to
the Seller's operations. To Seller's Knowledge, all such Tax Returns were
correct and complete and properly reflect the tax liability of the Seller. No
Tax deficiencies have been proposed or assessed against the Seller. All Taxes
owed by the Seller with respect to its operations of the Stations shown on any
Tax Return have been paid. The Seller has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party. No claim has
ever been made by any authority in any jurisdiction where the Seller does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
h. TANGIBLE ASSETS. Section 2(h) of the Disclosure Schedule sets
forth a listing of all transmitter and Stations equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Stations. The Seller owns or leases all tangible assets necessary for the
conduct of the operation and business of the Stations as presently conducted and
as presently proposed to be conducted and all leased assets are specifically
identified as such in Section 2(h) of the Disclosure Schedule.
i. REAL PROPERTY. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Seller
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Seller has delivered to the Buyers correct and complete copies of
the Leases. With respect to the Real Estate relating to the Stations:
(i) the Seller has title to all of the Owned Real Estate free
and clear of all liens, charges, mortgages, security interests,
easements, restrictions or other encumbrances of any nature whatsoever
except real estate taxes for the year of Closing and municipal and
zoning ordinances and recorded utility easements which do not impair
the current use, occupancy or value or the marketability of title of
the property and which are disclosed in Section 2(i) of the Disclosure
Schedule (collectively, the "Permitted Real Estate Encumbrances");
(ii) the Leases are and, following the Closing will continue
to be, legal, valid, binding, enforceable against Seller, and in full
force and effect;
(iii) to Sellers' Knowledge, no party to any Lease is in
breach or default (or has repudiated any provision thereof), and no
event has occurred which, with notice or lapse of time, would
constitute a breach or default thereunder or permit termination,
modification, or acceleration thereunder;
(iv) to Seller's Knowledge, there are no disputes, oral
agreements, or forbearance programs in effect as to any Lease;
(v) none of the Owned Real Estate and to the Seller's
Knowledge, none of the properties subject to the Leases is subject to
any lease (other than Leases), option to purchase or rights of first
refusal;
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<PAGE> 6
(vi) except for Permitted Real Estate Encumbrances, there are
no (i) actual or, to the Seller's Knowledge, proposed special
assessments with respect to any of the Real Estate; (ii) pending or, to
the Seller's Knowledge, threatened condemnation proceedings with
respect to any of the Real Estate; or (iii) any pending or, to the
Seller's Knowledge, threatened changed in any zoning laws or ordinances
which may materially adversely affect any of the Real Estate or
Seller's use thereof;
(vii) the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or
its rights thereunder;
(viii) to the Seller's Knowledge, all facilities on the Real
Estate have received all approvals of governmental authorities
(including licenses, permits and zoning approvals) required in
connection with the operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and regulations
in all material respects; and
(ix) to the Seller's Knowledge, the owner of each leased
facility has good and marketable title to the underlying parcel of real
property, free and clear of any Security Interest, easement, covenant,
or other restriction, except for Permitted Real Estate Encumbrances and
Seller's leasehold interest in each Lease has priority over any other
interest except for the fee interest therein and Permitted Real Estate
Encumbrances.
j. CONTRACTS. Section 2(j) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) either involving
more than $5,000 or not entered into in the Ordinary Course of Business. The
Seller has delivered to the Buyers a correct and complete copy of each written
arrangement listed in Section 2(j) of the Disclosure Schedule (as amended to
date). With respect to each written arrangement so listed which constitutes an
Assumed Contract: (A) the written arrangement is legal, valid, binding,
enforceable against Seller, and in full force and effect; (B) the written
arrangement will continue to be legal, valid, binding, and enforceable against
Seller and in full force and effect on identical terms following the Closing (if
the arrangement has not expired according to its terms); (C) to Seller's
Knowledge, no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under the written arrangement; and
(D) no party has repudiated any provision of the written arrangement. The Seller
is not a party to any verbal contract, agreement, or other arrangement which, if
reduced to written form, would be required to be listed in Section 2(j) of the
Disclosure Schedule under the terms of this Section 2(j). Except for the Assumed
Contracts, the Buyers shall not have any Liability or obligations for or in
respect of any of the contracts set forth in Section 2(j) of the Disclosure
Schedule or any other contracts or agreements of the Seller.
k. COMMISSION LICENSES AND COMPLIANCE WITH COMMISSION REQUIREMENTS.
(i) All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC Licenses, used or useful in the
operation of the Stations as they are now being operated are (A) in
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<PAGE> 7
full force and effect, (B) unimpaired by any acts or omissions of the
Seller or the Seller's employees or agents, (C) free and clear of any
restrictions which might limit the full operation of the Stations, and
(D) detailed in Section 2(k) of the Disclosure Schedule. With respect
to the licenses, permits, authorizations, franchises, certificates of
compliance and consents referenced in the preceding sentence, Section
2(k) of the Disclosure Schedule also sets forth, without limitation,
the date of the last renewal, the expiration date thereof, and any
conditions or contingencies related thereto. Except as set forth in
Section 2(k) of the Disclosure Schedule, no condition exists or event
has occurred that permits, or after notice or lapse of time, or both,
would permit, the revocation or termination of any such license,
permit, consent, franchise, or authorization (other than pursuant to
their express expiration date) or the imposition of any material
restriction or limitation upon the operation of the Stations as now
conducted. Except as set forth in Section 2(k) of the Disclosure
Schedule, the Seller is not aware of any reason why the FCC licenses
might not be renewed in the ordinary course or revoked.
(ii) The Stations are in material compliance with the FCC's
policy on exposure to radio frequency radiation. No renewal of any FCC
License would constitute a major environmental action under the FCC's
rules or policies. Access to the Stations' transmission facilities is
restricted in accordance with the policies of the FCC.
(iii) Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Seller's Knowledge, the Stations are not the subject
of any FCC or other governmental investigation or any notice of
violation or order, or any material complaint, objection, petition to
deny, or opposition issued by or filed with the FCC or any other
governmental authority in connection with the operation of or
authorization for the Stations, and there are no proceedings (other
than rule making proceedings of general applicability) before the FCC
or any other governmental authority that could adversely affect any of
the FCC Licenses or the authorizations listed in Section 2(k) of the
Disclosure Schedule.
(iv) The Seller has filed with the FCC and all other
governmental authorities having jurisdiction over the Stations all
material reports, applications, documents, instruments, and other
information required to be filed, and will continue to make such
filings through the Closing Date.
(v) The Seller is not aware of any information concerning the
Stations that could cause the FCC or any other regulatory authority not
to issue to the Buyers all regulatory certificates and approvals
necessary for the consummation of the transactions contemplated
hereunder or the Buyer's operation and/or ownership of the Stations.
l. INTELLECTUAL PROPERTY. The Seller owns or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the businesses of the Stations as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder is set forth on Section 2(l) of the Disclosure Schedule and
each item listed will be owned or available for use by the Buyers on identical
terms and conditions immediately subsequent to the Closing hereunder. With
respect to the Stations, the Seller has not interfered
-7-
<PAGE> 8
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and the Seller has never received
any charge, complaint, or notice alleging any such interference, infringement,
misappropriation, or violation. To the Knowledge of the Seller, with respect to
the Stations, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of the Seller.
m. INSURANCE. Section 2(m) of the Disclosure Schedule sets forth a
complete and accurate description of all Seller's insurance coverage. With
respect to each such insurance policy, to Seller's Knowledge, the policy is
legal, valid, and binding.
n. LITIGATION. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(n) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no Knowledge of any Basis for any such charge, complaint, action,
suit, proceeding, hearing, or investigation against the Seller.
o. EMPLOYEES. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee as of
the date of this Agreement. To the Knowledge of the Seller, no key employee or
group of employees has any plans to terminate employment with the Stations. With
respect to the Stations, the Seller is not a party to or bound by any collective
bargaining or similar agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. With
respect to the Stations, the Seller has no Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to the employees of the Seller. The Seller has no Knowledge of any
Basis for any claim by past or current employees of the Seller or applicants for
employment that the Seller or its management has discriminated based on each
individuals race, sex, national origin, religion, ethnicity, handicap or any
other protected characteristic under applicable law.
p. EMPLOYEE BENEFITS. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that the Seller maintains with respect to the
Stations or to which the Seller contributes or is required to contribute for the
benefit of any current or former employee of the Seller with respect to the
Stations, and true and correct copies of each such Employee Benefit Plan have
been delivered to the Buyers. Each Employee Benefit Plan (and each related trust
or insurance contract) complies and at all times has complied in form and in
operation in all respects with the applicable requirements of ERISA and the
Code. The Seller does not have any commitment to create any additional Employee
Benefit Plan or modify or change any existing Employee Benefit Plan that would
affect any employee or terminated employee of the Stations.
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<PAGE> 9
There are no pending or, to the Knowledge of the Seller, threatened claims
under, by or on behalf of any of the Employee Benefit Plans, by any employee or
beneficiary covered by any such Employee Benefit Plan, or otherwise involving
any such Employee Benefit Plan (other than routine claims for benefits), nor
have there been any Reportable Events or Prohibited Transactions with respect to
any Employee Benefit Plan.
q. ENVIRONMENT, HEALTH, AND SAFETY.
(i) To Seller's Knowledge, with respect to the operation of
the Stations and the Real Estate, the Seller is, and at all times in
the past has been, in compliance in all material respects with all
Environmental Laws and all laws (including rules and regulations
thereunder) of federal, state, and local governments (and all agencies
thereof) concerning employee health and safety, and the Seller has no
Liability (and to Seller's Knowledge there is no Basis related to the
past or present operations of the Seller for any present or future
Liability) under any Environmental Law. The Seller has no Liability
(and to Seller's Knowledge there is no Basis for any present or future
charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against the Seller giving rise to any Liability) under
the Occupational Safety and Health Act, as amended, or any other law
(or rule or regulation thereunder) of any federal, state, local, or
foreign government (or agency thereof) concerning employee health and
safety, or for any illness of or personal injury to any employee.
(ii) To Seller's Knowledge, the Seller has obtained and at
all times has been in compliance in all material respects with all of
the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all Environmental Laws or law of any federal, state, or
local or foreign government relating to worker health and safety.
(iii) To Seller's Knowledge, all properties and equipment
used in the Stations and the Acquired Assets have been free of
asbestos, PCB's, methylene chloride, trichloroethylene, 1,
2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances. No pollutant, contaminant, or chemical,
industrial, hazardous, or toxic material or waste ever has been buried,
stored, spilled, leaked, discharged, emitted, or released on any of the
Real Estate. Except as disclosed in Section 2(q) of the Disclosure
Schedule, no above ground or underground storage tanks have ever been
located at, on or under the Real Estate. The Seller has delivered to
the Buyers a complete copy of all environmental claims, reports,
studies, compliance actions or the like of the Seller or which are
available to the Seller with respect to any of the Real Estate or any
of the Acquired Assets.
r. LEGAL COMPLIANCE. With respect to the operation of the Stations,
the Seller has complied in all material respects with all laws (including rules
and regulations thereunder) of federal, state, local and foreign governments
(and all agencies thereof. With respect to the operation of the Stations, the
Seller has filed in a timely manner all reports, documents, and other
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<PAGE> 10
materials it was required to file (and the information contained therein was
correct and complete in all material respects) under all applicable laws.
s. ADVERTISING CONTRACTS. Section 2(s) of the Disclosure Schedule
lists all arrangements for the sale of air time or advertising on the Stations
in excess of $5000, and the amount to be paid to the Seller therefor. The Seller
has no reason to believe and has not received a notice or indication of the
intention of any of the advertisers or third parties to material contracts of
the Seller to cease doing business or to reduce in any material respect the
business transacted with the Seller or to terminate or modify any agreements
with the Seller (whether as a result of consummation of the transactions
contemplated hereby or otherwise).
t. BROKERS' FEES. Other than the fee payable to Don Sailors, for
which the Seller shall pay Two Hundred Five Thousand Dollars ($205,000) upon
Closing, the Seller has no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
u. UNDISCLOSED COMMITMENTS OR LIABILITIES. There are no material
commitments, liabilities or obligations relating to the Stations, whether
accrued, absolute, contingent or otherwise including, without limitation,
guaranties by the Seller of the liabilities of third parties, for which specific
and adequate provisions have not been made on the Financial Statements except
those incurred in or as a result of the Ordinary Course of Business since
January 1, 1999.
v. YEAR 2000 COMPLIANCE. To Seller's Knowledge, all data processing
systems, other computer systems, chips, firmware and software owned, used,
affecting or relied upon by Seller ("Computer Systems") will be usable to,
during and after the calendar year 2000, and will operate during such time
period without error relating to date data, specifically including any error
relating to, or the product of, date data which represents or references
different centuries or more than one century. The Computer Systems will manage
and manipulate data involving dates, including but not limited to single century
formulas and multi-century formulas, and will not cause an abnormally ending
scenario within the application or generate incorrect values or invalid results
involving such date(s).
w. DISCLOSURE. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 2 not misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
Buyers represent and warrant to the Seller that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the Disclosure Schedule.
a. ORGANIZATION OF THE BUYERS. Broadcasting, Licensing, and
Wireless are corporations duly organized, validly existing, and in good standing
under the laws of Nevada. Broadcasting or an affiliated subsidiary of Cumulus
Media Inc. as of the effective date of the MA
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Agreement is duly registered to do business and is in good standing in the State
of California.
b. AUTHORIZATION OF TRANSACTION. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute legally binding obligations of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
c. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1 (e) above).
d. BROKERS' FEES. Other than the fee payable to Don Sailors, for
which the Buyers shall pay Two Hundred Five Thousand Dollars ($205,000), the
Buyers have no Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement.
e. QUALIFICATIONS. Licensing is legally and financially qualified
under the Communications Act of 1934, as amended, and the rules, regulations and
policies of the FCC to acquire the FCC Licenses. There is no fact that would,
under present law (including the Communications Act of 1934, as amended) and the
present rules and regulations of the FCC, disqualify Buyers from being the
assignee of the Stations or that would materially delay Commission approval of
the Assignment Application. Should Buyer become aware of any such fact, it will
inform Seller and will use commercially reasonably efforts to remove any such
disqualification. Buyers will not take any action that Buyers know, or have
reason to believe, would result in such disqualification. Buyers have sufficient
financial resources available now, and will on the Closing Date have financial
resources available for the consummation of this transaction.
4. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
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a. GENERAL. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
b. ASSIGNMENT APPLICATIONS. Within five (5) days after the delivery
by Escrow Agent to Seller and Buyer of a dated and executed copy of this
Agreement, the Seller and the Buyers shall jointly file with the FCC an
application for assignment of the FCC Licenses, permits and authorizations
pertaining to the Stations from the Seller to Licensing (the "Assignment
Application"). The costs of the FCC filing fees in connection with the
Assignment Application shall be divided equally between the Parties. Each party
shall pay its own attorneys' fees. The Seller and the Buyers shall thereafter
prosecute the Assignment Application with all reasonable diligence and otherwise
use commercially reasonable efforts to obtain the grant of the Assignment
Application as expeditiously as practicable (but neither the Seller nor the
Buyers shall have any obligation to satisfy complainants or the FCC by taking
any steps which would have a material adverse effect upon the Stations or impose
significant costs on such party). If the FCC imposes any condition on either
party to the Assignment Application, such party shall use commercially
reasonable efforts to comply with such condition, provided, that neither party
shall be required hereunder to comply with any condition that would have a
material adverse effect upon the Stations or any Affiliate. The Seller and the
Buyers shall jointly oppose any requests for reconsideration or judicial review
of FCC approval of the Assignment Application and shall jointly request from the
FCC extension of the effective period of FCC approval of the Assignment
Application if the Closing shall not have occurred prior to the expiration of
the original effective period of the FCC Consent. Nothing in this Section 4(b)
shall be construed to limit either party's right to terminate this Agreement
pursuant to Section 9 of this Agreement. In the event that Buyers are precluded
from acquiring one or more of the Stations as a result of regulatory policies,
rules, regulations or applicable laws, Buyers shall have the obligation to
procure a purchaser of such Station(s) reasonably satisfactory to Seller to
perform the obligations of Buyers under this Agreement with respect to those
Stations, and shall assign its rights under this Agreement with respect to those
Stations to such purchaser. Buyers shall bear the potential risk that such
Stations cannot be sold for the Purchase Price, and shall be entitled to retain
the potential benefit from assigning the rights to purchase the Station for
greater than the Purchase Price.
c. NOTICES AND CONSENTS. The Seller will give all notices to third
parties and shall have obtained all third party consents that the Buyers
reasonably may request. Each of the Parties will take any additional action that
may be necessary, proper, or advisable in connection with any other notices to,
filings with, and authorizations, consents, and approvals of governments,
governmental agencies, and third parties that it may be required to give, make,
or obtain.
d. OPERATING STATEMENTS. The Seller shall deliver to the Buyer, for
the Buyer's informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Station through the MA
Commencement Date, within ten (10) days after each such statement is prepared by
or for the Company or the Seller. The Seller shall provide to the
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Buyer such written or oral sales, inventory, and pacing reports as Seller may
have available and Buyer may reasonably request.
e. CONTRACTS. The Seller will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(k) of the Disclosure Schedule in any material respect. The Seller will not
without prior written consent of the Buyers enter into any contract outside the
Ordinary Course of Business which involves more than Five Thousand Dollars
($5,000).
f. OPERATION OF STATIONS. The Seller will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Except as may be provided in the Management Agreement
entered into between Seller and Cumulus Broadcasting, inc., the Seller shall
operate the Stations in compliance with the FCC Licenses and the rules and
regulations of the FCC, and the FCC Licenses shall at all times remain in full
force and effect. The Seller shall file with the FCC all material reports,
applications, documents, instruments and other information required to be filed
in connection with the operation of the Stations.
g. PRESERVATION OF STATIONS AND THE ACQUIRED ASSETS. The Seller
will keep its Stations and the Acquired Assets and properties substantially
intact, including its present operations, employee relationships, physical
facilities, working conditions, relationships with lessors, licensors,
advertisers, insurance, suppliers, customers, and employees, all of the
Confidential Information, call letters and trade secrets of the Stations, and
the FCC Licenses.
h. FULL ACCESS AND CONSULTATION. The Seller will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Stations, to all premises, properties, books, records, contracts, Tax records,
and documents of or pertaining to the Seller. The Seller will consult with the
Buyers' management with a view to informing Buyers' management as to the
operations, management and business of the Stations.
i. NOTICE OF DEVELOPMENTS. The Seller will give prompt written
notice to the Buyers of any material development affecting business or
operations of the Stations or the Acquired Assets or the ability of the Seller
to perform hereunder.
j. EXCLUSIVITY. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) merger or consolidation, (B) acquisition or purchase of securities or
assets, or (C) similar transaction or business combination involving the Seller,
or (ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
foregoing. The Seller will notify the Buyers immediately if any person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
k. TITLE INSURANCE, SURVEYS AND ENVIRONMENTAL ASSESSMENTS. The
Seller will obtain with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Seller, in an amount equal to the fair
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market value of such Real Estate (including all improvements located thereon),
insuring over the standard pre-printed exceptions and insuring leasehold title
to such Real Estate in the Buyers as of the Closing subject only to the
Permitted Real Estate Encumbrances, together with such endorsements for zoning,
contiguity, public access and extended coverage as the Buyers or their lender
reasonably request, (ii) with respect to each parcel of Owned Real Estate, an
owner's policy of title insurance by a title insurer reasonably satisfactory to
the Buyers, in an amount equal to the fair market value of such Real Estate
(including all improvements located thereon), insuring over the standard
pre-printed exceptions and insuring title to the Owned Real Estate to be vested
in the Buyers as of the Closing free and clear of all liens and encumbrances
except Permitted Real Estate Encumbrances, together with such endorsements for
zoning, contiguity, public access and extended coverage as the Buyers or its
lender reasonably request, (iii) a current survey of each parcel of Real Estate
certified to the Buyers and its lender, prepared by a licensed surveyor and
conforming to current ALTA Minimum Detail Requirements for Land Title Surveys,
disclosing the location of all improvements, easements, party walls, sidewalks,
roadways, utility lines, and other matters shown customarily on such surveys,
and showing access affirmatively to public streets and roads (the "Surveys')
which shall not disclose any survey defect or encroachment from or onto any of
the Real Estate which has not been cured or insured over prior to the Closing;
and (iv) with respect to each parcel of Real Estate, a current Phase I
environmental site assessment from an environmental consultant or engineer
reasonably satisfactory to the Seller which does not indicate that the Seller
and the Real Estate are not in compliance with any Environmental Law and which
shall not disclose or recommend any action with respect to any condition to be
remediated or investigated or any contamination on the site assessed. The Buyers
and Seller will each pay one-half (1/2) the costs of standard ALTA owner's title
policies, Surveys, and environmental assessments; provided, the Buyers will pay
the fees of any title endorsements.
l. CONTROL OF STATIONS. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application. Except as provided in the Management
Agreement, between the date of this Agreement and the Closing Date, the Buyers
and their employees or agents shall not directly or indirectly control,
supervise, or direct, or attempt to control, supervise, or direct, the operation
of the Stations, and such operation shall be the sole responsibility of and in
the control of the Seller.
m. RISK OF LOSS. The risk of loss, damage, or destruction to any of
the Acquired Assets (other than the FCC Licenses) shall remain with the Seller
until the MA Commencement Date and, to the extent not covered by Seller's
insurance, shall belong to the Buyers between the MA Commencement Date and the
Closing.
n. HART-SCOTT-RODINO APPLICATION. The Parties acknowledge that the
transaction contemplated herein requires clearance by regulatory authorities
under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the
"HSR Act"). Within ten (10) days of the execution of this Agreement, the Parties
will jointly file any submissions to the Department of Justice or Federal Trade
Commission as may be necessary to obtain clearance of the transaction. The
Parties each will use best efforts to cooperate with regulators to achieve
expeditious clearance of the transaction contemplated herein. The filing fees
and costs associated with any filings in connection with the HSR (other than
each party's attorney's fees, which shall be borne
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by each party respectively) shall be paid one-half by Seller and one-half by
Buyers.
5. CONDITIONS TO OBLIGATION TO CLOSE.
a. CONDITIONS TO OBLIGATION OF THE BUYERS. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Sections
2(a), (b), (c), (d), (i), (k), (o), and (p) above shall be true and
correct in all material respects at and as of the Closing Date as
though made on and as of the Closing Date, and all other
representations and warranties set forth in Section 2 shall be true and
correct in all material respects as of the MA Commencement Date as
though made on and as of the MA Commencement Date;
(ii) the Seller shall have performed and complied with all of
its covenants hereunder in all respects through the Closing;
(iii) the Seller shall have procured all of the third party
consents specified in Section 4(d) above and all of the title insurance
commitments (and endorsements), Surveys and environmental site
assessments described in Section 4(o) above;
(iv) no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or
quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement or impose
damages or penalties upon any of the parties if such transactions are
consummated, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (C) affect
adversely the right of the Buyers to own, operate, or control the
Acquired Assets (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyers a
certificate to the effect that each of the conditions specified above
in Sections 5(a)(i) through (iv) is satisfied in all material respects;
(vi) each of the Assignment Applications shall have been
approved by a Final Order of the FCC, the transaction shall have
received clearance under the HSR Act, and the Buyers shall have
received all governmental approvals required to transfer all other
authorizations, consents, and approvals of governments and governmental
agencies set forth in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the
Postclosing Agreement;
(viii) the Buyers shall have received from counsel to the
Seller an opinion with respect to the matters set forth in Exhibit C
attached hereto, addressed to the Buyers and
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its lender and dated as of the Closing Date;
(ix) the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with an allocation schedule to be delivered at closing;
(x) the Seller shall have consummated its purchase of
stations KKSB-FM and KMGQ-FM pursuant to its option thereto; and
(xi) all actions to be taken by the Seller in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers.
b. CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the
Closing Date as though made on and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
(iii) no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement or impose
damages or penalties upon any of the Parties if such transactions are
consummated, or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
(iv) the Buyers shall have delivered to the Seller a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
(v) each of the Assignment Applications shall have been
approved by a Final Order of the FCC, the transaction shall have
received clearance under the HSR Act, and the Buyers shall have
received all governmental approvals required to transfer all other
authorizations, consents, and approvals of governments and governmental
agencies set forth in the Disclosure Schedule;
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(vi) all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller; and
(vii) the Buyers shall have delivered to Seller the Purchase
Price in readily available funds by bank wire, to an account designated
by Seller, on the Closing Date; and
(viii) the Sellers shall have received from counsel to the
Buyers or its general counsel an opinion with respect to the matters
set forth in Exhibit D attached hereto, addressed to the Seller and
dated as of the MA Commencement Date;
6. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following
the Closing:
a. GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 7 below).
b. LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
c. ADJUSTMENTS. Such items as power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, and deposits
shall be prorated between the Seller and the Buyers as of the Closing Date and
as of the MA Commencement Date in accordance with the foregoing principle. The
prorations and adjustments hereunder shall be made and paid insofar as feasible
on the Closing Date and the MA Commencement Date, with a final settlement sixty
(60) days after such dates, respectively. In the event of any disputes between
the Parties as to such adjustments, the amounts not in dispute shall nonetheless
be paid at such time and such disputes shall be determined by an independent
accounting firm mutually acceptable to both parties and
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the fees and expenses of such accounting firm shall be paid one-half (1/2) by
the Seller and one-half (1/2) by the Buyer.
d. CONSENTS. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Seller
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Seller will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Seller's interest in the benefits under any such Assumed Contract,
including performance by the Seller as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
a. SURVIVAL. All of the representations and warranties of the
Seller contained in Section 2 of this Agreement (other than the representations
and warranties of the Seller contained in Sections 2(a), 2(b), 2(c), and 2(d)
hereof or relating to the Seller's title to the Acquired Assets) shall survive
the Closing and continue in full force and effect for a period until one (1)
year after the effective date of this Agreement. All of the other
representations and warranties (including the representations and warranties
Seller contained in Sections 2(a), 2(b), 2(c), and 2(d) hereof or relating to
the Seller's title to the Acquired Assets) and all covenants of the Buyers and
the Seller contained in this Agreement shall survive the Closing and continue in
full force and effect for five (5) years.
b. INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE BUYERS. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
(i) any misrepresentation or breach of any of the Seller's
representations or warranties, and covenants contained in this
Agreement or in any Ancillary Agreement executed and/or delivered by
the Seller which is not cured within any applicable cure period (so
long as the Buyers make a written claim for indemnification within the
applicable survival period);
(ii) any breach or nonfulfillment of any agreement or
covenant of the Seller contained herein or in any Ancillary Agreement;
(iii) any Liability of the Seller which is not an Assumed
Liability; and/or
(iv) any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto
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merger or successor liability) which is
not an Assumed Liability.
c. INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE SELLER. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers which is not cured within any applicable cure
period (so long as the Seller makes a written claim for indemnification within
the applicable survival period) or (ii) any breach or nonfulfillment of any
agreement or covenant of the Buyers contained herein or in any Ancillary
Agreement, or (iii) any Assumed Liability.
d. SPECIFIC PERFORMANCE. Each of the Parties acknowledges and
agrees that the Buyers would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the Buyers shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10(o) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that not withstanding the provision in
Section 7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for Buyers for a breach of any provision of this
Agreement.
e. LIQUIDATED DAMAGES. The Buyers and the Seller acknowledge that
in the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Seller as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(c), the Seller
shall be entitled to retain the Option Money as liquidated damages without the
need for proof of damages. The Option Money shall represent full satisfaction of
liquidated damages owed by the Buyers and Seller's sole remedy for a failure of
the transactions contemplated hereby to occur as a result of a material breach
of the terms of this Agreement by the Buyers. Notwithstanding anything in this
section to the contrary, any liquidated damages received by Seller from Buyers
in connection with the proposed transaction for the sale of the Oregon radio
stations by Sellers to Buyers shall be deducted to arrive at the liquidated
damages owed by Buyers to Seller under this section.
f. MATTERS INVOLVING THIRD PARTIES. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any
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Indemnifying Party notifies the Indemnified Party within 15 days after the
Indemnified Party has given notice of the matter that the Indemnifying Party is
assuming the defense thereof, (i) the Indemnifying Party will defend the
Indemnified Party against the matter with counsel of its choice reasonably
satisfactory to the Indemnified Party, (ii) the Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for the fees and expenses of the separate co-counsel
to the extent the Indemnified Party reasonably concludes that the counsel the
Indemnifying Party has selected has a conflict of interest), (iii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the matter without the written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iv) the Indemnifying
Party will not consent to the entry of any judgment with respect to the matter,
or enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
Liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event the Indemnifying Party
does not notify the Indemnified Party within 15 days after the Indemnified Party
has given notice of the matter that the Indemnifying Party is assuming the
defense thereof, however, and/or in the event the Indemnifying Party shall fail
to defend such claim actively and in good faith, then the Indemnified Party may
defend against, or enter into any settlement with respect to, the matter in any
manner it reasonably may deem appropriate.
g. LIMITATION OF LIABILITY. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the Indemnified Party, in
the aggregate from all indemnifiable events shall exceed Fifty Thousand Dollars
($50,000) and indemnification shall be made by the indemnifying party only to
the extent of such excess over Fifty Thousand Dollars ($50,000); provided,
however, that the Option Money, amounts due under trade agreements, and
adjustments to the Purchase Price shall not be credited toward the $50,000
limitation of liability; provided, further, that the maximum liability for
Adverse Consequences in the aggregate from all indemnifiable events shall be Six
Million Dollars ($6,000,000); and provided, further, that the foregoing
limitations shall not be applicable to: (i) the obligations of the Buyer to pay
and discharge any Liability of the Seller to third parties from and after the
Closing Date assumed by the Buyer under the terms of this Agreement; (ii) the
obligation of the Seller to pay and discharge any Liability to third parties not
assumed by the Buyer under the terms of this Agreement, or (iii) the Seller's
obligation to deliver clear title to the Acquired Assets.
8. DEFINITIONS.
"ACQUIRED ASSETS" means all right, title, and interest in and to all of
the assets of the Stations, other than Retained Assets that are used or useful
in the operation of the Stations, wherever located, including but not limited to
all of its (a) real property, leaseholds and other interests of any kind
therein, improvements, fixtures, and fittings thereon (such as towers and
antennae), and easements, rights-of-way, and other appurtenances thereto); (b)
tangible personal property (such as fixed assets, computers, data processing
equipment, electrical devices, monitoring equipment, test equipment, switching,
terminal and studio equipment, transmitters, transformers, receivers, broadcast
facilities, furniture, furnishings, inventories of compact disks,
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<PAGE> 21
records, tapes and other supplies, vehicles) and all assignable warranties with
respect thereto; (c) Intellectual Property, goodwill associated therewith,
licenses and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions; (d) rights under orders
and agreements (including those Barter Agreements and Advertising Contracts
identified on the Disclosure Schedule) now existing or entered into in the
Ordinary Course of Business for the sale of advertising time on the Stations;
(e) Assumed Contracts, indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (f) call letters of the Stations, jingles,
logos, slogans, and business goodwill of the Stations; (g) Licenses and similar
rights obtained from governments and governmental agencies; and (h) FCC logs and
records and all other books, records, ledgers, logs, files, documents,
correspondence, advertiser lists, all other lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, program production materials, studies, reports, and other printed or
written materials; and (i) goodwill of the Stations.
"ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"ADVERTISING CONTRACTS" has the meaning set forth in Section 2(s),
bove.
"AFFILIATE" means with reference to any person or entity, another
person or entity controlled by, under the control of or under common control
with that person or entity.
"AS IS" means the condition of the Stations and Acquired Assets on the
MA Commencement Date.
"ASSIGNMENT APPLICATION" has the meaning set forth in Section 4(b)
above.
"ASSUMED CONTRACTS" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(k) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"ASSUMED LIABILITIES" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contract either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liabilities.
"BARTER AGREEMENTS" has the meaning set forth in Section 4(e) above.
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
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<PAGE> 22
"BUYERS" has the meaning set forth in the preface above.
"CASH" means cash and cash equivalents determined in accordance with
GAAP applied on a basis consistent with the preparation of the Financial
Statements.
"CLOSING" has the meaning set forth in Section 1(d) above.
"CLOSING DATE" has the meaning set forth in Section 1(d) above.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPUTER SYSTEMS" has the meaning set forth in Section 2(v) above.
"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of the Seller.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 1 above.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multi-employer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(1).
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, the Refuse Act of 1899, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law of any federal,
state, local, or foreign government or agency thereof (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety, or
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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<PAGE> 23
"ESCROW AGENT" means AmSouth Bank.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC LICENSES" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations.
"FINAL ORDER" means an action by the FCC as to which: (a) no request
for stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"HSR ACT" has the meaning set forth in Section 4(n) above.
"INDEMNIFIED PARTY" has the meaning set forth in Section 7(d) above.
"INDEMNIFYING PARTY" has the meaning set forth in Section 7(d) above.
"INTELLECTUAL PROPERTY" means, with respect to the Stations, all (a)
patents, patent applications, patent disclosures, and improvements thereto, (b)
trademarks, service marks, domain names, trade dress, call letters, logos, and
trade names; (c) all programs, programming materials, copyrights and
registrations and applications for registration thereof, (d) mask works and
registrations and applications for registration thereof, (e) computer software,
data, and documentation, (f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, market and other
research information, drawings, specifications, designs, plans proposals,
technical data, copyrightable works, financial, marketing, and business data,
pricing and cost information, business and marketing plans, and customer and
supplier lists and information), (g) other proprietary rights, and (h) copies
and tangible embodiments thereof (in whatever form or medium).
"KNOWLEDGE" means the current actual knowledge without independent
inquiry or investigation of Jack Standridge, Turner O. Waide, William W.
McDonald, representatives or
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<PAGE> 24
officers of Seller, and Joseph Schwartz of Bengal Communications.
"LEASES" means those real estate leases to which Seller is a party
governing Seller's studios, AM tower sites, and FM tower sites, as described in
Section 2(i) of the Disclosure Schedule.
"LIABILITY" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"LICENSES" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"MANAGEMENT AGREEMENT " OR "MA" means the Management Agreement dated as
of the MA Commencement Date.
"MA COMMENCEMENT DATE" means the commencement date of the Management
Agreement.
"MULTI-EMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"OPTION MONEY " has the meaning set forth in Section 1(c) above.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"OWNED REAL ESTATE" means the real property owned by the Seller as
described in Section 2(i) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"PARTY" has the meaning set forth in the preface above.
"PERMITTED REAL ESTATE ENCUMBRANCES" shall have the meaning set forth
in Section 2(i), above.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"PURCHASE PRICE " has the meaning set forth in Section 1(c) above.
"REAL ESTATE" means the Owned Real Estate and the real estate,
building, fixtures and improvements which are the subject of the Leases.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
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<PAGE> 25
"RETAINED ASSETS" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables of the Seller; (iv) Cash and cash
equivalents such as certificates of deposits and marketable securities; (v)
sufficient information to enable Seller to file its tax returns; and (vi)
claims, deposits, prepayments, refunds, causes of action, chooses in action,
rights of recovery (including rights under policies of insurance), rights of set
off, and rights of recoupment.
"RETAINED LIABILITIES" means any other obligations or Liabilities of
the Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing (other than those
contemplated by the MA Agreement); (ii) any Liability of the Seller for income,
transfer, sales, use, and other Taxes arising in connection with the
consummation contemplated hereby; (iii) any Liability of the Seller for costs
and expenses incurred in connection with this Agreement or the consummation of
the transactions contemplated hereby (except as set forth in Section 4(i)
relating to Surveys, title commitments and environmental audits and Section 4(b)
with regard to the Assignment Application); or (iv) any Liability or obligation
of the Seller under this Agreement (or under any side agreement between the
Seller on the one hand and the Buyers on the other hand entered into on or after
the date of this Agreement).
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"SELLER" has the meaning set forth in the preface above.
"STATIONS" means the radio broadcast stations KVEN-AM, KHAY-FM, and
KBBY-FM, licensed to Oxnard-Ventura, California, and KKSB-FM and KMGQ-FM,
licensed to Goleta, California.
"SUBSIDIARY," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"SURVEYS" has the meaning set forth in Section 4(o) above.
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<PAGE> 26
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. TERMINATION.
a. TERMINATION OF AGREEMENT. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing in the event the
Seller is in material breach of any representation, warranty, or covenant
contained in this Agreement; provided, however, that if such breach is capable
of being cured, such breach also remains uncured for thirty (30) days after
notice of breach is received by the Seller from the Buyers (which 30-day period
shall be extended for an additional ninety (90) days if Seller is proceeding
with diligence and in good faith to cure or correct such default or breach);
(iii) the Seller may terminate this Agreement by giving
written notice to the Buyers at any time prior to the Closing in the event the
Buyers are in material breach of any representation, warranty, or covenant
contained in this Agreement; provided, however that if such breach is capable
being cured, such breach remains uncured for thirty (30) days after notice of
breach is received by the Buyers from the Seller (which 30-day period shall be
extended for an additional ninety (90) days if the Buyers are proceeding with
diligence and in good faith to cure or correct such default or breach, other
than a breach or default in the delivery of payment);
(iv) the Buyers may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing if the Closing
shall not have occurred on or before the 360th day following the date of this
Agreement by reason of the failure of any condition precedent under Section 5(a)
hereof (unless the failure results primarily from the Buyers themselves
breaching any representation, warranty, or covenant contained in this
Agreement);
(v) the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall not
have occurred on or before
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<PAGE> 27
the 360th day following the date of this Agreement by reason of the failure of
any condition precedent under Section 5(b) hereof (unless the failure results
primarily from the Seller itself breaching any representation, warranty, or
covenant contained in this Agreement);
(vi) the Buyers or the Seller may terminate this Agreement if
any Assignment Application is denied by Final Order.
b. EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 9 above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. MISCELLANEOUS.
a. PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any
press release or announcement relating to the subject matter of this Agreement
prior to the Closing without the prior written approval of the other Party;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by law or regulation (in which case the disclosing Party
will advise the other Party prior to making the disclosure).
b. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
c. ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
d. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that (i) Buyers or Seller may assign all
of their right, title, interest in, and obligations under this Agreement to one
or more Affiliates, provided that such assignment shall not eliminate the
liability of the assignor under this Agreement, and (ii) Buyers may assign all
of their right, title, interest in, and obligations under this Agreement to a
party qualified to serve as an FCC licensee under the Communications Act of
1934, as amended, and the rules and regulations thereunder, provided such
assignment shall not eliminate the liability of the assignor under this
Agreement; and (iii) Buyers may assign their indemnification claims and their
rights under the warranties and representations of the Seller to the financial
institution(s) providing financing to the Buyers in connection with this
transaction.
e. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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<PAGE> 28
f. HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
McDonald Media Group, Inc.
One Office Park Circle
Suite 300
Birmingham, Alabama 35223
Attn: Mr. Jack Standridge
Phone: (205) 879-0456
Fax: (205) 879-0479
Copy to:
J. Fred Powell, Esquire
Burr & Forman
420 North 20th Street
Suite 3100
Birmingham, Alabama 35203
Phone: (205) 251-3000
Fax: (205) 458-5100
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
Cumulus Wireless Services Inc.
111 E. Kilbourn Avenue
Suite 2700
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Phone: (414) 615-2800
Fax: (414) 615-2880
With a copy to:
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<PAGE> 29
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
Cumulus Wireless Services Inc.
875 N. Michigan Avenue
Suite 1460
Chicago, Illinois 60611
Attn: Richard J. Bonick
Phone: (312) 867-0091
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
h. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Delaware.
i. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
j. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
k. EXPENSES. The Buyers and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(o) with respect to Surveys, title commitments and
environmental audits. The Seller will pay all income taxes. The Buyers will pay
any recording fees from the recording of deeds associated with this transaction.
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<PAGE> 30
l. CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any Party. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. Nothing in the Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. The Parties
intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
m. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
n. SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Ventura, California in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(g) above. Nothing in this Section 10(n), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as of the
date first above written.
CUMULUS BROADCASTING, INC.
By: /s/ Richard Weening
-----------------------------
Richard Weening
Executive Chairman
CUMULUS LICENSING CORP.
By: /s/ Richard Weening
-----------------------------
Richard Weening
Executive Chairman
CUMULUS WIRELESS SERVICES INC.
By: /s/ Richard Weening
-----------------------------
Richard Weening
Executive Chairman
MCDONALD MEDIA GROUP, INC.
By: /s/ William W. McDonald
-----------------------------
William W. McDonald (printed)
-----------------------------
Title: President
---------------------------
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<PAGE> 32
SCHEDULE A
PURCHASE PRICE. The purchase price for the assets associated with radio
stations KVEN-AM, KHAY-FM, KBBY-FM, KKSB-FM, and KMGQ-FM shall be Thirty-Three
Million and no/100 Dollars ($33,000,000), of which Eight Million Dollars and
no/100 ($8,000,000) was paid to Seller as of the date of execution of the
Management Agreement (which payment of Eight Million Dollars ($8,000,000) shall
be considered the Option Money for purposes of this Agreement), and (2)
Twenty-Five Million and no/100 Dollars ($25,000,000) shall be payable in cash on
the closing of the Asset Purchase Agreement. The allocation of the $33,000,000
shall be: $5,600,000 to KKSB-FM and KMGQ-FM (licensed to Santa Barbara,
California), and $27,400,000 to KVEN-AM, KHAY-FM, and KBBY-FM (licensed to
Oxnard-Ventura, California).
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<PAGE> 33
EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of August
17, 1998, by and among MCDONALD MEDIA GROUP, INC. ("Seller"); CUMULUS
BROADCASTING, INC., a Nevada corporation; CUMULUS LICENSING CORP., a Nevada
corporation, CUMULUS WIRELESS SERVICES INC. (collectively referred to as
"Buyers"); and BANK ONE TRUST COMPANY, N.A. ("Escrow Agent"). Capitalized terms
that are used but not defined herein shall have that meaning assigned to them in
the Purchase Agreement.
WITNESSETH:
WHEREAS, Seller and Buyers are parties to that certain Option
Agreement executed as of , 1999 (the "Option Agreement"),
conferring an exclusive option on Buyers to purchase substantially all the
assets associated with radio broadcast stations KVEN-AM, KHAY-FM, and KBBY-FM,
licensed to Oxnard-Ventura, California, and KKSB-FM and KMGQ-FM licensed to
Santa Barbara, California (the "Stations"), and are parties to that certain
Local Marketing Agreement (the "Local Marketing Agreement"), under which Buyers
will purchase airtime from Seller on the Stations pending closing of the
contemplated purchase and sale transaction; and
WHEREAS, upon the exercise by Buyers of their option under the
Option Agreement, Seller and Buyers are obligated to enter into an Asset
Purchase Agreement substantially in the form of Exhibit A to the Option
Agreement (the "Asset Purchase Agreement"); and
WHEREAS, in connection with the Option Agreement, Seller and
Buyers have agreed to enter into this Escrow Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and conditions set forth in the Option Agreement, the Local
Marketing Agreement, and herein, Seller, Buyers and Escrow Agent agree as
follows:
1. Seller and Buyers hereby establish this Escrow Agreement and
mutually appoint Bank One Trust Company, N.A., as escrow agent pursuant to the
terms and conditions of the Purchase Agreement. Escrow Agent hereby accepts this
appointment.
2. Upon the execution of this Escrow Agreement by all parties
hereto, Buyers and Seller each shall deposit with Escrow Agent fully executed,
but undated, copies of the Asset Purchase Agreement.
3. Upon the receipt by the Escrow Agent of written notice from
the Buyers, on or after March 1, 2000 but on or before March 31, 2000, that
Buyers have exercised their option under the Option Agreement, the Escrow Agent
shall date the duplicate original copies of the Asset Purchase Agreement in its
possession with the date of receipt of such exercise notice, and deliver one
fully executed and dated Asset Purchase Agreement to each of Seller and Buyers.
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<PAGE> 34
4. The Escrow Agent shall be discharged from its obligations
under this Agreement upon either (a) the dating and delivery of the Asset
Purchase Agreement following receipt of notice by Buyer, or, (b) April 1, 2000,
if no notice is received from Buyer before that date.
5. Any notice or order provided to Escrow Agent by Buyers will be
simultaneously provided to Seller and any notice or order provided to Escrow
Agent by Seller will be simultaneously provided to Buyers.
6. Escrow Agent undertakes to perform only such duties as are
expressly set forth herein.
7. Escrow Agent may rely and shall be protected in acting or
refraining from acting upon any written notice, instruction or request furnished
to it hereunder and believed by it to be genuine and to have been signed or
presented by the proper party or parties. Escrow Agent may conclusively presume
that the undersigned representatives of Seller or Buyers individually have full
power and authority to instruct Escrow Agent on behalf of that party unless
written notice to the contrary is delivered to Escrow Agent.
8. Except for its gross negligence or willful misconduct, Escrow
Agent shall not be liable for any action taken by it in good faith and believed
by it to be authorized or within the rights or powers conferred upon it by this
Escrow Agreement. Escrow Agent may consult with counsel of its own choice and
shall have full and complete authorization and protection of any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel.
9. Escrow Agent may resign and be discharged from its duties or
obligations hereunder by giving notice in writing of such resignation specifying
a date upon which such resignation shall take effect, whereupon a successor
Escrow Agent shall be appointed by Seller and Buyers (or, if no agreement is
reached between Buyers and Seller as to a successor, then the Santa Barbara,
California agent of the title insurance company which issues title insurance
policies at the Closing).
10. Escrow Agent shall be entitled to be reimbursed for all
losses, liabilities or expense, including reasonable attorneys' fees, incurred
or made by it arising out of or in connection with its entering into this Escrow
Agreement or carrying out its duties hereunder, and shall receive compensation
for its services according to its regular billing schedules. Any such
reimbursement to which Escrow Agent is entitled shall be borne jointly by Seller
and Buyers, unless otherwise ordered by a court which adjudicates a dispute or
disagreement under Section 4 above.
11. This Escrow Agreement expressly sets forth all the duties of
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Escrow Agreement against Escrow
Agent. Escrow Agent shall not be bound by the provisions of any agreement among
the parties hereto except this Escrow Agreement.
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<PAGE> 35
12. This Escrow Agreement shall inure to the benefit of and be
binding upon the parties and their respective heirs, successors, assigns and
legal representatives. This Escrow Agreement shall be governed by and construed
in accordance with the laws of California. This Escrow Agreement cannot be
modified, amended or terminated except in writing signed by Seller, Buyers and
Escrow Agent.
13. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
McDonald Media Group, Inc.
One Office Park Circle
Suite 300
Birmingham, Alabama 35223
Attn: Mr. Jack Standridge
Phone: (205) 879-0456
Fax: (205) 879-0479
Copy to:
J. Fred Powell, Esquire
Burr & Forman
420 North 20th Street
Suite 3100
Birmingham, Alabama 35203
(which copy shall not constitute notice to Seller)
Phone: (205) 251-3000
Fax: (205) 458-5100
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
Cumulus Wireless Services Inc.
111 E. Kilbourn Avenue
Suite 2700
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Phone: (414) 615-2800
Fax: (414) 615-2880
-35-
<PAGE> 36
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 1460
Chicago, Illinois 60611
Attn: Richard J. Bonick
Phone: (312) 867-0091
Fax: (312) 867-0098
If to the Escrow Agent:
Bank One Trust Company, NA
111 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Atttn: Francine Olstinske
Phone: (414) 298-4216
Fax: (414) 298-4223
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
14. This Escrow Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute a single agreement.
* * * * *
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<PAGE> 37
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Escrow Agreement on the date first above written.
MCDONALD MEDIA GROUP, INC.
By:
----------------------------------
Its:
----------------------------------
"Seller"
CUMULUS BROADCASTING, INC.
By:
----------------------------------
Its:
----------------------------------
CUMULUS LICENSING CORP.
By:
----------------------------------
Its:
----------------------------------
CUMULUS WIRELESS SERVICES INC.
By:
----------------------------------
Its:
----------------------------------
"Buyers"
BANK ONE TRUST COMPANY, N.A.
By:
----------------------------------
Its:
----------------------------------
"Escrow Agent"
-37-
<PAGE> 38
EXHIBIT B
INSTRUMENT OF ASSUMPTION
THIS INSTRUMENT OF ASSUMPTION, dated as of , 1998 from Cumulus
Broadcasting, Inc., a Nevada corporation ("Assignee"); to McDonald Media Group,
Inc., a Delaware company ("Assignor"); is delivered pursuant to Section 1(e) of
that certain Asset Purchase Agreement, dated as of , 2000 (the "Asset
Purchase Agreement"), between Assignee and Assignor. Defined terms used herein
without definition have the meanings assigned to such terms in the Asset
Purchase Agreement.
WHEREAS, by a General Assignment being executed and delivered by
Assignor to Assignee simultaneously herewith pursuant to the Asset Purchase
Agreement, Assignor is selling, transferring, assigning, conveying and
delivering to Assignee substantially all of the assets of Assignor (the
"Assets");
NOW THEREFORE, in partial consideration of such sale, transfer,
assignment, conveyance and delivery on and as of the date hereof, subject to and
in accordance with the terms and conditions of the Asset Purchase Agreement,
Assignee hereby assumes and becomes responsible for the following Assumed
Liabilities:
Obligations of Assignor under the licenses, sublicenses,
leases, subleases, contracts, and other arrangements referred
to in the definition of Acquired Assets either: (i) to furnish
services, and other non-Cash benefits to another party after
the Closing; or (ii) to pay for goods, services, and other
non-Cash benefits that another party will furnish to it after
the Closing;
provided, however, that the Assumed Liabilities shall not include any other
obligations or liabilities of Assignor, including but not limited to: (i) any
Liability relating to the ownership or operation of the Stations prior to the
Closing; (ii) any Liability of Assignor for income, transfer, sales, use, and
other Taxes arising in connection with the consummation contemplated by the
Asset Purchase Agreement; (iii) any Liability of Assignor for costs and expenses
incurred in connection with the Asset Purchase Agreement or the consummation of
the transactions contemplated hereby; or (iv) any Liability or obligation of
Assignor under the Asset Purchase Agreement (or under any side agreement between
Assignor on the one hand and Assignee on the other hand).
Other than as specifically stated in this Instrument of Assignment,
Assignee assumes no obligation of Assignor. As to any lease, contract,
agreement, permit or other authorization included in the Acquired Assets which
may be assigned only with the consent of the other party thereto, this
Instrument of Assumption shall be of no force and effect until such requisite
consents shall have been obtained, whereupon it shall become of full force and
effect as of the
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<PAGE> 39
date of such consent.
IN WITNESS WHEREOF, Assignee has caused this instrument to be signed in
its name by its officers thereunto duly authorized on the date first above
written.
ASSIGNEE:
CUMULUS BROADCASTING, INC.
By:
Richard Weening
Chairman
ASSIGNOR:
MCDONALD MEDIA GROUP, INC.
By:
Its:
-39-
<PAGE> 40
EXHIBIT D
POST-CLOSING AGREEMENT
Agreement dated as of , 1998 among CUMULUS BROADCASTING,
INC., a Nevada corporation, CUMULUS LICENSING CORP., a Nevada corporation
(collectively the "Buyers"), MCDONALD MEDIA GROUP, INC., a corporation
("Seller"), and CITATION CABLEVISION, INC. (the "Seller's Owner") . The Buyers,
the Seller, and the Seller's Owner are referred to collectively herein as the
"Parties."
The Buyers and the Seller are concurrently herewith concluding
a transaction in which the Buyers will purchase the "Acquired Assets" (and
accept responsibility for the "Assumed Liabilities") of the Sellers in return
for cash pursuant to the terms of an Asset Purchase Agreement dated ,
1999 (the "Asset Purchase Agreement"). Certain terms used herein without
definition are used herein as defined in the Asset Purchase Agreement.
The Buyers and the Seller have made certain representations,
warranties, and covenants in the Asset Purchase Agreement which will survive the
Closing for purposes of potential indemnification. The Seller's Owner, however,
may cause the Seller to liquidate and dissolve immediately after the Closing.
The Buyers and the Seller's Owner therefore wish to provide for post-Closing
indemnification against breaches of these representations, warranties, and
covenants and to make certain other covenants among themselves.
Now, therefore, in consideration of the premises and the
mutual promises herein made, the Buyers and the Seller's Owner agree as follows.
1. Representations and Warranties of Seller's Owner. The Seller's Owner
represents and warrants to the Buyers that the statements contained in this
Section 1 are correct and complete as of the date of this Agreement.
(a) Enforceability. The Seller's Owner has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Seller's Owner, enforceable in accordance with its terms and conditions.
(b) Absence of Conflicts. Neither the execution and the
delivery of this Agreement by the Seller's Owner, nor his performance of his
obligations hereunder, will (i) violate any statute, regulation, rule, judgment,
order, decree, stipulation, injunction, charge, or other restriction of any
government, governmental agency, or court to which he is subject or (ii )
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other arrangement to
which he is a party or by which he is bound or to which any of his assets is
subject.
-40-
<PAGE> 41
2. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of the Asset Purchase
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
Section 4 below.)
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under the Asset Purchase Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Sellers, each of the other Parties will
cooperate with the contesting or defending Party and his or its counsel in the
contest or defense, make available his or its personnel, and provide such
testimony and access to his or its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 3 below.)
(c) Transition. Neither the Seller's Owner nor any of his respective
Affiliates will take any action that primarily is designed or intended to have
the effect of discouraging any lessor, licensor, customer, supplier, or other
business associate of the Seller from maintaining the same business
relationships with the Buyers after the Closing as it maintained with the Seller
prior to the Closing. The Seller's Owner will refer all customer inquiries
relating to the Stations or to the business of the Seller to the Buyers from and
after the Closing. Except with the Buyers' prior written consent, neither the
Seller's Owner nor any of his respective Affiliates will employ or offer to
employ any employee of the Seller for a period of three (3) years after the
Closing Date.
(d) Confidentiality. The Seller's Owner and his Affiliates will treat
and hold as such all of the Confidential Information, refrain from using any of
the Confidential Information except in connection with this Agreement, and
deliver promptly to the Buyers or destroy, at the request and option of the
Buyers, all tangible embodiments (and all copies) of the Confidential
Information which are in his or its possession. In the event that the Seller's
Owner or any Affiliate is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that person will notify the Buyers promptly of the request or
requirement so that the Buyers may seek an appropriate protective order or waive
compliance with the provisions of this Section 2(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, the Seller's Owner or any
Affiliate is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, that person may
disclose the Confidential Information to the tribunal;
-41-
<PAGE> 42
provided, however, that the disclosing Person shall use his or its best efforts
to obtain, at the reasonable request of the Buyers, an order or other assurance
that confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyers shall designate. The
foregoing provisions shall not apply to any Confidential Information which is
generally available to the public immediately prior to the time of disclosure.
(e) Covenant Not to Compete. For a period of three (3) years from and
after the Closing Date, neither the Seller's Owner nor any of his respective
Affiliates will engage directly or indirectly in any business that the Seller
conducts as of the Closing Date within (75) seventy-five miles of the Santa
Barbara, California or Oxnard-Venetura, California Arbitron markets; provided,
however, that no owner of less than 1% of the outstanding stock of any publicly
traded corporation shall be deemed to engage solely by reason thereof in any of
its businesses.
3. Remedies for Breaches of This Agreement and the Asset Purchase
Agreement.
(a) Survival. All of the representations, warranties, and covenants of
the Buyers, the Seller, and the Seller's Owner contained in the Asset Purchase
Agreement and in this Agreement shall survive the Closing and continue in full
force and effect to the extent set forth in the Asset Purchase Agreement.
(b) Indemnification Provisions for Benefit of the Buyers.
(i) In the event the Seller is liquidated or has
insufficient assets to cover claims by Buyers for indemnification under
the Asset Purchase Agreement, the Seller's Owner agrees to indemnify
the Buyers from and against the entirety of any Adverse Consequences
the Buyers may suffer, subject to the limitation of liability set forth
in Section 7(g) of the Asset Purchase Agreement, to the extent
applicable, resulting from, arising out of, relating to, in the nature
of, or caused by:
(A) any breach of any of the Seller's
representations, warranties, and covenants contained in the
Asset Purchase Agreement (so long as the particular
representation, warranty, or covenant survives the Closing and
the Buyers makes a written claim for indemnification pursuant
to Section 3(d) below within the applicable survival period);
(B) any Liability of the Seller which is not
an Assumed Liability; or
(C) any Liability of the Buyers arising by
operation of law (including under any bulk transfer law of any
jurisdiction or under any common law doctrine of defacto
merger or successor liability) which is not an Assumed
Liability.
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<PAGE> 43
(ii) The Seller's Owner agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the
Buyers may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the breach of any of the Seller's Owner's
representations, warranties, and covenants contained in Section 1 and
Section 2 above (so long as the particular representation, warranty, or
covenant survives the Closing and the Buyers make a written claim for
indemnification pursuant to Section 3(d) below within the applicable
survival period).
(c) Indemnification Provisions for Benefit of the Seller's
Owner. The Buyers agree to indemnify the Seller's Owner from and against the
entirety of any Adverse Consequences they may suffer in excess of the limitation
of liability set forth in Section 7(g) of the Asset Purchase Agreement, to the
extent applicable, resulting from, arising out of, relating to, in the nature
of, or caused by (i) the breach of any of the Buyers' representations,
warranties, and covenants contained in the Asset Purchase Agreement and this
Agreement (so long as the particular representation, warranty, or covenant
survives the Closing and the Seller's Owner makes a written claim for
indemnification pursuant to Section 3(d) below within the applicable survival
period) or (ii) any Assumed Liability.
(d) Matters Involving Third Parties. If any third party shall
notify any Party (the "Indemnified Party") with respect to any matter which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 3, then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party thereby is
damaged. In the event any Indemnifying Party notifies the Indemnified Party
within 15 days after the Indemnified Party has given notice of the matter that
the Indemnifying Party is assuming the defense thereof, (A) the Indemnifying
Party will defend the Indemnified Party against the matter with counsel of its
choice reasonably satisfactory to the Indemnified Party, (B) the Indemnified
Party may retain separate co-counsel at its sole cost and expense (except that
the Indemnifying Party will be responsible for the fees and expenses of the
separate co-counsel to the extent the Indemnified Party concludes reasonably
that the counsel the Indemnifying Party has selected has a conflict of
interest), (C) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld unreasonably), and
(D) the Indemnifying Party will not consent to the entry of any judgment with
respect to the matter, or enter into any settlement which does not include a
provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
no Indemnifying Party notifies the Indemnified Party within 15 days after the
Indemnified Party has given notice of the matter that the Indemnifying Party is
assuming the defense thereof, however, the Indemnified Party may defend against,
or enter into any settlement with respect to, the matter in any manner it may
deem appropriate.
(e) Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory or common law remedy any Party may have for breach of representation,
warranty, or covenant.
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<PAGE> 44
4. Miscellaneous.
(a) Press Releases and Announcements. Neither the Seller's
Owner nor any of his Affiliates shall issue any press release or announcement
relating to the subject matter of the Asset Purchase Agreement without the prior
written approval of the Buyers; provided, however, that the Seller's Owner may
make any public disclosure he believes in good faith is required by law or
regulation (in which case the Seller's Owner will advise the Buyers prior to
making the disclosure).
(b) No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, that may have related in any way to the subject
matter hereof.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyers and the Seller's Owner; provided, however, that
the Buyers may (i) assign any or all of their rights and interests hereunder to
one or more of their Affiliates and (ii) designate one or more of their
Affiliates to perform their obligations hereunder (in any or all of which cases
the Buyers nonetheless shall remain liable and responsible for the performance
of all of their obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, or if (and then the next business day after) it is
sent by reputable overnight courier, in each case addressed to the intended
recipient at the address for notices (and copies thereof) set forth in the Asset
Purchase Agreement. Any Party may give any notice, request, demand, claim, or
other communication hereunder using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary mail,
or electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
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<PAGE> 45
actually is received by the individual for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Delaware.
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyers and the Requisite Seller's Owner. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(k) Expenses. Each of the Parties will bear his or its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby (except as
otherwise provided herein).
(l) Construction. The language used in this Agreement will be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any Party. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.
(m) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 4(o) below), in addition to any other remedy to which they may
be entitled, at law or in equity. Each of the Parties acknowledges and agrees
that notwithstanding the provision in Section 4(n) with respect to liquidated
damages upon a breach
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<PAGE> 46
of a covenant of this Agreement, money damages would not be an adequate remedy
for a breach of any provision of this Agreement.
(n) Submission to Jurisdiction. Each of the Parties submits to
the jurisdiction of any state or federal court sitting in Ventura, California in
any action or proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court, and agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Any Party may
make service on any other Party by sending or delivering a copy of the process
to the Party to be served at the address and in the manner provided for the
giving of notices in Section 4(g) above. Nothing in this Section 4(n), however,
shall affect the right of any Party to serve legal process in any other manner
permitted by law. Each Party agrees that a final judgment in any action or
proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law.
* * * * *
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<PAGE> 47
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
MCDONALD MEDIA GROUP, INC.
By:
--------------------------
Its:
-------------------------
"Seller"
CUMULUS BROADCASTING, INC.
By:
-------------------------------------
Its:
------------------------------------
CUMULUS LICENSING CORP.
By:
-------------------------------------
Its:
------------------------------------
CUMULUS WIRELESS SERVICES INC.
By:
-------------------------------------
Its:
------------------------------------
"Buyers"
SELLER'S OWNER:
[ ]
-------------
---------------------------------------
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<PAGE> 48
EXHIBIT F
[LETTERHEAD OF SELLER'S COUNSEL]
, 2000
- ---------------
Cumulus Broadcasting, Inc.
Cumulus Licensing Corporation
Cumulus Wireless Services Inc.
111 E. Kilbourn Avenue
Suite 2700
Milwaukee, WI 53202
Lehman Brothers Commercial Paper Inc.
Gentlemen:
We have acted as counsel to McDonald Media Group, Inc. (the "Company") in
connection with the preparation of the Asset Purchase Agreement dated [ ],
1999 (the "Agreement"), and have participated on its behalf in connection with
the purchase and sale to be made by you with the Company pursuant to the
Agreement (the "Transaction") and the transfer of control thereby of radio
stations he radio broadcast stations KVEN-AM, KHAY-FM, and KBBY-FM, licensed to
Oxnard-Ventura, California, and KKSB-FM and KMGQ-FM, licensed to Santa Barbara,
California (collectively, the "Stations"). We have also acted as counsel to in
connection with the preparation of the Post-Closing Agreement dated the date
hereof between you and each of them (the "Post-Closing Agreement"). The
Agreement, the Post-Closing Agreement, the Warranty Deeds, the Assignment of
Lease, the General Assignment and the Instrument of Assumption are referred to
in this Opinion Letter as the Transaction Documents.
In connection with this Opinion Letter, we have examined signed copies of
the Transaction Documents and a certificate as to certain objective facts
executed by an officer of the Company (the "Officer's Certificate"). We have
considered such matters of law and fact, and relied upon such certificates and
other information furnished to us, as we have deemed appropriate as a basis for
our opinions set forth below. We have also relied upon the representations of
the Company made in the Agreement.
This Opinion Letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this Opinion Letter should be
read in conjunction therewith. The law covered by the opinions expressed herein
is limited to the Federal law of the United States and the law of the State of
Alabama.
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Based upon the foregoing, and subject to the qualifications and
exceptions set forth below, we are of the opinion that:
1. The Company is a corporation organized and existing under the laws
of the State of Alabama and is qualified to do business under the laws of
the State of California.
2. The Company has the requisite corporate authority to enter into the
Transaction Documents, perform its obligations thereunder and to own its
properties and carry on its business as presently conducted in the State of
California.
3. The Agreement and each of the other Transaction Documents
contemplated thereby to which the Company is a party have been duly
authorized, executed and delivered by the Company and each is enforceable
against the Company in accordance with its terms.
4. The execution and delivery by the Company of, and performance of
its obligations under the Transaction Documents do not violate the
Company's articles of incorporation or bylaws or, based and relying upon
the Officer's Certificate, breach, or result in a default under, any of the
agreements or instruments identified therein or require the consent or
other action of or filing with any governmental body or agency which has
not been obtained or which has not been made.
5. The Post-Closing Agreement has been duly executed and delivered by
the Company and [ ] and is enforceable against each of them in
accordance with its terms.
6. The Assignment of Leases and the General Assignment convey all of
the Seller's right, title and interest in the Acquired Assets to the Buyer
and the Assignment of Leases is in appropriate form under the laws of the
State of Alabama for recording.
7. The Seller has obtained and validly holds the FCC Licenses listed
in Attachment 1 to this opinion letter. The FCC Licenses listed in
Attachment 1 constitute the only authorizations, licenses, and permits of
the FCC required by the FCC or necessary in connection with the present
operation of Stations. The FCC Licenses relating to the Stations listed in
Attachment 1 are in full force and effect and are duly issued in the name
of, or validly assigned to, the Seller. The FCC has approved the assignment
of the Licenses to operate the Stations from the Seller to the Buyer, and
such approval is in full force and effect, and is no longer subject to
administrative or judicial review. Upon execution and delivery of the
General Assignment, the Buyer will validly hold the FCC Licenses to operate
the Stations.
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<PAGE> 50
8. The Seller has filed with the FCC all material reports, documents,
instruments, information, and applications required to be filed in
connection with the operation of the Stations pursuant to FCC rules,
regulations and requests. No notice has been issued by the FCC which
permits, or after notice or lapse of time or both, would permit, revocation
or termination of any of the FCC Licenses prior to the respective
expiration dates thereof, or which results or would result in any other
material impairment of any rights thereunder.
9. The Stations are now operating, and prior to the date hereof were
operating, in compliance in all material respects with the Communications
Act of 1934, as amended, and the rules and regulations of the FCC
promulgated thereunder. There is not now issued or outstanding, pending or
threatened, any Notice of Violation, Order to Show Cause, complaint or
investigation or rulemaking proceeding by or before the FCC which might
materially threaten or adversely affect any of the FCC Licenses or result
in any substantial adverse effect upon the operation of the Stations, nor
is there any reason to believe, as of the date hereof, that any of the FCC
Licenses will not be renewed in the ordinary course.
10. The execution, delivery and performance by the Seller of its
obligations under the Transaction Documents (a) is not contrary to the
Communications Act of 1934, as amended, or any of the rules, regulations or
policies of the FCC promulgated thereunder; (b) will not result in any
violation of the present rules, regulations or policies of the FCC; and (c)
will not cause any forfeiture or impairment of any of the FCC Licenses.
This Opinion Letter may be relied upon by you only in connection
with the Transaction and may not be used or relied upon by any other person
for any purpose whatsoever without this firm's prior written consent.
Very truly yours,
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<PAGE> 51
EXHIBIT __
GENERAL ASSIGNMENT
THIS GENERAL ASSIGNMENT, dated as of ___________________, 1998
from MCDONALD MEDIA GROUP, INC., a Delaware corporation (the "Assignor"), to
CUMULUS BROADCASTING, INC., a Nevada corporation, (together with its successors
and assigns, the "Assignee"), is delivered pursuant to Section 1(e) of that
certain Asset Purchase Agreement, dated as of [_____________], 1997 (the "Asset
Purchase Agreement"), by and among Assignor and Assignee. Defined terms used
herein without definition have the meanings assigned to such terms in the Asset
Purchase Agreement.
KNOW ALL PERSONS BY THESE PRESENTS that, pursuant to the terms
and conditions of the Asset Purchase Agreement and for the considerations set
forth therein, the receipt and sufficiency of which are hereby acknowledged by
Assignor, Assignor hereby sells, transfers, assigns, conveys and delivers to
Assignee forever all of Assignor's right, title and interest in and to the
following Acquired Assets:
All right, title and interest in and to all of the assets of
Assignor, other than Retained Assets, that are used or useful
in the operation of the Stations, including but not limited to
all of its (a) real property, leaseholds and other interests
of any kind therein, improvements, fixtures, and fittings
thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible
personal property (such as computers, electrical devices,
monitoring equipment, test equipment, switching, terminal and
studio equipment, transmitters, transformers, receivers,
broadcast facilities, inventories of compact disks, records,
tapes and other supplies, and all assignable warranties with
respect thereto; (c) Intellectual Property, goodwill
associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions; (d)
rights under orders and agreements (including those barter
agreements identified on the Disclosure Schedule) now existing
or entered into in the Ordinary Course of Business for the
sale of advertising time on the Stations; (e) contracts,
indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (f) call letters of the
Stations, jingles, logos, slogans, and business goodwill of
the Stations; and (g) FCC logs and records and all other
books, records, ledgers, logs, files, documents,
correspondence, lists, plats, architectural plans, drawings,
and specifications, creative materials, advertising and
promotional materials, studies, reports, and other printed or
written materials.
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<PAGE> 52
provided, however, that the Acquired Assets shall not include (i) the corporate
charter, qualifications to conduct business as a foreign corporation,
arrangements with registered agents relating to foreign qualifications, taxpayer
and other identification numbers, seals, minute books, stock transfer books,
blank stock certificates, and other documents relating to the organization,
maintenance, and existence of the Seller as a corporation; (ii) any of the
rights of Assignor under the Asset Purchase Agreement (or under any side
agreement between Assignor on the one hand and Assignee on the other hand
entered into on or after the date of the Asset Purchase Agreement); (iii)
accounts, notes and other receivables; (iv) Cash; and (v) claims, deposits,
prepayments, refunds, causes of action, choses in action, rights of recovery
(including rights under policies of insurance), rights of set off, and rights of
recoupment (including any such item relating to the payment of Taxes);.
TO HAVE AND TO HOLD the same unto Assignee forever. Assignor
hereby constitutes and appoints Assignee the true and lawful attorney of
Assignor, with the full power of substitution, in the name of Assignee or in the
name of Assignor, but by and on behalf of and for the sole benefit of Assignee,
to demand and receive from time to time any and all of the above described
Acquired Assets, and from time to time to institute and prosecute, in the name
of Assignor or otherwise on behalf of Assignor, any and all proceedings at law,
in equity or otherwise which Assignee may deem necessary or desirable in order
to receive, collect, assert or enforce any right, title, benefit or interest of
any kind in or to the above described Acquired Assets and to defend and
compromise any and all actions, suits or proceedings in respect thereof and to
do all such acts and things and execute any instruments in relation thereto as
Assignee may deem advisable. Without limitation of any of the foregoing,
Assignor hereby authorizes any authorized representative of Assignee to endorse
or assign any instrument, contract or chattel paper relating to the above
described Acquired Assets. Assignor agrees that the foregoing appointment made
and the powers hereby granted are coupled with an interest and shall be
irrevocable by Assignee.
All of the terms and provisions of this General Assignment
will be binding upon Assignor and its successors and assigns and will enure to
the benefit of Assignee; provided, that nothing in this General Assignment,
express or implied, is intended or shall be construed to confer upon or give to
any person, firm, partnership, corporation or other entity other than Assignee
any rights or remedies under or by reason of this General Assignment.
* * * * *
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IN WITNESS WHEREOF, Assignor has caused this instrument to be signed in its name
by its representative thereunto duly authorized on the date first written above.
MCDONALD MEDIA GROUP, INC.
By:_____________________________________
Its:____________________________________
ACCEPTED AND AGREED:
CUMULUS BROADCASTING, INC.
By:___________________________________
Its:____________________________________
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<PAGE> 54
EXHIBIT __
GENERAL ASSIGNMENT
THIS GENERAL ASSIGNMENT, dated as of ___________________, 1998
from MCDONALD MEDIA GROUP, INC., a Delaware corporation (the "Assignor"), to
CUMULUS LICENSING CORP., a Nevada corporation (together with its successors and
assigns, the "Assignee"), is delivered pursuant to Section 1(e) of that certain
Asset Purchase Agreement, dated as of _________, 1998 (the "Asset Purchase
Agreement"), by and among Assignor and Assignee. Defined terms used herein
without definition have the meanings assigned to such terms in the Asset
Purchase Agreement.
KNOW ALL PERSONS BY THESE PRESENTS that, pursuant to the terms
and conditions of the Asset Purchase Agreement and for the considerations set
forth therein, the receipt and sufficiency of which are hereby acknowledged by
Assignor, Assignor hereby sells, transfers, assigns, conveys and delivers to
Assignee forever all of Assignor's right, title and interest in and to the
following Acquired Assets:
All FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the
Sellers with respect to the operations of the Stations and all
applications therefor, together with any renewals, extension
or modifications thereof and additions thereto.
TO HAVE AND TO HOLD the same unto Assignee forever.
All of the terms and provisions of this General Assignment
will be binding upon Assignor and its successors and assigns and will enure to
the benefit of Assignee; provided, that nothing in this General Assignment,
express or implied, is intended or shall be construed to confer upon or give to
any person, firm, partnership, corporation or other entity other than Assignee
any rights or remedies under or by reason of this General Assignment.
* * * * *
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<PAGE> 55
IN WITNESS WHEREOF, Assignor has caused this instrument to be
signed in its name by its representative thereunto duly authorized on the date
first written above.
MCDONALD MEDIA GROUP, INC.
By:_____________________________________
Its:____________________________________
ACCEPTED AND AGREED:
CUMULUS LICENSING CORP.
By:___________________________________
Its:____________________________________
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<PAGE> 1
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of December 17, 1999, by
and among Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corp., a Nevada corporation ("Licensing), Cumulus Wireless
Services Inc., a Nevada corporation ("Wireless"), and McDonald Media Group,
Inc., a Delaware corporation (the "Seller"). Broadcasting, Licensing and
Wireless are referred to collectively herein as the "Buyers." The Buyers and the
Seller are referred to individually as the "Party" or collectively as the
"Parties." Capitalized terms used in this Agreement are defined in Section 8
hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
stations KNRQ-FM (licensed to Creswel, Oregon), and KNRQ-AM and KZEL-FM
(licensed to Eugene, Oregon) (the "Stations") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. BASIC TRANSACTION.
A. PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, the Seller agrees to sell, transfer, convey and
deliver to (i) Licensing, and Licensing agrees to purchase from the Seller, all
of the FCC Licenses listed in Section 2(k) of the disclosure schedule
("Disclosure Schedule"); and (ii) Seller agrees to sell, transfer convey and
deliver to Broadcasting and Wireless, and Broadcasting and Wireless agree to
purchase from the Seller, all of the Acquired Assets other than the FCC
Licenses. Both such sales shall take place at the Closing for the consideration
specified in Schedule A of this Agreement.
B. ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Seller not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Seller agrees to pay
and discharge all Liabilities and obligations of the Seller other than the
Assumed Liabilities.
C. PURCHASE PRICE. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the purchase price (the "Purchase Price")
described in Schedule A to this Agreement.
D. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at a mutually agreed location, within
ten (10) days after the FCC approval of the Assignment Application becomes a
Final Order, by which date all other conditions to the obligations of the
Parties to consummate the transactions contemplated hereby
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<PAGE> 2
will have been satisfied, or such other date as the Parties may mutually
determine (the "Closing Date"). The Closing shall occur not earlier later than
May 1, 2000; provided, however, that if the parties are proceeding with all due
diligence and in good faith to close the transaction, but the Closing has not
occurred as a result of the failure of the FCC to approve the transaction and
for such approval to become a Final Order, the Closing shall be extended for
such an additional period of time for the FCC to issue its approval and for such
approval to become a Final Order, but in any event, not later than the 360th day
following the date of this Agreement.
E. DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), as is bills of sale
and statutory warranty deeds in form reasonably acceptable to the Buyers, (B)
such affidavits, transfer tax returns, memorandums of lease, and other
additional documents as may be required by the terms of the title insurance
commitments described in Section 4(o) hereof, as necessary to furnish title
insurance as required by such section or as may be necessary to convey title to
the Real Estate to the Buyers in the condition required herein or provide public
notice of existence of the Leases, and (C) such other instruments of sale,
transfer, conveyance, and assignment as the Buyers and their counsel reasonably
may request; (iv) the Buyers will execute, acknowledge (if appropriate), and
deliver to the Seller (A) an assumption in the form attached hereto as Exhibit A
and (B) such other instruments of assumption as the Seller and its counsel
reasonably may request; and (v) the Buyers will deliver to the Seller the
consideration specified in Schedule 1(c) above.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to the Buyers that the statements
contained in this Section 2 are correct and complete in all material respects as
of the date of this Agreement and will be correct and complete in all material
respects as of the Closing Date, except as set forth in the Disclosure Schedule.
A. ORGANIZATION OF THE SELLER. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
The Seller has the power and authority to own or lease its properties and to
carry on all business activities now conducted by it.
B. AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority to execute and deliver this Agreement and all agreements and
instruments to be executed and delivered by Seller pursuant to this Agreement
(collectively, the "Ancillary Agreements") and to perform its obligations
hereunder and thereunder. Without limiting the generality of the foregoing, the
Board of Directors of the Seller has duly authorized the execution, delivery,
and performance of this Agreement and the Ancillary Agreements by the Seller.
This Agreement and the Ancillary Agreements constitute the valid and legally
binding obligation of the Seller, enforceable in accordance with their
respective terms and conditions, subject to general equitable
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<PAGE> 3
principles, bankruptcy, insolvency, fraudulent transfer, or similar laws
generally affecting creditors' rights.
C. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), assuming the receipt of all necessary
regulatory approvals, will (i) violate any statute, regulation, rule, judgment,
order, decree, stipulation, injunction, charge, or other restriction of any
government, governmental agency, or court to which the Seller is subject or any
provision of the charter or bylaws of the Seller; or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice or third party consent under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or other
agreement, arrangement to which the Seller is a party or by which it is bound or
to which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b) the Seller does not need to
give any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any court or government or governmental agency in order for the
Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
D. TITLE TO ACQUIRED ASSETS. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) the Seller has good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
E. FINANCIAL STATEMENTS. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal years ended December 31, 1996, December 31, 1997,
and December 31, 1998 for the Stations; and (ii) unaudited balance sheets and
statements of income, as of and for each month during 1998 and each month to
date in 1999 for the Stations. The Financial Statements have been prepared in
conformity with the Seller's normal accounting policies, practices and
procedures applied on a consistent basis (except for minor reclassification
items), throughout the periods covered thereby, are correct and complete, fairly
present the financial condition of the Stations and the results of operation of
Stations at the dates and for the periods indicated, and are consistent with the
books and records of the Seller (which books and records are correct and
complete in all material respects). The Financial Statements accurately state
the revenues of the Stations for the period indicated therein and include an
accurate breakout of cash and trade revenues.
F. EVENTS SUBSEQUENT TO JANUARY 1, 1999. From January 1, 1999 to the
effective date of the Management Agreement between Broadcasting and Seller (the
"MA Commencement Date"), except as set forth in Section 2(f) of the Disclosure
Schedule, there has not been any material adverse change in the assets,
Liabilities, business, financial condition, operations, results of operations,
except for conditions affecting the radio industry generally. Without limiting
the
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<PAGE> 4
generality of the foregoing and with respect to the operation of the
Stations since January 1, 1999:
(i) other than this Agreement, the Seller has not entered
into any material agreement, contract, lease, sublease, license, or
sublicense (or series of related agreements, contracts, leases, subleases,
licenses, and sublicenses) outside the Ordinary Course of Business;
(ii) the Seller has not delayed or postponed (beyond its
normal practice in the Ordinary Course of Business) the payment of accounts
payable and other Liabilities;
(iii) the Seller has not altered its credit and collection
policies or its accounting policies;
(iv) other than in the Ordinary Course of Business, the
Seller has not entered into or terminated any employment arrangement,
employment contract, consulting contract or severance agreement or
collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(v) other than in the Ordinary Course of Business, there have
been no changes and, to Seller's Knowledge, any threatened changes in
employment terms for any of its directors, officers, and employees;
(vi) there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Seller;
(vii) the Seller has not materially altered the programming,
format or call letters of the Stations, or its promotional and marketing
activities;
(viii) the Seller has not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Stations in material
compliance therewith and with all FCC rules and regulations;
(ix) the Seller has not terminated or received notice of
termination for any syndicated programming; and
(x) the Seller has not committed to any of the foregoing.
G. TAX MATTERS. With respect to the Stations, the Seller has timely
and properly filed all Tax Returns that it was required to file with respect to
the Seller's operations. To Seller's Knowledge, all such Tax Returns were
correct and complete and properly reflect the tax liability of the Seller. No
Tax deficiencies have been proposed or assessed against the Seller. All Taxes
owed by the Seller with respect to its operations of the Stations shown on any
Tax Return have been paid. The Seller has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor, or
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<PAGE> 5
other third party. No claim has ever been made by any authority in any
jurisdiction where the Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
H. TANGIBLE ASSETS. Section 2(h) of the Disclosure Schedule sets
forth a listing of all transmitter and Stations equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Stations. The Seller owns or leases all tangible assets necessary for the
conduct of the operation and business of the Stations as presently conducted and
as presently proposed to be conducted and all leased assets are specifically
identified as such in Section 2(h) of the Disclosure Schedule.
I. REAL PROPERTY. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Seller
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Seller has delivered to the Buyers correct and complete copies of
the Leases. With respect to the Real Estate relating to the Stations:
(i) the Seller has title to all of the Owned Real Estate free
and clear of all liens, charges, mortgages, security interests, easements,
restrictions or other encumbrances of any nature whatsoever except real
estate taxes for the year of Closing and municipal and zoning ordinances
and recorded utility easements which do not impair the current use,
occupancy or value or the marketability of title of the property and which
are disclosed in Section 2(i) of the Disclosure Schedule (collectively, the
"Permitted Real Estate Encumbrances");
(ii) the Leases are and, following the Closing will continue
to be, legal, valid, binding, enforceable against Seller, and in full force
and effect;
(iii) to Sellers' Knowledge, no party to any Lease is in
breach or default (or has repudiated any provision thereof), and no event
has occurred which, with notice or lapse of time, would constitute a breach
or default thereunder or permit termination, modification, or acceleration
thereunder;
(iv) to Seller's Knowledge, there are no disputes, oral
agreements, or forbearance programs in effect as to any Lease;
(v) none of the Owned Real Estate and to the Seller's
Knowledge, none of the properties subject to the Leases is subject to any
lease (other than Leases), option to purchase or rights of first refusal;
(vi) except for Permitted Real Estate Encumbrances, there are
no (i) actual or, to the Seller's Knowledge, proposed special assessments
with respect to any of the Real Estate; (ii) pending or, to the Seller's
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; or (iii) any pending or, to the Seller's Knowledge, threatened
changed in any zoning laws or ordinances which may materially adversely
affect any of the Real Estate or Seller's use thereof;
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<PAGE> 6
(vii) the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or its
rights thereunder;
(viii) to the Seller's Knowledge, all facilities on the Real
Estate have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations in all material respects; and
(ix) to the Seller's Knowledge, the owner of each leased
facility has good and marketable title to the underlying parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, except for Permitted Real Estate Encumbrances and
Seller's leasehold interest in each Lease has priority over any other
interest except for the fee interest therein and Permitted Real Estate
Encumbrances.
J. CONTRACTS. Section 2(j) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) either involving
more than $5,000 or not entered into in the Ordinary Course of Business. The
Seller has delivered to the Buyers a correct and complete copy of each written
arrangement listed in Section 2(j) of the Disclosure Schedule (as amended to
date). With respect to each written arrangement so listed which constitutes an
Assumed Contract: (A) the written arrangement is legal, valid, binding,
enforceable against Seller, and in full force and effect; (B) the written
arrangement will continue to be legal, valid, binding, and enforceable against
Seller and in full force and effect on identical terms following the Closing (if
the arrangement has not expired according to its terms); (C) to Seller's
Knowledge, no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under the written arrangement; and
(D) no party has repudiated any provision of the written arrangement. The Seller
is not a party to any verbal contract, agreement, or other arrangement which, if
reduced to written form, would be required to be listed in Section 2(j) of the
Disclosure Schedule under the terms of this Section 2(j). Except for the Assumed
Contracts, the Buyers shall not have any Liability or obligations for or in
respect of any of the contracts set forth in Section 2(j) of the Disclosure
Schedule or any other contracts or agreements of the Seller.
K. COMMISSION LICENSES AND COMPLIANCE WITH COMMISSION REQUIREMENTS.
(i) All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies, including,
without limitation, the FCC Licenses, used or useful in the operation of
the Stations as they are now being operated are (A) in full force and
effect, (B) unimpaired by any acts or omissions of the Seller or the
Seller's employees or agents, (C) free and clear of any restrictions which
might limit the full operation of the Stations, and (D) detailed in Section
2(k) of the Disclosure Schedule. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and consents
referenced in the preceding sentence, Section 2(k) of the Disclosure
Schedule also sets forth, without limitation, the date of the last renewal,
the expiration date thereof, and any conditions or contingencies related
thereto. Except as set forth in Section 2(k) of the Disclosure Schedule, no
condition exists or event has occurred that
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permits, or after notice or lapse of time, or both, would permit, the
revocation or termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the operation
of the Stations as now conducted. Except as set forth in Section 2(k) of
the Disclosure Schedule, the Seller is not aware of any reason why the FCC
licenses might not be renewed in the ordinary course or revoked.
(ii) The Stations are in material compliance with the FCC's
policy on exposure to radio frequency radiation. No renewal of any FCC
License would constitute a major environmental action under the FCC's rules
or policies. Access to the Stations' transmission facilities is restricted
in accordance with the policies of the FCC.
(iii) Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Seller's Knowledge, the Stations are not the subject of
any FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Stations, and there are no proceedings (other than rule making proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(k) of the Disclosure Schedule.
(iv) The Seller has filed with the FCC and all other
governmental authorities having jurisdiction over the Stations all material
reports, applications, documents, instruments, and other information
required to be filed, and will continue to make such filings through the
Closing Date.
(v) The Seller is not aware of any information concerning the
Stations that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary for
the consummation of the transactions contemplated hereunder or the Buyer's
operation and/or ownership of the Stations.
L. INTELLECTUAL PROPERTY. The Seller owns or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the businesses of the Stations as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder is set forth on Section 2(l) of the Disclosure Schedule and
each item listed will be owned or available for use by the Buyers on identical
terms and conditions immediately subsequent to the Closing hereunder. With
respect to the Stations, the Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and the Seller has never received any charge,
complaint, or notice alleging any such interference, infringement,
misappropriation, or violation. To the Knowledge of the Seller, with respect to
the Stations, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of the Seller.
M. INSURANCE. Section 2(m) of the Disclosure Schedule sets forth a
complete and
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accurate description of all Seller's insurance coverage. With respect to each
such insurance policy, to Seller's Knowledge, the policy is legal, valid, and
binding.
N. LITIGATION. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(n) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no Knowledge of any Basis for any such charge, complaint, action,
suit, proceeding, hearing, or investigation against the Seller.
O. EMPLOYEES. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee as of
the date of this Agreement. To the Knowledge of the Seller, no key employee or
group of employees has any plans to terminate employment with the Stations. With
respect to the Stations, the Seller is not a party to or bound by any collective
bargaining or similar agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. With
respect to the Stations, the Seller has no Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to the employees of the Seller. The Seller has no Knowledge of any
Basis for any claim by past or current employees of the Seller or applicants for
employment that the Seller or its management has discriminated based on each
individuals race, sex, national origin, religion, ethnicity, handicap or any
other protected characteristic under applicable law.
P. EMPLOYEE BENEFITS. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that the Seller maintains with respect to the
Stations or to which the Seller contributes or is required to contribute for the
benefit of any current or former employee of the Seller with respect to the
Stations, and true and correct copies of each such Employee Benefit Plan have
been delivered to the Buyers. Each Employee Benefit Plan (and each related trust
or insurance contract) complies and at all times has complied in form and in
operation in all respects with the applicable requirements of ERISA and the
Code. The Seller does not have any commitment to create any additional Employee
Benefit Plan or modify or change any existing Employee Benefit Plan that would
affect any employee or terminated employee of the Stations. There are no pending
or, to the Knowledge of the Seller, threatened claims under, by or on behalf of
any of the Employee Benefit Plans, by any employee or beneficiary covered by any
such Employee Benefit Plan, or otherwise involving any such Employee Benefit
Plan (other than routine claims for benefits), nor have there been any
Reportable Events or Prohibited Transactions with respect to any Employee
Benefit Plan.
Q. ENVIRONMENT, HEALTH, AND SAFETY.
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(i) To Seller's Knowledge, with respect to the operation of
the Stations and the Real Estate, the Seller is, and at all times in the
past has been, in compliance in all material respects with all
Environmental Laws and all laws (including rules and regulations
thereunder) of federal, state, and local governments (and all agencies
thereof) concerning employee health and safety, and the Seller has no
Liability (and to Seller's Knowledge there is no Basis related to the past
or present operations of the Seller for any present or future Liability)
under any Environmental Law. The Seller has no Liability (and to Seller's
Knowledge there is no Basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against
the Seller giving rise to any Liability) under the Occupational Safety and
Health Act, as amended, or any other law (or rule or regulation thereunder)
of any federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety, or for any illness of or personal
injury to any employee.
(ii) To Seller's Knowledge, the Seller has obtained and at
all times has been in compliance in all material respects with all of the
terms and conditions of all permits, licenses, and other authorizations
which are required under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
Environmental Laws or law of any federal, state, or local or foreign
government relating to worker health and safety.
(iii) To Seller's Knowledge, all properties and equipment
used in the Stations and the Acquired Assets have been free of asbestos,
PCB's, methylene chloride, trichloroethylene, 1, 2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances. No pollutant,
contaminant, or chemical, industrial, hazardous, or toxic material or waste
ever has been buried, stored, spilled, leaked, discharged, emitted, or
released on any of the Real Estate. Except as disclosed in Section 2(q) of
the Disclosure Schedule, no above ground or underground storage tanks have
ever been located at, on or under the Real Estate. The Seller has delivered
to the Buyers a complete copy of all environmental claims, reports,
studies, compliance actions or the like of the Seller or which are
available to the Seller with respect to any of the Real Estate or any of
the Acquired Assets.
R. LEGAL COMPLIANCE. With respect to the operation of the Stations,
the Seller has complied in all material respects with all laws (including rules
and regulations thereunder) of federal, state, local and foreign governments
(and all agencies thereof. With respect to the operation of the Stations, the
Seller has filed in a timely manner all reports, documents, and other materials
it was required to file (and the information contained therein was correct and
complete in all material respects) under all applicable laws.
S. ADVERTISING CONTRACTS. Section 2(s) of the Disclosure Schedule
lists all arrangements for the sale of air time or advertising on the Stations
in excess of $5000, and the amount to be paid to the Seller therefor. The Seller
has no reason to believe and has not received a notice or indication of the
intention of any of the advertisers or third parties to material contracts of
the Seller to cease doing business or to reduce in any material respect the
business
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transacted with the Seller or to terminate or modify any agreements with the
Seller (whether as a result of consummation of the transactions contemplated
hereby or otherwise).
T. BROKERS' FEES. The Seller has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
U. UNDISCLOSED COMMITMENTS OR LIABILITIES. There are no material
commitments, liabilities or obligations relating to the Stations, whether
accrued, absolute, contingent or otherwise including, without limitation,
guaranties by the Seller of the liabilities of third parties, for which specific
and adequate provisions have not been made on the Financial Statements except
those incurred in or as a result of the Ordinary Course of Business since
January 1, 1999.
V. YEAR 2000 COMPLIANCE. To Seller's Knowledge, all data processing
systems, other computer systems, chips, firmware and software owned, used,
affecting or relied upon by Seller ("Computer Systems") will be usable to,
during and after the calendar year 2000, and will operate during such time
period without error relating to date data, specifically including any error
relating to, or the product of, date data which represents or references
different centuries or more than one century. The Computer Systems will manage
and manipulate data involving dates, including but not limited to single century
formulas and multi-century formulas, and will not cause an abnormally ending
scenario within the application or generate incorrect values or invalid results
involving such date(s).
W. DISCLOSURE. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 2 not misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
Buyers represent and warrant to the Seller that the statements contained in
this Section 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date except as set forth in the
Disclosure Schedule.
A. ORGANIZATION OF THE BUYERS. Broadcasting, Licensing, and Wireless
are corporations duly organized, validly existing, and in good standing under
the laws of Nevada. Broadcasting or an affiliated subsidiary of Cumulus Media
Inc. as of the effective date of the MA Agreement is duly registered to do
business and is in good standing in the State of Oregon.
B. AUTHORIZATION OF TRANSACTION. Buyers have full power and authority
to execute and deliver this Agreement and the Ancillary Agreements and to
perform their obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute legally binding obligations of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
C. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or
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the Ancillary Agreements, nor the consummation of the transactions contemplated
hereby and thereby (including the assignments and assumptions referred to in
Section 1(e) above), will (i) violate any statute, regulation, rule, judgment,
order, decree, stipulation, injunction, charge, or other restriction of any
government, governmental agency, or court to which the Buyers are subject or any
provision of their articles of organization or other charter documents, or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or third party consent under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other arrangement to which the Buyers are a party or by which they are bound or
to which any of their assets is subject. Other than the Assignment Application
described in Section 4(b), the Buyers do not need to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any court
or government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement or the Ancillary Agreements
(including the assignments and assumptions referred to in Section 1 (e) above).
D. BROKERS' FEES. The Buyers have no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
E. QUALIFICATIONS. Licensing is legally and financially qualified
under the Communications Act of 1934, as amended, and the rules, regulations and
policies of the FCC to acquire the FCC Licenses. There is no fact that would,
under present law (including the Communications Act of 1934, as amended) and the
present rules and regulations of the FCC, disqualify Buyers from being the
assignee of the Stations or that would materially delay Commission approval of
the Assignment Application. Should Buyer become aware of any such fact, it will
inform Seller and will use commercially reasonably efforts to remove any such
disqualification. Buyers will not take any action that Buyers know, or have
reason to believe, would result in such disqualification. Buyers have sufficient
financial resources available now, and will on the Closing Date have financial
resources available for the consummation of this transaction.
4. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
A. GENERAL. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
B. ASSIGNMENT APPLICATIONS. Within ten (10) business days after the
date of this Agreement, the Seller and the Buyers shall jointly file with the
FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Stations from the Seller to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in
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connection with the Assignment Application shall be divided equally between the
Parties. Each party shall pay its own attorneys' fees. The Seller and the Buyers
shall thereafter prosecute the Assignment Application with all reasonable
diligence and otherwise use commercially reasonable efforts to obtain the grant
of the Assignment Application as expeditiously as practicable (but neither the
Seller nor the Buyers shall have any obligation to satisfy complainants or the
FCC by taking any steps which would have a material adverse effect upon the
Stations or impose significant costs on such party). If the FCC imposes any
condition on either party to the Assignment Application, such party shall use
commercially reasonable efforts to comply with such condition, provided, that
neither party shall be required hereunder to comply with any condition that
would have a material adverse effect upon the Stations or any Affiliate. The
Seller and the Buyers shall jointly oppose any requests for reconsideration or
judicial review of FCC approval of the Assignment Application and shall jointly
request from the FCC extension of the effective period of FCC approval of the
Assignment Application if the Closing shall not have occurred prior to the
expiration of the original effective period of the FCC Consent. Nothing in this
Section 4(b) shall be construed to limit either party's right to terminate this
Agreement pursuant to Section 9 of this Agreement.
C. NOTICES AND CONSENTS. The Seller will give all notices to third
parties and shall have obtained all third party consents that the Buyers
reasonably may request. Each of the Parties will take any additional action that
may be necessary, proper, or advisable in connection with any other notices to,
filings with, and authorizations, consents, and approvals of governments,
governmental agencies, and third parties that it may be required to give, make,
or obtain.
D. OPERATING STATEMENTS. The Seller shall deliver to the Buyer, for
the Buyer's informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Station through the MA
Commencement Date, within ten (10) days after each such statement is prepared by
or for the Company or the Seller. The Seller shall provide to the Buyer such
written or oral sales, inventory, and pacing reports as Seller may have
available and Buyer may reasonably request.
E. CONTRACTS. The Seller will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(k) of the Disclosure Schedule in any material respect. The Seller will not
without prior written consent of the Buyers enter into any contract outside the
Ordinary Course of Business which involves more than Five Thousand Dollars
($5,000).
F. OPERATION OF STATIONS. The Seller will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. The Seller shall operate the Stations in compliance with the FCC
Licenses and the rules and regulations of the FCC, and the FCC Licenses shall at
all times remain in full force and effect. The Seller shall file with the FCC
all material reports, applications, documents, instruments and other information
required to be filed in connection with the operation of the Stations.
G. PRESERVATION OF STATIONS AND THE ACQUIRED ASSETS. The Seller will
keep its Stations and the Acquired Assets and properties substantially intact,
including its present
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operations, employee relationships, physical facilities, working conditions,
relationships with lessors, licensors, advertisers, insurance, suppliers,
customers, and employees, all of the Confidential Information, call letters and
trade secrets of the Stations, and the FCC Licenses.
H. FULL ACCESS AND CONSULTATION. The Seller will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Stations, to all premises, properties, books, records, contracts, Tax records,
and documents of or pertaining to the Seller. The Seller will consult with the
Buyers' management with a view to informing Buyers' management as to the
operations, management and business of the Stations.
I. NOTICE OF DEVELOPMENTS. The Seller will give prompt written notice
to the Buyers of any material development affecting business or operations of
the Stations or the Acquired Assets or the ability of the Seller to perform
hereunder.
J. EXCLUSIVITY. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) merger or consolidation, (B) acquisition or purchase of securities or
assets, or (C) similar transaction or business combination involving the Seller,
or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any person to do or seek any of the
foregoing. The Seller will notify the Buyers immediately if any person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
K. TITLE INSURANCE, SURVEYS AND ENVIRONMENTAL ASSESSMENTS. The Seller
will obtain with respect to each parcel of Real Estate subject to the Leases, a
leasehold owner's policy issued by a title insurer reasonably satisfactory to
the Seller, in an amount equal to the fair market value of such Real Estate
(including all improvements located thereon), insuring over the standard
pre-printed exceptions and insuring leasehold title to such Real Estate in the
Buyers as of the Closing subject only to the Permitted Real Estate Encumbrances,
together with such endorsements for zoning, contiguity, public access and
extended coverage as the Buyers or their lender reasonably request, (ii) with
respect to each parcel of Owned Real Estate, an owner's policy of title
insurance by a title insurer reasonably satisfactory to the Buyers, in an amount
equal to the fair market value of such Real Estate (including all improvements
located thereon), insuring over the standard pre-printed exceptions and insuring
title to the Owned Real Estate to be vested in the Buyers as of the Closing free
and clear of all liens and encumbrances except Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or its lender reasonably request,
(iii) a current survey of each parcel of Real Estate certified to the Buyers and
its lender, prepared by a licensed surveyor and conforming to current ALTA
Minimum Detail Requirements for Land Title Surveys, disclosing the location of
all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys') which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing; and (iv) with
respect to each parcel of Real Estate, a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably
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satisfactory to the Seller which does not indicate that the Seller and the Real
Estate are not in compliance with any Environmental Law and which shall not
disclose or recommend any action with respect to any condition to be remediated
or investigated or any contamination on the site assessed. The Buyers and Seller
will each pay one-half (1/2) the costs of standard ALTA owner's title policies,
Surveys, and environmental assessments; provided, the Buyers will pay the fees
of any title endorsements.
L. CONTROL OF STATIONS. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application. Except as provided in the Management
Agreement, between the date of this Agreement and the Closing Date, the Buyers
and their employees or agents shall not directly or indirectly control,
supervise, or direct, or attempt to control, supervise, or direct, the operation
of the Stations, and such operation shall be the sole responsibility of and in
the control of the Seller.
M. RISK OF LOSS. The risk of loss, damage, or destruction to any of
the Acquired Assets (other than the FCC Licenses) shall remain with the Seller
until the MA Commencement Date and, to the extent not covered by Seller's
insurance, shall belong to the Buyers between the MA Commencement Date and the
Closing.
5. CONDITIONS TO OBLIGATION TO CLOSE.
A. CONDITIONS TO OBLIGATION OF THE BUYERS. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Sections
2(a), (b), (c), (d), (i), (k), (o), and (p) above shall be true and correct
in all material respects at and as of the Closing Date as though made on
and as of the Closing Date, and all other representations and warranties
set forth in Section 2 shall be true and correct in all material respects
as of the MA Commencement Date as though made on and as of the MA
Commencement Date;
(ii) the Seller shall have performed and complied with all of
its covenants hereunder in all respects through the Closing;
(iii) the Seller shall have procured all of the third party
consents specified in Section 4(d) above and all of the title insurance
commitments (and endorsements), Surveys and environmental site assessments
described in Section 4(o) above;
(iv) no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasijudicial
or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the parties if such transactions are consummated, (B) cause any
of the transactions contemplated by this Agreement to be rescinded
following consummation, or (C) affect
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adversely the right of the Buyers to own, operate, or control the Acquired
Assets (and no such judgment, order, decree, stipulation, injunction, or
charge shall be in effect);
(v) the Seller shall have delivered to the Buyers a
certificate to the effect that each of the conditions specified above in
Sections 5(a)(i) through (iv) is satisfied in all material respects;
(vi) each of the Assignment Applications shall have been
approved by a Final Order of the FCC, and the Buyers shall have received
all governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the
Postclosing Agreement;
(viii) the Buyers shall have received from counsel to the
Seller an opinion with respect to the matters set forth in Exhibit C
attached hereto, addressed to the Buyers and its lender and dated as of the
Closing Date;
(ix) the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes) in accordance
with an allocation schedule to be delivered at closing; and
(x) all actions to be taken by the Seller in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Buyers.
B. CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
(iii) no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such
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judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
(iv) the Buyers shall have delivered to the Seller a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
(v) each of the Assignment Applications shall have been
approved by a Final Order of the FCC, the transaction shall have received
clearance under the HSR Act, and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vi) all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Seller; and
(vii) the Buyers shall have delivered to Seller the Purchase
Price in readily available funds by bank wire, to an account designated by
Seller, on the Closing Date; and
(viii) the Sellers shall have received from counsel to the
Buyers or its general counsel an opinion with respect to the matters set
forth in Exhibit D attached hereto, addressed to the Seller and dated as of
the MA Commencement Date;
6. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the
Closing:
A. GENERAL. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
B. LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection
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with the contest or defense, all at the sole cost and expense of the contesting
or defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 7 below); provided, however, that such
access and cooperation does not unreasonably disrupt the normal operations of
the cooperating party.
C. ADJUSTMENTS. Such items as power and utilities charges, insurance,
real and personal property taxes, prepaid expenses, and deposits shall be
prorated between the Seller and the Buyers as of the Closing Date and as of the
MA Commencement Date in accordance with the foregoing principle. The prorations
and adjustments hereunder shall be made and paid insofar as feasible on the
Closing Date and the MA Commencement Date, with a final settlement sixty (60)
days after such dates, respectively. In the event of any disputes between the
Parties as to such adjustments, the amounts not in dispute shall nonetheless be
paid at such time and such disputes shall be determined by an independent
accounting firm mutually acceptable to both parties and the fees and expenses of
such accounting firm shall be paid one-half (1/2) by the Seller and one-half
(1/2) by the Buyer.
D. CONSENTS. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Seller
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Seller will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Seller's interest in the benefits under any such Assumed Contract,
including performance by the Seller as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
A. SURVIVAL. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b), 2(c), and 2(d) hereof
or relating to the Seller's title to the Acquired Assets) shall survive the
Closing and continue in full force and effect for a period until one (1) year
after the effective date of this Agreement. All of the other representations and
warranties (including the representations and warranties Seller contained in
Sections 2(a), 2(b), 2(c), and 2(d) hereof or relating to the Seller's title to
the Acquired Assets) and all covenants of the Buyers and the Seller contained in
this Agreement shall survive the Closing and continue in full force and effect
for five (5) years.
B. INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE BUYERS. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
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<PAGE> 18
(i) any misrepresentation or breach of any of the Seller's
representations or warranties, and covenants contained in this Agreement or
in any Ancillary Agreement executed and/or delivered by the Seller which is
not cured within any applicable cure period (so long as the Buyers make a
written claim for indemnification within the applicable survival period);
(ii) any breach or nonfulfillment of any agreement or
covenant of the Seller contained herein or in any Ancillary Agreement;
(iii) any Liability of the Seller which is not an Assumed
Liability; and/or
(iv) any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
C. INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE SELLER. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers which is not cured within any applicable cure
period (so long as the Seller makes a written claim for indemnification within
the applicable survival period) or (ii) any breach or nonfulfillment of any
agreement or covenant of the Buyers contained herein or in any Ancillary
Agreement, or (iii) any Assumed Liability.
D. SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the Buyers would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyers
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 10(o) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each of the
Parties acknowledges and agrees that not withstanding the provision in Section
7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for Buyers for a breach of any provision of this
Agreement.
E. LIQUIDATED DAMAGES. The Buyers and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Seller as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(c), the Seller
shall be entitled to retain Eight Million Dollars as liquidated damages without
the need for proof of damages. Seller acknowledges that Buyer has previously
deposited Eight Million Dollars with Seller in connection with the extension of
the letter of intent with respect to this
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transaction and certain other stations to be sold by Seller to Buyer, and in
connection with the execution and commencement of the Management Agreement. This
amount shall represent full satisfaction of liquidated damages owed by the
Buyers and Seller's sole remedy for a failure of the transactions contemplated
hereby to occur as a result of a material breach of the terms of this Agreement
by the Buyers; provided, however, that any liquidated damages received by Seller
in connection with the Option Agreement between Seller and Buyers with respect
to the California radio stations shall be deducted from the liquidated damages
owed by Buyers to Seller under this section.
F. MATTERS INVOLVING THIRD PARTIES. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
G. LIMITATION OF LIABILITY. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the Indemnified Party, in
the aggregate from all indemnifiable events shall exceed Fifty Thousand Dollars
($50,000) and indemnification shall be made by the indemnifying party only to
the extent of such excess over Fifty Thousand Dollars ($50,000); provided,
however, that the Option Money, amounts due under trade agreements, and
adjustments to the Purchase Price shall not be credited toward the $50,000
limitation of liability; provided, further, that the maximum liability for
Adverse Consequences in the aggregate from all indemnifiable events shall be Two
Million Dollars ($2,000,000); and provided, further, that the foregoing
limitations shall not be
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applicable to: (i) the obligations of the Buyer to pay and discharge any
Liability of the Seller to third parties from and after the Closing Date assumed
by the Buyer under the terms of this Agreement; (ii) the obligation of the
Seller to pay and discharge any Liability to third parties not assumed by the
Buyer under the terms of this Agreement, or (iii) the Seller's obligation to
deliver clear title to the Acquired Assets.
8. DEFINITIONS.
"ACQUIRED ASSETS" means all right, title, and interest in and to all of the
assets of the Stations, other than Retained Assets that are used or useful in
the operation of the Stations, wherever located, including but not limited to
all of its (a) real property, leaseholds and other interests of any kind
therein, improvements, fixtures, and fittings thereon (such as towers and
antennae), and easements, rights-of-way, and other appurtenances thereto); (b)
tangible personal property (such as fixed assets, computers, data processing
equipment, electrical devices, monitoring equipment, test equipment, switching,
terminal and studio equipment, transmitters, transformers, receivers, broadcast
facilities, furniture, furnishings, inventories of compact disks, records, tapes
and other supplies, vehicles) and all assignable warranties with respect
thereto; (c) Intellectual Property, goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions; (d) rights under orders and
agreements (including those Barter Agreements and Advertising Contracts
identified on the Disclosure Schedule) now existing or entered into in the
Ordinary Course of Business for the sale of advertising time on the Stations;
(e) Assumed Contracts, indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (f) call letters of the Stations, jingles,
logos, slogans, and business goodwill of the Stations; (g) claims, deposits,
prepayments, refunds, causes of action, chooses in action, rights of recovery
(including rights under policies of insurance), rights of set off, and rights of
recoupment; (h) Licenses and similar rights obtained from governments and
governmental agencies; and (i) FCC logs and records and all other books,
records, ledgers, logs, files, documents, correspondence, advertiser lists, all
other lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, program production materials,
studies, reports, and other printed or written materials; and (j) goodwill of
the Stations.
"ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"ADVERTISING CONTRACTS" has the meaning set forth in Section 2(s), above.
"AFFILIATE" means with reference to any person or entity, another person or
entity controlled by, under the control of or under common control with that
person or entity.
"AS IS" means the condition of the Stations and Acquired Assets on the MA
Commencement Date.
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<PAGE> 21
"ASSIGNMENT APPLICATION" has the meaning set forth in Section 4(b) above.
"ASSUMED CONTRACTS" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(k) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"ASSUMED LIABILITIES" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contract either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liabilities.
"BARTER AGREEMENTS" has the meaning set forth in Section 4(e) above.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"BUYERS" has the meaning set forth in the preface above.
"CASH" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in Section 1(d) above.
"CLOSING DATE" has the meaning set forth in Section 1(d) above.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPUTER SYSTEMS" has the meaning set forth in Section 2(v) above.
"CONFIDENTIAL INFORMATION" means any information concerning the businesses
and affairs of the Seller.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 1 above.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(1).
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"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, the Refuse Act of 1899, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law of any federal,
state, local, or foreign government or agency thereof (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety, or
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means Bank One, NA.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC LICENSES" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations.
"FINAL ORDER" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"INDEMNIFIED PARTY" has the meaning set forth in Section 7(d) above.
"INDEMNIFYING PARTY" has the meaning set forth in Section 7(d) above.
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<PAGE> 23
"INTELLECTUAL PROPERTY" means, with respect to the Stations, all (a)
patents, patent applications, patent disclosures, and improvements thereto, (b)
trademarks, service marks, domain names, trade dress, call letters, logos, and
trade names; (c) all programs, programming materials, copyrights and
registrations and applications for registration thereof, (d) mask works and
registrations and applications for registration thereof, (e) computer software,
data, and documentation, (f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, market and other
research information, drawings, specifications, designs, plans proposals,
technical data, copyrightable works, financial, marketing, and business data,
pricing and cost information, business and marketing plans, and customer and
supplier lists and information), (g) other proprietary rights, and (h) copies
and tangible embodiments thereof (in whatever form or medium).
"KNOWLEDGE" means the current actual knowledge without independent inquiry
or investigation of Jack Standridge, Turner O. Waide, William W. McDonald,
representatives or officers of Seller, and Rick Prusator, President of Keen
Management Group.
"LEASES" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower sites, as described in Section 2(i) of
the Disclosure Schedule.
"LIABILITY" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LICENSES" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"MANAGEMENT AGREEMENT " OR "MA" means the Management Agreement dated as of
the MA Commencement Date.
"MA COMMENCEMENT DATE" means the commencement date of the Management
Agreement.
"MULTI-EMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"OWNED REAL ESTATE" means the real property owned by the Seller as
described in Section 2(i) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"PARTY" has the meaning set forth in the preface above.
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<PAGE> 24
"PERMITTED REAL ESTATE ENCUMBRANCES" shall have the meaning set forth in
Section 2(i), above.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Section 406 and
Code Section 4975.
"PURCHASE PRICE " has the meaning set forth in Section 1(c) above.
"REAL ESTATE" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
"RETAINED ASSETS" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables of the Seller; (iv) Cash and cash
equivalents such as certificates of deposits and marketable securities; (v)
sufficient information to enable Seller to file its tax returns; and (vi)
claims, deposits, prepayments, refunds, causes of action, chooses in action,
rights of recovery (including rights under policies of insurance), rights of set
off, and rights of recoupment.
"RETAINED LIABILITIES" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing (other than those
contemplated by the MA Agreement); (ii) any Liability of the Seller for income,
transfer, sales, use, and other Taxes arising in connection with the
consummation contemplated hereby; (iii) any Liability of the Seller for costs
and expenses incurred in connection with this Agreement or the consummation of
the transactions contemplated hereby (except as set forth in Section 4(i)
relating to Surveys, title commitments and environmental audits and Section 4(b)
with regard to the Assignment Application); or (iv) any Liability or obligation
of the Seller under this Agreement (or under any side agreement between the
Seller on the one hand and the Buyers on the other hand entered into on or after
the date of this Agreement).
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"SELLER" has the meaning set forth in the preface above.
"STATIONS" means the radio broadcast stations KNRQ-FM, KNRQ-AM, and
KZEL-FM, licensed to Eugene, Oregon.
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"SUBSIDIARY," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"SURVEYS" has the meaning set forth in Section 4(o) above.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. TERMINATION.
a. TERMINATION OF AGREEMENT. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing in the event
the Seller is in material breach of any representation, warranty, or
covenant contained in this Agreement; provided, however, that if such
breach is capable of being cured, such breach also remains uncured for
thirty (30) days after notice of breach is received by the Seller from the
Buyers (which 30-day period shall be extended for an additional ninety (90)
days if Seller is proceeding with diligence and in good faith to cure or
correct such default or breach);
(iii) the Seller may terminate this Agreement by giving
written notice to the Buyers at any time prior to the Closing in the event
the Buyers are in material breach of any representation, warranty, or
covenant contained in this Agreement; provided, however that if such breach
is capable being cured, such breach remains uncured for thirty (30) days
after notice of breach is received by the Buyers from the Seller (which
30-day period shall be extended for an additional ninety (90) days if the
Buyers are proceeding with diligence and in good faith to cure or correct
such default or breach,
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other than a breach or default in the delivery of payment);
(iv) the Buyers may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing if the
Closing shall not have occurred on or before the 360th day following the
date of this Agreement by reason of the failure of any condition precedent
under Section 5(a) hereof (unless the failure results primarily from the
Buyers themselves breaching any representation, warranty, or covenant
contained in this Agreement);
(v) the Seller may terminate this Agreement by giving
written notice to the Buyers at any time prior to the Closing if the
Closing shall not have occurred on or before the 360th day following the
date of this Agreement by reason of the failure of any condition precedent
under Section 5(b) hereof (unless the failure results primarily from the
Seller itself breaching any representation, warranty, or covenant contained
in this Agreement);
(vi) the Buyers or the Seller may terminate this Agreement
if any Assignment Application is denied by Final Order.
b. EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 9 above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. MISCELLANEOUS.
a. PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
b. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
c. ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
d. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that (i) Buyers or Seller may assign all
of their right, title, interest in, and obligations under this Agreement to one
or more Affiliates, provided that such assignment shall not eliminate the
liability of the assignor under
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<PAGE> 27
this Agreement, and (ii) Buyers may assign all of their right, title, interest
in, and obligations under this Agreement to a party qualified to serve as an FCC
licensee under the Communications Act of 1934, as amended, and the rules and
regulations thereunder, provided such assignment shall not eliminate the
liability of the assignor under this Agreement; and (iii) Buyers may assign
their indemnification claims and their rights under the warranties and
representations of the Seller to the financial institution(s) providing
financing to the Buyers in connection with this transaction.
e. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
f. HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
McDonald Media Group, Inc.
One Office Park Circle
Suite 300
Birmingham, Alabama 35223
Attn: Mr. Jack Standridge
Phone: (205) 879-0456
Fax: (205) 879-0479
Copy to:
J. Fred Powell, Esquire
Burr & Forman
420 North 20th Street
Suite 3100
Birmingham, Alabama 35203
Phone: (205) 251-3000
Fax: (205) 458-5100
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
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<PAGE> 28
Cumulus Licensing Corp.
Cumulus Wireless Services Inc.
111 E. Kilbourn Avenue
Suite 2700
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Phone: (414) 615-2800
Fax: (414) 615-2880
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
Cumulus Wireless Services Inc.
875 N. Michigan Avenue
Suite 1460
Chicago, Illinois 60611
Attn: Richard J. Bonick
Phone: (312) 867-0091
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
h. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Oregon.
i. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
j. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision
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<PAGE> 29
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
k. EXPENSES. The Buyers and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(o) with respect to Surveys, title commitments and
environmental audits. The Seller will pay all income taxes. The Purchaser will
pay any privilege taxes from the recording of deeds associated with this
transaction.
l. CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
m. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
n. SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Ventura, California, in
any action or proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court, and agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Any Party may
make service on the other Party by sending or delivering a copy of the process
to the Party to be served at the address and in the manner provided for the
giving of notices in Section 10(g) above. Nothing in this Section 10(n),
however, shall affect the right of any Party to serve legal process in any other
manner permitted by law. Each Party agrees that a final judgment in any action
or proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law.
* * * * *
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<PAGE> 30
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as of the
date first above written.
CUMULUS BROADCASTING, INC.
By: /s/ Richard Weening
-----------------------------
Richard Weening
Executive Chairman
CUMULUS LICENSING CORP.
By: /s/ Richard Weening
-----------------------------
Richard Weening
Executive Chairman
CUMULUS WIRELESS SERVICES INC.
By: /s/ Richard Weening
-----------------------------
Richard Weening
Executive Chairman
MCDONALD MEDIA GROUP, INC.
By: /s/ William W. McDonald
-----------------------------
William W. McDonald (printed)
-----------------------------
Title: President
--------------------------
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<PAGE> 31
SCHEDULE A
PURCHASE PRICE. The purchase price for the assets associated with KNRQ-FM
(licensed to Creswel, Oregon), KNRQ-AM and KZEL-FM (licensed to Eugene, Oregon),
shall be Eight Million Dollars ($8,000,000), which shall be payable in cash on
the Closing Date.
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<PAGE> 32
EXHIBIT A
INSTRUMENT OF ASSUMPTION
THIS INSTRUMENT OF ASSUMPTION, dated as of, 1998 from Cumulus
Broadcasting, Inc., a Nevada corporation ("Assignee"); to McDonald Media Group,
Inc., a Delaware company ("Assignor"); is delivered pursuant to Section 1(e) of
that certain Asset Purchase Agreement, dated as of, 1999 (the "Asset Purchase
Agreement"), between Assignee and Assignor. Defined terms used herein without
definition have the meanings assigned to such terms in the Asset Purchase
Agreement.
WHEREAS, by a General Assignment being executed and delivered by Assignor
to Assignee simultaneously herewith pursuant to the Asset Purchase Agreement,
Assignor is selling, transferring, assigning, conveying and delivering to
Assignee substantially all of the assets of Assignor (the "Assets");
NOW THEREFORE, in partial consideration of such sale, transfer, assignment,
conveyance and delivery on and as of the date hereof, subject to and in
accordance with the terms and conditions of the Asset Purchase Agreement,
Assignee hereby assumes and becomes responsible for the following Assumed
Liabilities:
Obligations of Assignor under the licenses, sublicenses, leases,
subleases, contracts, and other arrangements referred to in the
definition of Acquired Assets either: (i) to furnish services, and
other non-Cash benefits to another party after the Closing; or (ii) to
pay for goods, services, and other non-Cash benefits that another
party will furnish to it after the Closing;
provided, however, that the Assumed Liabilities shall not include any other
obligations or liabilities of Assignor, including but not limited to: (i) any
Liability relating to the ownership or operation of the Stations prior to the
Closing; (ii) any Liability of Assignor for income, transfer, sales, use, and
other Taxes arising in connection with the consummation contemplated by the
Asset Purchase Agreement; (iii) any Liability of Assignor for costs and expenses
incurred in connection with the Asset Purchase Agreement or the consummation of
the transactions contemplated hereby; or (iv) any Liability or obligation of
Assignor under the Asset Purchase Agreement (or under any side agreement between
Assignor on the one hand and Assignee on the other hand).
Other than as specifically stated in this Instrument of Assignment,
Assignee assumes no obligation of Assignor. As to any lease, contract,
agreement, permit or other authorization included in the Acquired Assets which
may be assigned only with
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<PAGE> 33
the consent of the other party thereto, this Instrument of Assumption shall be
of no force and effect until such requisite consents shall have been obtained,
whereupon it shall become of full force and effect as of the date of such
consent.
IN WITNESS WHEREOF, Assignee has caused this instrument to be signed in its
name by its officers thereunto duly authorized on the date first above written.
ASSIGNEE:
CUMULUS BROADCASTING, INC.
By:
Richard Weening
Chairman
ASSIGNOR:
MCDONALD MEDIA GROUP, INC.
By:
Its:
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<PAGE> 34
EXHIBIT C
POST-CLOSING AGREEMENT
Agreement dated as of , 1998 among CUMULUS BROADCASTING, INC., a
Nevada corporation, CUMULUS LICENSING CORP., a Nevada corporation, CUMULUS
WIRELESS SERVICES INC., a Nevada corporation (collectively the "Buyers"),
MCDONALD MEDIA GROUP, INC., a Delaware corporation ("Seller"), and CITATION
CABLEVISION, INC., a corporation (the "Seller's Owner"). The Buyers,
the Seller, and the Seller's Owner are referred to collectively herein as the
"Parties."
The Buyers and the Seller are concurrently herewith concluding a
transaction in which the Buyers will purchase the "Acquired Assets" (and accept
responsibility for the "Assumed Liabilities") of the Sellers in return for cash
pursuant to the terms of an Asset Purchase Agreement dated , 1999 (the
"Asset Purchase Agreement"). Certain terms used herein without definition are
used herein as defined in the Asset Purchase Agreement.
The Buyers and the Seller have made certain representations,
warranties, and covenants in the Asset Purchase Agreement which will survive the
Closing for purposes of potential indemnification. The Seller's Owner, however,
may cause the Seller to liquidate and dissolve immediately after the Closing.
The Buyers and the Seller's Owner therefore wish to provide for post-Closing
indemnification against breaches of these representations, warranties, and
covenants and to make certain other covenants among themselves.
Now, therefore, in consideration of the premises and the mutual
promises herein made, the Buyers and the Seller's Owner agree as follows.
1. Representations and Warranties of Seller's Owner. The Seller's Owner
represents and warrants to the Buyers that the statements contained in this
Section 1 are correct and complete as of the date of this Agreement.
(a) Enforceability. The Seller's Owner has full power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Seller's Owner, enforceable in accordance with its terms and conditions.
(b) Absence of Conflicts. Neither the execution and the delivery of
this Agreement by the Seller's Owner, nor his performance of his obligations
hereunder, will (i) violate any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court to which he is subject or (ii ) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest, or other arrangement to which he
is a party or by which he is bound or to which any of his assets is subject.
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<PAGE> 35
2. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of the Asset Purchase
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
Section 4 below.)
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under the Asset Purchase Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Sellers, each of the other Parties will
cooperate with the contesting or defending Party and his or its counsel in the
contest or defense, make available his or its personnel, and provide such
testimony and access to his or its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 3 below.)
(c) Transition. Neither the Seller's Owner nor any of his respective
Affiliates will take any action that primarily is designed or intended to have
the effect of discouraging any lessor, licensor, customer, supplier, or other
business associate of the Seller from maintaining the same business
relationships with the Buyers after the Closing as it maintained with the Seller
prior to the Closing. The Seller's Owner will refer all customer inquiries
relating to the Stations or to the business of the Seller to the Buyers from and
after the Closing. Except with the Buyers' prior written consent, neither the
Seller's Owner nor any of his respective Affiliates will employ or offer to
employ any employee of the Seller for a period of three (3) years after the
Closing Date.
(d) Confidentiality. The Seller's Owner and his Affiliates will treat and
hold as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyers or destroy, at the request and option of the Buyers, all
tangible embodiments (and all copies) of the Confidential Information which are
in his or its possession. In the event that the Seller's Owner or any Affiliate
is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, that
person will notify the Buyers promptly of the request or requirement so that the
Buyers may seek an appropriate protective order or waive compliance with the
provisions of this Section 2(d). If, in the absence of a protective order or the
receipt of a waiver hereunder, the Seller's Owner or any Affiliate is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else
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<PAGE> 36
stand liable for contempt, that person may disclose the Confidential Information
to the tribunal; provided, however, that the disclosing Person shall use his or
its best efforts to obtain, at the reasonable request of the Buyers, an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as the Buyers shall
designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
(e) Covenant Not to Compete. For a period of three (3) years from and
after the Closing Date, neither the Seller's Owner nor any of his respective
Affiliates will engage directly or indirectly in any business that the Seller
conducts as of the Closing Date within (75) seventy-five miles of the Eugene,
Oregon Arbitron market; provided, however, that no owner of less than 1% of the
outstanding stock of any publicly traded corporation shall be deemed to engage
solely by reason thereof in any of its businesses.
3. Remedies for Breaches of This Agreement and the Asset Purchase
Agreement.
(a) Survival. All of the representations, warranties, and covenants
of the Buyers, the Seller, and the Seller's Owner contained in the Asset
Purchase Agreement and in this Agreement shall survive the Closing and continue
in full force and effect to the extent set forth in the Asset Purchase
Agreement.
(b) Indemnification Provisions for Benefit of the Buyers.
(i) In the event the Seller is liquidated or has insufficient
assets to cover claims by Buyers for indemnification under the Asset
Purchase Agreement, Seller's Owner agrees to indemnify the Buyers from and
against the entirety of any Adverse Consequences the Buyers may suffer,
subject to the limitation of liability set forth in Section 7(g) of the
Asset Purchase Agreement, to the extent applicable, resulting from, arising
out of, relating to, in the nature of, or caused by:
(a) any breach of any of the Seller's representations,
warranties, and covenants contained in the Asset Purchase Agreement
(so long as the particular representation, warranty, or covenant
survives the Closing and the Buyers makes a written claim for
indemnification pursuant to Section 3(d) below within the applicable
survival period);
(b) any Liability of the Seller which is not an Assumed
Liability; or
(c) any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under
any common law doctrine of defacto merger or successor liability)
which is not an Assumed Liability.
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<PAGE> 37
(ii) The Seller's Owner agrees to indemnify the Buyers from
and against the entirety of any Adverse Consequences the Buyers may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by the breach of any of the Seller's Owner's
representations, warranties, and covenants contained in Section 1 and
Section 2 above (so long as the particular representation, warranty,
or covenant survives the Closing and the Buyers make a written claim
for indemnification pursuant to Section 3(d) below within the
applicable survival period).
(c) Indemnification Provisions for Benefit of the Seller's
Owner. The Buyers agree to indemnify the Seller's Owner from and against the
entirety of any Adverse Consequences they may suffer in excess of the limitation
of liability set forth in Section 7(g) of the Asset Purchase Agreement, to the
extent applicable, resulting from, arising out of, relating to, in the nature
of, or caused by (i) the breach of any of the Buyers' representations,
warranties, and covenants contained in the Asset Purchase Agreement and this
Agreement (so long as the particular representation, warranty, or covenant
survives the Closing and the Seller's Owner makes a written claim for
indemnification pursuant to Section 3(d) below within the applicable survival
period) or (ii) any Assumed Liability.
(d) Matters Involving Third Parties. If any third party shall
notify any Party (the "Indemnified Party") with respect to any matter which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 3, then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party thereby is
damaged. In the event any Indemnifying Party notifies the Indemnified Party
within 15 days after the Indemnified Party has given notice of the matter that
the Indemnifying Party is assuming the defense thereof, (A) the Indemnifying
Party will defend the Indemnified Party against the matter with counsel of its
choice reasonably satisfactory to the Indemnified Party, (B) the Indemnified
Party may retain separate co-counsel at its sole cost and expense (except that
the Indemnifying Party will be responsible for the fees and expenses of the
separate co-counsel to the extent the Indemnified Party concludes reasonably
that the counsel the Indemnifying Party has selected has a conflict of
interest), (C) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld unreasonably), and
(D) the Indemnifying Party will not consent to the entry of any judgment with
respect to the matter, or enter into any settlement which does not include a
provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
no Indemnifying Party notifies the Indemnified Party within 15 days after the
Indemnified Party has given notice of the matter that the Indemnifying Party is
assuming the defense thereof, however, the Indemnified Party may defend against,
or enter into any settlement with respect to, the matter in any manner it may
deem appropriate.
(e) Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory or common law remedy any Party may have for breach of representation,
warranty, or covenant.
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<PAGE> 38
4. Miscellaneous.
(a) Press Releases and Announcements. Neither the Seller's Owner
nor any of his Affiliates shall issue any press release or announcement relating
to the subject matter of the Asset Purchase Agreement without the prior written
approval of the Buyers; provided, however, that the Seller's Owner may make any
public disclosure he believes in good faith is required by law or regulation (in
which case the Seller's Owner will advise the Buyers prior to making the
disclosure).
(b) No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, that may have related in any way to the subject
matter hereof.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyers and the Seller's Owner; provided, however, that
the Buyers may (i) assign any or all of their rights and interests hereunder to
one or more of their Affiliates and (ii) designate one or more of their
Affiliates to perform their obligations hereunder (in any or all of which cases
the Buyers nonetheless shall remain liable and responsible for the performance
of all of their obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, or if (and then the next business day after) it is
sent by reputable overnight courier, in each case addressed to the intended
recipient at the address for notices (and copies thereof) set forth in the Asset
Purchase Agreement. Any Party may give any notice, request, demand, claim, or
other communication hereunder using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary mail,
or electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
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<PAGE> 39
actually is received by the individual for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Delaware.
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyers and the Requisite Seller's Owner. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(k) Expenses. Each of the Parties will bear his or its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby (except as otherwise
provided herein).
(l) Construction. The language used in this Agreement will be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any Party. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.
(m) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 4(o) below), in addition to any other remedy to which they may
be entitled, at law or in equity. Each of the Parties acknowledges and agrees
that notwithstanding the provision in Section 4(n) with respect to liquidated
damages upon a breach
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<PAGE> 40
of a covenant of this Agreement, money damages would not be an adequate remedy
for a breach of any provision of this Agreement.
(o) Submission to Jurisdiction. Each of the Parties submits to
the jurisdiction of any state or federal court sitting in Ventura, California in
any action or proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court, and agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Any Party may
make service on any other Party by sending or delivering a copy of the process
to the Party to be served at the address and in the manner provided for the
giving of notices in Section 4(g) above. Nothing in this Section 4(o), however,
shall affect the right of any Party to serve legal process in any other manner
permitted by law. Each Party agrees that a final judgment in any action or
proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law.
* * * * *
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<PAGE> 41
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
MCDONALD MEDIA GROUP, INC.
By:
--------------------------------------
Its:
--------------------------------------
"Seller"
CUMULUS BROADCASTING, INC.
By:
--------------------------------------
Its:
--------------------------------------
CUMULUS LICENSING CORP.
By:
--------------------------------------
Its:
--------------------------------------
CUMULUS WIRELESS SERVICES INC.
By:
--------------------------------------
Its:
--------------------------------------
"Buyers"
SELLER'S OWNER:
[ ]
------------
------------------------------------------
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<PAGE> 42
EXHIBIT F
[LETTERHEAD OF SELLER'S COUNSEL]
, 2000
- ------------
Cumulus Broadcasting, Inc.
Cumulus Licensing Corporation
111 E. Kilbourn Avenue
Suite 2700
Milwaukee, WI 53202
Lehman Brothers Commercial Paper Inc.
Gentlemen:
We have acted as counsel to McDonald Media Group, Inc. (the
"Company") in connection with the preparation of the Asset Purchase Agreement
dated [ ], 1999 (the "Agreement"), and have participated on its behalf in
connection with the purchase and sale to be made by you with the Company
pursuant to the Agreement (the "Transaction") and the transfer of control
thereby of radio stations he radio broadcast stations (collectively, the
"Stations"). We have also acted as counsel to in connection with the
preparation of the Post-Closing Agreement dated the date hereof between you and
each of them (the "Post-Closing Agreement"). The Agreement, the Post-Closing
Agreement, the Warranty Deeds, the Assignment of Lease, the General Assignment
and the Instrument of Assumption are referred to in this Opinion Letter as the
Transaction Documents.
In connection with this Opinion Letter, we have examined signed
copies of the Transaction Documents and a certificate as to certain objective
facts executed by an officer of the Company (the "Officer's Certificate"). We
have considered such matters of law and fact, and relied upon such certificates
and other information furnished to us, as we have deemed appropriate as a basis
for our opinions set forth below. We have also relied upon the representations
of the Company made in the Agreement.
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. The law covered by the opinions
expressed herein is limited to the Federal law of the United States and the laws
of the States of Alabama and Oregon.
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<PAGE> 43
Based upon the foregoing, and subject to the qualifications and
exceptions set forth below, we are of the opinion that:
1. The Company is a corporation organized and existing under the laws
of the State of Alabama and is qualified to do business under the laws of
the State of Oregon.
2. The Company has the requisite corporate authority to enter into the
Transaction Documents, perform its obligations thereunder and to own its
properties and carry on its business as presently conducted in the State of
Oregon.
3. The Agreement and each of the other Transaction Documents
contemplated thereby to which the Company is a party have been duly
authorized, executed and delivered by the Company and each is enforceable
against the Company in accordance with its terms.
4. The execution and delivery by the Company of, and performance of its
obligations under the Transaction Documents do not violate the Company's
articles of incorporation or bylaws or, based and relying upon the
Officer's Certificate, breach, or result in a default under, any of the
agreements or instruments identified therein or require the consent or
other action of or filing with any governmental body or agency which has
not been obtained or which has not been made.
5. The Post-Closing Agreement has been duly executed and delivered by
the Company and [ ] and is enforceable against each of them in
accordance with its terms.
6. The Assignment of Leases and the General Assignment convey all of
the Seller's right, title and interest in the Acquired Assets to the Buyer
and the Assignment of Leases is in appropriate form under the laws of the
State of Oregon for recording.
7. The Seller has obtained and validly holds the FCC Licenses listed in
Attachment 1 to this opinion letter. The FCC Licenses listed in Attachment
1 constitute the only authorizations, licenses, and permits of the FCC
required by the FCC or necessary in connection with the present operation
of Stations. The FCC Licenses relating to the Stations listed in Attachment
1 are in full force and effect and are duly issued in the name of, or
validly assigned to, the Seller. The FCC has approved the assignment of the
Licenses to operate the Stations from the Seller to the Buyer, and such
approval is in full force and effect, and is no longer subject to
administrative or judicial review. Upon execution and delivery of the
General Assignment, the Buyer will validly hold the FCC Licenses to operate
the Stations.
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<PAGE> 44
8. The Seller has filed with the FCC all material reports, documents,
instruments, information, and applications required to be filed in
connection with the operation of the Stations pursuant to FCC rules,
regulations and requests. No notice has been issued by the FCC which
permits, or after notice or lapse of time or both, would permit, revocation
or termination of any of the FCC Licenses prior to the respective
expiration dates thereof, or which results or would result in any other
material impairment of any rights thereunder.
9. The Stations are now operating, and prior to the date hereof were
operating, in compliance in all material respects with the Communications
Act of 1934, as amended, and the rules and regulations of the FCC
promulgated thereunder. There is not now issued or outstanding, pending or
threatened, any Notice of Violation, Order to Show Cause, complaint or
investigation or rulemaking proceeding by or before the FCC which might
materially threaten or adversely affect any of the FCC Licenses or result
in any substantial adverse effect upon the operation of the Stations, nor
is there any reason to believe, as of the date hereof, that any of the FCC
Licenses will not be renewed in the ordinary course.
10. The execution, delivery and performance by the Seller of its
obligations under the Transaction Documents (a) is not contrary to the
Communications Act of 1934, as amended, or any of the rules, regulations or
policies of the FCC promulgated thereunder; (b) will not result in any
violation of the present rules, regulations or policies of the FCC; and (c)
will not cause any forfeiture or impairment of any of the FCC Licenses.
This Opinion Letter may be relied upon by you only in
connection with the Transaction and may not be used or relied upon by any other
person for any purpose whatsoever without this firm's prior written consent.
Very truly yours,
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<PAGE> 45
EXHIBIT
---
GENERAL ASSIGNMENT
THIS GENERAL ASSIGNMENT, dated as of , 1999
from MCDONALD MEDIA GROUP, INC., a Delaware corporation (the "Assignor"), to
CUMULUS BROADCASTING, INC., a Nevada corporation, (together with its successors
and assigns, the "Assignee"), is delivered pursuant to Section 1(e) of that
certain Asset Purchase Agreement, dated as of [ ], 1999 (the "Asset
Purchase Agreement"), by and among Assignor and Assignee. Defined terms used
herein without definition have the meanings assigned to such terms in the Asset
Purchase Agreement.
KNOW ALL PERSONS BY THESE PRESENTS that, pursuant to the terms
and conditions of the Asset Purchase Agreement and for the considerations set
forth therein, the receipt and sufficiency of which are hereby acknowledged by
Assignor, Assignor hereby sells, transfers, assigns, conveys and delivers to
Assignee forever all of Assignor's right, title and interest in and to the
following Acquired Assets:
All right, title and interest in and to all of the assets of
Assignor, other than Retained Assets, that are used or useful
in the operation of the Stations, including but not limited to
all of its (a) real property, leaseholds and other interests
of any kind therein, improvements, fixtures, and fittings
thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible
personal property (such as computers, electrical devices,
monitoring equipment, test equipment, switching, terminal and
studio equipment, transmitters, transformers, receivers,
broadcast facilities, inventories of compact disks, records,
tapes and other supplies, and all assignable warranties with
respect thereto; (c) Intellectual Property, goodwill
associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions; (d)
rights under orders and agreements (including those barter
agreements identified on the Disclosure Schedule) now existing
or entered into in the Ordinary Course of Business for the
sale of advertising time on the Stations; (e) contracts,
indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (f) call letters of the
Stations, jingles, logos, slogans, and business goodwill of
the Stations; and (g) FCC logs and records and all other
books, records, ledgers, logs, files, documents,
correspondence, lists, plats, architectural plans, drawings,
and specifications, creative materials, advertising and
promotional materials, studies, reports, and other printed or
written materials.
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<PAGE> 46
provided, however, that the Acquired Assets shall not include (i) the corporate
charter, qualifications to conduct business as a foreign corporation,
arrangements with registered agents relating to foreign qualifications, taxpayer
and other identification numbers, seals, minute books, stock transfer books,
blank stock certificates, and other documents relating to the organization,
maintenance, and existence of the Seller as a corporation; (ii) any of the
rights of Assignor under the Asset Purchase Agreement (or under any side
agreement between Assignor on the one hand and Assignee on the other hand
entered into on or after the date of the Asset Purchase Agreement); (iii)
accounts, notes and other receivables; (iv) Cash; and (v) claims, deposits,
prepayments, refunds, causes of action, choses in action, rights of recovery
(including rights under policies of insurance), rights of set off, and rights of
recoupment (including any such item relating to the payment of Taxes).
TO HAVE AND TO HOLD the same unto Assignee forever. Assignor
hereby constitutes and appoints Assignee the true and lawful attorney of
Assignor, with the full power of substitution, in the name of Assignee or in the
name of Assignor, but by and on behalf of and for the sole benefit of Assignee,
to demand and receive from time to time any and all of the above described
Acquired Assets, and from time to time to institute and prosecute, in the name
of Assignor or otherwise on behalf of Assignor, any and all proceedings at law,
in equity or otherwise which Assignee may deem necessary or desirable in order
to receive, collect, assert or enforce any right, title, benefit or interest of
any kind in or to the above described Acquired Assets and to defend and
compromise any and all actions, suits or proceedings in respect thereof and to
do all such acts and things and execute any instruments in relation thereto as
Assignee may deem advisable. Without limitation of any of the foregoing,
Assignor hereby authorizes any authorized representative of Assignee to endorse
or assign any instrument, contract or chattel paper relating to the above
described Acquired Assets. Assignor agrees that the foregoing appointment made
and the powers hereby granted are coupled with an interest and shall be
irrevocable by Assignee.
All of the terms and provisions of this General Assignment
will be binding upon Assignor and its successors and assigns and will enure to
the benefit of Assignee; provided, that nothing in this General Assignment,
express or implied, is intended or shall be construed to confer upon or give to
any person, firm, partnership, corporation or other entity other than Assignee
any rights or remedies under or by reason of this General Assignment.
* * * * *
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<PAGE> 47
IN WITNESS WHEREOF, Assignor has caused this instrument to be signed in its name
by its representative thereunto duly authorized on the date first written above.
MCDONALD MEDIA GROUP, INC.
By:
-----------------------------------------
Its:
-----------------------------------------
ACCEPTED AND AGREED:
CUMULUS BROADCASTING, INC.
By:
-----------------------------------------
Its:
-----------------------------------------
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<PAGE> 48
EXHIBIT
---
GENERAL ASSIGNMENT
THIS GENERAL ASSIGNMENT, dated as of , 1999
from MCDONALD MEDIA GROUP, INC., a Delaware corporation (the "Assignor"), to
CUMULUS LICENSING CORP., a Nevada corporation (together with its successors and
assigns, the "Assignee"), is delivered pursuant to Section 1(e) of that certain
Asset Purchase Agreement, dated as of , 1999 (the "Asset Purchase
Agreement"), by and among Assignor and Assignee. Defined terms used herein
without definition have the meanings assigned to such terms in the Asset
Purchase Agreement.
KNOW ALL PERSONS BY THESE PRESENTS that, pursuant to the terms
and conditions of the Asset Purchase Agreement and for the considerations set
forth therein, the receipt and sufficiency of which are hereby acknowledged by
Assignor, Assignor hereby sells, transfers, assigns, conveys and delivers to
Assignee forever all of Assignor's right, title and interest in and to the
following Acquired Assets:
All FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the
Sellers with respect to the operations of the Stations and all
applications therefor, together with any renewals, extension
or modifications thereof and additions thereto.
TO HAVE AND TO HOLD the same unto Assignee forever.
All of the terms and provisions of this General Assignment
will be binding upon Assignor and its successors and assigns and will enure to
the benefit of Assignee; provided, that nothing in this General Assignment,
express or implied, is intended or shall be construed to confer upon or give to
any person, firm, partnership, corporation or other entity other than Assignee
any rights or remedies under or by reason of this General Assignment.
* * * * *
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<PAGE> 49
IN WITNESS WHEREOF, Assignor has caused this instrument to be
signed in its name by its representative thereunto duly authorized on the date
first written above.
MCDONALD MEDIA GROUP, INC.
By:
---------------------------------
Its:
---------------------------------
ACCEPTED AND AGREED:
CUMULUS LICENSING CORP.
By:
---------------------------------
Its:
---------------------------------
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<PAGE> 1
EXHIBIT 2.4
OPTION AGREEMENT
This is an OPTION AGREEMENT ("Agreement") entered into as of
this 17th day of December, 1999, among CUMULUS BROADCASTING, INC., a Nevada
corporation, CUMULUS LICENSING CORP., Nevada corporation, CUMULUS WIRELESS
SERVICES INC., a Nevada corporation, their successors and assigns (collectively
"Cumulus" or "Optionee"), and MCDONALD MEDIA GROUP, INC., a Delaware corporation
("McDonald" or "Optionor").
W I T N E S S E T H :
WHEREAS, McDonald is the licensee of radio stations KVEN-AM,
KHAY-FM, KBBY-FM (licensed to Oxnard-Ventura, California), and has an option to
purchase KKSB-FM and KMGQ-FM (licensed to Santa Barbara, California)
(collectively the "Stations") under the rules and regulations of the Federal
Communications Commission ("FCC" or "Commission");
WHEREAS, Cumulus and McDonald have previously entered into a
Management Agreement regarding the Stations (the "Management Agreement"); and
WHEREAS, Cumulus desires to acquire an Option to acquire all
of the assets of McDonald used or intended for use in the Stations' operations,
including all permits, authorizations and licenses issued by the FCC, in
accordance with the terms and conditions set forth below;
WHEREAS, Cumulus and McDonald on this date have entered into
an Escrow Agreement among themselves and AmSouth Bank ("Escrow Agent"), pursuant
to which Escrow Agent shall carry out various duties to implement the sale and
purchase transaction:
NOW, THEREFORE, in consideration of the mutual promises set
forth in this Option Agreement, the parties, intending to be legally bound,
agree as follows:
1. GRANT OF OPTION. McDonald hereby grants to Cumulus an option
(the "Option") to acquire all of the assets of McDonald used or intended for use
in the Stations' operations, including, but not limited to, all permits,
authorizations and licenses issued by the FCC, in accordance with the terms and
conditions set forth below, in consideration of the previous payment by Cumulus
to McDonald the amount of Eight Million and no/100 Dollars ($8,000,000) in cash
by wire transfer of immediately available U.S. funds (the "Option Money") (
which amounts shall not be refundable to Cumulus in the event Cumulus does not
fully exercise the Option hereunde), and for other good and valuable
consideration.
2. TERM. This Option will be for a term commencing with the
Effective Date of this Agreement and ending March 31, 2000 (provided that upon
exercise the provisions of the Asset Purchase Agreement shall apply to the
closing of the transaction contemplated therein). The
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<PAGE> 2
Option may be exercised by Cumulus at any time from March 1, 2000 to and
including March 31, 2000, by the delivery of notice by Cumulus to McDonald as
provided below.
3. SPECIFIC PERFORMANCE. The parties mutually understand and
agree that the assets which are the subject of this Option Agreement are unique
and cannot readily be purchased in the open market. The parties further agree
that this Option, and any extensions of it, will be subject to enforcement by
decree of specific performance.
4. STATION ASSETS. As used in this Option Agreement, the term
"Station Assets" shall have the same meaning as set forth in set forth in the
Asset Purchase Agreement attached hereto as Exhibit A ("the Asset Purchase
Agreement").
5. PURCHASE PRICE. The Purchase Price to be paid McDonald as
consideration for the Station Assets shall be an amount equal to Thirty-Three
Million and no/100 Dollars ($33,000,000) (and towards which Cumulus shall
receive a credit in the amount of the Option Price), payable on the terms and
conditions set forth in the Asset Purchase Agreement.
6. EXERCISE OF THE OPTION
(a) Cumulus may exercise the Option by delivering to
McDonald and to Escrow Agent, within the time period set forth in Section 2,
written Notice that it is exercising the Option. Such written Notice shall be to
McDonald's address set forth in this Option Agreement.
(b) Within five (5) business days of the delivery of
Cumulus's exercise of the Option, Escrow Agent shall date two executed copies of
the Asset Purchase Agreement with the date of the receipt of notice, and shall
deliver one such dated, executed copy of the Asset Purchase Agreement to each of
Cumulus and McDonald, respectively, and shall carry out the other duties of the
Escrow Agent specified in the Escrow Agreement.
7. FCC CONSENT
(a) Joint Application. Closing on the purchase of the
Station Assets is subject to the prior approval of the Federal Communications
Commission. Within five (5) business days of the Escrow Agent's dating and
delivery of the Asset Purchase Agreement to Cumulus and McDonald, McDonald will
deliver to Cumulus, fully executed and with all necessary exhibits, the Seller's
section of FCC Form 314 requesting FCC consent to the assignment to Cumulus
designee of the FCC licenses, permits, and authorizations of the Stations.
Cumulus will combine the same with Buyer's section of the form and file the
application with the FCC (the "Application").
(b) Fees. Cumulus and McDonald each will pay their
respective FCC filing fees required in connection with the Application.
(c) Closing. The Closing on the purchase of the Station
Assets shall take place following FCC approval, at a date and place set forth in
the Asset Purchase Agreement (the
2
<PAGE> 3
"Closing Date").
8. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF MCDONALD.
McDonald represents and warrants that the representations, warranties, and
covenants McDonald makes, as Seller, in the Asset Purchase Agreement are true
and correct as of the date hereof, as if the Asset Purchase Agreement had been
executed and delivered as of the date hereof, and such representations,
warranties, and covenants are incorporated herein by reference. Cumulus is
entitled to rely on such representations, warranties, and covenants as if the
Asset Purchase Agreement had been dated and executed as of the date hereof.
9. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF CUMULUS. Cumulus
represents and warrants that the representations, warranties, and covenants
Cumulus makes, as Buyer, in the Asset Purchase Agreement are true and correct as
of the date hereof, as if the Asset Purchase Agreement had been executed and
delivered as of the date hereof, and such representations, warranties, and
covenants are incorporated herein by reference. McDonald is entitled to rely on
such representations, warranties, and covenants as if the Asset Purchase
Agreement had been dated and executed as of the date hereof.
10. AFFIRMATIVE COVENANTS OF MCDONALD. Subject to the terms of the
Management Agreement, McDonald shall, through the Closing Date, with respect to
the Station:
(a) Operation. Carry on its business and operations,
maintain its facilities and equipment, maintain its inventory of supplies, parts
and other materials and keep its books of account, records, and files in the
ordinary and usual course of business. McDonald will continue to keep and
maintain the Public Inspection Files of the Station in accordance with FCC rules
and regulations. Subject to the terms of the Management Agreement, McDonald
shall continue to operate the Station in all material respects in accordance
with the terms of their FCC Licenses and in compliance in all material respects
with all applicable laws, FCC rules and regulations, the Communications Act and
Standards of Good Engineering Practice. McDonald will promptly execute any
necessary application for renewal of the FCC Licenses. McDonald will deliver to
Buyer, within ten days after filing, copies of any reports, applications or
responses to the FCC or any other governmental entity related to the Stations
which are filed between the date of this Option Agreement and the Closing Date.
(b) Insurance. Maintain in full force and effect through
the Closing Date adequate property damage, liability, and other insurance with
respect to the Station Assets providing coverage against such risks and in at
least the amounts as provided by the insurance policies currently maintained by
McDonald.
(c) Notification.
(i) Give detailed written notice to Cumulus
promptly upon the occurrence of, or upon becoming aware of the impending or
threatened occurrence of, any event that would cause or constitute a breach of
any of McDonald's representations or warranties contained in this Option
Agreement or in any schedule referred to by it.
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<PAGE> 4
(ii) Promptly notify Cumulus in writing upon
becoming aware of any offer or decree or any complaint praying for an order or
decree restraining or enjoining the consummation of this Option Agreement or the
transactions contemplated by it, or upon receiving any notice from any
governmental department, court, agency, or commission of its intention to
institute an investigation into, or institute a suit or proceeding to restrain
or enjoin the consummation of this Option Agreement or such transactions, or to
nullify or render ineffective this Option Agreement or such transactions if
consummated.
(d) Fulfill Conditions. Use its respective best efforts
to fulfill and perform all conditions and obligations on its part to be
fulfilled and performed under this Option Agreement and to cause the
transactions contemplated by this Option Agreement to be fully carried out.
(e) Provide Access. Allow Cumulus and representatives of
Cumulus, upon reasonable notice and during normal business hours, to inspect the
titles, contracts, books of account, records and affairs of the Station. Cumulus
shall be entitled to all such other information concerning the affairs of the
Station as Cumulus shall reasonably request.
(f) Disclose Problems. Disclose to Cumulus any unusual
and significant problems or developments or any competing offers with respect to
the Station or the Station Assets. McDonald shall give prompt written notice to
Cumulus if the Station Assets shall have suffered damage on account of fire,
explosion or other cause of any nature which is sufficient to prevent operation
of the Station.
(g) Disclosure Schedule. At the request of Cumulus at any
time, and in any event no later than March 1, 2000, update the Disclosure
Schedule to accompany the Asset Purchase Agreement.
11. NEGATIVE COVENANTS OF MCDONALD. Prior to the Closing Date, McDonald
will not, without the prior written consent of Cumulus:
(a) No Alienation of Station Assets. Sell, lease,
transfer, or agree to sell, lease, or transfer any Station Assets without notice
to Cumulus and without replacement thereof with a substantially equivalent asset
of substantially equivalent kind, condition, and value.
(b) No Labor and Employment Contracts. Enter into any
contract of employment or collective bargaining agreement, permit any increases
or changes in the compensation or benefits of any of the Stations' employees or
otherwise hire any employee, except to replace any non-managerial or sales
employee whose employment terminates prior to the Closing Date on substantially
the same terms and conditions as the terminated employee, or except as in the
ordinary course of business in accordance with past practices.
(c) No Adverse Permits. Apply to the FCC for any
construction permit or
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<PAGE> 5
modification of license which would materially restrict
the Stations' operations, or make any material change in the Stations'
buildings, leasehold improvements, or fixtures.
(d) Negotiations for Sale. Hold out the Stations for
sale, entertain an offer to purchase the Station Assets or the interests of
McDonald, enter into any negotiations with any party other than Cumulus for the
assignment and transfer of the Station Assets to be assigned and conveyed under
this Option Agreement or the Asset Purchase Agreement, give an option to any
such other party to acquire the Station Assets or interests of McDonald, or
provide any information to any third-party (other than McDonald's employees,
agents, attorneys or accountants) regarding the Stations' finances or equipment.
(e) No New Encumbrances. Create or assume any new
mortgage, security interest or pledge, or subject to lien or encumbrance any of
the Station Assets, whether now owned or later acquired. Any existing security
interests or encumbrances shall be paid in full and cleared of record on or
before the Closing Date.
(f) FCC Obligations. By any act or omission of it, its
directors, officers, employees or agents, surrender, modify, forfeit or fail to
seek timely renewal of the FCC Licenses from the Commission or cause the
Commission to institute any proceedings for revocation, cancellation or
modification of the FCC Licenses, or fail to prosecute with due diligence, or
participate in the prosecution of, the Assignment Application, including all
amendments to it, as necessitated by FCC Rules and Regulations, or as requested
by the Commission Staff.
12. AFFIRMATIVE COVENANTS OF CUMULUS. Subject to the terms of the
Management Agreement, Cumulus shall, through the Closing Date, with respect to
the Stations:
(a) Notification.
(i) Give detailed written notice to McDonald
promptly upon the occurrence of, or upon becoming aware of the impending or
threatened occurrence of, any event that would cause or constitute a breach of
any of Cumulus' representations or warranties contained in this Option Agreement
or in any schedule referred to by it.
(ii) Promptly notify McDonald in writing upon
becoming aware of any offer or decree or any complaint praying for an order or
decree restraining or enjoining the consummation of this Option Agreement or the
transactions contemplated by it, or upon receiving any notice from any
governmental department, court, agency, or commission of its intention to
institute an investigation into, or institute a suit or proceeding to restrain
or enjoin the consummation of this Option Agreement or such transactions, or to
nullify or render ineffective this Option Agreement or such transactions if
consummated.
(b) Fulfill Conditions. Use its respective best efforts
to fulfill and perform all conditions and obligations on its part to be
fulfilled and performed under this Option Agreement and to cause the
transactions contemplated by this Option Agreement to be fully carried out.
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<PAGE> 6
(c) Provide Access. Allow McDonald and representatives of
McDonald, upon reasonable notice and during normal business hours, to inspect
the titles, contracts, books of account, records and affairs of the Stations.
McDonald shall be entitled to all such other information concerning the affairs
of the Stations as McDonald shall reasonably request.
13. NOTICES.
(a) Notices. All notices, demands and requests required
or permitted hereunder shall be in writing and shall be deemed properly given if
delivered personally or sent by certified mail, postage prepaid, return receipt
requested, or by commercial overnight delivery service to the parties at the
following addresses or such other addresses as either party may specify by
written notice to the other. Notices shall be deemed given on the date of
receipt (if delivered in person) or on the date of delivery set forth in the
records of the delivery service (if delivered by commercial delivery service) or
on the return receipt (if delivered by certified mail).
If to McDonald: Mr. Jack Standridge
-------------- McDonald Media Group, Inc.
One Office Park Circle
Suite 300
Birmingham, Alabama 35223
Phone: (205) 879-0456
Fax: (205) 879-0479
with copy to: J. Fred Powell, Esquire
Burr & Forman LLP
P.O. Box 830719
Birmingham, Alabama 35283
Phone: (205) 251-3000
Fax: (205) 458-5100
If to Cumulus: Terrence J. Leahy, Esq.
------------- Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
Cumulus Wireless Services Inc.
111 East Kilbourn Avenue, Suite 2700
Milwaukee, WI 53211
Phone: (414) 615-2800
Fax: (414) 615-2880
(b) Written notification to Counsel or by telephone
facsimile shall not constitute Notice for purposes of this paragraph.
14. NO WAIVER. The failure of any party at any time to require
performance of any
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<PAGE> 7
provision of this Option Agreement shall not affect its right at a later time to
enforce the provision. No waiver by any party of any condition or of any breach
of any term, covenant, representation or warranty contained in this Option
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be in other instances a waiver of any other
condition or breach of any other term, covenant, representation or warranty.
15. ENFORCEMENT. Should either party breach or be in default under
this Option Agreement, the other party shall be entitled to seek judicial
enforcement in law and equity, and such damages as a court of competent
jurisdiction may determine. In any court action, the prevailing party will be
entitled to recovery of reasonable expenses, court costs, and reasonable
attorney's fees.
16. CONTROL OF STATION. During the term of this Option Agreement,
and until such time as the Option has been exercised and the Commission has
approved the assignment of the Licenses for Station from McDonald to Cumulus,
Cumulus shall not control the operation of the Station, but such operation shall
be the responsibility of McDonald.
17. OTHER AGREEMENTS. The parties acknowledge that they have
previously executed a Management Agreement with respect to the Stations; that
simultaneously with the execution of this Option Agreement, they are executing
an Escrow Agreement; and that they are executing (but not dating) duplicate
originals of the Asset Purchase Agreement. Execution and delivery of the Escrow
Agreement and the duplicate originals of the Asset Purchase Agreement are
conditions to the effectiveness of this Option Agreement.
18. AMENDMENTS. The provisions of this Option Agreement may be
amended, terminated or waived only by an instrument in writing executed by both
of the parties or by the party granting a waiver.
19. HEADINGS. The headings contained in this Option Agreement are
for reference purposes only and shall not affect its meaning or interpretation.
20. COUNTERPARTS. This Option Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
21. COMPLIANCE WITH THE COMMUNICATIONS ACT AND FCC RULES. The
parties agree that the provisions of this Option Agreement are subject to all
applicable requirements under the Communications Act of 1934, as amended (the
"Communications Act"), and the rules, regulations and policies of the FCC
promulgated thereunder ("FCC Rules"). The parties agree that all actions
undertaken pursuant to this Option Agreement shall be in full compliance with
the requirements of the Communications Act and the FCC Rules, and the parties
shall take no action which would be in violation thereof. Each party agrees to
execute, and to cooperate in the filing and prosecution of, all applications and
other documents which in the opinion of counsel are
7
<PAGE> 8
necessary to obtain FCC or other governmental approval of any transactions
contemplated by this Option Agreement.
23 FURTHER ASSURANCES. The parties to this Option Agreement
hereby each pledge to the other that they shall take whatever steps are
reasonably necessary, in good faith, and shall use their best efforts to carry
out their obligations under this Option Agreement so that the transactions
contemplated herein shall be consummated in a complete and expeditious manner.
24. OTHER DOCUMENTS. The parties shall execute such other
documents as may be necessary and desirable to the implementation and
consummation of this Option Agreement.
25. ASSIGNMENT. The rights granted to Cumulus by this Option
Agreement may be assigned by Cumulus to an entity which is controlled by or
under common control with Cumulus upon the providing of written Notice to
McDonald, provided that such assignment shall not relieve Cumulus of its
obligations under this Option Agreement.
26. CONSTRUCTION. This Option Agreement shall be construed in
accordance with the laws of the State of Delaware.
[ THE NEXT PAGE IS THE SIGNATURE PAGE ONLY ]
8
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the date and year first above written.
OPTIONOR:
McDONALD MEDIA GROUP, INC.
/s/ William W. McDonald
-------------------------
By: William W. McDonald
Title: President
-------------------------------
OPTIONEES:
CUMULUS BROADCASTING, INC.
/s/ Richard Weening
-------------------------
By: Richard Weening
Executive Chairman
CUMULUS WIRELESS SERVICES INC.
/s/ Richard Weening
-------------------------
By: Richard Weening
Executive Chairman
CUMULUS LICENSING CORP.
/s/ Richard Weening
-------------------------
By: Richard Weening
Executive Chairman
9
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
--------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-94323) of Cumulus Media Inc. of our report dated
January 12, 2000, on our audit of the financial statements of Radio Stations
KHAY-FM, KVEN-AM, KBBY-FM, KKSB-FM, and KMGQ-FM (a division of McDonald Media
Group, Inc.), which appears in the Current Report on Form 8-K of Cumulus Media
Inc. filed January 18, 2000.
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-94323) of Cumulus Media Inc. of our report dated
January 12, 2000, on our audit of the financial statements of KZEL-FM Radio and
KNRQ-AM/FM Radio (a division of McDonald Media Group, Inc.), which appears in
the Current Report on Form 8-K of Cumulus Media Inc. filed January 18, 2000.
/s/ PRICEWATERHOUSECOOPERS LLP
January 18, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-94323) of Cumulus Media Inc. of our report dated
March 10, 1999 relating to the consolidated financial statements of Connoisseur
Communications Partners, L.P., which appears in the Current Report on Form 8-K
of Cumulus Media Inc.
filed January 18, 2000.
/s/ ERNST & YOUNG LLP
January 18, 2000
