<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1998
REGISTRATION NO. 333-61381
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ENTERCOM COMMUNICATIONS CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
PENNSYLVANIA 4832 23-1701044
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
401 CITY AVENUE, SUITE 409
BALA CYNWYD, PENNSYLVANIA 19004
(610) 660-5610
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOSEPH M. FIELD
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
ENTERCOM COMMUNICATIONS CORP.
401 CITY AVENUE, SUITE 409
BALA CYNWYD, PENNSYLVANIA 19004
(610) 660-5610
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
JAMES W. MCKENZIE, JR., ESQ. JOHN C. DONLEVIE, ESQ. JEREMY W. DICKENS, ESQ.
MORGAN, LEWIS & BOCKIUS LLP EXECUTIVE VICE PRESIDENT WEIL, GOTSHAL & MANGES LLP
2000 ONE LOGAN SQUARE AND GENERAL COUNSEL 100 CRESCENT COURT, SUITE 1300
PHILADELPHIA, PENNSYLVANIA 19103 ENTERCOM COMMUNICATIONS CORP. DALLAS, TEXAS 75201
(215) 963-5000 401 CITY AVENUE, SUITE 409 (214) 746-7700
BALA CYNWYD, PENNSYLVANIA 19004
(610) 660-5610
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1998
Shares
[ENTERCOM LOGO]
Entercom Communications Corp.
CLASS A COMMON STOCK
($.01 par value)
------------------
Of the shares of Class A Common Stock, par value $.01 per share (the "Class A
Common Stock"), of Entercom Communications Corp., a Pennsylvania corporation
(the "Company" or "Entercom"), offered hereby, shares are being sold by
the Company and shares are being sold by the Selling Shareholder named
herein under "Principal and Selling Shareholders" (the "Offering"). The Company
will not receive any of the proceeds from the shares of Class A Common Stock
sold by the Selling Shareholder. Prior to the Offering, there has been no public
market for the Class A Common Stock. It is anticipated that the initial public
offering price per share will be between $ and $ per share. For
information relating to the factors to be considered in determining the initial
public offering price to the public, see "Underwriting."
The Company's authorized common stock consists of Class A Common Stock, Class B
Common Stock, par value $.01 per share ("Class B Common Stock"), and Class C
Common Stock, par value $.01 per share ("Class C Common Stock" and, together
with the Class A Common Stock and the Class B Common Stock, the "Common
Stock"). The rights of each share of Common Stock are essentially identical
other than with respect to voting rights. The Class A Common Stock
entitles the holders thereof to one vote per share, the Class B Common
Stock entitles the holders thereof to ten votes per share subject to
certain exceptions and the Class C Common Stock has no voting rights,
except as otherwise required by law. Upon completion of the Offering
(assuming no exercise of the over-allotment option), (i) the holders
of Class A Common Stock will have approximately % of the total
voting power of the outstanding Common Stock, (ii) Joseph M.
Field, the Company's Chairman of the Board and Chief Executive
Officer, and David J. Field, the Company's President, Chief
Operating Officer and Chief Financial Officer, will beneficially
own all the outstanding shares of Class B Common Stock,
representing approximately % of the total voting power of the
outstanding Common Stock and (iii) the Selling Shareholder,
which is an affiliate of Chase Capital Partners, will own %
of the outstanding Class A Common Stock, representing
approximately % of the total voting power of the
outstanding Common Stock. See "Recapitalization, Chase
Conversion and Former S Corporation Status." Subject to
any necessary approval of the Federal Communications
Commission (the "FCC"), the Class B Common Stock and the
Class C Common Stock are convertible in whole or in
part at any time into Class A Common Stock on a
share-for-share basis. See "Description of Capital
Stock."
Application will be made to list the Class A Common Stock on the New York Stock
Exchange.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE CLASS A COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE
13 HEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS COMPANY(1) SHAREHOLDER
-------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Per Share............................................ $ $ $ $
Total(2)............................................. $ $ $ $
</TABLE>
- ---------------
(1) Before deduction of expenses, all of which are payable by the Company,
estimated at $ .
(2) The Company and the Selling Shareholder have granted to the Underwriters an
option, exercisable by Credit Suisse First Boston Corporation for 30 days
from the date of this Prospectus, to purchase a maximum of
additional shares of Class A Common Stock from the Company and
additional outstanding shares of Class A Common Stock from the Selling
Shareholder at the Price to Public less underwriting discounts and
commissions to cover over-allotments, if any. If the option is exercised in
full, the total Price to Public will be $ , Underwriting Discounts
and Commissions will be $ , Proceeds to Company will be $ and
Proceeds to Selling Shareholder will be $ . See "Underwriting."
The shares of Class A Common Stock are offered by the several Underwriters
when, as and if delivered to and accepted by the Underwriters and subject to
their right to reject orders in whole or in part. It is expected that the shares
will be ready for delivery on or about , 1998 against payment in
immediately available funds.
Credit Suisse First Boston
BT Alex. Brown
Goldman, Sachs & Co.
Morgan Stanley Dean Witter
Prospectus dated , 1998
<PAGE> 3
[INSIDE COVER ART]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
------------------
<PAGE> 4
CERTAIN DEFINITIONS
Unless otherwise indicated herein, (i) market ranking by radio advertising
revenue, market radio advertising revenue, market revenue share and the number
of viable radio stations per market have been obtained from Duncan's Radio
Market Guide (1998 ed.) ("Duncan's"); (ii) the Company's revenue rank in the
radio broadcasting industry is derived from Duncan's, as adjusted to reflect the
CBS Transactions (as defined) and assumes the completion of all other announced
mergers in the radio broadcasting industry, (iii) all audience share data and
audience rankings, except where specifically stated to the contrary, have been
derived from surveys of persons, listening Monday through Sunday, 6 a.m. to 12
midnight, in the indicated demographic, as reported by 1998 Spring Arbitron,
Radio Market Reports, The Arbitron Company (copyright 1998) ("Arbitron") and
(iv) all data regarding radio stations assumes the completion of the Completed
Transactions and the CBS Transactions and the acquisition of KSLM-AM. Duncan's
defines "viable stations" as stations which are active and viable competitors
for advertising dollars in their market.
The Company calculates "same station" growth by (i) comparing the
performance of stations operated by the Company throughout a relevant quarter to
the performance of those same stations (whether or not operated by the Company)
in the prior year's corresponding quarter, excluding the effect of barter
revenues and expenses and discontinued operations and (ii) averaging such growth
rates for the period presented.
Unless otherwise indicated herein, (i) "broadcast cash flow" consists of
operating income before depreciation, amortization, net expenses (income) of any
time brokerage agreement (a "TBA") and corporate expenses, (ii) "EBITDA before
net TBA expenses (income)" consists of operating income before depreciation,
amortization and net TBA expenses (income), (iii) "pro forma income before
extraordinary items" consists of the Company's income before extraordinary items
as adjusted to reflect the Company's income during the relevant periods as if
the Company had been a corporation subject to taxation under Subchapter C (a "C
Corporation") of the Internal Revenue Code of 1986, as amended (the "Code"),
assuming an effective tax rate of 38% per annum, instead of a corporation
subject to Subchapter S of the Code (an "S Corporation"), such taxes hereinafter
referred to as "pro forma income taxes" and (iv) "after-tax cash flow" consists
of pro forma income before extraordinary items minus net gain on sale of assets
(net of tax) and plus depreciation, amortization, and the deferred tax provision
(or minus the deferred tax benefit). Although broadcast cash flow, EBITDA before
net TBA expenses (income) and after-tax cash flow are not measures of
performance or liquidity calculated in accordance with generally accepted
accounting principles ("GAAP"), management believes that these measures are
useful to an investor in evaluating the Company because they are widely used in
the broadcast industry to measure a radio company's operating performance.
Nevertheless, none of these measures should be considered in isolation or as a
substitute for operating income, cash flows from operating activities or any
other measure for determining the Company's operating performance or liquidity
that is calculated in accordance with GAAP. Moreover, because these measures are
not calculated in accordance with GAAP, they are not necessarily comparable to
similarly titled measures employed by other companies.
Unless otherwise indicated, pro forma results of operations for the year
ended September 30, 1997 and for the nine months ended June 30, 1997 and 1998
give effect to the following transactions as if each had occurred on October 1,
1996:
- the Recapitalization of the Company, effecting a for one stock split
and the exchange of the Company's prior common stock for Class A Common
Stock and Class B Common Stock as described on page 20,
- the Completed Transactions described on page 24,
- the CBS Transactions described on page 24,
- the S Corporation Distribution described on page 20,
- the Chase Conversion described on page 20, and
- the Offering and the application of the net proceeds to the Company as
described in "Use of Proceeds."
2
<PAGE> 5
Pro forma balance sheet data as of June 30, 1998 give effect to any such
events not yet consummated on that date as if each had occurred on that date.
The Completed Transactions, the First Boston Transaction, the acquisition
of KSLM-AM and the Tampa Transaction will be completed prior to the Offering,
while the Recapitalization and the Chase Conversion will be completed concurrent
with the Offering. The S Corporation Distribution will be declared concurrent
with the Offering but paid subsequent to the Offering. The Second Boston
Transaction will be completed subsequent to the Offering. The Recapitalization,
the S Corporation Distribution and the Chase Conversion are contingent upon the
consummation of the Offering, while the Completed Transactions, the acquisition
of KSLM-AM and the CBS Transactions will occur whether the Offering is
consummated or not.
3
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
THE COMPANY
Entercom, founded in 1968, is the sixth largest radio broadcasting company
in the United States, based on pro forma 1997 gross revenues. The Company owns
and operates 41 stations, 25 FM and 16 AM, in eight markets, including five of
the country's top 30 radio advertising markets. The Company has built the
largest radio station clusters, based on gross revenues, in Seattle and Kansas
City, and one of the three largest clusters in Boston, Portland, Sacramento and
Rochester. On a pro forma basis, the Company had net revenues of $165.1 million,
operating income of $25.6 million and net income of $5.4 million for the twelve
months ended June 30, 1998. In addition, pro forma broadcast cash flow (as
defined in "Certain Definitions") during the same period was $49.5 million.
The Company's net revenues and broadcast cash flow have grown significantly
on both a total and same-station basis. Over the past three fiscal years ending
September 30, net revenues grew at a compound annual rate of 75.1% from an
actual $29.1 million in fiscal 1994 to a pro forma $156.3 million in fiscal
1997. Broadcast cash flow grew at a compound annual rate of 81.8% from an actual
$7.6 million in fiscal 1994 to a pro forma $45.8 million in fiscal 1997. During
this same period the Company's same station net revenues and broadcast cash flow
grew at average annual rates of 15.3% and 38.1%, respectively. In addition, the
Company's after-tax cash flow grew at a compound annual rate of 94.0% during
these three fiscal years.
The Company has built a highly consolidated portfolio of radio stations
concentrated primarily in top 30 markets with above average growth
characteristics. The Company generated 93.5% of its pro forma fiscal 1997 net
revenues from the five top 30 markets in which it operates. Radio advertising
revenues in these five markets have grown at an average annual rate of 10.8%
from 1993 to 1997, which exceeded the average annual growth rate of both the
aggregate radio industry and the top 30 markets. Furthermore, the Company
generated 97.6% of its pro forma fiscal 1997 net revenues from superduopolies,
which the Company defines as clusters of four or more stations in one market.
Management believes that Entercom's superduopolies enable the Company to (i)
amass greater resources to penetrate and capture additional local radio
advertising revenues, (ii) consolidate administrative, engineering and
management functions to reduce costs and (iii) be more flexible in adjusting
formats to serve changing listener needs. In addition, the Company believes that
superduopolies enhance its stations' ability to compete for advertising and
promotional dollars with other media, including television and newspaper.
The following table sets forth certain information about the markets in
which the Company operates:
<TABLE>
<CAPTION>
1993-1997 1997
1997 RADIO MARKET COMPANY'S STATIONS COMPANY
RADIO MARKET AVERAGE ------------------- MARKET
MARKET(1) REVENUE RANK(2) REVENUE GROWTH(2) FM AM TOTAL REVENUE SHARE(2)
- --------- --------------- ----------------- -- -- ----- ----------------
<S> <C> <C> <C> <C> <C> <C>
Boston................ 10 13.7% 2 3 5 19.4%(3)
Seattle(4)............ 13 10.5 5(4) 3 8(4) 40.4(4)
Portland.............. 21 11.8 4 3 7 25.8
Sacramento............ 28 6.7 4 1 5 20.9
Kansas City........... 29 11.3 3 3 6 33.8
--- --- --
Top 30 Markets...... 18 13 31
Rochester............. 55 8.1 3 1 4 21.7
Gainesville/Ocala..... 124 6.5 2 0 2 23.8
Longview/Kelso........ n/a n/a 2 2 4 n/a
--- --- --
All Markets......... 25 16 41
</TABLE>
- ---------------
(1) The Company's stations are in some instances licensed to communities other
than the named principal community for the market.
(2) Source: Duncan's.
(3) Does not include the revenues of WWTM-AM, which competes in the adjacent
Worcester market.
(4) The Company also sells substantially all the advertising time of a sixth FM
station under a joint sales agreement and the revenue from such sales are
included in the Company's Market Revenue Share.
4
<PAGE> 7
ACQUISITION STRATEGY
The Company, through a disciplined acquisition strategy, seeks to (i) build
market leading clusters of stations principally in large growth markets and (ii)
acquire underdeveloped properties that offer the potential for significant
improvements in revenues and broadcast cash flow through the application of the
Company's operational, administrative and/or engineering expertise. As part of
its strategy, the Company has strategically redeployed its asset base by
swapping relatively mature stations in markets where the Company believed it
would be difficult to build leading station clusters in exchange for
underperforming stations in other markets that management believed offered
stronger growth and clustering opportunities. For example, in 1997 the Company
exchanged one station in Houston plus $5 million for three stations in Seattle
and four stations in Kansas City. The Seattle acquisitions solidified the
Company's position as the leading radio operator in that market while the four
stations acquired in Kansas City enabled the Company to enter a new large market
with a significant presence.
The Company has a track record of structuring acquisitions in creative
ways, including being a pioneer of multi-party station swaps. Since October 1,
1996, the Company, in 18 transactions, has acquired or agreed to acquire 36
radio stations and has divested or agreed to divest, for strategic reasons, nine
radio stations. As a result of these transactions, the Company has divested its
stand-alone stations while establishing the largest clusters in Seattle and
Kansas City and building superduopolies in Boston, Portland, Sacramento and
Rochester. The Company believes that its proven record of consummating creative
transactions with many of the leading radio broadcast companies positions it
well to continue to participate in the consolidation occurring in its industry.
OPERATING STRATEGY
The principal components of the Company's operating strategy are set forth
below.
- DEVELOP MARKET LEADING STATION CLUSTERS. The Company has built one of
the three leading clusters in each of its eight markets. To enhance its
competitive position, the Company strategically aligns its stations
within each market to optimize their performance, both individually and
collectively. The Company seeks to maximize the ratings, revenue and
broadcast cash flow of its radio stations by tailoring their programming
to optimize aggregate audience delivery.
- ENHANCE OPERATIONS OF NEWLY ACQUIRED UNDERPERFORMING STATIONS. The
Company has built a long-term track record of acquiring and developing
underperforming stations enabling the Company to achieve superior
same-station revenue and broadcast cash flow growth over the past several
years. The Company's current portfolio includes a significant number of
recently acquired stations which management believes are underdeveloped.
Among the 31 stations which the Company acquired or commenced operations
under TBAs since January 1, 1997, 14 operated with broadcast cash flow
margins below 20%, 11 with margins between 20% and 40% and six with
margins over 40% during calendar 1997. By comparison, among the nine
stations which the Company owned or operated prior to 1997, two operated
with margins under 20%, one between 20% and 40% and six over 40% during
calendar 1997.
- BUILD STRONGLY-BRANDED FRANCHISES. The Company analyzes market research
and competitive factors to identify the format opportunity, music
selection and rotation, presentation and other key programming attributes
that it believes will best position each station to develop a distinctive
identity and to strengthen the stations' local "brand" or "franchise"
value. The Company believes that this will enable it to maximize audience
share and consequently, its revenues and broadcast cash flow.
- LEVERAGE STATION CLUSTERS TO CAPTURE GREATER SHARE OF ADVERTISING
REVENUE. The Company believes radio will continue to gain revenue share
from other media by capitalizing on its enhanced competitive platform. As
a result of deregulation in the radio broadcasting industry, operators
can now create radio station clusters that have the critical mass of
audience reach and marketing resources necessary to pursue incremental
advertising and promotional revenues more aggressively. The Company has
begun to capitalize on this opportunity by developing specialized teams
in Seattle, Portland, Sacramento and
5
<PAGE> 8
Kansas City to work with non-traditional radio advertisers to create and
develop marketing programs and solutions.
- MAXIMIZE TECHNICAL CAPABILITIES. The Company seeks to operate stations
with the strongest signals in their respective markets. In addition, the
Company, on various occasions, has identified opportunities to acquire
and upgrade low-powered or out-of-market stations and transform them into
competitive signals, thus increasing their value significantly.
- RECRUIT, DEVELOP, MOTIVATE AND RETAIN SUPERIOR EMPLOYEES. The Company
believes that station operators differentiate themselves from their peers
primarily through their ability to recruit, develop, motivate and retain
superior management, programming and sales talent. Accordingly, the
Company strives to establish a compelling corporate structure which is
attractive to high performers.
COMPLETED AND CBS TRANSACTIONS
Since October 1, 1996, the Company, in 18 transactions, has acquired or
agreed to acquire 36 radio stations and, for strategic reasons, has divested or
agreed to divest, nine radio stations. These transactions consist of the
Completed Transactions, the CBS Transactions and the acquisition of KSLM-AM. See
"Completed Transactions" for a complete list of the Completed Transactions.
In August 1998, the Company entered into three agreements with CBS Radio,
Inc. ("CBS") under which it will: (i) purchase WRKO-AM and WEEI-AM in Boston for
$82.0 million in cash (the "First Boston Transaction"); (ii) sell WLLD-FM and
WYUU-FM in Tampa for $75.0 million in cash (the "Tampa Transaction"); and (iii)
purchase WAAF-AM and WEGQ-FM in Boston and WWTM-AM in Worchester for $58.0
million in cash (the "Second Boston Transaction" and, together with the First
Boston Transaction, the "Boston Transactions"). Collectively, the Tampa
Transaction and the Boston Transactions are referred to as the "CBS
Transactions." The Boston Transactions will enable the Company to establish a
strong Boston presence with a 19.4% market share. The Company anticipates
closing the First Boston Transaction and the Tampa Transaction prior to the
consummation of the Offering. The Company anticipates that the Second Boston
Transaction will close within one year. The Company began operating the Boston
stations and CBS began operating the Tampa stations under time brokerage
agreements in September 1998. See "CBS Transactions."
RISK FACTORS
Prospective purchasers of Class A Common Stock should consider carefully
all of the information set forth in this Prospectus and, in particular, should
evaluate the specific factors set forth under the caption "Risk Factors"
beginning on page 13 of this Prospectus. These factors include, among other
things: (i) the highly competitive nature of the radio broadcasting industry;
(ii) the Company's dependence upon its Seattle radio stations; (iii)
management's continued control over the Company's operations; (iv) the risks
associated with the Company's acquisition strategy; and (v) the Company's
vulnerability to changes in federal legislation or FCC regulatory policy.
6
<PAGE> 9
THE OFFERING
<TABLE>
<S> <C> <C>
Class A Common Stock offered hereby....... shares by the Company(1)
shares by the Selling Shareholder
---------
shares of Class A Common Stock
=========
Common Stock to be outstanding after the
Offering................................ shares of Class A Common Stock(1)(2)
shares of Class B Common Stock
---------
shares of Common Stock
=========
</TABLE>
Voting Rights................. The Class A Common Stock and the Class B Common
Stock vote together as a single class on all
matters submitted to a vote of shareholders.
Each share of Class A Common Stock is entitled
to one vote and each share of Class B Common
Stock is entitled to ten votes, except (i) any
share of Class B Common Stock not voted by
either Joseph M. Field or David J. Field, in
their own right or by proxy, is entitled to
only one vote, (ii) the holders of Class A
Common Stock, voting as a separate class, are
entitled to elect two directors (the "Class A
Directors"), (iii) with respect to any proposed
"going private" transaction (as defined in Rule
13e-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), each
share of Class A Common Stock and Class B
Common Stock shall be entitled to one vote and
(iv) as otherwise required by law. The Class C
Common Stock has no voting rights except as
otherwise required by law. Upon completion of
the Offering, the holders of the Class A Common
Stock will have approximately % of the
total voting power of the outstanding Common
Stock, and the Class B Common Stock will be
held solely by Joseph M. Field and David J.
Field, who will have approximately % of
the total voting power of the outstanding
Common Stock. See "Risk Factors -- Control of
the Company," "Description of Capital Stock"
and "Principal and Selling Shareholders."
Other Rights.................. Each class of Common Stock has the same rights
to dividends and distributions upon
liquidation. Subject to prior FCC approval in
certain circumstances, shares of Class B Common
Stock and Class C Common Stock are convertible
in whole or in part at any time into shares of
Class A Common Stock on a share-for-share
basis. Shares of Class B Common Stock
automatically convert into shares of Class A
Common Stock on a share-for-share basis upon a
transfer to any person other than Joseph M.
Field, David J. Field or a Field Shareholder
(as defined). Any shares of Class A Common
Stock owned by a Regulated Entity (as defined)
may be converted at the option of the holder
into shares of Class C Common Stock on a
share-for-share basis. See "Description of
Capital Stock."
- ---------------
(1) Excludes shares of Class A Common Stock issuable pursuant to the
Underwriters' over-allotment option.
(2) Includes shares of Class A Common Stock issued in the Chase
Conversion. Excludes shares of Class A Common Stock currently
issuable upon exercise of the outstanding stock options issued under the
Company's 1998 Equity Compensation Plan (as defined) at a weighted average
exercise price of $ per share. See "Management -- 1998 Equity
Compensation Plan."
7
<PAGE> 10
Dividend Policy............... The Company intends to retain future earnings
for use in the Company's business and does not
anticipate declaring or paying any cash or
stock dividends on shares of its Common Stock
in the foreseeable future. In addition, the
Company's ability to declare dividends is
restricted under the Credit Facility (as
defined).
Use of Proceeds............... To repay revolving indebtedness of the Company.
See "Use of Proceeds."
Proposed NYSE Ticker Symbol... "ETM"
8
<PAGE> 11
SUMMARY HISTORICAL FINANCIAL DATA
The following table presents summary historical financial data of the
Company for the periods indicated. The following financial information should be
read in conjunction with the Consolidated Financial Statements of the Company
and the related notes included elsewhere in this Prospectus.
The comparability of the historical financial data reflected herein has
been significantly impacted by acquisitions and dispositions. The information
presented below is qualified in its entirety by, and should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and "Unaudited Pro Forma Financial Information,"
and, in each case, the related notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, JUNE 30,
----------------------------------- ------------------------
1995 1996 1997 1997 1998
-------- -------- ----------- ----------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues.............................. $ 35,893 $ 48,675 $ 93,862 $ 64,540 $ 92,086
Station operating expenses................ 24,061 31,659 61,280 41,757 61,617
Depreciation and amortization............. 2,225 2,960 7,685 3,874 8,959
Corporate general and administrative
expenses................................ 2,535 2,872 3,249 2,259 3,042
Net TBA expenses (income)................. 603 (879) (476) (476) 2,273
Operating income.......................... 6,469 12,063 22,124 17,126 16,195
Interest expense.......................... 1,992 5,196 11,388 8,454 9,175
Gain on sale of assets.................... 228 119 197,097 197,097 8,791
Income before income taxes and
extraordinary items..................... 4,805 7,053 206,329 204,189 16,036
Pro forma income taxes(1)................. 1,826 2,680 78,405 77,592 6,094
Pro forma income before extraordinary
items(1)................................ 2,979 4,373 127,924 126,597 9,942
Pro forma earnings per share before
extraordinary items(1)(2)...............
Pro forma weighted average common shares
outstanding(2)..........................
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents................. $ 1,564 $ 5,292 $ 3,626 $ 6,094
Intangibles and other assets.............. 29,548 119,269 300,029 428,542
Total assets.............................. 52,209 150,575 364,743 513,445
Long-term debt, including current
portion................................. 46,554 136,642 144,427 280,633
Total shareholders' equity................ 828 5,079 208,089 219,175
OTHER DATA:
Broadcast cash flow(3).................... $ 11,832 $ 17,016 $ 32,582 22,783 30,469
Broadcast cash flow margin(4)............. 33.0% 35.0% 34.7% 35.3% 33.1%
EBITDA before net TBA expenses
(income)(5)............................. $ 9,297 $ 14,144 $ 29,333 20,524 27,427
After-tax cash flow(6).................... 4,172 7,923 14,947 9,194 14,040
Cash flows related to:
Operating activities.................... 1,182 12,773 8,859 (1,518) 16,629
Investing activities.................... (28,636) (96,502) (13,695) (6,950) (146,545)
Financing activities.................... 27,505 87,457 3,170 5,482 132,384
</TABLE>
- ---------------
(1) Throughout the periods presented, the Company had elected to be taxed under
Subchapter S of the Code, and comparable provisions of certain state tax
laws. The amounts shown reflect pro forma provisions for state and federal
income taxes (at an assumed combined rate of 38% per annum) as if the
Company had been taxed under Subchapter C of the Code throughout the periods
presented. The Company intends to revoke its election to be taxed as an S
Corporation immediately prior to the consummation of the Offering.
(2) Reflects the effect of the for one stock split to be effected as part of
the Recapitalization.
9
<PAGE> 12
(3) Broadcast cash flow consists of operating income before depreciation,
amortization, net TBA expenses (income) and corporate expenses. Although
broadcast cash flow is not a measure of performance or liquidity calculated
in accordance with GAAP, management believes that it is useful to an
investor in evaluating the Company because it is a measure widely used in
the broadcast industry to measure a radio company's operating performance.
Nevertheless, it should not be considered in isolation or as a substitute
for operating income, cash flows from operating activities or any other
measure for determining the Company's operating performance or liquidity
that is calculated in accordance with GAAP. Moreover, because broadcast cash
flow is not a measure calculated in accordance with GAAP, this measure is
not necessarily comparable to similarly titled measures employed by other
companies.
(4) Broadcast cash flow margin represents broadcast cash flow as a percentage of
net revenue.
(5) EBITDA before net TBA expenses (income) consists of operating income before
depreciation, amortization and net TBA expenses (income). Although EBITDA
before net TBA expenses (income) is not a measure of performance or
liquidity calculated in accordance with GAAP, management believes that it is
useful to an investor in evaluating the Company because it is a measure
widely used in the broadcast industry to measure a radio company's operating
performance. Nevertheless, it should not be considered in isolation or as a
substitute for operating income, cash flows from operating activities or any
other measure for determining the Company's operating performance or
liquidity that is calculated in accordance with GAAP. Moreover, because
EBITDA before net TBA expenses (income) is not a measure calculated in
accordance with GAAP, this measure is not necessarily comparable to
similarly titled measures employed by other companies.
(6) After-tax cash flow consists of pro forma income before extraordinary items
minus net gain on sale of assets (net of tax) and plus depreciation,
amortization, and the deferred tax provision (or minus the deferred tax
benefit). Although after-tax cash flow is not a measure of performance or
liquidity calculated in accordance with GAAP, management believes that it is
useful to an investor in evaluating the Company because it is a measure
widely used in the broadcast industry to measure a radio company's operating
performance. Nevertheless, it should not be considered in isolation or as a
substitute for operating income, cash flows from operating activities or any
other measure for determining the Company's operating performance or
liquidity that is calculated in accordance with GAAP. Moreover, because
after-tax cash flow is not a measure calculated in accordance with GAAP,
this measure is not necessarily comparable to similarly titled measures
employed by other companies.
10
<PAGE> 13
SUMMARY PRO FORMA FINANCIAL DATA
The following table presents summary historical and pro forma financial
data of the Company for the periods indicated. The pro forma operating and other
data reflect adjustments to the summary historical data of the Company to
illustrate the effects of the Recapitalization, the Completed and CBS
Transactions, the S Corporation Distribution, the Chase Conversion, the Offering
and the application of the net proceeds therefrom as described in "Use of
Proceeds" as if each had occurred on October 1, 1996. The pro forma balance
sheet data as of June 30, 1998 give effect to any such events not yet
consummated on that date as if each had occurred on that date. The summary pro
forma financial data are not necessarily indicative of either future results of
operations or the results that would have occurred if those transactions had
been consummated on the indicated dates. The following financial information
should be read in conjunction with the Consolidated Financial Statements, the
Unaudited Pro Forma Financial Information and, in each case, the related notes
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 JUNE 30, 1997 JUNE 30, 1998
---------------------- ----------------------- ----------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ----------- --------- ---------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues........................... $ 93,862 $156,305 $ 64,540 $114,164 $ 92,086 $123,001
Station operating expenses............. 61,280 110,523 41,757 80,791 61,617 85,869
Depreciation and amortization.......... 7,685 18,751 3,874 12,710 8,959 13,941
Corporate general and administrative
expenses............................. 3,249 2,895 2,259 2,013 3,042 3,104
Net TBA expenses (income).............. (476) (476) 2,273
Operating income....................... 22,124 24,136 17,126 18,650 16,195 20,087
Interest expense....................... 11,388 15,010 8,454 11,258 9,175 11,258
Gain on sale of assets................. 197,097 205,565 197,097 205,585 8,791 291
Income before income taxes and
extraordinary items.................. 206,329 214,945 204,189 213,139 16,036 9,280
Pro forma income taxes(1).............. 78,405 81,679 77,592 80,992 6,094 3,527
Pro forma income before extraordinary
items(1)............................. 127,924 133,266 126,597 132,147 9,942 5,753
Pro forma earnings per share before
extraordinary items(1)(2)............ $ $ $ $ $ $
Pro forma weighted average common
shares outstanding(2)................
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents................................................................ $ 6,094 $ 5,984
Intangibles and other assets............................................................. 428,542 564,058
Total assets............................................................................. 513,445 654,126
Long-term debt, including current portion................................................ 280,633 217,616
Total shareholders' equity............................................................... 219,175 341,523
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 JUNE 30, 1997 JUNE 30, 1998
---------------------- ----------------------- ----------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ----------- --------- ---------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Broadcast cash flow(3)................. $ 32,582 $ 45,782 $ 22,783 $ 33,373 $ 30,469 $ 37,132
Broadcast cash flow margin(4).......... 34.7% 29.3% 35.3% 29.2% 33.1% 30.2%
EBITDA before net TBA expenses
(income)(5).......................... $ 29,333 $ 42,887 $ 20,524 $ 31,360 $ 27,427 $ 34,028
After-tax cash flow(6)................. 14,947 9,194 14,040
Cash flows related to:
Operating activities................. 8,859 17,902 (1,518) 5,695 16,629 15,299
Investing activities................. (13,695) (221,994) (6,950) (215,249) (146,545) (2,876)
Financing activities................. 3,170 202,316 5,482 206,458 132,384 (9,955)
</TABLE>
- ---------------
(1) Throughout the periods presented, the Company had elected to be taxed under
Subchapter S of the Code, and comparable provisions of certain state tax
laws. The amounts shown reflect pro forma provisions for state and federal
income taxes (at an assumed combined rate of 38% per annum) as if the
Company had been taxed under Subchapter C of the Code throughout the periods
presented. The Company intends to revoke its election to be taxed as an S
Corporation immediately prior to the consummation of the Offering.
(2) Reflects the effect of the for one stock split to be effected as
part of the Recapitalization.
(3) Broadcast cash flow consists of operating income before depreciation,
amortization, net TBA expenses (income) and corporate expenses. Although
broadcast cash flow is not a measure of performance or liquidity calculated
in accordance with GAAP, management believes that it is useful to an
investor in evaluating the Company because it is a measure widely used in
the broadcast industry to measure a radio company's operating performance.
Nevertheless, it should not be considered in isolation or as a substitute
for operating income, cash flows from operating activities or any other
measure for determining the Company's operating performance or liquidity
that is calculated in accordance with GAAP. Moreover, because broadcast cash
flow is not a measure calculated in accordance with GAAP, this measure is
not necessarily comparable to similarly titled measures employed by other
companies.
(4) Broadcast cash flow margin represents broadcast cash flow as a percentage of
net revenue.
(5) EBITDA before net TBA expenses (income) consists of operating income before
depreciation, amortization and net TBA expenses (income). Although EBITDA
before net TBA expenses (income) is not a measure of performance or
liquidity calculated in accordance with GAAP, management believes that it is
useful to an investor in evaluating the Company because it is a measure
widely used in the broadcast industry to measure a radio company's operating
performance. Nevertheless, it should not be considered in isolation or as a
substitute for operating income, cash flows from operating activities or any
other measure for determining the Company's operating performance or
liquidity that is calculated in accordance with GAAP. Moreover, because
EBITDA before net TBA expenses (income) is not a measure calculated in
accordance with GAAP, this measure is not necessarily comparable to
similarly titled measures employed by other companies.
(6) After-tax cash flow consists of pro forma income before extraordinary items
minus net gain on sale of assets (net of tax) and plus depreciation,
amortization and the deferred tax provision (or minus the deferred tax
benefit). Although after-tax cash flow is not a measure of performance or
liquidity calculated in accordance with GAAP, management believes that it is
useful to an investor in evaluating the Company because it is a measure
widely used in the broadcast industry to measure a radio company's operating
performance. Nevertheless, it should not be considered in isolation or as a
substitute for operating income, cash flows from operating activities or any
other measure for determining the Company's operating performance or
liquidity that is calculated in accordance with GAAP. Moreover, because
after-tax cash flow is not a measure calculated in accordance with GAAP,
this measure is not necessarily comparable to similarly titled measures
employed by other companies.
12
<PAGE> 15
RISK FACTORS
This Prospectus contains forward-looking statements. The words
"anticipate," "believe," "expect," "plan," "intend," "estimate," "project,"
"foresee," "will," "could," "may" and similar expressions are intended to
identify such forward-looking statements. Such statements reflect the Company's
current views with respect to future events and financial performance and
involve risks and uncertainties, including without limitation the risks
described in "Risk Factors." Should one or more of these risks or uncertainties
occur, or should underlying assumptions prove incorrect, actual results may vary
materially from those indicated. Investors should consider carefully the
following risk factors, in addition to the other information contained in this
Prospectus, before purchasing the shares of Class A Common Stock offered hereby.
COMPETITION
Radio broadcasting is a highly competitive business. The Company's radio
stations compete for audiences and advertising revenues within their respective
markets directly with other radio stations, as well as with other media, such as
newspapers, magazines, television, outdoor advertising and direct mail. Audience
ratings and market shares are subject to change, and any adverse change in a
particular market could have a material adverse effect on the revenue of
stations located in that market. While the Company already competes in some of
its markets with other stations with similar programming formats, if another
radio station in a market were to convert its programming format to a format
similar to one of the Company's stations, if a new station were to adopt a
comparable format or if an existing competitor were to strengthen its
operations, the Company's stations could suffer a reduction in ratings and/or
advertising revenue and could incur increased promotional and other expenses.
Other radio broadcasting companies may enter into the markets in which the
Company operates or may operate in the future. Such companies may be larger and
have more financial resources than the Company. Although the Company believes
that substantially all of its radio stations are positioned to compete
effectively in their respective markets, there can be no assurance that any such
station will be able to maintain or increase its current audience ratings and
advertising revenues.
BUSINESS RISKS
Future operations are further subject to many business risks which could
have a material adverse effect on the Company. These variables include the
following: economic conditions, both generally and relative to the radio
broadcasting industry; shifts in population and other demographics; the level of
competition for advertising dollars with other radio stations, television
stations and other entertainment and communications media; fluctuations in
operating costs; technological changes and innovations; changes in labor
conditions; and changes in governmental regulations and policies and actions of
federal regulatory bodies, including the United States Department of Justice
("DOJ"), the Federal Trade Commission (the "FTC") and the FCC. Given the
inherent unpredictability of these variables, the Company cannot, with any
degree of certainty, predict what effect, if any, these variables will have on
future operations.
NEW TECHNOLOGIES
Radio broadcasting is subject to competition from new media technology that
are being developed or introduced, including, without limitation, the delivery
of audio programming by cable television systems, digital audio radio services
("DARS"), the Internet, satellite, television, personal communications services
("PCS") and the possible authorization by the FCC of a new service of
microbroadcasting (low powered, limited coverage radio stations). DARS plans to
deliver by satellite to nationwide audiences multi-channel, multi-format digital
radio services with sound quality equivalent to compact discs. The Company
cannot predict the effect, if any, that any such new technology may have on the
radio broadcasting industry or the Company. See "Business -- Competition;
Changes in Broadcasting Industry."
IMPORTANCE OF SEATTLE RADIO STATIONS
In the fiscal year ended September 30, 1997, the Company's eight radio
stations in Seattle and the activities of the Company pursuant to a joint sales
agreement ("JSA") for a ninth radio station generated
13
<PAGE> 16
approximately 49.2% of the Company's net revenues and 54.6% of the Company's
broadcast cash flow. On a pro forma basis after giving effect to the Completed
and CBS Transactions, the Seattle radio stations would have generated
approximately 34.9% of the Company's net revenues and 39.5% of the Company's
broadcast cash flow in the fiscal year ended September 30, 1997. A significant
decline in net revenues and broadcast cash flow from the Company's stations in
this market, as a result of a ratings decline or otherwise, could have a
material adverse effect on the Company's financial position and results of
operations. In addition, given the relatively high percentage of the Company's
total revenue and broadcast cash flow derived from the Seattle area, adverse
events or conditions that affect the Seattle economy could have a more adverse
effect on the profitability of the Company than if the Company's operations were
more geographically diverse.
RISKS OF ACQUISITION STRATEGY
The Company pursues growth, in part, through the acquisition of individual
radio stations and groups of radio stations. Consummation of future acquisitions
is subject to various conditions, including the FCC and other regulatory
approval, and intense scrutiny under federal and state antitrust laws. The
Company cannot predict whether it will be successful in identifying future
acquisition opportunities, consummating such acquisitions or what the
consequences of any acquisitions will be. Accordingly, no assurances can be
given that any pending or future acquisitions (including the CBS Transactions)
will be consummated or that, if completed, they will be successful. The
Company's acquisition strategy involves numerous risks, including increasing
debt service requirements, difficulties in the integration of operations and
systems and the management of a large and geographically diverse group of
stations, the diversion of management's attention from other business concerns
and the potential loss of key employees of acquired stations. There can be no
assurance that the Company's management will be able to manage effectively the
resulting business or that such acquisitions will benefit the Company. Depending
on the nature, size and timing of future acquisitions, the Company may be
required to raise additional financing necessary to consummate the future
acquisitions. There can be no assurance that such financing will be permitted
under the agreements that govern the outstanding indebtedness of the Company or
any other loan agreements or indebtedness to which the Company may become a
party. Moreover, there can be no assurance that such additional financing will
be available to the Company on terms acceptable to its management. Radio
broadcasting is a rapidly consolidating industry, with many companies seeking to
consummate acquisitions and increase their market share. In this environment,
the Company competes and will continue to compete with many other buyers for the
acquisition of radio stations. Some of those competitors may be able to outbid
the Company for acquisitions because they have greater financial resources. As a
result of these and other factors, there can be no assurance that future
acquisitions will be available on attractive terms. The Company's failure to
implement its acquisition strategy as a result of the factors described above,
or for any reasons, could have a material adverse effect on the value of the
Class A Common Stock or the Company's operations as a whole. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
CONTROL OF THE COMPANY
Upon completion of the Offering, the purchasers of the Class A Common Stock
offered hereby will own approximately % of the outstanding Class A Common
Stock, representing approximately % of the total voting power of the
outstanding Common Stock ( % of the outstanding Class A Common Stock,
representing % of the total voting power if the Underwriters'
over-allotment option is exercised in full). Upon completion of the Offering,
Joseph M. Field, the Company's Chairman of the Board and Chief Executive Officer
and David J. Field, the Company's President, Chief Operating Officer and Chief
Financial Officer, will beneficially own all of the outstanding Class B Common
Stock, representing approximately % of the total voting power of the
outstanding Common Stock ( % of the total voting power if the Underwriters'
over-allotment option is exercised in full). Shares of Class B Common Stock are
transferable only to Field Shareholders, and upon any other transfer they
convert automatically into shares of Class A Common Stock on a share-for-share
basis. Shares of Class B Common Stock shall be entitled to ten votes only when
they are voted by Joseph M. Field or David J. Field, subject to certain
exceptions where they are entitled to one vote. Joseph M. Field will be able to
control the vote on all matters submitted to the vote of
14
<PAGE> 17
shareholders and therefore, will be able to direct the management and policies
of the Company, except with respect to those matters where the shares of Class B
Common Stock are only entitled to one vote and those matters requiring a class
vote under the provisions of the Company's Articles of Incorporation, bylaws or
applicable law, including, without limitation, the election of the two Class A
directors. In addition, without the approval of Joseph M. Field, the Company
will be unable to consummate transactions involving an actual or potential
change of control of the Company, including transactions in which the holders of
Class A Common Stock might otherwise receive a premium for their shares over
then current market prices. See "Principal and Selling Shareholders," and
"Description of Capital Stock."
ABILITY TO INCUR SUBSTANTIAL INDEBTEDNESS
The Company has the ability to incur indebtedness that is substantial in
relation to its shareholders' equity. As of June 30, 1998, on a pro forma basis
after giving effect to the Offering, the Company had approximately $217.6
million in long-term indebtedness (less current portions) and shareholders'
equity of approximately $341.5 million. However, under the Credit Facility, the
Company can increase its long-term indebtedness up to $350 million, subject to
compliance with certain financial ratios. See "Capitalization," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
If the Company were to incur a substantial amount of indebtedness under the
Credit Facility, it could have several important consequences to the holders of
Class A Common Stock, including, but not limited to, the following: (i) a
substantial portion of the Company's cash flow from operations could be
dedicated to debt service and would not be available for other purposes,
including for funding future expansion and ongoing capital expenditures; (ii)
the Company's ability to obtain additional financing for working capital,
capital expenditures, acquisitions and general corporate or other purposes could
be impaired; (iii) the Company's leveraged position and the covenants contained
in the Credit Facility could limit the Company's ability to compete, expand and
make capital improvements; (iv) the Company's level of indebtedness could make
it more vulnerable to economic downturns, limit its ability to withstand
competitive pressures and reduce its flexibility in responding to changing
business and economic conditions and (v) certain restrictive covenants contained
in the Credit Facility could limit the ability of the Company to pay dividends
and make other distributions to its shareholders.
EFFECT OF RESTRICTIVE COVENANTS
The Credit Facility contains certain covenants that restrict, among other
things, the ability of the Company to incur additional indebtedness, derive over
60% of its aggregate broadcast cash flow from any one market, acquire radio
stations that are not located in either one of the top 75 markets or in a market
in which the Company has existing operations, incur capital expenditures, invest
in non-related industries, pay dividends or make certain other restricted
payments, incur liens, consummate certain asset sales, enter into certain
transactions with affiliates, merge or consolidate with any other person or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. In addition, all of the assets
and the stock of the Company's subsidiaries are pledged to secure the debt under
the Credit Facility. The Credit Facility requires that the Company maintain
specified financial ratios; the ability of the Company to meet these financial
ratios can be affected by events beyond its control and there can be no
assurance that the Company will meet those ratios. A breach of any of these
covenants could result in a default under the Credit Facility. Upon an event of
default under the Credit Facility, the lenders thereunder could elect to declare
all amounts outstanding thereunder, together with accrued interest, to be
immediately due and payable. If the Company were unable to repay those amounts,
the lenders thereunder could proceed against the collateral granted to them to
secure that indebtedness. Any such event of default, therefore, could have a
material adverse effect on the Company. Even if the Company is able to comply
with the restrictive covenants contained in the Credit Facility, such covenants
could limit the Company's ability to capitalize on opportunities that would
otherwise be advantageous. In addition, the Credit Facility, in certain
circumstances, requires that the Company apply excess cash flow from operations,
net proceeds from asset sales, net equity proceeds and insurance proceeds to
reduce permanently the amount available under the Credit Facility.
15
<PAGE> 18
Pursuant to the terms of the Credit Facility, the Offering would constitute an
event requiring a permanent reduction in the principal amount of the Credit
Facility. The Company has received a waiver of this provision with respect to
the Offering. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources," and "Description
of Capital Stock."
RADIO BROADCASTING INDUSTRY AND ECONOMIC CONDITIONS
The profitability of the Company's radio stations is subject to various
factors that influence the radio broadcasting industry as a whole. The Company's
radio stations may be affected by numerous factors, including changes in
audience tastes, competition from other radio stations and other communications
and entertainment media, priorities of advertisers, new laws, governmental
regulations and policies, changes in broadcast technical requirements,
technological changes and proposals to eliminate the tax deductibility of
expenses incurred by advertisers. The Company cannot predict which, if any, of
these or other factors might have a significant impact on the radio broadcasting
industry in the future, nor can it predict what impact, if any, the occurrence
of these or other events might have on the Company's operations. Generally,
advertising tends to decline during economic recession or downturn.
Consequently, the Company's advertising revenue is likely to be adversely
affected by a recession or downturn in the United States economy, the economy of
an individual geographic market in which the Company owns or operates radio
stations or other events or circumstances that adversely affect advertising
activity. See "-- Importance of Seattle Radio Stations."
GOVERNMENTAL REGULATION OF BROADCASTING INDUSTRY
The radio broadcasting industry is subject to extensive federal regulation
by the FCC under the Communications Act of 1934, as amended (the "Communications
Act"), that, among other things, requires approval by the FCC for the issuance,
renewal, transfer of control and assignment of broadcasting station operating
licenses and limits the number of broadcasting properties that the Company may
acquire in any market. In addition, the Communications Act and FCC rules impose
limitations on alien ownership and voting of the capital stock of, and
participation in the affairs of, the Company. The Company's business is
dependent upon maintaining its broadcasting licenses issued by the FCC, which
are ordinarily issued for a maximum term of eight years. Although it is rare for
the FCC to deny a license renewal application, there can be no assurance that
the future renewal applications of the Company will be approved or that such
renewals will not include conditions or qualifications that could adversely
affect the Company. The non-renewal, or renewal with substantial conditions or
modifications, of one or more of the Company's licenses could have a material
adverse effect on the Company. Moreover, governmental regulations and policies
may change over time and there can be no assurance that such changes would not
have a material adverse impact upon the Company.
As a result of the passage of the Telecommunications Act of 1996 (the
"Telecom Act"), radio broadcasting companies were permitted to increase their
ownership of stations within a single radio market from a maximum of four to a
maximum of between five and eight stations, depending on market size. The
Telecom Act creates significant new opportunities for broadcasting companies but
also creates uncertainties as to how the FCC and the courts will enforce and
interpret the Telecom Act. Compliance with the FCC's multiple ownership rules
may cause the Company and other radio broadcasters to forego acquisition
opportunities that they might otherwise wish to pursue. Compliance with these
rules by third parties may also have a significant impact on the Company by, for
example, precluding the consummation of swap transactions that would cause such
third parties to violate multiple ownership limitations. The consummation of
radio broadcasting acquisitions requires prior approval of the FCC with respect
to the transfer of control or assignment of the broadcast licenses of the
acquired stations. There can be no assurance that the FCC will approve future or
pending acquisitions or dispositions by the Company or will not impose
conditions or qualifications in connection with such acquisitions or
dispositions (including the CBS Transactions) by the Company. As a result of the
recent consolidation of ownership in the radio broadcast industry, the DOJ has
been giving closer scrutiny to acquisitions in the industry. The DOJ has stated
publicly that it has established certain revenue and audience share
concentration benchmarks with respect to radio station acquisitions, above which
a transaction may receive additional antitrust scrutiny. However, to date, the
DOJ has also investigated
16
<PAGE> 19
transactions that do not meet or exceed these benchmarks and has cleared
transactions that do exceed the benchmarks. The FCC is also reviewing
applications for transfers and assignment of licenses in instances where a
proposed transaction would result in a high degree of revenue concentration.
Although the Company has not encountered any problems in receiving clearance
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") and does not believe that its acquisition strategy as a whole will be
adversely affected in any material respect by antitrust review or by
divestitures that the Company may have to make as a result of antitrust review,
there can be no assurance that this will continue to be the case.
The number of radio stations the Company may acquire in any market under
FCC rules may also vary depending upon whether the interests in other radio
stations or certain other media properties of certain persons or entities
affiliated with the Company are attributable to those persons or entities under
FCC rules. Under the FCC's cross-interest policy, the FCC in certain instances
may prohibit one party from acquiring an attributable interest in one media
outlet and a substantial non-attributable economic interest in another media
outlet in the same market, thereby prohibiting a particular acquisition by the
Company. The FCC generally applies its ownership limits to "attributable"
interests held by an individual, corporation, partnership or other association.
The interests of the Company's officers, directors, and shareholders who have
the right to vote 5% or more of the Company's voting stock are generally
attributable to the Company. If any such attributable broadcast interests
overlap with the Company's directly-held radio broadcast interests in the
Company's markets, such interests are combined with the Company's interests in
such markets when determining compliance with the multiple ownership
limitations. In addition, under the FCC's "one-to-a-market" rule, a party may
not have attributable interests in radio stations and a television station in
the same market unless a waiver is granted by the FCC. Although the Company's
current officers, directors and shareholders who have the right to vote 5% or
more of the Company's voting stock do not have attributable broadcast interests
limiting the number of radio stations that the Company may acquire or own, there
can be no assurance that such persons will not in the future hold such
attributable interests. The FCC's attribution and ownership rules are currently
under review and changes in those rules could affect the ability of the Company
to acquire stations in certain markets in the future. See "Business -- Federal
Regulation of Radio Broadcasting -- Proposed and Recent Changes." Applications
of, or changes to, the FCC policies described above could cause the Company to
lose valuable broadcasting licenses or force the Company to divest profitable
radio stations or abandon plans to acquire new, potentially profitable radio
stations. Any such occurrences could adversely affect the Company's operations
and consequently, the value of the Class A Common Stock.
DEPENDENCE ON KEY PERSONNEL
The Company's business depends upon the continued efforts, abilities and
expertise of its executive officers and other key executives, including Joseph
M. Field, its Chairman of the Board and Chief Executive Officer; David J. Field,
its President, Chief Operating Officer and Chief Financial Officer; and John C.
Donlevie, Esq., its Executive Vice President and General Counsel. The Company
believes that the loss of any of these individuals could have a material adverse
effect on the Company. See "Management."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Upon completion of the Offering, the Company will have
shares of Class A Common Stock and shares of Class B Common Stock
issued and outstanding. Of these shares, the shares of Class A
Common Stock sold in the Offering ( shares if the Underwriters'
over-allotment option is exercised in full) will be freely transferable without
restriction under the Securities Act by persons other than "affiliates" of the
Company within the meaning of Rule 144 promulgated under the Securities Act
("Rule 144"). The remaining shares of Class A Common Stock and
all shares of Class B Common Stock were issued in reliance on exemptions from
the registration requirements of the Securities Act, and those shares are
"restricted" securities under Rule 144. The number of such "restricted" shares
of Common Stock available for sale in the public market is limited by
restrictions under the Securities Act and lock-up agreements under which all of
the holders of such shares have agreed not to sell or otherwise dispose of their
shares for a period of 180 days after the date of this Prospectus (the "Lock-Up
Period") without the prior written consent of Credit Suisse First Boston
17
<PAGE> 20
Corporation. Because of these restrictions, on the date of this Prospectus, no
shares other than those offered hereby will be eligible for sale. Upon
expiration of the Lock-Up Period, all of the restricted securities will be
eligible for sale in the public market, subject to compliance with the
manner-of-sale, volume and other limitations of Rule 144.
Notwithstanding the foregoing, the Company executed a Registration Rights
Agreement, dated as of May 21, 1996, with Chase Capital (the "Registration
Rights Agreement") which grants Chase Capital the right to require the Company,
subject to certain limitations, to effect up to two "demand" registrations under
the Securities Act for the sale of Chase Capital's shares of Common Stock. In
connection with the Offering, however, Chase Capital has entered into a lock-up
agreement, under which it has agreed not to sell or otherwise dispose of its
shares or demand registration of such shares during the Lock-Up Period.
Future sales of substantial amounts of Class A Common Stock, or the
perception that such sales could occur, may affect the market price of the Class
A Common Stock prevailing from time to time. See "Shares Eligible for Future
Sale" and "Underwriting."
DILUTION
Persons purchasing shares of Class A Common Stock in the Offering will
incur immediate dilution in the pro forma net tangible book value per share of
Class A Common Stock of approximately $ per share. In addition, the exercise
of vested stock options, if any, would result in further dilution. This dilution
is calculated based on an assumed initial public offering price of $ per
share (the midpoint of the estimated offering range). Dilution for this purpose
represents the difference between the per share initial public offering price of
the Class A Common Stock and the pro forma net tangible book value per share of
Class A Common Stock after giving effect to the Recapitalization, the Completed
and CBS Transactions, the S Corporation Distribution, the Chase Conversion, the
consummation of the Offering and the application of the net proceeds therefrom.
See "Dilution."
BENEFITS TO EXISTING SHAREHOLDERS AND AFFILIATES
In connection with the Offering and associated termination of the Company's
S Corporation status, the existing shareholders of the Company will receive an
aggregate cash distribution of approximately $86.0 million, consisting of $15.8
million which is estimated to be the amount of the taxes due by the Company's S
Corporation shareholders on the income of the Company through the Revocation
Date (as defined) (including the taxes on the income from the Tampa Transaction)
net of prior distributions to such shareholders for such taxes and $70.2 million
which is the estimated amount of the Company's remaining taxed but undistributed
income through the Revocation Date (including the income from the Tampa
Transaction). In addition, an affiliate of Chase Capital, the Selling
Shareholder in the Offering, will receive aggregate net proceeds of
approximately $ from the sale of shares of Class A Common Stock
therein, constituting approximately % of the shares of Class A Common Stock
beneficially owned by Chase Capital following the Chase Conversion. A general
partner of Chase Capital, Michael R. Hannon, is also a director of the Company.
See "Recapitalization, Chase Conversion and Former S Corporation Status" and
"Principal and Selling Shareholders."
NO PRIOR PUBLIC MARKET
Prior to the Offering, there has been no public market for the Class A
Common Stock and there can be no assurance that an active public market will
develop or be sustained after the Offering or that the initial public offering
price will correspond to the price at which the Class A Common Stock will trade
in the public market subsequent to the Offering. The initial public offering
price for the Class A Common Stock will be determined by negotiations among the
Company and the representatives of the Underwriters based upon the consideration
of certain factors set forth herein under "Underwriting." Market conditions in
the radio broadcasting industry, the Company's future operating results and
fluctuations in the stock market generally may have an adverse impact on the
market price of the Class A Common Stock.
18
<PAGE> 21
CERTAIN ANTITAKEOVER PROVISIONS
Certain provisions of Pennsylvania law could also make more difficult a
merger, tender offer or proxy contest involving the Company, even if such events
could be beneficial to the interests of the shareholders. Such provisions could
limit the price that certain investors might be willing to pay in the future for
shares of the Company's Class A Common Stock. See "Description of Capital
Stock -- Certain Provisions of the Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws of the Company."
IMPACT OF YEAR 2000 ISSUES
The Company relies, directly and indirectly, on information technology
systems to operate its digital radio stations, provide its radio stations with
up-to-date news and perform a variety of administrative services including
accounting, financial reporting, advertiser spot scheduling, payroll and
invoicing. The Company also uses non-information technology systems, such as
microchips, for dating and other automated functions. Information and
non-information technology systems that do not properly recognize and process
date sensitive information when the year changes to "2000" or "00" could
generate erroneous data or cause such systems to fail ("Year 2000 Issues"). As a
result, Year 2000 Issues could have a material adverse effect on the operations
of the Company. In order to minimize the risk of Year 2000 related losses, the
Company is conducting a comprehensive assessment of its Year 2000 Issues.
However, there can be no assurance that the Company will resolve its Year 2000
Issues prior to the year 2000, or that the cost of remedying any Year 2000
Issues will not have a material adverse effect on the Company's business.
Furthermore, there can be no assurance that the systems of other companies with
which the Company's systems interact will be timely converted and, if not timely
converted, would not have a material adverse effect on the Company's business.
See "Management Discussion and Analysis of Financial Condition and Results of
Operation -- Impact of Year 2000 Issues."
19
<PAGE> 22
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Class A
Common Stock offered by it after deducting underwriting discounts and other
offering expenses, all of which are payable by the Company, are estimated to be
approximately $186 million (approximately $ million if the
Underwriters' over-allotment option is exercised in full), assuming an initial
public offering price of $ per share. The net proceeds of the Offering will
be used to repay revolving indebtedness of the Company. On November , 1998,
the Company had revolving indebtedness outstanding of approximately $
million; approximately $77.0 million of such indebtedness was incurred in
connection with the First Boston Transaction and the remainder was incurred to
fund the Sinclair Transaction, other acquisitions and general corporate
purposes. Following the Offering, the Company will fund the Second Boston
Transaction and a portion of the S Corporation Distribution with revolving
indebtedness under the Credit Facility.
As of June 30, 1998, on a pro forma basis, the Company had approximately
$217.6 million of indebtedness outstanding under the Credit Facility. The final
maturity date for the Credit Facility is February 13, 2006. Interest on any
outstanding principal accrues at a rate based, at the Company's election, on
either LIBOR plus a spread which ranges from 0.5% to 2.125%, or on KeyBank
N.A.'s base rate, plus a spread of up to 0.875%, in either case, depending on
the Company's total outstanding indebtedness. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
RECAPITALIZATION, CHASE CONVERSION AND FORMER S CORPORATION STATUS
Prior to the consummation of the Offering, the Company will engage in a
Recapitalization that will result in the Company having Class A Common Stock,
Class B Common Stock, Class C Common Stock and Preferred Stock authorized, and
Class A Common Stock and Class B Common Stock issued and outstanding. Prior to
the Offering, the Company was an S Corporation with voting and non-voting Prior
Common Stock authorized and issued. In connection with the Recapitalization, (i)
the Company will effect a for one stock split of the outstanding shares of
Prior Common Stock, (ii) each share of Prior Common Stock held by Joseph M.
Field, the Company's Chairman of the Board and Chief Executive Officer, and
David J. Field, the Company's President, Chief Operating Officer and Chief
Financial Officer, will be exchanged for one share of Class B Common Stock,
(iii) each share of Prior Common Stock held by all other shareholders will be
exchanged for one share of Class A Common Stock and (iv) the Company will revoke
its S Corporation status.
Chase Capital currently owns the 7% Subordinated Convertible Note. Chase
Capital, a global private equity organization with approximately $5 billion
under management, is an affiliate of The Chase Manhattan Corporation. Chase
Capital has substantial investment experience in the radio broadcasting sector,
including having co-founded American Radio Systems, Inc. in 1993, and currently
has approximately 20% of its portfolio committed to the media and
telecommunications industry. A general partner of Chase Capital serves on the
Company's Board of Directors. Chase Capital has agreed with the Underwriters and
the Company that immediately prior to the Offering it will convert the 7%
Subordinated Convertible Note into Class A Common Stock. Upon the Chase
Conversion, Chase Capital will receive shares of Class A Common Stock.
After giving effect to the Offering, including Chase Capital's sale of shares of
Class A Common Stock therein, Chase Capital will beneficially own approximately
% of the Company's Class A Common Stock, representing % of the total voting
power of the Company's outstanding Common Stock (approximately % of the
Company's Class A Common Stock, representing % of the total voting power of
the Company's outstanding Common Stock, if the over-allotment option is
exercised in full).
The Company has been an S Corporation subject to taxation under Subchapter
S of the Code since October 1, 1987. As a result, the net income of the Company,
for federal and certain state and local tax purposes, has been reported by and
taxed directly to the Company's shareholders, rather than to the Company. In
connection with the Recapitalization and shortly before the consummation of the
Offering, the Company will file a notice with the Internal Revenue Service
revoking its S Corporation status as of a date preceding the Offering (the
"Revocation Date").
20
<PAGE> 23
In connection with the revocation of the Company's S Corporation status and
prior to the Offering, the Company intends to declare a dividend payable to its
existing shareholders approximately within six (6) months after the Offering.
This dividend distribution will be comprised of (i) $ million, which is
estimated to be the taxes due by the Company's existing S Corporation
shareholders on the income of the Company through the Revocation Date (including
the taxes on the income from the Tampa Transaction), net of prior distributions
to the shareholders for such taxes and (ii) $ million, which is the
estimated amount of the Company's remaining taxed but undistributed income
through the Revocation Date (including the income from the Tampa Transaction)
(collectively, the "S Corporation Distribution"). From this S Corporation
Distribution, such existing shareholders will fund their pending tax liability
attributable to the Company's S Corporation income through the Revocation Date.
As of June 30, 1998, on a pro forma basis, the amount of the S Corporation
Distribution would have been approximately $15.8 million for taxes due by such
existing shareholders on the income of the Company through the Revocation Date
(including the income from the Tampa Transaction) and $70.2 million for income,
net of taxes, on the remaining taxed but undistributed income of the Company
through the Revocation Date (including the income from the Tampa Transaction).
The S Corporation Distribution will be funded from the net proceeds of the Tampa
Transaction and borrowings under the Credit Facility. After the amount of the S
Corporation Distribution is determined by the Company, the amounts distributed
will not be adjusted to reflect any difference between actual and estimated
amounts; provided however, if the Company subsequently realizes an economic
benefit in connection with a reassessment of the Company's tax returns which
results in an increase in the tax liability of its S Corporation shareholders,
then the Company shall reimburse those shareholders pursuant to an
indemnification agreement to the extent of such economic benefit. See "Risk
Factors -- Benefits to Existing Shareholders and Affiliates."
In addition, as a result of the revocation of its S Corporation status, the
Company will record a net deferred income tax liability and corresponding income
tax expense (the "Deferred Tax Liability"), effective upon the Revocation Date.
The amount of the Deferred Tax Liability would have been approximately $78.8
million if the Revocation Date had been June 30, 1998, but the actual amount
will be adjusted to reflect the Company's actual financial position at the
Revocation Date.
DIVIDEND POLICY
The Company does not anticipate paying cash dividends on its Common Stock
in the foreseeable future because it intends to retain its earnings, if any, to
finance the expansion of its business and for general corporate purposes. Any
payment of future dividends will be at the discretion of the Board of Directors
and will depend upon, among other factors, the Company's earnings, financial
condition, capital requirements, level of indebtedness, contractual restrictions
with respect to the payment of dividends, including, without limitation, the
provisions of the Credit Facility that limit the Company's ability to pay
dividends and other considerations that the Board of Directors deems relevant.
21
<PAGE> 24
DILUTION
Dilution is the amount by which the initial public offering price paid by
the purchasers of the shares of Class A Common Stock will exceed the net
tangible book value per share of Common Stock after the Offering. The net
tangible book value per share of Common Stock is determined by subtracting the
total liabilities of the Company from the total book value of the tangible
assets of the Company and dividing the difference by the number of shares of
Common Stock deemed to be outstanding on the date as of which such book value is
determined.
At June 30, 1998, on a pro forma basis to reflect the Recapitalization, the
Completed and CBS Transactions, the S Corporation Distribution and the Chase
Conversion, the Company had a net tangible book value (deficit) of approximately
$ or $ per share (excluding intangible book value of $ per
share). After giving effect to the sale by the Company of shares
of Class A Common Stock offered hereby at an assumed initial public offering
price of $ per share (the mid-point of the range set forth on the cover page
of this Prospectus), and the application of the estimated net proceeds
therefrom, the pro forma net tangible book value (deficit) of the Company as of
June 30, 1998 would have been approximately $ or $ per share. This
represents an immediate increase in such net tangible book value of $ per
share to existing shareholders and an immediate dilution to new investors of
$ per share. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Net tangible book value per share after the
Recapitalization....................................... $
Decrease in net tangible book value from the Chase
Conversion, revocation of S Corporation status and S
Corporation Distribution...............................
Decrease in net tangible book value per share resulting
from Completed Transactions after June 30, 1998 and the
CBS Transactions.......................................
Increase in net tangible book value per share resulting
from the Offering......................................
-------
Pro forma net tangible book value per share.................
-------
Dilution per share to new investors(1)...................... $
=======
</TABLE>
- ---------------
(1) Determined by subtracting the pro forma as adjusted net tangible book value
per share after the Offering from the assumed initial public offering price
per share.
If the Underwriters' over-allotment option is exercised in full, the
increase in net tangible book value per share resulting from the Offering, pro
forma net tangible book value per share after the Offering, and dilution per
share to new investors would be $ , $ and $ ,
respectively.
The following table sets forth at June 30, 1998 after giving effect to the
Recapitalization, the Chase Conversion, the S Corporation Distribution and the
sale of the Class A Common Stock offered by the Company in the Offering: (i) the
number of shares of Class A Common Stock purchased by existing shareholders from
the Company and the total consideration and the average price per share paid to
the Company for such shares; (ii) the number of shares received by Chase Capital
in connection with the Chase Conversion and the total consideration and the
price per share paid by it for such shares; (iii) the number of shares of Class
A Common Stock purchased by new investors in the Offering from the Company and
the total consideration and the price per share paid by them for such shares;
and (iv) the percentage of shares purchased from the Company by existing
shareholders, Chase Capital and the new investors and the percentages of
consideration paid to the Company for such shares by existing shareholders and
new investors.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders (1)................. % $ % $
Chase Capital.............................
New investors.............................
-------- -------- -------- --------
Total........................... % $ %
======== ======== ======== ========
</TABLE>
- ---------------
(1) Does not include shares of Common Stock equal to % of the shares of
Class A Common Stock outstanding from time to time that are reserved for
issuance under the Company's 1998 Equity Compensation Plan, of which options
to purchase shares of Class A Common Stock are issued and
outstanding. See "Management -- 1998 Equity Compensation Plan" and
"Principal and Selling Shareholders."
22
<PAGE> 25
CAPITALIZATION
The following table sets forth as of June 30, 1998, in each case after
adjustment for the Recapitalization, (i) the historical capitalization of the
Company, (ii) the unaudited pro forma capitalization of the Company after giving
effect to the Completed Transactions not yet consummated on that date and the
CBS Transactions and (iii) the unaudited pro forma capitalization of the Company
after giving effect to the foregoing events and the S Corporation Distribution,
the Chase Conversion, the Offering and the application of the estimated net
proceeds therefrom as described in "Use of Proceeds." This table should be read
in conjunction with the Company's Consolidated Financial Statements and the
Unaudited Pro Forma Financial Information and the notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
-----------------------------------------------
PRO FORMA AS
ADJUSTED FOR
THE COMPLETED
AND CBS
TRANSACTIONS,
THE S CORPORATION
PRO FORMA FOR DISTRIBUTION,
THE COMPLETED THE CHASE
AND CBS CONVERSION AND
ACTUAL TRANSACTIONS THE OFFERING(1)
-------- -------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents: $ 6,094 $ 5,984 $ 5,984
======== ======== ========
Short-term debt and current portion of long-term
debt............................................. $ 9 $ 9 $ 9
Long-term debt, less current portion:
Credit Facility.................................. 251,500 317,350 217,331
7% Subordinated Convertible Note................. 28,848 28,848
Other............................................ 276 276 276
-------- -------- --------
Total long-term debt..................... 280,624 346,474 217,607
Shareholders' equity:
Preferred Stock, $.01 par value per share,
25,000,000 shares authorized, no shares issued
and outstanding...............................
Class A Common Stock, $.01 par value per share,
200,000,000 shares authorized, shares
issued and outstanding actual and pro forma,
shares issued and outstanding pro forma as
adjusted...................................... 2 2
Class B Common Stock, $.01 par value per share,
75,000,000 shares authorized, shares
issued and outstanding actual and pro forma,
shares issued and outstanding pro forma
as adjusted................................... 4 4
Class C Common Stock, $.01 par value per share,
50,000,000 shares authorized, no shares issued
and outstanding...............................
Additional paid-in capital....................... 710 710 341,523
Retained earnings................................ 218,459 287,329
-------- -------- --------
Total shareholders' equity............... 219,175 288,045 341,523
-------- -------- --------
Total capitalization................ $499,808 $634,528 $559,139
======== ======== ========
</TABLE>
- ---------------
(1) Does not include shares of Common Stock equal to 10% of the shares of Class
A Common Stock outstanding from time to time that are reserved for issuance
under the Company's 1998 Equity Compensation Plan, of which options to
purchase shares of Class A Common Stock are issued and
outstanding. See "Management -- 1998 Equity Compensation Plan."
23
<PAGE> 26
CBS TRANSACTIONS
In August 1998, the Company entered into three agreements with CBS, the CBS
Transactions, pursuant to which it will (i) purchase WRKO-AM and WEEI-AM in
Boston for $82.0 million in cash, (ii) sell WLLD-FM and WYUU-FM in Tampa for
$75.0 million in cash and (iii) purchase WAAF-FM and WEGQ-FM in Boston and
WWTM-AM in Worchester for $58.0 million. Subject to satisfaction of necessary
conditions to closing, the Company currently anticipates that the First Boston
Transaction and the Tampa Transaction will close prior to the consummation of
the Offering, and that the Second Boston Transaction will close within one year.
As each of the three agreements with CBS has separate conditions to closing and
none of the transactions is conditioned on the closing of the other two, there
can be no certainty concerning when or whether each of the transactions will
close or the order in which they will close. The Company began operating the
Boston stations and CBS began operating the Tampa stations under time brokerage
agreements in September 1998. Upon completion of the Boston Transactions, the
Company will have a strong presence in the Boston market with a 19.4% market
share.
COMPLETED TRANSACTIONS
In March 1997, the Company acquired three stations in Seattle, KIRO-AM/FM
and KNWX-AM, and four stations in Kansas City, KCMO-AM/FM, KYYS-FM (formerly
KLTH-FM) and KMBZ-AM, from Bonneville International Corp. ("Bonneville") in
exchange for KLDE-FM in Houston plus $5 million (the "Bonneville Transaction").
The three Seattle stations and a JSA for KING-FM in Seattle complemented the
Company's pre-existing holdings of five stations in Seattle, provided the
Company with the maximum permissible ownership in that market and solidified the
Company as the leading radio operator in Seattle. In addition, the Bonneville
Transaction enabled the Company to enter the Kansas City market with a
four-station cluster.
In April 1997, the Company acquired KLYK-FM and KEDO-AM in Longview/Kelso,
Washington from Rodney J. Etherton ("Etherton") for $1.8 million (the "Etherton
Transaction"). Longview/Kelso is a market located north of Portland, Oregon,
which management considers to be of strategic importance because of its
influence over the potential upgrade of certain Portland stations.
In May 1997, the Company acquired KLOU-FM in St. Louis plus $39.7 million
from Group W Broadcasting, Inc. ("Group W") in exchange for KITS-FM in San
Francisco (the "Group W Transaction").
In May 1997, the Company acquired KISW-FM in Seattle plus $32.5 million in
exchange for WDSY-FM and WJJJ-FM (formerly WNRQ-FM) in Pittsburgh in a three-way
transaction (the "Nationwide-Secret Transaction") with Nationwide
Communications, Inc. ("Nationwide") and Secret Communications L.P. ("Secret").
Prior thereto, in June 1996, the Company began operating and selling radio
advertising time on KISW-FM pursuant to a TBA. This acquisition added a third
rock station to the Company's Seattle cluster.
In June 1997, the Company acquired KRXQ-FM and KSEG-FM in Sacramento from
Citicasters Inc. ("Citicasters") for $45 million (the "Citicasters Transaction")
and KDND-FM (formerly KXOA-FM) in Sacramento from American Radio Systems
Corporation ("ARS") for $27.2 million (the "ARS-KXOA Transaction"). Prior
thereto, in January 1997, the Company began operating and selling radio
advertising time on all three stations pursuant to TBAs. By purchasing three
stations, the Company gained a substantial share of the Sacramento market and
established a platform for further acquisitions.
In October 1997, the Company exchanged the broadcast frequency and
transmission facilities of its Kansas City station, KCMO-AM, for those of Kanza
Inc.'s ("Kanza") Kansas City station, WHB-AM (the "Kanza Transaction"). Each
party retained its call letters, formats and studio facilities. The signal swap
allowed the Company to enhance the 24-hour metro signal of KCMO-AM by providing
nighttime and winter drive time coverage of Johnson County, Kansas, in the
affluent and growing southwestern section of Kansas City.
24
<PAGE> 27
In November 1997, the Company acquired KSSJ-FM (formerly KBYA-FM) in
Sacramento from Susquehanna Radio Corp ("Susquehanna") for $15.9 million (the
"Susquehanna Transaction"). KSSJ-FM was not on-the-air when the Company
announced the acquisition but became operational in December 1997.
In January 1998, the Company acquired WDAF-AM and KUDL-FM in Kansas City
plus $7 million from ARS in exchange for the Company's sole station in St.
Louis, KLOU-FM (the "ARS-Kansas City Transaction"). As a result of this
transaction, the Company became the leading radio station operator in Kansas
City.
In January 1998, the Company acquired KCTC-AM in Sacramento from ARS for $4
million (the "ARS-KCTC Transaction") in order to make it possible, under FCC
ownership rules, for the Company to acquire a fifth FM station in that market.
In May 1998, the Company acquired WSKY-FM (formerly WRRX-FM) in the
Gainesville/Ocala market from Gator Broadcasting, Inc. ("Gator") for $2.0
million, plus an additional payment of up to $1.0 million payable once the
authorized upgrade of the station from a Class A license to a Class C-2 license
becomes final (the "Gator Transaction"). The Company believes that this second
Gainesville station will permit it to solidify its leadership position in the
Gainesville/Ocala market.
In May 1998, the Company sold its rights to participate in a FCC licensing
procedure in the Vancouver, Washington radio market to Jacor for $10.0 million
(the "Vancouver Transaction").
In May 1998, the Company acquired KBAM-AM and KRQT-FM in the Longview/Kelso
market from Armak Broadcasters, Inc. ("Armak") for $1.0 million to bolster the
Company's competitive position in that market (the "Armak Transaction").
In June 1998, the Company acquired three stations, KRSK-FM (formerly
KKRH-FM), KKSN-FM and KKSN-AM in Portland, and four stations, WBEE-FM, WBBF-FM
(formerly WKLX-FM), WEZO-AM (formerly WBBF-AM) and WQRV-FM in Rochester, from
Sinclair Broadcasting Group ("Sinclair") for $126.5 million (the "Sinclair
Transaction"). Prior thereto, in March 1998, the Company began operating and
selling the radio advertising time of these stations under TBAs. The Portland
stations significantly enhanced the Company's position in that market by
increasing the number of the Company's stations to six and its market share to
approximately 25.8%. The acquisition of the Rochester stations enabled the
Company to enter that market with a 21.7% market share.
In September 1998, the Company exchanged the broadcast frequency and
transmission facilities of KRXQ-FM, a Class B-1 station in Sacramento, plus $3.8
million with ARS for the broadcast frequency and transmission facilities of
KRAK-FM, a full Class B station in that market (the "Sacramento Frequency
Exchange"). Each station retained its call letters, formats and studio
facilities.
In September 1998, the Company acquired from Capital Broadcasting, Inc. the
assets and rental leases used in connection with the operation of a tower
facility serving the Kansas City market for $2.1 million (the "Kansas City Tower
Transaction").
The Bonneville Transaction, the Etherton Transaction, the Group W
Transaction, the Nationwide-Secret Transaction, the Citicasters Transaction, the
ARS-KXOA Transaction, the Kanza Transaction, the Susquehanna Transaction, the
ARS-Kansas City Transaction, the ARS-KCTC Transaction, the Gator Transaction,
the Vancouver Transaction, the Armak Transaction, the Sinclair Transaction, the
Sacramento Frequency Exchange and the Kansas City Tower Transaction are referred
to collectively as the "Completed Transactions."
In addition to the foregoing Completed Transactions, it is anticipated that
in November 1998, the Company will acquire from Willamette Broadcasting Co.
KSLM-AM, serving the Salem, Oregon portion of the Portland radio market for $0.6
million. The purchase of this radio station is not included in the definition of
"Completed Transactions" or in the pro forma financial statements as the effect
would be immaterial.
25
<PAGE> 28
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") is based on the audited historical financial statements
of the Company and the related notes included elsewhere in this Prospectus and
the unaudited historical financial information of Bonneville, Etherton, Group W,
Nationwide, Secret, Citicasters, ARS, Susquehanna, Armak, Gator, Sinclair,
Capital and CBS.
The pro forma statement of income for the year ended September 30, 1997 and
for the nine months ended June 30, 1997 and 1998 have been prepared to
illustrate the effects of the Recapitalization, the Completed and CBS
Transactions, the S Corporation Distribution, the Chase Conversion, the Offering
and the application of the net proceeds thereof as described in "Use of
Proceeds" as if each had occurred on October 1, 1996. The pro forma balance
sheet data as of June 30, 1998 give effect to any such events not yet
consummated on that date as if each had occurred on that date. The Pro Forma
Financial Information and accompanying notes should be read in conjunction with
the consolidated financial statements and other financial information included
elsewhere herein pertaining to the Company, including "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Pro Forma Financial Information is not necessarily indicative
of either future results of operations or the results that might have been
achieved if such transactions had been completed on the indicated dates.
The Pro Forma Financial Information has been prepared as if the Credit
Facility was entered into on October 1, 1996 at the terms currently in effect.
Additionally, it has been assumed that the Company's conversion from an S
Corporation to a C Corporation became effective on October 1, 1996.
All acquisitions given effect in the Pro Forma Financial Information are
accounted for using the purchase method of accounting. The aggregate purchase
price of each transaction is allocated to the tangible and intangible assets
acquired and liabilities assumed based on their respective fair values. The
allocation of the aggregate purchase price reflected in the Pro Forma Financial
Information is preliminary for transactions to be closed subsequent to June 30,
1998. The final allocation of the purchase price is contingent upon the receipt
of final appraisals of the acquired assets and the revision of other estimates.
Management does not expect such allocations to differ materially from the
preliminary allocation.
26
<PAGE> 29
ENTERCOM COMMUNICATIONS CORP.
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS PRO FORMA ADJUSTMENTS FOR
COMPLETED FOR THE FOR THE THE OFFERING,
AND CBS COMPLETED COMPLETED THE S CORPORATION
THE TRANSACTIONS AND CBS AND CBS DISTRIBUTION AND
COMPANY COMBINED(A) TRANSACTIONS TRANSACTIONS CHASE CONVERSION TOTAL PRO FORMA
-------- ------------ ------------ ------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................. $ 93,862 $62,443 $156,305 $156,305
Station operating expenses.... 60,024 52,533 $ (2,034)(B) 110,523 110,523
Depreciation and
amortization................ 7,685 9,192 1,874(C) 18,751 18,751
Corporate general and
administrative expenses..... 3,249 (354) 2,895 2,895
Net TBA expenses (income)..... (476) 3,054 (2,578)(D)
Other operating expenses...... 1,256 (1,256)
-------- ------- -------- -------- -------- --------
Operating income (loss)..... 22,124 (726) 2,738 24,136 24,136
Interest expense.............. 11,388 41 15,317(E) 26,746 $(11,736)(F) 15,010
Gain on sale of assets........ 197,097 8,468 205,565 205,565
Other (income) expense........ 1,504 228 1,732 (1,986)(G) (254)
-------- ------- -------- -------- -------- --------
Income before income taxes
and extraordinary items... 206,329 7,473 (12,579) 201,223 13,722 214,945
Income taxes.................. 489 489 489
-------- ------- -------- -------- -------- --------
Income before extraordinary
items....................... $205,840 $ 7,473 $(12,579) $200,734 $ 13,722 $214,456
======== ======= ======== ======== ======== ========
Income before income taxes and
extraordinary items......... $206,329 $ 7,473 $(12,579) $201,223 $ 13,722 $214,945
Pro forma income taxes(H)..... 78,405 2,840 (4,780) 76,465 5,214 81,679
-------- ------- -------- -------- -------- --------
Pro forma income before
extraordinary items......... $127,924 $ 4,633 $ (7,799) $124,758 $ 8,508 $133,266
======== ======= ======== ======== ======== ========
Pro forma earnings per share
before extraordinary
items.......................
Shares used to compute pro
forma earnings per share....
</TABLE>
See accompanying notes to pro forma financial information.
27
<PAGE> 30
ENTERCOM COMMUNICATIONS CORP.
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS FOR
ADJUSTMENTS PRO FORMA THE OFFERING, THE
COMPLETED FOR THE FOR THE S CORPORATION
AND CBS COMPLETED COMPLETED DISTRIBUTION
THE TRANSACTIONS AND CBS AND CBS AND CHASE
COMPANY COMBINED(I) TRANSACTIONS TRANSACTIONS CONVERSION TOTAL PRO FORMA
-------- ------------ ------------ ------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................... $ 64,540 $49,624 $114,164 $114,164
Station operating expenses...... 40,554 41,999 $(1,762)(B) 80,791 80,791
Depreciation and amortization... 3,874 7,155 1,681(C) 12,710 12,710
Corporate general and
administrative expenses....... 2,259 (246) 2,013 2,013
Net TBA expenses (income)....... (476) 2,814 (2,338)(D)
Other operating expenses........ 1,203 (1,203)
-------- ------- ------- -------- ------- --------
Operating income (loss)....... 17,126 (895) 2,419 18,650 18,650
Interest expense................ 8,454 17 11,589(J) 20,060 $(8,802)(K) 11,258
Gain on sale of assets.......... 197,097 8,488 205,585 205,585
Other (income) expense.......... 1,580 228 1,808 (1,970)(G) (162)
-------- ------- ------- -------- ------- --------
Income before income taxes and
extraordinary items......... 204,189 7,348 (9,170) 202,367 10,772 213,139
Income taxes.................... 261 261 261
-------- ------- ------- -------- ------- --------
Income before extraordinary
items......................... $203,928 $ 7,348 $(9,170) $202,106 $10,772 $212,878
======== ======= ======= ======== ======= ========
Income before income taxes and
extraordinary items........... $204,189 $ 7,348 $(9,170) $202,367 $10,772 $213,139
Pro forma income taxes(H)....... 77,592 2,792 (3,485) 76,899 4,093 80,992
-------- ------- ------- -------- ------- --------
Pro forma income before
extraordinary items........... $126,597 $ 4,556 $(5,685) $125,468 $ 6,679 $132,147
======== ======= ======= ======== ======= ========
Pro forma earnings per share
before extraordinary items....
Shares used to compute pro forma
earnings per share............
</TABLE>
See accompanying notes to pro forma financial information.
28
<PAGE> 31
ENTERCOM COMMUNICATIONS CORP.
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS FOR
THE OFFERING,
ADJUSTMENTS PRO FORMA THE
COMPLETED FOR THE FOR THE S CORPORATION
AND CBS COMPLETED COMPLETED DISTRIBUTION
THE TRANSACTIONS AND CBS AND CBS AND THE CHASE
COMPANY COMBINED(L) TRANSACTIONS TRANSACTIONS CONVERSION TOTAL PRO FORMA
------- ------------ ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................. $92,086 $30,915 $123,001 $123,001
Station operating expenses.... 61,487 27,361 $ (2,979)(B) 85,869 85,869
Depreciation and
amortization................ 8,959 5,896 (914)(C) 13,941 13,941
Corporate general and
administrative expenses..... 3,042 62 3,104 3,104
Net TBA expenses.............. 2,273 (2,273)(D)
Other operating expenses...... 130 (130)
------- ------- -------- -------- ------- --------
Operating income (loss)..... 16,195 (2,274) 6,166 20,087 20,087
Interest expense.............. 9,175 14 10,965(M) 20,154 $(8,896)(P) 11,258
Gain (loss) on sale of
assets...................... 8,791 (8) 8(N) 291 291
(8,500)(O)
Other (income) expense........ (225) 147 (78) (82)(G) (160)
------- ------- -------- -------- ------- --------
Income (loss) before income
taxes and extraordinary
items..................... 16,036 (2,443) (13,291) 302 8,978 9,280
Income taxes.................. 172 172 172
------- ------- -------- -------- ------- --------
Income (loss) before
extraordinary items......... $15,864 $(2,443) $(13,291) $ 130 $ 8,978 $ 9,108
======= ======= ======== ======== ======= ========
Income (loss) before income
taxes and extraordinary
items....................... $16,036 $(2,443) $(13,291) $ 302 $ 8,978 $ 9,280
Pro forma income taxes(H)..... 6,094 (928) 5,051 115 3,412 3,527
------- ------- -------- -------- ------- --------
Pro forma income (loss) before
extraordinary items......... $ 9,942 $(1,515) $ (8,240) $ 187 $ 5,566 $ 5,753
======= ======= ======== ======== ======= ========
Pro forma earnings per share
before extraordinary
items.......................
Shares used to compute pro
forma earnings per share....
</TABLE>
See accompanying notes to pro forma financial information.
29
<PAGE> 32
ENTERCOM COMMUNICATIONS CORP.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS PRO FORMA ADJUSTMENTS FOR
COMPLETED FOR THE FOR THE THE OFFERING,
AND CBS COMPLETED COMPLETED THE S CORPORATION
THE TRANSACTIONS AND CBS AND CBS DISTRIBUTION AND
COMPANY COMBINED(Q) TRANSACTIONS TRANSACTIONS CHASE CONVERSION TOTAL PRO FORMA
-------- ------------ ------------ ------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.... $ 6,094 $ (110) $ --(R) $ 5,984 $ 5,984
Accounts receivable, net..... 30,469 8,353 (9,276)(R) 29,546 29,546
Prepaid expenses and other... 2,797 836 (893)(R) 2,740 $ 2,207(W) 4,947
-------- ------- -------- -------- --------- --------
Total current assets....... 39,360 9,079 (10,169) 38,270 2,207 40,477
Property and equipment, net.... 45,543 7,899 (3,851)(S) 49,591 49,591
Intangible and other assets,
net.......................... 428,542 35,403 101,083(S) 565,028 (970)(X) 564,058
-------- ------- -------- -------- --------- --------
Total Assets............... $513,445 $52,381 $ 87,063 $652,889 $ 1,237 $654,126
======== ======= ======== ======== ========= ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities:
Accounts payable and other
accrued expenses........... $ 11,443 $ 2,708 $ (2,984)(R) $ 16,167 $ 16,167
5,000(T)
Current portion of long-term
debt....................... 9 35 (35)(R) 9 9
-------- ------- -------- -------- --------- --------
Total current
liabilities.............. 11,452 2,743 1,981 16,176 16,176
Long-term debt, less current
portion...................... 280,624 5,850 140,000(U) 346,474 $(186,000)(Y) 217,607
(75,000)(V) (28,848)(X)
(5,000)(T) 70,159(Z)
15,822(AA)
Other long-term liabilities.... 2,194 -- --(R) 2,194 78,820(W) 78,820
(2,194)(AB)
-------- ------- -------- -------- --------- --------
Total liabilities.......... 294,270 8,593 61,981 364,844 (52,241) 312,603
Shareholders' Equity:
Common Stock -- Nonvoting.... 2 2 2
Common Stock -- Voting....... 4 4 4
Additional Paid in Capital... 710 710 340,807(AD) 341,517
Retained Earnings............ 218,459 43,788 (49,918)(R) 287,329 (76,613)(W) 0
75,000(V) 186,000(Y)
27,878(X)
(70,159)(Z)
(15,822)(AA)
2,194(AB)
(340,807)(AD)
Total Shareholders'
Equity................... 219,175 43,788 25,082 288,045 53,478 341,523
-------- ------- -------- -------- --------- --------
Total liabilities and
shareholders' equity..... $513,445 $52,381 $ 87,063 $652,889 $ 1,237 $654,126
======== ======= ======== ======== ========= ========
</TABLE>
See accompanying notes to pro forma financial information.
30
<PAGE> 33
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
(A) The schedule below gives effect to the Completed and CBS Transactions for
the period from October 1, 1996 through September 30, 1997.
COMPLETED AND CBS TRANSACTIONS COMBINED
<TABLE>
<CAPTION>
COMPLETED TRANSACTIONS
---------------------------------------------------------------------------
HISTORICAL
OTHER
HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
SINCLAIR(1) ARS(2) BONNEVILLE(3) CITICASTERS(4) COMBINED(5)
------------ ---------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Net revenues......... $16,423 $8,330 $12,665 $1,781 $(10,350)
Station operating
expenses............ 8,763 7,015 12,398 1,369 (5,664)
Depreciation and
amortization........ 2,328 1,135 1,478 926 571
Corporate general and
administrative
expenses............ (11)
Net TBA expenses..... 2,669
Other operating
expenses............ (1,256)
------- ------ ------- ------ --------
Operating income
(loss)............ 5,332 180 (1,211) (514) (6,659)
Interest expense.....
Gain (loss) on sale
of assets........... 8,500
Other expense........ 228
------- ------ ------- ------ --------
Income (loss) before
income tax
expense........... 5,332 180 (1,211) (514) 1,613
Income taxes.........
------- ------ ------- ------ --------
Net income (loss)... $ 5,332 $ 180 $(1,211) $ (514) $ 1,613
======= ====== ======= ====== ========
<CAPTION>
CBS TRANSACTIONS
-----------------------
COMPLETED
AND CBS
HISTORICAL HISTORICAL TRANSACTIONS
BOSTON (6) TAMPA (7) COMBINED(8)
---------- ---------- ------------
<S> <C> <C> <C>
Net revenues......... $38,375 $(4,781) $62,443
Station operating
expenses............ 32,309 (3,657) 52,533
Depreciation and
amortization........ 2,985 (231) 9,192
Corporate general and
administrative
expenses............ (364) 21 (354)
Net TBA expenses..... 385 3,054
Other operating
expenses............ (1,256)
------- ------- -------
Operating income
(loss)............ 3,060 (914) (726)
Interest expense..... 41 41
Gain (loss) on sale
of assets........... (20) (12) 8,468
Other expense........ 228
------- ------- -------
Income (loss) before
income tax
expense........... 2,999 (926) 7,473
Income taxes.........
------- ------- -------
Net income (loss)... $ 2,999 $ (926) $ 7,473
======= ======= =======
</TABLE>
- ---------------
(1) The column represents the results of operations of KKSN-AM/FM and
KRSK-FM (formerly KKRH-FM) in Portland and WBBF-FM (formerly WKLX-FM),
WBEE-FM, WQRV-FM and WEZO-AM (formerly WBBF-AM) in Rochester from
October 1, 1996 through September 30, 1997, prior to the date of the
Sinclair Transaction.
(2) The column represents the results of operations of KDND-FM (formerly
KXOA-FM) in Sacramento from October 1, 1996 through December 31, 1996,
prior to the date of the TBA with ARS, and of WDAF-AM and KUDL-FM in
Kansas City, and KCTC-AM in Sacramento from October 1, 1996 through
September 30, 1997, prior to the dates of the ARS-Kansas City
Transaction and the ARS-KCTC Transaction, respectively.
(3) The column represents the results of operations of KIRO-AM/FM and
KNWX-AM in Seattle and KCMO-AM/FM, KYYS-FM (formerly KLTH-FM) and
KMBZ-AM in Kansas City from October 1, 1996 through February 28, 1997,
prior to the date of the TBA with Bonneville.
(4) The column represents the results of operations of KSEG-FM and KRXQ-FM
in Sacramento from October 1, 1996 through December 31, 1996, prior to
the date of the TBA with Citicasters.
(5) The column represents the historical results of operations for the
following transactions which were consummated prior to the date of the
Offering: (i) the acquisitions of WSKY-FM (formerly WRRX-FM) in
Gainesville, KSSJ-FM (formerly KBYA-FM) in Sacramento and KBAM-AM,
KRQT-FM, KEDO-AM, and KLYK-FM in Longview/Kelso, (ii) the disposition
of KITS-FM in San Francisco, KLDE-FM in Houston, KLOU-FM in St. Louis,
KEGE-AM in Minneapolis and
31
<PAGE> 34
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
WDSY-FM and WJJJ-FM (formerly WNRQ-FM) in Pittsburgh, (iii) the Kansas
City Tower Transaction, (iv) the Sacramento Frequency Exchange and (v)
the Vancouver Transaction.
(6) The column represents the results of operations of WEEI-AM, WRKO-AM,
WEGQ-FM and WAAF-FM in Boston and WWTM-AM in Worcester from October 1,
1996 through September 30, 1997, prior to the date of the Boston
Transactions.
(7) The column represents the results of operations of WYUU-FM and WLLD-FM
in Tampa from October 1, 1996 through September 30, 1997, prior to the
date of the Tampa Transaction.
(8) All stations acquired in the Completed and CBS Transactions have
December 31 year ends. Amounts derived for these transactions for the
year ended September 30, 1997 were computed by: (1) adding fourth
quarter 1996 results to December 31, 1997 results, and (2) subtracting
1997 fourth quarter results.
(B) The adjustment reflects the estimated amortization of the liability assumed
for certain loss contracts acquired in the transaction.
(C) This adjustment represents the change in depreciation arising from an
increase in property, equipment, FCC licenses and intangibles, offset by a
decrease in those assets, as a result of the various acquisitions and
dispositions described herein, as well as establishing the estimated useful
lives of the acquired assets. Under the Company's normal accounting
policies, property and equipment are depreciated over periods of five to
twenty years, and intangibles are amortized over forty years.
(D) The adjustment reflects the TBA expenses (income) received or paid related
to the operations of the stations under TBAs while pending the consummation
of purchase or sale of the Completed Transactions.
(E) The adjustment reflects interest expense under the current Credit Facility,
based on the rate of 7.86%, and the 7% Subordinated Convertible Note as if
the Completed and CBS Transactions were completed on October 1, 1996, net
of the historical interest expense. The calculation of interest expense
assumes an outstanding indebtedness under the Credit Facility of $317,350
(consisting of $251,500 of previously incurred indebtedness, plus the
$135,000 in additional indebtedness incurred to fund the Boston
Transaction, less the $75,000 reduction in indebtedness following the
application of proceeds from the sale of WYUU-FM and WLLD-FM in Tampa, plus
the $5,850 in indebtedness assumed as a result of the Kansas City Tower and
Sacramento Frequency Exchange). A change in interest rates of 1/8% will
increase or decrease interest expense by $408.
<TABLE>
<S> <C>
Credit Facility............................................. $ 24,932
7% Subordinated Convertible Note............................ 1,794
Other Indebtedness.......................................... 20
--------
Pro forma interest expense................................ 26,746
Historical interest expense................................. (11,429)
--------
Net adjustment............................................ $ 15,317
========
</TABLE>
(F) The adjustment reflects (i) the interest expense savings resulting from the
use of proceeds from the Offering, (ii) the Chase Conversion and (iii) an
$86,000 increase in outstanding indebtedness as a result of the S
Corporation Distribution, all net of pro forma interest expense as adjusted
for the Completed and CBS Transactions (see Note (E)). The remaining
indebtedness incurs assumed interest expense at a rate of 6.90%, based on
the current terms of the Credit Facility. The calculation of interest
expense assumes an outstanding indebtedness under the Credit Facility of
$217,350 (consisting of $317,350 of indebtedness outstanding after the
Completed and CBS Transactions, plus the $86,000 of additional indebtedness
outstanding after the S Corporation Distribution, and less the $186,000 of
indebtedness which will be repaid with the proceeds from the Offering). The
net adjustment figure includes $5,934 of
32
<PAGE> 35
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
interest on the $86,000 indebtedness incurred to fund the S Corporation
Distribution. A change in interest rates of 1/8% will increase or decrease
interest expense by $259.
<TABLE>
<S> <C>
Credit Facility............................................. $ 15,010
7% Subordinated Convertible Note............................ 0
--------
Pro forma interest expense................................ 15,010
Pro forma interest expense as adjusted for the Completed and
CBS Transactions.......................................... (26,746)
--------
Net adjustment............................................ $(11,736)
========
</TABLE>
(G) The adjustment reflects the elimination of the income attributable to a 1%
limited partnership interest held by an affiliate of the Company, ECI
Investors Corporation ("Investors"), as a result of the contribution of the
stock of such affiliate to the Company, which will occur immediately prior
to the Offering.
(H) The adjustment reflects the income tax expense (benefit) related to the
income (loss) that would have been generated by the Company during the pro
forma period based on the assumption that the conversion from an S
Corporation to a C Corporation occurred on October 1, 1996. A combined
federal and state income tax rate of 38% was used for this calculation.
(I) The schedule below gives effect to the Completed and CBS Transactions for
the period from October 1, 1996 through June 30, 1997.
COMPLETED AND CBS TRANSACTIONS COMBINED
<TABLE>
<CAPTION>
COMPLETED TRANSACTIONS
----------------------------------------------------------------------------
HISTORICAL
OTHER
HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS
SINCLAIR(1) ARS(2) BONNEVILLE(3) CITICASTERS(4) COMBINED(5)
------------ ---------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues.................. $12,397 $6,605 $12,665 $1,781 $(9,422)
Station operating expenses.... 6,628 5,446 12,398 1,369 (5,095)
Depreciation and
amortization................ 1,317 970 1,478 926 655
Corporate general and
administrative expenses.....
Net TBA expenses (income)..... 2,669
Other operating expenses...... (1,203)
------- ------ ------- ------ -------
Operating income (loss)....... 4,452 189 (1,211) (514) (6,448)
Interest expense..............
Gain (loss) on sale of
assets...................... 8,500
Other expense................. 228
------- ------ ------- ------ -------
Income (loss) before income
tax expense................. 4,452 189 (1,211) (514) 1,824
Income taxes..................
------- ------ ------- ------ -------
Net income (loss)............. $ 4,452 $ 189 $(1,211) $ (514) $ 1,824
======= ====== ======= ====== =======
<CAPTION>
CBS TRANSACTIONS
-----------------------
COMPLETED
AND CBS
HISTORICAL HISTORICAL TRANSACTIONS
BOSTON(6) TAMPA(7) COMBINED(8)
---------- ---------- ------------
<S> <C> <C> <C>
Net revenues.................. $29,281 $(3,683) $49,624
Station operating expenses.... 23,972 (2,719) 41,999
Depreciation and
amortization................ 1,956 (147) 7,155
Corporate general and
administrative expenses..... (246) (246)
Net TBA expenses (income)..... 145 2,814
Other operating expenses...... (1,203)
------- ------- -------
Operating income (loss)....... 3,454 (817) (895)
Interest expense.............. 17 17
Gain (loss) on sale of
assets...................... (12) 8,488
Other expense................. 228
------- ------- -------
Income (loss) before income
tax expense................. 3,437 (829) 7,348
Income taxes..................
------- ------- -------
Net income (loss)............. $ 3,437 $ (829) $ 7,348
======= ======= =======
</TABLE>
--------------------
(1) The column represents the results of operations of KKSN-AM/FM and
KRSK-FM (formerly KKRH-FM) in Portland and WBBF-FM (formerly WKLX-FM),
WBEE-FM, WQRV-FM and WEZO-AM (formerly WBBF-AM) in Rochester from
October 1, 1996 through June 30, 1997, prior to the date of the
Sinclair Transaction.
(2) The column represents the results of operations of KDND-FM (formerly
KXOA-FM) in Sacramento from October 1, 1996 through December 31, 1996,
prior to the date of the TBA with ARS, and of WDAF-AM and KUDL-FM in
Kansas City, and KCTC-AM in Sacramento from October 1, 1996 through
June 30, 1997, prior to the dates of the ARS-Kansas City Transaction
and the ARS-KCTC Transaction, respectively.
33
<PAGE> 36
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(3) The column represents the results of operations of KIRO-AM/FM and
KNWX-AM in Seattle and KCMO-AM/FM, KYYS-FM (formerly KLTH-FM), and
KMBZ-AM in Kansas City from October 1, 1996 through February 28, 1997,
prior to the date of the TBA with Bonneville.
(4) The column represents the results of operations of KSEG-FM and KRXQ-FM
in Sacramento from October 1, 1996 through December 31, 1996, prior to
the date of the TBA with Citicasters.
(5) The column represents the historical results of operations for the
following transactions which were consummated prior to the date of the
Offering: (i) the acquisitions of WSKY-FM (formerly WRRX-FM) in
Gainesville, KSSJ-FM (formerly KBYA-FM) in Sacramento and KBAM-AM,
KRQT-FM, KEDO-AM, and KLYK-FM in Longview/Kelso, (ii) the dispositions
of KITS-FM in San Francisco, KLDE-FM in Houston, KLOU-FM in St. Louis,
KEGE-AM in Minneapolis and WDSY-FM and WJJJ-FM (formerly WNRQ-FM) in
Pittsburgh, (iii) the Kansas City Tower Transaction, (iv) the
Sacramento Frequency Exchange and (v) the Vancouver Transaction.
(6) The column represents the results of operations of WEEI-AM, WRKO-AM,
WEGQ-FM, and WAAF-FM in Boston and WWTM-AM in Worcester from October 1,
1996 through June 30, 1997, prior to the date of the Boston
Transactions.
(7) The column represents the results of operations of WYUU-FM and WLLD-FM
in Tampa from October 1, 1996 through June 30, 1997, prior to the date
of the Tampa Transaction.
(8) All stations acquired in the Completed and CBS Transactions have
December 31 year ends. Amounts derived for these transactions for the
nine month period ended June 30, 1997 were computed by adding fourth
quarter 1996 results to interim period results for the first and second
quarters of 1997.
(J) The adjustment reflects interest expense under the current Credit Facility,
based on the rate of 7.86%, and 7% Subordinated Convertible Note as if the
Completed and CBS Transactions were completed on October 1, 1996, net of the
historical interest expense. The calculation of interest expense assumes an
outstanding indebtedness under the Credit Facility of $317,350 (consisting
of $251,500 of previously incurred indebtedness, plus the $135,000 in
additional indebtedness incurred to fund the Boston Transactions, less the
$75,000 reduction in indebtedness following the application of proceeds from
the sale of WYUU-FM and WLLD-FM in Tampa, plus the $5,850 in indebtedness
assumed as a result of the Kansas City Tower and Sacramento Frequency
Exchange).A change in interest rates of 1/8% will increase or decrease
interest expense by $306.
<TABLE>
<S> <C>
Credit Facility............................................. $18,699
7% Subordinated Convertible Note............................ 1,346
Other indebtedness.......................................... 15
-------
Pro forma interest expense................................ 20,060
Historical interest expense................................. (8,471)
-------
Net adjustment............................................ $11,589
=======
</TABLE>
(K) The adjustment reflects (i) the interest expense savings resulting from the
use of proceeds from the Offering, (ii) the Chase Conversion and (iii) an
$86,000 increase in outstanding indebtedness as a result of the S
Corporation Distribution, all net of pro forma interest expense as adjusted
for the Completed and CBS Transactions (see Note (J)). The remaining
indebtedness incurs assumed interest expense at a rate of 6.90%, based on
the current terms of the Credit Facility. The net adjustment figure includes
$2,967 of interest on the $86,000 indebtedness incurred to fund the S
Corporation Distribution.
34
<PAGE> 37
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
<TABLE>
<S> <C>
Credit Facility............................................. $ 11,258
7% Subordinated Convertible Note............................ 0
--------
Pro forma interest expense................................ 11,258
Pro forma interest expense as adjusted for the Completed and
CBS Transactions.......................................... (20,060)
--------
Net adjustment............................................ $ (8,802)
========
</TABLE>
(L) The schedule below gives effect to the Completed and CBS Transactions for
the period from October 1, 1997 through June 30, 1998.
COMPLETED AND CBS TRANSACTIONS COMBINED
<TABLE>
<CAPTION>
COMPLETED TRANSACTIONS CBS TRANSACTIONS
--------------------------------------- -----------------------
HISTORICAL COMPLETED
OTHER AND CBS
HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL TRANSACTIONS
SINCLAIR(1) ARS(2) COMBINED(3) BOSTON(4) TAMPA(5) COMBINED(6)
----------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues...................... $ 6,460 $1,847 $ (762) $27,038 $(3,668) $30,915
Station operating expenses........ 3,498 1,554 (202) 25,193 (2,682) 27,361
Depreciation and amortization..... 4,316 165 466 1,164 (215) 5,896
Corporate general and
administrative expenses......... 62 62
Net TBA expenses (income).........
Other operating expenses.......... (130) (130)
------- ------ ------- ------- ------- -------
Operating income (loss)......... (1,354) 128 (896) 619 (771) (2,274)
Interest expense.................. 14 14
Gain (loss) on sale of assets..... (8) (8)
Other expense..................... 147 147
------- ------ ------- ------- ------- -------
Income (loss) before income tax
expense....................... (1,354) 128 (1,043) 597 (771) (2,443)
Income taxes......................
------- ------ ------- ------- ------- -------
Net income (loss)............... $(1,354) $ 128 $(1,043) $ 597 $ (771) $(2,443)
======= ====== ======= ======= ======= =======
</TABLE>
- ---------------
(1) The column represents the results of operations of KKSN-AM/FM and
KRSK-FM (formerly KKRH-FM) in Portland and WBBF-FM (formerly WKLX-FM),
WBEE-FM, WQRV-FM and WEZO-AM (formerly WBBF-AM) in Rochester from
October 1, 1997 through February 28, 1998, the date the Company began
operating the stations under TBAs.
(2) The column represents the results of operations of WDAF-AM and KUDL-FM
in Kansas City and KCTC-AM in Sacramento from October 1, 1997 through
December 31, 1997, prior to the dates of the ARS-Kansas City
Transaction and the ARS-KCTC Transaction, respectively.
(3) The column represents the historical results of operations for the
following transactions which were consummated prior to the date of the
Offering: (i) the acquisitions of WSKY-FM (formerly WRRX-FM) in
Gainesville, KSSJ-FM (formerly KBYA-FM) in Sacramento and KBAM-AM and
KRQT-FM in Longview/Kelso, (ii) the disposition of KLOU-FM in St.
Louis, (iii) the Kansas City Tower Transaction, and (iv) the Sacramento
Frequency Exchange.
(4) The column represents the results of operations of WEEI-AM, WRKO-AM,
WEGQ-FM and WAAF-FM in Boston and WWTM-AM in Worcester from October 1,
1997 through June 30, 1998, prior to the date of the Boston
Transactions.
(5) The column represents the results of operations of WYUU-FM and WLLD-FM
in Tampa from October 1, 1997 through June 30, 1998, prior to the date
of the Tampa Transaction.
35
<PAGE> 38
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(6) All stations acquired in the Completed and CBS Transactions have
December 31 year ends. Amounts derived for these transactions for the
nine month period ended June 30, 1998 were computed by adding fourth
quarter 1997 results to interim period results for the first and second
quarters of 1998.
(M) The adjustment reflects interest expense under the current Credit Facility,
based on the rate of 7.86%, and 7% Subordinated Convertible Note as if the
Completed and CBS Transactions were completed on October 1, 1996, net of
the historical interest expense. The calculation of interest expense
assumes an outstanding indebtedness under the Credit Facility of $17,350
(consisting of $251,500 of previously incurred indebtedness, plus the
$135,000 in additional indebtedness incurred to fund the Boston
Transaction, less the $75,000 reduction in indebtedness following the
application of proceeds from the sale of WYUU-FM and WLLD-FM in Tampa, plus
the $5,850 in indebtedness assumed as a result of the Kansas City Tower and
Sacramento Frequency Exchange). A change in interest rates of 1/8% will
increase or decrease interest expense by $306.
<TABLE>
<S> <C>
Credit Facility............................................. $18,699
7% Subordinated Convertible Note............................ 1,440
Other indebtedness.......................................... 15
-------
Pro forma interest expense................................ 20,154
Historical interest expense................................. (9,189)
-------
Net adjustment............................................ $10,965
=======
</TABLE>
(N) The adjustment represents the elimination of the historical gain on asset
sale recorded by CBS.
(O) The adjustment reflects the elimination of the gain on the sale of the
Vancouver license rights. For purposes of the pro forma presentation, the
sale is deemed to have occurred on October 1, 1996. Accordingly, the gain
on the sale is reflected on the pro forma statements of income for the year
ended September 30, 1997 and for the nine months ended June 30, 1997.
(P) The adjustment reflects (i) the interest expense savings resulting from the
use of proceeds from the Offering, (ii) the Chase Conversion and (iii) an
$86,000 increase in outstanding indebtedness as a result of the S
Corporation Distribution, all net of pro forma interest expense as adjusted
for the Completed and CBS Transactions (see Note (M)). The remaining
indebtedness incurs assumed interest expense at a rate of 6.90%, based on
the current terms of the Credit Facility. The net adjustment figure
includes $2,967 of interest on the $86,000 indebtedness incurred to fund
the S Corporation Distribution.
<TABLE>
<S> <C>
Credit Facility............................................. $ 11,258
7% Subordinated Convertible Note............................ 0
--------
Pro forma interest expense................................ 11,258
Pro forma interest expense as adjusted for the Completed and
CBS Transactions.......................................... (20,154)
--------
Net adjustment............................................ $ (8,896)
========
</TABLE>
(Q) The column represents the combined balance sheets as of June 30, 1998 of
those Completed Transactions not yet consummated on that date and the CBS
Transactions as if all such transactions were consummated on that date.
36
<PAGE> 39
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
COMPLETED AND CBS TRANSACTIONS COMBINED
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
------------
HISTORICAL CBS TRANSACTIONS
OTHER ----------------------- COMPLETED AND
TRANSACTIONS HISTORICAL HISTORICAL CBS TRANSACTIONS
COMBINED(1) BOSTON(2) TAMPA(3) COMBINED
------------ ---------- ---------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash................................. $ $ (110) $ (110)
Accounts receivable, net............. 9,276 (923) 8,353
Prepaid expenses and other........... $ 893 (57) 836
------ ------- ------- -------
Total current assets.............. 10,169 (1,090) 9,079
Property and equipment, net.......... 269 10,381 (2,751) 7,899
Intangible and other assets, net..... 5,581 32,387 (2,565) 35,403
------ ------- ------- -------
Total assets................. $5,850 $52,937 $(6,406) $52,381
====== ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other accrued
liabilities....................... $ 2,984 $ (276) $ 2,708
Long-term debt, current portion...... 35 35
------ ------- ------- -------
Total current liabilities......... 3,019 (276) 2,743
Long-term debt, less current
portion........................... $5,850 5,850
Other long-term liabilities.......... --
------ ------- ------- -------
Total liabilities................. 5,850 3,019 (276) 8,593
Shareholders' equity................. 0 49,918 (6,130) 43,788
------ ------- ------- -------
Total liabilities and
shareholders' equity....... $5,850 $52,937 $(6,406) $52,381
====== ======= ======= =======
</TABLE>
- ---------------
(1) The column reflects the combined balance sheets of the following
transactions consummated subsequent to June 30, 1998, but prior to the
Offering: (i) the Kansas City Tower Transaction and (ii) the Sacramento
Frequency Exchange.
(2) The column represents the combined balance sheet of WEEI-AM, WRKO-AM,
WEGQ-FM, WAAF-FM in Boston and WWTM-AM in Worcester as the CBS
Transactions will be consummated subsequent to June 30, 1998.
(3) The column represents the combined balance sheet of WYUU-FM and WLLD-FM
in Tampa as the Tampa Transaction will be consummated subsequent to
June 30, 1998.
(R) The adjustment represents the elimination of the historical CBS balance as
this amount will not be acquired or assumed by the Company, as the case may
be, in the asset purchase agreement.
37
<PAGE> 40
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(S) The adjustment reflects the estimated allocation of the purchase price of
the Boston Transactions to the assets acquired resulting in adjustments to
the property and equipment and intangibles and other assets to their
estimated fair values associated with the acquisition as follows:
<TABLE>
<CAPTION>
ESTIMATED
ALLOCATION OF CARRYING
PURCHASE PRICE VALUE ADJUSTMENTS
-------------- -------- -----------
<S> <C> <C> <C>
Property and equipment, net................... $ 6,530 $10,381 $ (3,851)
Intangible and other assets, net
FCC Licenses................................ 133,240 32,387 100,853
Other Intangibles........................... 230 -- 230
-------- ------- --------
Total intangible and other assets........... 133,470 32,387 101,083
-------- ------- --------
Total purchase price................ $140,000 $42,768 $ 97,232
======== ======= ========
</TABLE>
Intangible and other assets are amortized over a period of 40 years.
(T) The adjustment reflects the amount to be received from CBS to offset
prospective losses from certain contracts acquired in the CBS Transactions.
(U) The adjustment reflects the increase in debt necessary to fund the Boston
Transactions.
(V) The adjustment reflects the proceeds received for WYUU-FM and WLLD-FM in the
Tampa Transaction.
(W) The adjustment represents the recording of the current deferred tax assets
and the deferred tax liabilities related to the conversion from an S
Corporation to a C Corporation.
(X) The adjustment reflects the Chase Conversion.
(Y) The adjustment reflects assumed proceeds to the Company of $186 million from
the Offering, net of estimated fees and expenses.
(Z) The adjustment reflects the portion of the S Corporation Distribution
related to the estimated amount of the Company's taxed but undistributed
income through the Revocation Date (including the income from the Tampa
Transaction).
(AA) The adjustment reflects the portion of the S Corporation Distribution which
is estimated to be the taxes due by existing S Corporation shareholders as
a result of the income of the Company through the Revocation Date
(including the income from the Tampa Transaction) net of prior
distributions to such shareholders for such taxes.
(AB) The adjustment reflects the effect of the contribution of the stock of ECI
Investors Corporation, which will occur immediately prior to the Offering.
38
<PAGE> 41
SELECTED HISTORICAL FINANCIAL DATA
The operating and other data in the following table have been derived from
audited financial statements of the Company for the years ended September 30,
1995, 1996 and 1997 and for the nine months ended June 30, 1998 and the
unaudited financial statements of the Company for the nine months ended June 30,
1997, all of which are included elsewhere in this Prospectus, and from audited
financial statements for the years ended September 30, 1993 and 1994. The
selected balance sheet data in the following table have been derived from
audited financial statements of the Company as of September 30, 1996 and 1997
and June 30, 1998, all of which are included elsewhere in this Prospectus, and
from audited financial statements of the Company as of September 30, 1993, 1994
and 1995.
In management's opinion, the unaudited financial statements from which such
data have been derived include all adjustments (consisting only of normal,
recurring adjustments) necessary to present fairly, in all material respects,
the results of operations and financial condition of the Company as of and for
the periods presented.
The comparability of the historical financial data reflected herein has
been significantly impacted by acquisitions and dispositions. The information
presented below is qualified in its entirety by, and should be read in
conjunction with the "Audited Financial Statements," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the
"Unaudited Pro Forma Financial Information," and, in each case, the related
notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, JUNE 30,
------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- -------- -------- ----------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues.................... $30,065 $29,137 $35,893 $ 48,675 $ 93,862 $ 64,540 $ 92,086
Station operating expenses...... 22,478 21,520 24,061 31,659 61,280 41,757 61,617
Depreciation and amortization... 2,182 2,248 2,225 2,960 7,685 3,874 8,959
Corporate general and
administrative expenses....... 2,015 2,300 2,535 2,872 3,249 2,259 3,042
Net TBA expenses (income)....... 603 (879) (476) (476) 2,273
Operating income................ 3,390 3,069 6,469 12,063 22,124 17,126 16,195
Interest expense................ 1,740 1,648 1,992 5,196 11,388 8,454 9,175
Gain on sale of assets.......... 22 20,545 228 119 197,097 197,097 8,791
Income before income taxes and
extraordinary items........... 1,657 21,531 4,805 7,053 206,329 204,189 16,036
Pro forma income taxes(1)....... 630 8,182 1,826 2,680 78,405 77,592 6,094
Pro forma income before
extraordinary items(1)........ 1,027 13,349 2,979 4,373 127,924 126,597 9,942
Pro forma earnings per share
before extraordinary
items(1)(2)...................
Pro forma weighted average
common shares
outstanding(2)................
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents....... $ 938 $ 1,513 $ 1,564 $ 5,292 $ 3,626 $ 6,094
Intangibles and other assets.... 8,986 5,552 29,548 119,269 300,029 428,542
Total assets.................... 24,879 19,368 52,209 150,575 364,743 513,445
Long-term debt, including
current portion............... 19,250 15,250 46,554 136,642 144,427 280,633
Total shareholders' equity...... 2,057 427 828 5,079 208,089 219,175
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, JUNE 30,
--------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1997 1998
------- -------- -------- -------- -------- ----------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Broadcast cash flow(3).......... $ 7,587 $ 7,617 $ 11,832 $ 17,016 $ 32,582 $22,783 $ 30,469
Broadcast cash flow margin(4)... 25.2% 26.1% 33.0% 35.0% 34.7% 35.3% 33.1%
EBITDA before net TBA expenses
(income)(5)................... $ 5,572 $ 5,317 $ 9,297 $ 14,144 $ 29,333 $20,524 $ 27,427
After-tax cash flow(6).......... 2,591 2,047 4,172 7,923 14,947 9,194 14,040
Cash flows related to:
Operating activities.......... 3,461 3,950 1,182 12,773 8,859 (1,518) 16,629
Investing activities.......... (5,352) 23,787 (28,636) (96,502) (13,695) (6,950) (146,545)
Financing activities.......... 1,599 (27,161) 27,505 87,457 3,170 5,482 132,384
</TABLE>
- ---------------
(1) Throughout the periods presented, the Company had elected to be taxed under
Subchapter S of the Code, and comparable provisions of certain state tax
laws. The amounts shown reflect pro forma provisions for state and federal
income taxes (at an assumed combined rate of 38% per annum) as if the
Company had been taxed under Subchapter C of the Code throughout the periods
presented. The Company intends to revoke its election to be taxed as an S
Corporation immediately prior to the consummation of the Offering.
(2) Reflects the effect of the for one stock split to be effected as part
of the Recapitalization.
(3) Broadcast cash flow consists of operating income before depreciation,
amortization, net TBA expense (income) and corporate expenses. Although
broadcast cash flow is not a measure of performance or liquidity calculated
in accordance with GAAP, management believes that it is useful to an
investor in evaluating the Company because it is a measure widely used in
the broadcast industry to measure a radio company's operating performance.
Nevertheless, it should not be considered in isolation or as a substitute
for operating income, cash flows from operating activities or any other
measure for determining the Company's operating performance or liquidity
that is calculated in accordance with GAAP. Moreover, because broadcast cash
flow is not a measure calculated in accordance with GAAP, this measure is
not necessarily comparable to similarly titled measures employed by other
companies.
(4) Broadcast cash flow margin represents broadcast cash flow as a percentage of
net revenue.
(5) EBITDA before net TBA expenses (income) consists of operating income before
depreciation, amortization and net TBA expense (income). Although EBITDA
before net TBA expenses (income) is not a measure of performance or
liquidity calculated in accordance with GAAP, management believes that it is
useful to an investor in evaluating the Company because it is a measure
widely used in the broadcast industry to measure a radio company's operating
performance. Nevertheless, it should not be considered in isolation or as a
substitute for operating income, cash flows from operating activities or any
other measure for determining the Company's operating performance or
liquidity that is calculated in accordance with GAAP. Moreover, because
EBITDA before net TBA expenses (income) is not a measure calculated in
accordance with GAAP, this measure is not necessarily comparable to
similarly titled measures employed by other companies.
(6) After-tax cash flow consists of pro forma income before extraordinary items
minus net gain on sale of assets (net of tax) and plus depreciation,
amortization, and the deferred tax provision (or minus the deferred tax
benefit). Although after-tax cash flow is not a measure of performance or
liquidity calculated in accordance with GAAP, management believes that it is
useful to an investor in evaluating the Company because it is a measure
widely used in the broadcast industry to measure a radio company's operating
performance. Nevertheless, it should not be considered in isolation or as a
substitute for operating income, cash flows from operating activities or any
other measure for determining the Company's operating performance or
liquidity that is calculated in accordance with GAAP. Moreover, because
after-tax cash flow is not a measure calculated in accordance with GAAP,
this measure is not necessarily comparable to similarly titled measures
employed by other companies.
40
<PAGE> 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis of financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes thereto of the Company included elsewhere
in this Prospectus. Periodically, the Company may make statements about trends,
future plans and the Company's prospects. Actual results may differ materially
from those described in such forward looking statements based on the risks and
uncertainties facing the Company, including but not limited to, the following:
business conditions, competition and growth in the radio broadcasting industry
and the general economy; changes in interest rates; the failure or inability to
renew one or more of the Company's broadcasting licenses; and the factors
described in "Risk Factors."
Historically, the Company has operated with an October 1st to September
30th fiscal year. All references herein, with the exception of specific
references to calendar year periods, are based on the Company's fiscal year.
A radio broadcasting company's revenues are derived primarily from the sale
of broadcasting time to local and national advertisers. Those revenues are
largely determined by the advertising rates that a radio station is able to
charge and the number of advertisements that can be broadcast without
jeopardizing listener levels. Advertising rates are primarily based on three
factors: (i) a station's audience share in the demographic groups targeted by
advertisers, as measured principally by quarterly reports issued by Arbitron;
(ii) the number of radio stations in the market competing for the same
demographic groups; and (iii) the supply of and demand for radio advertising
time. In 1997, 73.6% of the Company's revenues were generated from local
advertising (which is sold primarily by each individual local radio station's
sales staff), and 22.8% were generated from national spot advertising (which is
sold by independent advertising sales representatives). The balance of 1997
revenues were generated principally by network advertising and rental income
from tower sites.
Revenues recognized under a TBA or JSA for stations operated by the Company
prior to acquiring the stations are included in net revenues, while operating
expenses associated with these stations are reflected in station operating
expenses. Consequently, there is no difference in the method of revenue and
operating expense recognition between a station operated by the Company under a
TBA or JSA and a station owned and operated by the Company.
Several factors may adversely affect a radio broadcasting company's
performance in any given period. In the radio broadcasting industry, seasonal
revenue fluctuations are common and are due primarily to variations in
advertising expenditures by local and national advertisers. Typically, revenues
are lowest in the first calendar quarter of the year. The Company generally
incurs advertising and promotional expenses to increase "listenership" and
Arbitron ratings. However, since Arbitron reports ratings quarterly, any
increased ratings and therefore increased advertising revenues tend to lag
behind the incurrence of such advertising and promotional spending.
In the broadcasting industry, radio stations often utilize trade (or
barter) agreements to reduce expenses by exchanging advertising time for goods
or services. The Company, in order to maximize cash revenue from its spot
inventory, minimizes its use of trade agreements and during the past five years
has held barter revenues under 2.0% of the Company's gross revenues and barter
related broadcast cash flow under 0.4% of the Company's broadcast cash flow.
In the following analysis, management discusses broadcast cash flow and
EBITDA before net TBA expenses (income). Broadcast cash flow consists of
operating income before depreciation, amortization, net TBA expenses (income)
and corporate expenses. EBITDA before net TBA expenses (income) consists of
operating income before depreciation, amortization and net TBA expenses
(income). In part due to the non-capital intensive nature of the radio
broadcasting industry and the high level of non-cash depreciation and
amortization expense, broadcast cash flow and EBITDA before net TBA expenses
(income) are frequently
41
<PAGE> 44
used as bases for evaluating radio broadcasting businesses, although the
Company's measures of broadcast cash flow and EBITDA before net TBA expenses
(income) may not be comparable to similarly titled measures of other companies.
Neither broadcast cash flow nor EBITDA before net TBA expenses (income) purports
to represent net income, operating income or net cash provided by operating
activities, as those terms are defined under GAAP, and they should not be
considered in isolation or as a substitute for such measurements.
The Company calculates "same station" growth by (i) comparing the
performance of stations operated by the Company throughout a relevant quarter to
the performance of those same stations (whether or not operated by the Company)
in the prior year's corresponding quarter, excluding the effect of barter
revenues and expenses and discontinued operations and (ii) averaging such growth
rates for the period presented. "Same station broadcast cash flow margin" is the
broadcast cash flow margin of the stations included in the Company's same
station calculations. For purposes of the following discussion, pro forma net
income before extraordinary items represents historical net income before
extraordinary items adjusted as if the Company were treated as a C Corporation
during all relevant periods at an effective tax rate of 38%.
Because of the Company's significant acquisition and divestiture activities
in 1997, Entercom's actual 1997 results of operation do not reflect a full year
of operations of the Company's current portfolio of radio stations. Therefore,
the Company's pro forma 1997 results of operation differ materially from its
actual 1997 results. In addition, due to acquisition and divestiture activities,
the Company's pro forma results of operation for the first nine months of 1998
differ materially from its actual results for the first nine months of 1998.
Entercom's actual results for the first nine months of 1998 do not reflect a
full nine months of operations of the Company's current portfolio of radio
stations; however, the actual results include a partial year of operating
results for a station in St. Louis which the Company has since divested. In
fiscal 1997, the Company's pro forma net revenues were $156.3 million and pro
forma broadcast cash flow was $45.8 million. For the nine months ended June 30,
1998, pro forma net revenues were $123.0 million and pro forma broadcast cash
flow was $37.1 million. Pro forma broadcast cash flow margin was 30.2% for the
nine months ended June 30, 1998.
RESULTS OF OPERATIONS
Nine Months Ended June 30, 1998 Compared to Nine Months Ended June 30, 1997
Net Revenues. Net revenues increased 42.7% to $92.0 million for the nine
months ended June 30, 1998 from $64.5 million for the nine months ended June 30,
1997. Of the increase, $10.5 million is attributable to stations acquired during
this period, offset by $0.3 million for stations divested during the same
period. On a same station basis, net revenues for the period increased 15.4% to
$89.9 million in 1998 from $77.9 million in 1997, largely due to stronger
selling efforts and radio advertising market growth. Same station revenue growth
was led by substantial increases in Seattle, Kansas City and Portland.
Station Operating Expenses. Station operating expenses increased 47.6% to
$61.6 million for the nine months ended June 30, 1998 from $41.8 million for the
nine months ended June 30, 1997. Of the increase, $7.0 million is attributable
to stations acquired during this period, offset by $0.3 million for stations
divested during the same period. On a same station basis, station operating
expenses increased 9.2% to $60.0 million for the nine months ended June 30, 1998
from $54.8 million for the nine months ended June 30, 1997.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased 34.7% to $3.0 million for the nine months
ended June 30, 1998 from $2.3 million for the nine months ended June 30, 1997.
This increase was primarily due to the higher administrative expenses associated
with supporting the Company's growth.
Depreciation and Amortization. Depreciation and amortization increased
131.3% to $9.0 million for the nine months ended June 30, 1998 from $3.9 million
for the nine months ended June 30, 1997. This increase was primarily
attributable to the Company's acquisitions during 1997 and 1998.
Interest Expense. Interest expense increased 8.5% to $9.2 million for the
nine months ended June 30, 1998, from $8.5 million for the nine months ended
June 30, 1997. This increase was primarily due to indebtedness incurred in
connection with the Company's acquisitions.
42
<PAGE> 45
Pro Forma Income Before Extraordinary Items. Pro forma income before
extraordinary items reflects the Company's historical income before
extraordinary items, as adjusted to reflect state and federal income taxes as if
the Company had been taxed under Subchapter C of the Code at an effective rate
of 38% throughout the nine month periods ended June 30, 1998 and 1997,
respectively. As a result of the factors described above, pro forma income
before extraordinary items for the nine months ended June 30, 1998 was $9.9
million, including a gain of $5.5 million, net of taxes, on the sale of assets.
This compares to pro forma income before extraordinary items of $126.6 million
for the nine months ended June 30, 1997, which included a prior year gain of
$122.2 million, net of taxes, on the sale of assets. The decrease in gain on the
sale of assets is primarily attributable to the Company's disposition of
stations in the Houston, San Francisco and Pittsburgh radio markets during the
nine month period ended June 30, 1997. The Company used the proceeds from these
dispositions to acquire stations in markets where it believed there was greater
potential for establishing clusters. The Company does not expect such
significant gains on the sale of assets to continue in the future.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased 33.7% to $30.5 million for the nine months ended June 30,
1998 from $22.8 million for the nine months ended June 30, 1997. On a same
station basis, broadcast cash flow increased 30.1% to $30.0 million for the nine
months ended June 30, 1998 from $23.1 million for the nine months ended June 30,
1997.
The Company's broadcast cash flow margin (defined as broadcast cash flow as
a percentage of net revenues) declined to 33.1% for the nine months ended June
30, 1998 from 35.3% for the nine months ended June 30, 1997. This decline was
primarily attributable to the Company's 1997 exchange of relatively mature
stations in San Francisco and Houston, which operated at higher broadcast cash
flow margins but were located in markets where management believed there were
limited growth and clustering opportunities, for less developed properties in
Seattle, Kansas City and Sacramento, which collectively operated with lower
broadcast cash flow margins but offered stronger growth and clustering
opportunities. On a same station basis, the Company's broadcast cash flow margin
increased to 33.4% for the nine months ended June 30, 1998 from 29.7% for the
nine months ended June 30, 1997.
EBITDA Before Net TBA Expenses (Income). As a result of the factors
described above, EBITDA before net TBA expenses (income) increased 33.6% to
$27.4 million for the nine months ended June 30, 1998, from $20.5 million for
the nine months ended June 30, 1997.
Fiscal Year Ended September 30, 1997 Compared to Fiscal Year Ended September
30, 1996
Net Revenues. Net revenues increased 92.8% to $93.9 million for the year
ended September 30, 1997 from $48.7 million for the year ended September 30,
1996. Of the increase, $32.3 million is attributable to stations acquired during
this period, offset by $8.8 million for stations divested during the same
period. On a same station basis, net revenues increased 14.2% to $86.6 million
for the year ended September 30, 1997 from $75.8 million for the year ended
September 30, 1996. Same station revenue growth was led by substantial increases
in Seattle, Kansas City, Portland, Houston and St. Louis.
Station Operating Expense. Station operating expenses increased 93.6% to
$61.3 million for the year ended September 30, 1997 from $31.7 million for the
year ended September 30, 1996. Of the increase, $16.3 million is attributable to
stations acquired during this period, offset by $4.7 million for stations
divested during the same period. On a same station basis, station operating
expenses decreased 0.4% to $55.0 million for the year ended September 30, 1997
from $55.2 million for the year ended September 30, 1996. This decrease was
attributable to cost savings measures implemented by the Company in connection
with its acquisitions.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased 13.1% to $3.2 million for the year ended
September 30, 1997 from $2.9 million for the year ended September 30, 1996. This
increase was primarily due to higher administrative expenses associated with
supporting the Company's growth.
Depreciation and Amortization. Depreciation and amortization increased
159.6% to $7.7 million for the year ended September 30, 1997 from $3.0 million
for the year ended September 30, 1996. This increase was
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<PAGE> 46
primarily attributable to the Company's 1996 and 1997 acquisitions and was
partially offset by the net effect of stations sold during the same period.
Interest Expense. Interest expense increased 119.2% to $11.4 million for
the year ended September 30, 1997 from $5.2 million for the year ended September
30, 1996. This increase was primarily due to indebtedness incurred in connection
with the Company's acquisitions.
Pro Forma Income Before Extraordinary Items. Pro forma income before
extraordinary items reflects the Company's historical income before
extraordinary items, as adjusted to reflect state and federal income taxes as if
the Company had been taxed under Subchapter C of the Code at an effective rate
of 38% throughout the fiscal years ended September 30, 1997 and 1996,
respectively. As a result of the factors described above, pro forma income
before extraordinary items for the year ended September 30, 1997 was $127.9
million, including a $122.2 million gain, net of taxes, on the sale of assets.
This compares to pro forma income before extraordinary items of $4.4 million for
the year ended September 30, 1996, which includes a gain of $0.1 million, net of
taxes, on the sale of assets. The increase in gain on the sale of assets is
primarily attributable to the Company's disposition of stations in the Houston,
San Francisco and Pittsburgh radio markets during the year ended September 30,
1997. The Company used the proceeds from these dispositions to acquire stations
in markets where it believed there was greater potential for establishing
clusters. The Company does not expect such significant gains on the sale of
assets to continue in the future.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased 91.5% to $32.6 million for the year ended September 30, 1997
from $17.0 million for the year ended September 30, 1996. On a same station
basis, broadcast cash flow increased 53.3% to $31.6 million for the year ended
September 30, 1997 from $20.6 million for the year ended September 30, 1996.
Broadcast cash flow margin declined to 34.7% for fiscal 1997 from 35.0% for
fiscal 1996. This decline was primarily attributable to the Company's exchange
in fiscal 1997 of relatively mature stations in San Francisco and Houston, which
operated at higher broadcast cash flow margins but were located in markets where
management believed there were limited growth and clustering opportunities, for
less developed properties in Seattle, Kansas City and Sacramento, which
collectively operated with lower broadcast cash flow margins, but offered
stronger growth and clustering opportunities. On a same station basis, broadcast
cash flow margins increased to 36.5% for the year ended September 30, 1997 from
27.2% for the year ended September 30, 1996.
EBITDA Before Net TBA Expenses (Income). As a result of the factors
described above, EBITDA before net TBA expenses (income) increased 107.4% to
$29.3 million for the year ended September 30, 1997, from $14.1 million for the
year ended September 30, 1996.
Fiscal Year Ended September 30, 1996 Compared to Fiscal Year Ended September
30, 1995
Net Revenues. Net revenues increased 35.6% to $48.7 million for the year
ended September 30, 1996 from $35.9 million for the year ended September 30,
1995. Of the increase, $5.0 million is attributable to stations acquired during
this period, offset by $1.2 million for stations divested during the same
period. On a same station basis, net revenues increased 15.3% to $44.7 million
for the year ended September 30, 1996 from $38.8 million for the year ended
September 30, 1995. Same station revenue growth was led by substantial increases
in Portland, Tampa, Houston, Seattle and San Francisco.
Station Operating Expenses. Station operating expenses increased 31.6% to
$31.7 million for the year ended September 30, 1996 from $24.1 million for the
year ended September 30, 1995. Of the increase, $2.2 million is attributable to
stations acquired during this period, offset by $0.9 million for stations
divested during the same period.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased 13.3% to $2.9 million for the year ended
September 30, 1996 from $2.5 million for the year ended September 30, 1995. This
increase was primarily due to higher administrative expenses associated with
supporting the Company's growth.
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<PAGE> 47
Depreciation and Amortization. Depreciation and amortization increased
33.0% to $3.0 million for the year ended September 30, 1996 from $2.2 million
for the year ended September 30, 1995. This increase was primarily attributable
to the Company's 1995 and 1996 acquisitions.
Interest Expense. Interest expense increased 160.8% to $5.2 million for
the year ended September 30, 1996 from $2.0 million for the year ended September
30, 1995. The increase was primarily due to indebtedness incurred in connection
with the Company's acquisitions.
Pro Forma Income Before Extraordinary Items. Pro forma income before
extraordinary items reflects the Company's historical income before
extraordinary items, as adjusted to reflect state and federal income taxes as if
the Company had been taxed under Subchapter C of the Code at an effective rate
of 38% throughout the fiscal years ended September 30, 1996 and 1995,
respectively. As a result of the factors described above, pro forma income
before extraordinary items for the year ended September 30, 1996 was $4.4
million, including a gain of $0.1 million, net of taxes, on the sale of assets.
This compares to pro forma income before extraordinary items of $3.0 million for
the year ended September 30, 1995, which did not include any gains on the sale
of assets.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased 43.8% to $17.0 million for the year ended September 30, 1996
from $11.8 million for the year ended September 30, 1995. On a same station
basis, broadcast cash flow increased 27.2% to $15.4 million for the year ended
September 30, 1996 from $12.1 million for the year ended September 30, 1995.
Broadcast cash flow margin increased from 33.0% for the year ended 1995 to 35.0%
for the year ended 1996. Same station broadcast cash flow margin rose from 31.3%
to 34.5%.
EBITDA Before Net TBA Expenses (Income). As a result of the factors
described above, EBITDA before net TBA expenses (income) increased 52.1% to
$14.1 million for the year ended September 30, 1996, from $9.3 million for the
year ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has used a significant portion of its capital resources to
consummate acquisitions. These acquisitions were or will be funded from one or a
combination of the following sources: (i) the Credit Facility (described below),
(ii) the 7% Subordinated Convertible Note (described below), (iii) the swapping
of Company owned radio stations in qualified Section 1031 transactions and (iv)
internally-generated cash flow. Net proceeds from the Offering will be used to
repay a portion of the Company's outstanding indebtedness under the Credit
Facility. See "Use of Proceeds."
Net cash flows from operating activities were $8.9 million, $12.8 million
and $1.2 million for the twelve months ended September 30, 1997, 1996 and 1995,
respectively, and $16.6 million and $(1.5) million for the nine months ended
June 30, 1998 and 1997, respectively. Changes in the Company's net cash flow
from operating activities are primarily a result of changes in advertising
revenues and station operating expenses which are affected by the acquisition
and dispositions of stations during those periods.
Net cash flows used in investing activities were $13.7 million, $96.5
million and $28.6 million for the twelve months ended September 30, 1997, 1996
and 1995, respectively, and $146.5 million and $6.9 million for the nine months
ended June 30, 1998 and 1997, respectively. Net cash flows from financing
activities were $3.2 million, $87.5 million and $27.5 million for the twelve
months ended September 30, 1997, 1996 and 1995, respectively, and $132.4 million
and $5.5 million for the nine months ended June 30, 1998 and 1997, respectively.
These cash flows reflect the acquisitions consummated in the relevant periods
and the related borrowings.
In addition to debt service, the Company's principal liquidity requirements
will be for working capital and general corporate purposes, including capital
expenditures, and, if appropriate opportunities arise, acquisitions of
additional radio stations. [For fiscal 1998, management anticipates that
maintenance capital expenditures will be approximately $1.0 million while total
capital expenditures will be approximately $11.0 million, including
approximately $6.7 million for one-time expenditures associated with studio
consolidations related to the Company's acquisition activity and $1.5 million
for one-time expenditures for signal upgrades.] For
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<PAGE> 48
calendar 1999, management anticipates maintenance capital expenditures to be
between $1.0 million and $1.5 million and total capital expenditures to be
between $3.5 million and $5.0 million. Management believes that cash from
operating activities, together with available revolving credit borrowings under
the Credit Facility, should be sufficient to permit the Company to meet its
financial obligations and fund its operations. The Company may require
additional financing for future acquisitions, if any, and there can be no
assurance that it would be able to obtain such financing on terms considered to
be favorable by management.
The Company entered into a Loan Agreement, dated as of February 13, 1998 as
amended October 8, 1998, with several banks, including Key Corporate Capital,
Inc. and Bank of America NT&SA for a $350 million revolving credit facility (the
"Credit Facility"), subject to compliance with certain financial ratios. The
Credit Facility was established to: (i) refinance existing indebtedness of the
Company, (ii) provide working capital and (iii) fund corporate acquisitions. At
the Company's election, interest on any outstanding principal accrues at a rate
based on either LIBOR plus a spread which ranges from 0.5% to 2.125% or on
KeyBank N.A.'s base rate plus a spread of up to 0.875%, depending on the
Company's leverage ratio. Although the Company may borrow, repay and reborrow
under the Credit Facility, the aggregate maximum amount that the Company can
have outstanding at any one time is reduced throughout the term of the Credit
Facility. The final maturity date for the Credit Facility is February 13, 2006.
As of June 30, 1998, on a pro forma basis after giving effect to the Offering,
the Company had approximately $217.6 million of borrowings outstanding under the
Credit Facility. As of November , 1998, the Company had approximately
$[ ] million of borrowings outstanding under the Credit Facility.
The Credit Facility prohibits the Company from maintaining a total leverage
ratio (defined as the ratio of the Company's total debt to operating cash flow)
greater than 7.0 to 1.0, at any time through March 31, 1999. In addition, the
Credit Facility prohibits the Company from maintaining a senior leverage ratio
(defined as the ratio of the principal amount outstanding under the Credit
Facility to operating cash flow) greater than 6.5 to 1.0, at any time through
March 31, 1999. Currently, the Company is in compliance with the total and
senior leverage ratio obligations imposed by the Credit Facility.
The Credit Facility also requires the Company to (i) maintain a fixed
charge coverage ratio (defined as the ratio of operating cash flow to the sum of
the Company's debt service, capital expenditures, taxes and capital
distributions, over any four quarter period) greater than 1.05 to 1.00 and (ii)
maintain an interest coverage ratio (defined as the ratio of operating cash flow
to interest expense over any four quarter period) greater than 2.0 to 1.0.
Currently, the Company is in compliance with each of these financial ratio
obligations imposed by the Credit Facility.
The Company entered into the Chase Agreement with Chase Capital on May 21,
1996 pursuant to which the Company issued the 7% Subordinated Convertible Note
in the original principal amount of $25 million. Interest accrues on the 7%
Subordinated Convertible Note at a rate of seven percent. However, payment of
interest is deferred until May 21, 2003. As of June 30, 1998, the total amount
of principal and interest owed by the Company under the Chase Agreement was
$[ ] million.
Chase Capital has agreed with the Underwriters and the Company that,
immediately prior to the Offering, it will convert the 7% Subordinated
Convertible Note into Class A Common Stock. Upon the Chase Conversion, Chase
Capital will receive shares of Class A Common Stock. After giving
effect to the Offering, including Chase Capital's sale of shares of Class A
Common Stock therein, Chase Capital will beneficially own approximately %
of the Company's Class A Common Stock, representing % of the total voting
power of the Company's outstanding Common Stock (approximately % of the
Company's Class A Common Stock, representing % of the total voting power of
the Company's outstanding Common Stock, if the over-allotment option is
exercised in full). See "Principal and Selling Shareholders" and "Risk
Factors -- Benefits to Existing Shareholders and Affiliates."
The Credit Facility requires the Company to protect itself from interest
rate fluctuations through the use of derivative rate hedging instruments. As a
result, the Company has entered into various convertible rate cap and interest
rate swap transactions with various banks (the "Rate Hedging Transactions")
designed to mitigate the Company's exposure to significantly higher floating
interest rates. In the future, the Company expects to continue executing Rate
Hedging Transactions only to the extent required under the Credit Facility
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<PAGE> 49
and does not anticipate holding derivative securities for speculative or
investment purposes. The following table sets forth certain information
regarding the Rate Hedging Transactions which the Company had entered into as of
June 30, 1998.
<TABLE>
<CAPTION>
UNRECOGNIZED GAINS (LOSSES) AS OF
---------------------------------
SEPTEMBER 30, JUNE 30,
CONVERTIBLE CAP SWAP --------------------- ---------
NOTIONAL AMOUNT INTEREST RATE INTEREST RATE 1996 1997 1998
- --------------- --------------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$20 million 6.77% $(208,000) $(351,000) $(399,000)
$25 million* 6.72% 5.89% (117,000) (212,000) (301,000)
$25 million 7.50% 6.05% 15,000 (101,000) (230,000)
$15 million 5.61% -- -- 164,000
$14 million 5.86% -- -- (33,000)
$30 million 5.77% -- -- (303,000)
</TABLE>
* This cap was converted by the bank into an interest rate swap effective
October 29, 1998.
No gains or losses have been recognized by the Company during the periods
indicated.
RECENT PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133 entitled "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
"derivatives") and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management has not yet determined what effect, if any, this statement will have
on the Company.
IMPACT OF YEAR 2000 ISSUES
The Company relies, directly and indirectly, on information technology
systems to operate its digital radio stations, provide its radio stations with
up-to-date news and perform a variety of administrative services including
accounting, financial reporting, advertiser spot scheduling, payroll and
invoicing. Most of these information technology systems, such as Marketron,
Columbine, Ultipro, Solomon and Novell, are standard commercial software
products used both throughout the radio broadcasting industry and in other
industries. The Company also uses non-information technology systems, such as
microchips for dating and other automated functions. All of these technology
systems could potentially be affected by Year 2000 Issues.
In order to minimize the risk of Year 2000 related losses, the Company is
conducting a comprehensive assessment of its Year 2000 Issues. This assessment
consists of (i) an analysis of all of the information and non-information
technology systems that the Company uses, including the circulation of Year 2000
compliance questionnaires to the chief engineers of each of the Company's
stations, requiring them to evaluate their respective station's preparedness for
Year 2000 Issues and (ii) an inquiry as to the Year 2000 status of third parties
material to the Company's operations, including the transmission of letters to
all key service providers requesting written confirmation of their Year 2000
readiness.
Although the Company is still in the process of assessment, the Company has
received confirmation from each supplier that provides or manufactured a
material information or non-information technology system used by the Company
that such system is either Year 2000 compliant or that such supplier will,
within a short period of time, provide software aides, supplements or
replacements that will make such system Year 2000 compliant.
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<PAGE> 50
Due to (i) the results of the Company's assessment and to the preventive
measures being taken, (ii) the relatively small degree to which the radio
broadcasting industry, as compared to other industries, depends on technology
systems, (iii) the fact that most of the Company's automated administrative
services can, if needed, be performed manually, and (iv) the fact that the
Company's radio stations are equipped to operate without the use of technology
systems, management has concluded that Year 2000 Issues will not have a material
adverse effect on the Company's operations, results of operations or financial
condition. Furthermore, since the Company relies mostly on technology systems
used industrywide, management believes that even if its opinions regarding the
Company's Year 2000 Issues prove incorrect, the Company would be exposed to no
greater Year 2000 related risks than those which other radio broadcasting
companies will face.
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<PAGE> 51
BUSINESS
OVERVIEW
Entercom, founded in 1968, is the sixth largest radio broadcasting company
in the United States, based on pro forma 1997 gross revenues. The Company owns
and operates 41 stations, 25 FM and 16 AM, in eight markets, including five of
the country's top 30 radio advertising markets. The Company has built the
largest radio station clusters, based on gross revenues, in Seattle and Kansas
City, and one of the three largest clusters in Boston, Portland, Sacramento and
Rochester. On a pro forma basis, the Company had net revenues of $165.1 million,
operating income of $25.6 million and net income of $5.4 million for the twelve
months ended June 30, 1998. In addition, pro forma broadcast cash flow during
the same period was $49.5 million.
The Company's net revenues and broadcast cash flow have grown significantly
on both a total and same-station basis. Over the past three fiscal years ending
September 30, net revenues grew at a compound annual rate of 75.1% from an
actual $29.1 million in fiscal 1994 to a pro forma $156.3 million in fiscal
1997. Broadcast cash flow grew at a compound annual rate of 81.8% from an actual
$7.6 million in fiscal 1994 to a pro forma $45.8 million in fiscal 1997. During
this same period, the Company's same station net revenues and broadcast cash
flow grew at average annual rates of 15.3% and 38.1%, respectively. In addition,
the Company's after-tax cash flow grew at a compound annual rate of 94.0% during
these three fiscal years.
CORPORATE HISTORY
Throughout its 30 year history of operations, Entercom has experienced
sustained growth by adapting its acquisition and operating strategies to
capitalize on changes occurring in the radio broadcasting industry. Entercom's
Chairman of the Board and Chief Executive Officer, Joseph M. Field, founded the
Company in 1968 on the conviction that FM broadcasting, then in its infancy,
would surpass AM broadcasting as the leading aural medium. The Company's
strategy from inception through the 1970's was to acquire FM stations in the top
20 radio advertising markets at a fraction of prevailing prices for AM stations
and to operate those stations economically and profitably by utilizing niche
formats not being offered by major AM stations. The Company continued this
strategy until FM's technical superiority and the availability of inexpensive
AM/FM receivers drove FM's penetration of the radio advertising market to
critical mass and FM stations began to compete successfully with the dominant AM
stations of the time for control of mass market audiences. In addition, Entercom
pursued a strategy of purchasing technically underdeveloped FM stations and
upgrading them so that they could become competitive stations in their markets.
The Company adjusted its strategic plan in the mid-1980's. With FM at
critical mass, the Company began a deliberate multi-year effort to enhance its
operations at both the corporate and station levels to compete for greater
shares of audience and advertising dollars in its markets. With the advent of
the duopoly rules in 1992 (permitting expansion of ownership in a market from
one to two stations in each radio medium), Entercom began to "double up" in its
markets. Since the passage of the Telecom Act, which permitted ownership of up
to eight radio stations in most major markets, the Company has pursued a
creative acquisition and development strategy pursuant to which it has swapped
stand-alone FM stations in various markets to build market leading clusters in
large growth markets where the Company could develop a significant presence.
ACQUISITION STRATEGY
The Company, through a disciplined acquisition strategy, seeks to (i) build
market leading clusters of stations principally in large growth markets and (ii)
acquire underdeveloped properties that offer the potential for significant
improvements in revenues and broadcast cash flow through the application of the
Company's operational, administrative and/or engineering expertise. As part of
its strategy, the Company has strategically redeployed its asset base by
swapping relatively mature stations in markets where the Company believed it
would be difficult to build leading station clusters in exchange for
underperforming stations in other markets that management believed offered
stronger growth and clustering opportunities. For example, in 1997 the Company
exchanged one station in Houston plus $5 million for three stations in Seattle
and four stations in
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<PAGE> 52
Kansas City. The Seattle acquisitions solidified the Company's position as the
leading radio operator in that market while the four stations acquired in Kansas
City enabled the Company to enter a new large market with a significant
presence.
The Company has a track record of structuring acquisitions in creative
ways, including being a pioneer of multi-party station swaps. Since October 1,
1996, the Company, in 18 transactions, has acquired or agreed to acquire 36
radio stations and has divested or agreed to divest, for strategic reasons, nine
radio stations. The Company has been involved in transactions with many of the
leading radio broadcast companies or their predecessors, including CBS Radio,
Viacom Inc., American Radio Systems Corporation, Citicasters Inc., Jacor
Communications, Inc., Sinclair Broadcast Group, Inc., Bonneville International
Corp. and Susquehanna Radio Corp. As a result of these transactions, the Company
has divested its stand-alone stations while establishing the largest clusters in
Seattle and Kansas City and building superduopolies in Boston, Portland,
Sacramento and Rochester. The Company believes that its proven record of
consummating creative transactions with many of the leading radio broadcast
companies positions it well to continue to participate in the consolidation
occurring in its industry.
OPERATING STRATEGY
The principal components of the Company's operating strategy are set forth
below.
- DEVELOP MARKET LEADING STATION CLUSTERS. The Company has built one of
the three leading clusters in each of its eight markets. To enhance its
competitive position, the Company strategically aligns its stations
within each market to optimize their performance, both individually and
collectively. The Company seeks to maximize the ratings, revenue and
broadcast cash flow of its radio stations by tailoring their programming
to optimize aggregate audience delivery. For example, in Kansas City,
Entercom acquired two stations that had been engaged in a lengthy battle
in the Adult Contemporary format. Largely as a result of that
competition, these stations were the 10(th) and 12(th) ranked stations
among Adults 25-54 in the market. Shortly after acquiring the stations,
the Company reformatted one of the stations to an Album Oriented Rock
format. As a result of this strategy, the stations now rank 1(st) in
Women 25-54 and Men 25-54, respectively.
- ENHANCE OPERATIONS OF NEWLY ACQUIRED UNDERPERFORMING STATIONS. The
Company has built a long-term track record of acquiring and developing
underperforming stations. This has enabled the Company to achieve
superior same-station revenue and broadcast cash flow growth over the
past several years. The Company utilizes a variety of techniques to
develop underachieving properties, including: strategic market research
and analysis; management enhancements; expenditure reductions; facility
consolidations; technical upgrades; programming and marketing
enhancements; and improved sales training and techniques. The Company's
current portfolio includes a significant number of recently acquired
stations which management believes are underdeveloped. Among the 31
stations which the Company acquired or commenced operations under TBAs
since January 1, 1997, 14 operated with broadcast cash flow margins below
20%, 11 with margins between 20% and 40% and six with margins over 40%
during calendar 1997. By comparison, among the nine stations which the
Company owned or operated prior to 1997, two operated with margins under
20%, one between 20% and 40% and six over 40% during calendar 1997.
- BUILD STRONGLY-BRANDED FRANCHISES. The Company analyzes market research
and competitive factors to identify the format opportunity, music
selection and rotation, presentation and other key programming attributes
that it believes will best position each station to maximize its audience
share and, consequently, its revenues and broadcast cash flow. The
Company's stations pursue a variety of programming and marketing
initiatives designed to develop a distinctive identity and to strengthen
the stations' local "brand" or "franchise" value. For example, the
Company's "endfest(TM)" festival in Seattle attracts 20,000 listeners to
a day-long festival with live music and other attractions, solidifying
KNDD's ("The End(TM)") brand image in Seattle. The Company has also been
on the leading edge of several national programming trends during the
past decade including Modern Rock, Young Adult Country and Adult Album
Alternative.
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<PAGE> 53
- LEVERAGE STATION CLUSTERS TO CAPTURE GREATER SHARE OF ADVERTISING
REVENUE. The Company believes radio will continue to gain revenue share
from other media by capitalizing on its enhanced competitive platform. As
a result of deregulation in the radio broadcasting industry, operators
can now create radio station clusters that have the critical mass of
audience reach and marketing resources necessary to pursue incremental
advertising and promotional revenues more aggressively. The Company has
begun to capitalize on this opportunity by developing specialized teams
in Seattle, Portland, Sacramento and Kansas City to work with
non-traditional radio advertisers to create and develop marketing
programs and solutions.
- MAXIMIZE TECHNICAL CAPABILITIES. The Company seeks to operate stations
with the strongest signals in their respective markets. In addition, the
Company, on various occasions, has identified opportunities to acquire
and upgrade low-powered or out-of-market stations and transform them into
competitive signals, thus increasing their value significantly. For
example, the Company recently agreed to sell its two Tampa FM stations,
which it had purchased for an aggregate of $4.9 million, for $75 million
after upgrading their respective license classes. In addition, the
Company upgraded the FCC license class of KMTT-FM in Seattle, KNRK-FM in
Portland and, KRXQ-FM in Sacramento. Today each of these stations has a
competitive signal in its respective market.
- RECRUIT, DEVELOP, MOTIVATE AND RETAIN SUPERIOR EMPLOYEES. The Company
believes that station operators differentiate themselves from their peers
primarily through their ability to recruit, develop, motivate and retain
superior management, programming, and sales talent. Accordingly, the
Company strives to establish a creative and collegial working environment
in which talented employees are able to thrive. The Company encourages
its stations to build strong community bonds through local and
company-wide community service programs, which facilitate strong local
business relationships and provide employees with opportunities for
enhanced job fulfillment. The Company offers competitive pay packages
with performance-based incentives for its key employees. In addition, the
Company provides employees with opportunities for personal growth and
advancement through extensive training, seminars and other educational
programs.
STATION PORTFOLIO
The Company has built a highly consolidated portfolio of radio stations
concentrated primarily in top 30 markets with above average growth
characteristics. The Company generated 93.5% of its pro forma fiscal 1997 net
revenues from the five top 30 markets in which it operates. Radio advertising
revenues in these five markets have grown at an average annual rate of 10.8%
from 1993 to 1997, which exceeded the average annual growth rate of both the
aggregate radio industry and top 30 markets. Furthermore, the Company generated
97.6% of its pro forma fiscal 1997 net revenues from superduopolies, which the
Company defines as clusters of four or more stations in one market. Management
believes that Entercom's superduopolies enable the Company to (i) amass greater
resources to penetrate and capture additional local radio advertising revenues,
(ii) consolidate administrative, engineering and management functions to reduce
costs and (iii) be more flexible in adjusting formats to serve changing listener
needs. In addition, the Company believes that superduopolies enhance its
stations' ability to compete for advertising and promotional dollars with other
media, including television and newspaper.
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The following table sets forth certain information about the markets in
which the Company operates:
<TABLE>
<CAPTION>
1993-1997 1997
1997 RADIO MARKET COMPANY'S STATIONS COMPANY
RADIO MARKET AVERAGE ------------------- MARKET
MARKET(1) REVENUE RANK(2) REVENUE GROWTH(2) FM AM TOTAL REVENUE SHARE(2)
- --------- ---------------- ------------------ --- --- ----- ----------------
<S> <C> <C> <C> <C> <C> <C>
Boston................. 10 13.7% 2 3 5 19.4%(3)
Seattle(4)............. 13 10.5 5(4) 3 8(4) 40.4(4)
Portland............... 21 11.8 4 3 7 25.8
Sacramento............. 28 6.7 4 1 5 20.9
Kansas City............ 29 11.3 3 3 6 33.8
-- -- --
Top 30 Markets....... 18 13 31
Rochester.............. 55 8.1 3 1 4 21.7
Gainesville/Ocala...... 124 6.5 2 0 2 23.8
Longview/Kelso......... n/a n/a 2 2 4 n/a
-- -- --
All Markets.......... 25 16 41
</TABLE>
- ---------------
(1) The Company's stations are in some instances licensed to communities other
than the named principal community for the market.
(2) Source: Duncan's.
(3) Does not include the revenues of WWTM-AM, which competes in the adjacent
Worcester market.
(4) The Company also sells substantially all the advertising time of a sixth FM
station under a joint sales agreement and the revenue from such sales are
included in the Company's Market Revenue Share.
The following is a general description of each of the Company's stations
and the markets served by those stations. The Audience Share and Audience Rank
in Target Demographic figures are shown as reported by Arbitron, and the 1997
Radio Market Revenue Rank for each market figure is shown as reported by
Duncan's.
BOSTON
1997 Radio Market Revenue Rank: 10
<TABLE>
<CAPTION>
AUDIENCE SHARE AUDIENCE RANK
TARGET IN TARGET IN TARGET
STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC
- -------------------- ------------ -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
WEEI-AM Sports Talk pending Men 25-54 7.1 2
WRKO-AM Talk pending Adults 25-54 3.6 11
Men 25-54 4.4 7(tie)
WAAF-FM Active Rock pending Men 18-34 11.7 1
WEGQ-FM Classic Hits pending Adults 25-54 3.3 13
WWTM-AM(1) Sports Talk pending Men 25-54 n/a n/a
</TABLE>
- ---------------
(1) Station competes in the adjacent community of Worcester, Massachusetts and
simulcasts virtually all of the programming of WEEI-AM.
Market Overview
Boston is the tenth largest radio market in the United States based on 1997
radio advertising revenue. Radio advertising revenues in the Boston market have
grown from approximately $115.6 million in 1992 to approximately $219.0 million
in 1997 at a compound annual rate of 13.7%. Market radio advertising revenue in
1997 grew 12.9% over 1996 revenue. There are currently 20 viable stations in the
Boston market, according to Duncan's.
Boston Stations
The Company will own and operate five stations, 2 FM and 3 AM, in Boston,
including one AM station in the adjacent Worcester market, upon consummation of
the CBS Transactions. The Company's cluster is the second largest in Boston with
a 19.4% market revenue share. Of the Company's five Boston stations, one ranks
first and another ranks second for their respective target demographic
audiences.
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<PAGE> 55
The Entercom cluster in Boston features two of the market's three major AM
stations. WEEI-AM, Boston's all-sports station, is the flagship for the radio
networks of the Boston Red Sox, Boston Celtics and Boston College's football and
basketball teams. The station also features a highly rated line-up of talk show
hosts which has enabled WEEI-AM to rank consistently as one of the leaders among
Men 25-54. WRKO-AM is Boston's principal talk station, featuring major
nationally syndicated and local personalities such as Dr. Laura and Howie Carr,
whose afternoon show is syndicated by WRKO-AM to several other stations
throughout New England.
The Company will also own and operate two FM rock stations in the Boston
market, WAAF-FM and WEGQ-FM. WAAF-FM, a heritage rock station, features an
Active Rock format that appeals to the Men 18-34 demographic. WEGQ-FM is a
Classic Hits station featuring music from the 70's and 80's that is targeted to
Adults 25-54.
SEATTLE
1997 Radio Market Revenue Rank: 13
<TABLE>
<CAPTION>
AUDIENCE SHARE AUDIENCE RANK
TARGET IN TARGET IN TARGET
STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC
- -------------------- ---------------- -------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
KBSG-AM/FM Oldies August 1996 Adults 25-54 6.4 1
KIRO-AM News/Talk/Sports March 1997 Adults 25-54 5.9 2
Men 25-54 7.3 2
KIRO-FM Talk March 1997 Adults 25-54 2.3 19
KISW-FM Active Rock May 1997(1) Men 18-34 11.6 1(tie)
Men 25-54 6.1 3
KMTT-FM Adult Rock 1973 Adults 25-54 3.3 13
KNWX-AM News/Business March 1997 Adults 25-54 0.5 26(tie)
KNDD-FM Modern Rock August 1996 Men 18-34 7.2 4
Adults 18-34 6.4 5
</TABLE>
- ---------------
(1) TBA commenced June 1996
Market Overview
Seattle is the thirteenth largest radio market in the United States based
on 1997 radio advertising revenue. Radio advertising revenues in the Seattle
market have grown from approximately $91.9 million in 1992 to approximately
$150.5 million in 1997 at a compound annual rate of 10.5%. Market radio
advertising revenue in 1997 grew 13.8% over 1996 revenue. There are currently 22
viable stations in the Seattle market, according to Duncan's.
Seattle Stations
The Company owns and operates eight stations, 5 FM and 3 AM, in Seattle,
and sells advertising on a sixth FM station pursuant to a joint sales agreement.
The nine station group is the market's largest radio cluster with a 40.4% market
revenue share according to Duncan's. Of the Company's eight Seattle stations,
two rank first and an additional two rank in the top five for their respective
target demographic audiences.
A cornerstone of Entercom's Seattle cluster is KIRO-AM, the market's
leading radio news and information source. KIRO Newsradio 710 AM broadcasts
up-to-the-minute news and popular local talk-shows and serves as the flagship
station for the Seattle Mariners and the Seattle Seahawks radio networks. In the
last eight Arbitron quarterly reports, the station has ranked first among Adults
25-54 five times and first among Men 25-54 four times. The Company recently
negotiated a five-year extension through the 2002 season of its exclusive radio
broadcasting rights agreement with the Seattle Mariners. The Company's agreement
with the Seattle Seahawks runs through the 1999 season. Complementing KIRO-AM,
the Company owns and operates KNWX-AM, a business-oriented news radio station,
and KIRO-FM, Seattle's only FM talk station.
In addition, the Company owns and operates three of the four major rock
stations in the Seattle market including KNDD-FM ("The End(TM)"), KMTT-FM ("The
Mountain(R)") and KISW-FM. The Company has
53
<PAGE> 56
refined the programming of each of these rock stations so that each station
targets a distinct segment of the Adults 18-54 market. As a result, the
Company's rock stations rank first and fifth with Men 18-34. The Company's
Seattle cluster also includes KBSG-AM/FM, Seattle's only Oldies station, which
has ranked first or second among Adults 25-54 in eleven of the last twelve
Arbitron quarterly reports.
In connection with the Bonneville Transaction in March 1997, the Company
assumed the obligations of Bonneville under a JSA pursuant to which it sells all
the commercial air time for KING-FM, Seattle's only classical radio station. On
July 1, 1997 the Company and Classic Radio, Inc. extended the JSA through June
2002.
PORTLAND
1997 Radio Market Revenue Rank: 21
<TABLE>
<CAPTION>
AUDIENCE SHARE AUDIENCE RANK
STATION TARGET IN TARGET IN TARGET
CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC
- ------------ ---------------------- ----------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
KFXX-AM Sports Talk August 1995(1) Men 25-54 4.1 11
KGON-FM Classic Rock August 1995(1) Men 25-54 10.2 1
Adults 7.3 3
25-54
KKSN-AM Nostalgia June 1998(2) Adults 1.6 15(tie)
35-64
KKSN-FM Oldies June 1998(2) Adults 7.6 3
25-54
KNRK-FM Modern Rock August 1995(1) Men 18-34 6.6 4
Adults 6.2 5(tie)
18-34
KRSK-FM Hot Adult Contemporary June 1998(2) Women 18-49 n/a(3) n/a(3)
KSLM-AM Sports Talk November 1998(4) Men 25-54 n/a(4) n/a(4)
</TABLE>
- ---------------
(1) TBA commenced April 1995.
(2) TBA commenced March 1998.
(3) KRSK-FM recently changed its format. Accordingly, prior Arbitron ratings are
not meaningful.
(4) KSLM-AM is licensed to Salem, Oregon within the Portland market and will
simulcast KFXX-AM programming. The Salem market is not surveyed by Arbitron.
Market Overview
Portland is the twenty-first largest radio market in the United States
based on 1997 radio advertising revenue. Radio advertising revenues in the
Portland market have grown from approximately $52.5 million in 1992 to
approximately $91.8 million in 1997 at a compound annual rate of 11.8%. Market
radio advertising revenue in 1997 grew 6.3% over 1996 revenue. There are
currently 18.5 viable stations in the Portland market, according to Duncan's.
Portland Stations
The Company owns and operates seven stations, 4 FM and 3 AM, in the
Portland market. The Company's seven-station cluster is one of the three largest
clusters in the market with a 25.8% market revenue share. Of the Company's seven
stations, one ranks first and an additional two rank in the top five stations
for their respective demographic audiences.
The Company entered the Portland market in 1995, as a result of an internal
study that identified Portland as the Company's primary target market for
expansion. In 1995, the Company acquired three stations in Portland, including
KGON-FM, the market's Classic Rock station. The Company recently increased the
size of its Portland cluster by acquiring three additional stations, including
KKSN-FM, the market's only Oldies station and KKSN-AM, the market's only
Nostalgia station. The Company also acquired KKRH-FM, a Classic Hits station,
which competed directly with KGON-FM. In June 1998, the Company changed
KKRH-FM's format to Hot Adult Contemporary to pursue a different demographic
target, Women 18-49 and changed its call letters to KRSK-FM.
The Company also owns and operates KFXX-AM, an all-sports station. KFXX-AM
is an affiliate of the Seattle Mariners radio network and carries popular local
and nationally-syndicated programming. To increase the nighttime strength and
coverage of KFXX-AM's signal, the Company recently exchanged the broadcast
54
<PAGE> 57
frequency and technical facilities of KFXX-AM with those of KKSN-AM and agreed
to acquire KSLM-AM in Salem, Oregon to expand the coverage of KFXX-AM to the
south through a simulcast of its programming.
SACRAMENTO
1997 Radio Market Revenue Rank: 28
<TABLE>
<CAPTION>
AUDIENCE SHARE AUDIENCE RANK
TARGET IN TARGET IN TARGET
STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC
- -------------------- -------------- ---------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
KCTC-AM Nostalgia January 1998 Adults 35-64 1.4 18
KRXQ-FM Active Rock June 1997(1) Men 18-34 10.0 1(tie)
Adults 18-34 7.5 2
KSEG-FM Classic Rock June 1997(1) Men 25-54 7.2 2
KSSJ-FM Smooth Jazz November 1997 Adults 25-54 4.5 10
KDND-FM Contemporary June 1997(1) Women 18-34 n/a(2) n/a(2)
Hit Radio
</TABLE>
- ---------------
(1) TBA commenced January 1997.
(2) KDND-FM (formerly KXOA-FM) recently changed its format. Accordingly, prior
Arbitron ratings are not meaningful.
Market Overview
Sacramento is the twenty-eighth largest radio market in the United States
based on 1997 radio advertising revenue. Radio advertising revenues in the
Sacramento market have grown from approximately $54.4 million in 1992 to
approximately $75 million in 1997 at a compound annual rate of 6.7%. Market
radio advertising revenue in 1997 grew 5.0% over 1996 revenue. There are
currently 17 viable stations in the Sacramento radio market, according to
Duncan's.
Sacramento Stations
The Company owns and operates five stations, 4 FM and 1 AM, in Sacramento.
The five-station group is one of the three largest clusters in the market with a
20.9% market revenue share. Of the Company's five stations, one ranks first and
an additional station ranks in the top five in their respective target
demographic audiences.
Two of the Company's FM stations, KSEG-FM and KDND-FM (formerly KXOA-FM),
have been direct competitors. In July 1998, the Company changed KDND-FM's format
from Classic Hits to Contemporary Hit Radio to pursue a different demographic
target, Women 18-34. Management believes that KSEG-FM, Sacramento's exclusive
Classic Rock station, should benefit from this format change.
KRXQ-FM, an Active Rock station, has been the market's consistent leader
among Men 18-34 and a leading competitor among Adults 18-34 as well. The Company
recently completed a frequency exchange with ARS, through which KRXQ-FM has
upgraded its current class B1 facility at 93.7 FM to a full class B signal at
98.5 FM, which has expanded KRXQ-FM's signal coverage, and therefore, its
competitive position. KSSJ-FM (formerly KBYA-FM) commenced operations from a new
tower site in December 1997 with a Smooth Jazz format.
55
<PAGE> 58
KANSAS CITY
1997 Radio Market Revenue Rank: 29
<TABLE>
<CAPTION>
AUDIENCE SHARE AUDIENCE RANK
TARGET IN TARGET IN TARGET
STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC
- -------------------- ------------------- ------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
KCMO-AM Talk March 1997 Adults 3.4 12
25-54
KCMO-FM Oldies March 1997 Adults 6.0 7(tie)
25-54
KMBZ-AM News/Talk/Sports March 1997 Men 25-54 5.7 5(tie)
Adults 3.9 11
25-54
KUDL-FM Adult Contemporary January 1998 Women 25-54 10.6 1
Adults 7.0 4
25-54
KYYS-FM Album Oriented Rock March 1997 Adults 7.1 3
25-54
Men 25-54 9.6 1
WDAF-AM Country January 1998 Adults 2.9 14
25-54 6.6 5
Adults
35-64
</TABLE>
Market Overview
Kansas City is the twenty-ninth largest radio market in the United States
based on 1997 radio advertising revenue. Radio advertising revenues in the
Kansas City market have grown from approximately $42.0 million in 1992 to
approximately $71.4 million in 1997 at a compound annual rate of 11.3%. Market
radio advertising revenue in 1997 grew 7.5% over 1996 revenue. There are
currently 16 viable stations in the Kansas City market, according to Duncan's.
Kansas City Stations
The Company owns and operates six stations, 3 FM and 3 AM, in the Kansas
City market. The six-station group is the market's largest radio cluster with a
33.8% market revenue share. The Company's cluster includes three well-branded FM
stations and the market's three strongest AM signals. Of the Company's six
stations, two rank first and an additional two rank in the top five in their
respective target demographic audiences.
The Company's Kansas City FM stations illustrate the Company's ability to
react to local market conditions and tailor its stations' programming to broaden
their collective audience reach and, consequently, their revenue and broadcast
cash flow potential. Prior to their recent acquisition by the Company, KYYS-FM
(formerly KLTH-FM) and KUDL-FM had been engaged in a lengthy battle in the Adult
Contemporary format. Largely as result of that competition, these stations were
the 10th and 12th ranked adult stations in the market. Shortly after acquiring
the stations, the Company took advantage of the opportunity created when a new
operator dropped the format and call-letters of KYYS-FM, the Kansas City
heritage rock station. To capitalize on this opportunity, the Company replaced
the Adult Contemporary format on KLTH-FM with an Album Oriented Rock format,
changed KLTH-FM's call letters to KYYS-FM and emerged as the heritage rock
station in the market. As a result of this strategy, KUDL-FM and KYYS-FM rank
1st in Women 25-54 and Men 25-54, respectively. The Company's third FM station
in Kansas City, KCMO-FM, is the market's exclusive Oldies station and targets
the Adults 25-54 demographic.
The cornerstone of the Company's Kansas City AM presence is KMBZ-AM, the
market's news/talk/sports leader. In addition to featuring successful talk-shows
such as the Rush Limbaugh Show, KMBZ-AM is the new flagship of the Kansas City
Royals Radio Network and carries sports coverage of the University of Kansas and
the University of Missouri. The Company's exclusive radio broadcasting rights
agreement with the Kansas City Royals runs through the 2000 season. In addition,
the Company owns and operates KCMO-AM, the market's leading Talk Radio station,
and WDAF-AM, one of the most listened to AM Country stations in the United
States. Traditionally known as the "voice of the heartland," WDAF-AM possesses
the Kansas City radio market's best AM signal and a multi-decade heritage of
Country music programming.
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<PAGE> 59
ROCHESTER
1997 Radio Market Revenue Rank: 55
<TABLE>
<CAPTION>
AUDIENCE SHARE AUDIENCE RANK
TARGET IN TARGET IN TARGET
STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC
- -------------------- ------------ ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
WBBF-FM Oldies June 1998 (1) Adults 25-54 6.1 8
WBEE-FM Country June 1998 (1) Adults 25-54 10.3 1
WEZO-AM Nostalgia June 1998 (1) Adults 35-64 1.6 14
WQRV-FM Classic Hits June 1998 (1) Adults 25-54 3.4 11
</TABLE>
- ---------------
(1) TBA commenced March 1998.
Market Overview
Rochester, New York is the fifty-fifth largest radio market in the United
States based on 1997 radio advertising revenue. Radio advertising revenues in
the Rochester market have grown from approximately $23.5 million in 1992 to
approximately $34.5 million in 1997 at a compound annual rate of 8.1%. Market
radio advertising revenue in 1997 grew 6.8% over 1996 revenue. There are
currently 13.5 viable stations in the Rochester market, according to Duncan's.
Rochester Stations
In June 1998, the Company acquired the four stations, 3 FM and 1 AM,
comprising its Rochester cluster. The four-station group is one of the three
largest clusters in the market with a 21.7% market revenue share. Of the
Company's four stations, one ranks first in its target demographic.
The Rochester market has only seven full-powered FM stations, of which the
Company owns two. One is WBEE-FM which features Country music and is Rochester's
leading station among Adults 25-54. The second is WBBF-FM (formerly WKLX-FM),
Rochester's exclusive Oldies station. Prior to its acquisition by Entercom,
WBBF-FM relied on nationally syndicated programing, without the benefit of
locally-targeted music or personalities. Management believes that this approach
limited the station's financial potential. The Company has recently modified the
station's programming focusing on locally programmed music and live
personalities, and utilizing significantly enhanced audience marketing and
research. The Company's third FM station in Rochester is WQRV-FM, a Class A
station that commenced operations in 1997 as a Classic Hits station.
GAINESVILLE / OCALA
1997 Radio Market Revenue Rank: 124
<TABLE>
<CAPTION>
AUDIENCE SHARE AUDIENCE RANK
TARGET IN TARGET IN TARGET
STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC
- -------------------- ------------------ ------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
WKTK-FM Adult Contemporary November 1986 Women 25-54 11.1 2
Adults 11.2 2
25-54
WSKY-FM News Talk May 1998 Adults n/a(1) n/a(1)
25-54
</TABLE>
- ---------------
(1) WSKY-FM (formerly WRRX-FM) recently changed its format. Accordingly, prior
Arbitron ratings are not meaningful.
Market Overview
Gainesville/Ocala is the 124th largest radio market in the United States
based on 1997 radio advertising revenue. Radio advertising revenues in the
Gainesville/Ocala market have grown from approximately $8.9 million in 1992 to
approximately $12.2 million in 1997 at a compound annual rate of 6.5%. Market
radio advertising revenue in 1997 grew 8.0% over 1996 revenue. There are
currently 13 viable stations in the Gainesville/Ocala market, according to
Duncan's.
57
<PAGE> 60
Gainesville/Ocala Stations
The Company owns and operates two FM stations in Gainesville/Ocala. With
WKTK-FM and WSKY-FM (formerly WRRX-FM), the Company has a 23.8% market revenue
share. Although the Gainesville/Ocala market's size is outside of the Company's
target parameters, the acquisition presented the opportunity to acquire the
dominant station in a fast growing area of the country. WKTK-FM broadcasts an
Adult Contemporary format and has been a ratings leader in this northern Florida
market for many years. In May 1998, the Company acquired WSKY-FM and management
believes that Entercom can now begin capitalizing on the benefits of multiple
station ownership in this market.
LONGVIEW/KELSO
1997 Radio Market Revenue Rank: N/A
<TABLE>
<CAPTION>
AUDIENCE SHARE AUDIENCE RANK
TARGET IN TARGET IN TARGET
STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC
- -------------------- ------------------ ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
KBAM-AM Country May 1998 Adults 25-54 n/a n/a
KEDO-AM Oldies April 1997 Adults 25-54 n/a n/a
KLYK-FM Adult Contemporary April 1997 Adults 25-54 n/a n/a
KRQT-FM Classic Rock May 1998 Men 25-54 n/a n/a
</TABLE>
Market Overview
The Longview/Kelso market is located between the Seattle and Portland
markets. The market is not surveyed by Arbitron or Duncan's.
Longview/Kelso Stations
The Company owns and operates four stations, 2 FM and 2 AM, in the
Longview/Kelso market. These stations serve two important functions for the
Company. First these stations, which the Company acquired at relatively low
capital costs, are strategically significant because of their impact on the
potential upgrade of certain Portland radio stations. Second, these stations
also permit the Company to capitalize on some regional revenue and cost saving
opportunities.
COMPETITION; CHANGES IN BROADCASTING INDUSTRY
The radio broadcasting industry is highly competitive. The success of each
of the Company's stations depends largely upon its audience ratings and its
share of the overall advertising revenue within its market. The Company's
stations compete for listeners and advertising revenue directly with other radio
stations within their respective markets. Radio stations compete for listeners
primarily on the basis of program content that appeals to a particular
demographic group. By building a strong listener base consisting of a specific
demographic group in each of its markets, the Company is able to attract
advertisers seeking to reach those listeners.
Factors that are material to a radio station's competitive position include
management experience, the station's local audience rank in its market,
transmitter power, assigned frequency, audience characteristics, local program
acceptance and the number and characteristics of other radio stations and other
advertising media in the market area. The Company attempts to improve its
competitive position with promotional campaigns aimed at the demographic groups
targeted by its stations and by sales efforts designed to attract advertisers.
Recent changes in the FCC's policies and rules permit increased ownership and
operation of multiple local radio stations. Management believes that radio
stations that elect to take advantage of joint arrangements such as local
marketing agreements or joint sales agreements may in certain circumstances have
lower operating costs and may be able to offer advertisers more attractive rates
and services. Although the Company currently operates several multiple station
groups and intends to pursue the creation of additional
58
<PAGE> 61
multiple station groups, the Company's competitors in certain markets include
operators of multiple stations or operators who already have entered into local
marketing agreements or joint sales agreements.
Despite the competitiveness within the radio broadcasting industry, some
barriers to entry exist. The operation of a radio broadcast station requires a
license from the FCC. The number of radio stations that can operate in a given
market is limited by strict AM interference criteria and the availability of FM
radio frequencies allotted by the FCC to communities in that market, as well as
by the FCC's multiple ownership rules that regulate the number of stations
serving the same area that may be owned and controlled by a single entity. See
"-- Federal Regulation of Radio Broadcasting."
The Company's stations also compete for audiences and advertising revenues
within their respective markets directly with other radio stations, as well as
with other media such as newspapers, magazines, cable television, outdoor
advertising and direct mail. In addition, the radio broadcasting industry is
subject to competition from new media technologies that are being developed or
introduced, such as the delivery of audio programming by cable television
systems, DARS, the Internet, satellite, television and PCS. DARS plans to
deliver by satellite to nationwide audiences, multi-channel, multi-format,
digital radio services with sound quality equivalent to compact discs. The FCC
is also considering proposals for the establishment of "microbroadcasting"
stations, low-powered AM or FM stations that would be designed to serve small
localized areas. The delivery of information or entertainment programming
through the presently unregulated Internet also could create a new form of
competition. The radio broadcasting industry historically has grown despite the
introduction of new technologies for the delivery of entertainment and
information, such as television broadcasting, cable television, audio tapes and
compact discs. A growing population and greater availability of radios,
particularly car and portable radios, have contributed to this growth. There can
be no assurance, however, that the development or introduction in the future of
any new media technology will not have an adverse effect on the radio
broadcasting industry.
The FCC has adopted licensing and operating rules for DARS and in April
1997 awarded two licenses for this service. DARS may provide a medium for the
delivery by satellite or terrestrial means of multiple new audio programming
formats to local and/or national audiences. Digital technology also may be used
in the future by terrestrial radio broadcast stations either on existing or
alternate broadcasting frequencies, and the FCC has stated that it will consider
making changes to its rules to permit AM and FM radio stations to offer digital
sound following industry analysis of technical standards. In addition, the FCC
has authorized an additional 100 kHz of bandwidth for the AM band and has
allotted frequencies in this new band to certain existing AM station licensees
that applied for migration to the expanded AM band, subject to the requirement
that at the end of a transition period, those licensees return to the FCC either
the license for their existing AM band station or the license for the expanded
AM band station.
The Company cannot predict what other matters might be considered in the
future by the FCC, nor can it assess in advance what impact, if any, the
implementation of any of these proposals or changes might have on its business.
The Company employs a number of on-air personalities and generally enters
into employment agreements with certain of these personalities to protect its
interests in those relationships that it believes to be valuable. The loss of
certain of these personalities could result in a short-term loss of audience
share, but the Company does not believe that any such loss would have a material
adverse effect on the Company.
FEDERAL REGULATION OF RADIO BROADCASTING
The ownership, operation and sale of radio stations are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act. Among other things, the FCC assigns frequency bands for
broadcasting; determines the particular frequencies, locations and operating
power of stations; issues, renews, revokes and modifies station licenses;
determines whether to approve changes in ownership or control of station
licenses; regulates equipment used by stations; and adopts and implements
regulations and policies that directly affect the ownership, operation and
employment practices of stations. The FCC has the power to impose penalties for
violation of its rules or the Communications Act, including the imposition of
monetary
59
<PAGE> 62
forfeitures, the issuance of short-term licenses, the imposition of a condition
on the renewal of a license, and the revocation of operating authority.
The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. Reference
should be made to the Communications Act, FCC rules and the public notices and
rulings of the FCC for further information concerning the nature and extent of
federal regulation of radio stations.
FCC Licenses. Radio stations operate pursuant to broadcasting licenses
that are ordinarily granted by the FCC for maximum terms of eight years and are
subject to renewal upon application to the FCC. The FCC licenses for the
Company's stations are held by certain of the Company's subsidiaries. During
certain periods when renewal applications are pending, petitions to deny license
renewals can be filed by interested parties, including members of the public.
Historically, the Company's management has not experienced any material
difficulty in renewing any licenses for stations under its control. The FCC is
required to hold hearings on a station's renewal application if a substantial or
material question of fact exists as to whether (i) the station has served the
public interest, convenience and necessity, (ii) there have been serious
violations by the licensee of the Communications Act or the FCC rules thereunder
or (iii) there have been other violations by the licensee of the Communications
Act or the FCC rules thereunder that, taken together, constitute a pattern of
abuse. Historically, FCC licenses have generally been renewed. The Company has
no reason to believe that its licenses will not be renewed in the ordinary
course, although there can be no assurance to that effect. The non-renewal of
one or more of the Company's licenses could have a material adverse effect on
the Company.
The FCC classifies each AM and FM station. An AM station operates on either
a clear channel, regional channel or local channel. A clear channel is one on
which AM stations are assigned to serve wide areas. Clear channel AM stations
are classified as either: Class A stations, which operate on an unlimited time
basis and are designated to render primary and secondary service over an
extended area; Class B stations, which operate on an unlimited time basis and
are designed to render service only over a primary service area; or Class D
stations, which operate either during daytime hours only, during limited times
only or on an unlimited time basis with low nighttime power. A regional channel
is one on which Class B and Class D AM stations may operate and serve primarily
a principal center of population and the rural areas contiguous to it. A local
channel is one on which AM stations operate on an unlimited time basis and serve
primarily a community and the suburban and rural areas immediately contiguous
thereto. Class C AM stations operate on a local channel and are designed to
render service only over a primary service area that may be reduced as a
consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend, in part, upon the
geographic zone in which the transmitter of the FM station is located. In
general, commercial FM stations are classified as follows, in order of
increasing power and antenna height: Class A, B1, C3, B, C2, C1 and C. The FCC
is considering dividing Class C stations into two subclasses, Class C and Class
C0. Stations would be categorized into one of the two classes depending on the
antenna height of each station.
The following table sets forth the market, call letters, FCC license
classification, antenna height above average terrain ("HAAT"), power and
frequency, of each of the stations owned or operated by the Company, and the
date on which each station's FCC license expires (a station may continue to
operate beyond the expiration date if a timely filed license application is
pending):
<TABLE>
<CAPTION>
FCC HAAT POWER IN EXPIRATION DATE OF
MARKET(1) STATION CLASS (IN METERS) FREQUENCY KILOWATTS(2) FCC LICENSE
- --------- ------- ----- ----------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Boston
WRKO-AM B * 680 KHZ 50 June 1, 2006
WEEI-AM B * 850 KHZ 50 June 1, 2006
WWTM-AM B * 1440 KHZ 5 June 1, 2006
WEGQ-FM B 179 98.7 MHZ 34.0 June 1, 2006
WAAF-FM B 250 107.3 MHZ 18.5 June 1, 2006
</TABLE>
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<PAGE> 63
<TABLE>
<CAPTION>
FCC HAAT POWER IN EXPIRATION DATE OF
MARKET(1) STATION CLASS (IN METERS) FREQUENCY KILOWATTS(2) FCC LICENSE
- --------- ------- ----- ----------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Seattle
KIRO-AM A * 710 KHZ 50 February 1, 2006
KNWX-AM B * 770 KHZ 50-D February 1, 2006
5-N
KBSG-AM B * 1210 KHZ 27.5-D February 1, 2006
10.0-N
KBSG-FM C 729 97.3 MHZ 55 February 1, 2006
KISW-FM C 350 99.9 MHZ 100 February 1, 2006
KIRO-FM C 714 100.7 MHZ 58 February 1, 2006
KMTT-FM C 714 103.7 MHZ 58 February 1, 2006
KNDD-FM C 714 107.7 MHZ 58 February 1, 2006
Portland
KFXX-AM B * 910 KHZ 5 February 1, 2006
KSLM-AM B * 1390 KHZ 5-D February 1, 2006
KKSN-AM B * 1520 KHZ 50-D February 1, 2006
15-N
KGON-FM C 386 92.3 MHZ 100 February 1, 2006
KNRK-FM C2 259 94.7 MHZ 17 February 1, 2006
KKSN- FM C 386 97.1 MHZ 100 February 1, 2006
KRSK-FM C 561 105.1 MHZ 100 February 1, 2006
0.69-N
Sacramento
KCTC-AM B * 1320 KHZ 5 December 1, 2005
KSSJ-FM B1 99 94.7 MHZ 25 December 1, 2005
KSEG-FM B 152 96.9 MHZ 50 December 1, 2005
KRXQ-FM B 151 98.5 MHZ 50 December 1, 2005
KDND-FM B 123 107.9 MHZ 50 December 1, 2005
Kansas City
WDAF-AM B * 610 KHZ 5 February 1, 2005
KCMO-AM B * 710 KHZ 10-D February 1, 2005
5-N
KMBZ-AM B * 980 KHZ 5 February 1, 2005
KCMO-FM C 322 94.9 MHZ 100 February 1, 2005
KUDL-FM C 303 98.1 MHZ 100 February 1, 2005
KYYS-FM C 308 99.7 MHZ 100 February 1, 2005
Rochester
WEZO-AM B * 950 KHZ 1 June 1, 2006
WBEE-FM B 152 92.5 MHZ 50 June 1, 2006
WQRV-FM A 119 93.3 MHZ 4 June 1, 2006
WBBF-FM B 172 98.9 MHZ 37 June 1, 2006
Gainesville/Ocala
WSKY-FM(3) C2 289 97.3 MHZ 13.5 February 1, 2004
WKTK-FM C1 299 98.5 MHZ 100 February 1, 2004
Longview/Kelso
KBAM-AM D * 1270 KHZ 5-D February 1, 2006
0.083-N
KEDO-AM C * 1400 KHZ 1 February 1, 2006
KLYK-FM A 262 105.5 MHZ 0.7 February 1, 2006
KRQT-FM C3 528 107.7 MHZ 0.74 February 1, 2006
</TABLE>
- ---------------
* Not applicable for AM transmission facilities.
(1) Metropolitan market served; city of license may differ.
(2) Pursuant to FCC rules and regulations, many AM radio stations are licensed
to operate at a reduced power during the nighttime broadcasting hours, which
results in reducing the radio station's coverage during the nighttime hours
of operation. Both power ratings are shown, where applicable. For FM
stations, the effective radiated power is given.
(3) Station is currently operating pursuant to Program Test Authority.
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<PAGE> 64
Ownership Matters. The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a broadcast licensee without the
prior approval of the FCC. In determining whether to grant such approval, the
FCC considers a number of factors pertaining to the licensee, including
compliance with the various rules limiting common ownership of media properties
in a given market, the "character" of the licensee and those persons holding
"attributable" interests therein, and compliance with the Communications Act's
limitations on alien ownership as well as compliance with other FCC policies,
including FCC equal employment opportunity requirements. The equal opportunity
requirements have been declared unconstitutional by the U.S. Court of Appeals
for the District of Columbia. See "-- Programming and Operation."
A transfer of control of a corporation holding a broadcast license may
occur in various ways. For example, a transfer of control occurs if an
individual stockholder gains or loses "affirmative" or "negative" control of
such corporation through issuance, redemption or conversion of stock.
"Affirmative" control would consist of control of more than 50% of such
corporation's outstanding voting power and "negative" control would consist of
control of exactly 50% of such voting power. To obtain the FCC's prior consent
to assign or transfer control of a broadcast license, appropriate applications
must be filed with the FCC. If the application involves a "substantial change"
in ownership or control, in that new individuals approved by the FCC propose to
acquire "affirmative" or "negative" control, the application must be placed on
public notice for a period of not less than 30 days during which petitions to
deny or other objections against the application may be filed by interested
parties, including members of the public. If the application does not involve a
"substantial change" in ownership or control, it is a "pro forma" application.
The "pro forma" application is nevertheless subject to having informal
objections filed against it. If the FCC grants an assignment or transfer
application, interested parties have not less than 30 days from public notice of
the grant to seek reconsideration or review of that grant. Generally, parties
that do not file initial petitions to deny or informal objections against the
application face a high hurdle in seeking reconsideration or review of the
grant. The FCC normally has approximately an additional ten days to set aside on
its own motion any grant made by the FCC staff acting pursuant to delegated
authority. When passing on an assignment or transfer application, the FCC is
prohibited from considering whether the public interest might be served by an
assignment or transfer of the broadcast license to any party other than the
assignee or transferee specified in the application.
In response to the Telecom Act, the FCC amended its multiple ownership
rules to eliminate the national limits on the ownership of AM and FM stations.
Additionally, it established new local ownership rules that use a sliding scale
of permissible ownership, depending on market size. In radio markets with 45 or
more commercial radio stations, a licensee may own up to eight stations, no more
than five of which can be in a single radio service (i.e., no more than five AM
or five FM). In radio markets with 30 to 44 commercial radio stations, a
licensee may own up to seven stations, no more than four of which can be in a
single radio service. In radio markets having 15 to 29 commercial radio
stations, a licensee may own up to six radio stations, no more than four of
which can be in a single radio service. Finally, in radio markets having 14 or
fewer commercial radio stations, a licensee may own up to five radio stations,
no more than three of which can be in the same service; provided that the
licensee may not own more than one half of the total number of radio stations in
the market. FCC ownership rules continue to permit an entity to own one FM and
one AM station in a local market regardless of market size. In addition to the
numerical limitations on ownership depending on market size, the FCC is
considering adopting a policy that would review a proposed transaction if it
would enable a single owner to attain a high degree of revenue concentration in
a market.
The FCC's "one-to-a-market" rule prohibits the common ownership, operation
or control of a radio broadcast station and a television broadcast station
serving the same geographic market (subject to a waiver of such prohibition if
certain conditions are satisfied) and the common ownership, operation or control
of a radio broadcast station and a daily newspaper serving the same geographic
market. Under these rules, absent waivers, the Company would not be permitted to
acquire any daily newspaper or television broadcast station (other than
low-power television) in any geographic market in which it now owns radio
broadcast properties. On October 1, 1996, the FCC commenced a proceeding to
explore possible revisions of its policies concerning waiver of the
newspaper/radio cross-ownership restrictions.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. In the
case of corporations holding, or through subsidiaries
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<PAGE> 65
controlling, broadcast licenses, the interests of officers, directors and those
who, directly or indirectly, have the right to vote 5% or more of the
corporation's voting stock (or 10% or more of such stock in the case of
insurance companies, investment companies and bank trust departments that are
passive investors) are generally attributable. If a single individual or entity
controls more than 50% of a corporation's voting stock, that individual or
entity is viewed as a single majority shareholder; in this case, the interests
of other shareholders are not attributable unless the shareholders are also
officers or directors of the corporation. The FCC is currently reviewing its
attribution rules to determine whether changes in those rules are appropriate.
In determining whether the Company is in compliance with the local
ownership limits on AM and FM stations, the FCC will consider the Company's AM
and FM holdings, as well as the attributable broadcast interests of the
Company's officers, directors and attributable shareholders. Accordingly, the
attributable broadcast interests of the Company's officers and directors
described in the preceding paragraph will limit the number of radio stations the
Company may acquire or own in any market in which such officers or directors
hold or acquire attributable broadcast interests. In addition, the Company's
officers and directors may from time to time hold various nonattributable
interests in media properties, which, under certain circumstances, may also
limit the number of radio stations the Company may acquire or own in a given
market.
Under its "cross-interest" policy, the FCC considers certain "meaningful"
relationships among competing media outlets in the same market, even if the
ownership rules do not specifically prohibit the relationship. Under the
cross-interest policy, the FCC in certain instances may prohibit one party from
holding an attributable interest in one media outlet and a substantial
non-attributable economic interest in another media outlet in the same market.
Under this policy, the FCC may consider significant equity interests combined
with an attributable interest in a media outlet in the same market, joint
ventures, and common key employees among competitors. The cross-interest policy
does not necessarily prohibit all of these interests, but requires that the FCC
consider whether, in a particular market, the "meaningful" relationships between
competitors could have a significant adverse effect upon economic competition
and program diversity. Heretofore, the FCC has not applied its cross-interest
policy to TBAs and JSAs between broadcast stations. In its ongoing rulemaking
proceeding concerning the attribution rules described below, the FCC has sought
comment on, among other things, (i) whether the cross-interest policy should be
applied only in smaller markets and (ii) whether non-equity financial
relationships such as debt, when combined with multiple business
interrelationships such as TBAs and JSAs, raise concerns under the
cross-interest policy.
The Communications Act prohibits the issuance of broadcast licenses to, or
the holding of broadcast licenses by, any corporation of which more than 20% of
the capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or a representative thereof, or by
any corporation organized under the laws of a foreign country (collectively,
"Aliens"). The Communications Act also authorizes the FCC, if the FCC determines
that it would be in the public interest, to prohibit the issuance of a broadcast
license to, or the holding of a broadcast license by, any corporation directly
or indirectly controlled by any other corporation of which more than 25% of the
capital stock is owned of record or voted by Aliens. The FCC staff has
interpreted this provision to require a public interest finding in favor of such
a grant or holding before a broadcast license may be granted to or held by any
such corporation and has made such a finding only in limited circumstances
generally involving licenses other than broadcast licenses. The FCC has issued
interpretations of existing law (i) under which these restrictions in modified
form apply to other forms of business organizations, including partnerships and
(ii) indicating how alien interests in a company that are held directly through
intermediate entities should be considered in determining whether that company
is in compliance with these alien ownership restrictions. As a result of these
provisions, the licenses granted to the radio station subsidiaries of the
Company by the FCC could be revoked if, among other restrictions imposed by the
FCC, more than 25% of the Company's stock were directly or indirectly owned or
voted by Aliens. The Company's Amended and Restated Articles of Incorporation
restrict the ownership, voting and transfer of the Company's capital stock in
accordance with the Communications Act and the rules of the FCC, and prohibit
the issuance of more than 25% of the Company's outstanding capital stock (or
more than 25% of the voting rights it represents) to or for the account of
Aliens or corporations otherwise subject to domination or control by Aliens. The
Amended and Restated Articles of Incorporation authorize the Company's Board of
Directors to enforce these prohibitions. In addition, the Amended and Restated
Articles of Incorporation provide that shares of capital stock of the Company
determined by the Company's Board of Directors to be owned
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<PAGE> 66
beneficially by an Alien or an entity directly or indirectly owned by Aliens in
whole or in part shall be subject to redemption by the Company by action of the
Board of Directors to the extent necessary, in the judgment of the Board of
Directors, to comply with these alien ownership restrictions. See "Description
of Capital Stock."
Time Brokerage Agreements. Over the past few years, a number of radio
stations have entered into what have commonly been referred to TBAs. While these
agreements may take varying forms, under a typical TBA, separately owned and
licensed radio stations agree to enter into cooperative arrangements of varying
sorts, subject to compliance with the requirements of antitrust laws and with
the FCC's rules and policies. Under these arrangements, separately-owned
stations could agree to function cooperatively in programming, advertising sales
and similar matters, subject to the requirement that the licensee of each
station maintain independent control over the programming and operations of its
own station. One typical type of TBA is a programming agreement between two
separately-owned radio stations serving a common service area, whereby the
licensee of one station provides substantial portions of the broadcast
programming for airing on the other licensee's station, subject to ultimate
editorial and other controls being exercised by the latter licensee, and sells
advertising time during those program segments.
The FCC has specifically revised its "cross-interest" policy to make that
policy inapplicable to TBAs. Furthermore, the staff of the FCC's Mass Media
Bureau has held that TBAs are not contrary to the Communications Act provided
that the licensee of the station that is being substantially programmed by
another entity maintains complete responsibility for, and control over,
programming and operations of its broadcast station and assures compliance with
applicable FCC rules and policies.
The FCC's multiple ownership rules specifically permit radio station TBAs
to continue to be entered into and implemented, but provide that a licensee or a
radio station that brokers more than 15% of the weekly broadcast time on another
station serving the same market will be considered to have an attributable
ownership interest in the brokered station for purposes of the FCC's multiple
ownership rules. As a result, in a market where it owns a radio station, the
Company would not be permitted to enter into a TBA with another local radio
station in the same market that it could not own under the local ownership
rules, unless the Company's programming on the brokered station constituted 15%
or less of the other local station's programming time on a weekly basis. The FCC
rules also prohibit a broadcast licensee from simulcasting more than 25% of its
programming on another station in the same broadcast service (i.e., AM-AM or FM-
FM) through a TBA where the brokered and brokering stations which it owns or
programs serve substantially the same area. Such 25% simulcasting limitation
also applies to commonly owned stations in the same broadcast service that serve
substantially the same area.
Joint Sales Agreements. Over the past few years, a number of radio
stations have entered into cooperative arrangements commonly known as JSAs.
While these agreements may take varying forms, under the typical JSA, a station
licensee obtains, for a fee, the right to sell substantially all of the
commercial advertising on a separately-owned and licensed station in the same
market. The typical JSA also customarily involves the provision by the selling
party of certain sales, accounting and "back office" services to the station
whose advertising is being sold. The typical JSA is distinct from a TBA in that
a JSA normally does not involve programming.
The FCC has determined that issues of joint advertising sales should be
left to enforcement by antitrust authorities, and therefore does not generally
regulate joint sales practices between stations. Currently, stations for which
another licensee sells time under a JSA are not deemed by the FCC to be
attributable interests of that licensee. However, in connection with its ongoing
rulemaking proceeding concerning the attribution rules, the FCC is considering
whether JSAs should be considered attributable interests or within the scope of
the FCC's cross-interest policy, particularly when JSAs contain provisions for
the supply of programming services and/or other elements typically associated
with TBAs. If JSAs become attributable interests as a result of changes in the
FCC rules, the Company may be required to terminate any JSA it might have with a
radio station which the Company could not own under the FCC's multiple ownership
rules.
Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." The FCC gradually has relaxed or eliminated many of
the more formalized procedures it had developed in the past to promote the
broadcast of certain types of programming responsive to the needs of a
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<PAGE> 67
station's community of license. A licensee continues to be required, however, to
present programming that is responsive to issues of the station's community of
license and to maintain certain records demonstrating such responsiveness.
Complaints from listeners concerning a station's programming often will be
considered by the FCC when it evaluates renewal applications of a licensee,
although listener complaints may be filed at any time, are required to be
maintained in the station's public file and generally may be considered by the
FCC at any time. Stations also must pay regulatory and application fees and
follow various rules promulgated under the Communications Act that regulate,
among other things, political advertising, sponsorship identifications, the
advertisement of contests and lotteries, obscene and indecent broadcasts, and
technical operations, including limits on human exposure to radio frequency
radiation. In addition, the FCC rules formerly required that licensees develop
and implement affirmative action programs designed to promote equal employment
opportunities and submit reports to the FCC with respect to these matters on an
annual basis and in connection with a renewal application. The U.S. Court of
Appeals for the District of Columbia has declared these rules unconstitutional.
The FCC has announced that it intends to reestablish employment regulations
through rulemaking proceedings to be initiated in the future.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
"short term" (less than the full term) license renewal, the imposition of a
condition on the renewal of a license or, for particularly egregious violations,
the denial of a license renewal application or the revocation of a license.
Proposed and Recent Changes. The FCC has pending a rulemaking proceeding
that seeks, among other things, comment on whether the FCC should modify its
radio and television broadcast ownership "attribution" rules by (i) raising the
basic benchmark for attributing ownership in a corporate licensee from 5% to 10%
of the licensee's outstanding voting power, (ii) increasing from 10% to 20% of
the licensee's outstanding voting power the attribution benchmark for
institutional investors in corporate licensees holding interests deemed
"passive" in nature, (iii) attributing certain minority stockholdings in
corporations with a single majority shareholder and (iv) attributing certain
local marketing agreements ("LMA"), TBAs, JSAs, debt or non-voting stock
interests that have heretofore been non-attributable.
Moreover, Congress and the FCC have under consideration, and in the future
may consider and adopt, new laws, regulations and policies regarding a wide
variety of matters that could affect, directly or indirectly, the operation,
ownership and profitability of the Company's radio stations, result in the loss
of audience share and advertising revenues for the Company's radio stations, and
affect the ability of the Company to acquire additional radio stations or to
finance those acquisitions. Such matters may include spectrum use or other fees
on FCC licenses; foreign ownership of broadcast licenses; restatement in revised
form of the FCC's equal employment opportunity rules and revisions to the FCC's
rules relating to political broadcasting; technical and frequency allocation
matters; proposals to restrict or prohibit the advertising of beer, wine and
other alcoholic beverages on radio; changes in the FCC's cross-interest,
multiple ownership and attribution policies; and new technologies such as DARS
and microbroadcasting. As required by the Telecom Act, the FCC has instituted a
proceeding to investigate, among other things, the effect of the revised
ownership rules for radio stations adopted through the Telecom Act, and the
resulting consolidation in the radio industry, on the diversity of programming
and ownership, and on programming and advertising competition. The FCC may
conclude, as a consequence of this review, to modify the radio ownership rules.
Finally, the FCC has adopted procedures for the auction of broadcast spectrum in
circumstances where two or more parties have filed for major change applications
which are mutually exclusive; such procedure may limit the Company's efforts to
modify or expand the broadcast signals of its stations.
The Company cannot predict what other matters might be considered in the
future by the FCC or Congress, nor can it judge in advance what impact, if any,
the implementation of any of these proposals or changes might have on its
business.
Federal Antitrust Laws. In addition to the risks associated with the
acquisition of radio stations, the Company is also aware of the possibility that
certain acquisitions it proposes to make may be investigated by the FTC or the
DOJ, which are the agencies responsible for enforcing the federal antitrust
laws. The Company cannot predict the outcome of any specific DOJ or FTC
investigation, which is necessarily fact specific. Any
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<PAGE> 68
decision by the FTC or the DOJ to challenge a proposed acquisition could affect
the ability of the Company to consummate the acquisition or to consummate it on
the proposed terms.
For an acquisition meeting certain size thresholds, the HSR Act and the
rules promulgated thereunder require the parties to file Notification and Report
Forms with the FTC and the DOJ and to observe specified waiting period
requirements before consummating the acquisition. During the initial 30-day
period after the filing, the agencies decide which of them will investigate the
transaction. If the investigating agency determines that the transaction does
not raise significant antitrust issues, then it will either terminate the
waiting period or allow it to expire after the initial 30 days. On the other
hand, if the agency determines that the transaction requires a more detailed
investigation, then prior to the conclusion of the initial 30-day period, it
will issue a formal request for additional information ("Second Request"). The
issuance of a Second Request extends the waiting period until the twentieth
calendar day after the date of substantial compliance with the Second Request by
all parties to the acquisition. Thereafter, such waiting period may only be
extended by court order or with the consent of the parties. In practice,
complying with a Second Request can take a significant amount of time. In
addition, if the investigating agency raises substantive issues in connection
with a proposed transaction, then the parties frequently engage in lengthy
discussions or negotiations with the investigating agency concerning possible
means of addressing those issues, including but not limited to persuading the
agency that the proposed acquisition would not violate the antitrust laws,
restructuring the proposed acquisition, divestiture of other assets of one or
more parties, or abandonment of the transaction. Such discussions and
negotiations can be time-consuming and expensive, and the parties may agree to
delay consummation of the acquisition during their pendency.
At any time before or after the consummation of a proposed acquisition, the
FTC or the DOJ could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
acquisition or seeking divestiture of the business acquired or other assets of
the Company. Acquisitions that are not required to be reported under the HSR Act
may be investigated by the FTC or the DOJ under the antitrust laws before or
after consummation. In addition, private parties may under certain circumstances
bring legal action to challenge an acquisition under the antitrust laws.
As part of its increased scrutiny of radio station acquisitions, the DOJ
has stated publicly that it believes that LMAs, JSAs, TBAs and other similar
agreements customarily entered into in connection with radio station transfers
could violate the HSR Act if such agreements take effect prior to the expiration
of the waiting period under the HSR Act. Furthermore, the DOJ has noted that
JSAs may raise antitrust concerns under Section 1 of the Sherman Act and has
challenged JSAs in certain locations.
EMPLOYEES
On October 20, 1998, the Company had a staff of 821 full-time employees and
373 part-time employees. The Company is a party to interim collective bargaining
agreements with the American Federation of Television and Radio Artists
("AFTRA") which apply to certain of the Company's programming personnel in
Seattle and Kansas City. Under the interim agreements the Company has agreed to
recognize AFTRA as the collective bargaining unit and to not lock out its
employees, and AFTRA has agreed to recognize management's rights and to refrain
from taking a strike vote. The interim agreements are terminable, by either
party, upon seven days notice. The Company is currently negotiating the terms of
longer-term comprehensive agreements with these unions. In addition, certain
personnel in the stations included in the Boston Transactions are members of
AFTRA and the International Brotherhood of Electrical Workers. Upon completion
of either of the Boston Transactions, the Company will be required to either
assume the existing collective bargaining agreements or negotiate a new
collective bargaining agreement with such personnel. The Company believes that
its relations with its employees are good.
SEASONALITY
Seasonal revenue fluctuations are common in the radio broadcasting industry
and are due primarily to fluctuations in advertising expenditures by retailers.
The Company's revenues and broadcast cash flows are typically lowest in the
first calendar quarter.
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PROPERTIES AND FACILITIES
The types of properties required to support each of the Company's radio
stations include offices, studios and transmitter/antenna sites. The Company
typically leases its studio and office space with lease terms that expire in
five to ten years, although the Company does own certain of its facilities. A
station's studios are generally housed with its offices in downtown or business
districts. The Company generally considers its facilities to be suitable and of
adequate size for its current and intended purposes. The Company owns a majority
of its main transmitter and antenna sites and leases the remainder of its
transmitter/antenna sites with lease terms that expire, including renewal
options, in periods ranging up to twenty years. The transmitter/antenna site for
each station is generally located so as to provide maximum market coverage,
consistent with the station's FCC license. In general, the Company does not
anticipate difficulties in renewing facility or transmitter/antenna site leases
or in leasing additional space or sites if required.
The Company owns substantially all of its other equipment, consisting
principally of transmitting antennae, transmitters, studio equipment and general
office equipment. The towers, antennae and other transmission equipment used by
the Company's stations are generally in good condition, although opportunities
to upgrade facilities are continuously reviewed. Substantially all of the
property owned by the Company secures the Company's borrowings under the Credit
Facility.
The principal executive offices of the Company are located at 401 City
Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004. The telephone number of the
Company is (610) 660-5610.
LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business, but the Company is not a party to any
lawsuit or proceeding which, in the opinion of management, is likely to have a
material adverse effect on the Company.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table provides information concerning the directors and
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
Joseph M. Field........................... 66 Chairman of the Board and Chief Executive
Officer
David J. Field............................ 36 President, Chief Operating Officer, Chief
Financial Officer and Director
John C. Donlevie.......................... 51 Executive Vice President, General Counsel
and Director
Eugene D. Levin........................... 47 Treasurer and Controller
Deborah Kane.............................. 43 Vice President - Sales
Herbert Kean, M.D......................... 66 Director
S. Gordon Elkins.......................... 67 Director
Thomas H. Ginley, M.D..................... 74 Director
Lee Hague................................. 52 Director
Marie H. Field............................ 61 Director
Michael R. Hannon......................... 38 Director
</TABLE>
Joseph M. Field founded Entercom in 1968 and has served since the Company's
inception as Chairman of the Board and Chief Executive Officer and was the
Company's President until September 1998. Mr. Field served on the Board of
Directors of the National Association of Broadcasters for four years as a
representative of the major radio group broadcasters. Mr. Field is a graduate of
the University of Pennsylvania and of Yale Law School and practiced law in New
York and Philadelphia before entering the broadcasting business. Mr. Field
currently serves on the Boards of Directors of The Curtis Institute of Music,
the Settlement Music School, the American Interfaith Institute, the Liberty
Museum, the Jewish Educational and Vocational Service (JEVS) and the
Philadelphia Chamber Music Society in Philadelphia. Joseph M. Field is the
spouse of Marie H. Field and the father of David J. Field.
David J. Field has served as President of the Company since September 1998,
as Chief Operating Officer and Chief Financial Officer since April 1996 and as
director since November 1995. Mr. Field joined the Company in 1987 and served as
Director of Finance and Corporate Development from 1987 to 1988, Vice
President - Finance and Corporate Development from 1988 to 1992, Vice
President - Operations and Chief Financial Officer from 1992 to 1995 and Senior
Vice President - Operations and Chief Financial Officer from 1995 to 1996. Prior
to joining the Company, Mr. Field was an investment banker with Goldman, Sachs &
Co. Mr. Field has a B.A. from Amherst College and an M.B.A. from the Wharton
School of the University of Pennsylvania. Mr. Field currently serves on the
Board of Directors of The Wilderness Society in Washington, D.C. David J. Field
is the son of Joseph M. Field and Marie H. Field.
John C. Donlevie has served as Executive Vice President and director since
1989 and as General Counsel of the Company since 1984 when he joined the
Company. In addition, Mr. Donlevie served as Vice President - Legal and
Administrative from 1984 through 1989. Prior to joining the Company, Mr.
Donlevie practiced law for eleven years, most recently as Corporate Counsel of
Ecolaire Incorporated in Malvern, Pennsylvania. Mr. Donlevie has a B.S. in
engineering from Drexel University and a J.D. from Temple University School of
Law.
Eugene D. Levin has served as Controller of the Company since 1977 when he
joined the Company, and as Treasurer since 1988. Prior to joining the Company,
Mr. Levin was a senior accountant for Laventhal and Horwath, and an
operational/financial auditor and divisional controller for After-Six Inc. Mr.
Levin has a B.S. from Pennsylvania State University and is a certified public
accountant.
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<PAGE> 71
Deborah Kane has served as Vice President - Sales of the Company since June
1996. Ms. Kane joined the Company in 1990 and served as the Local Sales Manager
for Entercom's previously owned San Francisco station KITS-FM from 1990 to 1994.
From 1994 to 1996, Ms. Kane served as the Company's Director of Strategic Sales.
Ms. Kane has over 20 years of experience in the radio industry. Ms. Kane has a
B.A. in Radio, Television and Film from the University of Maryland.
Herbert Kean, M.D. has served as a director of the Company since its
inception and as secretary from its inception until February 1984. Dr. Kean is
currently a medical physician in private practice in the Philadelphia area. Dr.
Kean has a B.S. from the University of Pennsylvania and a M.D. from Hahnemann
University.
S. Gordon Elkins has served as a director of the Company since February
1978. Mr. Elkins is a partner in the law firm of Stradley, Ronon, Stevens &
Young. Mr. Elkins has a B.S. from Temple University and an L.L.B. from Yale Law
School.
Thomas H. Ginley, M.D. has served as a director of the Company since
January 1971 and as Secretary of the Company since February 1984. Dr. Ginley is
currently a medical physician in private practice in the Philadelphia area. Mr.
Ginley serves on the Board of Directors of A & T Development Corporation, Vanesa
Noel Couture, Inc. and GEM Treasury International Corporation. Dr. Ginley has a
M.D. from Georgetown University.
Lee Hague has served as a director of the Company since March 1980. Mr.
Hague has served as an independent consultant to various broadcasting groups and
provides financial advisory and media brokering services to the industry. Mr.
Hague has over 20 years' experience in the radio industry. Mr. Hague has a B.S.
in Economics from Northwestern University and a M.M. from the J.L. Kellogg
Graduate School of Management, Northwestern University.
Marie H. Field has served as a director of the Company since 1989. Mrs.
Field served for over 25 years as a teacher in public and private schools in New
York and Philadelphia. Mrs. Field serves on the Board of Directors of the
Ovarian Cancer Research Fund in New York and the Board of Overseers of the
University of Pennsylvania School of Social Work. Mrs. Field has a B.A. from
Barnard College. Mrs. Field is the spouse of Joseph M. Field and the mother of
David J. Field.
Michael R. Hannon was elected to serve as a director of the Company in
1998. Mr. Hannon is a general partner of Chase Capital, a general
partnership which invests in international private equity opportunities with a
significant concentration on the media and telecommunications industries. Prior
to joining Chase Capital in 1988, Mr. Hannon held various positions at Morgan
Stanley & Co. Incorporated. Mr. Hannon currently serves as Chairman of Telecorp
PCS, Inc. and as a director of Formus Communications, Financial Equity Partners
and Bell Sports. Mr. Hannon has a B.A. from Yale University and an M.B.A. from
Columbia Business School.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established an Audit Committee and a
Compensation Committee.
The responsibilities of the Audit Committee include recommending to the
Board of Directors independent public accountants to conduct the annual audit of
the financial statements of the Company, reviewing the proposed scope of such
audit and approving the audit fees to be paid, reviewing accounting and
financial controls of the Company with the independent public accountants and
the Company's financial and accounting staff and reviewing and approving
transactions, other than compensation matters, between the Company and its
directors, officers and affiliates. Prior to the consummation of the Offering,
the Board will appoint two or more non-employee directors to be the initial
members of the Audit Committee.
The Compensation Committee provides a general review of the Company's
compensation plans to ensure that they meet corporate objectives. The
responsibilities of the Compensation Committee also include administering and
interpreting the Company's 1998 Equity Compensation Plan, including selecting
the officers
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<PAGE> 72
and salaried employees to whom awards will be granted. Messrs. Ginley, Hague and
Kean serve as the initial members of the Compensation Committee.
DIRECTOR COMPENSATION
During the last fiscal year, all directors of the Company were compensated
$200 for each meeting of the Board that they attended in person. Upon
consummation of the Offering, all directors who are not currently receiving
compensation as officers, employees or consultants of the Company will be
entitled to receive an annual retainer fee of $ , plus $ and
reimbursement of expenses for each meeting of the Board and each committee
meeting that they attend in person. Directors who serve as employees of the
Company will not receive additional compensation for their services as
directors.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain information concerning compensation
paid to or earned by the Chief Executive Officer of the Company and the
Company's other most highly compensated executive officers for services rendered
during the year ended September 30, 1997 (the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION
--------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Joseph M. Field, Chairman of the Board and Chief
Executive Officer............................... 1997 $542,335 0 *
David J. Field, President, Chief Operating Officer
and Chief Financial Officer..................... 1997 $257,250 $89,500 *
John C. Donlevie, Executive Vice President and
General Counsel................................. 1997 $178,071 $89,500 *
Deborah Kane, Vice President - Sales.............. 1997 $117,500 $68,800 *
Eugene D. Levin, Treasurer and Controller......... 1997 $ 97,130 $44,750 *
</TABLE>
- ---------------
* Value of perquisites and other personal benefits paid does not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported for
the executive officer and, therefore, is not required to be disclosed
pursuant to rules of the Securities and Exchange Commission (the
"Commission").
(1) Includes amounts accrued during year presented but paid in the subsequent
year.
1998 EQUITY COMPENSATION PLAN
The Company has adopted the 1998 Equity Compensation Plan, effective as of
June 24, 1998. The 1998 Equity Compensation Plan provides for grants of (i)
options intended to qualify as incentive stock options ("ISOs") within the
meaning of Section 422 of the Code, (ii) "nonqualified stock options" that are
not intended to so qualify ("NQSOs"), (iii) restricted stock and (iv) stock
appreciation rights ("SARs"). Such grants may be made to employees of the
Company and its subsidiaries (including employees who are officers or
directors), non-employee directors of the Company and certain advisors and
consultants who perform services for the Company and its subsidiaries (the
"Participants"). Only shares of Class A Common Stock may be issued under the
1998 Equity Compensation Plan. By encouraging stock ownership, the Company seeks
to motivate such individuals and to encourage such individuals to devote their
best efforts to the business and financial success of the Company.
General. Subject to adjustment in certain circumstances as discussed
below, up to 10% of the outstanding Class A Common Stock of the Company may be
issued under the 1998 Equity Compensation Plan. The number of shares for which
ISOs may be issued under the 1998 Equity Compensation Plan may not exceed
shares (subject to adjustment as described below), and the number of
shares of restricted stock that may be issued under the 1998 Equity Compensation
Plan may not exceed shares (subject to adjustment as described
below). If and to the extent grants awarded under the 1998 Equity Compensation
Plan expire or are terminated for any reason without being exercised, the shares
of Class A
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<PAGE> 73
Common Stock subject to such grant again will be available for purposes of the
1998 Equity Compensation Plan.
Administration of the 1998 Equity Compensation Plan. The 1998 Equity
Compensation Plan is administered and interpreted by the Compensation Committee
(the "Committee") of the Board of Directors consisting of not less than two
persons appointed by the Board of Directors from among its members, each of whom
may be a "disinterested person" as defined by Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and an "outside director"
as defined by Section 162(m) of the Code. Subject to the ratification or
approval by the Board of Directors, if the Board retains such right, the
Committee has the sole authority to (i) determine the individuals to whom awards
shall be made under the 1998 Equity Compensation Plan, (ii) determine the type,
size and terms of the awards to be made to each such individual, (iii) determine
the time when the grants will be made and the duration of any applicable
exercise or restriction period, including the criteria for vesting and the
acceleration of vesting, (iv) delegate to the Chief Executive Officer of the
Company the authority to make grants under the 1998 Equity Compensation Plan to
employees of the Company who are not subject to the limitations of Section 16(b)
of the Exchange Act and who are not expected to be subject to the limitations of
Section 162(m) of the Code and (v) deal with any other matters arising under the
Plan. See "-- Committees of the Board of Directors."
Eligibility for Participation. Awards may only be made to Participants.
During any calendar year, no Participant may receive awards for more than
1,000,000 shares of Class A Common Stock issued or available for issuance under
the 1998 Equity Compensation Plan. As of June 30, 1998, no options were
outstanding under the 1998 Equity Compensation Plan.
Options. The exercise price of any ISO granted under the 1998 Equity
Compensation Plan will not be less than the fair market value of the underlying
shares of Common Stock on the date of grant. The exercise price of an ISO
granted to an employee who owns more than 10% of the Common Stock may not be
less than 110% of the fair market value of the underlying shares of Common Stock
on the date of grant. The exercise price of an NQSO may be greater than, equal
to or less than the fair market value of the underlying shares of Common Stock
on the date of grant. The Committee will determine the term of each option;
provided, however, that the exercise period may not exceed ten years from the
date of grant, and the exercise period of an ISO granted to an employee who owns
more than 10% of the Common Stock may not exceed five years from the date of
grant. The Participant may pay the exercise price (i) in cash, (ii) with the
approval of the Committee, by delivering shares of Common Stock owned by the
Participant and having a fair market value on the date of exercise equal to the
exercise price or (iii) by such other method as the Committee approves. The
participant may instruct the Company to deliver the shares of Common Stock due
upon the exercise to a designated broker instead of to the Participant.
Restricted Stock. The Committee may issue shares of restricted Common
Stock to a Participant pursuant to the 1998 Equity Compensation Plan. Shares may
be issued for consideration or for no consideration, as the Committee
determines. The number of shares of Common Stock granted to each Participant
shall be determined by the Committee, subject to the maximum limit described
above. Grants of restricted stock will be made subject to such performance
requirements, vesting provisions, transfer restrictions or other restrictions
and conditions as the Committee may determine in its sole discretion.
Stock Appreciation Rights. The Committee may grant SARs alone or in tandem
with any stock option pursuant to the 1998 Equity Compensation Plan. Unless the
Committee determines otherwise, the exercise price of an SAR will be either (i)
the exercise price of the related stock option or (ii) the fair market value of
a share of Common Stock on the date of grant of the SAR. When the Participant
exercises a SAR, the Participant will receive the amount by which the fair
market value of the Common Stock on the date of exercise exceeds the exercise
price of the SAR. The appreciation shall be paid in cash or in shares of Common
Stock, as the Committee determines. To the extent a Participant exercises a
tandem SAR, the related option shall terminate. Similarly, upon exercise of a
stock option, the related SAR, if any, shall terminate.
Amendment and Termination of the 1998 Equity Compensation Plan. The Board
of Directors may amend or terminate the 1998 Equity Compensation Plan at any
time; provided, however, that, the Board of Directors may not amend, without
stockholder approval, the 1998 Equity Compensation Plan to make any
71
<PAGE> 74
amendment that requires stockholder approval pursuant to Rule 16b-3 of the
Exchange Act, Section 162(m) of the Code or Section 422 of the Code. The 1998
Equity Compensation Plan will terminate on the day immediately preceding the
tenth anniversary of its effective date, unless terminated earlier by the Board
of Directors or extended by the Board of Directors with approval of the
stockholders.
Adjustment Provisions. Subject to the change of control provisions below,
in the event of certain transactions identified in the 1998 Equity Compensation
Plan, the Committee may appropriately adjust (i) the number and kind of shares
of Class A Common Stock (and the option price per share) subject to awards, (ii)
the number and kind of shares for which awards may be made under the 1998 Equity
Compensation Plan and (iii) the maximum number of shares that may be awarded to
an individual, and such adjustments shall be effective and binding for all
purposes of the 1998 Equity Compensation Plan.
Change of Control of the Company. In the event of a change of control,
unless the Committee determines otherwise, all grants shall become fully vested
and all restrictions and conditions on restricted stock shall lapse. If the
Company is not the surviving corporation, unless the Committee determines
otherwise, outstanding options and SARs will be replaced by options and SARs or
equivalent rights of the surviving corporation. The Committee may also provide
for a cashout or termination of outstanding options and SARs.
A change of control is defined as (i) any person or group becomes the owner
of more than 50% of the votes required to elect a majority of the Board of
Directors, except if such change in control results from the death of a
shareholder, (ii) a liquidation or a sale of substantially all the Company's
assets or (iii) a merger in which the shareholders of the Company immediately
before the merger do not own, after the merger, more than 50% of all votes
required to elect a majority of the Board of Directors of the surviving
corporation.
Section 162(m). Under Section 162(m) of the Code, the Company may be
precluded from claiming a federal income tax deduction for total remuneration in
excess of $1,000,000 paid to the chief executive officer or to any of the other
four most highly compensated officers in any one year. Total remuneration would
include amounts received upon the exercise of stock options or SARs granted
under the 1998 Equity Compensation Plan and the value of shares received when
the shares of restricted stock became transferable (or such other time when
income is recognized). An exception exists, however, for "performance-based
compensation," including amounts received upon the exercise of stock options or
SARs pursuant to a plan approved by shareholders that meets certain
requirements. The 1998 Equity Compensation Plan has been approved by
shareholders and is intended to make grants of options thereunder that meet the
requirements of "performance- based compensation." Awards of restricted stock
will not qualify as "performance-based compensation."
New Plan Benefits. Prior to the effective date of the Offering, the
Company will grant certain options under the 1998 Equity Compensation Plan. The
Company anticipates that these options will vest one-fourth each year over the
next four years. All options expire on the tenth anniversary of the date of
grant. The following table sets forth certain information with respect to such
contemplated Option grants.
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE NUMBER OF UNITS (1)
- ----------------- ------------ -------------------
<S> <C> <C>
Joseph M. Field, Chairman of the Board and Chief Executive
Officer...................................................
David J. Field, President, Chief Operating Officer, Chief
Financial Officer and Director............................
John C. Donlevie, Executive Vice President and General
Counsel...................................................
Deborah Kane, Vice-President - Sales........................
Eugene D. Levin, Treasurer and Controller...................
All current executive officers as a group...................
All current directors who are not executive officers as a
group.....................................................
All employees, including all current officers who are not
executive officers, as a group............................
</TABLE>
- ---------------
(1) The number of units represents the number of shares of Class A Common Stock
underlying the options expected to be granted.
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<PAGE> 75
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "ESP Plan") was adopted in
June 1998 and will become effective after the Offering on such date as the Board
of Directors or the committee established to administer the ESP Plan (the
"Committee") designates. The purpose of the ESP Plan is to provide eligible
employees of the Company an opportunity to purchase Common Stock of the Company.
The Company believes that employee participation in stock ownership will be to
the mutual benefit of both the employees and the Company. The ESP Plan is
intended to constitute an employee stock purchase plan within the meaning of
Section 423 of the Code. The ESP Plan is not intended to constitute an employee
benefit plan within the meaning of Section 3(3) of the Employee Retirement
Security Act of 1974, as amended. A total of up to shares of Class A
Common Stock of the Company may be issued under the ESP Plan (subject to
adjustment in the event of certain changes in the Common Stock). The ESP Plan
will terminate after a term of 10 years, unless it is terminated earlier
pursuant to its terms or by action of the Board of Directors. All funds received
or held by the Company under the ESP Plan are general assets of the Company,
shall be held free of any trust or other restriction and may be used for any
corporate purpose.
In order to be eligible to participate in the ESP Plan, an employee must
(i) be classified by the Company as a full or part-time employee, (ii) be
employed by the Company for more than 20 hours per week and for more than five
months per year, (iii) have completed at least one year of service with the
Company or a predecessor and (iv) not be deemed for purposes of Section
423(b)(3) of the Code to own stock representing five percent or more of the
total combined voting power of all classes of stock of the Company or any
subsidiary of the Company. Employees who are covered by a collective bargaining
agreement will not participate during any period in which the union has
determined that such employees will not participate in the ESP Plan. Under the
ESP Plan, the Company will withhold a specified percentage (not to exceed 10%)
of the compensation paid to each participant, and the amount withheld (and any
additional amount contributed by the participant) will be used to purchase Class
A Common Stock from the Company on the last day of each purchase period. The
price at which the Class A Common Stock will be purchased under the ESP Plan
will be determined by the Committee and shall not be less than 85% of the value
of the stock on the last day of the purchase period. The length of each purchase
period shall be specified by the Committee, with the first purchase period to
begin on a date subsequent to the effective date of this Prospectus.
Employees may end their participation in a purchase period at any time, and
participation ends automatically upon termination of employment with the
Company. The maximum value of shares that a participant in the ESP Plan may
purchase during any calendar year is $25,000. In the event of a dissolution or
liquidation of the Company or of a merger or consolidation in which the Company
is not the surviving corporation, the ESP Plan and any purchase periods then in
progress will terminate upon the effective date of such event.
The Board of Directors has the right to amend or terminate the ESP Plan.
However, any amendment that requires shareholder approval under Section 423 of
the Code shall be approved by the Company's shareholders.
EMPLOYMENT AGREEMENTS
Joseph M. Field Employment Agreement. The Company has entered into an
employment agreement with Joseph M. Field pursuant to which Mr. Field serves as
Chief Executive Officer. The employment agreement with Mr. Field may be
terminated upon written notice no less than 30 days prior to the end of any
calendar year. Absent such written notice, the employment agreement is
automatically renewed for a period of one year. In the event of Mr. Field's
death during the term of the employment agreement, the Company will pay his
survivors Mr. Field's compensation for one year at the then current rate. In the
event of the total disability of Mr. Field, the Company will pay Mr. Field
compensation for the lesser of the period of his disability or one year at the
then applicable rate. Mr. Field's current base salary is $544,800 and is
increased or decreased annually by a percentage equal to the percentage of
inflation or deflation over the immediately preceding twelve month period,
provided that the base salary shall never be less than $500,000. The Board of
Directors may approve additional salary, bonuses, fees, or other compensation
for Mr. Field. Mr. Field is
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<PAGE> 76
entitled to participate in any bonus, profit sharing, retirement, insurance or
other plan or program adopted by the Company. Absent the express prior written
consent of the Company, Mr. Field is prohibited, in the event of his termination
by resignation or for cause, for a period of two years following the termination
of the employment agreement, from engaging in any broadcast business in
competition with the Company in any standard metropolitan statistical area in
which the Company is then operating a broadcast property.
Executive Officer Employment Agreements. The Company has entered into
employment agreements with David J. Field, John C. Donlevie and Eugene D. Levin.
Each of the employment agreements provides that the employee may be terminated
at will by either party (i) immediately if good cause for termination exists, or
(ii) upon thirty days notice in the absence of good cause. Pursuant to the
employment agreements, the current annual salaries of Mr. Field, Mr. Donlevie
and Mr. Levin are $263,000, $183,000 and $100,000, respectively. Each of the
employment agreements provides for yearly salary adjustments for inflation and
an annual incentive bonus based on the increased real cash flow (as defined in
the agreement) of the Company. In addition, Mr. Donlevie and Mr. Levin may
collect a percentage of any special or liquidating distributions made by the
Company.
Deborah Kane Employment Agreement. The Company has entered into an
employment agreement with Deborah Kane pursuant to which Ms. Kane serves as Vice
President - Sales. The employment agreement with Ms. Kane may be terminated at
will by either party with or without cause or notice. Ms. Kane is paid an annual
base salary of $160,000 under the employment agreement and is entitled to
receive certain quarterly and annual incentive bonuses based on the completion
of several performance related objectives.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
S. Gordon Elkins, a director of the Company, is a partner at the law firm
of Stradley, Ronon, Stevens & Young, that has served as the Company's outside
counsel on various matters.
Michael R. Hannon, a director of the Company, is a general partner of Chase
Capital. In May 1996, Chase Equity Associates, L.P., an affiliate of Chase
Capital, acquired the 7% Subordinated Convertible Note for $25 million. The 7%
Subordinated Convertible Note will be converted in the Chase Conversion into
shares of Class A Common Stock. Chase Equity Associates, L.P. is the
Selling Shareholder in the Offering and will receive net proceeds of $
from the sale of shares of Class A Common Stock in the Offering. Upon
completion of the Offering, Chase Capital will beneficially own approximately
% of the Company's Class A Common Stock.
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<PAGE> 77
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of May 31, 1998, by: (i) each person (or group
of affiliated persons) known by the Company to be the beneficial owner of more
than five percent of the outstanding Common Stock; (ii) each Named Executive
Officer of the Company; (iii) each director of the Company; (iv) the Selling
Shareholder and (v) all of the Company's directors and executive officers as a
group. Each shareholder possesses sole voting and investment power with respect
to the shares listed, unless otherwise noted.
<TABLE>
<CAPTION>
CLASS B
CLASS A COMMON STOCK(1) COMMON STOCK(2)
--------------------------------------------------------- -------------------------------------
PERCENT OF CLASS NUMBER OF PERCENT OF
SHARES ---------------------- SHARES CLASS
NAME OF BEFORE BEING AFTER BEFORE AFTER AFTER AFTER
BENEFICIAL OWNER OFFERING OFFERED OFFERING(3) OFFERING OFFERING(3) OFFERING(3) OFFERING(3)
- ----------------------- -------- ------- ----------- -------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph M. Field (4)....
David J. Field (4).....
John C. Donlevie.......
Eugene D. Levin........
Deborah Kane...........
Herbert Kean, M.D......
S. Gordon Elkins.......
Thomas H. Ginley,
M.D. ................
Lee Hague..............
Marie H. Field(4)......
Michael R. Hannon(5)...
Nancy E. Field(4)......
Chase Equity
Associates, L.P.(5)
380 Madison Avenue
New York, NY 10017....
All directors, and
executive officers,
as a group
("persons")..........
<CAPTION>
PERCENT OF PERCENT OF
NAME OF TOTAL ECONOMIC TOTAL VOTING
BENEFICIAL OWNER INTEREST POWER
- ----------------------- -------------- ------------
<S> <C> <C>
Joseph M. Field (4)....
David J. Field (4).....
John C. Donlevie.......
Eugene D. Levin........
Deborah Kane...........
Herbert Kean, M.D......
S. Gordon Elkins.......
Thomas H. Ginley,
M.D. ................
Lee Hague..............
Marie H. Field(4)......
Michael R. Hannon(5)...
Nancy E. Field(4)......
Chase Equity
Associates, L.P.(5)
380 Madison Avenue
New York, NY 10017....
All directors, and
executive officers,
as a group
("persons")..........
</TABLE>
- ---------------
* Less than one percent.
(1) The number of shares of Class A Common Stock does not include the shares of
Class A Common Stock issuable upon conversion of the outstanding shares of
Class B Common Stock.
(2) The holders of the Class B Common Stock are entitled to vote with the
holders of the Class A Common Stock on all matters submitted to a vote of
shareholders of the Company, except with respect to the election of Class A
Directors and as otherwise required by law. Each share of Class B Common
Stock that is voted by Joseph M. Field and David J. Field is entitled to ten
votes per share on all matters submitted to a vote of shareholders, except
certain "going private" transactions or as otherwise required by law. The
shares of Class B Common Stock are convertible in whole or in part, at the
option of the holder or holders thereof, subject to certain conditions, into
the same number of shares of Class A Common Stock. See "Description of
Capital Stock."
(3) Shares beneficially owned and percentage ownership are based on
shares of Class A Common Stock and shares of Class B Common Stock
outstanding after the Offering.
(4) The address of these shareholders is 401 City Avenue, Suite 409, Bala
Cynwyd, Pennsylvania 19004.
(5) The amounts shown consist of shares held of record by Chase Equity
Associates, L.P. to be received upon the Chase Conversion. Michael Hannon is
a general partner of Chase Capital, which is an affiliate of Chase Equity
Associates, L.P. Mr. Hannon exercises shared investment and voting power
with respect to such shares, but disclaims beneficial ownership of such
shares.
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<PAGE> 78
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company gives effect
to the Recapitalization and the Chase Conversion, which will occur immediately
prior to the Offering, and to the proposed sale of shares of Class A
Common Stock in the Offering. The Company's authorized capital stock consists of
(i) 200,000,000 shares of Class A Common Stock, of which shares are
issued and outstanding; (ii) 75,000,000 shares of Class B Common Stock, of which
shares are issued and outstanding; (iii) 50,000,000 shares of Class C
Common Stock, none of which are issued or outstanding; and (iv) 25,000,000
shares of preferred stock, none of which are issued or outstanding. In addition,
the Company has reserved for issuance shares of Class A Common Stock
under the 1998 Equity Compensation Plan. See "Management -- 1998 Equity
Compensation Plan."
The following summary description of the capital stock of the Company does
not purport to be complete and is subject to the detailed provisions of, and
qualified in its entirety by reference to, the Company's Amended and Restated
Articles of Incorporation and Amended and Restated Bylaws, copies of which have
been filed as exhibits to the registration statement of which this Prospectus
forms a part, and to the applicable provisions of the Pennsylvania Business
Corporation Law of 1988 (the "PBCL").
Common Stock
The rights of holders of the Common Stock are identical in all respects,
except as discussed below. All the outstanding shares of Class A Common Stock
and Class B Common Stock and the shares of Class A Common Stock sold in the
Offering will be, upon issuance and payment of the purchase price therefor,
validly issued, fully paid and nonassessable.
Dividends. Subject to the right of the holders of any class of preferred
stock, holders of shares of Common Stock are entitled to receive such dividends
as may be declared by the Company's Board of Directors out of funds legally
available for such purpose. No dividend may be declared or paid in cash or
property on any share of any class of Common Stock unless simultaneously the
same dividend is declared or paid on each share of that and every other class of
Common Stock; provided that, in the event of stock dividends, holders of a
specific class of Common Stock shall be entitled to receive only additional
shares of such class.
Voting Rights. The Class A Common Stock and the Class B Common Stock vote
together as a single class on all matters submitted to a vote of shareholders,
with each share of Class A Common Stock entitling the holder thereof to one vote
and each share of Class B Common Stock entitling the holder thereof to ten
votes, except that (i) beginning with the Company's first annual meeting
following the Offering, the holders of Class A Common Stock, voting as a
separate class, shall be entitled to elect two Class A Directors, (ii) with
respect to a Going Private Transaction (defined as a "Rule 13e-3 transaction"
under the Exchange Act), each share of Class A Common Stock and Class B Common
Stock shall be entitled to one vote, (iii) any share of Class B Common Stock
shall only be entitled to ten votes if it is voted by either Joseph M. Field, or
David J. Field, in their own right or pursuant to a proxy and (iv) as otherwise
required by law. The Class C Common Stock has no voting rights except as
otherwise required by law.
The first two Class A Directors will be appointed by the Company's Board of
Directors as soon as practicable after the consummation of the Offering and will
serve until the Company's next annual meeting of shareholders, when the holders
of the Class A Common Stock will elect the Class A Directors. The Class A
Directors serve one-year terms and must be "independent directors." For this
purpose, an "independent director" means a person who is not an officer or
employee of the Company or its subsidiaries, and who does not have a
relationship which, in the opinion of the Board of Directors, would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a director. Holders of Common Stock are not entitled to cumulate votes in the
election of directors.
Liquidation Rights. Upon liquidation, dissolution or winding-up of the
Company, the holders of the Common Stock are entitled to share ratably in all
assets available for distribution after payment in full of creditors and holders
of the preferred stock of the Company, if any.
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Conversion of Class A Common Stock. Shares of Class A Common Stock owned
by a Regulated Entity (defined as either an entity that is a "bank holding
company" under the Bank Holding Company Act of 1956 (the "BHC Act") or a
non-bank subsidiary of such an entity, or an entity that, pursuant to Section
8(a) of the International Banking Act of 1978, as amended, is subject to the
provisions of the BHC Act, or any non-bank subsidiary of such an entity), are
convertible at any time, at the option of the holder thereof, into an equal
number of fully paid and non-assessable shares of Class C Common Stock. All
conversion rights of Class A Common Stock are subject to any necessary FCC
approval.
Conversion, Transferability of Class B Common Stock. Shares of Class B
Common Stock are convertible at any time, at the option of the holder thereof,
into an equal number of fully paid and non-assessable shares of Class A Common
Stock. All conversion rights of Class B Common Stock are subject to any
necessary FCC approval. Shares of Class B Common Stock transferred to a party
other than a Field Shareholder are automatically converted into an equal number
of fully paid and non-assessable shares of Class A Common Stock.
Conversion, Transferability of Class C Common Stock. Shares of Class C
Common Stock are convertible at any time, at the option of the holder thereof,
into an equal number of fully paid and non-assessable shares of Class A Common
Stock. All conversion rights of Class C Common Stock are subject to any
necessary FCC approval. Shares of Class C Common Stock transferred to a party
other than a Regulated Entity are automatically converted into an equal number
of fully paid and non-assessable shares of Class A Common Stock. Shares of Class
C Common Stock may be transferred by a Regulated Entity under a limited set of
circumstances.
Other Provisions. The holders of Common Stock are not entitled to
preemptive or similar rights.
Preferred Stock
The Company is authorized to issue 25,000,000 shares of preferred stock,
par value $.01 per share. The Board of Directors of the Company, in its sole
discretion, may designate and issue one or more series of preferred stock from
the authorized and unissued shares of preferred stock. Subject to limitations
imposed by law or the Amended and Restated Articles of Incorporation of the
Company, the Board of Directors is empowered to determine the designation of and
the number of shares constituting a series of preferred stock, the dividend
rate, if any, for the series, the terms and conditions of any voting and
conversion rights for the series, if any, the number of directors, if any, which
the series shall be entitled to elect, the amounts payable on the series upon
the liquidation, dissolution or winding-up of the Company, the redemption prices
and terms applicable to the series, if any, and the preferences and relative
rights among the series of preferred stock. Such rights, preferences, privileges
and limitations of preferred stock could adversely affect the rights of holders
of Common Stock. There are currently no shares of preferred stock outstanding.
FOREIGN OWNERSHIP
The Amended and Restated Articles of Incorporation of the Company restrict
the ownership, voting and transfer of the Company's capital stock, including the
Common Stock, in accordance with the Communications Act and the rules of the
FCC, which prohibit the issuance of more than 25% of the Company's outstanding
capital stock (or more than 25% of the voting rights it represents) to or for
the account of Aliens or corporations otherwise subject to domination or control
by Aliens. The Company's Amended and Restated Articles of Incorporation prohibit
any transfer of the Company's capital stock that would cause a violation of this
prohibition. In addition, the Amended and Restated Articles authorize the Board
of Directors of the Company to take action to enforce these prohibitions,
including requiring redemptions of Common Stock and placing a legend regarding
restrictions on foreign ownership on the certificates representing the Common
Stock. See "Business -- Federal Regulation of Radio Broadcasting -- Ownership
Matters."
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CERTAIN PROVISIONS OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION AND
AMENDED AND RESTATED BYLAWS OF THE COMPANY
The Company's Amended and Restated Articles of Incorporation and Amended
and Restated Bylaws include certain provisions that could have an anti-takeover
effect. These provisions are intended to preserve the continuity and stability
of the Board of Directors and the policies formulated by the Board of Directors.
These provisions are also intended to help ensure that the Board of Directors,
if confronted by a surprise proposal from a third party which has acquired a
block of stock of the Company, will have sufficient time to review the proposal,
to consider appropriate alternatives to the proposal and to act in what it
believes to be the best interests of the shareholders.
The following is a summary of the provisions included in the Amended and
Restated Articles of Incorporation and is qualified in its entirety by reference
to such documents, copies of which will be filed as exhibits to the Registration
Statement, of which this Prospectus forms a part. The Board of Directors has no
current plans to formulate or effect additional measures that could have an
anti-takeover effect.
Exculpation. The Amended and Restated Articles of Incorporation of the
Company provide that a director or officer of the Corporation shall not be
personally liable for monetary damages as such (including, without limitation,
any judgment, amount paid in settlement, penalty, punitive damages or expense of
any nature (including, without limitation, attorneys' fees and disbursements))
for any action taken, or any failure to take any action, unless (i) the director
has breached or failed to perform the duties of his or her office under the
Amended and Restated Articles of Incorporation of the Company, the Amended and
Restated Bylaws of the Company or applicable provisions of law and (ii) the
breach or failure to perform constitutes self-dealing, willful misconduct or
recklessness.
Indemnification. The Amended and Restated Articles of Incorporation of the
Company provide that, to the fullest extent permitted by the PBCL, the Company
will indemnify any person who was, is, or is threatened to be made, a party to a
proceeding by reason of the fact that he or she (i) is or was a director or
officer of the Company or (ii) while a director or officer of the Company, is or
was serving at the request of the Company as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise.
Blank Check Preferred Stock. The Company's Amended and Restated Articles
of Incorporation will provide that the Board of Directors of the Company may
authorize the issuance of up to 25,000,000 shares of preferred stock in one or
more classes or series and may designate the dividend rate, voting rights and
other rights, preferences and restrictions of each such class or series. The
Board of Directors of the Company has no present intention to issue any
preferred stock; however, the Board of Directors of the Company has the
authority, without further shareholder approval, to issue one or more series of
preferred stock that could, depending on the terms of such series, either impede
or facilitate the completion of a merger, tender offer or other takeover
attempt. Although the Board of Directors of the Company is required to make any
determination to issue such stock based on its judgment as to the best interests
of the shareholders of the Company, the Board of Directors of the Company could
act in a manner that would discourage an acquisition attempt or other
transaction that some, or a majority, of the shareholders might believe to be in
their best interests or in which shareholders might receive a premium for their
stock over the then market price of such stock. The Board of Directors of the
Company does not intend to seek shareholder approval prior to any issuance of
such stock, unless otherwise required by law.
PENNSYLVANIA CONTROL-SHARE ACQUISITIONS LAW
Generally, subchapters 25E, F, G, H, I and J of the PBCL place certain
procedural requirements and establish certain restrictions upon the acquisition
of voting shares of a corporation which would entitle the acquiring person to
cast or direct the casting of a certain percentage of votes in an election of
directors. Subchapter 25E of the PBCL provides generally that, if the Company
were involved in a "control transaction," shareholders of the Company would have
the right to demand from a "controlling person or group" payment of the fair
value of their shares. For purposes of subchapter 25E, a "controlling person or
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<PAGE> 81
group" is a person or group of persons acting in concert that, through voting
shares, has voting power over at least 20% of the votes which shareholders of
the Company would be entitled to cast in the election of directors. A control
transaction arises, in general, when a person or group acquires the status of a
controlling person or group.
In general, Subchapter 25F of the PBCL delays for five years and imposes
conditions upon "business combinations" between an "interested shareholder" and
the Company. The term "business combination" is defined broadly to include
various merger, consolidation, division, exchange or sale transactions,
including transactions utilizing the Company's assets for purchase price
amortization or refinancing purposes. An "interested shareholder," in general,
would be a beneficial owner of at least 20% of the Company's voting shares.
In general, Subchapter 25G of the PBCL suspends the voting rights of the
"control shares" of a shareholder that acquires for the first time 20% or more,
33 1/3% or more or 50% or more of the Company's shares entitled to be voted in
an election of directors. The voting rights of the control shares generally
remain suspended until such time as the "disinterested" shareholders of the
Company vote to restore the voting power of the acquiring shareholder.
Subchapter 25H of the PBCL provides in certain circumstances for the
recovery by the Company of profits made upon the sale of its common stock by a
"controlling person or group" if the sale occurs within 18 months after the
controlling person or group became such and the common stock was acquired during
such 18 month period or within 24 months prior thereto. In general, for purposes
of Subchapter 25H, a "controlling person or group" is a person or group that (i)
has acquired, (ii) offered to acquire or (iii) publicly disclosed or caused to
be disclosed an intention to acquire voting power over shares that would entitle
such person or group to cast at least 20% of the votes that shareholders of the
Company would be entitled to cast in the election of directors.
If the disinterested shareholders of the Company vote to restore the voting
power of a shareholder who acquires control shares subject to Subchapter 25G,
the Company would then be subject to subchapters 25I and J of the PBCL.
Subchapter 25I generally provides for a minimum severance payment to certain
employees terminated within two years of such approval. Subchapter 25J, in
general, prohibits the abrogation of certain labor contracts prior to their
stated date of expiration.
The foregoing descriptions of certain subchapters of the PBCL do not
purport to be complete.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is .
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Class A
Common Stock of the Company. The sale, or availability for sale, of substantial
amounts of Class A Common Stock in the public market subsequent to the Offering,
could adversely affect the prevailing market price of the shares of Class A
Common Stock and could impair the Company's ability to raise additional capital
through the sale of equity securities.
Upon completion of the Offering, the Company will have outstanding
shares of Class A Common Stock and shares of Class B Common
Stock. Of these outstanding shares, the shares of Class A Common Stock
sold in the Offering will be freely transferable without restriction under the
Securities Act, except for any such shares purchased by an "affiliate" (as
defined in Rule 144 under the Securities Act) of the Company, which shares may
generally only be sold in compliance with the limitations of Rule 144 described
below. The remaining shares of Class A Common Stock and all of Class B
Common Stock will be "restricted securities" for purposes of Rule 144 and may
not be resold unless registered under the Securities Act or sold pursuant to an
applicable exemption thereunder, including the exemption contained in Rule 144.
The number of shares of Common Stock available for sale in the public
market is limited by restrictions under the Securities Act and lock-up
agreements under which all of the holders of such shares have agreed not to sell
or otherwise dispose of their shares during the Lock-Up Period without the prior
written consent of Credit Suisse First Boston Corporation. Because of these
restrictions, on the date of this Prospectus, no shares other than those offered
hereby will be eligible for sale. Upon expiration of the Lock-Up Period, all of
the restricted securities will be eligible for sale in the public market,
subject to compliance with the manner-of-sale, volume and other limitations of
Rule 144.
In general, under Rule 144, as currently in effect, a shareholder (or
shareholders whose shares are aggregated) who has beneficially owned restricted
securities for at least one year (including persons who may be deemed
"affiliates" of the Company under Rule 144) is entitled to sell a number of
shares within any three-month period that does not exceed the greater of 1% of
the then outstanding shares of the class of Common Stock or the average weekly
trading volume of such stock during the four calendar weeks preceding such sale,
subject to certain manner of sale limitations. A shareholder who is deemed not
to have been an affiliate of the Company for at least three months prior to the
date of sale and who has beneficially owned restricted securities for at least
two years would be entitled to sell such shares under Rule 144 without regard to
the volume or manner of sale limitations described above.
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UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1998 (the "Underwriting Agreement"), the
underwriters named below (the "Underwriters"), for whom Credit Suisse First
Boston Corporation, BT Alex. Brown Incorporated, Goldman, Sachs & Co. and Morgan
Stanley & Co. Incorporated, acting as representatives (the "Representatives"),
have severally but not jointly agreed to purchase from the Company and the
Selling Shareholder the following respective numbers of shares of Class A Common
Stock:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
BT Alex. Brown Incorporated.................................
Goldman, Sachs & Co. .......................................
Morgan Stanley & Co. Incorporated...........................
-------
Total.............................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Class A Common
Stock offered hereby (other than those shares covered by the over-allotment
option described below) if any are purchased. The Underwriting Agreement
provides that, in the event of a default by an Underwriter, in certain
circumstances the purchase commitments of non-defaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
The Company and the Selling Shareholder have granted to the Underwriters an
option, expiring at the close of business on the 30th day after the date of this
Prospectus, to purchase up to additional shares from the Company
and additional outstanding shares from the Selling Shareholder at the
initial public offering price less the underwriting discounts and commissions,
all as set forth on the cover page of this Prospectus. Such option may be
exercised only to cover over-allotments in the sale of the shares of Class A
Common Stock. To the extent such option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares of Class A Common Stock as it was
obligated to purchase pursuant to the Underwriting Agreement.
The Company and the Selling Shareholder have been advised by the
Representatives that the Underwriters propose to offer the shares of Class A
Common Stock to the public initially at the public offering price set forth on
the cover page of this Prospectus and, through the Representatives, to certain
dealers at such price less a concession of $ per share of Class A Common
Stock, and the Underwriters and such dealers may allow a discount of $
per share of Class A Common Stock on sales to certain other dealers. After the
initial public offering, the public offering price and concession and discount
to dealers may be changed by the Representatives.
The Representatives have informed the Company that they do not expect
discretionary sales by the Underwriters to exceed 5% of the shares of Class A
Common Stock being offered hereby.
The Company has agreed that it will not offer, sell, contract to sell,
announce its intention to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under the
Securities Act relating to, any additional shares of its Class A Common Stock or
securities convertible into or exchangeable or exercisable for any shares of
capital stock of the Company without the prior written consent of Credit Suisse
First Boston Corporation for a period of 180 days after the date of this
Prospectus (the "Lock-Up Period"), except (i) pursuant to or in connection with
employee stock option plans or other
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employee or non-employee director or key advisor compensation arrangements or
agreements, in each case in effect on the date of this Prospectus, and (ii) in
connection with the conversion of shares of Class A Common Stock, Class B Common
Stock or Class C Common Stock solely into another class of Common Stock. Each of
the Company's officers, directors and the Selling Shareholder have agreed not to
sell, offer, or otherwise dispose of any shares of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock, except for the
conversion of the Class A Common Stock, Class B Common Stock and Class C Common
Stock solely into shares of another class of Common Stock, without the prior
written consent of Credit Suisse First Boston Corporation during the Lock-Up
Period, except for certain limited exceptions.
The Underwriters have reserved for sale, at the initial public offering
price up to shares of the Class A Common Stock for employees,
directors and certain other persons associated with the Company or with its
officers or directors, who have expressed an interest in purchasing such shares
of Class A Common Stock in the Offering. The number of shares available for sale
to the general public in the Offering will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares not so purchased will be
offered by the Underwriters to the general public on the same terms as the other
shares offered hereby.
The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or contribute to payments which the Underwriters may be required
to make in respect thereof.
Application will be made to list the shares of Class A Common Stock on the
New York Stock Exchange. In connection with the listing of the Class A Common
Stock on The New York Stock Exchange, the Underwriters will undertake to sell
round lots of 100 shares or more to a minimum of 2,000 beneficial owners.
Prior to this Offering, there has been no public market for the Class A
Common Stock. Accordingly, the initial public offering price for the Class A
Common Stock will be determined by negotiations between the Company and the
Representatives. Among the factors considered in determining the initial public
offering price will be the history of, and the prospects for, the Company's
business and the industry in which it competes, an assessment of the Company's
management, its past and present operations, its past and present earnings and
the trend of such earnings, the prospects for earnings of the Company, the
present state of the Company's development, the general condition of the
securities markets at the time of the Offering and the market prices and the
earnings of similar securities of comparable companies at the time of the
Offering.
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Class A Common Stock in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when the
shares of Class A Common Stock originally sold by such syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Class A Common Stock to be higher than
it would otherwise be in the absence of such transactions. These transactions
may be effected on the New York Stock Exchange or otherwise and, if commenced,
may be discontinued at any time.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the shares of Class A Common Stock in Canada is being
made only on a private placement basis exempt from the requirement that the
Company and the Selling Shareholder prepare and file a prospectus with the
securities regulatory authorities in each province where trades of shares of
Class A Common Stock are effected. Accordingly, any resale of the shares of
Class A Common Stock in Canada must
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be made in accordance with applicable securities laws which will vary depending
on the relevant jurisdiction, and which may require resales to be made in
accordance with available statutory exemptions or pursuant to a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the shares of
Class A Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of shares of Class A Common Stock in Canada who receives a
purchase confirmation will be deemed to represent to the Company, the Selling
Shareholder and the dealer from whom such purchase confirmation is received that
(i) such purchaser is entitled under applicable provincial securities laws to
purchase such shares of Class A Common Stock without the benefit of a prospectus
qualified under such securities laws, (ii) where required by law, that such
purchaser is purchasing as principal and not as agent and (iii) such purchaser
has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulations under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein and the Selling Shareholder may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of shares of Class A Common Stock to whom the Securities Act
(British Columbia) applies is advised that such purchaser is required to file
with the British Columbia Securities Commission a report within ten days of the
sale of any shares of Class A Common Stock acquired by such purchaser pursuant
to this offering. Such report must be in the form attached to British Columbia
Securities Commission Blanket Order (BOR) #95/17, a copy of which may be
obtained from the Company. Only one such report must be filed in respect of
Class A Common Stock acquired on the same date and under the same prospectus
exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of shares of Class A Common Stock should consult their
own legal and tax advisers with respect to the tax consequences of an investment
in the shares of Class A Common Stock in their particular circumstances and with
respect to the eligibility of the shares of Class A Common Stock for investment
by the purchaser under relevant Canadian Legislation.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.
Certain legal matters will be passed upon for the Underwriters by Weil, Gotshal
& Manges LLP, Dallas, Texas and New York, New York.
EXPERTS
The financial statements of Entercom Communications Corp. as of September
30, 1996 and 1997 and June 30, 1998 and for each of the three years in the
period ended September 30, 1997 and for the nine months ended June 30, 1998
included in this Prospectus and the related financial statement schedule
included elsewhere in the registration statement have been audited by Deloitte &
Touche LLP, independent auditors,
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as stated in their reports appearing herein and elsewhere in the registration
statement, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
The combined financial statements of KMBZ-AM, KLTH-FM, KCMO-AM/FM,
KIRO-AM/FM, KNWX-AM and KING-FM for each of the three years in the period ended
December 31, 1996 included in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein,
and have been so included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The combined financial statements of the Sacramento Station Group for the
period January 1, 1996 to September 18, 1996 and for the period September 19,
1996 to December 31, 1996 included in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and have been so included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The combined financial statements of KBSG, Inc. and KNDD, Inc. for the year
ended December 31, 1995 included in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and have been so included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The combined financial statements of the Portland, Oregon and Rochester,
New York Radio Groups of Heritage Media Services, Inc. - Broadcasting Segment as
of December 31, 1997 and for the eight month period ended August 31, 1997 and
the four month period ended December 31, 1997 included in this Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as stated
in their report appearing herein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The combined financial statements of the Boston Radio Market of CBS Radio,
Inc. for the year ended December 31, 1997 included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act and the rules and
regulations promulgated thereunder, covering the Common Stock offered hereby.
This Prospectus omits certain information contained in the Registration
Statement, and reference is made to the Registration Statement, and the exhibits
and schedules thereto for further information with respect to the Company and
the Common Stock offered hereby. Statements contained in this Prospectus as to
the contents of any contract, agreement or other document filed as an exhibit to
the Registration Statement are not necessarily complete, and in each instance,
reference is made to the exhibit for a more complete description of the matter
involved, each such statement being qualified in its entirety by such reference.
The Registration Statement may be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
maintained at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such
materials may be obtained from the Public Reference Section of the Commission,
Room 10124, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, registration statements and certain other filings
made with the Commission through its Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") system are publicly available through the Commission's site
on the Internet's World Wide Web, located at http://www.sec.gov. The
Registration Statement, including all exhibits thereto and amendments thereof,
has been filed with the Commission through EDGAR.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report.............................. F-3
Balance Sheets as of September 30, 1996, 1997 and June 30,
1998................................................... F-4
Statements of Income for the Years Ended September 30,
1995, 1996 and 1997 and nine months ended June 30, 1997
and 1998............................................... F-6
Statements of Retained Earnings for the Years Ended
September 30, 1995, 1996 and 1997 and nine months ended
June 30, 1998.......................................... F-7
Statements of Cash Flows for the Years Ended September 30,
1995, 1996 and 1997 and nine months ended June 30, 1997
and 1998............................................... F-8
Notes to the Consolidated Financial Statements for years
ended September 30, 1995, 1996, and 1997 and for the
nine month periods ended June 30, 1997 and 1998........ F-9
THE BONNEVILLE TRANSACTION
KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND
KING-FM
Independent Auditors' Report........................... F-24
Combined Statements of Operations for the Years Ended
December 31, 1994, 1995 and 1996 and for the Three
Months Ended March 27, 1996 and 1997 (Unaudited)...... F-25
Combined Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996 and for the Three
Months Ended March 27, 1996 and 1997 (Unaudited)...... F-26
Notes to Combined Statements of Operations and of Cash
Flows................................................. F-27
THE CITICASTERS TRANSACTION
SACRAMENTO STATION GROUP (KSEG-FM AND KRXQ-FM)
Independent Auditors' Report........................... F-31
Combined Statements of Operations for the Periods
January 1, 1996 to September 18, 1996 (Predecessor)
and September 19, 1996 to December 31, 1996 and for
the Five Months Ended May 31, 1996 (Predecessor) and
1997 (Unaudited)...................................... F-32
Combined Statements of Cash flows for the Periods
January 1, 1996 to September 18, 1996 (Predecessor)
and September 19, 1996 to December 31, 1996 and for
the Five Months Ended May 31, 1996 (Predecessor) and
1997 (Unaudited)...................................... F-33
Notes to Combined Financial Statements................. F-34
KBSG, INC. AND KNDD, INC. (KBSG-FM AND KNDD-FM)
Independent Auditors' Report.............................. F-36
Combined Statements of Operations for the Year Ended
December 31, 1995 and for the Seven-Month Periods Ended
July 31, 1995 and 1996 (Unaudited)..................... F-37
Combined Statements of Cash Flows for the Year Ended
December 31, 1995 and for the Seven-Month Periods Ended
July 31, 1995 and 1996 (Unaudited)..................... F-38
Notes to Combined Financial Statements.................... F-39
</TABLE>
F-1
<PAGE> 88
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE SINCLAIR TRANSACTION
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING
SEGMENT
Report of Independent Public Accountants............... F-42
Combined Balance Sheet as of December 31, 1997......... F-43
Combined Statements of Operations for the Eight-Month
Period Ended August 31, 1997 (Predecessor) and for the
Four-Month Period Ended December 31, 1997............. F-44
Combined Statements of Stockholders' Equity for the
Eight-Month Period Ended August 31, 1997 (Predecessor)
and for the Four-Month Period Ended December 31,
1997.................................................. F-45
Combined Statements of Cash Flows for the Eight-Month
Period Ended August 31, 1997 (Predecessor) and for the
Four-Month Period Ended December 31, 1997............. F-46
Notes to Combined Financial Statements................. F-47
Unaudited Financial Statements
Combined Balance Sheets as of December 31, 1997 and
March 31, 1998........................................ F-52
Combined Statements of Operations for the Three Months
Ended March 31, 1997, the Two-Month Period Ended
February 28, 1998 and the One-Month Period Ended March
31, 1998.............................................. F-53
Combined Statements of Cash Flows for the Three Months
Ended March 31, 1997, the Two-Month Period Ended
February 28, 1998 and the One-Month Period Ended March
31, 1998.............................................. F-54
Notes to Combined Financial Statements................. F-55
THE BOSTON TRANSACTION
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
Independent Auditors' Report........................... F-56
Combined Balance Sheet as of December 31, 1997......... F-57
Combined Statements of Operations for the Year Ended
December 31, 1997 and for the Six-Month Periods Ended
June 30, 1997 and 1998 (Unaudited).................... F-58
Combined Statements of Cash Flows for the Year Ended
December 31, 1997 and for the Six-Month Periods Ended
June 30, 1997 and 1998 (Unaudited).................... F-59
Notes to Combined Financial Statements................. F-60
</TABLE>
F-2
<PAGE> 89
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Entercom Communications Corp.:
We have audited the accompanying consolidated balance sheets of Entercom
Communications Corp. (formerly Entertainment Communications, Inc.) and
subsidiaries (the "Company") as of September 30, 1996 and 1997 and as of June
30, 1998, and the related consolidated statements of income, retained earnings,
and cash flows for each of the three years in the period ended September 30,
1997 and for the nine months ended June 30, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Entercom Communications Corp. and
subsidiaries at September 30, 1996 and 1997 and June 30, 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended September 30, 1997 and for the nine months ended June 30, 1998 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
September 18, 1998
(October 8, 1998 as to Note 12(F) and
October 29, 1998 as to Note 6(B)(3))
F-3
<PAGE> 90
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1997
JUNE 30, 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
-------------------- --------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 2)....................... $ 5,292 $ 3,626 $ 6,094
Accounts receivable (net of allowance for doubtful
accounts of $117 in 1996, $292 in 1997 and $422 in
1998)................................................. 12,998 24,796 30,469
Prepaid expenses and deposits............................ 735 1,691 1,298
Station acquisition deposits............................. 131 4,957 521
Income tax deposit....................................... 517 490 978
-------- -------- --------
Total current assets............................. 19,673 35,560 39,360
-------- -------- --------
PROPERTY AND EQUIPMENT -- At cost (Note 2):
Land and land easements.................................. 1,495 4,445 6,788
Land improvements........................................ 109 139
Building................................................. 970 2,454 5,858
Equipment................................................ 15,634 22,784 31,307
Furniture and fixtures................................... 2,831 5,064 7,527
Leasehold improvements................................... 864 1,047 4,002
-------- -------- --------
21,903 35,933 55,482
Accumulated depreciation................................. (10,403) (8,158) (10,699)
-------- -------- --------
11,500 27,775 44,783
Capital improvements in progress......................... 133 1,379 759
-------- -------- --------
Net property and equipment....................... 11,633 29,154 45,542
-------- -------- --------
RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES
Net of accumulated amortization of $1,864 in 1996, $6,307
in 1997 and $11,822 in 1998 (Notes 2, 3, and 4)....... 114,754 295,419 425,365
DEFERRED CHARGES AND OTHER ASSETS -- Net (Notes 2, 3 and
5)....................................................... 4,515 4,610 3,178
-------- -------- --------
TOTAL...................................................... $150,575 $364,743 $513,445
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 91
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1997
AND JUNE 30, 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------- JUNE 30, JUNE 30, 1998
1996 1997 1998 PRO FORMA
-------- -------- -------- -------------
(NOTE 1)
<S> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................... $ 5,788 $ 7,128 $ 7,022 $ 7,022
Accrued liabilities:
Salaries.................................... 1,629 2,422 3,139 3,139
Interest.................................... 993 109 829 829
Taxes other than income..................... 40 69 206 206
Barter (Note 2)............................. 120 5 19 19
Corporate state income taxes (Note 2).......... 23 323 228 228
Long-term debt -- current...................... 9 9
-------- -------- -------- --------
Total current liabilities.............. 8,593 10,056 11,452 11,452
LONG-TERM DEBT (Note 6).......................... 136,000 142,000 276,776 293,678
ACCRUED INTEREST (Note 6)........................ 642 2,427 3,848 3,848
DEFERRED TAX LIABILITY........................... 78,820
MINORITY INTEREST IN EQUITY OF PARTNERSHIP (Notes
2 and 8)....................................... 261 2,171 2,194 2,194
-------- -------- -------- --------
Total liabilities...................... 145,496 156,654 294,270 389,992
-------- -------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 9)
SHAREHOLDERS' EQUITY (Note 10):
Common stock $.05 par value; nonvoting;
authorized 180,000 shares; issued 46,260,
43,650 and 43,650 shares in 1996, 1997 and
1998, respectively.......................... 2 2 2 2
Common stock $.05 par value; voting; authorized
180,000 shares; issued 80,580, 72,750 and
72,750 shares in 1996, 1997 and 1998,
respectively................................ 4 4 4 4
Capital in excess of par value................. 710 710 710 125,654
Retained earnings.............................. 5,407 207,373 218,459 0
-------- -------- -------- --------
6,123 208,089 219,175 125,660
Treasury stock consisting of 2,610 shares
nonvoting common stock and 7,830 shares
voting common stock at cost................. (1,044)
-------- -------- -------- --------
Total shareholders' equity............. 5,079 208,089 219,175 125,660
-------- -------- -------- --------
TOTAL............................................ $150,575 $364,743 $513,445 515,652
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 92
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND
NINE MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30,
----------------------------- --------------------
1995 1996 1997 1997 1998
------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
NET REVENUES....................................... $35,893 $48,675 $ 93,862 $ 64,540 $92,086
OPERATING EXPENSES:
Station operating expenses....................... 24,061 31,659 61,280 41,757 61,617
Depreciation and amortization.................... 2,225 2,960 7,685 3,874 8,959
Corporate general and administrative expenses.... 2,535 2,872 3,249 2,259 3,042
Net time brokerage agreement expenses (income)... 603 (879) (476) (476) 2,273
------- ------- --------- ---------- -------
29,424 36,612 71,738 47,414 75,891
------- ------- --------- ---------- -------
OPERATING INCOME................................... 6,469 12,063 22,124 17,126 16,195
OTHER EXPENSE (INCOME) ITEMS:
Interest expense................................. 1,992 5,196 11,388 8,454 9,175
Interest income.................................. (104) (95) (482) (390) (307)
Other nonoperating expenses...................... 4 28 1,986 1,970 82
Gains on sale of assets and other................ (228) (119) (197,097) (197,097) (8,791)
------- ------- --------- ---------- -------
Total other expenses (income)............. 1,664 5,010 (184,205) 187,063 (159)
------- ------- --------- ---------- -------
INCOME FROM OPERATIONS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS.............................. 4,805 7,053 206,329 204,189 16,036
INCOME TAXES....................................... 270 274 489 261 172
------- ------- --------- ---------- -------
INCOME BEFORE EXTRAORDINARY ITEMS.................. 4,535 6,779 205,840 203,928 15,864
EXTRAORDINARY ITEMS:
Debt extinguishment (net of taxes of $20, $23 and
$24 in 1995, 1996 and 1998, respectively) (Note
6)............................................... 334 539 2,377
------- ------- --------- ---------- -------
NET INCOME......................................... $ 4,201 $ 6,240 $ 205,840 $ 203,928 $13,487
======= ======= ========= ========== =======
PRO FORMA DATA (UNAUDITED)
PRO FORMA NET INCOME DATA:
Income before income taxes and extraordinary
items.......................................... 4,805 7,053 206,329 $ 204,189 $16,036
Pro forma income taxes (Note 1).................. 1,826 2,680 78,405 77,592 6,094
------- ------- --------- ---------- -------
Pro forma income before extraordinary items...... 2,979 4,373 127,924 126,597 9,942
Extraordinary items, net of pro forma taxes...... 219 348 1,488
------- ------- --------- ---------- -------
PRO FORMA NET INCOME............................... $ 2,760 $ 4,025 $ 127,924 $ 126,597 $ 8,454
======= ======= ========= ========== =======
PRO FORMA EARNINGS PER SHARE (Note 1):
Basic:
Pro forma earnings before extraordinary
items........................................ $ 25.59 $ 37.57 $1,099.00 $ 1,087.60 $ 85.41
Extraordinary items, net of pro forma taxes.... 1.88 2.99 12.78
------- ------- --------- ---------- -------
Pro forma earnings per share................... $ 23.71 $ 34.58 $1,099.00 $ 1,087.60 $ 72.63
======= ======= ========= ========== =======
Diluted:
Pro forma earnings before extraordinary
items........................................ $ 25.59 $ 31.93 $ 934.08 $ 924.39 $ 72.59
Extraordinary items, net of pro forma taxes.... 1.88 2.54 10.87
------- ------- --------- ---------- -------
Pro forma earnings per share................... $ 23.71 $ 29.39 $ 934.08 $ 924.39 $ 61.72
======= ======= ========= ========== =======
WEIGHTED AVERAGE SHARES:
Basic............................................ 116,400 116,400 116,400 116,400 116,400
Diluted.......................................... 116,400 136,952 136,952 136,952 136,952
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 93
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND
NINE MONTHS ENDED JUNE 30, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED SEPTEMBER 30, ENDED
---------------------------- -------------
1995 1996 1997 JUNE 30, 1998
------- ------- -------- -------------
<S> <C> <C> <C> <C>
RETAINED EARNINGS, BEGINNING OF PERIOD............. $ 754 $ 1,155 $ 5,407 $207,373
NET INCOME......................................... 4,201 6,240 205,840 13,487
RETIREMENT OF TREASURY STOCK....................... (1,044)
DIVIDENDS (Note 10)................................ (3,800) (1,988) (2,830) (2,401)
------- ------- -------- --------
RETAINED EARNINGS, END OF PERIOD................... $ 1,155 $ 5,407 $207,373 $218,459
======= ======= ======== ========
</TABLE>
See notes to consolidated financial statements
F-7
<PAGE> 94
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND
NINE MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30,
------------------------------- ---------------------
1995 1996 1997 1997 1998
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income........................................ $ 4,201 $ 6,240 $ 205,840 $ 203,928 $ 13,487
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................... 1,163 1,554 2,141 1,173 2,636
Amortization of:
Covenant not to compete....................... 296 50 25 25
Radio broadcasting licenses, other intangible
and deferred charges........................ 766 1,357 5,519 2,676 6,323
Extraordinary items............................. 354 562 2,401
Gains on dispositions and exchanges of assets... (228) (119) (197,097) (197,097) (8,791)
Interest accrued................................ 642 1,785 1,318 1,421
Changes in assets and liabilities which provided
(used) cash:
Other liabilities............................. (257)
Accounts receivable........................... (3,863) (3,336) (11,798) (10,707) (5,673)
Funds held for asset exchange................. (3,511) 3,511
Prepaid expenses.............................. (405) (150) (956) (1,403) 393
Accounts payable, accrued liabilities and
corporate state income taxes................ 1,148 4,048 1,463 229 1,386
Minority interest............................. 244 (21) 1,910 1,824 23
IRS deposit................................... (2,237) 1,946 27 27 (488)
-------- -------- --------- --------- ---------
Net cash provided (used) by operating
activities................................ 1,182 12,773 8,859 (1,518) 16,629
-------- -------- --------- --------- ---------
INVESTING ACTIVITIES:
Additions to property and equipment............... (733) (1,493) (4,373) (2,499) (9,967)
Proceeds from sale of property and equipment,
intangibles and other assets.................... 310 560 3,750 3,750 8,974
Proceeds from exchanges of radio stations......... 72,200 72,200 3,132
Payments for exchanges of radio stations.......... (5,304) (5,304) (306)
Purchases of radio station assets (Note 3)........ (27,962) (91,519) (74,498) (74,498) (146,090)
Deferred charges and other assets................. (251) (4,050) (644) (610) (3,213)
Station acquisition deposits...................... (4,826) 11 925
-------- -------- --------- --------- ---------
Net cash used in investing activities....... (28,636) (96,502) (13,695) (6,950) (146,545)
-------- -------- --------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.......... 68,307 137,500 20,000 20,000 270,793
Payments of long-term debt........................ (37,002) (48,055) (14,000) (12,500) (136,008)
Dividends paid.................................... (3,800) (1,988) (2,830) (2,018) (2,401)
-------- -------- --------- --------- ---------
Net cash provided by financing activities... 27,505 87,457 3,170 5,482 132,384
-------- -------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... 51 3,728 (1,666) (2,986) 2,468
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...... 1,513 1,564 5,292 5,292 3,626
-------- -------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF
PERIOD............................................ $ 1,564 $ 5,292 $ 3,626 $ 2,306 $ 6,094
======== ======== ========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Cash paid during the period for:
Interest........................................ $ 2,050 $ 3,688 $ 10,203 $ 8,024 $ 6,880
======== ======== ========= ========= =========
Income taxes.................................... $ 622 $ 148 $ 211 $ 170 $ 243
======== ======== ========= ========= =========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES --
In connection with the radio station exchange transactions completed by the
Company, the noncash portion of assets recorded was $127,000 for the periods
ended June 30, 1997 and September 30, 1997 and $22,500 for the period ended June
30, 1998.
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 95
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
AND FOR THE NINE MONTH PERIODS ENDED JUNE 30, 1997 (UNAUDITED) AND 1998
1. BASIS OF PRESENTATION AND ORGANIZATION
Operations -- Entercom Communications Corp. (formerly Entertainment
Communications, Inc.) (the "Company") is principally engaged in the management
and operation of radio broadcast stations throughout the United States. The
Company has three or more radio stations in the following markets: Seattle,
Kansas City, Portland, Sacramento and Rochester.
Interim Financial Information -- Information, with respect to the June 30,
1997 financial statements is unaudited; however, in the opinion of management,
all adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Also, operating results
for the nine month periods ended June 30, 1997 and 1998 are not necessarily
indicative of the results that may be expected for a full fiscal year.
Pro Forma Adjustments -- The Company intends to offer shares of its Class A
Common Stock to the public during 1998 (the "Offering"). Upon completion of the
Offering of Class A Common Stock, the Company will be subject to federal and
state income taxes from the date of termination of the Company's S corporation
status (the "Termination Date"). The unaudited pro forma net income data for
each of the three years in the period ended September 30, 1997 and for the nine
month periods ended June 30, 1997 and 1998 reflects adjustments for income taxes
based upon income before income taxes as if the Company had been subject to
additional federal and state income taxes based upon a pro forma effective tax
rate of 38%.
In addition, the Company will be required to provide a deferred tax
liability for cumulative temporary differences between financial statement and
income tax bases of the Company's assets and liabilities by recording an expense
for such deferred tax liabilities in its consolidated statement of income for
the period following the effective date of the Offering. Such deferred tax
liabilities will be based on the cumulative temporary differences upon the
conversion from an S Corporation to a C Corporation on the Termination Date. The
net difference between the financial statement and income tax bases of the
Company's assets and liabilities resulted in a deferred tax liability of
approximately $78.8 million at June 30, 1998. In addition, prior to the
conversion from an S Corporation to a C Corporation, distributions of
approximately $86.0 million will be made to the Company's existing S Corporation
shareholders.
Pro Forma Earnings Per Share -- Pro forma earnings per share is calculated
in accordance with Statement of Financial Accounting Standards No. 128 and, as
such, is based on the weighted average number of shares of Common Stock
outstanding and dilutive common equivalent shares from convertible debt (using
the if-converted method).
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30
----------------------------- ------------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Weighted average
shares -- basic...... 116,400 116,400 116,400 116,400 116,400
Common Stock
equivalent -- convertible
debt................. 20,552 20,552 20,552 20,552
Weighted average
shares -- diluted.... 116,400 136,952 136,952 136,952 136,952
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES
Income Tax Status -- The shareholders of the Company elected to change the
tax status of the Company from a C Corporation to an S Corporation beginning
October 1, 1987 for federal and certain state income tax
F-9
<PAGE> 96
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purposes. For certain other states for which an S Corporation election has not
been made, the Company incurs state income taxes.
The shareholders' election to be taxed as an S Corporation relieves the
Company of the obligation to pay federal and certain state corporate income
taxes but results in shareholders being directly liable for payment of such
income taxes on their pro rata share of the Company's taxable income, including
taxable income which has been deferred as a result of the Company's use of
different accounting methods for financial reporting and income tax reporting.
Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts of the Company, its limited partnership interest
and its subsidiaries, all of which are consolidated. All intercompany
transactions and balances have been eliminated in consolidation.
Management's Use of Estimates -- The preparation of consolidated financial
statements, in accordance with generally accepted accounting principles,
requires the Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and the disclosure of contingent assets and
liabilities, as of the date of the consolidated financial statements, and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Depreciation -- Depreciation is determined on a straight-line basis. The
estimated useful lives for depreciation are as follows:
<TABLE>
<S> <C>
Land improvements.................................... 10 years
Building............................................. 20 years
Equipment............................................ 5-20 years
Furniture and fixtures............................... 5-10 years
Leasehold improvements............................... Various
</TABLE>
Revenue Recognition -- Revenue from the sale of commercial broadcast time
to advertisers is recognized when the commercials are broadcast. Promotional
fees are recognized as services are rendered.
Concentration of Credit Risk -- The Company's revenues and accounts
receivable relate primarily to the sale of advertising within the radio
stations' broadcast areas. Credit is extended based on an evaluation of the
customers' financial condition, and generally, collateral is not required.
Credit losses are provided for in the financial statements and consistently have
been within management's expectations.
Advertising Costs -- Advertising costs are expensed as incurred and
approximated $3.9 million, $4.3 million, $6.0 million, $5.1 million and $5.7
million for the fiscal years ended September 30, 1995, 1996 and 1997 and the
nine month periods ended June 30, 1997 and 1998, respectively.
Radio Broadcasting Licenses and Other Intangibles -- Broadcasting licenses
and other intangibles are being amortized on a straight-line basis over 40
years.
Long-Lived Assets -- In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
the Company evaluates the recoverability of its long-lived assets which include
broadcasting licenses, other intangibles, deferred charges, and other assets
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. If indications are that the carrying amount of the asset
is not recoverable, the Company will estimate the future cash flows expected to
result from use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, the Company recognizes an impairment
loss. The impairment loss recognized is measured as the amount by which the
carrying amount of the asset exceeds its fair value.
F-10
<PAGE> 97
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred Charges -- The Company defers and amortizes debt issuance costs
and leasehold premiums over the term of the debt and life of the lease,
respectively. Costs of program format changes are expensed when incurred.
Covenants not to compete are being amortized over the lives of the respective
contracts.
Time Brokerage Agreements for Acquisitions -- With respect to its
acquisitions as described in Note 3, the Company programmed certain radio
stations under Time Brokerage Agreements ("TBAs") for the periods prior to
consummation of the purchase transactions. Under these TBAs, revenues and
expenses were approximately $3.7 million and $3.3 million, $2.4 million and $1.7
million, and $12.3 million and $11.2 million for the years ended September 30,
1995, 1996 and 1997, and $12.3 million and $11.2 million and $6.4 million and
$6.2 million for the nine month periods ended June 30, 1997 and 1998,
respectively. These amounts are included in net broadcasting revenues and
operating costs and expenses.
Time Brokerage Agreements for Dispositions -- The Company has received TBA
fees for the right granted to other broadcasters to program certain stations
that the Company had agreed to exchange (Pittsburgh in 1996, and Houston and
Pittsburgh in 1997) for the periods prior to consummation of the exchange
transactions. Under these TBAs, revenues during the relevant periods were
approximately $1.2 million and $2.7 million for the years ended September 30,
1996 and 1997, respectively, and $2.7 million for the nine months ended June 30,
1997. These amounts are included as income under the Time Brokerage Agreements.
Barter Transactions -- The Company provides advertising broadcast time in
exchange for certain products, supplies and services. The terms of the exchanges
generally permit the Company to preempt such broadcast time in favor of
advertisers who purchase time on regular terms. The Company includes the value
of such exchanges in both broadcasting revenues and operating costs and
expenses. Barter valuation is based upon management's estimate of the fair value
of the products, supplies and services received. For the years ended September
30, 1995, 1996 and 1997 and nine months ended June 30, 1997 and 1998, barter
transactions amounted to approximately $684,000, $632,000, $822,000, $579,000
and $749,000, respectively. The Company accrues as a liability the amount by
which the value of broadcasting time to be provided exceeds the value of
products, supplies and services to be received. At September 30, 1996, 1997 and
June 30, 1998, such amounts were approximately $120,000, $5,000 and $19,000,
respectively.
Cash and Cash Equivalents -- Cash and cash equivalents consist primarily of
amounts held on deposit with financial institutions in immediately available
money market accounts.
Derivative Financial Instruments -- The Company uses derivative financial
instruments, including interest rate exchange agreements ("Swaps") and interest
rate cap agreements ("Caps"), to manage its exposure to fluctuations in interest
rates. Swaps and Caps are matched with debt and periodic cash payments and are
accrued on a net basis as an adjustment to interest expense. Any fees associated
with these instruments are amortized over their term.
Recent Accounting Pronouncements -- In February 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standard ("SFAS") No. 128, "Earnings per Share", which was effective for the
Company beginning October 1, 1997. SFAS No. 128 establishes standards for
computing and presenting earnings per share ("EPS") and applies to entities with
publicly held common stock or potential common stock. It replaces the
presentation of primary EPS with a presentation of basic EPS and requires the
dual presentation of basic and diluted EPS on the face of the income statement.
This statement requires restatement of all prior period EPS data presented. The
Company had a simple capital structure in 1995. Diluted EPS for 1996, 1997 and
1998 includes the effect of convertible debt.
In June 1998, the FASB issued SFAS No. 133 entitled "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
"derivatives") and for hedging activities. It requires that an entity recognize
all derivatives as either assets or
F-11
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ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
liabilities in the statement of financial position and measure those instruments
at fair value. This statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Management has not yet determined what
effect, if any, this statement will have on the Company.
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 disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Reclassifications -- Certain reclassifications have been made to the
consolidated financial statements for the years ended September 30, 1995, 1996
and 1997 and the nine months ended June 30, 1997 in order to conform to the
current period presentation.
3. ACQUISITIONS AND OTHER SIGNIFICANT TRANSACTIONS
During each of the periods presented the Company consummated acquisitions
of radio stations. All of these acquisitions were accounted for under the
purchase method of accounting (unless otherwise noted below), and the purchase
prices, including transaction costs, were allocated to the assets based upon
their respective fair values as determined by independent appraisal as of the
purchase dates. Gains on exchange transactions are determined based on the
excess of the fair value of the station assets acquired, as determined by an
independent appraisal, plus any cash received, over the Company's carrying basis
in the station assets exchanged, plus cash paid by the Company, all less
transaction costs.
1995 Acquisitions
On April 17, 1995, the Company acquired the assets of WLLD-FM (formerly
WISP-FM), a radio station serving the Sarasota/Bradenton, Florida radio market.
The assets were acquired from Alpalm Broadcasting Corporation for a price of
$2.9 million. In addition, the Company paid $100,000 for a two-year covenant not
to compete by the Seller. The Company incurred approximately $118,000 in
transaction costs related to the acquisition. Broadcasting licenses and other
intangibles totaling approximately $2.4 million were recorded in connection with
this transaction.
On September 1, 1995, the Company acquired the assets of three radio
stations, KGON-FM, KFXX-AM and KNRK-FM, serving the Portland, Oregon market. The
assets were acquired from Apogee Communications, Inc. and related Apogee
entities for a price of $24.5 million. The Company incurred approximately
$343,000 in transaction costs related to the acquisitions. Broadcasting licenses
and other intangibles totaling approximately $21.6 million were recorded in
connection with this transaction.
1996 Acquisitions
The Company completed a three party Asset Purchase Agreement on August 1,
1996, whereby the Company acquired WAXQ-FM, New York City, from GAF Corporation
for a cash purchase price of $90 million and simultaneously exchanged WAXQ-FM
and $1.2 million in cash to Viacom, Inc. for all of Viacom's broadcast assets of
three radio stations, KBSG-FM, KBSG-AM and KNDD-FM, and two tower facilities,
all serving the Seattle, Washington radio market. The Company incurred
approximately $319,000 in transaction costs related to the acquisition.
Broadcasting licenses and other intangibles totaling approximately $87.5 million
were recorded in connection with this transaction.
1997 Acquisitions
On March 27, 1997, the Company acquired the assets of KMBZ-AM, KYYS-FM
(formerly KLTH-FM), KCMO-AM and KCMO-FM, serving the Kansas City,
Kansas/Missouri radio market, from Bonneville
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ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
International Corporation and Bonneville Holding Corporation (collectively
referred to hereafter as "Bonneville") for a purchase price of $35 million. The
Company also acquired the assets of KIRO-AM, KIRO-FM and KNWX-AM, serving the
Seattle, Washington radio market, from KIRO, Inc., a wholly owned subsidiary of
Bonneville International Corporation ("KIRO") for a purchase price of $60
million. As consideration for the assets received, the Company transferred the
assets of KLDE-FM serving the Houston, Texas radio market, plus $5 million, to
Bonneville and KIRO resulting in a gain of $88.7 million. The Company incurred
transaction costs of $246,000 related to these acquisitions. Broadcasting
licenses and other intangibles in the amount of $85.8 million were recorded in
connection with these transactions.
On April 28, 1997, the Company acquired the assets of KEDO-AM and KLYK-FM,
serving the Longview/Kelso, Washington radio market, for $1.8 million from
Longview Broadcasting Company and Premier Development Company. The Company
incurred transaction costs of $38,000 related to these acquisitions.
Broadcasting licenses and other intangibles in the amount of $733,000 were
recorded in connection with this transaction.
On May 30, 1997, the Company completed an Asset Exchange Agreement with
Nationwide Communications, Inc. ("Nationwide") and Secret Communications, LP
("Secret"). In this three party agreement, in exchange for the transfer to
Secret of the Company's two FM radio stations in Pittsburgh, WDSY and WNRQ, the
Company received Nationwide's FM radio station in Seattle, KISW, plus $32.5
million, resulting in a gain of $43.9 million. Broadcasting licenses and other
intangibles in the amount of $12.1 million were recorded in connection with this
transaction. The total purchase price of this transaction was $47 million.
On May 30, 1997, the Company acquired the assets of KLOU-FM, serving the
St. Louis, Missouri radio market, from Group W Broadcasting, Inc., plus $39.7
million, in exchange for the assets of KITS-FM, resulting in a gain of $61.2
million. The Company incurred transaction costs of $58,000 related to this
acquisition. Broadcasting licenses and other intangibles in the amount of $21.6
million were recorded in connection with this transaction. The total purchase
price of this transaction was $62.2 million.
On June 3, 1997, the Company acquired the assets of KDND-FM (formerly
KXOA-FM), serving the Sacramento, California radio market, from American Radio
Systems Corporation for $27.2 million. The Company incurred transaction costs of
$192,000 related to this acquisition. Broadcasting licenses and other
intangibles in the amount of $26.9 million were recorded in connection with this
transaction.
On June 4, 1997, the Company acquired the assets of KRXQ-FM and KSEG-FM,
serving the Sacramento, California radio market, from Citicasters Co. for $45.0
million. The Company incurred transaction costs of $268,000 related to these
acquisitions. Broadcasting licenses and other intangibles in the amount of $40.7
million were recorded in connection with this transaction.
1998 Acquisitions
On November 26, 1997, the Company acquired the assets of KSSJ-FM (formerly
KBYA-FM), serving the Sacramento, California radio market, from Susquehanna
Radio Corp., KTHX License Investment Co. and KTHX Radio Inc. for $15.9 million.
The Company incurred transaction costs of $87,000 related to this acquisition.
Broadcasting licenses and other intangibles in the amount of $15.8 million were
recorded in connection with this transaction.
On January 1, 1998, the Company acquired the assets of KCTC-AM, serving the
Sacramento, California radio market, from ARS for $4.0 million. The Company
incurred transaction costs of $13,000 related to this acquisition. Broadcasting
licenses and other intangibles in the amount of $2.7 million were recorded in
connection with this transaction.
On January 1, 1998, the Company acquired the assets of KUDL-FM and WDAF-AM,
serving the Kansas City, Kansas/Missouri radio market from ARS. As consideration
for the assets received, which
F-13
<PAGE> 100
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
included the receipt of $7.1 million in cash from ARS, the Company transferred
the assets of KLOU-FM, serving the St. Louis radio market, to ARS resulting in a
gain of $300,000. The Company incurred transaction costs of $294,000 related to
this acquisition. Broadcasting licenses and other intangibles in the amount of
$12.8 million were recorded in connection with this transaction. The total
purchase price of this transaction was $15.4 million.
On May 7, 1998, the Company acquired the assets of WSKY-FM (formerly
WRRX-FM), serving the Gainesville/Ocala, Florida radio market, from Gator
Broadcasting Co. for $2.0 million. The Company incurred transaction costs of
$66,000 related to this acquisition. Broadcasting licenses and other intangibles
in the amount of $1.7 million were recorded in connection with this transaction.
On May 15, 1998, the Company acquired the assets of KBAM-AM and KRQT-FM,
serving the Longview, Washington radio market, from Armak Broadcasters Inc. for
$1.0 million. The Company incurred transaction costs of $43,000 related to this
acquisition. Broadcasting licenses and other intangibles in the amount of
$350,000 were recorded in connection with this transaction.
On June 19, 1998, the Company acquired from Sinclair Broadcast Group the
assets of KKSN-AM, KKSN-FM, and KKRH-FM, all serving the Portland, Oregon radio
market, and WBEE-FM, WBBF-FM (formerly WKLX-FM), WQRV-FM and WEZO-AM (formerly
WBBF-AM) all serving the Rochester, New York radio market. The purchase price
for the stations was $126.5 million. The Company began operations at these
stations on March 1, 1998 under a time brokerage agreement ("TBA"). The Company
incurred transaction costs of $494,000 related to this acquisition. Broadcasting
licenses and other intangibles in the amount of $121.3 million were recorded in
connection with this transaction.
Other Transactions
On March 6, 1996, the Company sold all of the assets of KMTT-AM, Tacoma,
Washington, including assignment of the FCC license, to Southwave Wireless
Communications, Inc. LLC for a cash purchase price of $500,000, resulting in a
gain of approximately $140,000.
On December 6, 1996, the Company sold certain assets of KEGE-AM,
Minneapolis, Minnesota, including assignment of the FCC license, to Salem Media
of Minnesota, Inc. for $3.0 million, resulting in a gain of approximately $2.6
million.
On February 6, 1997, the Company sold all of the assets of WDSY-AM,
Pittsburgh, Pennsylvania, including assignment of the FCC license, to Mortenson
Broadcasting Company for a cash purchase price of $750,000, resulting in a gain
of approximately $700,000.
On May 7, 1998, the Company sold certain rights in a license for the
Vancouver, Washington radio market to Jacor Communications and Smith
Broadcasting, Inc. $10 million. The Company acquired an interest in these rights
at a cost of $1.3 million through an agreement with Q Prime Inc., Clifford
Burnstein and Peter D. Mensch. The sale resulted in a gain of $8.5 million.
On June 25, 1998, the Company completed its transaction with McKenzie River
Broadcasting Company ("McKenzie") whereby McKenzie received FCC approval to
reclassify the broadcast license of its KMGE-FM station, serving the Eugene,
Oregon radio market, from a Class C to a Class C-1. Such a reclassification of
that station allowed the Company to seek approval from the FCC for construction
and operation of an enhanced transmission facility for its KNRK-FM station
serving the Portland, Oregon radio market. In consideration for its agreement,
McKenzie was paid approximately $1.2 million and the Company recorded this
amount as broadcast licenses.
Effective July 1, 1997, the Company entered into a Joint Sales Agreement
("JSA") with Classic Radio, Inc. ("Classic"), whereby the Company will be the
exclusive sales agent for the Classic-owned KING-FM
F-14
<PAGE> 101
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
radio station, located in Seattle, Washington. This agreement is a continuation
of a relationship under a prior JSA which expired on June 30, 1997. Under the
new JSA, which continues through June 30, 2002, the Company will be entitled to
all revenues from the sale of advertising time broadcast on KING-FM, but will be
required to pay a monthly fee to Classic based upon calculations as defined in
the agreement. Under the terms of the JSA, the Company will be responsible for
all costs incurred in selling the advertising time. Classic will be responsible
for all costs incurred in operating the station.
On October 7, 1997, the Company, in a transaction with Kanza Inc.,
exchanged the broadcasting frequency and the transmitter related assets of
KCMO-AM, Kansas City, Missouri for the broadcasting frequency and transmitter
related assets of WHB-AM, Kansas City, Missouri. The Company incurred
transaction costs of $233,000. The transaction was accounted for as a
non-monetary exchange. The total purchase price of this transaction was $5.5
million.
The following unaudited pro forma summary presents the consolidated results
of operations as if the transactions which occurred within either the 1996 or
1997 fiscal years had all occurred at the beginning of the 1996 fiscal year,
after giving effect to certain adjustments, including depreciation and
amortization of assets and interest expense on any debt incurred to fund the
acquisitions which would have been incurred had such acquisitions and other
transactions occurred at the beginning of the 1996 fiscal year. These unaudited
pro forma results have been prepared for comparative purposes only and do not
purport to be indicative of what would have occurred had the acquisitions and
other transactions been made as of that date or results which may occur in the
future.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------
1996 1997
---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Net revenues................................................ $ 92,100 $105,700
======== ========
Income before extraordinary items and gains on sales of
assets.................................................... $ 9,400 $ 4,600
======== ========
Net income.................................................. $206,100 $ 4,600
======== ========
</TABLE>
The following unaudited pro forma summary presents the consolidated results
of operations as if the transactions which occurred within either fiscal 1997 or
the nine month period ended June 30, 1998 had all occurred on October 1, 1996,
after giving effect to certain adjustments, including depreciation and
amortization of assets and interest expense on any debt incurred to fund the
acquisitions which would have been incurred had such acquisitions and other
transactions occurred on October 1, 1996. These unaudited pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisitions and other transactions been
made as of that date or results which may occur in the future.
<TABLE>
<CAPTION>
NINE MONTH PERIODS
ENDED JUNE 30,
----------------------
1997 1998
-------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Net revenues................................................ $ 88,566 $ 99,631
======== ========
Income before extraordinary items and gains on sales of
assets.................................................... $ 4,673 $ 7,766
======== ========
Net income.................................................. $207,896 $ 8,057
======== ========
</TABLE>
F-15
<PAGE> 102
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES
Radio Broadcasting Licenses and other intangibles consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
-------------------- --------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
FCC Licenses....................................... $116,618 $300,022 $434,645
Other Intangibles.................................. 0 1,704 2,542
-------- -------- --------
Subtotal................................. 116,618 301,726 437,187
Less accumulated amortization...................... (1,864) (6,307) (11,822)
-------- -------- --------
Total radio broadcasting licenses and other
intangibles...................................... $114,754 $295,419 $425,365
======== ======== ========
</TABLE>
5. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets (which are amortized principally on the
straight-line method) consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
---------------- --------
1996 1997 1998
------ ------ --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Debt issuance costs, less accumulated amortization of
$123,000, $715,000 and $474,000 in 1996, 1997 and 1998,
respectively........................................... 3,667 $3,629 $2,228
Leasehold premium, less accumulated amortization of
$90,000, $125,000 and $195,000 in 1996, 1997 and 1998,
respectively........................................... 700 862 792
Other deferred charges, less accumulated amortization of
$120,000, $77,000 and $246,000 in 1996, 1997 and 1998,
respectively........................................... 148 119 158
------ ------ ------
$4,515 $4,610 3,178
====== ====== ======
</TABLE>
6. DEBT
(A) Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
-------------------- --------
1996 1997 1998
-------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Notes payable due February 13, 2006 (A)(4)......... $251,500
Notes payable, due June 30, 2003 ((A)(2) in
1996)(A)(3)(a) in 1997........................... $ 86,000 $ 92,000 --
Notes payable, due June 30, 2003 ((A)(2) in
1996)(A)(3)(b) in 1997........................... 25,000 25,000 --
Note payable, subordinated, due May 21,
2003(A)(1)....................................... 25,000 25,000 25,002
Other.............................................. 285
-------- -------- --------
Total.................................... 136,000 142,000 276,785
Amounts due within one year........................ 9
-------- -------- --------
$136,000 $142,000 $276,776
======== ======== ========
</TABLE>
(1) On May 21, 1996, the Company entered into a convertible subordinated note
purchase agreement with an investment partnership in the principal amount of
$25 million. Interest on the note accrues at the rate of 7% per annum. Such
interest compounds annually and is deferred and payable with principal in
one
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ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
installment on May 21, 2003. The payment due date can be deferred by one
year under certain circumstances. The obligations of the Company under the
note are subordinate to the obligations of the notes payable to the banks as
noted in (A)(4) below.
The convertible subordinated note is convertible by the holder under certain
events and circumstances such as a public offering of the Company's capital
stock, a change of control of the Company, a sale of substantially all of
the Company's assets, a merger or consolidation into a publicly traded
company or the company's ceasing to be an S Corporation. In the event of
conversion, the holders would receive shares of the common stock of the
Company representing an ownership interest of approximately 15% of the
Company prior to such event in lieu of all outstanding principal and
interest. If the note is not converted by May 21, 2003, then the holder of
the note has the option to put the convertible subordinated note to the
Company and receive, at the option of the Company, either cash or a new note
(Put Note). The amount of cash or principal of the Put Note will equal the
fair market value of the shares of common stock into which the convertible
subordinated notes were convertible. The Put Note would accrue interest at
prime plus 2% and would be due May 21, 2004.
In the event that the note is not converted or put to the Company by May 21,
2003, then the Company can redeem the convertible subordinated note by
either paying cash or issuing a new note (Redemption Note). The amount of
cash or principal of the Redemption Note will equal the original principal
amount of the convertible subordinated note ($25 million) plus interest
accrued through the Date of Redemption at an interest rate of 7% per annum .
The Redemption Note would also accrue interest at 7% per annum and would be
due on May 21, 2004.
(2) On August 1, 1996, the Company entered into a $100 million reducing
revolving credit agreement and a $25 million amortizing term loan with a
group of banks. At September 30, 1996, outstanding balances against these
credit facilities were $86 million and $25 million, respectively. The
Company used proceeds from borrowings against these credit facilities to
retire existing debt, finance the acquisition from Viacom of three stations
serving the Seattle market (KBSG-AM/FM, KNDD-FM, see Note 3), and provide
for capital expenditures and working capital. These debt facilities were
replaced with the debt facilities described in paragraph (A)(3).
(3) On March 25, 1997, the Company expanded its existing credit facility with a
group of banks to $165 million. The credit facility consisted of a $140
million reducing revolving credit and a $25 million amortizing term loan. At
September 30, 1997, outstanding balances against these credit facilities
were $92 million and $25 million, respectively. The Company expects to use
borrowings against these credit facilities to finance future acquisitions,
and provide for capital expenditures and working capital. Under the loan
agreement, the Company has provided the banks with a pledge of its 99%
interest in ECI License Company LP, a pledge of all of the outstanding stock
of the Company, and a pledge of all the Company's other assets. The
agreement includes certain restrictive covenants, including a limitation on
dividends. These debt facilities were replaced with the debt facility
described in paragraph (A)(4) below.
(a) The reducing revolving credit agreement, which matures on June 30,
2003, reduces on a quarterly basis beginning September 30, 1997 in
amounts which vary from $3.5 million to $12.4 million. The Company
has the option under this agreement to elect to pay interest at a
rate equal to LIBOR (in increments with durations of 1,2,3 or 6
months) plus 1.25% or the prime rate. Under certain events, the
Company's borrowing costs can increase to a maximum of LIBOR plus
3.25% or prime plus 2%. The interest payable on LIBOR rates is
payable at the end of the selected duration but not less frequently
than every three months and on prime rates is payable at the end of
each calendar quarter. The weighted average interest rate under this
agreement at September 30, 1997 was 7.46%. The Company is required
to maintain a minimum of $1 million in cash, cash equivalents, or
cash available under this facility.
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<PAGE> 104
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(b) The $25 million amortizing term loan, which matures on June 30,
2003, reduces in ten equal quarterly payments of $625,000, beginning
December 31, 2000 with a final payment of $18.75 million due June
30, 2003. The Company has the option to pay interest at a rate of
LIBOR plus 3.25% or prime plus 2%. The interest payment is due in
the same manner as described in (A)(3)(a) above. The interest rate
under this agreement at September 30, 1997 was 8.91%.
(4) The Company's term and revolving credit facilities were refinanced on
February 13, 1998, under a new bank credit agreement (the "New Credit
Agreement") with Key Corporate Capital Inc., as administrative agent. The
New Credit Agreement provides for a $300 million Senior Secured Revolving
Credit Facility (the "New Bank Facility"). See Note 12, Subsequent Events,
for further discussion.
The New Bank Facility is secured by (i) a pledge of 100% of the Company's
interest in ECI License Company LP ("ECI"), (ii) a security interest in
substantially all of the assets of ECI, (iii) a pledge of 100% of the
outstanding stock of the Company; provided, however, that this pledge will
be released if the Company restructures by forming subsidiaries to hold the
station assets and licenses (in such a restructuring, the Company will
pledge the stock of all such subsidiaries which will become Guarantors, and
ECI will be dissolved, further, upon such restructuring and pledge of stock,
the pledges under (i) and (ii) above will be terminated and released), (iv)
a security interest in all major tangible and intangible personal property
assets of the Company and any future subsidiaries as well as a negative
pledge on all real property, and (v) an assignment of all major leases,
rights, etc. as appropriate.
The reducing revolving credit agreement, which matures on February 13, 2006,
reduces on a quarterly basis beginning June 30, 2000 in amounts which vary
from $3.75 million to $15.0 million. The Company has the option under this
agreement to elect to pay interest at a rate equal to LIBOR (in increments
with durations of 1, 2, 3 or 6 months) plus .50% or the prime rate. Under
certain events, the Company's borrowing costs can increase to a maximum of
LIBOR plus 2.125% or prime plus .875%. The interest payable on LIBOR rates
is payable at the end of the selected duration but not less frequently than
every three months and on prime rates is payable at the end of each calendar
quarter. The weighted average interest rates under this agreement at June
30, 1998 was 7.53%. The Company also pays a commitment fee of 0.375% per
annum on the average unused balance of the New Bank Facility.
(B) The Company has entered into several interest rate transactions as hedges
against the variable rate debt discussed in 6(A) above:
(1) In June 1987, the Company entered into an interest rate agreement or
"swap" for a notional amount of $6 million which concluded in June
1996. The Company paid a fixed rate of 9.55% on the notional amount to
a bank and the bank paid to the Company a variable rate equal to
three-month LIBOR as determined from time to time on a quarterly basis
through June 30, 1996. The amounts the Company paid under this
agreement were $214,000 and $175,000 for the years ended September 30,
1995 and 1996, respectively, and have been accounted for as interest
expense.
(2) In May 1995, the Company entered into an interest rate swap agreement
for a notional amount of $20 million through May 16, 2000. Under this
agreement, the Company pays a fixed rate of 6.77% on the notional
amount to a bank and the bank pays to the Company a variable rate equal
to three-month LIBOR as determined from time to time on a quarterly
basis through May 16, 2000. The variable rate was 5.9%, 5.5%, 5.7% and
5.7% at September 30, 1995, 1996, 1997 and June 30, 1998, respectively.
The amount the Company paid under this agreement was $54,000, $240,000
and $235,000 for the years ended September 30, 1995, 1996 and 1997, and
185,000 and 156,000 for the nine month periods ended June 30, 1997 and
1998, respectively. These amounts have been accounted for as interest
expense.
F-18
<PAGE> 105
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) In July 1996, the Company entered into a convertible rate cap
transaction in the amount of $25 million to hedge a portion of its
variable rate debt. The bank elected, effective October 29, 1998, to
convert the transaction into a swap for a notional amount of $25
million in which the Company pays a fixed rate of 5.89% on the notional
amount to a bank and the bank pays to the Company a variable rate equal
to three-month LIBOR through July 29, 2003. No amounts were paid
relating to this transaction during the years ended September 30, 1996
and 1997 or the nine month period ended June 30, 1998.
(4) In August 1996, the Company simultaneously entered into a rate cap
transaction and a swap option transaction in the amount of $25 million
to hedge a portion of its variable rate debt. Under the rate cap
transaction, which expires August 8, 2000, the Company's base LIBOR
rate cannot exceed 7.5% at the time of any quarterly reset date. Under
the swap option transaction, the bank may make an election prior to
August 8, 2000 to enter into a swap in which the Company pays a fixed
rate of 6.05% on the notional amount to a bank and the bank pays to the
Company a variable rate equal to three-month LIBOR. If the bank
exercises its election, then the swap will terminate on August 8, 2002.
Any election by the bank will not terminate the rate cap transaction
described above. No amounts were paid related to these transactions
during the years ended September 30, 1996 and 1997 or the nine month
period ended June 30, 1998.
(5) On January 6, 1998, the Company entered into an interest rate swap
agreement transaction with a bank in the amount of $15 million to hedge
a portion of its variable rate debt. Under the swap transaction, which
expires January 10, 2005, unless terminated by the bank by January 6,
2003, the Company pays a fixed rate of 5.61% on the notational amount
to the bank and the bank pays to the Company a variable rate equal to
three month LIBOR as determined from time to time on a quarterly basis
through the end of the transaction period. The variable rate was 5.7%
as of June 30, 1998. The amount paid to the Company under this
agreement was $6,000 for the nine month period ended June 30, 1998.
(6) On January 6, 1998, the Company entered into an interest rate swap
agreement with a bank in the amount of $14 million to hedge a portion
of its variable rate debt. Under the swap transaction, which expires
January 10, 2005, the Company pays a fixed rate of 5.86% on the
notational amount to the bank and the bank pays to the Company a
variable rate equal to three months LIBOR as determined from time to
time on a quarterly basis through the end of the transaction period.
The variable rate was 5.7% as of June 30, 1998. The amount paid by the
Company under this agreement was $11,000 for the nine month period
ended June 30, 1998.
(7) On February 26, 1998, the Company entered into an interest rate swap
agreement with a bank in the amount of $30 million to hedge a portion
of its variable rate debt. Under the swap transaction, which expires
February 27, 2008, unless terminated by the bank on February 28, 2005,
the Company pays a fixed rate of 5.77% on the notational amount to the
bank and the bank pays to the Company a variable rate equal to three
month LIBOR as determined from time to time on a quarterly basis
through the end of the transaction period. The variable rate was 5.7%
as of June 30, 1998. The amount paid by the Company under this
agreement was $10,000 for the nine month period ended June 30, 1998.
F-19
<PAGE> 106
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(C) Aggregate principal maturities on long-term debt are as follows (amounts in
thousands):
<TABLE>
<S> <C>
Fiscal years ending September 30:
1998..........................................
1999.......................................... $ 9
2000.......................................... 9
2001.......................................... 9
2002.......................................... 42,509
Thereafter.................................... 234,240
--------
Total...................................... $276,776
========
</TABLE>
The extraordinary charges for 1995, 1996, and 1998 are the result of the
write-off's ($334,000, $539,000 and $2,376,000 respectively, net of tax
benefits) of unamortized finance charges resulting from the early extinguishment
of long-term debt.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial instruments, which
consist of notes receivable from a related party, debt and interest rate
instruments, have been determined by the Company using available market
information and appropriate valuation methodologies. At September 30, 1996 and
1997 and June 30, 1998, the fair value of notes receivable from a related party
and debt approximate their carrying value. At September 30, 1996 and 1997 and
June 30, 1998, respectively, unrealized gains (losses) on interest rate hedges
described under Note 6(B) (2), (3), (4), (5), (6) and (7) are as follows
(amounts in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------- JUNE 30,
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
6(B)(2)................. $ (208) $ (351) $ (399)
(3)................ (117) (212) (301)
(4)................ 15 (103) (230)
(5)................ -- -- 164
(6)................ -- -- (38)
(7)................ -- -- (303)
</TABLE>
8. MINORITY INTEREST
On December 2, 1992, in connection with a financing transaction, the
Company created a wholly owned subsidiary, ECI Investors Corporation
("Investors"), with a capital of $50,000. Upon creation, the Company immediately
distributed the stock of Investors to the Company's shareholders. On December
23, 1992, the Company formed a limited partnership, ECI License Company, LP
("Partnership") with Investors. The Company is the sole general partner of the
Partnership. The Company contributed its Federal Communications Commission (FCC)
licenses and authorizations to the Partnership in exchange for a 99% interest in
the Partnership, and Investors acquired its 1% interest in the Partnership for
cash.
On all subsequent occasions when the Company acquired FCC licenses and
authorizations it has contributed them to the Partnership for its 99% interest
and Investors has contributed its matching 1% interest. On each such occasion,
as well as on the dispositions of FCC licenses and authorizations, excluding
those FCC licenses and authorizations used to acquire new FCC licenses and
authorizations which qualify under IRC Section 1031, commonly known as "SWAPS,"
the book value of the Partnership has been adjusted to reflect such transaction.
The book value of the Partnership at September 30, 1996, after reflecting all
acquisitions and dispositions described in Note 3 was approximately $113.7
million (net of accumulated
F-20
<PAGE> 107
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amortization of approximately $1.6 million), at September 30, 1997, the book
value was approximately $114.2 million (net of accumulated amortization of
approximately $4.5 million), and at June 30, 1998, the book value was
approximately $121.2 million (net of accumulated amortization of approximately
$6.5 million). The Company's 99% interest in the Partnership is pledged as
collateral for the debt described in Note 6A(4). The Company pays a licensing
fee to the Partnership in exchange for the right to utilize the Partnership's
licenses and authorizations in connection with the operation of the stations. As
discussed in Note 2, the financial impact of such transactions is substantially
eliminated in consolidation. The minority interest at September 30, 1996 and
1997 and June 30, 1998 included in the accompanying consolidated balance sheets
represents the 1% interest of Investors in the Partnership, net of two notes
receivable by the Partnership from Investors. These notes were in the amounts of
approximately $884,000 and $34,000 at September 30, 1996, $875,000 and $7,000 at
September 30, 1997 and $839,000 plus various other notes which total
approximately $200,000 at June 30, 1998. These notes bear interest at rates
ranging from 6% to 8% per annum, and were issued to the Partnership by Investors
for Investors' share of the FCC licenses and authorizations acquired by the
Company during 1996, 1997 and 1998. These notes are due in ten equal annual
installments, plus accrued interest.
9. COMMITMENTS AND CONTINGENCIES
Acquisitions
The Company entered into a preliminary agreement on February 6, 1996 for
the Company to acquire the assets of radio station KWOD-FM, Sacramento,
California, from Royce International Broadcasting Corporation subject to
approval by the FCC for a purchase price of $25 million. Notwithstanding efforts
by the Company to pursue this transaction, the seller has been nonresponsive.
Accordingly, the Company cannot determine if and when the transaction might
occur.
Other
The Company's employment agreement with its Chairman and Chief Executive
Officer renews automatically each calendar year unless terminated by either
party in accordance with the contract. Under the terms of the agreement,
compensation is calculated annually by utilizing the gross national product
implicit price deflator issued by the Bureau of Economic Analysis to determine
the equivalent of 1993 base compensation of $500,000. Total compensation for the
years ended September 30, 1995, 1996, 1997 and nine months ended June 30, 1997
and 1998 was approximately $519,000, $540,000, $554,000, $406,000 and $415,000,
respectively. The Company also has various contracts for sports programming and
on-air personalities with terms ranging from one to five years.
Rental expense is incurred principally for office and broadcasting
facilities. Rental expense during the years ended September 30, 1995, 1996, 1997
and nine months ended June 30, 1997 and 1998 was approximately $822,000,
$1,208,000, $2,190,000 $1,592,000 and $2,186,000, respectively.
F-21
<PAGE> 108
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate minimum annual commitments as of June 30, 1998 for operating
leases, sports programming and on-air personalities are as follows:
<TABLE>
<CAPTION>
OPERATING SPORTS ON-AIR
LEASES PROGRAMMING PERSONALITIES
--------- ----------- -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Fiscal years ending September 30:
1998..................................... $ 525 $ 2,326 $1.024
1999..................................... 2,408 10,080 3,293
2000..................................... 2,250 10,960 1,689
2001..................................... 2,099 6,703 315
2002..................................... 2,231 6,718
Thereafter............................... 10,127
------- ------- ------
$19,640 $36,787 $6,321
======= ======= ======
</TABLE>
The Company is subject to various outstanding claims which arose in the
ordinary course of business and to other legal proceedings. In the opinion of
management, any liability of the Company which may arise out of or with respect
to these matters will not materially affect the financial position, results of
operations or cash flows of the Company.
10. SHAREHOLDERS' EQUITY
During 1997, the Company retired treasury stock consisting of 2,610 shares
of nonvoting common stock and 7,830 shares of voting common stock.
For the fiscal years ended September 30, 1995, 1996, and 1997 and the nine
month periods ended June 30, 1997, and 1998, the Company paid total dividends of
$3,800,000, $1,988,000, $2,830,000, $2,018,000 and $2,401,000, respectively.
These amounts include special dividends paid to the Company's shareholders to
compensate them for federal and state tax obligations attributable to
pass-through taxable income generated by the Company.
On June 24, 1998, the Board of Directors and the shareholders of the
Company approved the Company's amended and restated Articles of Incorporation to
provide for, among other things, an increase in the aggregate number of shares
which the Company has authority to issue to 350,000,000 shares, par value $.01
per share, consisting of the following: (i) 200,000,000 shares of Class A Common
Stock; (ii) 75,000,000 shares of Class B Common Stock; (iii) 50,000,000 shares
of Class C Common Stock; and (iv) 25,000,000 shares of Preferred Stock. Such
change will occur just prior to the effective date of the Company's initial
public offering.
11. EMPLOYEE SAVINGS AND BENEFIT PLANS
The Company sponsors a 401(k) savings plan which includes a provision under
which the Company contributes 50% of the amount of any eligible employee's
contribution to the plan up to a maximum employer contribution of 3% of an
employee's compensation. The maximum eligible employee contribution under the
plan was $9,240, $9,500, $9,500 and $10,000 for the plan years ended December
31, 1995, 1996, 1997 and 1998. The Company may at its discretion suspend future
matching contributions. The Company contributed approximately $193,000,
$232,000, $485,000, $324,000 and $411,000, under the 401(k) plan for the years
ended September 30, 1995, 1996 and 1997, and the nine month periods ended June
30, 1997 and 1998, respectively.
F-22
<PAGE> 109
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On June 24, 1998, the Company adopted an Equity Compensation Plan (the
"Compensation Plan"). The Compensation Plan will allow officers (including those
also serving as directors) and other employees, non-employee directors and key
advisors or consultants, selected by a Committee of the Board of Directors, to
receive incentive stock options, nonqualified stock options, restricted stock
and stock appreciation rights in the Common Stock of the Company. There are
5,000,000 shares of Common Stock reserved for issuance under the Compensation
Plan.
On June 24, 1998, the Company adopted an Employee Stock Purchase Plan (the
"Purchase Plan"). The Purchase Plan will allow the participants to purchase
shares of the Company's Common Stock at a purchase price equal to 85% of the
Market Value of such shares on the Purchase Date. There are 1,000,000 shares of
Common Stock reserved for issuance under the Purchase Plan.
12. SUBSEQUENT EVENTS
(A) On July 2, 1998, the name of the Company was changed from Entertainment
Communications, Inc. to Entercom Communications Corp.
(B) On July 13, 1998, the Company entered into a preliminary agreement with
Willamette Broadcasting Co. to acquire KSLM-AM, serving the Salem, Oregon
radio markets. The purchase price for the station is $605,000. The Company
anticipates that this transaction will close in the fourth quarter of fiscal
year 1998.
(C) On August 13, 1998, the Company entered into three agreements with CBS
Radio, Inc. pursuant to which it will (i) purchase WRKO-AM and WEEI-AM in
Boston for $82.0 million in cash (the "First Boston Transaction"), (ii) sell
WLLD-FM and WYUU-FM in Tampa for $75.0 million in cash (the "Tampa
Transaction") and (iii) purchase WAAF-AM and WEGQ-FM in Boston and WWTM-AM
in Worchester for $58.0 million (the "Second Boston Transaction"). The
Company anticipates that the First Boston Transaction and the Tampa
Transaction will close in the calendar year 1998 and that the Second Boston
Transaction will close during the 1999 calendar year.
(D) On August 13, 1998 the Company acquired from Capital Broadcasting, Inc. the
assets and rental leaves used in connection with the operation of a tower
facility serving the Kansas City, Kansas/Missouri radio market for a
purchase price of $2.1 million.
(E) On September 16, 1998, the Company closed an agreement with American Radio
Systems, Inc. and American Radio Systems License Corp., (collectively
referred to as "ARS") to exchange certain assets used in the operation of
radio stations serving the Sacramento radio market. ARS provided KRAK-FM's
license and transmission facility to the Company in exchange for KRXO's
license and transmission facility and $4.5 million. Each of the stations
retained its own call letters, programming format and studio and office
property and equipment, and the parties provided each other with reciprocal
covenants against programming competition on the respective frequencies for
a period of two years. ARS also transferred the intellectual property
comprising the programming format of its KSSJ-FM (a station it is
transferring to another party in a separate transaction) for use by the
Company on its recently acquired KBYA-FM in that market. In a related
transaction the Company sold the KRXQ-FM transmitter site, including
broadcast tower facilities, to ARS for $750,000, resulting in a loss of
$34,000.
(F) On October 8, 1998, the Company amended their New Credit Agreement with Key
Corporation Capital Inc. to increase their Senior Secured Revolving Credit
Facility to $350 million.
F-23
<PAGE> 110
INDEPENDENT AUDITORS' REPORT
Entercom Communications Corp.:
We have audited the accompanying combined statements of operations and of cash
flows of KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, and KING-FM (the
Stations) for the years ended December 31, 1994, 1995, and 1996. These combined
financial statements are the responsibility of the Stations' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined 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 audits provide a reasonable basis for our
opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the results of operations and cash flows of the Stations for
the years ended December 31, 1994, 1995, and 1996 in conformity with generally
accepted accounting principles.
The accompanying combined financial statements have been prepared from the
separate records maintained by the Stations and may not be indicative of the
conditions that would have existed or the results of operations had the Stations
been operated as an unaffiliated company. As discussed in Note 1, certain
corporate overhead expenses represent allocations made by the Stations' parent.
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
June 10, 1998
F-24
<PAGE> 111
KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996 AND
FOR THE THREE MONTHS ENDED MARCH 27, 1996 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 27,
--------------------------------------- -----------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
GROSS REVENUE..................... $33,030,947 $35,313,323 $39,508,602 $6,882,991 $4,804,521
AGENCY AND REPRESENTATIVE
COMMISSIONS AND REVENUE SHARING
FEES............................ 5,854,857 6,863,145 7,847,095 1,519,908 1,090,028
----------- ----------- ----------- ---------- ----------
NET REVENUES...................... 27,176,090 28,450,178 31,661,507 5,363,083 3,714,493
OPERATING EXPENSES................ 11,827,214 15,046,401 16,666,152 2,120,720 1,246,577
SELLING AND PROMOTIONAL
EXPENSES........................ 7,381,684 9,121,858 9,395,272 2,139,418 1,469,538
GENERAL AND ADMINISTRATIVE
EXPENSES........................ 5,011,439 4,603,611 4,986,714 1,349,394 872,442
ALLOCATED CORPORATE EXPENSES...... 355,553 458,364 452,288 86,414 58,657
DEPRECIATION AND AMORTIZATION..... 1,291,220 1,517,720 1,421,065 405,676 338,826
----------- ----------- ----------- ---------- ----------
OPERATING INCOME (LOSS)........... 1,308,980 (2,297,776) (1,259,984) (738,539) (271,547)
OTHER EXPENSE:
Interest expense................ (72,566) (28,223)
Other -- net.................... (19,781) (41,309) (139,216)
----------- ----------- ----------- ---------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES........................... 1,216,633 (2,367,308) (1,399,200) (738,539) (271,547)
INCOME TAX (EXPENSE) BENEFIT...... (456,000) 888,000 525,000 277,000 102,000
----------- ----------- ----------- ---------- ----------
NET INCOME (LOSS)................. $ 760,633 $(1,479,308) $ (874,200) $ (461,539) $ (169,547)
=========== =========== =========== ========== ==========
</TABLE>
See notes to combined statements of operations and of cash flows.
F-25
<PAGE> 112
KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996 AND
FOR THE THREE MONTHS ENDED MARCH 27, 1996 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 27,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................... $ 760,633 $(1,479,308) $ (874,200) $ (461,539) $ (169,547)
Adjustments to reconcile net income
(loss) to cash provided by (used in)
operating activities:
Depreciation and amortization....... 1,291,220 1,517,720 1,421,065 405,676 338,826
Loss (gain) on disposal of property
and equipment..................... 2,750 (32,549) 114,134 675 (3,545)
Changes in operating assets and
liabilities:
Receivables....................... (1,172,491) (1,741,557) (1,440) 2,258,629 1,977,565
Prepaid expenses and other current
assets......................... 196,719 (498,815) 213,850 (249,871) 366,198
Other assets...................... (67,730) 62,741 (12,619) (4,185) 5,490
Accounts payable.................. (331,108) 227,182 (416,504) 331,145 (304,234)
Accrued expenses.................. (19,759) (357,472) (405,954) 58,362 399,655
Due to parent -- current.......... 394,680 (3,974,049) 202,305 (1,908,945) (1,317,870)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities......... 1,054,914 (6,276,107) 240,637 429,947 1,292,538
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment..... (951,151) (3,227,605) (3,637,864) (1,145,450) (546,944)
Proceeds from sale of property and
equipment........................... 8,024 390,439 25,294 17,647
----------- ----------- ----------- ----------- -----------
Net cash (used in) investing
activities................... (943,127) (2,837,166) (3,612,570) (1,127,803) (546,944)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES --
Net interdivisional transfers from (to)
parent.............................. 71,514 9,408,614 3,030,472 (86,398) (1,123,328)
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 183,301 295,341 (341,461) (784,254) (377,734)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................. 504,233 687,534 982,875 982,875 641,414
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD................................. $ 687,534 $ 982,875 $ 641,414 $ 198,621 $ 263,680
=========== =========== =========== =========== ===========
</TABLE>
See notes to combined statements of operations and of cash flows.
F-26
<PAGE> 113
KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM
NOTES TO COMBINED STATEMENTS OF OPERATIONS AND OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
(INFORMATION PERTAINING TO THE THREE MONTHS ENDED
MARCH 27, 1996 AND 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business -- The radio stations, KMBZ-AM, KLTH-FM, and KCMO-AM/FM are
broadcast in the Kansas City, Missouri area. The radio stations KIRO-AM/FM,
KNWX-AM, and KING-FM are broadcast in the Seattle, Washington area. Through
March 27, 1997, KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, and KING-FM
(the Stations) were operated by Bonneville International Corporation (BIC) with
the FCC broadcasting licenses for all Stations except KING-FM being owned by
Bonneville Holding Company (BHC), an affiliate of BIC, and the operating assets
for all Stations except KING-FM being owned by BIC.
BIC marketed and sold advertising for KING-FM under a Joint Sales Agreement
(the "KING Agreement") whereby BIC, through its wholly-owned subsidiary, KIRO,
Inc., acted as the exclusive sales agent for KING-FM. Under the KING Agreement,
BIC was required to pay to the Licensee an advertising revenue sharing fee equal
to the greater of 70% of net sales or an annual fixed dollar amount that varied
for each ratings share level. In addition, the KING Agreement required BIC to
pay costs of selling advertising time other than agency fees while the Licensee
paid for costs of operating the station. The accompanying statements of
operations include both the gross advertising revenues of KIRO-FM and the
advertising revenue sharing fees paid by BIC under the KING Agreement.
On March 27, 1997, BIC and BHC entered into an agreement (the "Exchange
Agreement") with Entercom Communications Corp., formerly Entertainment
Communications, Inc. ("Entercom"), whereby BIC and BHC agreed to transfer title
to the net assets and related FCC licenses of the Stations and BIC's sales agent
claim under the KING Agreement to Entercom in exchange for Entercom transferring
title to the assets and related FCC license of a radio station located in
Houston, Texas to BIC and BHC, respectively. In addition to the assets
exchanged, BIC received an additional $5.0 million in cash from Entercom under
the Exchange Agreement. For income tax purposes, the exchange was structured as
a "like-kind exchange" through a Qualified Intermediary under the provisions of
Section 1031 of the Internal Revenue Code. The parties to the Exchange Agreement
operated each other's stations under a time brokerage agreement ("TBA") for the
period March 1, 1997 through March 27, 1997, the closing date.
The accompanying statement of operations for the period January 1, 1997
through March 27, 1997 does not include the revenues or expenses of the Stations
during the TBA period, March 1, 1997 through March 27, 1997. However, the
accompanying statement of operations for the period January 1, 1997 through
March 27, 1997 does include as revenue, TBA fees received from Entercom in the
amount of $104,000, and as expense, TBA fees paid to Entercom in the amount of
$71,000.
Basis of Accounting -- The combined statements of operations and net assets
and of cash flows include the historical accounts and transactions of the
Stations, as operated by BIC, including the FCC licenses owned by BHC.
Historically, BIC did not charge the Stations for certain corporate overhead
expenses; however, for purposes of the accompanying statements of operations,
such expenses have been charged as described below. All inter-station
transactions have been eliminated in combination.
Use of Estimates in Preparing Financial Statements -- 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 disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
F-27
<PAGE> 114
KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM
NOTES TO COMBINED STATEMENTS OF OPERATIONS AND OF CASH FLOWS -- (CONTINUED)
Transactions with BIC -- The Stations are charged for certain corporate
services received from BIC based upon the percentage of revenue of each station
to total revenue of all stations operated by BIC. Although management is of the
opinion that the allocations used are reasonable and appropriate, other
allocations might be used that could produce results substantially different
from those reflected herein and these cost allocations might not be indicative
of amounts which might be paid to unrelated parties for similar services. The
following BIC corporate departmental expenses have been charged to the Stations'
accompanying statements of operations:
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED MARCH 27
-------------------------------- ------------------
1994 1995 1996 1996 1997
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Management............................ $110,588 $137,140 $115,079 $29,805 $19,072
Finance............................... 72,503 97,982 99,146 18,425 12,993
Information systems................... 57,327 85,556 66,436 11,453 8,551
Human resources....................... 71,928 84,571 113,088 16,532 11,488
Engineering........................... 19,034 24,871 27,160 4,532 3,822
Legal................................. 24,173 28,244 31,379 5,667 2,731
-------- -------- -------- ------- -------
Total....................... $355,553 $458,364 $452,288 $86,414 $58,657
======== ======== ======== ======= =======
</TABLE>
Revenue Recognition -- Revenues (including agency and representative
commissions and revenue sharing fees) are recognized when advertisements are
broadcast. Included in revenue are nonmonetary transactions arising from the
trading of advertising time for merchandise and services. These transactions are
recorded as the advertising is broadcast at the fair market value of the
merchandise and services received. Advertising time exchanged for merchandise
and services amounted to approximately $1,253,000, $1,975,000, and $1,619,000 in
1994, 1995, and 1996 and $134,000 and $20,000 for the three months ended March
27, 1996 and 1997, respectively.
Depreciation and Amortization -- Depreciation and amortization are computed
using the straight-line method, based on historical costs, over estimated useful
lives, as follows:
<TABLE>
<CAPTION>
ESTIMATED
LIVES (YEARS)
-------------
<S> <C>
Buildings.............................................. 8 - 40
Furniture and fixtures................................. 5 - 8
Equipment.............................................. 3 - 15
Leasehold improvements................................. Life of lease
</TABLE>
Intangible Assets -- Intangible assets (primarily the FCC licenses owned by
BHC) acquired prior to November 1, 1970 are not being amortized because
management believes there has been no decline in their values nor evidence of
limited lives. Amortization expense related to intangible assets acquired
subsequent to October 31, 1970 (effective date of the adoption by the Accounting
Principles Board of principles relating to the accounting for intangible assets)
has been included in the accompanying statements of operations. The intangible
assets are being amortized over various periods not exceeding forty years.
Income Taxes -- Through March 27, 1997, the results of the Stations'
operations are included in consolidated Federal, Utah, and Kansas income tax
returns filed by the parent corporation of BIC, Deseret Management Corporation
("DMC"). The Stations' portion of the income tax provision (benefit) is
allocated at a Federal and state computed statutory rate of 37.5%. The Stations'
Federal and Kansas income taxes are generally paid to, or refunded from, DMC.
F-28
<PAGE> 115
KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM
NOTES TO COMBINED STATEMENTS OF OPERATIONS AND OF CASH FLOWS -- (CONTINUED)
Concentration of Credit Risk -- The Stations extend credit to customers on
an unsecured basis in the normal course of business. The customers are generally
located in the greater Seattle, Washington and Kansas City, Missouri areas, and
no individual industry or industry segment is significant to the Stations'
customer base. The Stations have policies governing the extension of credit and
collection of amounts due from customers.
Statements of Cash Flows -- For purposes of the statements of cash flows,
the Stations consider all highly liquid, short-term investments purchased with
remaining maturities of three months or less to be cash equivalents.
Interim Results (Unaudited) -- In the opinion of management, the
accompanying unaudited interim financial statements for the periods January 1 to
March 27, 1996 and 1997 (referred to as the three months ended March 27, 1996
and 1997) have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of operating results and cash
flows for such periods.
2. EMPLOYEE BENEFIT PLANS
Defined Benefit Plan -- Through March 27, 1997, the Stations participated
in a defined benefit plan of BIC which covered all employees who worked at least
1,000 hours in a year, had one year or more of service, and were at least 21
years of age. The plan was sponsored by BIC. Retirement benefits were based on
years of service and an average of the employee's highest five years of
compensation during the last ten years of employment. BIC's policy is to fund
the maximum amounts required by the Employee Retirement Income Security Act of
1974. Contributions were intended to provide not only for benefits attributed
for service to date but also for those expected to be earned in the future. The
Stations have included in the accompanying statements of operations, pension
expense (benefit) under this plan of approximately $113,000, $(42,000), and
$21,000 for the years ended December 31, 1994, 1995, and 1996, respectively, and
$5,000 and $(21,000) for the three months ended March 27, 1996 and 1997,
respectively.
Thrift Plan -- The Stations also participated in a Section 401(k) defined
contribution plan (the Thrift Plan) of BIC in which employees age 21 or older
could participate. Under provisions of the Thrift Plan, participants could
contribute up to 17% of their pre-tax compensation to either a savings option
(based on after tax earnings) or a deferred option (based on pre-tax earnings),
subject to the "excess contribution" limitations defined in the Internal Revenue
Code. For each participating employee, the Stations provided a matching
contribution of up to 3% of a participant's annual salary. The Stations'
contributions to the Thrift Plan were approximately $372,000, $295,000, and
$263,000 in 1994, 1995, and 1996, respectively, and $66,000 and $55,000 for the
three months ended March 27, 1996 and 1997, respectively. The plan was sponsored
by BIC.
Postretirement Benefits Other Than Pensions -- BIC provided a
postretirement monetary benefit other than pensions. It consisted of a fixed
monthly dollar contribution toward the purchase of medical, dental, and life
insurance for substantially all of its retired employees. In 1993, BIC began
advance funding for postretirement life benefits for employees retiring on or
after January 1, 1994. Advance funding for medical benefits commenced in 1994.
Medical benefits for employees who retired before January 1, 1994 continue to be
funded on a pay-as-you-go basis. The Stations have included in the accompanying
statements of operations, expense under this plan of approximately $32,000,
$48,000, and $34,000 for the years ended December 31, 1994, 1995, and 1996,
respectively, and $9,000 and $19,000 for the three months ended March 27, 1996
and 1997, respectively.
F-29
<PAGE> 116
KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM
NOTES TO COMBINED STATEMENTS OF OPERATIONS AND OF CASH FLOWS -- (CONTINUED)
3. COMMITMENTS AND CONTINGENCIES
Leases -- The Stations lease office and studio space under operating leases
expiring in 2010 and lease antennas under operating leases expiring in 2002.
Rental expense pursuant to the terms of these operating leases was approximately
$354,000, $232,000, and $492,000 for the years ended December 31, 1994, 1995,
and 1996 and $208,000 and $89,000 for the three months ended March 27, 1996 and
1997.
At December 31, 1996, future minimum rental payments required under these
leases are as follows:
<TABLE>
<S> <C>
1997..................................................... $ 509,012
1998..................................................... 498,956
1999..................................................... 502,508
2000..................................................... 433,030
2001..................................................... 459,019
Thereafter............................................... 4,190,178
----------
Total.......................................... $6,592,703
==========
</TABLE>
Contingencies -- The Stations are involved in litigation regarding
transactions conducted in the ordinary course of business and are defending
their positions. The final outcome of litigation is not presently determinable;
however, in the opinion of management, the effects, if any, will not be material
to the net assets or the results of operations and cash flows derived from such
net assets.
F-30
<PAGE> 117
INDEPENDENT AUDITORS' REPORT
Entercom Communications Corp.:
We have audited the accompanying combined statements of operations and cash
flows of the Sacramento Station Group consisting of stations KSEG-FM and KRXQ-FM
(the "Stations") for the period January 1, 1996 to September 18, 1996 (the
"Predecessor") and for the period September 19, 1996 to December 31, 1996 (the
"Company"). These financial statements are the responsibility of the Station's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined 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 audits provide a reasonable basis for our
opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the results of operations and cash flows of the Predecessor
for the period January 1, 1996 to September 18, 1996 and of the Company for the
period September 19, 1996 to December 31, 1996 in conformity with generally
accepted accounting principles.
The accompanying combined financial statements have been prepared from the
separate records maintained by the Predecessor and the Company and may not be
indicative of the results of operations and cash flows had the Stations been
operated as an unaffiliated company and, as discussed in Note 3, certain
expenses represent allocations made from the Stations' parent.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
May 21, 1998
F-31
<PAGE> 118
SACRAMENTO STATION GROUP
COMBINED STATEMENTS OF OPERATIONS
FOR THE PERIODS JANUARY 1, 1996 TO SEPTEMBER 18, 1996 AND SEPTEMBER 19, 1996 TO
DECEMBER 31, 1996 AND THE FIVE MONTHS ENDED MAY 31, 1996 AND 1997
<TABLE>
<CAPTION>
PERIOD JANUARY 1, PERIOD FIVE MONTHS
1996 TO SEPTEMBER 19, ENDED MAY 31,
SEPTEMBER 18, 1996 TO --------------------------
1996 DECEMBER 31, 1996
(PREDECESSOR) 1996 (PREDECESSOR) 1997
----------------- ------------- ------------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUES.......................... $5,189,461 $1,944,529 $2,638,700
---------- ----------
OPERATING EXPENSES:
Operating expenses, excluding
depreciation and amortization.... 3,765,749 1,572,153 2,052,346
Depreciation and amortization....... 1,136,300 361,936 629,481 $ 580,527
Corporate and general expenses...... 202,000 78,000 112,000 112,000
---------- ---------- ---------- ---------
Total operating expenses.... 5,104,049 2,012,089 2,793,827 692,527
---------- ---------- ---------- ---------
OPERATING INCOME (LOSS)............... 85,412 (67,560) (155,127) (692,527)
OTHER INCOME (EXPENSE) -- Net......... (27,341) 35,361 (27,341) 586,000
---------- ---------- ---------- ---------
INCOME (LOSS) BEFORE INCOME TAXES..... 58,071 (32,199) (182,468) (106,527)
---------- ---------- ---------- ---------
PROVISION FOR INCOME TAXES............ 287,000 75,000 74,000 104,000
---------- ---------- ---------- ---------
NET LOSS.............................. $ (228,929) $ (107,199) $ (256,468) $(210,527)
========== ========== ========== =========
</TABLE>
See notes to financial statements.
F-32
<PAGE> 119
SACRAMENTO STATION GROUP
COMBINED STATEMENTS OF CASH FLOWS
FOR THE PERIODS JANUARY 1, 1996 TO SEPTEMBER 18, 1996 AND SEPTEMBER 19, 1996 TO
DECEMBER 31, 1996 AND THE FIVE MONTHS ENDED MAY 31, 1996 AND 1997
<TABLE>
<CAPTION>
PERIOD JANUARY 1, PERIOD FIVE MONTHS
1996 TO SEPTEMBER 19, ENDED MAY 31,
SEPTEMBER 18, 1996 TO ---------------------------
1996 DECEMBER 31, 1996
(PREDECESSOR) 1996 (PREDECESSOR) 1997
----------------- ------------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................. $ (228,929) $(107,199) $(256,468) $ (210,527)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation and amortization......... 1,136,300 361,936 629,481 580,527
Loss on disposal of property and
equipment........................... 32,341 32,341
Change in assets and liabilities:
Accounts receivable................. (245,215) (56,840) 68,087 1,755,043
Prepaid expenses and other assets... 11,698 138,711 (22,673) 31,768
Accounts payable and accrued
expenses......................... (13,569) (264,917) (224,392) (119,146)
---------- --------- --------- -----------
Cash provided by operating
activities..................... 692,626 71,691 226,376 2,037,665
---------- --------- --------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES -- Purchase of property and
equipment................................ (298,383) (17,348) (239,717) --
---------- --------- --------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES -- Change in due to Parent.... (336,450) (186,679) (57,374) (2,122,203)
---------- --------- --------- -----------
INCREASE (DECREASE) IN CASH................ 57,793 (132,336) (70,715) (84,538)
CASH, BEGINNING OF PERIOD.................. 159,081 216,874 159,081 84,538
---------- --------- --------- -----------
CASH, END OF PERIOD........................ $ 216,874 $ 84,538 $ 88,366 $ --
========== ========= ========= ===========
</TABLE>
See notes to financial statements.
F-33
<PAGE> 120
SACRAMENTO STATION GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE FIVE-MONTH PERIODS ENDED
MAY 31, 1996 AND 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business -- The Sacramento Station Group consists of radio stations KSEG-FM
and KRXQ-FM (the "Stations") which broadcast in the Sacramento, California area.
The stations were an operating unit of Jacor Communication, Inc. (the "Parent")
during the period September 19, 1996 through June 4, 1997. During the period
January 1, 1996 to September 18, 1996 ("Predecessor Period"), the Stations were
owned and operated by Citicasters, Inc. ("Predecessor Parent").
Basis of Presentation -- The accompanying combined statements of operations
and cash flows have been prepared from the separate records of the Stations and
may not be indicative of the results of operations and cash flows had the
Stations been operated as an unaffiliated entity. The accompanying combined
statements of operations and cash flows for the period from January 1, 1996 to
September 18, 1996 represent the results of direct revenues and expenses and
cash flows generated from the historical basis of assets and liabilities of the
Predecessor Parent. On September 18, 1996, Citicasters, Inc. was acquired by
Jacor Communications, Inc. and in accordance with the purchase method of
accounting the assets and liabilities of the Stations were adjusted to fair
value on the date of the acquisition. Accordingly, the combined statements of
operations and cash flows for the period from September 19, 1996 to December 31,
1996 represent the results of revenues and expenses and cash flows generated
from the revalued assets and liabilities. A vertical black line is shown in the
accompanying combined financial statements to separate the post acquisition
operations from those prior September 19, 1996 since they have not been prepared
on a comparable basis.
Effective January 1997, the Parent entered into a time brokerage agreement
with Entercom Communications Corp. ("Entercom"), formerly Entertainment
Communications, Inc. whereby Entercom operated the Stations and remitted to the
Parent a monthly rental fee totaling approximately $586,000 through June 4,
1997. The time brokerage agreement expired on June 4, 1997 at which time the
Parent sold substantially all of the tangible and intangible assets of the
Stations to Entercom for approximately $45,000,000. The Parent retained the
ownership of the FCC broadcast license for Stations throughout the contract
period of the time brokerage agreement.
Revenue Recognition -- Revenues are recognized when advertisements are
broadcast.
Property and Equipment -- Building, property and equipment are recorded at
cost and depreciation is provided using the straight-line method over estimated
useful lives ranging from 3 to 25 years. Leasehold improvements are depreciated
over the term of the lease.
Intangible Assets -- Intangible assets consisting primarily of goodwill,
FCC licenses and call letters acquired in connection with the acquisition of the
Stations are being amortized over their respective estimated useful lives
(ranging from 19 to 40 years during the period January 1, 1996 to September 18,
1996 and 40 years effective September 19, 1996 and thereafter) using the
straight-line method.
Income Taxes -- The results of operations of the Stations are included in
the consolidated tax returns of the Predecessor Parent and the Parent during
their respective periods of ownership. The Predecessor Parent and the Parent did
not historically allocate taxes to the Stations. However, for purposes of the
accompanying financial statements, a provision for income taxes has been made in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes, as if the stations filed separate returns. The
effective income tax rate for the periods September 19, 1996 to December 31,
1996 and January 1, 1996 to September 18, 1996 varies from the statutory rate of
35% due to non-deductible amortization.
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 revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
F-34
<PAGE> 121
SACRAMENTO STATION GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Interim Financial Statements (Unaudited) -- In the opinion of management,
the accompanying unaudited interim combined financial statements for the five
months ended May 31, have been prepared on the same basis as the audited
combined financial statements and include all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the operating
results and cash flows for such periods. Results of operations for an interim
period are not necessarily indicative of results to be expected for a full year.
2. EMPLOYEE BENEFIT PLAN
The Stations participate in a retirement savings plan (the "Plan") that is
sponsored by the Parent. The Stations' expense for the Plan was approximately
$15,000 for the period September 19, 1996 to December 31, 1996.
A similar plan was sponsored by the Predecessor Parent for which the
Stations expensed approximately $45,000 for the period January 1, 1996 to
September 18, 1996.
3. RELATED-PARTY TRANSACTIONS
Corporate and general expenses consists of corporate overhead costs
including treasury, tax, legal, data processing, risk management and other
administrative services not specifically related to any specific stations.
Management is of the opinion that the allocations used are reasonable and
appropriate.
4. LEASES
The Stations lease office and studio space under operating leases. Total
rent expense was approximately $59,000 for the period September 19, 1996 to
December 31, 1996 and approximately $177,000 for the period January 1, 1996 to
September 18, 1996. Future minimum rental commitments for noncancellable leases
are as follows: 1997, $242,000; 1998, $245,000; 1999, $245,000; 2000, $143,000;
2001, $109,000; thereafter, $290,000.
F-35
<PAGE> 122
INDEPENDENT AUDITORS' REPORT
Entercom Communications Corp.:
We have audited the accompanying combined statements of income and cash flows of
KBSG, Inc. and KNDD, Inc., (wholly owned subsidiaries of Viacom Inc. (the
"Parent"), which businesses were acquired on August 1, 1996 by Entercom
Communications Corp., formerly Entertainment Communications, Inc.) (the
"Companies") for the year ended December 31, 1995. These combined financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined 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, such financial statements present fairly, in all material
respects, the combined results of operations and combined cash flows of the
Companies for the year ended December 31, 1995 in conformity with generally
accepted accounting principles.
The accompanying combined financial statements have been prepared from the
separate records maintained by the Companies and may not necessarily be
indicative of the conditions that would have existed or the results of
operations if the Companies had been operated as unaffiliated companies. As
described in Note 3, portions of certain expenses represent allocations made
from the Companies' Parent.
DELOITTE & TOUCHE LLP
Seattle, Washington
May 29, 1998
F-36
<PAGE> 123
KBSG, INC. AND KNDD, INC.
COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995, AND SEVEN-MONTH
PERIODS ENDED JULY 31, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS ENDED JULY 31,
DECEMBER 31, ---------------------------
1995 1995 1996
------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
NET REVENUES:
Unaffiliated customers............................. $18,744,926 $8,682,084 $ 9,093,436
Related party...................................... 743,602 431,844 1,028,412
----------- ---------- -----------
19,488,528 9,113,928 10,121,848
OPERATING EXPENSES:
Operating expenses, excluding depreciation and
amortization and corporate, general, and
administrative expenses......................... 10,938,095 4,595,159 4,821,993
Depreciation and amortization...................... 1,532,665 889,813 902,825
Provision for doubtful accounts.................... 163,379 107,827 27,735
General and administrative......................... 1,505,255 976,678 578,459
----------- ---------- -----------
Total operating expenses................... 14,139,394 6,569,477 6,331,012
----------- ---------- -----------
Operating income........................... 5,349,134 2,544,451 3,790,836
OTHER INCOME......................................... 343,164 173,129 181,781
INTEREST EXPENSE, related party...................... (1,365,000) (796,250) (630,287)
----------- ---------- -----------
Income before income taxes................. 4,327,298 1,921,330 3,342,330
INCOME TAXES......................................... 1,745,960 813,482 1,296,621
----------- ---------- -----------
NET INCOME........................................... $ 2,581,338 $1,107,848 $ 2,045,709
=========== ========== ===========
</TABLE>
See notes to combined financial statements.
F-37
<PAGE> 124
KBSG, INC. AND KNDD, INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995, AND SEVEN-MONTH
PERIODS ENDED JULY 31, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS ENDED JULY 31,
DECEMBER 31, ---------------------------
1995 1995 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................................ $ 2,581,338 $ 1,107,848 $ 2,045,709
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 1,532,665 889,813 902,825
Loss (gain) on sale of property and equipment...... 7,655 (3,219)
Cash provided (used) by changes in operating assets
and liabilities:
Accounts receivable.............................. (117,162) 303,582 (14,244)
Prepaid expenses and other assets................ 11,651 10,436 34,222
Accounts payable and accrued expenses............ 284,600 (258,713) 185,407
----------- ----------- -----------
Net cash provided by operating activities..... 4,300,747 2,052,966 3,150,700
=========== =========== ===========
INVESTING ACTIVITIES:
Purchase of property and equipment.................... (225,615) (158,778) (92,076)
Proceeds from sale of property and equipment.......... 14,711 12,366 8,255
Net cash used by investing activities................. (210,904) (146,412) (83,821)
----------- ----------- -----------
FINANCING ACTIVITIES:
Net Change in due from Parent......................... (4,116,170) (1,932,962) (3,073,980)
NET DECREASE IN CASH AND CASH EQUIVALENTS............... (26,327) (26,408) (7,101)
CASH AND CASH EQUIVALENTS:
Beginning of period................................... 51,760 51,760 25,433
----------- ----------- -----------
End of period......................................... $ 25,433 $ 25,352 $ 18,332
=========== =========== ===========
</TABLE>
See notes to combined financial statements.
F-38
<PAGE> 125
KBSG, INC. AND KNDD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995, AND SEVEN-MONTH
PERIODS ENDED JULY 31, 1995 AND 1996 (UNAUDITED)
NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION: KBSG, Inc. and KNDD,
Inc. (the "Companies") own and operate radio stations KBSG-AM and -FM, and
KNDD-FM, respectively (the "Stations"), which broadcast in the greater Seattle,
Washington area. The Companies are wholly owned subsidiaries of Viacom Inc. (the
"Parent"). Effective August 1, 1996, the Stations were acquired by Entercom
Communications Corp., formerly Entertainment Communications, Inc. Accordingly,
the accompanying statements of income and cash flows include the accounts of the
Companies on a combined basis for 1995, and the unaudited interim seven-month
periods ended July 31, 1995 and 1996. Intercompany transactions are eliminated
in combination.
UNAUDITED INTERIM FINANCIAL INFORMATION: The accompanying unaudited
interim statements of income and cash flows for the seven-month periods ended
July 31, 1995 and 1996 are unaudited. In the opinion of management, such
unaudited interim financial statements have been prepared on a basis
substantially consistent with the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the statements of income and cash flows for those periods.
REVENUE RECOGNITION: Revenues consist primarily of sales of advertising
time and are recognized when advertisements are broadcast. Revenues from the
Stations' exchange of advertising time for goods or services (barter revenue)
are recognized based on the estimated value of advertising time provided, which
approximates the estimated fair value of the items received or to be received.
The value assigned to the goods and services received is charged to expense when
used. Barter revenue was approximately $1,035,800 for 1995.
DEPRECIATION AND AMORTIZATION: Depreciation of property and equipment is
provided using the straight-line method over their estimated useful lives
ranging from three to 20 years. Amortization of intangible assets, consisting
primarily of FCC licenses and goodwill is provided using the straight-line
method over 30 years.
ADVERTISING EXPENSES: Advertising costs are expensed as incurred and
totalled approximately $1,426,187 for 1995.
INCOME TAXES: The Companies are included in the consolidated federal
income tax return of the Parent. Income taxes have not historically been
allocated to the Companies. However, for purposes of the accompanying financial
statements, a provision for income taxes has been made in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes, as if the Companies filed separate tax returns. Information
regarding deferred income taxes is not available. The effective income tax rate
for the year ended December 31, 1995, varies from the statutory income tax rate
of 34% due to nondeductible amortization.
STATEMENTS OF CASH FLOWS: For purposes of the statements of cash flow, the
Companies consider highly liquid, short-term investments purchased with
remaining maturities of 90 days or less to be cash equivalents. Interest on
Parent debt and income taxes are deemed paid when accrued and credited to
amounts due from Parent. Actual payments to creditors and tax authorities are
made by the Parent. Also see Note 3.
PROVISION FOR DOUBTFUL ACCOUNTS: The Companies extend credit to customers
on an unsecured basis in the normal course of business. The customers are
generally located in the greater Seattle, Washington area, and no individual
industry or industry segment is significant to the Company's customer base. The
Companies record a provision for doubtful accounts based on their estimate of
uncollectible accounts receivable. Bad debt write-offs, net of recoveries, were
$193,000 for the year ended December 31, 1995.
F-39
<PAGE> 126
KBSG, INC. AND KNDD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES: 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 at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 2: COMMITMENTS
The Companies lease office space under operating leases expiring from 1998
to 2004. Rental expenses pursuant to the terms of these operating leases were
$295,670 for the year ended December 31, 1995.
At December 31, 1995, future minimum rental payments required under these
leases are as follows:
<TABLE>
<S> <C>
1996..................................................... $ 790,548
1997..................................................... 790,548
1998..................................................... 372,548
1999..................................................... 268,482
2000..................................................... 148,848
Thereafter............................................... 58,404
----------
$2,429,378
==========
</TABLE>
NOTE 3: RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Companies enter into transactions
with the Parent which are recorded through a due-from-Parent account. Such
transactions for the year ended December 31, 1995, consist primarily of:
<TABLE>
<S> <C>
Barter revenue.............................................. $ 744,000
Income tax expense payable to Parent........................ 1,746,000
Interest expense on Parent company debt at 9.75%............ 1,365,000
Corporate overhead charges.................................. 806,000
</TABLE>
The corporate overhead charge allocated to the seven month period ended
July 31, 1995 was approximately $470,000. There was no corporate overhead charge
for the seven month period ended July 31, 1996 (unaudited).
Other transactions include immaterial amounts related to employee benefits,
insurance, and other items. Although management is of the opinion that the
allocations used are reasonable, other allocations might be used that could
produce results substantially different from those reflected herein, and these
allocations might not be indicative of amounts which might be incurred with
unrelated parties.
The Companies' cash and financing requirements are managed on a centralized
basis by the Parent. Accordingly, the Companies' available cash is deposited in,
and cash requirements are transferred from, corporate accounts on a regular
basis. Such transactions are recorded through the due-from-Parent account.
The due-from-Parent account is noninterest bearing and has no specified
repayment date, which may not be indicative of arrangements that could be made
with unrelated parties. Arrangements with unrelated parties could produce
results substantially different from these reflected herein.
In June 1996, Parent Company debt of $14,000,000 was retired through
adjustment to the Parent company account.
F-40
<PAGE> 127
KBSG, INC. AND KNDD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4: EMPLOYEE BENEFIT PLANS
The Companies participate in a pension and other employee benefit plans
offered by the Parent covering substantially all employees. The Companies'
expenses related to the plans were not significant for the year ended December
31, 1995.
NOTE 5: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Subsequent to December 31, 1995, SFAS No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of,
became effective. SFAS No. 121 requires the Companies to analyze their
long-lived assets, such as fixed assets, identifiable intangibles, and goodwill,
for impairment when events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Adoption of this standard
is not expected to have a material effect on the financial statements.
Other subsequently issued pronouncements, such as SFAS No. 123, Stock-based
Compensation, SFAS No. 128, Earnings per Share, SFAS No. 130, Segment
Information, SFAS No. 131, Reporting Comprehensive Income, Statement of Position
(SOP) 98-1, Reporting the Costs of Computer Software Developed or Obtained for
Internal Use, SOP 98-5, Reporting the Costs of Start-up Activities, either do
not apply to the Companies or their adoption is not expected to have a material
effect on the financial statements.
F-41
<PAGE> 128
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Entertainment Communications, Inc. and Subsidiaries:
We have audited the accompanying combined balance sheet of the Portland, Oregon
and Rochester, New York Radio Groups of Heritage Media Services,
Inc. -- Broadcasting Segment (the Company) as of December 31, 1997, and the
related combined statements of operations, stockholders' equity and cash flows
of the Portland, Oregon and Rochester, New York Radio Groups of Heritage Media
Services, Inc. -- Broadcasting Segment (the Predecessor) for the eight months
ended August 31, 1997 and of the Company for the four months ended December 31,
1997. These financial statements are the responsibility of the Company's and the
Predecessor's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1997, and the results of operations and cash flows of the
Predecessor for the eight months ended August 31, 1997, and of the Company for
the four months ended December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Baltimore, Maryland,
May 29, 1998
F-42
<PAGE> 129
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997
--------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 594
Accounts receivable, net of allowance for doubtful
accounts of $166....................................... 3,474
Prepaid expenses and other current assets................. 41
Deferred barter costs..................................... 113
Deferred tax asset........................................ 64
--------
Total current assets.............................. 4,286
PROPERTY, PLANT AND EQUIPMENT, net.......................... 4,497
DUE FROM AFFILIATE.......................................... 1,719
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net................ 116,171
--------
Total Assets...................................... $126,673
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 520
Deferred revenue.......................................... 11
Deferred barter revenue................................... 108
--------
Total current liabilities......................... 639
DEFERRED TAX LIABILITY...................................... 98
OTHER LONG-TERM LIABILITIES................................. 292
--------
Total Liabilities................................. 1,029
--------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value, 10,000 shares authorized
and 10,000 shares issued and outstanding............... 10
Additional paid-in capital................................ 127,035
Accumulated deficit....................................... (1,401)
--------
Total Stockholders' Equity........................ 125,644
--------
Total Liabilities and Stockholders' Equity........ $126,673
========
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
F-43
<PAGE> 130
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ------------
EIGHT MONTHS FOUR MONTHS
ENDED ENDED
AUGUST 31, DECEMBER 31,
1997 1997
------------ ------------
<S> <C> <C>
NET REVENUES:
Station broadcasting revenues, net of agency commissions
of $1,060 and $1,845, respectively..................... $10,449 $ 5,635
Revenues realized from station barter arrangements........ 847 464
------- -------
Total net revenues................................ 11,296 6,099
------- -------
OPERATING EXPENSES:
Programming and production................................ 4,024 2,059
Selling, general and administrative....................... 1,618 830
Corporate overhead allocation............................. 814 478
Expenses realized from station barter arrangements........ 922 411
Depreciation of property and equipment.................... 395 251
Amortization of acquired intangible broadcasting assets
and other assets....................................... 775 2,623
------- -------
Total operating expenses.......................... 8,548 6,652
------- -------
Broadcast operating income (loss)................. 2,748 (553)
------- -------
OTHER INCOME (EXPENSE):
Interest expense.......................................... 651 265
Other expense, net........................................ -- 21
------- -------
Income (loss) before provision for income taxes... 2,097 (839)
PROVISION FOR INCOME TAXES.................................. 1,339 562
------- -------
Net income (loss)................................. $ 758 $(1,401)
======= =======
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-44
<PAGE> 131
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED EARNINGS/
--------------- PAID-IN (ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT) EQUITY
------ ------ ---------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
PREDECESSOR:
BALANCE, January 1, 1997......... 10 $ 10 $ -- $ 7,041 $ 7,051
HMC noncash capital
contributions............... -- -- 1,209 -- 1,209
Net income.................... -- -- -- 758 758
Acquisition by News
Corporation................. -- -- 125,291 (7,799) 117,492
----- ------ -------- ------- --------
BALANCE, August 31, 1997......... 10 $ 10 $126,500 $ -- $126,510
===== ====== ======== ======= ========
COMPANY:
BALANCE, September 1, 1997....... 10 $ 10 $126,500 $ -- $126,510
News Corporation noncash
capital contributions....... -- -- 535 -- 535
Net loss...................... -- -- -- (1,401) (1,401)
----- ------ -------- ------- --------
BALANCE, December 31, 1997....... 10 $ 10 $127,035 $(1,401) $125,644
===== ====== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-45
<PAGE> 132
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ------------
EIGHT MONTHS FOUR MONTHS
ENDED ENDED
AUGUST 31, DECEMBER 31,
1997 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 758 $(1,401)
Adjustments to reconcile net income (loss) to net cash
flows from operating activities-
Depreciation of property and equipment................. 395 251
Amortization of acquired intangible broadcasting assets
and other assets...................................... 775 2,623
Changes in assets and liabilities, net of effects of
acquisitions-
(Increase) decrease in accounts receivable, net........ 121 (225)
Net effect of change in deferred barter revenue and
deferred barter costs................................. 76 (49)
Increase in prepaid expenses and other current
assets................................................ (15) (15)
Increase in deferred tax asset......................... (50) (15)
Increase (decrease) in accounts payable and accrued
expenses.............................................. (826) 150
Increase (decrease) in deferred revenue................ (75) 11
(Decrease) increase in deferred tax liability.......... 99 (1)
Decrease in other long-term liabilities................ (12) (25)
------- -------
Net cash flows from operating activities.......... 1,246 1,304
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment..................... (157) (11)
Acquisitions, net of cash acquired........................ (1,859) --
------- -------
Net cash flows from investing activities.......... (2,016) (11)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due to affiliates............................. (512) --
Increase in due from affiliates........................... -- (1,719)
Capital contributions made by Parent...................... 1,209 535
------- -------
Net cash flows from financing activities.......... 697 (1,184)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (73) 109
CASH, beginning of period................................... 558 485
------- -------
CASH, end of period......................................... $ 485 $ 594
======= =======
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest.................................... $ -- $ 21
======= =======
Cash paid for income taxes................................ $ 152 $ 29
======= =======
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-46
<PAGE> 133
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
Heritage Media Services, Inc. ("HMSI") operates in two
segments -- Marketing Services and Broadcasting. Heritage Media Corporation is
the parent company of HMSI, (collectively referred to hereafter as either "HMC"
or the "Parent"). The Broadcasting Segment was wholly-owned and operated by
HMSI, which was owned by HMC through August 31, 1997 (the "Predecessor"). In
July 1997, HMC entered into an asset sale agreement with Sinclair Broadcast
Group, Inc. ("SBG") whereby SBG would acquire 100% of the Broadcasting Segment
(which consisted of six television stations in three markets and 24 radio
stations in seven markets) for $630 million in cash. Effective September 1,
1997, The News Corporation Limited ("News Corporation") acquired all of the
license and nonlicense assets of HMC. Due to certain regulatory requirements,
News Corporation has established a trust to hold all of the license and
nonlicense assets of the Broadcasting Segment until the sale to SBG has closed.
The acquisition was accounted for under the purchase method of accounting
whereby the purchase price was allocated to property and programming assets and
acquired intangible broadcasting assets of $51.4 million and $578.6 million,
respectively.
During January 1998, Entertainment Communications, Inc. ("Entercom")
entered into an Asset Purchase Agreement with Tuscaloosa Broadcasting Inc.,
Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester
Licensee, Inc. (collectively referred to hereafter as "Sinclair") to acquire
KKSN-AM, KKSN-FM and KKRH-FM, all serving the Portland, Oregon radio market and
WBBF-AM, WBBF-FM, WKLX-FM and WQRV-FM, all serving the Rochester, New York radio
market for a purchase price of $126.5 million. Simultaneously with the above
agreement, Entercom entered into a Time Brokerage Agreement ("TBA") with
Sinclair whereby, effective March 1, 1998, Entercom programs these stations for
the period prior to consummation of the purchase agreement and Sinclair receives
a monthly TBA fee of $631,500. Closing on this transaction is expected in June
1998. The accompanying combined financial statements include the accounts of the
Portland, Oregon and Rochester, New York Radio Group, which are collectively
referred to hereafter as "the Company."
The accompanying December 31, 1997, balance sheet and related statements of
operations and cash flows for the four-month period ended December 31, 1997, are
presented on a new basis of accounting, reflecting the impact of the News
Corporation acquisition. The accompanying financial statements for the
eight-month period ended August 31, 1997, are presented as "Predecessor"
financial statements.
Disclosure of Certain Significant Risks and Uncertainties
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
The Company's revenues and accounts receivable relate primarily to the sale
of advertising within the radio stations' broadcast areas. Credit is extended
based on an evaluation of the customers' financial condition. Credit losses are
provided for in the financial statements.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers and the geographic
diversification of the Company's customer base. The Company performs ongoing
credit evaluations of its customers and believes that adequate allowances for
any
F-47
<PAGE> 134
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
uncollectable trade receivables are maintained. At December 31, 1997, no
receivable from any customer exceeded 5% of stockholders' equity, and no
customer accounted for more than 10% of net revenues for the eight months ended
August 31, 1997 or for the four months ended December 31, 1997.
Acquired Intangible Broadcasting Assets
Acquired intangible broadcasting assets are being amortized over periods of
4 to 40 years. These amounts result from the acquisition of certain radio
station license and nonlicense assets by The News Corporation (see Note 1). The
Company monitors the individual financial performance of each of the stations
and continually evaluates the realizability of intangible and tangible assets
and the existence of any impairment to its recoverability based on the projected
undiscounted cash flows of the respective stations.
Intangible assets consist of the following as of December 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD 1997
------------ --------
<S> <C> <C>
Goodwill.......................................... 40 years $1,897
FCC licenses...................................... 15-25 years 52,092
Other............................................. 4-25 years 65,172
--------
119,161
Less: Accumulated amortization.................... 2,626
--------
$116,535
========
</TABLE>
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is recorded on the straight-line basis over the estimated useful
lives of the assets. Property and equipment at December 31, 1997, are summarized
as follows (in thousands):
<TABLE>
<CAPTION>
USEFUL LIFE 1997
----------- ------
<S> <C> <C>
Land........................................................ -- $ 442
Broadcasting equipment...................................... 5-25 years 366
Buildings and improvements.................................. 12-30 years 3,684
Other equipment............................................. 4-8 years 256
------
4,748
Less: Accumulated depreciation.............................. 251
------
$4,497
======
</TABLE>
Barter Transactions
Certain program contracts provide for the exchange of advertising air time
in lieu of cash payments for the rights to such programming. These contracts are
recorded as the programs are aired at the estimated fair value of the
advertising air time given in exchange for the program rights. Network
programming is excluded from these calculations.
The Company broadcasts certain customers' advertising in exchange for
equipment, merchandise and services. The estimated fair value of the equipment,
merchandise or services received is recorded as deferred barter costs and the
corresponding obligation to broadcast advertising is recorded as deferred barter
revenues.
F-48
<PAGE> 135
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The deferred barter costs are expensed or capitalized as they are used, consumed
or received. Deferred barter revenues are recognized as the related advertising
is aired.
Revenues
Revenue from the sale of commercial broadcast time to advertisers is
recognized when the commercials are broadcast. Promotional fees are recognized
as services are rendered.
2. ACCRUED EXPENSES:
Accrued expenses consist of the following at December 31, 1997, (in
thousands):
<TABLE>
<CAPTION>
1997
----
<S> <C>
Commissions................................................. $193
Payroll and employee benefits............................... 137
Other....................................................... 187
----
$517
====
</TABLE>
3. DUE TO AFFILIATE:
The Predecessor had an arrangement with HMSI whereby HMSI would provide
certain management and other services to the Predecessor. The services provided
included consultation and direct management assistance with respect to
operations and strategic planning. The Predecessor was allocated approximately
$814,000 of corporate overhead expenses for these services for the eight months
ended August 31, 1997.
In order to fund acquisitions and provide operating funds, HMSI entered
into a Bank Credit Agreement. The debt used to finance acquisitions and fund
daily operations of the Predecessor was recorded by the Predecessor as due to
affiliate in the year ending December 31, 1996. HMSI allocated interest at a
rate of approximately 10.0%, which approximated the average rate paid on the
borrowings. Associated with the HMSI debt, the Predecessor was allocated
approximately $0.6 million of deferred financing costs in 1996. The deferred
financing costs were fully amortized in accordance with the acquisition by News
Corporation on September 1, 1997.
4. INCOME TAXES:
The Parent files a consolidated federal tax return and separate state tax
returns for each of its subsidiaries in certain filing jurisdictions. It is the
Parent's policy to pay the federal income tax provision of the Company. The
accompanying financial statements have been prepared in accordance with the
separate return method of FASB 109, whereby the allocation of the federal tax
provision due to the Parent is based on what the Company's current and deferred
federal tax provision would have been had the Company filed a federal income tax
return outside of its consolidated group. The Company is not required to
reimburse the Parent for its federal tax provision. Accordingly, this amount is
recorded as a capital contribution in the accompanying consolidated financial
statements. No federal deferred tax assets or liabilities are recorded because
those amounts are considered currently paid to or received by the Parent. The
federal and state tax provision was calculated based on pretax income, plus or
minus permanent book-to-tax differences, times the statutory tax rate of 40%.
The Company had no alternative minimum tax credit carryforwards as of December
31, 1997. The effective tax rate in the current year exceeds the statutory tax
rate of 40% due to the effects of nondeductible goodwill.
F-49
<PAGE> 136
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ------------
EIGHT MONTHS FOUR MONTHS
ENDED ENDED
AUGUST 31, DECEMBER 31,
1997 1997
------------ ------------
<S> <C> <C>
Current:
Federal.................................................. $1,267 $523
State.................................................... 81 33
------ ----
1,348 556
------ ----
Deferred:
Federal.................................................. -- --
State.................................................... (9) 6
------ ----
(9) 6
------ ----
Provision for income taxes................................. $1,339 $562
====== ====
</TABLE>
The following is a reconciliation of federal income taxes at the applicable
statutory rate to the recorded provision (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ------------
EIGHT MONTHS FOUR MONTHS
ENDED ENDED
AUGUST 31, DECEMBER 31,
1997 1997
------------ ------------
<S> <C> <C>
Statutory federal income taxes............................. $ 703 $ (504)
Adjustments:
State income taxes, net of federal effect................ 82 (59)
Non-deductible goodwill amortization..................... 276 1,125
Other.................................................... 278 --
------ ------
Provision for income taxes................................. $1,339 $ 562
====== ======
</TABLE>
The following table summarizes the state tax effects of the significant
types of temporary differences between financial reporting basis and tax basis
which were generated during the years ended December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
1997
----
<S> <C>
Deferred Tax Assets:
Bad debt reserve.......................................... $14
Accruals.................................................. 27
Other intangibles......................................... 23
---
$64
===
Deferred Tax Liability:
Depreciation.............................................. $98
===
</TABLE>
5. EMPLOYEE BENEFIT PLAN:
Company employees were covered by HMC's Retirement Savings Plan (the Plan)
through December 31, 1997, whereby participants contributed portions of their
annual compensation to the Plan and
F-50
<PAGE> 137
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
certain contributions were made at the discretion of the Company based on
criteria set forth in the Plan Agreement. Participants are generally 100% vested
in Company contributions after five years of employment with the Company.
Company expenses under the Plan were not material for the year ended December
31, 1997.
6. RELATED PARTY TRANSACTIONS:
The Company received certain advances from HMC during the eight months
ended August 31, 1997, which were evidenced by a subordination agreement. All
advances from HMC were repaid on August 31, 1997.
7. CONTINGENCIES AND OTHER COMMITMENTS:
Leases and Contracts
The Company and its subsidiaries lease certain real property and
transportation and other equipment under noncancellable operating leases
expiring at various dates through 2015. The Company also has long-term
contractual obligations with two major broadcast ratings firms that provide
monthly ratings services and guaranteed store contracts. Rent expense under
these leases for the eight months ended August 31, 1997, and for the four months
ended December 31, 1997, was approximately $210,000 and $105,000, respectively.
Future minimum payments under the leases are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 392
1999........................................................ 386
2000........................................................ 386
2001........................................................ 371
2002........................................................ 357
2003 and thereafter......................................... 814
------
$2,706
======
</TABLE>
Litigation
Lawsuits and claims are filed against the Company from time to time in the
ordinary course of business which are generally incidental to its business.
Management of the Company does not believe the resolution of such matters will
have a significant effect on its liquidity, financial position or results of
operations.
F-51
<PAGE> 138
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
DECEMBER 31, MARCH 31,
1997 1998
------------ --------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 594 $ --
Accounts receivable, net of allowance for doubtful
accounts of $166....................................... 3,474 --
Prepaid expenses and other current assets................. 41 --
Deferred barter costs..................................... 113 --
Deferred tax asset........................................ 64 --
-------- --------
Total current assets.............................. 4,286 --
PROPERTY, PLANT AND EQUIPMENT, net.......................... 4,497 5,152
DUE FROM AFFILIATE.......................................... 1,719 --
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net................ 116,171 116,934
-------- --------
Total Assets...................................... $126,673 $122,086
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 520 $ --
Deferred revenue.......................................... 11 --
Deferred barter revenue................................... 108 --
Due to parent............................................. -- 70
-------- --------
Total current liabilities......................... 639 70
DEFERRED TAX LIABILITY...................................... 98 --
OTHER LONG-TERM LIABILITIES................................. 292 --
-------- --------
Total Liabilities................................. 1,029 70
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value, 10,000 shares authorized
and 10,000 and 0 shares issued and outstanding......... 10 --
Additional paid-in capital................................ 127,035 122,827
Accumulated deficit....................................... (1,401) (811)
-------- --------
Total Stockholders' Equity........................ 125,644 122,016
-------- --------
Total Liabilities and Stockholders' Equity........ $126,673 $122,086
======== ========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-52
<PAGE> 139
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR PREDECESSOR COMPANY
THREE MONTHS TWO MONTHS ONE MONTH
ENDED ENDED ENDED
MARCH 31, 1997 FEBRUARY 28, 1998 MARCH 31, 1998
-------------- ----------------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
NET REVENUES:
Station broadcasting revenue, net of agency
commissions of $611 and $387, respectively.... $3,349 $ 2,169 $ --
Revenues realized from station barter
arrangements.................................. 249 187 --
Time brokerage agreement revenues............... -- -- 635
------ ------- -----
Total net revenues.................... 3,598 2,356 635
OPERATING EXPENSES:
Programming and production...................... 1,303 824 3
Selling, general and administrative............. 885 603 --
Expenses realized from station barter
arrangements.................................. 245 280 --
Depreciation of property and equipment.......... 147 126 78
Amortization of acquired intangible broadcasting
assets and other assets....................... 287 1,503 663
------ ------- -----
Total operating expenses.............. 2,867 3,336 744
------ ------- -----
Broadcast operating income (loss)..... 731 (980) (109)
------ ------- -----
OTHER EXPENSE:
Interest expense................................ 261 -- 702
------ ------- -----
Income (loss) before provision for
income taxes........................ 470 (980) (811)
PROVISION FOR INCOME TAXES...................... 52 40 --
------ ------- -----
Net income (loss)..................... $ 418 $(1,020) $(811)
====== ======= =====
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-53
<PAGE> 140
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR PREDECESSOR COMPANY
THREE MONTHS TWO MONTHS ONE MONTH
ENDED ENDED ENDED
MARCH 31, 1997 FEBRUARY 28, 1998 MARCH 31, 1998
-------------- ----------------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................. $ 418 $(1,020) $(811)
Adjustments to reconcile net income (loss) to
net cash flows from operating activities-
Depreciation of property and equipment...... 147 126 78
Amortization of acquired intangible
broadcasting assets and other assets..... 287 1,503 663
Changes in certain assets and liabilities, net
of effects of acquisitions:
Decrease in accounts receivable, net........ 644 415 --
Net effect of change in deferred barter
revenue and deferred barter costs........ (6) 96 --
Increase in prepaid expenses and other
assets................................... (9) (3) --
(Decrease) increase in accounts payable and
accrued expenses......................... (535) 76 --
Decrease in deferred revenue................ (3) -- --
Decrease in other long-term liabilities..... (1) (70) --
------- ------- -----
Net cash flows from operating
activities........................ 942 1,123 (70)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment......... (82) (7) --
Acquisitions, net of cash acquired............ (1,894) -- --
------- ------- -----
Net cash flows from investing
activities........................ (1,976) (7) --
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in due to affiliates...... 995 (1,111) 70
------- ------- -----
Net cash flows from financing
activities........................ 995 (1,111) 70
------- ------- -----
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS................................. (39) 5 --
CASH, beginning of period..................... 558 594 --
------- ------- -----
CASH, end of period........................... $ 519 $ 599 $ --
======= ======= =====
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-54
<PAGE> 141
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
Heritage Media Services, Inc. ("HMSI") operates in two
segments -- Marketing Services and Broadcasting. Heritage Media Corporation is
the parent company of HMSI, (collectively referred to hereafter as either "HMC"
or the "Parent"). The Broadcasting Segment was wholly-owned and operated by
HMSI, which was owned by HMC through August 31, 1997 (the "Predecessor"). In
July 1997, HMC entered into an asset sale agreement with Sinclair Broadcast
Group, Inc. ("SBG") whereby SBG would acquire 100% of the Broadcasting Segment
(which consisted of six television stations in three markets and 24 radio
stations in seven markets) for $630 million in cash. Effective September 1,
1997, The News Corporation Limited ("News Corporation") acquired all of the
license and nonlicense assets of HMC. Due to certain regulatory requirements,
News Corporation established a trust to hold all of the license and nonlicense
assets of the Broadcasting Segment until the sale to SBG had closed. The
acquisition was accounted for under the purchase method of accounting whereby
the purchase price was allocated to property and programming assets and acquired
intangible broadcasting assets of $51.4 million and $578.6 million,
respectively.
During January 1998, Entertainment Communications, Inc. ("Entercom")
entered into an Asset Purchase Agreement with Tuscaloosa Broadcasting Inc.,
Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester
Licensee, Inc. (collectively referred to hereafter as "Sinclair") to acquire
KKSN-AM, KKSN-FM and KKRH-FM, all serving the Portland, Oregon radio market and
WBBF-AM, WBBF-FM, WKLX-FM and WQRV-FM, all serving the Rochester, New York radio
market for a purchase price of $126.5 million. Simultaneously with the above
agreement, Entercom entered into a Time Brokerage Agreement ("TBA") with
Sinclair whereby, effective March 1, 1998, Entercom programs these stations for
the period prior to consummation of the purchase agreement and Sinclair receives
a monthly TBA fee of $631,500. Effective March 1, 1998, SBG completed its
acquisition of the Portland, Oregon and Rochester, New York Radio Groups from
News Corporation. The acquisition was accounted for under the purchase method of
accounting whereby the purchase price was allocated to the assets to be sold. In
June 1998, Entercom closed its transaction with Sinclair. The accompanying
combined financial statements include the accounts of the Portland, Oregon and
Rochester, New York Radio Group, which are collectively referred to hereafter as
"the Company."
The accompanying March 31, 1998, balance sheet and the related statements
of operations and cash flows for the one-month period ended March 31, 1998, are
presented on a new basis of accounting, reflecting the impact of the acquisition
by SBG. The accompanying financial statements for the three months ended March
31, 1997, and the two months ended February 28, 1998, are presented as
"Predecessor" financial statements.
Interim Financial Statements
The combined financial statements for the period ended March 31, 1997, the
two months ended February 28, 1998, and the one month ended March 31, 1998, are
unaudited, but in the opinion of management, such financial statements have been
presented on the same basis as the audited combined financial statements 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. The results of operations
presented in the accompanying financial statements are not necessarily
representative of operations for an entire year.
F-55
<PAGE> 142
INDEPENDENT AUDITORS' REPORT
Entercom Communications Corp.:
We have audited the accompanying combined balance sheet of the Boston Radio
Market of CBS Radio, Inc. (the "Boston Radio Market") (formerly American Radio
Systems Corporation ("ARS") prior to the sale of ARS to CBS on June 4, 1998),
which is comprised of radio properties owned by CBS Radio, Inc., a wholly owned
subsidiary of CBS Corporation ("CBS") as of December 31, 1997, and the related
combined statements of operations, and cash flows for the year ended December
31, 1997. These financial statements are the responsibility of the management of
the Boston Radio Market. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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, such financial statements present fairly, in all material
respects, the combined financial position of the Boston Radio Market as of
December 31, 1997, and the results of their combined operations and their
combined cash flows for the year then ended in conformity with generally
accepted accounting principles.
The accompanying combined financial statements have been prepared from the
separate accounting records maintained by the Boston Radio Market while owned by
ARS and may not be indicative of the conditions that would have existed or the
results of operations had the assets to be sold been operated as an unaffiliated
company. As discussed in Note 1, certain of the operating expenses represent
allocations made by ARS in the accompanying financial statements.
In August 1998, CBS Radio, Inc. entered into an agreement to sell the net
assets of the Boston Radio Market to Entercom Communications Corp.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 18, 1998
F-56
<PAGE> 143
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1997 AND JUNE 30, 1998
<TABLE>
<CAPTION>
PREDECESSOR CURRENT
OWNER OWNER
------------ -----------
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
(NOTE 1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Accounts and notes receivable (less allowances for
doubtful accounts of $2,140,000 in 1997 and $2,690,000
(unaudited) in 1998)................................... $ 8,246,194 $ 9,275,415
Prepaid expenses and other assets......................... 486,976 893,408
Deposits and other current assets -- related parties...... 6,695 --
----------- -----------
Total............................................. 8,739,865 10,168,823
----------- -----------
PROPERTY AND EQUIPMENT -- Net............................... 11,799,363 10,380,837
----------- -----------
OTHER ASSETS:
Intangible assets -- net.................................. 33,006,828 32,292,335
Other assets.............................................. 94,758 94,758
----------- -----------
Total............................................. 33,101,586 32,387,093
----------- -----------
TOTAL....................................................... $53,640,814 $52,936,753
=========== ===========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 994,252 $ 661,201
Accrued compensation...................................... 303,104 607,799
Accrued expenses.......................................... 794,867 1,714,657
Capitalized lease obligation.............................. 137,762 35,324
----------- -----------
Total............................................. 2,229,985 3,018,981
COMMITMENTS AND CONTINGENCIES (Note 6)
EQUITY...................................................... 51,410,829 49,917,772
----------- -----------
TOTAL....................................................... $53,640,814 $52,936,753
=========== ===========
</TABLE>
See notes to combined financial statements.
F-57
<PAGE> 144
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997, SIX MONTHS ENDED JUNE 30, 1997,
FIVE MONTHS ENDED MAY 31, 1998, AND ONE MONTH ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
PREDECESSOR OWNER CURRENT OWNER
----------------------------------------------- --------------
YEAR ENDED SIX MONTHS FIVE MONTHS ONE MONTH
DECEMBER 31, ENDED JUNE 30, ENDED MAY 31, ENDED JUNE 30,
1997 1997 1998 1998
------------ -------------- ------------- --------------
(UNAUDITED)
(UNAUDITED) (UNAUDITED) (NOTE 1)
<S> <C> <C> <C> <C>
NET REVENUES........................ $37,331,314 $19,468,896 $14,994,176 $3,475,627
----------- ----------- ----------- ----------
OPERATING EXPENSES:
Operating expenses, excluding
depreciation, amortization,
general and administrative
expenses....................... 27,747,140 14,143,092 12,205,334 2,533,595
Depreciation and amortization..... 2,852,025 1,287,158 1,245,587 249,117
General and administrative........ 5,092,850 2,652,002 2,630,801 340,448
----------- ----------- ----------- ----------
Total operating
expenses................ 35,692,015 18,082,252 16,081,722 3,123,160
----------- ----------- ----------- ----------
OPERATING INCOME (LOSS) BEFORE
INCOME TAXES...................... 1,639,299 1,386,644 (1,087,546) 352,467
INCOME TAX EXPENSE (BENEFIT)........ 660,600 558,800 (438,300) 142,000
----------- ----------- ----------- ----------
NET INCOME (LOSS)................... $ 978,699 $ 827,844 $ (649,246) $ 210,467
=========== =========== =========== ==========
</TABLE>
See notes to combined financial statements.
F-58
<PAGE> 145
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997, SIX MONTHS ENDED JUNE 30, 1997,
FIVE MONTHS ENDED MAY 31, 1998, AND ONE MONTH ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
CURRENT
PREDECESSOR OWNER OWNER
------------------------------------------ -----------
SIX MONTHS FIVE MONTHS ONE MONTH
YEAR ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, MAY 31, JUNE 30,
1997 1997 1998 1998
------------ ----------- ----------- -----------
(UNAUDITED)
(UNAUDITED) (UNAUDITED) (NOTE 1)
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED FOR) OPERATING
ACTIVITIES (Note 1).................... $ 3,674,288 $ 2,037,283 $ (4,440) $ (888)
----------- ----------- ----------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment..... (1,396,694) (322,184) (373,488) --
Proceeds from sale of property......... 60,654 10,500 -- --
----------- ----------- ----------- --------
Net cash used for investing
activities................... (1,336,040) (311,684) (373,488) --
----------- ----------- ----------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt........... (189,840) (92,480) (85,000) (17,438)
----------- ----------- ----------- --------
Net transfer (to) from Owner........... (2,148,408) (1,633,119) 462,928 18,326
----------- ----------- ----------- --------
Net cash (used for) provided by
financing activities......... (2,338,248) (1,725,599) 377,928 888
----------- ----------- ----------- --------
CASH, BEGINNING AND END OF PERIOD........ $ -- $ -- $ -- $ --
=========== =========== =========== ========
</TABLE>
- ---------------
NONCASH ACTIVITIES:
In 1997, the Predecessor Owner acquired $24.8 million in assets,
principally intangible assets, which were financed by the Owners.
In 1997, the Predecessor Owner transferred assets to an affiliate of the
Stations totaling approximately $1 million.
See notes to combined financial statements.
F-59
<PAGE> 146
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997, SIX MONTHS ENDED JUNE 30, 1997,
FIVE MONTHS ENDED MAY 31, 1998, AND ONE MONTH ENDED JUNE 30, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Basis of Presentation -- The accompanying financial statements
present the combined assets, liabilities and operations of the Boston Radio
Market of CBS Radio, Inc. (the "Boston Radio Market"), which is comprised of
radio stations WRKO-AM, WEEI-AM, WEGQ-FM, WAAF-FM, serving the Boston,
Massachusetts, radio market, and WWTM-AM, serving the Worcester, Massachusetts,
radio market (the "Stations"). Through June 4, 1998, the Stations were owned by
American Radio Systems Corporation (the "Predecessor Owner" or "ARS"), an
operator of radio stations throughout the United States. On June 4, 1998, ARS
was acquired by CBS Radio, Inc., a wholly owned subsidiary of CBS Corporation
(collectively with CBS Radio, Inc., "CBS" or the "Current Owner"). In connection
with the acquisition of ARS by CBS (the "ARS/CBS merger"), CBS was required to
sell the Boston Radio Market to comply with certain regulations of the Federal
Communications Commission. During August 1998, CBS entered into purchase and
sale agreements with Entercom Communications Corp. ("Entercom") to sell the net
assets of the Boston Radio Market for approximately $140.0 million, subject to
receipt of regulatory approval which is expected to be received during 1998. CBS
and ARS are referred to as the Stations' "Owners" for purposes of these notes to
combined financial statements. All significant intercompany transactions have
been eliminated in combination.
Interim Financial Information and Related Valuation of Assets Acquired and
Liabilities Assumed -- The unaudited financial statements for the six months
ended June 30, 1997, the five months ended May 31, 1998, and the one month ended
June 30, 1998 have been prepared on a basis substantially consistent with that
of the audited Predecessor Owner's financial statements included herein. The
valuations of the assets acquired and the liabilities assumed have not been
prepared and, accordingly, the accompanying June 30, 1998 unaudited financial
statements have been prepared on the Predecessor Owner's historical cost basis
and do not reflect any purchase price adjustments. For purposes of preparing the
Predecessor Owner's unaudited financial statements, the ARS/CBS merger is
assumed to have occurred on May 31, 1998. In the opinion of management, such
unaudited financial statements include all adjustments, which are only of a
normal and recurring nature, considered necessary for a fair presentation.
Operating results for the unaudited periods presented are not necessarily
indicative of the results that may be expected for a full year.
Revenue Recognition -- Revenues are recognized when advertisements are
broadcast.
Property and Equipment -- Property and equipment are recorded at cost, and
depreciation is computed using straight-line and accelerated methods over
estimated useful lives ranging from three to twenty years.
Intangible Assets -- Intangible assets consist primarily of goodwill, FCC
licenses, and call letters acquired in connection with the acquisition of the
Stations and are being amortized over their respective estimated useful lives
(ranging from one to forty years) using the straight-line method.
On an ongoing basis, management evaluates the recoverability of the net
carrying value of property and equipment and intangible assets by reference to
the Stations' anticipated future cash flows generated by said assets and
comparison of carrying value to management's estimates of undiscounted fair
value, generally determined by using certain accepted industry measures of value
(principally, cash flow multiple methods).
Income Taxes -- The results of the Stations' operations are included in the
federal and state income tax returns filed by the Stations' Owners. The
Stations' portion of the income tax provision (benefit) is allocated at a
federal and state computed statutory rate of 40.3%. The Stations' federal and
state income taxes are generally paid to, or refunded from, the Owners. Deferred
tax assets and liabilities are maintained at the Owners' ownership levels.
F-60
<PAGE> 147
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Barter Transactions -- Revenues from the Stations' exchanges of advertising
time for goods or services are recognized at the fair market value of the items
received or to be received. The value of the goods and services received is
charged to expense when used. Net unearned barter balances are included in
accounts receivable.
Barter transactions are reported on a net basis within operating expenses
and balances as of and for the year ended December 31, 1997 were approximately
as follows:
<TABLE>
<S> <C>
Barter revenues.......................................... $2,273,689
Barter expenses.......................................... 1,978,702
Net barter receivable.................................... 120,852
</TABLE>
Use of Estimates -- The preparation of combined 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 to the financial statements. Management bases
its estimates on certain assumptions which they believe are reasonable in the
circumstances, and while actual results could differ from those estimates.
management does not believe that any change in those assumptions in the near
term would have a material effect on its financial position, results of
operations or liquidity.
Allocation of Certain Operating Expenses -- The operations, as presented
herein, include allocations and estimates of certain expenses, principally
corporate accounting and tax, rent, administrative salaries, and legal,
historically provided to the Stations by the Owners. The amounts of such
allocated expenses in these combined financial statements have been allocated by
management based on a variety of factors, including, for example, personnel,
labor costs and square footage. Management believes these allocations have been
made on a reasonable basis. However, the financial position and results of
operations, as presented herein, may not be the same as would have occurred had
the Stations been operated as a stand-alone entity.
Interest expense incurred by the Owners under various long-term debt
arrangements has not historically been allocated to the Stations and,
accordingly, the accompanying combined financial statements do not include
interest expense. See Note 4 for interest expense associated with a capitalized
lease obligation.
Concentration of Credit Risk -- The Stations extend credit to customers on
an unsecured basis in the normal course of business. No individual industry or
industry segment is significant to the Stations' customer base. The Stations
have policies governing the extension of credit and collection of amounts due
from customers.
Impairment of Long-Lived Assets -- Recoverability of long-lived assets is
determined by periodically comparing the forecasted undiscounted net cash flows
of the operations to which the assets relate to the carrying amount, including
associated intangible assets of such operations. Through December 31, 1997, no
impairments requiring adjustments have occurred.
Supplemental Cash Flow Information -- The Stations participate in a
centralized cash management system maintained by the Owners. Accordingly, cash
balances are not maintained at the Stations. The Stations' assets are pledged as
collateral for the Owners' long-term debt agreements.
F-61
<PAGE> 148
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The components of cash provided by operating activities for the year ended
December 31, 1997 are as follows:
<TABLE>
<S> <C>
Net income.................................................. $ 978,699
Reconciliation of net income to net cash provided by
operating activities:
Depreciation and amortization............................. 2,852,025
Loss on disposal of property and equipment................ 28,021
Change in assets and liabilities:
Accounts receivable.................................... 405,299
Prepaid expenses....................................... (324,285)
Other assets........................................... 709,979
Accounts payable and accrued expenses.................. (975,450)
----------
Net cash provided by operating activities................... $3,674,288
==========
</TABLE>
Cash paid for interest aggregated $44,900 during 1997.
New Accounting Pronouncements -- During 1998, the Stations adopted
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The adoption of SFAS No. 130 and No. 131
did not affect the Stations' combined financial statements. In June 1998, the
Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which the Stations will adopt
during fiscal year 2000. The adoption of SFAS No. 133 is not expected to have a
material impact on the Stations' combined financial statements.
2. ACQUISITIONS
In January 1997, ARS completed the acquisition of WAAF-FM and WWTM-AM for
an aggregate purchase price of approximately $24.8 million (the "1997
Acquisition"). The purchase price related to the 1997 Acquisition was allocated
to the assets acquired, principally intangible assets, based on their estimated
fair value at the date of acquisition. Since the acquisition, the 1997
Acquisition has been included as a component of the Boston Radio Market. The
Predecessor Owner began programming and marketing the Stations pursuant to a
Local Marketing Agreement ("LMA") in August 1996 and, as a result, proforma
financial information has not been presented as such information would not be
materially different from the amounts presented in the historical 1997 combined
statements of operations.
3. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS
Property and equipment consisted of the following at December 31, 1997:
<TABLE>
<S> <C>
Land and improvements....................................... $ 1,426,552
Buildings and improvements.................................. 3,133,400
Broadcast equipment(1)...................................... 8,847,524
Office and other equipment, furniture and fixtures.......... 2,382,158
Other....................................................... 7,430
-----------
Total....................................................... 15,797,064
Less accumulated depreciation............................... (3,997,701)
-----------
Property and equipment -- net............................... $11,799,363
===========
</TABLE>
- ---------------
(1) Includes approximately $570,000 of assets recorded under a capital lease
(see Note 4).
F-62
<PAGE> 149
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Intangible assets consisted of the following at December 31, 1997:
<TABLE>
<S> <C>
FCC licenses................................................ $30,786,241
Goodwill.................................................... 4,246,985
Other intangibles........................................... 2,044,207
-----------
Total....................................................... 37,077,433
Less accumulated amortization............................... (4,070,605)
-----------
Intangible assets -- net.................................... $33,006,828
===========
</TABLE>
4. CAPITALIZED LEASE OBLIGATION
In September of 1996, an equipment lease agreement with Fleet Capital
Corporation dated May 17, 1990 was extended for an additional twenty-four
months. Upon the lease's final payment in August 1998, ownership of the property
was transferred to the Stations. Interest expense, reported within general and
administrative expense in the accompanying combined statement of operations,
aggregated $32,400 during 1997.
5. EMPLOYEE BENEFIT PLAN
Through December 31, 1997, employees of the Stations participated in a
retirement savings plan (the "Plan") sponsored by the Predecessor Owner. The
Plan is a defined contribution plan that covers eligible salaried employees who
have at least one year of service. Participants may make pre-tax contributions
to the Plan up to 10% of their compensation, not to exceed the annual limit
prescribed by the Internal Revenue Service. The Owners matched contributions to
the Plan in an amount equal to 100% of the first 5% of base compensation that a
participant contributes to the Plan, unless otherwise determined by annual
resolution. The Stations were charged $90,000 by the Predecessor Owner for the
year ended December 31, 1997.
6. COMMITMENTS AND CONTINGENCIES
Broadcast Rights -- At December 31, 1997, the Stations were committed to
the purchase of broadcast rights for various sports events and other
programming, including on-air talent, aggregating approximately $21,134,000.
This programming is not yet available for broadcast. As of December 31, 1997,
aggregate payments related to these commitments during the next five years are
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
<S> <C>
1998....................................................... $ 8,042
1999....................................................... 7,266
2000....................................................... 5,408
2001....................................................... 358
2002....................................................... 60
-------
$21,134
=======
</TABLE>
F-63
<PAGE> 150
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Leases -- The Stations lease various offices, studios, and broadcast and
other equipment under operating leases that expire over various terms. Most
leases contain renewal options with specified increases in lease payments in the
event of renewal by the Stations.
Future minimum rental payments required under noncancelable operating
leases in effect at December 31, 1997 are approximately as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
<S> <C>
1998........................................................ $ 620
1999........................................................ 473
2000........................................................ 295
2001........................................................ 286
2002........................................................ 187
Thereafter.................................................. 1,378
------
Total....................................................... $3,239
======
</TABLE>
Aggregate rent expense under operating leases for the year ended December
31, 1997 approximated $438,000.
Audience Rating and Other Service Employment Contracts -- The Stations have
entered into various noncancelable audience rating and other service and
employment contracts that expire over the next five years. Most of these
audience rating and other service agreements are subject to escalation clauses
and may be renewed for successive periods ranging from one to five years on
terms similar to current agreements, except for specified increases in payments.
Certain of these contracts will not be assumed by Entercom.
Future minimum payments required under these contracts at December 31, 1997
are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $2,481
1999........................................................ 2,573
2000........................................................ 1,725
2001........................................................ 699
2002........................................................ 648
------
Total....................................................... $8,126
======
</TABLE>
Total expense under these contracts for the year ended December 31, 1997
approximated $2,574,000.
Litigation -- CBS has agreed to indemnify Entercom for any litigation
expenses associated with the Stations prior to the acquisition by Entercom.
* * * * * *
F-64
<PAGE> 151
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDER OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 13
Use of Proceeds....................... 20
Recapitalization, Chase Conversion and
Former S Corporation Status......... 20
Dividend Policy....................... 21
Dilution.............................. 22
Capitalization........................ 23
CBS Transactions...................... 24
Completed Transactions................ 24
Unaudited Pro Forma Financial
Information......................... 26
Selected Historical Financial Data.... 39
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 41
Business.............................. 49
Management............................ 68
Certain Relationships and Related
Party Transactions.................. 74
Principal and Selling Shareholders.... 75
Description of Capital Stock.......... 76
Shares Eligible for Future Sale....... 80
Underwriting.......................... 81
Notice to Canadian Residents.......... 82
Legal Matters......................... 83
Experts............................... 83
Additional Information................ 84
Index to Financial Statements......... F-1
</TABLE>
------------------
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
[ENTERCOM LOGO]
Entercom Communications Corp.
Shares
Class A Common Stock
($.01 par value)
PROSPECTUS
Credit Suisse First Boston
BT Alex. Brown
Goldman, Sachs & Co.
Morgan Stanley Dean Witter
------------------------------------------------------
<PAGE> 152
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth fees payable to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc., and other
estimated expenses expected to be incurred in connection with the issuance and
distribution of securities being registered. All such fees and expenses shall be
paid by the Company.
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission Registration Fee......... $71,242.50
NASD Fee.................................................... *
New York Stock Exchange Listing Fee......................... *
Printing and Engraving Expenses............................. *
Accounting Fees and Expenses................................ *
Legal Fees and Expenses..................................... *
Directors and Officers Insurance............................ *
Transfer Agent Fees and Expenses............................ *
Miscellaneous............................................... *
----------
Total............................................. $
==========
</TABLE>
- ---------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Amended and Restated Articles of Incorporation provide that
the Company's directors shall not be personally liable to the Company and its
shareholders for monetary damages for any action taken, or any failure to take
any action, unless: (i) the director has breached or failed to perform the
duties of his or her office under applicable provisions of Pennsylvania law, and
(ii) the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness. This provision does not eliminate the duty of care,
and, in appropriate circumstances, equitable remedies such as an injunction or
other forms of non-monetary relief would remain available under Pennsylvania
law. The provision does not affect a director's responsibilities under any other
law, such as federal securities laws, criminal laws or state or federal
environmental laws. The Company's Amended and Restated Bylaws provide that the
Company shall indemnify its officers and directors to the fullest extent
permitted by Pennsylvania law, including some instances in which indemnification
is otherwise discretionary under Pennsylvania law.
In general, any officer or director of the Company shall be indemnified by
the Company against expenses including attorneys' fees, judgments, fines and
settlements actually and reasonably incurred by that person in connection with a
legal proceeding as a result of such relationship, whether or not the
indemnified liability arises from an action by or in the right of the Company,
if the officer or director acted in good faith and in the manner believed to be
in, or not opposed to, the Company's best interest, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the conduct
was unlawful. Such indemnity is limited to the extent that (i) such person is
not otherwise indemnified and (ii) such indemnifications are not prohibited by
Pennsylvania law or any other applicable law.
Any indemnification under the previous paragraph (unless ordered by a
court) shall be made by the Company only as authorized in the specific case upon
the determination that indemnification of the director or officer is proper in
the circumstances because that person has met the applicable standard of conduct
set forth above. Such determination shall be made (i) by the Board of Directors
by a majority vote of a quorum of disinterested directors who are not parties to
such action or (ii) if such quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion. To the extent that a director or officer of the Company shall
be successful in prosecuting an indemnity claim, the reasonable expenses of any
such person and the fees and expenses of any special legal counsel engaged to
determine the possibility of indemnification shall be borne by the Company.
II-1
<PAGE> 153
Expenses incurred by a director or officer of the Company in defending a
civil or criminal action, suit or proceeding shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that person is not entitled to be
indemnified by the Company under the Bylaws or applicable provisions of
Pennsylvania law.
The indemnification and advancement of expenses provided by, or granted
pursuant to Article VIII of the Bylaws is not deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled, both as to action in that person's official capacity and as to action
in another capacity while holding such office.
To satisfy its indemnification obligations, the Company may maintain
insurance, obtain a letter of credit, act as self-insurer, create a reserve,
trust, escrow, cash collateral or other fund or account, enter into
indemnification agreements, pledge or grant a security interest in any assets or
properties of the Company, or use any other mechanism or arrangement whatsoever
in such amounts, costs, terms and conditions as the Board of Directors shall
deem appropriate. The obligations of the Company to indemnify a director or
officer under Article VIII of the Bylaws is a contract between the Company and
such director or officer and no modification or repeal of the Bylaws shall
detrimentally affect such officer or director with regard to that person's acts
or omissions prior to such amendment or repeal.
Upon consummation of the Offering, the Company will purchase insurance for
its directors and officers for certain losses arising from claims or charges
made against them in their capacities as directors and officers of the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On May 21, 1996, the registrant sold a 7% Subordinated Convertible Note due
2003 in the principal amount of $25 million to Chase Equity Associates, L.P., an
affiliate of Chase Capital Partners, for the aggregate purchase price of $25
million, which is convertible into the registrant's common stock. The
transaction was intended to be exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.01 Form of Underwriting Agreement
3.01 Form of Amended and Restated Articles of Incorporation of
the Registrant
3.02 Form of Amended and Restated Bylaws of the Registrant
5.01 Opinion of Morgan, Lewis & Bockius LLP as to the Legality of
the Securities Being Registered(1)
10.01 Registration Rights Agreement, dated as of May 21, 1996,
between the Registrant and Chase Equity Associates, L.P.
10.02 Employment Agreement, dated June 25, 1993, between the
Registrant and Joseph M. Field, as amended
10.03 Employment Agreement, dated December 28, 1992, between the
Registrant and David J. Field, as amended
10.04 Employment Agreement, dated December 28, 1992, between the
Registrant and John C. Donlevie, as amended
10.05 Employment Agreement, dated March 31, 1995, between the
Registrant and Deborah Kane, as amended
10.06 Employment Agreement, dated December 28, 1992, between the
Registrant and Euguene D. Levin, as amended
</TABLE>
II-2
<PAGE> 154
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.07 Asset Purchase Agreement, dated as of January 26, 1998,
among the Registrant, Tuscaloosa Broadcasting, Inc.,
Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio
of Rochester Licensee, Inc.
10.08 Time Brokerage Agreement, dated as of January 26, 1998,
among the Registrant, Tuscaloosa Broadcasting, Inc.,
Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio
of Rochester Licensee, Inc.
10.09 Loan Agreement, dated as of February 13, 1998, among the
Registrant, Key Corporate Capital Inc., as administrative
agent, Bank of America, National Trust and Savings
Association, as syndication agent, and certain banks listed
therein, as amended by the First Amendment to Loan Agreement
dated October 8, 1998
10.10 Asset Purchase Agreement, dated as of August 13, 1998, among
CBS Radio, Inc., CBS Radio License, Inc. and the Registrant
10.11 Time Brokerage Agreement, dated as of August 13, 1998, among
CBS Radio, Inc., CBS Radio License, Inc. and the Registrant
10.12 Asset Purchase Agreement, dated as of August 13, 1998, among
the Registrant, CBS Radio, Inc. and CBS Radio License, Inc.
10.13 Time Brokerage Agreement, dated as of August 13, 1998, among
the Registrant, CBS Radio, Inc. and CBS Radio License, Inc.
10.14 Asset Purchase Agreement, dated as of August 13, 1998, among
CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition
II, Inc. and the Registrant
10.15 Time Brokerage Agreement, dated as of August 13, 1998, among
CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition
II, Inc. and the Registrant
21.01 Information Regarding Subsidiaries of the Registrant(1)
23.01 Consent of Deloitte & Touche LLP, Philadelphia, PA
23.02 Consent of Deloitte & Touche LLP, Salt Lake City, UT
23.03 Consent of Deloitte & Touche LLP, Cincinnati, OH
23.04 Consent of Deloitte & Touche LLP, Seattle, WA
23.05 Consent of Deloitte & Touche LLP, Boston, MA
23.06 Consent of Arthur Andersen LLP, Baltimore, MD
23.07 Consent of Morgan, Lewis & Bockius LLP (included in opinion
filed as Exhibit 5.01)(1)
24.01 Power of Attorney (included on signature page of this
registration statement)(2)
27.01 Financial Data Schedule
99.01 Consent of Person About to Become a Director from Michael R.
Hannon(2)
</TABLE>
- ---------------
(1) To be filed by amendment.
(2) Previously filed with Registration Statement dated August 13, 1998.
(b) FINANCIAL STATEMENT SCHEDULE
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
II-3
<PAGE> 155
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 156
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Bala Cynwyd, Pennsylvania, on
November 4, 1998.
ENTERCOM COMMUNICATIONS CORP.
By: /s/ JOSEPH M. FIELD
------------------------------------
Joseph M. Field
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
* Chairman of the Board and November 4, 1998
- ----------------------------------------------------- Chief Executive Officer
Joseph M. Field (Principal Executive Officer)
* President, Chief Operating November 4, 1998
- ----------------------------------------------------- Officer, Chief Financial
David J. Field Officer and a Director
(Principal Financial Officer)
* Executive Vice President, November 4, 1998
- ----------------------------------------------------- General Counsel and a
John C. Donlevie Director
* Treasurer and Controller November 4, 1998
- ----------------------------------------------------- (Principal Accounting
Eugene D. Levin Officer)
* Director November 4, 1998
- -----------------------------------------------------
Marie H. Field
* Director November 4, 1998
- -----------------------------------------------------
Herbert Kean, M.D
* Director November 4, 1998
- -----------------------------------------------------
Lee Hague
* Director November 4, 1998
- -----------------------------------------------------
Thomas H. Ginley, M.D.
* Director November 4, 1998
- -----------------------------------------------------
S. Gordon Elkins
*By:
/s/ DAVID J. FIELD
------------------------------------------------
David J. Field
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 157
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Entercom Communications Corp.:
We have audited the accompanying consolidated financial statements of
Entercom Communications Corp. and subsidiaries (the "Company") as of September
30, 1996 and 1997, and June 30, 1998 and for each of the three years in the
period ended September 30, 1997 and for the nine months ended June 30, 1998, and
have issued our report thereon dated September 18, 1998 (October 8, 1998 as to
Note 12(F) and October 29, 1998 as to Note 6(B)(3)) (included elsewhere in this
Registration Statement). Our audits also included the financial statement
schedule listed in Item 16 of this Registration Statement. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Philadelphia, PA
September 18, 1998
(October 8, 1998 as to Note 12(F)
and October 29, 1998 as to Note 6(B)(3))
<PAGE> 158
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ENTERCOM COMMUNICATIONS CORP.
YEARS ENDED SEPTEMBER 30, 1995, 1996, AND 1997
AND NINE MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS
BEGINNING COSTS AND FROM BALANCE AT
ALLOWANCE FOR DOUBTFUL ACCOUNTS OF PERIOD EXPENSES RESERVES(A) END OF PERIOD
------------------------------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
1995.................................. $ 65,964 $225,370 $227,810 $ 63,524
1996.................................. 63,524 318,599 265,283 116,840
1997.................................. 116,840 548,726 373,566 292,000
1998.................................. 292,000 931,797 802,181 421,616
</TABLE>
- ---------------
(A) Uncollectible accounts written off.
<PAGE> 159
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.01 Form of Underwriting Agreement
3.01 Form of Amended and Restated Articles of Incorporation of
the Registrant
3.02 Form of Amended and Restated Bylaws of the Registrant
10.01 Registration Rights Agreement, dated as of May 21, 1996,
between the Registrant and Chase Equity Associates, L.P.
10.02 Employment Agreement, dated June 25, 1993, between the
Registrant and Joseph M. Field, as amended
10.03 Employment Agreement, dated December 28, 1992, between the
Registrant and David J. Field, as amended
10.04 Employment Agreement, dated December 28, 1992, between the
Registrant and John C. Donlevie, as amended
10.05 Employment Agreement, dated March 31, 1995, between the
Registrant and Deborah Kane, as amended
10.06 Employment Agreement, dated December 28, 1992, between the
Registrant and Euguene D. Levin, as amended
10.07 Asset Purchase Agreement, dated as of January 26, 1998,
among the Registrant, Tuscaloosa Broadcasting, Inc.,
Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio
of Rochester Licensee, Inc.
10.08 Time Brokerage Agreement, dated as of January 26, 1998,
among the Registrant, Tuscaloosa Broadcasting, Inc.,
Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio
of Rochester Licensee, Inc.
10.09 Loan Agreement, dated as of February 13, 1998, among the
Registrant, Key Corporate Capital Inc., as administrative
agent, Bank of America, National Trust and Savings
Association, as syndication agent, and certain banks listed
therein, as amended by the First Amendment to Loan Agreement
dated October 8, 1998
10.10 Asset Purchase Agreement, dated as of August 13, 1998, among
CBS Radio, Inc., CBS Radio License, Inc. and the Registrant
10.11 Time Brokerage Agreement, dated as of August 13, 1998, among
CBS Radio, Inc., CBS Radio License, Inc. and the Registrant
10.12 Asset Purchase Agreement, dated as of August 13, 1998, among
the Registrant, CBS Radio, Inc. and CBS Radio License, Inc.
10.13 Time Brokerage Agreement, dated as of August 13, 1998, among
the Registrant, CBS Radio, Inc. and CBS Radio License, Inc.
10.14 Asset Purchase Agreement, dated as of August 13, 1998, among
CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition
II, Inc. and the Registrant
10.15 Time Brokerage Agreement, dated as of August 13, 1998, among
CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition
II, Inc. and the Registrant
23.01 Consent of Deloitte & Touche LLP, Philadelphia, PA
23.02 Consent of Deloitte & Touche LLP, Salt Lake City, UT
23.03 Consent of Deloitte & Touche LLP, Cincinnati, OH
23.04 Consent of Deloitte & Touche LLP, Seattle, WA
23.05 Consent of Deloitte & Touche LLP, Boston, MA
23.06 Consent of Arthur Andersen LLP, Baltimore, MD
27.01 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 1.01
_________ Shares
ENTERCOM COMMUNICATIONS CORP.
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
UNDERWRITING AGREEMENT
___________, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
BT ALEX.BROWN INCORPORATED
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO. INCORPORATED
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue
New York, N.Y. 10010-3629
Ladies and Gentlemen:
1. Introductory. Entercom Communications Corp., a Pennsylvania
corporation (the "Company") proposes to issue and sell ___________ shares of its
Class A Common Stock, par value $.01 per share (the "Securities") and Chase
Equity Associates, L.P. (the "Selling Stockholder") proposes to sell an
aggregate of __________ outstanding shares of the Securities (such __________
shares of Securities being hereinafter referred to as the "Firm Securities").
The Company also proposes to sell to the Underwriters, at the option of the
Underwriters, an aggregate of not more than __________ additional shares of its
Securities and the Selling Stockholder also proposes to sell to the
Underwriters, at the option of the Underwriters, an aggregate of not more than
__________ additional outstanding shares of the Company's Securities, as set
forth below (such ____________ additional shares being hereinafter referred to
as the "Optional Securities"). The Firm Securities and the Optional Securities
are herein collectively called the "Offered Securities." The Company and the
Selling Stockholder hereby agree with the several Underwriters named in Schedule
A hereto (the "Underwriters") as follows:
2. Representations and Warranties of the Company and the Selling
Stockholder. (a) The Company represents and warrants to, and agrees with, the
several Underwriters that:
(i) Registration statement (No. 333-61381) relating to the
Offered Securities, including a form of prospectus, has been filed with
the Securities and Exchange Commission (the "Commission") and either
(A) has been declared effective under the Securities Act of 1933, as
amended (the "Act") and is not proposed to be amended or (B) is
proposed to be amended by amendment or post-effective amendment. If
such registration statement (the "initial registration statement") has
been declared effective, either (A) an additional registration
statement (the "additional registration statement") relating to the
Offered Securities may have been filed with the Commission pursuant to
Rule 462(b) ("Rule 462(b)") under the Act and, if so filed, has become
effective upon filing pursuant to such Rule and the Offered Securities
all have been duly registered under the Act pursuant to the initial
registration statement and, if applicable, the additional registration
statement or (B) such an additional registration statement is proposed
to be filed with the Commission pursuant to Rule 462(b) and
1
<PAGE> 2
will become effective upon filing pursuant to such Rule and upon such
filing the Offered Securities will all have been duly registered under
the Act pursuant to the initial registration statement and such
additional registration statement. If the Company does not propose to
amend the initial registration statement or if an additional
registration statement has been filed and the Company does not propose
to amend it, and if any post-effective amendment to either such
registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent amendment (if
any) to each such registration statement has been declared effective by
the Commission or has become effective upon filing pursuant to Rule
462(c) ("Rule 462(c)") under the Act or, in the case of the additional
registration statement, Rule 462(b). For purposes of this Agreement,
"Effective Time" with respect to the initial registration statement or,
if filed prior to the execution and delivery of this Agreement, the
additional registration statement means (A) if the Company has advised
the Representatives that it does not propose to amend such registration
statement, the date and time as of which such registration statement,
or the most recent post-effective amendment thereto (if any) filed
prior to the execution and delivery of this Agreement, was declared
effective by the Commission or has become effective upon filing
pursuant to Rule 462(c), or (B)if the Company has advised the
Representatives that it proposes to file an amendment or post-effective
amendment to such registration statement, the date and time as of which
such registration statement, as amended by such amendment or
post-effective amendment, as the case may be, is declared effective by
the Commission. If an additional registration statement has not been
filed prior to the execution and delivery of this Agreement but the
Company has advised the Representatives that it proposes to file one,
"Effective Time" with respect to such additional registration statement
means the date and time as of which such registration statement is
filed and becomes effective pursuant to Rule 462(b). "Effective Date"
with respect to the initial registration statement or the additional
registration statement (if any) means the date of the Effective Time
thereof. The initial registration statement, as amended at its
Effective Time, including all information contained in the additional
registration statement (if any) and deemed to be a part of the initial
registration statement as of the Effective Time of the additional
registration statement pursuant to the General Instructions of the Form
on which it is filed and including all information (if any) deemed to
be a part of the initial registration statement as of its Effective
Time pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is
hereinafter referred to as the "Initial Registration Statement." The
additional registration statement, as amended at its Effective Time,
including the contents of the initial registration statement
incorporated by reference therein and including all information (if
any) deemed to be a part of the additional registration statement as of
its Effective Time pursuant to Rule 430A(b), is hereinafter referred to
as the "Additional Registration Statement." The Initial Registration
Statement and the Additional Registration are hereinafter referred to
collectively as the "Registration Statements" and individually as a
"Registration Statement." The form of prospectus relating to the
Offered Securities, as first filed with the Commission pursuant to and
in accordance with Rule 424(b) ("Rule 424(b)") under the Act or (if no
such filing is required) as included in a Registration Statement, is
hereinafter referred to as the "Prospectus." No document has been or
will be prepared or distributed in reliance on Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement: (A)
on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement conformed in all respects to the
requirements of the Act and the rules and regulations of the Commission
("Rules and Regulations") and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, (B)
on the Effective Date of the Additional Registration Statement (if
any), each Registration Statement conformed or will conform, in all
respects to the requirements of the Act and the Rules and Regulations
and did not include, or will not include, any untrue statement of a
material fact and did not omit, or will not omit, to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and (C) on the date of this Agreement, the
Initial Registration Statement and, if the Effective Time of the
Additional Registration Statement is prior to the execution and
delivery of this Agreement, the Additional Registration Statement each
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b) or (if no such filing is required) at the Effective Date of the
Additional Registration
2
<PAGE> 3
Statement in which the Prospectus is included, each Registration
Statement and the Prospectus will conform, in all respects to the
requirements of the Act and the Rules and Regulations, and neither of
such documents includes, or will include, any untrue statement of a
material fact or omits, or will omit, to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of
this Agreement: on the Effective Date of the Initial Registration
Statement, the Initial Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act and the Rules
and Regulations, neither of such documents will include any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and no Additional Registration Statement has
been or will be filed. The two preceding sentences do not apply to
statements in or omissions from a Registration Statement or the
Prospectus based upon written information furnished to the Company by
any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information
is that described as such in Section 7(c) hereof.
(iii) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State of
Pennsylvania, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus; and
the Company is duly qualified to do business as a foreign corporation
in good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification.
(iv) Each subsidiary of the Company, has been duly
incorporated and is an existing corporation in good standing under the
laws of the jurisdiction of its incorporation, with power and authority
(corporate and other) to own its properties and conduct its business as
described in the Prospectus; and each subsidiary of the Company is duly
qualified to do business as a foreign corporation in good standing in
all other jurisdictions in which its ownership or lease of property or
the conduct of its business requires such qualification; all of the
issued and outstanding capital stock of each subsidiary of the Company
has been duly authorized and validly issued and is fully paid and
nonassessable; and the capital stock of each subsidiary owned by the
Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects.
(v) The Offered Securities and all other outstanding shares of
capital stock of the Company have been duly authorized and validly
issued, fully paid and nonassessable and conform to the description
thereof contained in the Prospectus; and the stockholders of the
Company have no preemptive rights with respect to the Securities and,
except as described in the Prospectus, there are no outstanding
options, warrants or other rights calling for the issuance of, or any
commitment, plan or arrangement to issue, any shares of capital stock
of the Company or any security convertible into or exchangeable or
exercisable for any capital stock of the Company.
(vi) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or any
Underwriter for a brokerage commission, finder's fee or other like
payment in connection with this offering.
(vii) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to a Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Act.
(viii) The Securities have been approved for listing on The
New York Stock Exchange subject to notice of issuance.
3
<PAGE> 4
(ix) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body (including, without
limitation, the Federal Communications Commission (the "FCC") or any
court is required to be obtained or made by the Company for the
consummation of the transactions contemplated by this Agreement in
connection with the sale of the Offered Securities, except such as have
been obtained and made under the Act and such as may be required under
state securities laws.
(x) The execution, delivery and performance of this Agreement,
and the consummation of the transactions herein contemplated will not
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any statute, any rule, regulation or
order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any subsidiary of the
Company or any of their properties, or any agreement or instrument to
which the Company or any such subsidiary is a party or by which the
Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject, or the
charter or by-laws of the Company or any such subsidiary, and the
Company has full power and authority to authorize, issue and sell the
Offered Securities pursuant to this Agreement.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
(xii) Except as disclosed in the Prospectus, the Company and
its subsidiaries have good and marketable title to all real properties
and all other properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the
value thereof or materially interfere with the use made or to be made
thereof by them; and except as disclosed in the Prospectus, the Company
and its subsidiaries hold any leased real or personal property under
valid and enforceable leases with no exceptions that would materially
interfere with the use made or to be made thereof by them.
(xiii) The Company and its subsidiaries possess adequate
certificates, authorities or permits and hold all necessary licenses
(including, without limitation, licenses issued by the FCC) issued by
appropriate governmental agencies or bodies necessary to conduct the
business now operated by them and have not received any notice of
proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the
Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the condition (financial or
other), business, properties or results of operations ("Material
Adverse Effect") of the Company and its subsidiaries taken as a whole.
(xiv) No labor dispute with the employees of the Company or
any subsidiary exists or, to the knowledge of the Company, is imminent
that might have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole.
(xv) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and other
rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property (collectively,
"intellectual property rights") necessary to conduct the business now
operated by them, or presently employed by them, and have not received
any notice of infringement of or conflict with asserted rights of
others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole.
(xvi) The Company and its subsidiaries have filed all
necessary federal, state, local and foreign income and franchise tax
returns, except where the failure to file such returns would not have a
Material Adverse Effect, and the Company and its subsidiaries have paid
all taxes shown as due thereon; and other than tax deficiencies that
the Company or its subsidiaries are contesting in good faith and for
which adequate reserves have been provided, there is no tax deficiency
that has been asserted against the Company or its subsidiaries that
would, individually or in the aggregate, have a Material Adverse
Effect.
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<PAGE> 5
(xvii) Except as disclosed in the Prospectus, neither the
Company nor any of its subsidiaries is in violation of any statute, any
rule, regulation, decision or order of any governmental agency or body
or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection
or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "environmental laws"), owns or operates
any real property contaminated with any substance that is subject to
any environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to any
claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the
aggregate have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole; and the Company is not aware of any
pending investigation which might lead to such a claim.
(xviii) Except as disclosed in the Prospectus, there are no
pending actions, suits, proceedings, inquiries or investigations before
or brought by any court or governmental agency or body (including,
without limitation, the FCC) against or affecting the Company, any of
its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole, or would materially and
adversely affect the ability of the Company to perform its obligations
under this Agreement, or which are otherwise material in the context of
the sale of the Offered Securities; and no such actions, suits or
proceedings are threatened or, to the Company's knowledge,
contemplated.
(xix) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of
the Company and its consolidated subsidiaries as of the dates shown and
their results of operations and cash flows for the periods shown, and,
except as otherwise disclosed in the Prospectus, such financial
statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent
basis; and the schedules included in each Registration Statement
present fairly the information required to be stated therein; and the
assumptions used in preparing the pro forma financial statements
included in each Registration Statement and the Prospectus provide a
reasonable basis for presenting the significant effects directly
attributable to the transactions or events described therein, the
related pro forma adjustments give appropriate effect to those
assumptions, and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical
financial statement amounts.
(xx) Except as disclosed in the Prospectus, since the date of
the latest audited financial statements included in the Prospectus
there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as a whole, and, except as
disclosed in or contemplated by the Prospectus, there has been no
dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(xxi) The statistical and market-related data included in the
Prospectus are based on or derived from sources that the Company
believes to be accurate and reliable.
(xxii) Each of the Company and its subsidiaries (i) make and
keep accurate books and records and (ii) maintain internal accounting
controls that provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its
financial statements and to maintain profitability for its assets, (C)
access to its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
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<PAGE> 6
(xxiii) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Prospectus, will not be an
"investment company" as defined in the Investment Company Act of 1940,
as amended.
(xxiv) Each of Deloitte & Touche LLP and Arthur Andersen LLP,
which firms have examined the consolidated financial statements as set
forth in their reports included in the Prospectus, is an independent
public accounting firm within the meaning of the Act and the rules and
regulations thereunder.
(xxv) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida Statutes
and the Company agrees to comply with such Section if prior to the
completion of the distribution of the Offered Securities it commences
doing such business.
(b) The Selling Stockholder represents and warrants to, and
agrees with, the several Underwriters that:
(i) The Selling Stockholder has and on each Closing Date
hereinafter mentioned will have valid and unencumbered title to the
Offered Securities to be delivered by the Selling Stockholder on such
Closing Date and full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver the Offered
Securities to be delivered by the Selling Stockholder on such Closing
Date hereunder; and upon the delivery of and payment for the Offered
Securities on each Closing Date hereunder the several Underwriters will
acquire valid and unencumbered title to the Offered Securities to be
delivered by the Selling Stockholder on such Closing Date.
(ii) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement: (A)
on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement conformed in all respects to the
requirements of the Act and the Rules and Regulations and did not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, (B) on the Effective Date of the
Additional Registration Statement (if any), each Registration Statement
conformed, or will conform, in all respects to the requirements of the
Act and the Rules and Regulations did not include, or will not include,
any untrue statement of a material fact and did not omit, or will not
omit, to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (C) on the
date of this Agreement, the Initial Registration Statement and, if the
Effective Time of the Additional Registration Statement is prior to the
execution and delivery of this Agreement, the Additional Registration
Statement each conforms, and at the time of filing of the Prospectus
pursuant to Rule 424(b) or (if no such filing is required) at the
Effective Date of the Additional Registration Statement in which the
Prospectus is included, each Registration Statement and the Prospectus
will conform, in all respects to the requirements of the Act and the
Rules and Regulations, and neither of such documents includes, or will
include, any untrue statement of a material fact or omits, or will omit
to state any material fact required to be stated therein or necessary
to make the statements therein not misleading. If the Effective Time of
the Initial Registration Statement is subsequent to the execution and
delivery of this Agreement: on the Effective Date of the Initial
Registration Statement, the Initial Registration Statement and the
Prospectus will conform in all respects to the requirements of the Act
and the Rules and Regulations, neither of such documents will include
any untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. The two preceding sentences apply
only to the extent that any statements in or omissions from a
Registration Statement or the Prospectus are based on written
information furnished to the Company by the Selling Stockholder
specifically for use therein.
(iii) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Selling Stockholder
and any person that would give rise to a valid claim against the
Selling
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<PAGE> 7
Stockholder or any Underwriter for a brokerage commission, finder's fee
or other like payment in connection with this offering.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company and the Selling
Stockholder agree, severally and not jointly, to sell to each Underwriter, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
and the Selling Stockholder, at a purchase price of $_ per share, the number of
Firm Securities set forth below the caption "Company" or "Selling Stockholder,"
as the case may be, and opposite the name of such Underwriter in Schedule A
hereto.
Certificates in negotiable form for the Offered Securities to be sold
by the Selling Stockholder hereunder have been placed in custody, for delivery
under this Agreement, under a Custody Agreement made with __________, as
custodian ("Custodian"). The Selling Stockholder agrees that the shares
represented by the certificates held in custody for the Selling Stockholder
under such Custody Agreement are subject to the interests of the Underwriters
hereunder, that the arrangements made by the Selling Stockholder for such
custody are to that extent irrevocable, and that the obligations of the Selling
Stockholder hereunder shall not be terminated by operation of law, whether by
the death of the Selling Stockholder or the occurrence of any other event, or in
the case of a trust, by the death of any trustee or trustees or the termination
of such trust. If the Selling Stockholder or any such trustee or trustees should
die, or if any other such event should occur, or if any of such trusts should
terminate, before the delivery of the Offered Securities hereunder, certificates
for such Offered Securities shall be delivered by the Custodian in accordance
with the terms and conditions of this Agreement as if such death or other event
or termination had not occurred, regardless of whether or not the Custodian
shall have received notice of such death or other event or termination.
The Company and the Custodian will deliver the Firm Securities to the
Representatives for the accounts of the Underwriters, against payment of the
purchase price in Federal (same day) funds by official bank check or checks or
wire transfer to an account at a bank acceptable to Credit Suisse First Boston
Corporation ("CSFBC") drawn to the order of the Company at the office of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York, at 10:00 A.M., New
York time, on _, 1998, or at such other time not later than seven full business
days thereafter as CSFBC and the Company determine, such time being herein
referred to as the "First Closing Date." For purposes of Rule 15c6-1 under the
Securities Exchange Act of 1934, the First Closing Date (if later than the
otherwise applicable settlement date) shall be the settlement date for payment
of funds and delivery of securities for all the Offered Securities sold pursuant
to the offering. The certificates for the Firm Securities so to be delivered
will be in definitive form, in such denominations and registered in such names
as CSFBC requests and will be made available for checking and packaging at the
above office of Weil, Gotshal & Manges LLP, at least 24 hours prior to the First
Closing Date.
In addition, upon written notice from CSFBC given to the Company and
the Selling Stockholder from time to time not more than 30 days subsequent to
the date of the Prospectus, the Underwriters may purchase all or less than all
of the Optional Securities at the purchase price per Security to be paid for the
Firm Securities. The Company and the Selling Stockholder agree, severally and
not jointly, to sell to the Underwriters the respective numbers of Optional
Securities obtained by multiplying the number of shares specified in such notice
by a fraction the numerator of which is in the case of the Company and in the
case of the Selling Stockholder and the denominator of which is the total number
of Optional Securities (subject to adjustment by CSFBC to eliminate fractions).
Such Optional Securities shall be purchased from the Company and the Selling
Stockholder for the account of each Underwriter in the same proportion as the
number of Firm Securities set forth opposite such Underwriter's name bears to
the total number of Firm Securities (subject to adjustment by CSFBC to eliminate
fractions) and may be purchased by the Underwriters only for the purpose of
covering over-allotments made in connection with the sale of the Firm
Securities. No Optional Securities shall be sold or delivered unless the Firm
Securities previously have been, or simultaneously are, sold and delivered. The
right to purchase the Optional Securities or any portion thereof may be
exercised from time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC to the Company and
the Selling Stockholder.
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<PAGE> 8
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date," which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company and the Custodian
will deliver the Optional Securities being purchased on each Optional Closing
Date to the Representatives for the accounts of the several Underwriters,
against payment of the purchase price therefor in Federal (same day) funds by
official bank check or checks or wire transfer to an account at a bank
acceptable to CSFBC drawn to the order of the Company, at the above office of
Weil, Gotshal & Manges LLP. The certificates for the Optional Securities being
purchased on each Optional Closing Date will be in definitive form, in such
denominations and registered in such names as CSFBC requests upon reasonable
notice prior to such Optional Closing Date and will be made available for
checking and packaging at the above office of Weil, Gotshal & Manges LLP at a
reasonable time in advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company and the Selling Stockholder. The
Company agrees with the several Underwriters and the Selling Stockholder that:
(a) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the
Company will file the Prospectus with the Commission pursuant to and in
accordance with subparagraph (1) (or, if applicable and if consented to
by CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier
of (A) the second business day following the execution and delivery of
this Agreement or (B) the fifteenth business day after the Effective
Date of the Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to
Rule 424(b). If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement and
an additional registration statement is necessary to register a portion
of the Offered Securities under the Act but the Effective Time thereof
has not occurred as of such execution and delivery, the Company will
file the additional registration statement or, if filed, will file a
post-effective amendment thereto with the Commission pursuant to and in
accordance with Rule 462(b) on or prior to 10:00 P.M., New York time,
on the date of this Agreement or, if earlier, on or prior to the time
the Prospectus is printed and distributed to any Underwriter, or will
make such filing at such later date as shall have been consented to by
CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration
statement as filed or the related prospectus or the Initial
Registration Statement, the Additional Registration Statement (if any)
or the Prospectus and will not effect such amendment or supplementation
without CSFBC's consent; and the Company will also advise CSFBC
promptly of the effectiveness of each Registration Statement (if its
Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration
Statement or the Prospectus and of the institution by the Commission of
any stop order proceedings in respect of a Registration Statement and
will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company will promptly notify CSFBC of such event and will promptly
prepare and file with the Commission, at its own expense, an amendment
or supplement which will correct such statement or omission
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<PAGE> 9
or an amendment which will effect such compliance. Neither CSFBC's
consent to, nor the Underwriters' delivery of, any such amendment or
supplement shall constitute a waiver of any of the conditions set forth
in Section 6.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its security holders an earnings statement covering a
period of at least 12 months beginning after the Effective Date of the
Initial Registration Statement (or, if later, the Effective Date of the
Additional Registration Statement) which will satisfy the provisions of
Section II (a) of the Act. For the purpose of the preceding sentence,
"Availability Date" means the 45th day after the end of the fourth
fiscal quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "Availability Date" means the
90th day after the end of such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of
each Registration Statement (five of which will be signed and will
include all exhibits), each related preliminary prospectus, and, so
long as a prospectus relating to the Offered Securities is required to
be delivered under the Act in connection with sales by any Underwriter
or dealer, the Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBC requests. The
Prospectus shall be so furnished on or prior to 3:00 P.M., New York
time, on the business day following the later of the execution and
delivery of this Agreement or the Effective Time of the Initial
Registration Statement. All other such documents shall be so furnished
as soon as available. The Company will pay the expenses of printing and
distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as
CSFBC designates and will continue such qualifications in effect so
long as required for the distribution.
(g) During the period of five years hereafter, the Company
will furnish to the Representatives and, upon request, to each of the
other Underwriters, as soon as practicable after the end of each fiscal
year, a copy of its annual report to stockholders for such year; and
the Company will furnish to the Representatives (i) as soon as
available, a copy of each report and any definitive proxy statement of
the Company filed with the Commission under the Securities Exchange Act
of 1934, as amended, or mailed to stockholders, and (ii) from time to
time, such other information concerning the Company as CSFBC may
reasonably request.
(h) For a period of 180 days after the date of the initial
public offering of the Offered Securities, the Company will not offer,
sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under
the Act relating to, any additional shares of its Securities or
securities convertible into or exchangeable or exercisable for any
shares of its Securities, or publicly disclose the intention to make
any such offer, sale, pledge, disposition or filing, without the prior
written consent of CSFBC, except issuances of Securities pursuant to
the conversion or exchange of convertible or exchangeable securities or
the exercise of options, in each case outstanding on the date hereof,
grants of employee stock options pursuant to the terms of a plan in
effect on the date hereof, or issuances of Securities pursuant to the
exercise of such options.
(i) The Company agrees with the several Underwriters that the
Company will pay all expenses incident to the performance of the
obligations of the Company and the Selling Stockholder, as the case may
be, under this Agreement, for any filing fees and other expenses
(including fees and disbursements of counsel) in connection with
qualification of the Offered Securities for sale under the laws of such
jurisdictions as CSFBC designates and the printing of memoranda
relating thereto, for the filing fee incident to, and the reasonable
fees and disbursements of counsel to the Underwriters in connection
with, the review by the National Association of Securities Dealers,
Inc. of the Offered Securities, for any travel expenses of the
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<PAGE> 10
Company's officers and employees and any other expenses of the Company
in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities, for any transfer taxes on the
sale by the Selling Stockholder of the Offered Securities to the
Underwriters and for expenses incurred in distributing preliminary
prospectuses and the Prospectus (including any amendments and
supplements thereto) to the Underwriters.
(j) The Selling Stockholder agrees to deliver to CSFBC,
attention: Transactions Advisory Group on or prior to the First Closing
Date a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof.
(k) The Selling Stockholder agrees, for a period of 180 days
after the date of the initial public offering of the Offered
Securities, not to offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any additional shares of the
Securities of the Company or securities convertible into or
exchangeable or exercisable for any shares of Securities, or publicly
disclose the intention to make any such offer, sale, pledge or
disposal, without the prior written consent of CSFBC.
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholder herein, to the
accuracy of the statements of Company officers made pursuant to the provisions
hereof, to the performance by the Company and the Selling Stockholder of their
respective obligations hereunder and to the following additional conditions
precedent:
(a) The Representatives shall have received a letter, dated
the date of delivery thereof (which, if the Effective Time of the
Initial Registration Statement is prior to the execution and delivery
of this Agreement, shall be on or prior to the date of this Agreement
or, if the Effective Time of the Initial Registration Statement is
subsequent to the execution and delivery of this Agreement~ shall be
prior to the filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to such Effective
Time), of Deloitte & Touche LLP and Arthur Andersen LLP confirming that
they are independent public accountants within the meaning of the Act
and the applicable published Rules and Regulations thereunder and
stating to the effect that:
(i) in their opinion the financial statements and
schedules examined by them and included in the Registration
Statements comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published Rules and Regulations;
(ii) with respect to Deloitte & Touche LLP only, they
have performed the procedures specified by the American
Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of
Auditing Standards No. 71, Interim Financial Information, on
the unaudited financial statements included in the
Registration Statements;
(iii) with respect to Deloitte & Touche LLP only, on
the basis of the review referred to in clause (ii) above, a
reading of the latest available interim financial statements
of the Company, inquiries of officials of the Company who have
responsibility for financial and accounting matters and other
specified procedures, nothing came to their attention that
caused them to believe that:
(A) the unaudited financial statements
included in the Registration Statements do not comply
as to form in all material respects with the
applicable accounting requirements of the Act and the
related published Rules and Regulations or any
material modifications should be made to such
unaudited financial statements for them to be in
conformity with generally accepted accounting
principles;
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<PAGE> 11
(B) at the date of the latest available
balance sheet read by such accountants, or at a
subsequent specified date not more than three
business days prior to the date of this Agreement,
there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt
of the Company and its consolidated subsidiaries or,
at the date of the latest available balance sheet
read by such accountants, there was any decrease in
consolidated net assets, as compared with amounts
shown on the latest balance sheet included in the
Prospectus; or
(C) for the period from the closing date of
the latest income statement included in the
Prospectus to the closing date of the latest
available income statement read by such accountants
there were any decreases, as compared with the
corresponding period of the previous year and with
the period of corresponding length ended the date of
the latest income statement included in the
Prospectus, in consolidated net broadcast revenue,
net income (loss) or in the total or per share
amounts of consolidated income (loss) before
extraordinary items;
except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such
letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration Statements
(in each case to the extent that such dollar amounts,
percentages and other financial information are derived from
the general accounting records of the Company and its
subsidiaries subject to the internal controls of the Company's
accounting system or are derived directly from such records by
analysis or computation) with the results obtained from
inquiries, a reading of such general accounting records and
other procedures specified in such letter and have found such
dollar amounts, percentages and other financial information to
be in agreement with such results, except as otherwise
specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statements is subsequent to the execution and
delivery of this Agreement, "Registration Statements" shall mean the
initial registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statements is prior to the execution and delivery of this Agreement but
the Effective Time of the Additional Registration Statement is
subsequent to such execution and delivery, "Registration Statements"
shall mean the Initial Registration Statement and the additional
registration statement as proposed to be filed or as proposed to be
amended by the post-effective amendment to be filed shortly prior to
its Effective Time, and (iii) "Prospectus" shall mean the prospectus
included in the Registration Statements.
(b) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this Agreement,
such Effective Time shall have occurred not later than 10:00 P.M., New
York time, on the date of this Agreement or such later date as shall
have been consented to by CSFBC. If the Effective Time of the
Additional Registration Statement (if any) is not prior to the
execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of
this Agreement or, if earlier, the time the Prospectus is printed and
distributed to any Underwriter, or shall have occurred at such later
date as shall have been consented to by CSFBC. If the Effective Time of
the Initial Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with
the Commission in accordance with the Rules and Regulations and Section
5(a) of this Agreement. Prior to such Closing Date, no stop order
suspending the effectiveness of a Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Selling Stockholder, the Company
or the Representatives, shall be contemplated by the Commission.
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<PAGE> 12
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition
(financial or other), business, properties or results of operations of
the Company or its subsidiaries which, in the judgment of a majority in
interest of the Underwriters including the Representatives, is material
and adverse and makes it impractical or inadvisable to proceed with
completion of the public offering or the sale of and payment for the
Offered Securities; (ii) any downgrading in the rating of any debt
securities or preferred stock of the Company by any "nationally
recognized statistical rating organization" (as defined for purposes of
Rule 436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating of any debt
securities or preferred stock of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iii) any
suspension or limitation of trading in securities generally on The New
York Stock Exchange, or any setting of minimum prices for trading on
such exchange, or any suspension of trading of any securities of the
Company on any exchange or in the over-the-counter market; (iv) any
banking moratorium declared by U.S. Federal, New York or Delaware
authorities; or (y) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war by Congress
or any other substantial national or international calamity or
emergency if, in the judgment of a majority in interest of the
Underwriters including the Representatives, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities.
(d) The Representatives shall have received an opinion, dated
such Closing Date, of Morgan, Lewis & Bockius LLP, counsel for the
Company, to the effect that:
(i) Each of the Company and Entercom Portland, LLC,
Entercom Portland License, LLC, Entercom Rochester, Inc. and
[the Boston Subsidiaries] (the "Subsidiaries") has been duly
incorporated and is an existing corporation in good standing
under the laws of the state of its incorporation, with
corporate power and authority to own its properties and
conduct its business as described in the Prospectus; and the
Company and each Subsidiary is duly qualified to do business
as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or
the conduct of its business requires such qualification;
(ii) Except as set forth in the Prospectus, all of
the outstanding shares of capital stock of, or other ownership
interests in, each of the Subsidiaries have been duly
authorized and validly issued and are fully paid and
nonassessable, and were not issued in violation of any
preemptive rights, rights of first refusal or other similar
rights (in each case created by statute or under any
Subsidiary's certificate of incorporation or bylaws or any
agreement to which any Subsidiary is a party of which we have
knowledge); to such counsel's knowledge, all such shares are
owned by the Company, free and clear of any security interest,
claim, lien, encumbrance or adverse interest of any nature,
except liens set forth in the Prospectus;
(iii) The Offered Securities delivered on such
Closing Date and all other outstanding shares of capital stock
of the Company have been duly authorized and validly issued,
are fully paid and nonassessable and conform to the
description thereof contained in the Prospectus; and the
stockholders of the Company have no preemptive rights with
respect to the Securities,
(iv) Except as described in the Prospectus, to such
counsel's knowledge, there are no outstanding options,
warrants or other rights calling for the issuance of, or any
commitment plan or arrangement to issue, any shares of
capital stock of the Company or any security convertible into
or exchangeable or exercisable for any capital stock of the
Company.
12
<PAGE> 13
(v) Except as described in the Prospectus, there are
no contracts, agreements or understandings known to such
counsel between the Company and any person granting such
person the right to require the Company to file a registration
statement under the Act with respect to any securities of the
Company owned or to be owned by such person or to require the
Company to include such securities in the securities
registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration
statement filed by the Company under the Act,
(vi) No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court
is required to be obtained or made by the Company or any
Selling Stockholder for the consummation of the transactions
contemplated by this Agreement or the Custody Agreement in
connection with the sale of the Offered Securities, except
such as have been obtained and made under the Act and such as
may be required under state securities laws;
(vii) The execution, delivery and performance of this
Agreement and the Custody Agreement and the consummation of
the transactions herein or therein contemplated will not
result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any
rate, regulation or order of any governmental agency or body
or any court having jurisdiction over the Company or any
subsidiary of the Company or any of their properties, or any
agreement or instrument to which the Company or any such
subsidiary is a party or by which the Company or any such
subsidiary is bound or to which any of the properties of the
Company or any such subsidiary is subject, or the charter or
by-laws of the Company or any such subsidiary;
(viii) The Initial Registration Statement was
declared effective under the Act as of the date and time
specified in such opinion, the Additional Registration
Statement (if any) was filed and became effective under the
Act as of the date and time (if determinable) specified in
such opinion, the Prospectus either was filed with the
Commission pursuant to the subparagraph of Rule 424(b)
specified in such opinion on the date specified therein or was
included in the Initial Registration Statement or the
Additional Registration Statement (as the case may be), and,
to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of a Registration Statement or
any part thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated
under the Act, and each Registration Statement and the
Prospectus, and each amendment or supplement thereto, as of
their respective effective or issue dates, complied as to form
in all material respects with the requirements of the Act and
the Rules and Regulations; such counsel have no reason to
believe that any part of a Registration Statement or any
amendment thereto, as of its effective date or as of such
Closing Date, contained any untrue statement of a material
fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading; or that the Prospectus or any amendment or
supplement thereto, as of its issue date or as of such Closing
Date, contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make
the statements therein, in the light of the circumstances
under which they were made, not misleading; the descriptions
in the Registration Statements and Prospectus of statutes,
legal and governmental proceedings and contracts and other
documents are accurate and fairly present the information
required to be shown; and such counsel do not know of any
legal or governmental proceedings required to be described in
a Registration Statement or the Prospectus which are not
described as required or of any contracts or documents of a
character required to be described in a Registration Statement
or the Prospectus or to be filed as exhibits to a Registration
Statement which are not described and filed as required; it
being understood that such counsel need express no opinion as
to the financial statements or other financial data contained
in the Registration Statements or the Prospectus; and
(ix) This Agreement has been duly authorized,
executed and delivered by the Company and constitutes a
validly and legally binding obligation of the Company
enforceable in accordance
13
<PAGE> 14
with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors'
rights and to general equity principles; and
(x) [The [Boston II Purchase Agreement] has been duly
authorized, executed and delivered by the Company and
constitutes a validly and legally binding obligation of the
Company enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity
principles.]
(e) The Representatives shall have received an opinion, dated
such Closing Date, of Leventhal, Senter & Lerman, FCC counsel for the
Company, to the effect that:
(i) The issuance and sale of the Offered Securities
by the Company in accordance with this Agreement does not
require FCC approval assuming that, in connection therewith,
(i) no individual or entity will acquire an attributable
interest (as defined by the FCC) in the Company that requires
any such consent or approval; and (ii) not more than 25% of
the capital stock of the Company will be owned by alien
individuals or entities, or representatives thereof
(ii) The execution and delivery by the Company of
this Agreement and the issuance and sale of the Offered
Securities by the Company in accordance with this Agreement
does not constitute a violation by the Company of the
Communications Act of 1934, as amended , and the regulations
promulgated thereunder (the "Communications Laws") assuming
that in connection therewith: (i) no individual or entity will
acquire an attributable interest (as defined by the FCC) in
the Company that violates the Communications Laws; and (ii)
not more than 25% of the capital stock of the Company will be
owned by alien individuals or entities, or representatives
thereof.
(iii) The entities listed on Exhibit A and on Exhibit
B attached to such opinion (the "Licensees") hold the
respective FCC Licenses listed thereon. Such FCC Licenses are
in full force and effect.
(iv) To the knowledge of such counsel, except for
those disclosed in this Agreement, the Registration Statement
or on Exhibit C attached to such opinion, and except for
proceedings affecting the radio broadcasting industry
generally, there are no proceedings pending or threatened in
writing under the Communications Laws against the Company, the
Licensees or the stations by or before the FCC or before any
court having jurisdiction of matters under the Communications
Laws which seek the revocation, non-renewal, or material
adverse modification of any of the FCC Licenses.
(v) The FCC Statements (Which include the statements
of the Company in the Registration Statements under the
captions "Risk Factors -- Governmental Regulation of
Broadcasting Industry," "Business -- Federal Regulation of
Radio Broadcasting" and "Business -- Competition; Changes in
Broadcasting Industry"), insofar as they constitute summaries
of the Communications Laws and material proceedings
thereunder, are accurate and fairly present the information
set forth therein in all material respects.
(vi) The FCC has granted its consent (the "FCC
Consent") to (Boston 111. FCC Consent is not subject to any
material adverse conditions imposed by the FCC outside the
ordinary course, except as set forth in the FCC Mass Media
Bureau Memorandum Opinion and Order, DA 98-970, released May
21, 1998. Without limiting the other qualifications set forth
in such opinion, in providing the foregoing opinion such
counsel may assume that all other conditions set forth on the
FCC forms evidencing the FCC Consent, those set forth in the
FCC orders granting the FCC Licenses
14
<PAGE> 15
or any renewal thereof, and those set forth in the
Communications Laws imposed upon licensees generally or radio
broadcasting licenses specifically, are conditions in the
ordinary course, and such counsel need not express any view on
such matters.
(vii) To such counsel's knowledge, no petition for
reconsideration or review of the FCC Consent has been filed
with the FCC and the FCC has not rescinded or revoked the FCC
Consent or given public notice of review of the FCC Consent on
its own motion-
(f) The Representatives shall have received an opinion, dated
such Closing Date, of Mayer, Brown & Platt, counsel for the Selling
Stockholder, to the effect that:
(i) The Selling Stockholder had valid and
unencumbered title to the Offered Securities delivered by the
Selling Stockholder on such Closing Date and had full right,
power and authority to sell, assign, transfer and deliver the
Offered Securities delivered by the Selling Stockholder on
such Closing Date hereunder; and the several Underwriters have
acquired valid and unencumbered title to the Offered
Securities purchased by them from the Selling Stockholder on
such Closing Date hereunder,
(ii) No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court
is required to be obtained or made by the Selling Stockholder
for the consummation of the transactions contemplated by the
Custody Agreement or this Agreement in connection with the
sale of the Offered Securities sold by the Selling
Stockholder, except such as have been obtained and made under
the Act and such as may be required under state securities
laws;
(iii) The execution, delivery and performance of the
Custody Agreement and this Agreement and the consummation of
the transactions therein and herein contemplated will not
result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any
rule, regulation or order of any governmental agency or body
or any court having jurisdiction over the Selling Stockholder
or any of its properties or any agreement or instrument to
which the Selling Stockholder is a party or by which the
Selling Stockholder is bound or to which any of the properties
of the Selling Stockholder is subject, or the charter or
by-laws of the Selling Stockholder;
(iv) Each of this Agreement, the Power of Attorney
and the related Custody Agreement with respect to the Selling
Stockholder has been duly authorized, executed and delivered
by the Selling Stockholder and constitutes a valid and legally
binding obligation of the Selling Stockholder enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and
(g) The Representatives shall have received from Weil, Gotshal
& Manges LLP, counsel for the Underwriters, such opinion or opinions,
dated such Closing Date, with respect to the incorporation of the
Company, the validity of the Offered Securities delivered on-such
Closing Date, the Registration Statements, the Prospectus and other
related matters as the Representatives may require, and the Selling
Stockholder and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters.
(h) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that: the representations and warranties of
the Company in this Agreement are true and correct; the Company has
complied with all
15
<PAGE> 16
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to such Closing Date; no stop order
suspending the effectiveness of any Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
contemplated by the Commission; the Additional Registration Statement
(if any) satisfying the requirements of subparagraphs (1) and (3) of
Rule 462(b) was filed pursuant to Rule 462(b), including payment of the
applicable filing fee in accordance with Rule III (a) or (b) under
the Act, prior to the time the Prospectus was printed and distributed
to any Underwriter; and, subsequent to the date of the most recent
financial statements in the Prospectus, there has been no material
adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole except as set forth in or contemplated by
the Prospectus or as described in such certificate.
(i) The Representatives shall have received letters, dated
such Closing Date, of Deloitte & Touche LLP and Arthur Andersen LLP
which meet the requirements of subsection (a) of this Section, except
that the specified date referred to in such subsection will be a date
not more than three business days prior to such Closing Date for the
purposes of this subsection.
The Selling Stockholder and the Company will furnish the Representatives with
such conformed copies of such opinions, certificates, letters and documents as
the Representatives reasonably request. CSFBC may in its sole discretion waive
on behalf of the Underwriters compliance with any conditions to the obligations
of the Underwriters hereunder, whether respect of an Optional Closing Date or
otherwise.
7. Indemnification and Contribution. (a) The Company will
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (c) below.
(b) The Selling Stockholder will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
the Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Selling Stockholder will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement in or omissions or alleged omission
from any of such documents in reliance upon and in conformity with written
information furnished to the Company by an Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (c) below.
16
<PAGE> 17
(c) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company and the Selling Stockholder against any losses, claims,
damages or liabilities to which the Company or the Selling Stockholder may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Underwriter through the Representatives specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company and the Selling Stockholder in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred, it being understood and agreed that the only such information
furnished by any Underwriter consists of the following information in the
Prospectus furnished on behalf of each Underwriter: the last paragraph at the
bottom of the cover page concerning the terms of the offering by the
Underwriters, the legend concerning over-allotments and stabilizing on the
inside front cover page, the over-allotment and stabilization information
contained in the last paragraph under the caption "Underwriting," the concession
and reallowance figures appearing in the fourth paragraph under the caption
"Underwriting" and the information concerning discretionary sales contained in
the fifth paragraph under the caption "Underwriting."
(d) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
subsection (a), (b) or (c) above, notify the indemnifying party of the
commencement thereof, but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a), (b) or (c) above. In case any such action
is brought against any indemnified party and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
(e) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of the losses, claims, damages
or liabilities referred to in subsection (a), (b) or (c) above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholder on the one hand and the Underwriters on the
other from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Stockholder on
the one hand and the Underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Stockholder on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company and the Selling Stockholder bear to the total underwriting discounts and
commissions received by the Underwriters. Me relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, the Selling
Stockholder or the Underwriters and the parties' relative
17
<PAGE> 18
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (e). Notwithstanding the provisions of this subsection (e), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section II
(0 of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholder under
this Section shall be in addition to any liability which the Company and the
Selling Stockholder may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter (as hereinafter
defined) within the meaning of the Act; and the obligations of the Underwriters
under this Section shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, Upon the same terms and
conditions, to each director of the Company, to each officer of the Company who
has signed a Registration Statement and to each person, if any, who controls the
Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company and the Selling Stockholder for
the purchase of such Offered Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
nondefaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Underwriters agreed but failed to purchase on such Closing Date. If
any Underwriter or Underwriters so default and the aggregate number of shares of
Offered Securities with respect to which such default or defaults occur exceeds
10% of the total number of shares of Offered Securities that the Underwriters
are obligated to purchase on such Closing Date and arrangements satisfactory to
CSFBC, the Company and the Selling Stockholder for the purchase of such Offered
Securities by other persons are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholder, except as
provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Selling Stockholder, of the Company or its officers and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, the Selling
Stockholder, the Company or any of their respective representatives, officers or
directors or any controlling person, and will survive delivery of and payment
for the Offered Securities. If this Agreement is terminated pursuant to Section
8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company and the Selling Stockholder shall
remain responsible for the expenses to be paid or reimbursed by them pursuant to
Section 5 and the respective obligations of the Company, the Selling
Stockholder, and the Underwriters pursuant to Section 7 shall remain in effect,
and if any Offered Securities have been purchased hereunder the representations
and warranties in Section 2 and all obligations under Section 5 shall also
remain in effect. If the purchase of the Offered Securities by the Underwriters
is not consummated for any reason other than solely because of the termination
of this Agreement
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<PAGE> 19
pursuant to Section 8 or the occurrence of any event specified in clause (iii),
(iv) or (v) of Section 6(c), the Company and the Selling Stockholder will,
jointly and severally, reimburse the Underwriters for all out-of-pocket expenses
(including fees and disbursements of counsel) reasonably incurred by them in
connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department --Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at 401 City Avenue, Suite
409, Bala Cynwyd, Pennsylvania 19004, Attention: John C. Donlevie, Esq., or, if
sent to the Selling Stockholder, will be mailed, delivered or telegraphed and
confirmed to Michael R. Hannon at Chase Capital Partners, 380 Madison Avenue,
12th Floor, New York, New York 10017; provided, however, that any notice to an
Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and
confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
12. Representation. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this Agreement,
and any action under this Agreement taken by the Representatives jointly or by
CSFBC will be binding upon all the Underwriters. Joseph M. Field, David J. Field
and John C. Donlevie will act for the Selling Stockholder in connection with
such transactions, and any action under or in respect of this Agreement taken by
Joseph M. Field, David I Field or John C. Donlevie will be binding upon the
Selling Stockholder.
13. Counterparts. This Agreement may-be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to
principles of conflicts of laws.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE> 20
If the foregoing is in accordance with the Representatives' understanding of our
agreement kindly sign and return to the Company one of the counterparts hereof,
whereupon it will become a binding agreement among the Selling Stockholder, the
Company and the several Underwriters in accordance with its terms.
Very truly yours.
CHASE EQUITY ASSOCIATES, L.P.
By:____________________________________
Name:__________________________________
Title: Attorney-in-fact
ENTERCOM COMMUNICATIONS CORP.
By:____________________________________
John C. Donlevie, Esq.
Executive Vice President and General
Counsel
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
CREDIT Sam FIRST BOSTON CORPORATION
BT ALEX. BROWN INCORPORATED
GOLDMAN, SACHS & CO.
MORGAN STANLEY & Co. INCORPORATED
Acting on behalf of themselves and as the
Representatives of the several Underwriters.
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By:____________________________________
Kristin Allen
Managing Director
20
<PAGE> 21
SCHEDULE A
<TABLE>
<CAPTION>
TOTAL
NUMBER OF FIRM SECURITIES NUMBER OF
TO BE SOLD BY FIRM SECURITIES
SELLING TO BE
UNDERWRITER COMPANY STOCKHOLDER PURCHASED
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Credit Suisse First Boston Corporation.......
BT Alex. Brown Incorporated..................
Goldman, Sachs & Co..........................
Morgan Stanley & Co. Incorporated............
------ ------- -------
Total...............................
====== ======= =======
</TABLE>
21
<PAGE> 1
EXHIBIT 3.01
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ENTERCOM COMMUNICATIONS CORP.
(A Pennsylvania Corporation)
The Articles of Incorporation of Entercom Communications Corp. are
hereby amended and restated in their entirety to read as follows:
FIRST: Corporate Name. The name of the corporation is Entercom
Communications Corp. (hereinafter referred to as the "Corporation").
SECOND: Registered Office. The location and post office address of the
registered office of the Corporation in the Commonwealth of Pennsylvania is 401
City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004.
THIRD: Original Incorporation. The Corporation was incorporated under
the provisions of the Business Corporation Law, Act of May 5, 1933, as amended.
The date of its incorporation is on October 21, 1968.
FOURTH: Method of Adoption. These Amended and Restated Articles of
Incorporation were duly adopted by vote of the shareholders in accordance with
Sections 1914 and 1915 of the Pennsylvania Business Corporation Law of 1988, as
amended (the "Pennsylvania BCL").
FIFTH: Corporate Purposes. The purpose for which the Corporation is
organized is to engage in any and all lawful acts and activity for which
corporations may be organized under the Pennsylvania BCL.
SIXTH: Corporate Existence. The term of existence of the Corporation is
perpetual.
SEVENTH: Capital Stock. The aggregate number of shares which the
Corporation shall have authority to issue is 350,000,000 shares, par value of
one cent ($.01) per share, consisting of:
(a) 200,000,000 shares of Class A Common Stock (the "Class A
Common Stock");
(b) 75,000,000 shares of Class B Common Stock (the "Class B Common
Stock");
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(c) 50,000,000 shares of Class C Common Stock (the "Class C Common
Stock" and together with the Class A Common Stock and the
Class B Common Stock, the "Common Stock"); and
(d) 25,000,000 shares of Preferred Stock.
EIGHTH: Reclassification. Upon these Amended and Restated Articles of
Incorporation becoming effective with the Pennsylvania Secretary of State:
(a) each share of the common stock, par value $.05, whether voting
or non voting, of the Corporation (the "Existing Common
Stock"), held by record by any shareholder other than the
Management Shareholders (as hereinafter defined) and issued
and outstanding immediately prior to such filing shall,
without any action on the part of the holder thereof, be
converted and reclassified into, and immediately represent one
validly issued, fully paid and non-assessable share of Class A
Common Stock; and
(b) each share of the Existing Common Stock held of record by the
Management Shareholders and issued and outstanding immediately
prior to such filing shall, without any action on the part of
the holder thereof, be converted and reclassified into, and
immediately represent one validly issued, fully paid and
non-assessable share of Class B Common Stock.
Each certificate representing shares of Existing Common Stock shall
thereafter represent that number of shares of either Class A Common Stock or
Class B Common Stock, as determined in the previous sentences. Each person
holding of record a stock certificate or certificates representing shares of
Existing Common Stock shall receive, upon surrender of such certificate or
certificates, a new certificate or certificates evidencing and representing the
number of shares of Class A Common Stock or Class B Common Stock, as the case
may be, to which such person is entitled.
NINTH: Preferred Stock. The Board of Directors may authorize the
issuance from time to time of Preferred Shares in one or more classes or series
and with designations, voting rights, preferences, and special rights, if any,
as the Board of Directors may fix by resolution.
TENTH: Rights of Common Stock. The designations, powers, preferences,
rights, qualifications, limitations and restrictions of the Common Stock are as
follows:
(a) General. Except as otherwise provided herein or as otherwise
provided by applicable law, all shares of Common Stock shall
have identical rights and privileges in every respect and
shall be treated identically in all respects.
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<PAGE> 3
(b) Dividends. Subject to the prior rights and preferences, if
any, applicable to shares of the Preferred Stock, the holders
of the Common Stock shall be entitled to participate ratably,
on a share-for-share basis as if all shares were of a single
class, in such dividends, whether in cash, stock or otherwise,
as may be declared by the Board of Directors from time to time
out of funds of the Corporation legally available therefor;
provided, however, that any dividends payable in shares of
Common Stock (or payable in rights to subscribe for or
purchase shares of Common Stock or securities or indebtedness
convertible into or exchangeable for shares of Common Stock)
shall be declared and paid at the same rate on each class of
Common Stock and only:
(i) in shares of Class A Common Stock (or rights to
subscribe for or to purchase shares of Class A Common
Stock or securities or indebtedness convertible into
or exchangeable for shares of Class A Common Stock)
to holders of Class A Common Stock;
(ii) in shares of Class B Common Stock (or rights to
subscribe for or to purchase shares of Class B Common
Stock or securities or indebtedness convertible into
or exchangeable for shares of Class B Common Stock)
to holders of Class B Common Stock; and
(iii) in shares of Class C Common Stock (or rights to
subscribe for or to purchase shares of Class C Common
Stock or securities or indebtedness convertible into
or exchangeable for shares of Class C Common Stock)
to holders of Class C Common Stock.
(c) Voting.
(i) Class A and Class B. The holders of Class A Common
Stock and Class B Common Stock shall vote together as
a single class with respect to all matters submitted
to a vote of shareholders with each such holder
having the number of votes specified in subparagraph
(ii) below, except:
(A) with respect to the election of directors
which shall be governed by subparagraphs
(iii) and (iv) below;
(B) with respect to any Going Private
Transaction (as hereinafter defined), which
shall be governed by subparagraph (v) below;
and
(C) as otherwise provided by law.
(ii) Class A and Class B Votes Per Share. The Class A
Common Stock shall entitle the holders thereof to one
(1) vote per share. The Class B Common
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<PAGE> 4
Stock shall entitle the holders thereof to ten (10)
votes per share at such times as the shares are voted
by a Management Shareholder in his own right in
person or by proxy or pursuant to a Qualified Voting
Agreement; at all other times the holders of Class B
Common Stock shall be entitled to one vote per share.
(iii) Election of Directors. The holders of Class A Common
Stock and Class B Common Stock, voting as a single
class, shall have the right to vote on the election
or removal of all directors of the Corporation (other
than the Class A Directors elected pursuant to
subparagraph (iv) below and the directors, if any,
who may be elected by the holders of any class or
series of Preferred Stock) with each share of Class A
Common Stock and each share of Class B Common Stock
entitling the holder thereof to the number of votes
specified in subparagraph (ii) above.
(iv) Election of Class A Directors. The Board of Directors
shall appoint the initial Class A Directors.
Commencing with the first annual meeting of
shareholders after completion of an IPO, the holders
of Class A Common Stock shall be entitled by class
vote, exclusive of all other shareholders, to elect
two directors of the Corporation (the "Class A
Directors") with each share of Class A Common Stock
entitling the holder thereof to one (1) vote per
share; provided, each director elected pursuant to
this subparagraph must be an Independent Director (as
hereinafter defined).
(v) Going Private Transactions. With respect to a vote on
a Going Private Transaction in which the Management
Shareholders will remain shareholders after such
transaction, the holders of Class A Common Stock and
Class B Common Stock shall vote as a single class,
with each share of Class A Common Stock and Class B
Common Stock entitled to one vote.
(vi) Class C. The Class C Common Stock shall not be
entitled to vote, except as required by law.
(d) Conversion of Class A Common Stock by a Regulated Entity. The
shares of Class A Common Stock shall be convertible in whole
or in part at any time only by a Regulated Entity (as
hereinafter defined) at the option of such holder or holders,
into an equal number of fully paid and non-assessable shares
of Class C Common Stock, for no additional consideration. Such
right shall be exercised by delivering to the office of the
Corporation, or the transfer agent, (A) the certificate or
certificates representing the shares of Class A Common Stock
to be converted, duly endorsed in blank or accompanied by duly
executed proper instruments of transfer, (B) written notice to
the Corporation stating that such holder or holders elect(s)
to convert such share or shares and stating the name and
address in which
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<PAGE> 5
each certificate for shares of Class C Common Stock issued
upon such conversion is to be issued, and (C) evidence
satisfactory to the Corporation that the holder of the Class A
Common Stock is a Regulated Entity. Conversion shall be deemed
to have been effected as of the date as of which the
conversion is recorded on the books of the Corporation. The
Corporation shall deliver, or cause the transfer agent to
deliver, a certificate or certificates for the Class C Common
Stock as promptly as reasonably practicable after the
conversion has been recorded on the books of the Corporation.
(e) Conversion of Class B Common Stock.
(i) Voluntary Conversion of Class B Common Stock. Subject
to any necessary approval of the FCC (as hereinafter
defined), the shares of Class B Common Stock shall be
convertible in whole or in part at any time at the
option of the holder or holders thereof, into an
equal number of fully paid and non-assessable shares
of Class A Common Stock, for no additional
consideration. Such right shall be exercised by
delivering to the office of the Corporation (A) the
certificate or certificates representing the shares
of Class B Common Stock to be converted, duly
endorsed in blank or accompanied by duly executed
proper instruments of transfer, and (B) written
notice to the Corporation stating that such holder or
holders elect(s) to convert such share or shares and
stating the name and address in which each
certificate for shares of Class A Common Stock issued
upon such conversion is to be issued. Conversion
shall be deemed to have been effected as of the date
as of which the conversion is recorded on the books
of the Corporation; provided, however, that to the
extent a conversion shall require the approval of the
FCC, the conversion shall become effective at the
time and date as the order of the FCC approving such
event shall become a Final Order (as hereinafter
defined). The Corporation shall cause the transfer
agent to deliver a certificate or certificates for
the Class A Common Stock as promptly as reasonably
practicable after the conversion has been recorded on
the books of the Corporation.
(ii) Automatic Conversion of Class B Common Stock. Except
for a transfer pursuant to subsection (f) of this
Article TENTH, each share of Class B Common Stock
shall convert automatically into one fully paid and
non-assessable share of Class A Common Stock for no
additional consideration upon any sale, assignment,
gift, bequest, appointment or other transfer,
voluntary or involuntary, subject to any necessary
approval of the FCC (an "Event of Automatic
Conversion"). Promptly upon the occurrence of an
Event of Automatic Conversion, the holder of the
shares of Class B Common Stock being converted shall
surrender the certificate or certificates therefor,
duly endorsed in blank or accompanied by duly
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<PAGE> 6
executed proper instruments of transfer, at the
office of the Corporation. The conversion of the
shares of Class B Common Stock subject to the Event
of Automatic Conversion shall be the date as of which
the conversion is recorded on the books of the
Corporation. The Corporation shall cause the transfer
agent to deliver a certificate or certificates for
the Class A Common Stock as promptly as reasonably
practicable after the conversion has been recorded on
the books of the Corporation.
The Corporation may, in connection with preparing a
list of shareholders entitled to vote at any meeting
of shareholders, or as a condition to the transfer or
the recording of shares of Class B Common Stock on
the Corporation's books, require the furnishing of
such affidavits or other proof as it deems necessary
to establish that any person is the beneficial owner
of shares of Class B Common Stock or is a Class B
Permitted Transferee. The good faith determination by
the Secretary of the Corporation that an Event of
Automatic Conversion has occurred shall be final and
binding as to the holder of the shares in question
for purposes of determining the holders right to vote
such shares.
(f) Transfer of Class B Common Stock. No person holding shares of
Class B Common Stock of record may transfer, and the
Corporation shall not register the transfer of, such shares of
Class B Common Stock, as Class B Common Stock, whether by
sale, assignment, gift, bequest, appointment or otherwise,
except (i) to a Management Shareholder, or (ii) to a Permitted
Class B Transferee (as hereinafter defined). Upon any
attempted transfer of shares of Class B Common Stock not
permitted hereunder such shares shall be automatically
converted into Class A Common Stock as provided by subsection
(e)(ii) of this Article TENTH.
(g) Pledges of Class B Common Stock. Notwithstanding anything to
the contrary set forth herein, any Class B Holder may pledge
such holder's shares of Class B Common Stock to a pledgee
pursuant to a bona fide pledge of such shares as collateral
security for indebtedness due to the pledgee, provided that
such shares shall not be transferred to or registered in the
name of the pledgee and shall remain subject to the provisions
of this Article ELEVENTH. In the event of foreclosure or other
similar action by the pledgee, such pledged shares of Class B
Common Stock may only be transferred to a Permitted Class B
Transferee or shall be converted into shares of Class A Common
Stock.
(h) Conversion of Class C Common Stock.
(i) Voluntary Conversion of Class C Common Stock. Subject
to any necessary approval of the FCC, the shares of
Class C Common Stock shall be convertible in whole or
in part at any time at the option of the holder or
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<PAGE> 7
holders thereof into an equal number of fully paid
and non-assessable shares of Class A Common Stock,
for no additional consideration. Such right shall be
exercised by delivery to the office of the
Corporation (A) the certificate or certificates
representing the shares of Class C Common Stock, to
be converted, duly endorsed in blank or accompanied
by duly executed proper instruments of transfer, and
(B) written notice to the Corporation stating that
such holder or holders elect(s) to convert such share
or shares and stating the name and address in which
each certificate for shares of Class A Common Stock
issued upon such conversion is to be issued.
Conversion shall be deemed to have been effected as
of the date as of which the conversion is recorded on
the books of the Corporation. The Corporation shall
cause the transfer agent to deliver a certificate or
certificates for the Class A Common Stock as promptly
as reasonably practicable after the conversion has
been recorded on the books of the Corporation.
(ii) Automatic Conversion of Class C Common Stock. Each
share of Class C Common Stock shall convert
automatically into one fully paid and non- assessable
share of Class A Common Stock for no additional
consideration upon any sale, assignment, gift,
bequest, appointment or other transfer, voluntary or
involuntary other than pursuant to subsection (i) of
this Article TENTH. Promptly upon the occurrence of
such an automatic conversion event, the holder of
shares of Class C Common Stock being converted shall
surrender the certificate or certificates therefor,
duly endorsed in blank or accompanied by duly
executed proper instruments of transfer, at the
office of the Corporation. Conversion shall be deemed
to have been effected as of the date as of which the
conversion is recorded on the books of the
Corporation. The Corporation shall cause the transfer
agent to deliver a certificate or certificates for
the Class A Common Stock as promptly as reasonably
practicable after the conversion has been recorded on
the books of the Corporation.
(i) Transfer of Class C Common Stock. No person holding shares of
Class C Common Stock of record may transfer, and the
Corporation shall not register the transfer of, such shares of
Class C Common Stock, as Class C Common Stock, whether by
sale, assignment, gift, bequest, appointment or otherwise,
except only under the following circumstances: (i) in a widely
distributed public offering of Class C Common Stock; (ii) in a
transfer pursuant to Rule 144 under the Securities Act of 1933
or any similar rule then in force; (iii) in a transfer to the
Corporation; (iv) in a transfer to an Affiliate of such
holder; or (v) in a transfer to a Regulated Entity. Upon any
attempted transfer of shares of Class C Common Stock not
permitted hereunder such shares shall be automatically
converted into Class A Common Stock as provided by subsection
(h)(ii) of this Article TENTH.
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<PAGE> 8
(j) Reservation of Shares. The Corporation shall at all times
reserve and keep available out of its authorized but unissued
shares of Class A Common Stock, solely for the purpose of
effecting the conversions provided for herein, such number of
shares of Class A Common Stock as shall from time to time be
sufficient to effect the conversions provided for herein and
shall take all such corporate action as may be necessary to
assure that such shares of Class A Common Stock shall be
validly issued, fully paid and non-assessable upon conversion
of all of the outstanding shares of Class B Common Stock and
Class C Common Stock, as applicable; moreover, if at any time
the number of authorized but unissued shares of Class A Common
Stock shall not be sufficient to effect the conversions
provided for herein, the Corporation shall take such corporate
action as may be necessary to increase its authorized but
unissued shares of Class A Common Stock to such number of
shares as shall be sufficient for such purpose.
(k) Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution, or winding-up of the Corporation,
after all creditors of the Corporation shall have been paid in
full and after payment of all sums payable in respect of
Preferred Stock, if any, the holders of the Common Stock shall
share ratably on a share-for-share basis in all distributions
of assets pursuant to such voluntary or involuntary
liquidation, dissolution, or winding-up of the Corporation.
For the purposes of this paragraph (k), neither the merger nor
the consolidation of the Corporation into or with another
entity or the merger or consolidation of any other entity into
or with the Corporation, or the sale, transfer, or other
disposition of all or substantially all the assets of the
Corporation, shall be deemed to be a voluntary or involuntary
liquidation, dissolution, or winding-up of the Corporation.
(l) Reissue of Shares. Shares of Class B Common Stock that are
converted into shares of Class A Common Stock, as provided
herein, shall be retired and canceled and shall not be
reissued.
(m) Dividends on Converted Shares. Any dividends declared and not
paid on shares of Common Stock prior to their conversion as
provided above shall be paid, on the payment date, to the
holder or holders entitled thereto on the record date for such
dividend payment, notwithstanding such conversion; provided,
however, that such holder or holders shall not be entitled to
receive the corresponding dividends declared but not paid on
the shares of Common Stock issuable upon such conversion.
(n) Street Name. Shares of Class B Common Stock and Class C Common
Stock shall be registered in the names of the beneficial
owners thereof and not in "street" or "nominee" name. For this
purpose "beneficial owner" shall mean any person who, or
entity which, possesses the power, singly or jointly, to
direct the disposition of such shares.
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<PAGE> 9
ELEVENTH: Definitions. Capitalized terms used in these Amended and
Restated Articles of Incorporation and not otherwise defined are used with the
meanings set forth below.
"Affiliate" shall have the same meaning as such term has under
Rule 12b-2 of the Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"FCC" shall mean the Federal Communications Commission.
"Final Order" shall mean an order, action or decision of the
FCC (without the inclusion of any material adverse conditions
not customarily imposed with respect to such orders, actions
or decisions) (i) that has not been reversed, stayed,
enjoined, set aside, annulled or suspended and (ii) with
respect to which (A) no timely request has been filed for
administrative or judicial review, reconsideration, appeal, or
stay, and the time for filing any such requests and for the
FCC to set aside the action on its own motion has expired or
(B) in the event of review, reconsideration, or appeal, such
review, reconsideration, or appeal has been denied and the
time for further review, reconsideration, or appeal has
expired.
"Going Private Transaction" shall mean any transaction that is
a "Rule 13e-3 transaction," as such term is defined in Rule
13e-3(a)(3) promulgated under the Exchange Act; provided,
however, that the term "affiliate" as used in Rule
13e-3(a)(3)(i) shall be deemed to include an Affiliate, as
defined in these Amended and Restated Articles of
Incorporation.
"Independent Director" shall mean a person who is not an
officer or employee of the Corporation or its subsidiaries or
a "family member" of any of the foregoing, and who does not
have a relationship which, in the opinion of the Board of
Directors, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director.
For purposes of this definition, "family member" shall mean a
spouse, sibling, child, parent, brother-in-law, sister-in-law,
mother-in-law or father-in-law.
"IPO" shall mean a firm commitment underwritten initial public
offering of Class A Common Stock for cash pursuant to a
registration statement under the Securities Act of 1933 where
the aggregate proceeds to the Company (prior to deducting any
underwriters' discounts and commissions from such offering)
exceed $10 million.
"Management Shareholder" shall mean Joseph M. Field or David
J. Field.
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<PAGE> 10
"Pennsylvania BCL" shall mean the Pennsylvania Business
Corporation Law of 1988, as amended.
"Permitted Class B Transferee" A "Permitted Class B
Transferee" shall mean:
(i) A Management Shareholder, the spouse or lineal
descendant of a Management Shareholder and any spouse
of such lineal descendant;
(ii) The trustee of a trust (including a voting trust)
principally for the benefit of one or more of the
persons described in (i) above;
(iii) The estate of any of the persons described in (i)
above.
(iv) For purposes of the definition of Permitted Class B
Transferee:
(A) The relationship of any person that is
derived by or through legal adoption shall
be treated the same as if such relationship
were a natural one.
(B) Ownership in the form of joint tenancy by a
Permitted Class B Transferee shall be
considered ownership by the Permitted Class
B Transferee provided that the terms of such
joint tenancy includes a right of
survivorship. Upon the death of a Permitted
Class B Transferee, at least one of the
surviving joint tenants must independently
qualify as a Permitted Class B Transferee or
there will be an Event of Automatic
Conversion.
(C) A minor for whom shares of Class B Common
Stock are held pursuant to a Uniform Gifts
to Minors Act or similar law shall be
considered to be held by a Class B Holder
for so long as the person entitled to vote
the shares under applicable laws
independently qualifies as a Permitted Class
B Transferee or there will be an Event of
Automatic Conversion.
(D) Unless otherwise specified, the term
"person" means both natural persons and
legal entities.
"Qualified Voting Agreement" shall mean any proxy, voting
agreement, voting trust or similar document, instrument or
agreement pursuant to which a Management Shareholder generally
controls the vote of the shares of Class B Common Stock held
by a Management Shareholder or held by a Permitted Class B
Transferee which shares are subject to such Qualified Voting
Agreement (the "Qualified Voting Shares"), regardless of
whether the beneficial owner of the
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Qualified Voting Shares reserves or is granted a limited right
to vote the Qualified Voting Shares in certain circumstances
or retains the right to revoke such right and/or to reinstate
such right at any time or from time to time. A good faith
determination by the Board of Directors as to whether a proxy,
voting agreement, voting trust or similar document, instrument
or agreement constitutes a Qualified Voting Agreement shall be
conclusive and binding on all shareholders.
"Regulated Entity" means (i) any entity that is a "bank
holding company" (as defined in Section 2(a) of the Bank
Holding Company Act of 1956, as amended (the "BHC Act")) or
any non-bank subsidiary of such an entity and (ii) any entity
that, pursuant to Section 8(a) of the International Banking
Act of 1978, as amended, is subject to the provisions of the
BHC Act or any non-bank subsidiary of such an entity.
TWELFTH: General.
(a) Issuance of Shares. Subject to the foregoing provisions of
these Amended and Restated Articles of Incorporation, the
Corporation may issue shares of its Class A Common Stock,
Class C Common Stock or Preferred Stock from time to time for
such consideration (not less than the par value thereof) as
may be fixed by the Board of Directors, which is expressly
authorized to fix the same in its absolute and uncontrolled
discretion subject to the foregoing provisions. Shares so
issued for which the consideration shall have been paid or
delivered to the Corporation shall be deemed fully paid
capital stock and shall not be liable to any further call or
assessment thereon, and the holders of such shares shall not
be liable for any further payments in respect of such shares.
(b) Rights and Options. The Corporation shall have authority to
create and issue rights and options entitling their holders to
purchase shares of the Corporation's capital stock of any
class or series or other securities of the Corporation except
Class B Common Stock, and such rights and options shall be
evidenced by instrument(s) approved by the Board of Directors
or otherwise provided in a plan relating to the issuance of
such rights and options which has been approved by the Board
of Directors. The Board of Directors or a committee of the
Board of Directors shall be empowered to set the exercise
price, duration, times for exercise, and other terms of such
options or rights; provided, however, that the consideration
to be received for any shares of capital stock subject thereto
shall not be less than the par value thereof.
THIRTEENTH: Board of Directors. The number, classification, and terms
of the Board of Directors of the Corporation and the procedures to elect
directors, to remove directors, and to fill vacancies in the Board of Directors
shall be as stated in the Corporation's By-Laws.
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FOURTEENTH: No Cumulative Voting. The shareholders of the Corporation
shall not have the right to cumulate their votes for the election of directors
of the Corporation.
FIFTEENTH: Restrictions of Foreign Ownership. The following provisions
are included for the purpose of ensuring that the control and management of the
Corporation remain with citizens of the United States and/or corporations formed
under the laws of the Unites States or any of the states of the United States,
as required by the Communications Act of 1934, as amended, and the rules and
regulations promulgated thereunder, as the same may be amended from time to time
(collectively, the "Communications Act"):
(a) Definition of Alien. "Alien" shall mean:
(i) a person who is a citizen of a country other than the
United States;
(ii) any entity organized under the laws of a government
other than the government of the United States or any
state, territory, or possession of the United States;
(iii) a government other than the government of the United
States or of any state, territory, or possession of
the United States; or
(iv) a representative of, or an individual or entity
controlled by, any of the foregoing.
(b) Restrictions on Issuances and Transfer. The Corporation shall
not issue any shares of capital stock of the Corporation if
such issuance would result in the total number of shares of
such capital stock held or voted by Aliens (or for or by the
account of Aliens) to exceed 25% of:
(i) the total number of all shares of such capital stock
outstanding at any time and from time to time, or
(ii) the total voting power of all shares of such capital
stock outstanding and entitled to vote at any time
and from time to time.
The Corporation shall not permit the transfer on the books of
the Corporation of any capital stock to any Alien that would
result in the total number of shares of such capital stock
held or voted by Aliens (or for or by the account of Aliens)
exceeding such 25% limits.
(c) Restrictions on Ownership by Aliens. No Alien or Aliens,
individually or collectively, shall be entitled to vote or
direct or control the vote of more than 25% of:
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(i) the total number of all shares of capital stock of
the Corporation outstanding at any time and from time
to time, or
(ii) the total voting power of all shares of capital stock
of the Corporation outstanding and entitled to vote
at any time and from time to time, and issuances and
transfers of capital stock of the Corporation in
violation of this subsection (c) shall be prohibited.
(d) Powers of the Board of Directors to Implement Alien Ownership
Restrictions. The Board of Directors shall have all powers
necessary to implement the provisions of this Article
FIFTEENTH and to ensure compliance with the alien ownership
restrictions (the "Alien Ownership Restrictions") of the
Communications Act, including, without limitation, the power
to prohibit the transfer of any shares of capital stock of the
Corporation to any Alien, to prohibit the vote by any Alien,
and to take or cause to be taken such action as it deems
appropriate to implement such prohibition, including placing a
legend regarding restrictions on foreign ownership of the
capital stock on certificates representing such capital stock.
(e) Redemption. Without limiting the generality of the foregoing
and notwithstanding any other provision of these Amended and
Restated Articles of Incorporation to the contrary, any shares
of capital stock of the Corporation determined by the Board of
Directors to be owned by an Alien or Aliens shall always be
subject to redemption by the Corporation by action of the
Board of Directors, pursuant to Sections 1521 and 1906 of the
Pennsylvania BCL, or any other applicable provision of law, to
the extent necessary in the judgment of the Board of Directors
to comply with the Alien Ownership Restrictions. The terms,
conditions and procedures of such redemption shall be as
follows:
(i) the redemption price of the shares to be redeemed
pursuant to this Article FIFTEENTH shall be equal to
the fair market value of the shares to be redeemed,
as determined by the Board of Directors in good
faith;
(ii) the redemption price of such shares may be paid in
cash, securities or any combination thereof;
(iii) if the aggregate redemption price for all of the
Alien-owned shares to be redeemed exceeds $5 million
in the aggregate during any one year period
consisting of any twelve (12) consecutive calendar
months, then the Corporation may elect to pay the
balance of any redemption price after the Corporation
has paid $5 million in any such period in
installments not to exceed $5 million per year in the
aggregate, with interest payable semi-annually at a
rate equal to the six-month LIBOR rate for such
six-month
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period from time to time as determined by the Board
of Directors in good faith;
(iv) if less than all the shares held by Aliens are to be
redeemed, the shares to be redeemed shall be selected
in any manner determined by the Board of Directors to
be fair and equitable;
(v) at least 10 days' prior written notice of the
redemption, which notice shall specify the date the
redemption is to be effective (the "Redemption
Date"), shall be given to the holders of record of
the shares selected to be redeemed (unless waived in
writing by any such holder), provided that the
Redemption Date may be the date on which written
notice shall be given to holders if the cash or
securities necessary to effect the redemption shall
have been deposited in trust for the benefit of such
holders and such cash and securities are subject to
immediate withdrawal by them upon surrender of the
stock certificates for their shares to be redeemed
duly endorsed in blank or accompanied by duly
executed proper instruments of transfer;
(vi) from and after the Redemption Date, the shares to be
redeemed shall cease to be regarded as outstanding
and any and all rights of the holders in respect of
the shares to be redeemed or attaching to such shares
of whatever nature (including without limitation any
rights to vote or participate in dividends declared
on capital stock of the same class or series as such
shares excepting only payment of dividends declared
prior to the Redemption Date for which the record
date precedes the Redemption Date) shall cease and
terminate, and the holders thereof thereafter shall
be entitled only to receive the cash or securities
payable upon redemption; and
(vii) such other terms and conditions as the Board of
Directors shall determine.
SIXTEENTH: Indemnification. The Corporation shall indemnify any Person
who was, is, or is threatened to be made a party to a proceeding (as hereinafter
defined) by reason of the fact that he or she (i) is or was a director or
officer of the Corporation or (ii) while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or other enterprise,
to the fullest extent permitted under the Pennsylvania BCL, as the same exists
or may hereafter be amended. Such right shall be a contract right and as such
shall run to the benefit of any director or officer who is elected and accepts
the position of director or officer of the Corporation or elects to continue to
serve as a director or officer of the Corporation while this Article SIXTEENTH
is in effect. Any repeal or amendment of this Article SIXTEENTH shall be
prospective only and shall not limit the rights of any such director
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or officer or the obligations of the Corporation with respect to any claim
arising from or related to the services of such director or officer in any of
the foregoing capacities prior to any such repeal or amendment to this Article
SIXTEENTH. Such right shall include the right to be paid by the Corporation
expenses incurred in investigating or defending any such proceeding in advance
of its final disposition to the maximum extent permitted under the Pennsylvania
BCL, as the same exists or may hereafter be amended. If a claim for
indemnification or advancement of expenses hereunder is not paid in full by the
Corporation within sixty (60) days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim, and if successful in
whole or in part, the claimant shall also be entitled to be paid the expenses of
prosecuting such claim. It shall be a defense to any such action that such
indemnification or advancement of costs of defense is not permitted under the
Pennsylvania BCL, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors or any committee thereof, independent legal counsel, or shareholders)
to have made its determination prior to the commencement of such action that
indemnification of, or advancement of costs of defense to, the claimant is
permissible in the circumstances nor an actual determination by the Corporation
(including its Board of Directors or any committee thereof, independent legal
counsel, or shareholders) that such indemnification or advancement is not
permissible shall be a defense to the action or create a presumption that such
indemnification or advancement is not permissible. In the event of the death of
any Person having a right of indemnification under the foregoing provisions,
such right shall inure to the benefit of his or her heirs, executors,
administrators, and personal representatives. The rights conferred above shall
not be exclusive of any other right which any Person may have or hereafter
acquire under any statute, bylaw, resolution of shareholders or directors,
agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
Without limiting the generality of the foregoing, to the extent
permitted by then applicable law, the grant of mandatory indemnification
pursuant to this Article SIXTEENTH shall extend to proceedings involving the
negligence of such Person.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
SEVENTEENTH: Personal Liability of Directors and Officers.
(a) Directors. A director of the Corporation shall not be
personally liable, as such, to the Corporation or its
shareholders for monetary damages (including, without
limitation, any judgment, amount paid in settlement, penalty,
punitive damages or expense of any nature (including, without
limitation, attorneys' fees and
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disbursements)) for any action taken, or any failure to take
any action, unless the director has breached or failed to
perform the duties of his or her office under these Amended
and Restated Articles of Incorporation, the Amended and
Restated Bylaws of the Corporation or applicable provisions of
law and the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.
(b) Officers. An officer of the Corporation shall not be
personally liable, as such, to the Corporation or its
shareholders for monetary damages (including, without
limitation, any judgment, amount paid in settlement, penalty,
punitive damages or expense of any nature (including, without
limitation, attorneys' fees and disbursements)) for any action
taken, or any failure to take any action, unless the officer
has breached or failed to perform the duties of his or her
office under these Amended and Restated Articles of
Incorporation, the Amended and Restated Bylaws of the
Corporation or applicable provisions of law and the breach or
failure to perform constitutes self-dealing, willful
misconduct or recklessness.
EIGHTEENTH: Powers of the Board of Directors. All of the power of the
Corporation, insofar as it may be lawfully vested by these Amended and Restated
Articles of Incorporation in the Board of Directors, is hereby conferred upon
the Board of Directors of the Corporation.
NINETEENTH: Special Meetings. Special meetings of the shareholders may
only be called by the Chairman or Chief Executive Officer of the Corporation or
by resolution of the Board of Directors; provided, however, that if there are
two vacancies in the offices for the Class A Directors, then the holders of 50%
of the Class A Common Stock outstanding shall have the right to call a special
meeting of shareholders for the purpose of electing Class A Directors to fill
such vacancies.
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Exhibit 3.02
AMENDED AND RESTATED BYLAWS
OF
ENTERCOM COMMUNICATIONS CORP.
ARTICLE I
Name and Seal
Section 1.01. Name. The name of the Corporation is ENTERCOM
COMMUNICATIONS CORP.
Section 1.02. State of Incorporation. The Corporation is
incorporated under the laws of the Commonwealth of Pennsylvania.
Section 1.03. Seal. The corporate seal of the Corporation
shall have inscribed thereon the name of the Corporation, the year of its
organization, the words "Corporate Seal," and the name of the State of
Incorporation. The seal may be used by any person authorized by the Board of
Directors of the Corporation or by these Bylaws by causing the seal or a
facsimile thereof to be impressed or affixed, or in any manner reproduced.
ARTICLE II
Offices and Fiscal Year
Section 2.01. Registered Office. The registered office of the
Corporation in the Commonwealth of Pennsylvania shall be at 401 City Avenue,
Suite 409, Bala Cynwyd, Pennsylvania 19004 until otherwise established by an
amendment of the articles of incorporation (the "articles") or by the Board of
Directors of the Corporation (the "Board of Directors" or the "Board") and a
record of such change is filed with the Pennsylvania Department of State in the
manner provided by law.
Section 2.02. Other Offices. The Corporation may also have
offices at such other places within or without the Commonwealth of Pennsylvania
as the Board of Directors may from time to time appoint or the business of the
Corporation may require.
Section 2.03. Fiscal Year. The fiscal year of the Corporation
shall begin on the first day of October in each year, until 1999 when it shall
begin on January 1, 1999 and then and thereafter become the calendar year.
<PAGE> 2
ARTICLE III
Notice--Waivers--Meetings Generally
Section 3.01. Manner of Giving Notice.
(a) General Rule. Whenever written notice is required to be
given to any person under the provisions of the Business Corporation Law or by
the articles or these bylaws, it may be given to the person either personally or
by sending a copy thereof by first class or express mail, postage prepaid, or by
telegram (with messenger service specified), telex or TWX (with answerback
received) or courier service, charges prepaid, or by facsimile transmission, to
the address (or to the telex, TWX, facsimile or telephone number) of the person
appearing on the books of the Corporation or, in the case of directors, supplied
by the director to the Corporation for the purpose of notice. If the notice is
sent by mail, telegraph or courier service, it shall be deemed to have been
given to the person entitled thereto when deposited in the United States mail or
with a telegraph office or courier service for delivery to that person or, in
the case of telex or TWX, when dispatched or, in the case of facsimile
transmission, when received. A notice of meeting shall specify the place, day
and hour of the meeting and any other information required by any other
provision of the Business Corporation Law, the articles or these bylaws.
(b) Bulk Mail. If the Corporation has more than 30
shareholders, notice of any regular or special meeting of the shareholders, or
any other notice required by the Business Corporation Law or by the articles or
these bylaws to be given to all shareholders or to all holders of a class or
series of shares, may be given by any class of postpaid mail if the notice is
deposited in the United States mail at least 20 days prior to the day named for
the meeting or any corporate or shareholder action specified in the notice.
(c) Adjourned Shareholder Meetings. When a meeting of
shareholders is adjourned by the Chairman of the meeting or a vote of the
shareholders, it shall not be necessary to give any notice of the adjourned
meeting or of the business to be transacted at an adjourned meeting, other than
by announcement at the meeting at which the adjournment is taken, unless the
Board fixes a new record date for the adjourned meeting in which event notice
shall be given in accordance with Section 3.03.
Section 3.02. Notice of Meetings of Board of Directors. Notice
of a regular meeting of the Board of Directors need not be given, provided that
the dates for such meetings are fixed by the Board of Directors or the Chairman
for an ensuing period of at least twelve months, and such dates are set forth in
the minutes of the meeting at which such dates were fixed, which minutes were
distributed to each director. Notice of every special meeting of the Board of
Directors shall be given to each director by telephone or in writing at least 24
hours (in the case of notice by telephone, telex, TWX or facsimile transmission)
or 48 hours (in the case of notice by telegraph, courier service or express
mail) or five days (in the case of notice by first class mail) before the time
at which the meeting is to be held. Every such notice shall state the time
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and place of the meeting. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board need be specified in a
notice of the meeting.
Section 3.03. Notice of Meetings of Shareholders.
(a) General Rule. Except as otherwise provided in Section
3.01(b), written notice of every meeting of the shareholders shall be given by,
or at the direction of, the Secretary or other authorized person to each
shareholder of record entitled to vote at the meeting at least (10) ten days
prior to the day named for a meeting (and, in case of a meeting called to
consider a merger, consolidation, share exchange or division, to each
shareholder of record not entitled to vote at the meeting) called to consider a
fundamental change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day
named for the meeting in any other case. If the Secretary neglects or refuses to
give notice of a meeting, the person or persons calling the meeting may do so.
In the case of a special meeting of shareholders, the notice shall specify the
general nature of the business to be transacted.
(b) Notice of Action by Shareholders on Bylaws. In the case of
a meeting of shareholders that has as one of its purposes action on the bylaws,
written notice shall be given to each shareholder that the purpose, or one of
the purposes, of the meeting is to consider the adoption, amendment or repeal of
the bylaws. There shall be included in, or enclosed with, the notice a copy of
the proposed amendment or a summary of the changes to be effected thereby.
(c) Notice of Action by Shareholders on Fundamental Change. In
the case of a meeting of the shareholders that has as one of its purposes action
with respect to any fundamental change under 15 Pa.C.S. Chapter 19, each
shareholder shall be given, together with written notice of the meeting, a copy
or summary of the amendment or plan to be considered at the meeting in
compliance with the provisions of Chapter 19.
(d) Notice of Action by Shareholders Giving Rise to Dissenters
Rights. In the case of a meeting of the shareholders that has as one of its
purposes action that would give rise to dissenters rights under the provisions
of 15 Pa.C.S. Subchapter 15D, each shareholder shall be given, together with
written notice of the meeting:
(1) statement that the shareholders have a right to
dissent and obtain payment of the fair value of their shares
by complying with the provisions of Subchapter 15D (relating
to dissenters rights); and
(2) copy of Subchapter 15D.
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Section 3.04. Waiver of Notice.
(a) Written Waiver. Whenever any written notice is required to
be given under the provisions of the Business Corporation Law, the articles or
these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of the notice. Neither the business to be
transacted at, nor the purpose of, a meeting need be specified in the waiver of
notice of the meeting.
(b) Waiver by Attendance. Attendance of a person at any
meeting shall constitute a waiver of notice of the meeting except where a person
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting was not lawfully
called or convened.
Section 3.05. Modification of Proposal Contained in Notice.
Whenever the language of a proposed resolution is included in a written notice
of a meeting required to be given under the provisions of the Business
Corporation Law or the articles or these bylaws, the meeting considering the
resolution may without further notice adopt it with such clarifying or other
amendments as do not materially enlarge its original purpose.
Section 3.06. Exception to Requirement of Notice.
(a) General Rule. Whenever any notice or communication is
required to be given to any person under the provisions of the Business
Corporation Law or by the articles or these bylaws or by the terms of any
agreement or other instrument or as a condition precedent to taking any
corporate action and communication with that person is then unlawful, the giving
of the notice or communication to that person shall not be required.
(b) Shareholders Without Forwarding Addresses. Notice or other
communications need not be sent to any shareholder with whom the Corporation has
been unable to communicate for more than 24 consecutive months because
communications to the shareholder are returned unclaimed or the shareholder has
otherwise failed to provide the Corporation with a current address. Whenever the
shareholder provides the Corporation with a current address, the Corporation
shall commence sending notices and other communications to the shareholder in
the same manner as to other shareholders.
Section 3.07. Use of Conference Telephone and Similar
Equipment. Any director may participate in any meeting of the Board of
Directors, and the Board of Directors may provide by resolution with respect to
a specific meeting or with respect to a class of meetings that one or more
persons may participate in a meeting of the shareholders of the Corporation, by
means of conference telephone or similar communications equipment by means
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of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this section shall constitute presence in
person at the meeting.
ARTICLE IV
Shareholders
Section 4.01. Place of Meeting. All meetings of the
shareholders of the Corporation shall be held at such place, within or without
the Commonwealth of Pennsylvania, as shall be determined by the Board of
Directors from time to time.
Section 4.02. Annual Meeting. The Board of Directors may fix
and designate the date and time of the annual meeting of the shareholders, but
if no such date and time is fixed and designated by the Board, the meeting for
any calendar year shall be called for and held on the third Tuesday in April in
such year, if not a legal holiday under the laws of Pennsylvania, and, if a
legal holiday, then on the next succeeding business day, not a Saturday, at 10
o'clock A.M. and at said meeting the shareholders then entitled to vote shall
elect directors and shall transact such other business as may properly be
brought before the meeting. If the annual meeting shall not have been called and
held within six months after the designated time, any shareholder may call the
meeting at any time thereafter.
Section 4.03. Special Meetings. Special meetings of the
shareholders may only be called by the Chairman or CEO, or by resolution of the
Board of Directors, which may fix the date, time and place of the meeting;
provided, however, that if there are two vacancies in the offices for the Class
A Directors, then the holders of 50% of the Class A Common Stock outstanding
shall have the right to call a special meeting of shareholders for the purpose
of electing Class A Directors to fill such vacancies. If the Board does not fix
the date, time or place of the meeting, it shall be the duty of the Secretary to
do so. A date fixed by the Secretary shall not be more than 60 days after the
date of the adoption of the resolution of the Board calling the special meeting.
Section 4.04. Quorum and Adjournment.
(a) General Rule. A meeting of shareholders of the Corporation
duly called shall not be organized for the transaction of business unless a
quorum is present. The presence of shareholders entitled to cast at least a
majority of the votes that all shareholders are entitled to cast on a particular
matter to be acted upon at the meeting shall constitute a quorum for the
purposes of consideration and action on the matter. Shares of the Corporation
owned, directly or indirectly, by the Corporation which are controlled, directly
or indirectly, by the Board of Directors shall not be counted in determining the
total number of outstanding shares for quorum purposes at any given time.
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(b) Withdrawal of a Quorum. The shareholders present at a duly
organized meeting can continue to do business until conclusion of the meeting,
including any adjournment thereof, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
(c) Adjournments Generally. Any regular or special meeting of
the shareholders, including one at which directors are to be elected and one
which cannot be organized because a quorum has not attended, may be adjourned
for such period and to such place (i) as the shareholders present and entitled
to vote shall direct, or (ii) if no shareholder vote is taken, as the Chairman
of the meeting shall direct.
(d) Electing Directors at Adjourned Meeting. Those
shareholders entitled to vote who attend a meeting called for the election of
directors that has been previously adjourned for lack of a quorum, although less
than a quorum as fixed in this section, shall nevertheless constitute a quorum
for the purpose of electing directors.
(e) Other Action in Absence of Quorum. Those shareholders
entitled to vote who attend a meeting of shareholders that has been previously
adjourned for one or more periods aggregating at least 15 days because of an
absence of a quorum, although less than a quorum as fixed in this section, shall
nevertheless constitute a quorum for the purpose of acting upon any matter set
forth in the notice of the meeting if such notice states that in the event a
quorum is not present on the date set forth in such notice and the meeting is
adjourned to a later date at least 15 days after the initial date then those
shareholders who attend the adjourned meeting shall nevertheless constitute a
quorum for the purpose of acting upon the matter.
Section 4.05. Action by Shareholders. Except as otherwise
provided in the Business Corporation Law or the articles or these bylaws,
whenever any corporate action is to be taken by vote of the shareholders of the
Corporation, it shall be authorized upon receiving the affirmative vote of a
majority of the votes cast by all shareholders entitled to vote thereon at a
meeting duly called and organized and, if any shareholders are entitled to vote
thereon as a class, upon receiving the affirmative vote of a majority of the
votes cast by the shareholders entitled to vote as a class.
Section 4.06. Organization. At every meeting of the
shareholders, the Chairman of the Board, if there be one, or, in the case of
vacancy in office or absence of the Chairman of the Board, one of the following
persons present in the order stated: the Vice Chairman of the Board, the CEO,
the President, the COO, the CFO, the Executive Vice President or a person chosen
by vote of the shareholders present, shall act as Chairman of the meeting. The
Secretary or, in the absence of the Secretary, an assistant Secretary, or, in
the absence of both the Secretary and assistant secretaries, a person appointed
by the Chairman of the meeting, shall act as Secretary of the meeting.
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Section 4.07. Voting Rights of Shareholders. Except as
otherwise provided in the articles, every shareholder of the Corporation shall
be entitled to one vote for each full share having voting power standing in the
name of the shareholder on the books of the Corporation.
Section 4.08. Voting and Other Action by Proxy.
(a) General Rule.
(1) every shareholder entitled to vote at a meeting
of shareholders may authorize another person to act for the
shareholder by proxy.
(2) The presence of, or vote or other action at a
meeting of shareholders by a proxy of a shareholder shall
constitute the presence of, or vote or action by the
shareholder.
(3) Where two or more proxies of a shareholder are
present, the Corporation shall, unless otherwise expressly
provided in the proxy, accept as the vote of all shares
represented thereby the vote cast by a majority of them and,
if a majority of the proxies cannot agree whether the shares
represented shall be voted or upon the manner of voting the
shares, the voting of the shares shall be divided equally
among those persons.
(b) Execution and Filing. Every proxy shall be executed in
writing by the shareholder or by the duly authorized attorney-in-fact of the
shareholder and filed with the Secretary of the Corporation. A telegram, telex,
cablegram, datagram or similar transmission from a shareholder or
attorney-in-fact, or a photographic, facsimile or similar reproduction of a
writing executed by a shareholder or attorney-in-fact:
(1) may be treated as properly executed for purposes
of this subsection; and
(2) shall be so treated if it sets forth a
confidential and unique identification number or other mark
furnished by the Corporation to the shareholder for the
purposes of a particular meeting or transaction.
(c) Revocation. A proxy, unless coupled with an interest,
shall be revocable at will, notwithstanding any other agreement or any provision
in the proxy to the contrary, but the revocation of a proxy shall not be
effective until written notice thereof has been given to the Secretary of the
Corporation. An unrevoked proxy shall not be valid after three years from the
date of its execution unless a longer time is expressly provided therein. A
proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised, written notice of the
death or incapacity is given to the Secretary of the Corporation.
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(d) Expenses. The Corporation shall pay the reasonable
expenses of solicitation of votes, proxies or consents of shareholders by or on
behalf of the Board of Directors or its nominees for election to the Board,
including solicitation by professional proxy solicitors and otherwise.
Section 4.09. Voting by Fiduciaries and Pledgees. Shares of
the Corporation standing in the name of a trustee or other fiduciary and shares
held by an assignee for the benefit of creditors or by a receiver may be voted
by the trustee, fiduciary, assignee or receiver. A shareholder whose shares are
pledged shall be entitled to vote the shares until the shares have been
transferred into the name of the pledgee, or a nominee of the pledgee, but
nothing in this section shall affect the validity of a proxy given to a pledgee
or nominee.
Section 4.10. Voting by Joint Holders of Shares.
(a) General Rule. Where shares of the Corporation are held
jointly or as tenants in common by two or more persons, as fiduciaries or
otherwise:
(1) if only one or more of such persons is present in
person or by proxy, all of the shares standing in the names of
such persons shall be deemed to be represented for the purpose
of determining a quorum and the Corporation shall accept as
the vote of all the shares the vote cast by a joint owner or a
majority of them; and
(2) if the persons are equally divided upon whether
the shares held by them shall be voted or upon the manner of
voting the shares, the voting of the shares shall be divided
equally among the persons without prejudice to the rights of
the joint owners or the beneficial owners thereof among
themselves.
(b) Exception. If there has been filed with the Secretary of
the Corporation a copy, certified by an attorney at law to be correct, of the
relevant portions of the agreement under which the shares are held or the
instrument by which the trust or estate was created or the order of court
appointing them or of an order of court directing the voting of the shares, the
persons specified as having such voting power in the document latest in date of
operative effect so filed, and only those persons, shall be entitled to vote the
shares but only in accordance therewith.
Section 4.11. Voting by Corporate Shareholders. Any
corporation that is a shareholder of this Corporation may vote at meetings of
shareholders of this Corporation by any of its officers or agents, or by proxy
appointed by any officer or agent, unless some other person, by resolution of
the board of directors of the other corporation or a provision of its articles
or bylaws, a copy of which resolution or provision certified to be correct by
one of its officers has been filed with the Secretary of this Corporation, is
appointed its general or special proxy in which case that person shall be
entitled to vote the shares.
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Section 4.12. Determination of Shareholders of Record.
(a) Fixing Record Date. The Board of Directors may fix a time
prior to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall be not
more than 90 days prior to the date of the meeting of shareholders. Only
shareholders of record on the date fixed shall be so entitled notwithstanding
any transfer of shares on the books of the Corporation after any record date
fixed as provided in this subsection. The Board of Directors may similarly fix a
record date for the determination of shareholders of record for any other
purpose. When a determination of shareholders of record has been made as
provided in this section for purposes of a meeting, the determination shall
apply to any adjournment thereof unless the Board fixes a new record date for
the adjourned meeting.
(b) Determination When a Record Date is Not Fixed. If a record
date is not fixed:
(1) The record date for determining shareholders
entitled to notice of or to vote at a meeting of shareholders
shall be at the close of business on the day that is ten days
prior to the day on which notice is given.
(2) The record date for determining shareholders for
any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating
thereto.
(c) Certification by Nominee. The Board of Directors may adopt
a procedure whereby a shareholder of the Corporation may certify in writing to
the Corporation that all or a portion of the shares registered in the name of
the shareholder are held for the account of a specified person or persons. Upon
receipt by the Corporation of a certification complying with the procedure, the
persons specified in the certification shall be deemed, for the purposes set
forth in the certification, to be the holders of record of the number of shares
specified in place of the shareholder making the certification.
Section 4.13. Voting Lists.
(a) General Rule. The officer or agent having charge of the
transfer books for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each.
The list shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting for the purposes thereof except that, if the Corporation has
1,000 or more shareholders, in lieu of the making of the list the Corporation
may make the information therein available at the meeting by any other means.
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(b) Effect of List. Failure to comply with the requirements of
this section shall not affect the validity of any action taken at a meeting
prior to a demand at the meeting by any shareholder entitled to vote thereat to
examine the list. The original share register or transfer book, or a duplicate
thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence
as to who are the shareholders entitled to examine the list or share register or
transfer book or to vote at any meeting of shareholders.
Section 4.14. Judges of Election.
(a) Appointment. In advance of any meeting of shareholders of
the Corporation, the Board of Directors may appoint judges of election, who need
not be shareholders, to act at the meeting or any adjournment thereof. If judges
of election are not so appointed, the presiding officer of the meeting may, and
on the request of any shareholder shall, appoint judges of election at the
meeting. The number of judges shall be one or three. A person who is a candidate
for an office to be filled at the meeting shall not act as a judge.
(b) Vacancies. In case any person appointed as a judge fails
to appear or fails or refuses to act, the vacancy may be filled by appointment
made by the Board of Directors in advance of the convening of the meeting or at
the meeting by the presiding officer thereof.
(c) Duties. The judges of election shall determine the number
of shares outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum, and the authenticity, validity and
effect of proxies, receive votes or ballots, hear and determine all challenges
and questions in any way arising in connection with nominations by shareholders
or the right to vote, count and tabulate all votes, determine the result and do
such acts as may be proper to conduct the election or vote with fairness to all
shareholders. The judges of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as is practical.
If there are three judges of election, the decision, act or certificate of a
majority shall be effective in all respects as the decision, act or certificate
of all.
(d) Report. On request of the presiding officer of the meeting
or of any shareholder, the judges shall make a report in writing of any
challenge or question or matter determined by them, and execute a certificate of
any fact found by them. Any report or certificate made by them shall be prima
facie evidence of the facts stated therein.
Section 4.15. Minors as Security Holders. The Corporation may
treat a minor who holds shares or obligations of the Corporation as having
capacity to receive and to empower others to receive dividends, interest,
principal and other payments or distributions, to vote or express consent or
dissent and to make elections and exercise rights relating to such shares or
obligations unless, in the case of payments or distributions on shares, the
corporate officer responsible for maintaining the list of shareholders or the
transfer agent of the Corporation or, in the case of payments or distributions
on obligations, the Treasurer or paying officer or agent has received written
notice that the holder is a minor.
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Section 4.16. Advance Notice of Nomination of Directors.
(a) Nominations for election of directors may be made by any
shareholder entitled to vote for the election of directors only if written
notice (the "Notice") of such shareholder's intent to nominate a director at the
meeting is given by the shareholder and received by the Secretary of the
Corporation in the manner and within the time specified herein. The Notice shall
be delivered to the Secretary of the Corporation not less than (i) for an
election of directors to be held at an annual meeting of shareholders, sixty
(60) days prior to the anniversary date of the immediately preceding annual
meeting of shareholders, and (ii) for an election of directors to be held at a
special meeting of shareholders, not later than the close of business on the
seventh (7th) day following the day on which notice of the meeting was first
mailed to shareholders or public disclosure of the special meeting is made. In
lieu of delivery to the Secretary of the Corporation, the Notice may be mailed
to the Secretary of the Corporation by certified mail, return receipt requested,
but shall be deemed to have been given only upon actual receipt by the Secretary
of the Corporation.
(b) The Notice shall be in writing and shall contain or be
accompanied by;
(1) the name and residence of such shareholder;
(2) a representation that the shareholder is a holder
of the Corporation's voting stock and intends to appear in
person or by proxy at the meeting to nominate the person or
persons specified in the Notice;
(3) such information regarding each nominee as would
have been required to be included in a proxy statement filed
pursuant to Regulation 14A of the rules and regulations
established by the Securities and Exchange Commission under
the Securities Exchange Act of 1934 (or pursuant to any
successor act or regulation) had proxies been solicited with
respect to such nominee by the management or Board of
Directors of the Corporation;
(4) a description of all arrangements or
understandings among the shareholder and each nominee and any
other person or persons (naming such person or persons)
pursuant to which such nomination or nominations are to be
made by the shareholder; and
(5) the consent of each nominee to serve as director
of the Corporation if so elected.
(c) The Chairman of the meeting may, in good faith, determine
and declare to the meeting that any nomination made at the meeting was not made
in accordance with the foregoing procedures and, in such event, the nomination
shall be disregarded.
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ARTICLE V
Board of Directors
Section 5.01. Powers; Personal Liability.
(a) General Rule. Unless otherwise provided by statute, all
powers vested by law in the Corporation shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be managed
under the direction of, the Board of Directors.
(b) Personal Liability of Directors.
(1) A director shall not be personally liable to the
Corporation or any of its shareholders, as such, for monetary
damages (including, without limitation, any judgment, amount
paid in settlement, penalty, punitive damages or expense of
any nature (including, without limitation, attorneys' fees and
disbursements)) for any action taken, or any failure to take
any action, unless:
(i) the director has breached or failed to
perform the duties of his or her office under
Subchapter 17B of the Business Corporation Law or any
successor provision; and
(ii) the breach or failure to perform
constitutes self-dealing, willful misconduct or
recklessness.
(2) The provisions of paragraph (1) shall not apply
to the responsibility or liability of a director pursuant to
any criminal statute, or the liability of a director for the
payment of taxes pursuant to local, State or Federal law.
(c) Notation of Dissent. A director of the Corporation who is
present at a meeting of the Board of Directors, or of a committee of the Board,
at which action on any corporate matter is taken on which the director is
generally competent to act, shall be presumed to have assented to the action
taken unless his or her dissent is entered in the minutes of the meeting or
unless the director files his or her written dissent to the action with the
Secretary of the meeting before the adjournment thereof or transmits the dissent
in writing to the Secretary of the Corporation immediately after the adjournment
of the meeting. The right to dissent shall not apply to a director who voted in
favor of the action. Nothing in this section shall bar a director from asserting
that minutes of the meeting incorrectly omitted his or her dissent if, promptly
upon receipt of a copy of such minutes, the director notifies the Secretary, in
writing, of the asserted omission or inaccuracy.
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Section 5.02. Qualifications and Selection of Directors.
(a) Qualifications. Each director of the Corporation shall be
a natural person of full age who need not be a resident of the Commonwealth of
Pennsylvania or a shareholder of the Corporation.
(b) Election of Directors. In elections for directors, voting
need not be by ballot, unless required by vote of the shareholders before the
voting for the election of directors begins. The candidates receiving the
highest number of votes from each class or group of classes, if any, entitled to
elect directors separately up to the number of directors to be elected by the
class or group of classes shall be elected. If at any meeting of shareholders,
directors of more than one class are to be elected, each class of directors
shall be elected in a separate election.
Section 5.03. Number and Term of Office.
(a) Number. The Board of Directors shall consist of not less
than seven (7) Directors nor more than fifteen (15) directors, including such
number of directors as may be elected from time to time by the holders of any
class or series of Preferred Stock entitled to elect directors ("Preferred Stock
Directors") and the Class A Directors (as hereinafter defined), such number to
be determined from time to time by resolution of the Board of Directors. The
Board of Directors shall include two directors elected by the holders of the
Class A Common Stock by class vote pursuant to the articles (the "Class A
Directors").
(b) Term of Office. Each director, other than Class A
Directors, shall be elected at the annual meeting of shareholders, except as
provided in Section 5.04, and each director shall hold office for such term as
shall be established by the Board of Directors provided that no term shall
exceed a period of more than three years and until a successor has been selected
and qualified or until his or her earlier death, resignation or removal. A
decrease in the number of directors shall not have the effect of shortening the
term of any incumbent director.
(c) Resignation. Any director may resign at any time upon
written notice to the Corporation. The resignation shall be effective upon
receipt thereof by the Corporation or at such subsequent time as shall be
specified in the notice of resignation.
(d) Class A Directors. The Class A Directors will be elected
at each annual meeting of shareholders commencing with the annual meeting of
shareholders to be held in 1999.
Section 5.04. Vacancies.
(a) General Rule. Vacancies in the Board of Directors,
including vacancies resulting from an increase in the number of directors, may
be filled by a majority vote of the remaining members of the Board though less
than a quorum, or by a sole remaining director, and each person so selected
shall be a director to serve until the next selection of the class for which
such director has been chosen, and until a successor has been selected and
qualified or until his
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or her earlier death, resignation or removal; provided, however that a vacancy
in a Class A Director may only be filled by the sole remaining Class A Director,
and if both Class A Directors are vacant, then only the holders of the Class A
Common Stock may fill such vacancies.
(b) Action by Resigned Directors. When one or more directors
resign from the Board effective at a future date, the directors then in office,
including those who have so resigned, shall have power by the applicable vote to
fill the vacancies, the vote thereon to take effect when the resignations become
effective.
Section 5.05. Removal of Directors.
(a) Removal by the Shareholders. The entire Board of
Directors, or any class of the Board, or any individual director may be removed
from office only for cause by vote of a majority of the shareholders entitled to
vote thereon. In case the Board, or a class of the Board or any one or more
directors are so removed, new directors may be elected at the same meeting. The
repeal of a provision of the articles or bylaws prohibiting, or the addition of
a provision to the articles or bylaws permitting, the removal by the
shareholders of the Board, a class of the Board or any individual director
without assigning any cause shall not apply to any incumbent director during the
balance of the term for which the director was selected.
(b) Removal by the Board. The Board of Directors may declare
vacant the office of a director who has been judicially declared of unsound mind
or who has been convicted of an offense punishable by imprisonment for a term of
more than one year or if, within 60 days after notice of his or her selection,
the director does not accept the office either in writing or by attending a
meeting of the Board of Directors.
Section 5.06. Place of Meetings. Meetings of the Board of
Directors may be held at such place within or without the Commonwealth of
Pennsylvania as the Board of Directors may from time to time appoint or as may
be designated in the notice of the meeting.
Section 5.07. Organization of Meetings. At every meeting of
the Board of Directors, the Chairman of the Board, if there be one, or, in the
case of a vacancy in the office or absence of the Chairman of the Board, one of
the following officers present in the order stated: the Vice Chairman of the
Board, the CEO, the President, the COO, the CFO, the Executive Vice President,
or a person chosen by a majority of the directors present, shall act as Chairman
of the meeting. The Secretary or, in the absence of the Secretary, an assistant
Secretary, or, in the absence of the Secretary and the assistant secretaries,
any person appointed by the Chairman of the meeting, shall act as Secretary of
the meeting.
Section 5.08. Regular Meetings. Regular meetings of the Board
of Directors shall be held at such time and place as shall be designated from
time to time by resolution of the Board of Directors, or as called by the
Chairman.
Section 5.09. Special Meetings. Special meetings of the Board
of Directors shall be held whenever called by the Chairman or by two or more of
the directors.
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Section 5.10. Quorum of and Action by Directors.
(a) General Rule. A majority of the directors in office of the
Corporation shall be necessary to constitute a quorum for the transaction of
business and the acts of a majority of the directors present and voting at a
meeting at which a quorum is present shall be the acts of the Board of
Directors.
(b) Action by Written Consent or Ratification. Any action
required or permitted to be taken at a meeting of the directors may be taken
without a meeting if, prior or subsequent to the action, a consent or consents
thereto by all of the directors in office is filed with the Secretary of the
Corporation or the action is ratified by the directors at the next regular or
special meeting thereof.
Section 5.11. Executive and Other Committees.
(a) Establishment and Powers. The Board of Directors may, by
resolution adopted by a majority of the directors in office, establish one or
more committees to consist of one or more directors of the Corporation. Any
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all of the powers and authority of the Board of
Directors except that a committee shall not have any power or authority as to
the following:
(1) The submission to shareholders of any action
requiring approval of shareholders under the Business
Corporation Law.
(2) The creation or filling of vacancies in the Board
of Directors.
(3) The adoption, amendment or repeal of these
bylaws.
(4) The amendment or repeal of any resolution of the
Board.
(5) Action on matters committed by a resolution of
the Board of Directors to another committee of the Board.
(b) Alternate Committee Members. The Board may designate one
or more directors as alternate members of any committee who may replace any
absent or disqualified member at any meeting of the committee or for the
purposes of any written action by the committee. In the absence or
disqualification of a member and alternate member or members of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
director to act at the meeting in the place of the absent or disqualified
member.
(c) Term. Each committee of the Board shall serve at the
pleasure of the Board.
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(d) Committee Procedures. Any provision of these bylaws
relating to the organization or procedures of or the manner of taking action by
the Board of Directors, shall be construed to apply and refer to the
organization and procedures of any executive or other committee of the Board.
Section 5.12. Compensation. The Board of Directors shall have
the authority to fix the compensation of directors for their services as
directors and a director may be a salaried officer of the Corporation.
ARTICLE VI
Officers
Section 6.01. Officers Generally.
(a) Number, Qualifications and Designation. The officers of
the Corporation shall be a Chief Executive Officer ("CEO"), a President, an
Executive Vice President, a Chief Operating Officer ("COO"), a Chief Financial
Officer ("CFO"), a Secretary, a Treasurer, and such other officers as may be
elected in accordance with the provisions of Section 6.03. Officers may but need
not be directors or shareholders of the Corporation. All of the officers shall
be natural persons of full age, except that the Treasurer may be a Corporation.
The Board of Directors may elect from among the members of the Board a Chairman
of the Board and a Vice Chairman of the Board who may both need not be officers
of the Corporation. Any number of offices may be held by the same person.
(b) Bonding. The Corporation may secure the fidelity of any or
all of its officers by bond or otherwise.
(c) Standard of Care. In lieu of the standards of conduct
otherwise provided by law, officers of the Corporation shall be subject to the
same standards of conduct, including standards of care and loyalty and rights of
justifiable reliance, as shall at the time be applicable to directors of the
Corporation. An officer of the Corporation shall not be personally liable, as
such, to the Corporation or its shareholders for monetary damages (including,
without limitation, any judgment, amount paid in settlement, penalty, punitive
damages or expense of any nature (including, without limitation, attorneys' fees
and disbursements)) for any action taken, or any failure to take any action,
unless the officer has breached or failed to perform the duties of his or her
office under the articles, these bylaws, or the applicable provisions of law and
the breach or failure to perform constitutes self-dealing, willful misconduct or
recklessness. The provisions of this subsection shall not apply to the
responsibility or liability of an officer pursuant to any criminal statute or
for the payment of taxes pursuant to local, state or federal law.
Section 6.02. Election, Term of Office and Resignations.
(a) Election and Term of Office. The officers of the
Corporation, except those appointed by delegated authority pursuant to Section
6.03, shall be elected annually by the Board
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of Directors, and each such officer shall hold office such term as may be
provided by the Board and until a successor has been elected and qualified or
until his or her earlier death, resignation or removal.
(b) Resignations. Any officer may resign at any time upon
written notice to the Corporation. The resignation shall be effective upon
receipt thereof by the Corporation or at such subsequent time as may be
specified in the notice of resignation.
Section 6.03. Subordinate Officers, Committees and Agents. The
Board of Directors may from time to time appoint such other officers and such
committees, employees or other agents as the business of the Corporation may
require, including one or more assistant secretaries, and one or more assistant
Treasurers, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws, or as the Board of
Directors may from time to time determine. The Board of Directors may delegate
to any officer or committee the power to appoint subordinate officers and to
retain or appoint employees or other agents, or committees thereof, and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.
Section 6.04. Removal of Officers and Agents. Any officer or
agent of the Corporation may be removed by the Board of Directors or by the CEO
with or without cause. The removal shall be without prejudice to the contract
rights, if any, of any person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
Section 6.05. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification, or any other cause, may be filled
by the Board of Directors or by the CEO or by the officer or committee to which
the power to fill such office has been delegated pursuant to Section 6.03, as
the case may be, and if the office is one for which these bylaws prescribe a
term, shall be filled for the unexpired portion of the term.
Section 6.06. Authority. All officers of the Corporation, as
between themselves and the Corporation, shall have such authority and perform
such duties in the management of the Corporation as may be provided by or
pursuant to resolutions or orders of the Board of Directors or, in the absence
of controlling provisions in the resolutions or orders of the Board of
Directors, as may be determined by or pursuant to these bylaws or in the absence
of any such controlling authority then as provided by the CEO.
Section 6.07. The Chairman and Vice Chairman of the Board. The
Chairman of the Board or in the absence of the Chairman, the Vice Chairman of
the Board, shall preside at all meetings of the shareholders and of the Board of
Directors, and shall perform such other duties as may from time to time be
requested by the Board of Directors.
Section 6.08. CEO. The CEO shall be the chief executive
officer of the Corporation. The CEO shall have general supervision over the
business, finances, operations and welfare of the Corporation, subject however,
to the control of the Board of Directors. The CEO shall sign, execute, and
acknowledge, in the name of the Corporation, deeds, mortgages, bonds,
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contracts or other instruments, authorized by the Board of Directors, except in
cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors, or by these bylaws or by the CEO, to some other officer
or agent of the Corporation; and, in general, shall have all powers and perform
all duties incident to the position of a chief executive officer and such other
powers and duties as from time to time may be assigned by the Board of
Directors. The CEO shall from time to time make such reports of the affairs of
the Corporation as the Board may require and shall present to the annual meeting
of the shareholders a report of the business of the Corporation for the
preceding fiscal year.
Section 6.09. The President. The President shall perform the
duties of the CEO in the absence of the CEO and such other duties as may from
time to time be assigned to the President by the CEO.
Section 6.10. The Vice Presidents. The Vice Presidents shall
perform such duties as may from time to time be assigned to them by the Board of
Directors, the CEO or the President.
Section 6.11. The Secretary. The Secretary or an assistant
Secretary shall attend all meetings of the shareholders and of the Board of
Directors and all committees thereof and shall record all the votes of the
shareholders and of the directors and the minutes of the meetings of the
shareholders and of the Board of Directors and of committees of the Board in a
book or books to be kept for that purpose; shall see that notices are given and
records and reports properly kept and filed by the Corporation as required by
law; shall be the custodian of the seal of the Corporation and see that it is
affixed to all documents to be executed on behalf of the Corporation under its
seal; and, in general, shall perform all duties incident to the office of
Secretary, and such other duties as may from time to time be assigned by the
Board of Directors or the CEO.
Section 6.12. The COO. The COO shall be the chief operating
officer and shall have general management and supervision of the operations of
the Corporation under the direction and supervision of the CEO; and, in general,
shall discharge such other duties as may from time to time be assigned by the
Board of Directors or the CEO.
Section 6.13. The CFO. The CFO shall be the chief financial
officer and shall have general management and supervision of the fiscal affairs
of the Corporation under the direction and supervision of the CEO. The CFO shall
see that a full and accurate accounting of all financial transactions is made;
shall oversee the investment and reinvestment of the capital funds of the
Corporation; shall oversee the preparation of any financial reports of the
Corporation; shall cooperate in the conduct of the annual audit of the
Corporation's financial records by the Corporation's certified public
accountants; and, in general, shall discharge such other duties as may from time
to time be assigned by the Board of Directors or the CEO.
Section 6.14. The Treasurer. The Treasurer shall perform the
duties of the CFO in the absence of the CFO and shall have or provide for the
custody of the funds or other property of the Corporation; shall collect and
receive or provide for the collection and receipt of
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moneys earned by or in any manner due to or received by the Corporation; shall
deposit all funds in his or her custody as Treasurer in such banks or other
places of deposit as the Board of Directors may from time to time designate;
shall, whenever so required by the Board of Directors, render an account showing
all transactions as Treasurer, and the financial condition of the Corporation;
and, in general, shall discharge such other duties as may from time to time be
assigned by the Board of Directors, the CEO, or the CFO.
Section 6.15. Salaries. The salaries of the officers elected
by the Board of Directors shall be fixed from time to time by the Board of
Directors or by such committee or officer as may be designated by resolution of
the Board, or in the absence of such designation by the CEO. The salaries or
other compensation of any other officers, employees and other agents shall be
fixed from time to time by the Board, or by the officer or committee to which
the power to appoint such officers or to retain or appoint such employees or
other agents has been delegated pursuant to Section 6.03, or in the absence of
such designation by the CEO or other officer designated by the CEO. No officer
shall be prevented from receiving such salary or other compensation by reason of
the fact that the officer is also a director of the Corporation.
ARTICLE VII
Certificates of Stock, Transfer, Etc.
Section 7.01. Share Certificates.
(a) Form of Certificates. Certificates for shares of the
Corporation shall be in such form as approved by the Board of Directors, and
shall state that the Corporation is incorporated under the laws of the
Commonwealth of Pennsylvania, the name of the person to whom issued, and the
number and class of shares and the designation of the series (if any) that the
certificate represents. If the Corporation is authorized to issue shares of more
than one class or series, certificates for shares of the Corporation shall set
forth upon the face or back of the certificate (or shall state on the face or
back of the certificate that the Corporation will furnish to any shareholder
upon request and without charge), a full or summary statement of the
designations, voting rights, preferences, limitations and special rights of the
shares of each class or series authorized to be issued so far as they have been
fixed and determined and the authority of the Board of Directors to fix and
determine the designations, voting rights, preferences, limitations and special
rights of the classes and series of shares of the Corporation.
(b) Share Register. The share register or transfer books and
blank share certificates shall be kept by the Secretary or by any transfer agent
or registrar designated by the Board of Directors for that purpose.
Section 7.02. Issuance. The share certificates of the
Corporation shall be numbered and registered in the share register or transfer
books of the Corporation as they are issued. They shall be executed in such
manner as the Board of Directors shall determine. In case any officer, transfer
agent or registrar who has signed or authenticated, or whose facsimile signature
or authentication has been placed upon, any share certificate shall have ceased
to be
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such officer, transfer agent or registrar because of death, resignation or
otherwise, before the certificate is issued, the certificate may be issued with
the same effect as if the officer, transfer agent or registrar had not ceased to
be such at the date of its issue. The provisions of this Section 7.02 shall be
subject to any inconsistent or contrary agreement in effect at the time between
the Corporation and any transfer agent or registrar.
Section 7.03. Transfer. Transfers of shares shall be made on
the share register or transfer books of the Corporation upon surrender of the
certificate therefor, endorsed by the person named in the certificate or by an
attorney lawfully constituted in writing. No transfer shall be made inconsistent
with the provisions of the Uniform Commercial Code, 13 Pa.C.S.
Sections 8101 et seq., and its amendments and supplements.
Section 7.04. Record Holder of Shares. The Corporation shall
be entitled to treat the person in whose name any share or shares of the
Corporation stand on the books of the Corporation as the absolute owner thereof,
and shall not be bound to recognize any equitable or other claim to, or interest
in, such share or shares on the part of any other person except that the
Corporation may in its discretion recognize certain beneficial owners or
shareholders in accordance with the procedures set forth in Section 4.12(c).
Section 7.05. Lost, Destroyed or Mutilated Certificates. The
holder of any shares of the Corporation shall immediately notify the Corporation
of any loss, destruction or mutilation of the certificate therefor, and the
Board of Directors may, in its discretion, cause a new certificate or
certificates to be issued to such holder, in case of mutilation of the
certificate, upon the surrender of the mutilated certificate or, in case of loss
or destruction of the certificate, upon satisfactory proof of such loss or
destruction and, if the Board of Directors shall so determine, the deposit of a
bond in such form and in such sum, and with such surety or sureties, as it may
direct.
Section 7.06. Agreements Restricting Transfer of Shares. The
Board of Directors may authorize the Corporation to become party to agreements
with shareholders and others relating to transfer, repurchase and issuance of
shares of stock of the Corporation; provided, however, that such agreements must
be filed with the Corporation and all share certificates affected thereby shall
have clearly imprinted thereon a legend containing such agreement or referring
thereto.
ARTICLE VIII
Indemnification of Directors, Officers and
Other Authorized Representatives
Section 8.01. Scope of Indemnification.
(a) General Rule. The Corporation shall indemnify an
indemnified representative against any liability incurred in connection with any
proceeding in which the indemnified representative may be involved as a party or
otherwise by reason of the fact that such person is or was serving in an
indemnified capacity, including, without limitation, liabilities
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resulting from any actual or alleged breach or neglect of duty, error,
misstatement or misleading statement, negligence, gross negligence or act giving
rise to strict or products liability, except:
(1) where such indemnification is expressly
prohibited by applicable law;
(2) where the conduct of the indemnified
representative has been finally determined pursuant to Section
8.06 or otherwise:
(i) to constitute willful misconduct or
recklessness within the meaning of 15 Pa.C.S. Section
1746(b) or any superseding provision of law
sufficient in the circumstances to bar
indemnification against liabilities arising from the
conduct; or
(ii) to be based upon or attributable to the
receipt by the indemnified representative from the
Corporation of a personal benefit to which the
indemnified representative is not legally entitled;
or
(3) to the extent such indemnification has been
finally determined in a final adjudication pursuant to Section
8.06 to be otherwise unlawful.
(b) Partial Payment. If an indemnified representative is
entitled to indemnification in respect of a portion, but not all, of any
liabilities to which such person may be subject, the Corporation shall indemnify
such indemnified representative to the maximum extent for such portion of the
liabilities.
(c) Presumption. The termination of a proceeding by judgment,
order, settlement or conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the indemnified
representative is not entitled to indemnification.
(d) Definitions. For purposes of this Article:
(1) "indemnified capacity" means any and all past,
present and future service by an indemnified representative in
one or more capacities as a director, officer, employee or
agent of the Corporation, or, at the request of the
Corporation, as a director, officer, employee, agent,
fiduciary or trustee of another Corporation, partnership,
joint venture, trust, employee benefit plan or other entity or
enterprise;
(2) "indemnified representative" means any and all
directors and officers of the Corporation and any other person
designated as an indemnified representative by the Board of
Directors of the Corporation (which may, but need not, include
any person serving at the request of the Corporation, as a
director, officer, employee, agent, fiduciary or trustee of
another Corporation, partnership, joint venture, trust,
employee benefit plan or other entity or enterprise);
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(3) "liability" means any damage, judgment, amount
paid in settlement, fine, penalty, punitive damages, excise
tax assessed with respect to an employee benefit plan, or cost
or expense of any nature (including, without limitation,
attorneys' fees and disbursements); and
(4) "proceeding" means any threatened, pending or
completed action, suit, appeal or other proceeding of any
nature, whether civil, criminal, administrative or
investigative, whether formal or informal, and whether brought
by or in the right of the Corporation, a class of its security
holders or otherwise.
Section 8.02. Proceedings Initiated by Indemnified
Representatives. Notwithstanding any other provision of this Article, the
Corporation shall not indemnify under this Article an indemnified representative
for any liability incurred in a proceeding initiated (which shall not be deemed
to include counter claims or affirmative defenses) or participated in as an
intervenor or amicus curiae by the person seeking indemnification unless such
initiation of or participation in the proceeding is authorized, either before or
after its commencement, by the affirmative vote of a majority of the directors
in office. This section does not apply to reimbursement of expenses incurred in
successfully prosecuting or defending an arbitration under Section 8.06 or
otherwise successfully prosecuting or defending the rights of an indemnified
representative granted by or pursuant to this Article.
Section 8.03. Advancing Expenses. The Corporation shall pay
the expenses (including attorneys' fees and disbursements) incurred in good
faith by an indemnified representative in advance of the final disposition of a
proceeding described in Section 8.01 or the initiation of or participation in a
proceeding which has been authorized by a majority of the directors in office
pursuant to Section 8.02 upon receipt of an undertaking by or on behalf of the
indemnified representative to repay the amount if it is ultimately determined
pursuant to Section 8.06 that such person is not entitled to be indemnified by
the Corporation pursuant to this Article. The financial ability of an
indemnified representative to repay an advance shall not be a prerequisite to
the making of such advance.
Section 8.04. Securing of Indemnification Obligations. To
further effect, satisfy or secure the indemnification obligations provided
herein or otherwise, the Corporation may maintain insurance, obtain a letter of
credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or
other fund or account, enter into indemnification agreements, pledge or grant a
security interest in any assets or properties of the Corporation, or use any
other mechanism or arrangement whatsoever in such amounts, at such costs, and
upon such other terms and conditions as the Board of Directors shall deem
appropriate. Absent fraud, the determination of the Board of Directors with
respect to such amounts, costs, terms and conditions shall be conclusive against
all security holders, officers and directors and shall not be subject to
voidability.
Section 8.05. Payment of Indemnification. An indemnified
representative who is entitled to indemnification under this Article VIII shall
be entitled to payment within 30 days after a written request for
indemnification has been delivered to the Secretary of the Corporation.
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Section 8.06. Arbitration.
(a) General Rule. Any dispute related to the right to
indemnification, contribution or advancement of expenses as provided under this
Article, except with respect to indemnification for liabilities arising under
the Securities Act of 1933 that the Corporation has undertaken to submit to a
court for adjudication, shall be decided only by arbitration in the metropolitan
area in which the principal executive offices of the Corporation are located at
the time, in accordance with the commercial arbitration rules then in effect of
the American Arbitration Association, before a panel of three arbitrators, one
of whom shall be selected by the Corporation, the second of whom shall be
selected by the indemnified representative and the third of whom shall be
selected by the other two arbitrators. In the absence of the American
Arbitration Association, or if for any reason arbitration under the arbitration
rules of the American Arbitration Association cannot be initiated, and if one of
the parties fails or refuses to select an arbitrator or the arbitrators selected
by the Corporation and the indemnified representative cannot agree on the
selection of the third arbitrator within 30 days after such time as the
Corporation and the indemnified representative have each been notified of the
selection of the other's arbitrator, the necessary arbitrator or arbitrators
shall be selected by the presiding judge of the court of general jurisdiction in
the county in which the Corporation's executive office is located.
(b) Qualifications of Arbitrators. Each arbitrator selected as
provided herein is required to be or have been a director or executive officer
of a Corporation whose shares of common stock were listed during at least one
year of such service on the New York Stock Exchange or the American Stock
Exchange or quoted on the National Association of Securities Dealers Automated
Quotations System.
(c) Burden of Proof. The party or parties challenging the
right of an indemnified representative to the benefits of this Article shall
have the burden of proof.
(d) Expenses. The Corporation shall reimburse an indemnified
representative for the expenses (including attorneys' fees and disbursements)
incurred in successfully prosecuting or defending such arbitration.
(e) Effect. Any award entered by the arbitrators shall be
final, binding and nonappealable and judgment may be entered thereon by any
party in accordance with applicable law in any court of competent jurisdiction,
except that the Corporation shall be entitled to interpose as a defense in any
such judicial enforcement proceeding any prior final judicial determination
adverse to the indemnified representative under Section 8.01(a)(1) or Section
8.01(a)(2). This arbitration provision shall be specifically enforceable.
Section 8.07. Contribution. If the indemnification provided
for in this Article or otherwise is unavailable for any reason in respect of any
liability or portion thereof, the Corporation shall contribute to the
liabilities to which the indemnified representative may be subject in such
proportion as is appropriate to reflect the intent of this Article or otherwise.
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Section 8.08. Mandatory Indemnification of Directors,
Officers, etc. To the extent that an authorized representative of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1741 or 1742 of the Business
Corporation Law or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees and
disbursements) actually and reasonably incurred by such person in connection
therewith.
Section 8.09. Contract Rights; Amendment or Repeal. All rights
under this Article shall be deemed a contract between the Corporation and the
indemnified representative pursuant to which the Corporation and each
indemnified representative intend to be legally bound. Any repeal, amendment or
modification hereof shall be prospective only and shall not affect any rights or
obligations then existing.
Section 8.10. Scope of Article. The rights granted by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an indemnified capacity and as to action in any
other capacity. The indemnification, contribution and advancement of expenses
provided by or granted pursuant to this Article shall continue as to a person
who has ceased to be an indemnified representative in respect of matters arising
prior to such time, and shall inure to the benefit of the heirs, executors,
administrators and personal representatives of such a person.
Section 8.11. Reliance on Provisions. Each person who shall
act as an indemnified representative of the Corporation shall be deemed to be
doing so in reliance upon the rights of indemnification, contribution and
advancement of expenses provided by this Article.
Section 8.12. Interpretation. The provisions of this Article
are intended to constitute bylaws authorized by 15 Pa.C.S. Section 1746.
Section 8.13. Changes in Pennsylvania Law. References in this
Article VIII to Pennsylvania law or to any provision thereof shall be to such
law (including without limitation to the Directors' Liability Act) as it existed
on the date this Article VIII was adopted or as such law thereafter may be
changed; provided that (a) in the case of any change which expands the liability
of Directors (or expands the liability of officers) or limits the
indemnification rights or the rights to advancement of expenses which the
Corporation may provide, the rights to limited liability, to indemnification and
to the advancement of expenses provided in this Article shall continue as
theretofore to the extent permitted by law; and (b) if such change permits the
Corporation without the requirement of any further action by shareholders or
Directors to limit further the liability of Directors (or limit the liability of
Officers) or to provide broader indemnification rights or rights to the
advancement of expenses than the Corporation was permitted to provide prior to
such change, then liability thereupon shall be so limited and the rights to
indemnification and the advancement of expenses shall be so broadened to the
extent permitted by law.
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ARTICLE IX
Dividends and Other Distributions to Shareholders
Section 9.01. Dividends. Subject to applicable law of the
Commonwealth of Pennsylvania, and in accordance with the provisions thereof at
the pertinent applicable time, the Board of Directors of the Corporation may
from time to time declare, and the Corporation may pay, dividends on its
outstanding shares in cash or property other than its own shares, except when
the Corporation is insolvent, or when the payment thereof would render the
Corporation insolvent, or when the declaration or payment thereof would be
contrary to any restriction contained in the articles, but:
(1) Dividends may be declared and paid in cash or
property only out of unreserved and unrestricted earned
surplus of the Corporation, except as otherwise provided by
statute; and
(2) No dividends shall be paid which would reduce the
remaining net assets of the Corporation below the aggregate
preferential amount payable in the event of voluntary
liquidation to the holders of shares having preferential
rights to the assets of the Corporation in the event of
liquidation. The Board of Directors may also, from time to
time, distribute to the holders of the Corporation's
outstanding shares having a cumulative preferential right to
receive dividends in discharge of their cumulative dividend
rights, dividends payable in cash out of the unrestricted
capital surplus of the Corporation, if at the time the
Corporation has no earned surplus and is not insolvent and
would not thereby be rendered insolvent. Each such
distribution, when made, shall be identified as a payment of
cumulative dividends out of capital surplus.
Section 9.02 Distributions of Shares of the Corporation. The
Board of Directors of the Corporation may, from time to time, distribute pro
rata to holders of any class or classes of its issued shares, treasury shares
and authorized but unissued shares, but
(1) If distribution is made, in the Corporation's
authorized but unissued shares having a par value, there shall
be transferred to stated capital at the time of such
distribution an amount of surplus at least equal to the
aggregate par value of the shares so issued;
(2) If a distribution is made in the Corporation's
authorized but unissued shares without par value, the Board of
Directors may fix a stated value for the shares so issued, and
there shall be transferred to stated capital, at the time of
such distribution, an amount of surplus equal to the aggregate
stated value, if any, so fixed;
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(3) The amount per share so transferred to stated
capital, or the fact that there was no such transfer, shall be
disclosed to the shareholders receiving such distribution
concurrently with the distribution thereof;
(4) No distribution of shares of any class shall be
made to holders of shares of any other class unless the
articles so provide or such distribution is authorized by the
affirmative vote or written consent of the holders of a
majority of the outstanding shares of the class in which the
distribution is to be made.
In lieu of issuing fractional shares in any such distribution,
the Corporation may pay in cash the fair value thereof, as determined by the
Board of Directors, to shareholders entitled thereto.
Section 9.03. Reserves. There may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
Directors, from time to time, in their absolute discretion determine as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for the purchase of
additional property, or for such other purpose as the Board of Directors shall
think conducive to the interests of the Corporation. The Board of Directors may
abolish or modify any such reserve.
Section 9.04 Distributions in Partial Liquidation. The Board
of Directors of the Corporation may, from time to time, distribute to the common
shareholders in partial liquidation, out of unrestricted capital surplus of the
Corporation, a portion of its assets in cash or property, subject to the
following conditions:
(1) No such distribution shall be made at a time when
the Corporation is insolvent or when such distribution would
render the Corporation insolvent;
(2) No such distribution shall be made unless such
distribution shall have been authorized by the prior
affirmative vote, obtained within one (1) year of such
distribution, of the holders of at least a majority of the
outstanding shares of each class of common stock, whether or
not entitled to vote thereon by the provisions of the
articles;
(3) No such distribution shall be made to the holders
of any class of shares unless all cumulative dividends accrued
on all classes of shares entitled to preferential dividends
shall have been fully paid prior to dividends on the shares to
the holders of which such distribution is to be made;
(4) No such distribution shall be made to the holders
of any class of shares which would reduce the remaining net
assets of the Corporation below the aggregate preferential
amount payable in the event of voluntary liquidation to the
holders of shares having preferential rights to the assets of
the Corporation in the event of liquidation;
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(5) Each such distribution, when made, shall be
identified as a distribution in partial liquidation and the
amount per share disclosed to the shareholders receiving the
same concurrently with the distribution thereof.
ARTICLE X
Miscellaneous
Section 10.01. Checks. All checks, notes, bills of exchange or
other similar orders in writing shall be signed by such one or more officers or
employees of the Corporation as the Board of Directors may from time to time
designate.
Section 10.02. Contracts.
(a) General Rule. Except as otherwise provided in the Business
Corporation Law in the case of transactions that require action by the
shareholders, the Board of Directors may authorize any officer or agent to enter
into any contract or to execute or deliver any instrument on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
(b) Statutory Form of Execution of Instruments. Any note,
mortgage, evidence of indebtedness, contract or other document, or any
assignment or endorsement thereof, executed or entered into between the
Corporation and any other person, when signed by one or more officers or agents
having actual or apparent authority to sign it, or by the CEO, or Executive Vice
President, COO or CFO and Secretary or assistant Secretary or Treasurer or
assistant Treasurer of the Corporation, shall be held to have been properly
executed for and in behalf of the Corporation, without prejudice to the rights
of the Corporation against any person who shall have executed the instrument in
excess of his or her actual authority.
Section 10.03. Interested Directors or Officers; Quorum.
(a) General Rule. A contract or transaction between the
Corporation and one or more of its directors or officers or between the
Corporation and another Corporation, partnership, joint venture, trust or other
enterprise in which one or more of its directors or officers are directors or
officers or have a financial or other interest, shall not be void or voidable
solely for that reason, or solely because the director or officer is present at
or participates in the meeting of the Board of Directors that authorizes the
contract or transaction, or solely because his, her or their votes are counted
for that purpose, if:
(1) the material facts as to the relationship or
interest and as to the contract or transaction are disclosed
or are known to the Board of Directors and the Board
authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors even though
the disinterested directors are less than a quorum;
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<PAGE> 28
(2) the material facts as to his or her relationship
or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote
thereon and the contract or transaction is specifically
approved in good faith by vote of those shareholders; or
(3) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or
ratified by the Board of Directors or the shareholders.
(b) Quorum. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board which authorizes
a contract or transaction specified in subsection (a).
Section 10.04. Deposits. All funds of the Corporation shall be
deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositaries as the Board of Directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by such
one or more officers or employees of the Corporation as the Board of Directors
shall from time to time designate.
Section 10.05. Corporate Records.
(a) Required Records. The Corporation shall keep complete and
accurate books and records of account, minutes of the proceedings of the
incorporators, shareholders and directors and a share register giving the names
and addresses of all shareholders and the number and class of shares held by
each. The share register shall be kept at either the registered office of the
Corporation in the Commonwealth of Pennsylvania or at its principal place of
business wherever situated or at the office of its registrar or transfer agent.
Any books, minutes or other records may be in written form or any other form
capable of being converted into written form within a reasonable time.
(b) Right of Inspection. Every shareholder shall, upon written
verified demand stating the purpose thereof, have a right to examine, in person
or by agent or attorney, during the usual hours for business for any proper
purpose, the share register, books and records of account, and records of the
proceedings of the incorporators, shareholders and directors and to make copies
or extracts therefrom. A proper purpose shall mean a purpose reasonably related
to the interest of the person as a shareholder. In every instance where an
attorney or other agent is the person who seeks the right of inspection, the
demand shall be accompanied by a verified power of attorney or other writing
that authorizes the attorney or other agent to so act on behalf of the
shareholder. The demand shall be directed to the Corporation at its registered
office in the Commonwealth of Pennsylvania or at its principal place of business
wherever situated.
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ARTICLE XI
Amendments
Section 11.01. Amendment of Bylaws. These bylaws may be
amended or repealed, or new bylaws may be adopted, either (i) by vote of the
shareholders at any duly organized annual or special meeting of shareholders, or
(ii) with respect to those matters that are not by statute committed expressly
to the shareholders and regardless of whether the shareholders have previously
adopted or approved the bylaw being amended or repealed, by vote of a majority
of the Board of Directors of the Corporation in office at any regular or special
meeting of directors. Any change in these bylaws shall take effect when adopted
unless otherwise provided in the resolution effecting the change.
Section 11.02. Recording Amendments and Alterations. The text
of all amendments and alterations to these bylaws shall be attached to the
bylaws with a notation of the date of each such amendment or alteration and a
notation of whether such amendment or alteration was adopted by the shareholders
or the Board of Directors.
ARTICLE XII
Adoption of Bylaws - Record of Amendment
Section 12.1. Adoption. These Amended and Restated Bylaws have
been adopted and filed with the undersigned on the ___ day of June, 1998, and
shall be effective as of ___________________.
Section 12.2. Amendments to Bylaws.
Section Amended Date Amended Adopted by
______________________________
[ ]
Secretary
June ___, 1998
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<PAGE> 1
EXHIBIT 10.01
[EXECUTION COPY]
ENTERTAINMENT COMMUNICATIONS, INC.
REGISTRATION RIGHTS AGREEMENT
Dated as of May 21, 1996
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of May 21,
1996 among ENTERTAINMENT COMMUNICATIONS, INC., a Pennsylvania corporation (the
"Company") and CHASE EQUITY ASSOCIATES, L.P., a California limited partnership
(the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to the Convertible Subordinated Note Purchase
Agreement, dated May 21, 1996, between the Company and certain other parties
signatories thereto (the "Purchase Agreement"), the Purchaser has purchased
Convertible Subordinated Notes from the Company; and
WHEREAS, as a condition to the execution and delivery by the Purchaser
of the Purchase Agreement, the Company has agreed to grant to the Purchaser
registration rights with respect to certain securities of the Company;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings; provided, however, that capitalized terms used herein and
not otherwise defined shall have the meanings given such terms in the Purchase
Agreement:
"Agreement" means this Agreement as in effect on the date hereof and as
hereafter from time to time amended, modified or supplemented in accordance with
the terms hereof.
"Commission" means the Securities and Exchange Commission and any
successor commission or agency having similar powers.
"Company" has the meaning specified in the preamble to this Agreement.
"Company Securities" has the meaning specified in Section 2.1(g).
"Holder Request" has the meaning specified in Section 2.1(a).
<PAGE> 3
"Initial Public Offering" means the public offer and sale of Common
Stock of the Company, pursuant to the initial registration thereof under the
Securities Act.
"Managing Underwriter" has the meaning specified in Section 2.1(f).
"NASDAQ" means the NASDAQ National Market or the NASDAQ
Small Cap Market.
"Note" means each of the Convertible Subordinated Notes issued pursuant
to the Purchase Agreement.
"Purchase Agreement" has the meaning specified in the first
recital to this Agreement.
"Registrable Securities" means Underlying Securities of the
following types:
(a) all shares of Common Stock issued or issuable upon the conversion
of Notes or other convertible securities (including New Securities, if any) now
or hereafter owned or acquired of record by any Qualified Holder; and
(b) any shares of Common Stock issued or issuable by the Company in
respect of the Notes or shares of Common Stock referred to in the foregoing
clause (a) by way of a stock dividend or stock split or in connection with a
combination or subdivision of shares, reclassification, recapitalization,
merger, consolidation or other reorganization of the Company.
As to any particular Registrable Securities that have been issued, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of under such registration statement, (ii) they shall have been distributed to
the public pursuant to Rule 144 (or any similar provision then in effect), (iii)
they shall have been otherwise transferred or disposed of, and new certificates
therefor not bearing a legend restricting further transfer shall have been
delivered by the Company, and subsequent transfer or disposition of them shall
not require their registration or qualification under the Securities Act or any
similar state law then in force, or (iv) they shall have ceased to be
outstanding.
"Registration Expenses" means any and all out-of-pocket expenses
incident to the Company's performance of or compliance with Article II hereof,
including, without limitation, all Commission, stock exchange or National
Association of Securities Dealers, Inc. ("NASD") registration and filing fees,
all fees and
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expenses of complying with securities and blue sky laws (including the
reasonable fees and disbursements of underwriters' counsel in connection with
blue sky qualifications and NASD filings), all fees and expenses of the transfer
agent and registrar for the Registrable Securities, all printing expenses, the
fees and disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits and/or "cold comfort"
letters required by or incident to such performance and compliance, and one firm
of counsel (other than house counsel) retained by the Holders, but excluding
underwriting discounts and commissions, applicable transfer and documentary
stamp taxes, if any, and filing fees which shall be borne by the seller of the
securities in all cases.
"Representative" means a representative designated by the Requisite
Holders of Registrable Securities that are subject to a registration request
pursuant to Article II hereof.
"Securities" means any Common Stock or other capital stock of the
Company, or warrants, options, convertible securities or other rights to acquire
the foregoing.
"Transferee" means any Person to whom any Purchaser has transferred
Registrable Securities and who continues to hold Registrable Securities.
"Underwritten Offering" has the meaning specified in Section 2.1(b).
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. Demand Registrations. (a) Subject to Section 2.1(j) below,
at any time, and from time to time, following the first anniversary of an
underwritten Initial Public Offering, any Qualified Holder may request in
writing that the Company effect the registration under the Securities Act of all
or part of the Registrable Securities of such Holder, specifying in the request
the number and type of Registrable Securities to be registered by such Holder
and the intended method of disposition thereof (such notice is hereinafter
referred to as a "Holder Request"). Upon receipt of a Holder Request, the
Company will promptly give written notice of such requested registration to all
other Holders of Registrable Securities and securities convertible or
exercisable into Registrable Securities, which other Holders shall have the
right to include as Registrable Securities held by them in such registration and
thereupon the Company will, as
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expeditiously as possible, use all reasonable efforts to effect the registration
under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by the Qualified Holder requesting registration;
(ii) all other Registrable Securities which the Company has
been requested to register by any other Holder thereof by written
request given to the Company within 30 calendar days after the giving
of such written notice by the Company (which request shall specify the
intended method of disposition of such Registrable Securities), all to
the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so
to be registered; and
(iii) shares of Common Stock for which Notes may be converted
and which the Company has been requested to register by the Holder
thereof by written request given to the Company within 30 days after
the giving of such written notice by the Company (which request shall
specify the intended method of disposition of such shares of Common
Stock), all to the extent necessary to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of such
shares of Common Stock so to be registered;
provided, however, that, in addition to postponements and delays pursuant to
applicable law, the Company may postpone for not more than 90 calendar days, on
one occasion only with respect to each request for registration made under this
Section 2.1(a), the filing or effectiveness of a registration statement under
this Section 2.1(a) if the Company and the Representative agree that such
registration might reasonably be expected to have an adverse effect on any
proposal or plan by the Company to engage in any acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer or similar transaction; provided, further, however, that, in such event,
the Holders of Registrable Securities and securities convertible or exercisable
into Registrable Securities initiating the request for such registration will be
entitled to withdraw such request, and if such request is withdrawn such
registration will not count as one of the permitted registrations under this
Section 2.1.
(b) Notwithstanding the foregoing provisions of Section 2.1(a), the
Company shall not be obligated to effect more than one registration pursuant to
this Section 2.1 in any twelve month period, in each case through a firm
commitment underwriting through a nationally recognized underwriter (an
"Underwritten Offering") and any requested registration must be for an
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aggregate number of Registrable Securities which the Representative reasonably
believes will have aggregate net sale proceeds of $5,000,000.
(c) If the Company proposes to effect a registration requested pursuant
to this Section 2.1 by the filing of a registration statement on Form S-3 (or
any similar short-form registration statement), the Company will comply with any
and all reasonable requests by the Managing Underwriter to effect such
registration on another permitted form if such Managing Underwriter advises the
Company that, in its reasonable opinion, the use of another form of registration
statement is of material importance to such proposed offering.
(d) A registration requested pursuant to Section 2.1(a) will not be
deemed to have been effected unless it has become effective; provided, however,
that if after it has become effective, the offering of Registrable Securities
pursuant to such registration is interfered with by any stop order, injunction
or other order or requirement of the Commission or other governmental agency or
court (and such stop order, injunction or other order or requirement is not
caused by (i) the breach by a Holder requesting registration of such Holder's
obligations under this Agreement or (ii) an act or omission by any such Holder),
such registration will be deemed not to have been effected.
(e) The Company shall bear all Registration Expenses in connection with
any registration requested pursuant to Section 2.1 and the Holders (together
with Transferees, if any, participating in the registration on a pro rata
basis); provided, however, in the event a Holder withdraws its demand subsequent
to the exclusion of certain Registrable Securities pursuant to clause (h) below,
such Holder shall reimburse the Company for its pro rata share of Registration
Expenses based upon the proportion the number of shares of Registrable
Securities such Holder requested to be registered bears to the total number of
shares requested or proposed to be registered in such registration.
(f) The Company shall have the right, subject to the reasonable
approval of the Representative, to select the investment banker (or investment
bankers) that shall manage the offering (collectively, the "Managing
Underwriter").
(g) In connection with any offering pursuant to this Section 2.1, the
only shares that may be included in such offering are (i) Registrable
Securities, (ii) shares of authorized but unissued Common Stock that the Company
elects to include in such offering ("Company Securities"), and (iii) shares of
authorized but unissued Common Stock for which the Notes are convertible.
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(h) If in connection with any Underwritten Offering pursuant to this
Section 2.1, the Managing Underwriter shall advise the Company that, in its
judgment, the number of shares proposed to be included in such offering should
be limited due to market conditions, then the Company will promptly so advise
each Holder of Registrable Securities and securities convertible or exercisable
into Registrable Securities that has requested registration, and shares shall be
excluded from such offering in the following order until such limitation has
been met: Company Securities, if any, shall be excluded until all of the Company
Securities shall have been so excluded, and, thereafter the Registrable
Securities requested to be included in such offering pursuant to Section
2.1(a)(ii) shall be excluded pro rata from among all Holders seeking to
participate in such offering, based on the respective number of Registrable
Securities as to which registration has been so requested by such Holders.
(i) If (i) any shares of Common Stock requested to be included in a
sale pursuant to this Section 2.1 shall not be outstanding but shall be issuable
upon conversion of Notes which are outstanding, or (ii) any shares of Common
Stock requested to be included in a sale pursuant to this Section 2.1 shall not
be shares of Voting Common Stock then the Holders of such Notes or Non-Voting
Common Stock and the Company shall take all actions necessary in order to
convert such Notes or Non-Voting Common Stock into shares of Voting Common Stock
in order to effect such sale.
(j) The Company shall be obligated to effect two registrations under
Section 2.1(a); provided, however, that such registrations under Section 2.1(a)
shall only count towards this limit if (i) the registration statement thereunder
becomes effective and remains effective (unless the failure to sell is due
solely to the breach by a Holder requesting registration of such Holder's
obligations under this Agreement or is due to a stop order, injunction or other
order or action of the Commission which is caused by a Holder requesting
registration) for 120 days or (if such sale occurs prior to the end of such 120
day period) until all shares of Registrable Stock and Common Stock for which the
Notes are convertible registered under such statement are sold and (ii) such
registration provides for distribution of all shares of Registrable Stock
requested to be included therein.
SECTION 2.2. Piggyback Registrations. (a) If the Company at any time
proposes to register any of its equity securities under the Securities Act
(other than a registration on Form S-4 or S-8 or any successor or similar forms
thereto and other than pursuant to a registration under Section 2.1), whether or
not for sale for its own account, on a form and in a manner that would permit
registration of Registrable Securities for sale to the public under the
Securities Act, it will give written notice to
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Holders and Transferees, if any, promptly of its intention to do so, describing
such securities and specifying the form and manner and the other relevant facts
involved in such proposed registration (including, without limitation, (x)
whether or not such registration will be in connection with an underwritten
offering of Registrable Securities and, if so, the identity of the Managing
Underwriter and whether such offering will be pursuant to a "best efforts" or
"firm commitment" underwriting and (y) the price (net of any underwriting
commissions, discounts and the like) at which the Registrable Securities are
reasonably expected to be sold). Upon the written request of any Holder or
Transferee delivered to the Company within 30 calendar days after the receipt of
any such notice (which request shall specify the Registrable Securities intended
to be disposed of by the Holders or Transferees and the intended method of
disposition thereof), such Holder or Transferee may participate in such
registration and sale, and the Company will use all reasonable efforts to effect
such registration under the Securities Act of all of the Registrable Securities
that the Company has been so requested to register; provided, however, that:
(i) If, at any time after giving such written notice of its
intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such
securities, the Company may, at its election, give written notice of
such determination to the Holders and the Transferees and thereupon the
Company shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights, of the Holders or
Transferees to request that such registration be effected as a
registration under Section 2.1.
(ii) If such registration involves an Underwritten Offering,
the Holders and Transferees must sell their Registrable Securities to
the underwriters selected by the Company on the same terms and
conditions as apply to the Company.
No registration effected under this Section 2.2 shall relieve the Company of its
obligation to effect registration upon request under Section 2.1.
(b) The Company shall not be obligated to effect any registration of
Registrable Securities under this Section 2.2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
dividend
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reinvestment plans or stock option or other employee benefit plans.
(c) The Registration Expenses (other than out of pocket expenses
incurred by the Holders or Transferees) incurred in connection with each
registration of Registrable Securities requested pursuant to this Section 2.2
shall be paid by the Company; provided, however, the Holders and Transferees
shall pay their pro rata share of any underwriting discounts and commissions.
(d) If a registration pursuant to this Section 2.2 involves an
Underwritten Offering and the Managing Underwriter advises the issuer that, in
its opinion, the number of securities proposed to be included in such
registration should be limited due to market conditions, then the Company will
exclude from such registration (i) first, on a pro rata basis, all equity
securities (other than equity securities which the Company proposes to include
in such registration) requested to be included in such registration, and (ii)
thereafter, the equity securities the Company proposes to sell in such
registration.
(e) The Company shall have the right to select the Managing Underwriter
with respect to the offering.
(f) If (i) any shares of Common Stock requested to be included in a
sale pursuant to this Section 2.2 shall not be outstanding but shall be issuable
upon the conversion of the Notes which are outstanding, or (ii) any shares of
Common Stock requested to be included in a sale pursuant to this Section 2.2
shall not be shares of Voting Common Stock, then the Holders of such Notes or
Non-Voting Common Stock and the Company shall take all actions necessary in
order to convert such Notes or NonVoting Common Stock into shares of Voting
Common Stock in order to effect such sale.
SECTION 2.3. Registration Procedures. (a) If and whenever the Company
is required to use all reasonable efforts to effect or cause the registration of
any Registrable Securities under the Securities Act as provided in Section 2.1
or Section 2.2, the Company will, as expeditiously as possible:
(i) Prepare and, in any event within 90 calendar days after
the end of the period within which requests for registration may be
given to the Company, file with the Commission a registration statement
with respect to such Registrable Securities and use all reasonable
efforts to cause such registration statements to become and remain
effective; provided, however, that in the case of a registration
provided for in Section 2.1 or Section 2.2, before filing a
registration statement or prospectus or any
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amendments or supplements thereof, the Company will furnish to the
counsel selected by the Representative copies of all such documents
proposed to be filed, which documents will be subject to the review of
such counsel; and, provided, further, that the Company may discontinue
any registration of its securities that is being effected pursuant to
Section 2.2 at any time prior to the effective date of the registration
statement relating thereto.
(ii) Prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period as may be requested by the Representative not exceeding the
earlier of the day 120 days from the date of effectiveness of such
registration statement or the date all Registrable Securities or shares
of Common Stock for which the Notes are convertible registered by such
registration statement have been sold and to comply with the provisions
of the Securities Act with respect to the disposition of all Common
Stock covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement.
(iii) Furnish to the Representative and to each underwriter,
if any, of such Registrable Securities, such number of copies of a
prospectus and preliminary prospectus for delivery in conformity with
the requirements of the Securities Act, and such other documents, as
the Representative may reasonably request, in order to facilitate the
public sale or other disposition of the Registrable Securities.
(iv) Use all reasonable efforts to register or qualify such
Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as the
Representative shall reasonably request, and do any and all other acts
and things which may be reasonably necessary or advisable to enable the
Holders or Transferees to consummate the disposition of the Registrable
Securities owned by the Holders or Transferees in such jurisdictions,
except that the Company shall not for any such purpose be required (A)
to qualify to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this Section 2.3(a)(iv), it is not
then so qualified, or (B) to subject itself to taxation in any such
jurisdiction, or (C) to take any action which would subject it to
general or unlimited service of process in any such jurisdiction where
it is not then so subject.
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(v) Use all reasonable efforts to cause such Registrable
Securities covered by such registration statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary to enable the Holders or Transferees to consummate the
disposition of such Registrable Securities.
(vi) Immediately notify the Representative at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act within the appropriate period mentioned in Section
2.3(a)(ii), if the Company becomes aware that the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing,
and, at the request of the Representative deliver a reasonable number
of copies of an amended or supplemental prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its security Holders, in each case as soon as practicable,
but not later than 45 calendar days after the close of the period
covered thereby (90 calendar days in case the period covered
corresponds to a fiscal year of the Company), an earnings statement of
the Company which will satisfy the provisions of Section 11(a) of the
Securities Act.
(viii) Use all reasonable efforts in cooperation with the
underwriters to list such Registrable Securities on the National Market
System of NASDAQ, the American Stock Exchange or the New York Stock
Exchange.
(ix) In the event the offering is an Underwritten Offering,
use all reasonable efforts to obtain a "cold comfort" letter from the
independent public accountants for the Company in customary form and
covering such matters of the type customarily covered by such letters
as the Representative reasonably requests.
(x) Execute and deliver all instruments and documents
(including in an Underwritten Offering an underwriting agreement in
customary form) and take such other actions and
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obtain such certificates and opinions as the Representative reasonably
requests in order to effect an underwritten public offering of such
Registrable Securities.
(b) Holders and Transferees will, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
2.3(a)(vi), forthwith discontinue disposition of the Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until Holders and Transferees receive copies of the supplemented or amended
prospectus contemplated by Section 2.3(a)(vi).
(c) If a registration pursuant to Section 2.1 or Section 2.2 involves
an Underwritten Offering, Holders and Transferees, whether or not the
Registrable Securities of Holders or Transferees, or shares of Common Stock for
which the Notes are convertible are included in such registration, not to effect
any public sale or distribution, including any sale pursuant to Rule 144 under
the Securities Act, of any Registrable Securities, or of any security
convertible into or exchangeable or exercisable for any Registrable Securities
(other than as part of such Underwritten Offering) or the Notes or any shares of
Common Stock for which the Notes are convertible without the consent of the
Managing Underwriter, during a period commencing seven calendar days before and
ending 120 calendar days (or such lesser number as the Managing Underwriter
shall designate) after the effective date of such registration.
(d) If a registration pursuant to Section 2.1 or Section 2.2 involves
an Underwritten Offering, Holders and Transferees agree to execute an
underwriting agreement in such customary form as the Underwriters may reasonably
request.
(e) If a registration pursuant to Section 2.1 or Section 2.2 involves
an Underwritten Offering, the Company agrees, if so required by the Managing
Underwriter, not to effect any public sale or distribution of any of its equity
or debt securities, as the case may be, or securities convertible into or
exchangeable or exercisable for any of such equity or debt securities, as the
case may be, during a period commencing seven calendar days before and ending
120 calendar days after the effective date of such registration, except for such
Underwritten Offering or except in connection with a stock option plan, stock
purchase plan, savings or similar plan, or an acquisition, merger or exchange
offer.
(f) If a registration pursuant to Section 2.1 or Section 2.2 involves
an Underwritten Offering, any Holder of Registrable Securities (or Notes with
respect to the shares of Common Stock for which the Notes are convertible)
requesting to be included in such registration may elect, in writing, prior to
the effective
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date of the registration statement filed in connection with such registration,
not to register such securities in connection with such registration, if such
Holder has agreed with the Company or the Managing Underwriter to limit its
rights under this Section 2.3.
(g) It is understood that in any Underwritten Offering, in addition to
any shares of Common Stock (the "initial shares") the underwriters have
committed to purchase, the underwriting agreement may grant the underwriters an
option to purchase up to a number of additional shares of authorized but
unissued shares of Common Stock (the "allotment shares") equal to 15% of the
initial shares (or such other maximum amount as the rules and regulations of the
National Association of Securities Dealers, Inc. may then permit), solely to
cover over-allotments. Allotment shares proposed to be sold shall first be
allocated to shares proposed to be sold by the Company until all such
securities, if any, shall have been so allocated. Thereafter, any additional
allotment shares shall be allocated to Registrable Securities proposed to be
sold by the Purchasers, the Transferees and any other shareholders of the
Company, pro rata.
(h) Notwithstanding anything in this Article II to the contrary, in
lieu of converting any Note prior to or simultaneously with the filing or the
effectiveness of any registration statement filed pursuant to this Article II,
the Holder of such Note may sell such Note to the underwriter of the offering
being registered upon the undertaking of such underwriter to convert such Note
before making any distribution pursuant to such registration statement and to
include the Common Stock issued upon such conversion among the securities being
offered pursuant to such registration statement. The Company agrees to cause
such Common Stock to be included among the securities being offered pursuant to
such registration statement to be issued within such time as will permit the
underwriter to make and complete the distribution contemplated by the
underwriting.
(i) With respect to any registration pursuant to Section 2.1 or Section
2.2 in which Registrable Securities of a Holder or Transferee are included, such
Holder or Transferee shall use all reasonable efforts to provide the Company
with such information as is necessary for the Company to effect such
registration pursuant to Section 2.1 or Section 2.2.
SECTION 2.4. Indemnification. (a) In the event of any registration of
any securities of the Company under the Securities Act pursuant to Section 2.1
or Section 2.2, the Company will, and it hereby agrees to, indemnify and hold
harmless, to the extent permitted by law, each seller of any Registrable
Securities covered by such registration statement,
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its directors and officers or general and limited partners, each other Person
who participates as an underwriter in the offering or sale of such securities
and each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, as follows:
(i) against any and all loss, liability, claim, damage or
expense whatsoever arising out of or based upon an untrue statement or
alleged untrue statement of a material fact contained in any
registration statement (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or arising out of an untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or
prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to
make the statements therein not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense reasonably incurred by them
in connection with investigating, preparing or defending against, or
serving as witnesses in connection with, any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such seller or underwriter expressly for use in the preparation of
any registration statement (or any amendment thereto) or any preliminary
prospectus or prospectus (or any amendment or supplement thereto); and provided,
further, that the Company will not be liable to any Person who
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participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the Securities Act, under the indemnity agreement in this Section 2.4(a) with
respect to any preliminary prospectus or final prospectus or final prospectus as
amended or supplemented, as the case may be, to the extent that any such loss,
claim, damage or liability of such underwriter or controlling Person results
from the fact that such underwriter sold Registrable Securities to a Person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the final prospectus or of the final prospectus as then
amended or supplemented, whichever is most recent, if the Company has previously
furnished copies thereof to such underwriter. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such seller or any such director, officer, general or limited partner,
investment advisor or agent, underwriter or controlling Person and shall survive
the transfer of such securities by such seller.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 2.1 or Section 2.2, that the Company shall have received an undertaking
reasonably satisfactory to it from the prospective seller of such Registrable
Securities or any underwriter, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 2.4(a)) the Company (and
its directors and officers and each other Person who controls the Company within
the meaning of the Securities Act) with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement, if such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such seller or underwriter
specifically stating that it is for use in the preparation of such registration
statement, preliminary, final or summary prospectus or amendment or supplement.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling Person and shall survive the transfer of such securities by such
seller. In that event, the obligations of the Company and such sellers pursuant
to this Section 2.4 are to be several and not joint; provided, however, that
with respect to each claim pursuant to this Section, the Company shall be liable
for the full amount of such claim, and each such seller's liability under this
Section 2.4 shall be limited to an amount equal to the net proceeds (after
deducting the underwriting discount and expenses) received by such seller from
the sale of
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Registrable Securities held by such seller pursuant to this Agreement.
(c) Promptly after receipt by an indemnified party hereunder of written
notice of the commencement of any action or proceeding involving a claim
referred to in this Section 2.4, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to such indemnifying party of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 2.4, except to the extent (not including any such notice of an
underwriter) that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim (in which case the indemnifying party shall not be liable for the fees and
expenses of more than one firm of counsel for the sellers of Registrable
Securities, or more than one firm of counsel for the underwriters in connection
with any one action or separate but similar or related actions), the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that it may wish with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnifying party in connection with the defense thereof.
(d) The Company and each seller of Registrable Securities shall provide
for the foregoing indemnity (with appropriate modifications) in any underwriting
agreement with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority.
SECTION 2.5. Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by Section
2.4 is for any reason not available, the parties required to indemnify by the
terms thereof shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, any seller of Registrable Securities and one or more of
the underwriters, except to the extent that contribution is not permitted under
Section 11(f) of the Securities Act. In determining the amounts which the
respective parties shall contribute, there shall be considered
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the relative benefits received by each party from the offering of the
Registrable Securities (taking into account the portion of the proceeds of the
offering realized by each), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
the opportunity to correct and prevent any statement or omission and any other
equitable considerations appropriate under the circumstances. The Company and
each Person selling securities agree with each other that no seller of
Registrable Securities shall be required to contribute any amount in excess of
the amount such seller would have been required to pay to an indemnified party
if the indemnity under Section 2.4(b) were available. The Company and each such
seller agree with each other and the underwriters of the Registrable Securities,
if requested by such underwriters, that it would not be equitable if the amount
of such contribution were determined by pro rata or per capita allocation (even
if the underwriters were treated as one entity for such purpose) or for the
underwriters' portion of such contribution to exceed the percentage that the
underwriting discount bears to the initial public offering price of the
Registrable Securities. For purposes of this Section 2.5, each Person, if any,
who controls an underwriter within the meaning of Section 15 of the Securities
Act shall have the same rights to contribution as such underwriter, and each
director and each officer of the Company who signed the registration statement,
and each Person, if any, who controls the Company or a seller of Registrable
Securities within the meaning of Section 15 of the Securities Act shall have the
same rights to contribution as the Company or a seller of Registrable
Securities, as the case may be.
SECTION 2.6. Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company covenants that it will file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not required to file such
reports, it will, upon the request of the Representative make publicly available
other information), and it will take such further action as a Holder or
Transferee may reasonably request, all to the extent required from time to time
to enable the Holder or Transferee to sell shares of Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of a Holder or Transferee, the
Company will deliver to such Holder or Transferee a written statement as to
whether it has complied with such requirements.
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SECTION 2.7. Other Provisions Regarding Registration Rights.
Notwithstanding anything to the contrary in any previous agreement or security,
upon the execution and delivery of this Agreement by all parties hereto, the
Company shall have no obligations to the Holders with respect to the
registration of any shares of Stock, except as provided in this Agreement.
ARTICLE III
TERMINATION
This Agreement shall in any event terminate with respect to any Holder
or any Transferee when (i) such Person and its Affiliates (other than the
Company) cease to hold Common Stock (including shares to be received upon the
conversion of the Notes) and (ii) solely with respect to the provisions of
Article II, on the third anniversary of the Company's Initial Public Offering.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon the parties hereto and their
respective successors and assigns, including, without limitation and without the
need for an express assignment, Transferees, and shall inure to the benefit of
and shall be enforceable by the respective successors and assigns of the parties
hereto and the successors and assigns of all Transferees. No Purchaser may
assign any of its rights hereunder to any Person other than a Transferee that
has complied with the requirements of the Purchase Agreement (if applicable) as
provided therein in all respects. Such Transferee must represent to the Company
in writing that it agrees (x) to be bound by and to comply with all provisions
of this Agreement or any other Transaction Document and (y) to execute any
amendment, supplement or other modification of this Agreement or any other
Transaction Document as may be reasonably requested by the Company; provided,
that the purpose of such amendment or other modification shall be limited to the
furtherance of the preceding clause (x) and shall not, in any respect, be
substantively inconsistent with any other terms or provisions hereof or thereof.
SECTION 4.2. Amendment and Modification; Waiver of Compliance;
Conflicts. (a) This Agreement may be amended only by a written instrument duly
executed by the Company and Holders and Transferees representing a majority in
interest of the Registrable Securities.
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(b) Except as otherwise provided in this Agreement, any failure of any
of the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
(c) In addition to the provisions of Section 4.2(b), any failure of the
Company to comply with any obligation, covenant, agreement or condition herein
may be waived by a written instrument duly executed by the Representative, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
SECTION 4.3. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and shall be made by personal service, facsimile, or reputable
courier service:
(i) if to any Stockholder or subsequent Stockholder, at the
address or telecopier number set forth on the signature pages hereof,
or such other address as shall be designated in a written notice
delivered to the Company, with a copy to Mayer, Brown & Platt, 1675
Broadway, New York, New York 10019, Facsimile No. (212) 262-1910,
Attention: Mark S. Wojciechowski, Esq.; and
(ii) if to the Company, at the address or telecopy number set
forth on the signature pages hereof, or such other address as shall be
designated in a written notice delivered to the other parties hereto,
with a copy to: Morgan, Lewis & Bockius LLP, 2000 One Logan Square,
Philadelphia, Pennsylvania 19103-6993, Facsimile No. (215) 963-5299,
Attention: Michael J. Pedrick.
Unless otherwise specifically provided herein, any notice or other
communication shall be deemed to have been given when delivered in person or by
courier service, upon receipt of facsimile (electronically confirmed), or five
Business Days after depositing it in the United States airmail with postage
prepaid and properly addressed.
SECTION 4.4. Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding, written or verbal,
of the parties
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hereto in respect of the subject matter contained herein and supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
SECTION 4.5. Injunctive Relief. The Holders and the Company acknowledge
and agree that a violation of any of the terms of this Agreement will cause the
Holders irreparable injury for which an adequate remedy at law is not available.
Therefore, the Holders and the Company agree that the Holders shall be entitled
to an injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining the Company from committing any violations
of the provisions of this Agreement.
SECTION 4.6. Inspection. For so long as this Agreement shall be in
effect, this Agreement shall be made available for inspection by any Holder at
the principal executive offices of the Company.
SECTION 4.7. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 4.8. Indemnification. The Company hereby agrees, without
limitation as to time, to indemnify and hold harmless all Indemnified Parties
(as defined below) from and against all Losses (as defined below). "Indemnified
Party" shall mean each of the Holders, each affiliate of any Holder and
respective directors, officers, agents and employees of each of the foregoing,
and each other Person controlling any of the foregoing within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act.
"Losses" shall mean any and all losses, claims, damages, liabilities or other
costs or expenses to which an Indemnified Party may become subject which arise
out of or relate to or result from any investigative, administrative or judicial
proceeding brought or threatened relating to this Agreement, the Purchase
Agreement or any other Transaction Document, or arising out of or relating to a
breach by the Company of any of the terms of any such agreement or any
transaction, action or proceeding to or connected with the transactions
described in this Agreement, the Purchase Agreement or any other Transaction
Document; provided, that no Indemnified Party shall have the right to be
indemnified hereunder for such Indemnified Party's own gross negligence or
wilful misconduct as determined by a court of competent jurisdiction. In
addition to the foregoing, the Company agrees to reimburse each Indemnified
Party for all legal or other expenses incurred in connection with investigating,
defending or participating in any action or other proceeding relating to any
Losses (whether or not such Indemnified Party is a party to any such action or
proceeding).
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SECTION 4.9. Recapitalizations, Exchanges, Etc., Affecting the Common
Stock; New Issuances. The provisions of this Agreement shall apply, to the full
extent set forth herein with respect to the Common Stock and to any and all
other Securities of the Company or any successor or assign of the Company
(whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for, or in substitution of, such equity or
debt securities and shall be appropriately adjusted for any stock dividends,
splits, reverse splits, combinations, reclassifications, recapitalizations,
reorganizations and the like occurring after the date hereof.
SECTION 4.10. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 4.11. Consent to Jurisdiction and Service of Process. ALL
JUDICIAL PROCEEDINGS BROUGHT BY THE COMPANY OR THE HOLDERS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY OBLIGATION
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF NEW YORK AND EACH HOLDER, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT,
SUCH OTHER TRANSACTION DOCUMENT OR SUCH OBLIGATION. The Company and each Holder
hereby agrees that service of all process in any such proceeding in any such
court may be made by registered or certified mail, return receipt requested, to
such Person at its address provided on the signature pages hereto, such service
being hereby acknowledged by such Person to be sufficient for personal
jurisdiction in any action against such Person in any such court and to be
otherwise effective and binding service in every respect. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of the Company or any Holder to bring proceedings against the
other in the courts of any other jurisdiction.
SECTION 4.12. Waiver of Jury Trial. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF
THE OTHER TRANSACTION DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS TRANSACTION. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including contract claims,
tort claims, breach of duty claims and all other common law and statutory
claims. Each party hereto acknowledges that this waiver is a material inducement
to enter
-20-
<PAGE> 22
into a business relationship, that each has already relied on this waiver in
entering into this Agreement, and that each will continue to rely on this waiver
in their related future dealings. Each party hereto further warrants and
represents that it has reviewed this waiver with its legal counsel and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
-21-
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
ENTERTAINMENT COMMUNICATIONS, INC.
By:_____________________________________
Name:
Title:
Notice Address:
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
Attention:______________________________
Telephone: 610-660-5610
Facsimile: 610-660-5620
CHASE EQUITY ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS, L.P.
its General Partner
By:
Name: Michael R. Hannon
Title: Principal
Notice Address:
380 Madison Avenue, 12th Floor
New York, New York 10017
Attention: Michael R. Hannon
Telephone: 212-622-3012
Facsimile: 212-622-3101
-22-
<PAGE> 24
TABLE OF CONTENTS
Page
RECITALS..................................................................... 1
ARTICLE I
CERTAIN DEFINITIONS
Agreement.................................................... 1
Commission................................................... 1
Company...................................................... 1
Company Securities........................................... 1
Holder Request............................................... 1
Initial Public Offering...................................... 2
Managing Underwriter......................................... 2
NASDAQ....................................................... 2
Note......................................................... 2
Purchase Agreement........................................... 2
Registrable Securities....................................... 2
Registration Expenses........................................ 2
Representative............................................... 3
Securities................................................... 3
Transferee................................................... 3
Underwritten Offering........................................ 3
ARTICLE II
REGISTRATION RIGHTS
2.1. Demand Registrations......................................... 3
2.2. Piggyback Registrations...................................... 6
2.3. Registration Procedures...................................... 8
2.4. Indemnification.............................................. 12
2.5. Contribution................................................. 15
2.6. Rule 144..................................................... 16
2.7. Other Provisions Regarding Registration Rights............... 17
ARTICLE III
TERMINATION
ARTICLE IV
MISCELLANEOUS
4.1. Successors and Assigns....................................... 17
4.2. Amendment and Modification; Waiver of Compliance
-i-
<PAGE> 25
Page
Conflicts.................................................... 17
4.3. Notices...................................................... 18
4.4. Entire Agreement............................................. 18
4.5. Injunctive Relief............................................ 19
4.6. Inspection................................................... 19
4.7. Headings..................................................... 19
4.8. Indemnification.............................................. 19
4.9. Recapitalizations, Exchanges, Etc., Affecting
the Common Stock; New Issuances.............................. 20
4.10. Applicable Law............................................... 20
4.11. Consent to Jurisdiction and Service of Process............... 20
4.12. Waiver of Jury Trial......................................... 20
-ii-
<PAGE> 1
EXHIBIT 10.02
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into in Bala Cynwyd, Montgomery County,
Pennsylvania this 25th day of June, 1993 as of January 1, 1993 by and between
JOSEPH M. FIELD ("Employee"), and ENTERTAINMENT COMMUNICATIONS, INC., a
Pennsylvania corporation ("Employer").
W I T N E S S E T H:
WHEREAS, Employer is in the business of owning and operating radio
broadcasting stations licensed to it by the Federal Communications Commission;
and
WHEREAS, Employee has served as President and Chief Executive officer
of the Company since its inception approximately twenty-four years ago; and
WHEREAS, the term of the Employment Agreement previously in effect
between Employer and Employee by its terms expired on December 31, 1991 but was
temporarily extended by agreement of the parties pending entry into this
Agreement, and Employee and Employer have agreed to a new agreement for a term
and on the basis described herein.
NOW, THEREFORE, intending to be legally bound, the parties hereby agree
as follows:
1. The Employment Agreement previously in force between the parties
dated July 12, 1989, the term of which was extended by agreement, is hereby
superseded and abrogated by the terms hereof effective January 1, 1993.
2. Employer hereby employs Employee as President and Chief Executive
officer of the company for a period of two (2) years commencing January 1, 1993
and Employee agrees to devote his full business time and attention to carry out
the duties as President and Chief Executive officer of Employer. Either party
desiring this Agreement to terminate at the end of such initial two year period
or any renewal period shall give the other party at least thirty days written
notice of termination prior to the end of the then current term. In the absence
of such a notice of termination at the end of the initial term or any renewal
term, this Agreement shall automatically renew for an additional period of one
year.
3. In consideration of the services to be rendered to Employer,
Employee shall receive annual base compensation during his first year of
employment hereunder of $500,000.00. Said annual base compensation shall be
increased or decreased annually as of the anniversary date of the commencement
date of the Agreement by a percentage equal to the percentage of inflation or
deflation over the last preceding twelve month period as determined in the
seasonally adjusted Gross National Product implicit Price Deflator issued by the
Bureau of Economic Analysis of the United States Department of Commerce for the
period from the 31st of December immediately preceding the prior year to the
31st of December immediately preceding the then current year. In addition,
<PAGE> 2
Employee shall receive such additional salary, bonuses, fees and other
compensation as may be approved by the Board of Directors from time to time and
shall be entitled to participate in any bonus, profit sharing, retirement,
insurance or other plan or program adopted by the Company for employees
generally.
4. During the term of this Agreement, Employer shall furnish Employee
with the use of a Company automobile.
5. In the event of the death of Employee during the term of this
Agreement, Employer shall pay to Employee's widow, if surviving, otherwise to
his children or their issue surviving per stirpes, compensation at the rate then
being received by Employee for a period of one (1) year following Employee's
death.
6. In the event of the onset of conditions during the term of this
Agreement which with the passage of time result in the total disability of
Employee, Employer shall pay to Employee the compensation payable under this
Agreement at the rate then being received by Employee for the period or periods
of total disability, or one year, whichever is less, and anything herein to the
contrary notwithstanding the term of this Agreement shall be extended through
the end of the period during which disability compensation pursuant to this
paragraph is payable to Employee. For purposes of the foregoing, a period of
total disability shall mean a period during which physical, mental, emotional or
neurological conditions prevent Employee from performing Employee's normal
duties under this Agreement.
7. In the event of termination of Employee's employment by resignation
or termination by Employer for cause, Employee agrees that he will not without
the written consent of Employer for a period of two (2) years from and after the
date of such termination engage in any broadcast business competing with
Employer in any standard metropolitan statistical area as defined by the Federal
Bureau of Census in which Employer is then operating a broadcast property.
8. This Agreement shall be binding upon Employer and its successors by
merger, consolidation or otherwise and shall be construed in accordance with the
laws of the Commonwealth of Pennsylvania This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
It supersedes any previous oral or written communications and agreements and
shall not be amended, modified or changed except in writing duly executed by the
parties hereto.
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
ENTERTAINMENT COMMUNICATIONS, INC.
By: /s/ John C. Donlevie
Executive Vice President
/s/ Jane F. Sweeney /s/ Joseph M. Field
Witness Joseph M. Field
<PAGE> 4
Memo to: Joseph M. Field
From: Gene Levin
Re: Auto Allowance
Date: August 20, 1996
In accordance with paragraph 4 of the Employment Agreement between
Entertainment Communications, Inc. and Joseph M. Field, the Company is required
to furnish you with the use of an automobile. Due to the theft and
non-replacement of the previously supplied Company automobile, you are entitled
to a car allowance until such time as another vehicle is purchased by the
Company. Accordingly, you will be paid a monthly car allowance of $1,000
retroactive to 4/12/96 .
cc: John Donlevie
David Field
<PAGE> 1
Exhibit 10.03
December 28, 1992
TO: David J. Field
FROM: Joseph M. Field
RE: Terms of Employment
This will confirm the agreement which we have reached
regarding the terms of your employment as Vice President-Operations and Chief
Financial officer at Entercom effective October 1, 1992.
We have agreed that commencing October 1, 1992 you will be
compensated as follows:
1. Your weekly salary will be $2,876.71 (annual rate of
$150,000.00). Effective as of October 1, 1993 your weekly salary will be
increased to $3356.16 (annual rate of $175,000.00) and effective as of October
1, 1994 your weekly salary will be increased to $3,835.62 (annual rate of
$200,000.00).
2. in addition to the salary set forth in 1 above, we have
agreed that you will be paid an incentive bonus based on increases in the real
cash flow of the Company. The formula set out below attempts to do this but it
cannot anticipate significant changes in the Company's accounting methods which
may occur subsequent to the date of this letter. Therefore in the event of a
significant change in the Company's accounting methods that would result in a
significant deviation from the stated purpose of the incentive then we have
agreed to equitably adjust the formula set forth below so that after reflecting
such accounting change the formula reflects the principle that the incentive is
to be based on changes in real cash flow. Changes in the Company's accounting
methods which have occurred prior to the date of this letter have already been
considered and are fully reflected in the formula. The formula to which we have
agreed is that you will be paid incentive compensation equal to 1.0% of the
excess of the Company's annual Adjusted Net Income (as defined below) over the
ANI Bass (as defined below) using an October 1 to September 30 fiscal year,
beginning with the fiscal year commencing October 1, 1992. Such incentive shall
be paid on the first regular payroll date for the corporate office which occurs
after the December 31st following the end of the fiscal year in question. In the
event of a termination of your employment, the incentive payable under this
paragraph 2 for the year of termination shall be the portion of the incentive
that would have been payable for the entire fiscal year in which the termination
occurs which is computed by multiplying the incentive for such entire fiscal
year by a fraction in which the numerator is the number of days from the start
of such fiscal year to the date of termination and the denominator is 365.
3. For purposes of this agreement the following definitions
shall be applicable.
1
<PAGE> 2
(a) For the fiscal year ending 9/30/93 the "ANI
Base" shall be $1,080,594.00, the amount of
the adjusted net income for the fiscal year
ending 9/30/92. For each subsequent fiscal
year the "ANI Base" shall be increased by a
percentage equal to the percentage increase
in the CPI-U for September of that year
compared to the CPI-U for September one year
earlier.
(b) "Normal Capital Replacements" in the fiscal
year ending 9/30/92 shall mean $56,552.22
for each station owned and operated by the
Company (i.e. 11 x $56,552.22 - $622.077.75
total for FYE 9/30/92). This per station
amount will be increased each fiscal year
thereafter in accordance with increases in
the CPI-U for the preceding one year period
(September to September) and shall also be
adjusted for any changes in the number of
stations owned and operated by the Company.
(c) "Pro Forma Taxable Income (Loss)" shall mean
the net income of the Company as shown on
the audited financial statements of the
Company for the fiscal year in question
adjusted for book vs. tax permanent
differences but not adjusted for book vs.
tax timing differences. For example, 20% of
certain travel and entertainment expenses
are not deductible expenses for tax purposes
and are a book vs. tax permanent difference.
Therefore the net income of the Company must
be increased by the non-deductible portion
of such expenses in computing "Pro Forma
Taxable Income." On the other hand the
difference between book depreciation
(computed an a straight line basis) and tax
depreciation (computed on an accelerated
basis) is a book vs. tax timing difference
and is not to be used as an adjustment to
net income of the Company in computing "Pro
Forma Taxable Income." All such book vs. tax
differences (both permanent and timing
differences) are identified on the Company's
Federal Income Tax Return. In the event that
the Company files an amended tax return
which changes the tax treatment of any such
book vs. tax difference from a timing
difference to a permanent difference or vice
versa, then the effect of such change on the
Pro Forma Taxable Income for the amended
year shall be added (or subtracted as the
case may be) from the Pro Forma Taxable
Income of the year in which such amended tax
return is filed.
(d) "Shareholders Tax Obligation (Benefit)"
shall mean the amount, for any fiscal year
in which the Company is taxed as a
Subchapter S corporation, which is computed
by multiplying the Pro Forma
2
<PAGE> 3
Taxable Income or Loss of the Company by the
higher of the combined maximum income tax
rates (federal, state and local) applicable
to a shareholder or shareholders resident in
Lower Merion Township, Pennsylvania or to a
shareholder or shareholders holding at least
25% of the Company's capital stock who
reside in any other jurisdiction as of the
end of the calendar year in which the
Company's fiscal year ends. In the event
that there is Pro Forma Taxable Income the
resultant number is the Shareholders
Subchapter S Tax Obligation. In the event
that there is a Pro Forma Taxable Loss the
resultant number is the Shareholders
Subchapter S Tax Benefit.
(e) "Adjusted Net Income" shall mean net income
of the Company as shown on the audited
financial statements of the Company for the
fiscal year in question plus charges or
expenses for depreciation or amortization
(exclusive of amortization of format change
expenses) less Normal Capital Replacements
(as defined above) and, so long as the
Company is taxed as a Subchapter S
corporation, less the Shareholders
Subchapter S Tax Obligation or plus the
Shareholders Subchapter S Tax Benefit (as
defined above) as the case may be.
4. You will be provided with the use of a Company vehicle (to
be selected by the Company) and insurance thereon. You will be responsible for
gas for the automobile. The Company will be responsible for repairs and
maintenance (including oil).
5. You will be entitled to medical insurance for yourself and
your dependents and to life insurance, vacation and other benefits available to
officers of the Company in accordance with Company policy. You will also be
eligible to participate in the Entercom Officers Profit Sharing Plan in
accordance with the terms of the Plan.
6. It is understood and agreed that your position is one of
executive authority involving the exercise of discretion in matters affecting
the vital interests of the Company, including the existence and degree of
profitability of the enterprise and the maintenance and renewal of its principal
assets, its FCC broadcast licenses. It is therefore essential that the
relationship at all times be one of complete confidence and mutual understanding
with respect to policies and goals. Accordingly it is expressly understood that
nothing herein shall be construed as altering the "at will" nature of your
employment and either party retains the right to terminate this agreement at any
time either for good cause or solely for the convenience of either party
provided that, except where there is good cause for said termination, each party
agrees to give at least thirty (30) days' notice in advance of said termination.
If you give notice of termination, the Company may at its option waive such
notice and accept your termination effective at any time prior to the expiration
of the notice period.
3
<PAGE> 4
Memo to: David Field
From: Joe Field
Date: December 1, 1996
Re: Modification to Employment Agreement
This will confirm that we have agreed to modify your Entercom
employment agreement dated December 28, 1992. Effective October 1, 1996, your
current annual salary of $250,000, as last adjusted on October 1, 1995, will be
increased annually effective on October 1 of each year commencing October 1,
1996. The increase shall be a percentage equal to the percentage increase in the
Consumer Price Index for All Urban Consumers (CPI-U), as published by the U.S.
Department of Labor for the immediately preceding August, compared to the CPI-U
for the month of August one year earlier.
Please confirm your agreement to the above by signing and
returning the enclosed copy of this memo.
Accepted and Agreed:
By: /s/ David Field
------------------
David Field
Date: 2/11/97
------------------
4
<PAGE> 5
7. In addition it is understood and agreed that for the one year period
following the termination of your employment with the Company you will not,
without the express prior written permission of the Company, employ, offer to
employ, counsel a third party to employ, or participate in any manner in the
recommendation, recruitment or solicitation of the employment of any person who
was an employee of the Company on the date of the termination of your employment
or at any time within the 90 days prior thereto. In the event that any such
person shall be employed in a position under your direct or indirect supervision
within such one year period without the Company's express prior written
permission, it shall be conclusively presumed that this restriction has been
violated.
Please confirm your agreement to the foregoing by signing and
returning the enclosed copy of this memo.
Very truly yours,
/s/ Joseph M. Field
Joseph M. Field
As agreed
/s/ David J. Field
David J. Field
Date 5/18/93
5
<PAGE> 1
Exhibit 10.04
December 28, 1992
TO: John C. Donlevie
FROM: Joseph M. Field
RE: Terms of Employment
This will confirm the agreement which we have reached regarding the
terms of your employment at Entercom effective October 1, 1992.
1. Your weekly salary will be $2,710.88 (annual rate of $141,353.00).
Effective January 1, 1993 your weekly salary will be increased to $2,876.71
(annual rate of $150,000.00). Your salary will be increased annually effective
January 1 of each year commencing January 1, 1994. The increase shall be a
percentage equal to the percentage increase in the Consumer Price Index for All
Urban Consumers (CPI-U), as published by the U.S. Department of Labor for the
immediately preceding November compared to the CPI-U for the month of November
one year earlier.
2. In addition to the salary set forth in 1 above, we have agreed that
you will be paid an incentive bonus based on increases in the real cash flow of
the Company. The formula set out below attempts to do this but it cannot
anticipate significant changes in the Company's accounting methods which may
occur subsequent to the date of this letter. Therefore in the event of a
significant change in the Company's accounting methods that would result in a
significant deviation from the stated purpose of the incentive then we have
agreed to equitably adjust the formula set forth below so that after reflecting
such accounting change the formula reflects the principle that the incentive is
to be based on changes in real cash flow. Changes in the Company's accounting
methods which have occurred prior to the date of this letter have already been
considered and are fully reflected in the formula. The formula to which we have
agreed is that you will be paid incentive compensation equal to 1.0% of the
excess of the Company's annual Adjusted Net Income (as defined below) over the
ANI Base (as defined below) using an October 1 to September 30 fiscal year,
beginning with the 1992-93 fiscal year. Such incentive shall be paid on the
first regular payroll date for the corporate office which occurs after the
December 31st following the and of the fiscal year in question. In the event of
a termination of your employment, the incentive payable under this paragraph 2
for the year of termination shall be that portion of the incentive that would
have been payable for the entire fiscal year in which the termination occurs,
which is computed by multiplying the incentive for the entire fiscal year by a
fraction in which the numerator is the number of days from the start of the
fiscal year to the date of termination and the denominator is 365.
3. For purposes of this agreement the following definitions shall be
applicable.
(a) The "ANI Base" for the 1992-93 fiscal year shall be
$1,080,594.00 This amount is the ANI for the 1991-92 fiscal year. For
each fiscal year following the 1992-93 fiscal year the "ANI Base" shall
be increased by a percentage equal to the percentage
<PAGE> 2
increase in the CPI-U for September of that year compared to the CPI-U
for September one year earlier.
(b) "Normal Capital Replacements" in the 1991-92 fiscal year
shall be $56,552.22 for each radio station owned and operated by the
Company. This per station amount will be increased each fiscal year
thereafter in accordance with increases in the CPI-U for the preceding
one year period (September to September) and shall also be adjusted pro
rata for any changes in the number of stations owned and operated by
the Company during any year.
(c) "Pro Forma Taxable Income (Loss)" shall mean the net
income of the Company as shown on the audited financial statements of
the Company for the fiscal year in question adjusted for book vs. tax
permanent differences but not adjusted for book vs. tax timing
differences. For example, 20% of certain travel and entertainment
expenses are not deductible expenses for tax purposes and are a book
vs. tax permanent difference. Therefore the net income of the Company
must be increased by the non-deductible portion of such expenses in
computing "Pro Forma Taxable Income". On the other hand the difference
between book depreciation (computed on a straight line basis) and tax
depreciation (computed on an accelerated basis) is a book vs. tax
timing difference and is not to be used as an adjustment to net income
of the Company in computing "Pro Forma Taxable Income." All such book
vs. tax differences (both permanent and timing differences) are
identified on the Company's Federal Income Tax Return. In the event
that the Company files an amended tax return which changes the tax
treatment of any such book vs. tax difference from a timing difference
to a permanent difference or vice versa, then the effect of such change
on the Pro Forma Taxable Income for the amended year shall be added (or
subtracted as the case may be) from the Pro Forma Taxable Income of the
year in which such amended tax return is filed.
(d) "Shareholders Tax Obligation (Benefit)" shall mean the
amount, for any fiscal year in which the company is taxed as a
Subchapter S corporation, which is computed by multiplying the Pro
Forma Taxable Income (or Loss) of the Company by the higher of the
combined maximum income tax rates (federal, state and local) applicable
to a shareholder or shareholders resident in Lower Merion Township,
Pennsylvania or to a shareholder or shareholders holding at least 25%
of the Company's capital stock who reside in any other jurisdiction as
of the and of the calendar year in which the Company's fiscal year
ends. In the event that there is Pro Forma Taxable Income the resultant
number is the Shareholders Subchapter S Tax Obligation In the event
that there is a Pro Forma Taxable Loss the resultant number is the
Shareholders Subchapter S Tax Benefit.
(e) "Adjusted Net Income" shall mean net income of the Company
as shown on the audited financial statements of the Company for the
fiscal year in question plus charges or expenses for depreciation or
amortization (exclusive of amortization of format change expenses) less
Normal Capital Replacements (as defined above) and, so long as the
Company
<PAGE> 3
is taxed as a Subchapter S corporation, less the Shareholders
Subchapter S Tax Obligation or plus the Shareholders Subchapter S Tax
Benefit (as defined above) as the case may be.
4. In the event the Company makes a Special or Liquidating
Distribution, as defined below, you will be paid a Special Bonus equal to 0.5%
of the total amount or value of any such Special Distribution or 0.1% of any
such Liquidating Distribution. Such Special Bonus will be in addition to the
salary and incentive compensation set forth in paragraphs 1 and 2 above.
Notwithstanding anything to the contrary set forth herein, in the event that any
portion of any special or Liquidating Distribution is made in a medium other
than cash, the Company at its option may elect to pay the same portion of any
such Special Bonus in the same medium or alternatively in a similar medium or in
cash of at least equivalent value.
Such Special Bonus shall be earned as of the record date for any such
Distribution and shall be paid on the same date as such Distribution is made to
shareholders, provided that you must be employed on such record date to earn any
such Special Bonus, and further provided that no change or adjustment shall be
made to the "ANI Base" as a result of any such Special or Liquidating
Distribution in the year of any such Distribution or in any subsequent year, it
being agreed that the Special Bonus shall be in lieu of any such change or
adjustment. A Special Distribution shall be defined as any dividend or
distribution made to the shareholders except:
(a) regular dividends or distributions made on a quarterly or
other periodic basis;
(b) dividends or distributions made to defray shareholders'
liability for income taxes with respect to the taxable income of the
Company; and
(c) any dividend or distribution of stock or rights, warrants
or options to acquire stock either in the Company or any other company
which is related to it either as a parent, subsidiary, successor or
company under common or similar ownership or control; and
(d) any Liquidating Distribution.
A "Liquidating Distribution" shall be defined as any dividend or distribution
made to the shareholders pursuant to a plan of complete liquidation of the
Company.
5. You will be entitled to medical insurance for yourself and your
dependents and to life insurance, vacation and other benefits available to
officers of the company in accordance with Company policy. You will also be
eligible to participate in the Entercom Officers Profit Sharing Plan in
accordance with the terms of the Plan.
6. You will be provided with the use of a Company vehicle (to be
selected by the Company) and insurance thereon. You will be responsible for gas
for the automobile. The Company will be responsible for repairs and maintenance
(including oil).
<PAGE> 4
7. It is understood and agreed that your position is one of executive
authority involving the exercise of discretion in matters affecting the vital
interests of the Company, including the existence and degree of profitability of
the enterprise and the maintenance and renewal of its principal assets, its FCC
broadcast licenses It is therefore essential that the relationship at all time
be one of complete confidence and mutual understanding with respect to policies
and goals. Accordingly it is expressly understood that nothing herein shall be
construed as altering the "at will" nature of your employment and either party
retains the right to terminate this agreement at any time either for good cause
or solely for the convenience of either party provided that, except where there
is good cause for said termination, each party agrees to give at least thirty
(30) days' notice in advance of said termination. If you give notice of
termination, the Company may at its option waive such notice and accept your
termination effective at any time prior to the expiration of the notice period.
Please confirm your agreement to the foregoing by signing and returning
the enclosed copy of this memo.
Very truly yours,
/s/ Joseph M. Field
Joseph M. Field
As agreed
/s/ John C. Donlevie
- --------------------
John C. Donlevie
Date
-------------------
<PAGE> 5
John C. Donlevie Employment Agreement
Calculation of Adjusted Net Income
for Fiscal Year Ending 9/30/92
Net Income 370,187
Plus: Depreciation and Amortization 1,468,193
(exclusive of amortization of format
change expenses)
Subtotal 1,838,380
Less: Normal Capital Replacements 1 622,077
- ----
Less: Shareholders Tax Obligation 2 135,709
- ---- ---------
Adjusted Net Income FYE 9/30/92 1,080,594
(1) Normal Capital Replacements for FYE 9/30/92 is computed in accordance
with paragraph 3(b) as follows: Normal capital replacements for FYE
9/30/91 was $54,905.36 per station x CPI increase of 3.0% = $56,552.52
This amount x 11 stations = $622,077.75.
(2) The Shareholders Tax Obligation is computed as follows:
Pro Forma Taxable Income is equal to Net Income of $370,187 plus an
adjustment for permanent book vs. tax differentials of $29,546. Thus
Pro Forma Taxable Income is $399,733.
The applicable tax rate is 33.95%, which is the sum of the 31% Federal
Income Tax Rate and the 2.95% Pennsylvania State Income Tax Rate.
The Shareholders Tax Obligation is equal to Pro Forma Taxable Income x
the applicable tax rate: i.e. $399,733 x 33.95% which equals
$135,709.35.
<PAGE> 6
MEMORANDUM
TO: John C. Donlevie and Eugene D. Levin
FROM: Joseph M. Field
DATE: September 8, 1994
IN RE: Incentive Compensation Calculation
In connection with the calculation of the incentive compensation which
you are to receive based upon the special distribution paid to shareholders of
the Company on August 2, 1994, we have discussed the issue of the amount of
state tax obligation that the shareholders may have relating to the tax on the
gain on the sale of the assets of KRXX-FM - Minneapolis and KOQL-FM - Oklahoma
City. The taxation of this gain in the various states is not free from doubt.
The Company has adopted a position with respect to such state tax obligation,
which tax counsel to the Company has advised is a reasonable position. Based
upon this position, the total income tax obligation of the shareholders relating
to the sale of the assets referenced above is $8,022,582.00. Of that amount the
obligation for state income taxes is $593,159.00.
This memo will confirm that we have agreed to compute the incentive
compensation on the basis of the state tax obligation of the shareholders
determined in accordance with the above-referenced position. However, in the
event that the state tax obligation of the shareholders with respect to such
sales is increased either through final audit or settlement, then each of you
has agreed that the incentive compensation payable as a result of said special
distribution would be recomputed and in the event the incentive compensation
bonus is reduced as a result of such recomputation, your compensation at the
time of such recomputation will be reduced by the amount of the reduction in the
incentive bonus.
Please confirm your agreement to the foregoing by signing and returning
the enclosed copy of this memo.
AS AGREED:
/s/ Eugene D. Levin /s/ John C. Donlevie
- ------------------- --------------------
Eugene D. Levin John C. Donlevie
<PAGE> 7
MEMORANDUM
MEMO TO: John C. Donlevie
FROM: Joe Field
DATE: August 2, 1996
RE: Incentive Compensation
This will confirm that we have agreed to change the formula for
incentive compensation set forth in the memorandum dated 12/28/92 as modified by
memos dated 3/17/94 and 9/8/94 to eliminate the effects of the deferral of
program format change expenses and to change the treatment of amortization of
financing costs.
We have also agreed that amortization of financing costs should not be
added back to net income in order to determine ANI. This adjustment will be made
retroactive to years ending 1992 and thereafter. As a result of this change the
ANI base set forth in the memo dated 12/28/92 is amended to the sum of
$1,194,440.00.
The net adjustment in incentive for fiscal years ending 1993 and 1994,
using the new ANI base and eliminating all effects for deferral of program
format change costs results in a net additional payment to you of $5,777.00.
Please confirm your agreement to the above changes by signing and
returning the enclosed copy of this memo If you have any questions regarding
this memo please call me.
ACCEPTED AND AGREED:
BY:/s/ John C. Donlevie
DATE: 8/9/96
<PAGE> 1
Exhibit 10.05
March 31, 1995
MEMO TO: Deborah Kane
FROM: David J. Field
RE: Appointment as Entercom's Director of
Strategic Sales
This will confirm our arrangement regarding your appointment
as Entercom's Director of Strategic Sales effective January 1, 1995. The terms
of your appointment to this new position are as follows:
1. Your duties and responsibilities shall be as set forth in
Exhibit A hereto.
2. Compensation. So long as you are performing the duties of
Director of Strategic Selling you will be compensated as follows:
a. Salary. You will be paid a semi-monthly
salary of $3,333.33 (annual rate of
$80,000).
b. One Time Payment. You will receive a one
time payment of $5,000 payable on February
23, 1995.
c. Car Allowance. You will receive a
semi-monthly car allowance of $208.33
(annual rate of $5,000) to reimburse you for
your expense involved in using your own
vehicle in connection with your duties.
d. Corporate SBD Incentive. You will be paid 2%
of Entercom SBD Revenue, as defined below
(i) in excess of $250,000 in each fiscal
quarter during the period 4/1/95 to 9/30/95
and (ii) in excess of $450,000 in each
fiscal quarter commencing on or after
10/1/95.
e. KITS SBD Incentive. In addition, you will
earn 1% of all SBD Revenue from KITS in San
Francisco commencing 4/1/95.
f. Quarterly SBD Budget Incentive. You will be
paid a quarterly bonus of $2,000 for each
fiscal quarter year commencing on 4/1/95 in
which Entercom's SBD Revenue equals or
exceeds the SBD Revenue budget amount for
that quarter. The SBD Revenue budget amount
will be set for each quarter in any
particular fiscal year (October 1 to
<PAGE> 2
September 30) at the beginning of that
fiscal year by David Field after consulting
with you. If such bonus is not earned in a
particular quarter but in a subsequent
quarter in the same fiscal year the
aggregate year to date SBD Revenue budget is
met, then the $2,000 bonus for the missed
quarter will be paid with the bonus for the
current quarter (i.e. if the fiscal year SBD
Revenue budget is met on a year-to-date
basis then to the extent not paid for prior
quarters in the fiscal year you will be paid
the $2,000 per quarter for each quarter in
the fiscal year, up to a maximum quarterly
SBD budget incentive bonus of $8,000 per
fiscal year.)
g. Quarterly Gross Revenue Budget Incentive.
You will be paid a quarterly bonus of $2,000
for each fiscal quarter year commencing
1/1/95 in which Entercom's Consolidated
Gross Revenue equals or exceeds the
Consolidated Gross Revenue budget amount for
that quarter. The Consolidated Gross Revenue
budget amount will be set for each quarter
in any particular fiscal year at the
beginning of the fiscal year by David Field
based on the approved Gross Revenue budgets
for each of Entercom's stations. If such
bonus is not earned in a particular quarter
but in a subsequent quarter in the same
fiscal year the aggregate year to date Gross
Revenue budget is met, then the $2,000 bonus
for the missed quarter will be paid with the
bonus for the current quarter (i.e. if the
fiscal year Gross Revenue budget is met on a
year-to-date basis then to the extent not
paid for prior quarters in the fiscal year
you will be paid the $2,000 per quarter for
each quarter in the fiscal year, up to a
maximum quarterly Gross Revenue budget
incentive bonus of $8, 000 per fiscal year.)
h. KITS LSM Override - You will continue to
earn the override on adjusted gross revenue
for local accounts on KITS set forth in your
prior agreement through the end of the
March, 1995 Standard Broadcast Month.
Thereafter this override will terminate.
i. The incentives set forth in 2.d. through
2.g. above shall be paid on the 23rd of the
2nd month following the end of the quarter
in question. Calculation of such incentives
may be estimated using monthly or weekly
billing reports but are subject to
adjustment or refund in any subsequent
payroll where the final quarterly financial
statements are available.
3. You will be entitled to such vacation, leave and other
benefits and shall be subject to such rules and regulations and disciplinary
action as shall be in effect from time to time in accordance with Company
policy. Company reserves the right to modify or terminate any such
<PAGE> 3
benefits, rules or regulations at any time upon notice to you. During any
periods of unpaid leave in accordance with such benefits, no salary or incentive
compensation shall be earned.
4. It is understood and agreed that your position is one of
executive authority involving the exercise of discretion in matters involving
the vital interests of the Company, including the existence and degree of
profitability of the enterprise. It is therefore essential that the relationship
at all times be one of complete confidence and mutual understanding with respect
to policies and goals. Accordingly, it is expressly agreed that your employment
shall be employment "at will" and shall be subject to termination at any time
with or without cause and with or without notice at the option of either you or
the Company. If at the time of any termination of this Agreement you are
entitled to severance pay, payment in lieu of notice, or payment for unused
vacation, such pay shall be based upon the amount of the salary set forth herein
and shall not contain any amounts for incentive compensation.
5. You will be required to maintain and use your own vehicle
to perform your duties hereunder. You agree to maintain automobile liability
insurance for such vehicle with coverage of at least $300,000 per occurrence.
Company's obligation with respect to your vehicle shall be limited to the "Car
Allowance" set forth in 2.c. above and Company shall not be responsible for any
costs or expenses associated with the use of such vehicle.
6. This Agreement constitutes the entire agreement and
understanding between you and the Company concerning the compensation to be paid
to you and all of the terms and conditions of your employment. This Agreement
supersedes any prior understanding, representations or agreements whether oral
or written concerning the subject matter hereof. This Agreement may not be
modified or amended except by written instrument duly executed by each of the
parties. A waiver by either party of any term or condition of this Agreement, or
the breach thereof, shall not be deemed to constitute a waiver of any other term
or condition of this Agreement or of any subsequent breach of any term or
condition hereof.
I am excited about the prospects for our new Strategic Selling
program and can't think of anybody in the world who I'd rather have leading the
change.
<PAGE> 4
Please confirm your agreement to the foregoing by signing and
returning the enclosed copy of this memo.
Very truly yours,
/s/ David J. Field
David J. Field
Sr. Vice President
DJF: dbs
As agreed:
/s/ Deborah Kane
Deborah Kane
Date 4/20/95
<PAGE> 5
EXHIBIT "A"
Your duties and responsibilities will include:
a. Build a customer focused selling culture which materially enhances
Entercom's selling effectiveness on a sustainable, day-to-day basis. To
accomplish this, you will develop industry-leading selling capabilities
within the organization on Strategic Business Development.
b. Develop, oversee and administer a systematic program of training,
reinforcement and consultation and develop and maintain the required
systems and procedures, reporting, communications, troubleshooting,
feedback, and rewards.
c. Provide daily telephone contact with SM's, AE's, and Account
Decision Makers for sales call plans, review strategy, solve problems,
brainstorm, etc.
d. Conduct monthly conference calls with the stations.
e. Distribute sales leads.
f. Coordinate the vendor and non-traditional sales training and
marketing efforts at all Entercom's stations.
g. Periodically provide ideas, information and materials to each of the
Entercom stations to enhance and improve the Entercom stations' SBD,
vendor and overall sales efforts.
h. Be available for consultation, brainstorming and problem solving
with personnel at each of the Entercom stations involved in vendor and
non-traditional sales.
i. Work to develop multi-station/market vendor and strategic sales
opportunities for the Entercom stations.
j. Become certified to instruct Entercom personnel various training
programs such as Conceptual Selling, Strategic Selling, Negotiation
Skills, Time Management, in addition to any other program that Entercom
deems as necessary and beneficial to its people.
k. Conduct on-site training sessions at all Entercom Radio stations and
follow up each training program with station visits to ensure correct
application of the programs. Visits will include training,
problem-solving and strategy sessions with local staff and management
plus Green Sheet reviews and sales calls with Station personnel.
Minimum of two station visits per month.
<PAGE> 6
l. Develop a complete sales training manual for all Entercom Radio
Stations that incorporates the best points of all programs.
m. Continue to investigate the very best sales and staff training
programs available and to determine the most cost effective manner to
implement the programs.
n. As new sales people and managers enter our stations, train them on
all available programs.
o. Continue your role as National Vendor Director of Entercom by
assisting Entercom's stations in the management of the Alternative
Sales efforts through, in-station training, infield sales calls,
reviewing proposals, uncovering and distributing sales leads, and
monthly conference calls.
p. Continue to assist the sales management at Entercom's radio stations
in an effort to stimulate the sales staffs to get maximum effectiveness
in the alternative arenas.
q. Provide a report on a monthly basis to David Field concerning your
activities and the status and success of the company's vendor and
strategic sales efforts.
r. You will no longer serve as the Local Sales Manager of KITS, San
Francisco, but you will be responsible for the direct supervision of
the station's Business Development Program at KITS.
s. Continue to develop alternative and direct sales programs for Live
105/KITS.
<PAGE> 7
M E M O R A N D U M
DATE: May 28,1996
TO: Deborah Kane
FROM: David J. Field
RE: Compensation Agreement
CC: JCD, GL
Deborah, I have listed below an outline of terms for your new contract
which will have an effective date of April 1, 1996. You will note that the
contract generally reflects our prior discussions and meetings, but I have made
some modifications and actually enhanced the structure in certain respects to
better reflect your contributions to Entercom. While I will be out of the
country until May 20, feel free to leave a message on my voice mail if you would
like to discuss any aspect of the agreement. If the terms are acceptable to you,
please confirm your agreement with Jack and Gene, so that they may document the
arrangement and immediately change your compensation to reflect your new
structure.
This has been an exciting year of enormous progress for Entercom and
you have played a vital role in our corporate evolution. You have done an
outstanding job in refining the Essential Sales Management Skills program,
working with each of the stations on programs, skills and systems, and helping
to develop our sales and sales management personnel. Now, we must make ESMS an
integral part of our stations' systems and methods so that we may reap the
benefits of this outstanding program.
We have some extraordinary challenges and opportunities ahead of us in
the coming months and years as we continue to rapidly grow the Company, both in
terms of our size and our operational capabilities. I have enormous confidence
in your judgment, skills and effectiveness and know that you will play a
critical role in our success.
SUMMARY CONTRACT TERMS
Salary: $100,000
Benefits: General Manager equivalent
<PAGE> 8
Company Car: You will forego your car allowance and be entitled to an automobile
on similar terms and conditions as Entercom General Managers.
Bonus: You will no longer receive any bonus for SBD revenue or LIVE 105 sales
revenues. Your bonus plan will be based entirely an the MBO plan.
MBO Plan: You will receive incentive compensation of $10,000 - $15,000 per
quarter based upon the following MBO criteria. You will complete a worksheet to
cover all of these criteria which you will complete and send to David Field
after each quarter. On the Worksheet, you will evaluate your performance against
each of the MBO goals and based on this self-evaluation you will propose an
appropriate bonus level within the $10,000 to $15,000 range. Your evaluation
should emphasize the quality of your performance and the magnitude of your
contributions, more than just the satisfactory completion of each goal. An
outstanding performance and the achievement of all goals should yield a $15,000
bonus. A merely good performance with the completion of most goals should
justify a $10,000 bonus.
David Field will review your self-evaluation and determine the level of
your MBO bonus compensation. While your self-evaluation will be considered as
part of your compensation review, it is not binding in any way on David Field.
The following will be your MBO goals for the twelve months ending March
31, 1997. These goals will be subject to change.
MBO's
Assist in developing and implementing strategic plans to reach or
exceed market share goals for each station and market. These goals will be
established by David Field in consultation with Deborah Kane and local
management. Certain markets may be designated as key markets, due to opportunity
or problems, and these markets will be accorded greater weight in evaluating
performance against this MBO.
Complete the initial implementation of ESMS's mandatory systems and
station-directed core systems with station management at all existing stations
by April 30, 1996 and at all new acquisitions within 60 days of operating
takeover. Provide David Field with updated list of each station's core systems.
Ensure that ESMS becomes an essential element of each station's process and
procedures by reinforcement (training, follow-up visits and calls, etc.),
compliance review, training new hires, etc. ESMS must be a passionate, core
component of the Entercom culture and system.
If it is not, we will have failed.
Provide David Field with succinct monthly report by the 15th of the
following month. The reports should cover the following areas, albeit it not in
every monthly report: a one paragraph review of each market with an emphasis on
future development not past history; Deborah Kane's top three priorities;
significant problems with planned solutions; major projects with timelines for
<PAGE> 9
completion; list of individuals deserving special recognition; plan of action
for the following month(s); and a broad assessment of our progress.
Implement AE training of all AE Skill Enhancement systems such as
Conceptual Selling, Strategic Selling, CNA, Negotiation Skills and Written
Presentation Model. Continue to provide on-going Sales Management training.
Evaluate new training needs and programs, and consider enhancements to existing
training systems and tools. In sum, passionately pursue a goal of continuous
improvement as we strive to build our "Culture of Excellence".
Interview and provide substantive input on all station Sales Management
hires. Advise station sales management in recruiting key sales talent.
Make a substantive contribution to planning and implementing the
successful integration and development of new acquisitions, particularly
multi-station "'clusters".
Conduct. and accompany AE's on a minimum of five Key and/or Target
accounts per market visit. Minimum of one visit to each market per quarter. Take
an active role in the strategic planning for all Entercom Key and Target
Accounts.
Oversee the Entercom Sales Club
Assist in structuring and implementation of new compensation structures
for Account Executives.
Conduct a competitive compensation study for GM, GSM and AE's with
major competitors.
Continue to maintain a special focus on LIVE 105 sales, based on your
history in the market and at the station and your proximity.
Become actively involved in reviewing station sales budgets for fiscal
1997. Performance against these budgets will be a key component of your future
bonuses.
Each quarter, do three unequivocally great things which make a
difference in our collective success. Examples might include making a manifest
difference in the development of an employee, successfully recruiting an
outstanding talent, or implementing a company-wide policy or system that makes
us a stronger operation. The only qualification is that these "great things" are
unambiguous and that you are truly proud of them.
Retake Strategic Selling
OTHER: Your bonus for the period January-March, 1996 should be based on
2% of SBD revenues for January and February in excess of $300,000. You should
already
<PAGE> 10
have received 1% of all LIVE 105 SBD dollars. In addition, we will pay
you a $6,500 bonus for your outstanding launch of ESMS during March.
Please provide Gene Levin immediately with a copy of the January and
February summary SBD revenues so that he may process your May 23, 1996
bonus without delay.
<PAGE> 11
MEMORANDUM
MEMO TO: Deborah Kane
RE: Compensation Plan
FROM: David J. Field
DATE: May 9, 1997
As we discussed, you will receive $14,000 for your 2nd fiscal quarterly
bonus. I'm also very pleased to make the following changes in your compensation
package retroactive to April 1, 1997.
* Base salary of $135,000
* In addition to your existing MBO bonus, we will add a performance bonus
based upon Entercom revenue performance vs. budget, vs. market growth
and considering other relevant factors. Because of the extraordinary
number of new properties, this performance bonus will not be tied to
any objective formula for the remainder of Fiscal 1997, but will be
determined by me after reviewing the company-wide revenue statistics.
This bonus will be limited to $5,000 per quarter for excellent
company-wide performance.
Commencing October 1, 1997, your salary will remain at $135,000, but we
will make the following changes to your incentive plan:
* Your MBO incentive will be reduced to a maximum of $35,000 per year
($8,750 per quarter) for excellent performance as described in my memo
of May 28, 1996, which is attached.
* In lieu of the $5,000 per quarter performance bonus, you will be
eligible for the following:
- $5,000 per quarter if Entercom achieves its aggregate
quarterly revenue budget.
- $2,500 for achievement of between 95% and 99.9% of that budget
- 0.2% of all revenue in excess of the aggregate Entercom
budget.
- We will, of course, exclude from the calculation any new
stations which we acquire until they are integrated into our
budgeting system.
* We will add a market share bonus of $15,000 per year ($3,750 per
quarter) for achievement of quarterly market revenue share goals to be
determined and defined prior to the commencement of Fiscal 1998.
<PAGE> 12
Deborah, we have made great progress towards our goal of building a
"culture of excellence". You have made a remarkable impact over the past year
and I took forward to great accomplishment in the future.
cc: Joseph M. Field
John C. Donlevie
Eugene D. Levin
<PAGE> 1
Exhibit 10.06
December 28, 1992
TO: Eugene D. Levin
FROM: Joseph M. Field
RE: Terms of Employment
This will confirm the agreement which we have reached
regarding the terms of your employment at Entercom effective October 1, 1992.
We have agreed that commencing October 1, 1992 you will be
compensated as follows:
1. Your weekly salary will be $1,534.25 (annual rate of
$80,000.00). Effective as of January 1, 1993 your weekly salary will be
increased to $1,630.14 (annual rate of $85,000.00). Your salary will be
increased annually effective January 1 of each year commencing January 1, 1994.
The increase shall be a percentage equal to the percentage increase in the
Consumer Price Index for All Urban Consumers (CPI-U), as published by the U.S.
Department of Labor for the immediately preceding November, compared to the
CPI-U for the month of November one year earlier.
2. In addition to the salary set forth in 1 above, we have
agreed that you will be paid an incentive bonus based on increases in the real
cash flow of the Company. The formula set out below attempts to do this but it
cannot anticipate significant changes in the Company's accounting methods which
may occur subsequent to the date of this letter. Therefore in the event of a
significant change in the Company's accounting methods that would result in a
significant deviation from the stated purpose of the incentive then we have
agreed to equitably adjust the formula set forth below so that after reflecting
such accounting change the formula reflects the principle that the incentive is
to be based on changes in real cash flow. Changes in the Company's accounting
methods which have occurred prior to the date of this letter have already been
considered and are fully reflected in the formula. The formula to which we have
agreed is that you will be paid incentive compensation equal to 0.5% of the
excess of the Company's annual Adjusted Net Income (as defined below) over the
ANI Base (as defined below) using an October 1 to September 30 fiscal year,
beginning with the 1992-93 fiscal year. Such incentive shall be paid on the
first regular payroll date for the corporate office which occurs after the
December 31st following the end of the fiscal year in question. In the event of
a termination of your employment,
<PAGE> 2
the incentive payable under this paragraph 2 for the year of termination shall
be that portion of the incentive that would have been payable for the entire
fiscal year in which the termination occurs, which is computed by multiplying
the incentive for the entire fiscal year by a fraction in which the numerator is
the number of days from the start of the fiscal year to the date of termination
and the denominator is 365.
3. For purposes of this agreement the following definitions
shall be applicable.
(a) The "ANI Base" for the 1992-93 fiscal year shall
be $1,080,594.00. This amount is the ANI for the 1991-92
fiscal year. For each fiscal year following the 1992-93 fiscal
year the "ANI Base" shall be increased by a percentage equal
to the percentage increase in the CPI-U for September of that
year compared to the CPI-U for September one year earlier."
(b) "Normal Capital Replacements" in the 1991-92
fiscal year shall be $56,552.22 for each radio station owned
and operated by the Company. This per station amount will be
increased each fiscal year thereafter in accordance with
increases in the CPI-U for the preceding one year period
(September to September) and shall also be adjusted pro rata
for any changes in the number of stations owned and operated
by the Company during any year.
(c) "Pro Forma Taxable Income (Loss)" shall mean the
net income of the Company as shown on the audited financial
statements of the Company for the fiscal year in question
adjusted for book vs. tax permanent differences but not
adjusted for book vs. tax timing differences. For example, 20%
of certain travel and entertainment expenses are not
deductible expenses for tax purposes and are a book vs. tax
permanent difference. Therefore the net income of the Company
must be increased by the non-deductible portion of such
expenses in computing "Pro Forma Taxable Income". On the other
hand the difference between book depreciation (computed on a
straight line basis) and tax depreciation (computed on an
accelerated basis) is a book vs. tax timing difference and is
not to be used as an adjustment to net income of the Company
in computing "Pro Forma Taxable Income". All such book vs. tax
<PAGE> 3
differences (both permanent and timing differences) are
identified on the Company's Federal Income Tax Return. In the
event that the Company files an amended tax return which
changes the tax treatment of any such book vs. tax difference
from a timing difference to a permanent difference or vice
versa, then the effect of such change on the Pro Forma Taxable
Income for the amended year shall be added (or subtracted as
the case may be) from the Pro Forma Taxable Income of the year
in which such amended tax return is filed.
(d) "Shareholders Tax Obligation (Benefit)" shall
mean the amount, for any fiscal year in which the Company is
taxed as a Subchapter S corporation, which is computed by
multiplying the Pro Forma Taxable Income (or Loss) of the
Company by the higher of the combined maximum income tax rates
(federal, state and local) applicable to a shareholder or
shareholders resident in Lower Merion Township, Pennsylvania
or to a shareholder or shareholders holding at least 25% of
the Company's capital stock who reside in any other
jurisdiction as of the end of the calendar year in which the
Company's fiscal year ends. In the event that there is Pro
Forma Taxable Income the resultant number is the Shareholders
Subchapter S Tax Obligation. In the event that there is a Pro
Forma Taxable Loss the resultant number is the Shareholders
Subchapter S Tax Benefit.
(e) "Adjusted Net Income" shall mean net income of
the Company as shown on the audited financial statements of
the Company for the fiscal year in question plus charges or
expenses for depreciation or amortization (exclusive of
amortization of format change expenses) less Normal Capital
Replacements (as defined above) and, so long as the Company is
taxed as a Subchapter S corporation, less the Shareholders
Subchapter S Tax Obligation or plus the Shareholders
Subchapter S Tax Benefit (as defined above) as the case may
be.
4. In the event the Company makes a Special or Liquidating
Distribution, as defined below, you will be paid a Special Bonus equal to 0.25%
of the total amount or value of any such Special Distribution or 0.05% of any
such Liquidating Distribution. Such Special Bonus will be in addition to the
salary and incentive compensation set forth in paragraphs 1 and 2 above.
Notwithstanding anything to the contrary set forth
<PAGE> 4
herein, in the event that any portion of any special or Liquidating Distribution
is made in a medium other than cash, the Company at its option may elect to pay
the same portion of any such Special Bonus in the same medium or alternatively
in a similar medium or in cash of at least equivalent value.
Such Special Bonus shall be earned as of the record date for any such
Distribution and shall be paid on the same date as such Distribution is made to
shareholders, provided that you must be employed on such record date to earn any
such Special Bonus, and further provided that no change or adjustment shall be
made to the "ANI Base" as a result of any such Special or Liquidating
Distribution in the year of any such Distribution or in any subsequent year, it
being agreed that the Special Bonus shall be in lieu of any such change or
adjustment. A Special Distribution shall be defined as any dividend or
distribution made to the shareholders except:
(a) regular dividends or distributions made on a
quarterly or other periodic basis;
(b) dividends or distributions made to defray
shareholders' liability for income taxes with respect to the
taxable income of the Company; and
(c) any dividend or distribution of stock or rights,
warrants or options to acquire stock either in the Company or
any other company which is related to it either as a parent,
subsidiary, successor or company under common or similar
ownership or control; and
(d) any Liquidating Distribution.
A "Liquidating Distribution" shall be defined as any dividend or distribution
made to the shareholders pursuant to a plan of complete liquidation of the
Company.
5. You will be entitled to medical insurance for yourself and
your dependents and to life insurance, vacation and other benefits available to
officers of the Company in accordance with Company policy. You will also be
eligible to participate in the Entercom Officers Profit Sharing Plan in
accordance with the terms of the Plan.
<PAGE> 5
6. You will be provided with the use of a Company vehicle (to
be selected by the Company) and insurance thereon. You will be responsible for
gas for the automobile. The Company will be responsible for repairs and
maintenance (including oil).
7. It is understood and agreed that your position is one of
executive authority involving the exercise of discretion in matters affecting
the vital interests of the Company, including the existence and degree of
profitability of the enterprise and the maintenance and renewal of its principal
assets, its FCC broadcast licenses. It is therefore essential that the
relationship at all times be one of complete confidence and mutual understanding
with respect to policies and goals. Accordingly it is expressly understood that
nothing herein shall be construed as altering the "at will" nature of your
employment and either party retains the right to terminate this agreement at any
time either for good cause or solely for the convenience of either party
provided that, except where there is good cause for said termination, each party
agrees to give at least thirty (30) days' notice in advance of said termination.
If you give notice of termination, the Company may at its option waive such
notice and accept your termination effective at any time prior to the expiration
of the notice period.
Please confirm your agreement to the foregoing by signing and
returning the enclosed copy of this memo.
Very truly yours,
/s/ Joseph M. Field
Joseph M. Field
As agreed
/s/ Eugene D. Levin
Eugene D. Levin
Date: 8/13/93
<PAGE> 6
Eugene D. Levin Employment Agreement
Calculation of Adjusted Net Income
for Fiscal Year Ending 9/30/92
Net Income 370,187
Plus: Depreciation and Amortization 1,468,193
(exclusive of amortization of format
change expenses)
Subtotal 1,838,380
Less: Normal Capital Replacements 1 622,077
- ----
Less: Shareholders Tax Obligation 2 135,709
-----------
Adjusted Net Income for FYE 9/30/92 1,080,594
(1) Normal Capital Replacements for FYE 9/30/92 is computed in accordance
with paragraph 3(b) as follows: Normal capital replacements for FYE
9/30/91 was $54,905.36 per station x CPI increase of 3.0% - $56,552.52.
This amount x 11 stations = $622,077.75.
(2) The Shareholders Tax Obligation is computed as follows:
Pro Forma Taxable Income is equal to Net Income of $370,187 plus an
adjustment for permanent book vs. tax differentials of $29,546. Thus
Pro Forma Taxable Income is $399,733.
The applicable tax rate is 33.95%, which is the sum of the 31% Federal
Income Tax Rate and the 2.95% Pennsylvania State Income Tax Rate.
The Shareholders Tax Obligation is equal to Pro Forma Taxable Income x
the applicable tax rate: i.e. $399,733 x 33.95% which equals
$135,709.35.
<PAGE> 7
March 17, 1994
MEMO TO: Eugene D. Levin
FROM: Joseph M. Field
RE: Terms of Employment
This will confirm our agreement regarding amendments to our
letter agreement dated December 28, 1992 as follows:
1. The definition of Pro Forma Taxable Income (Loss) contained
in paragraph 3(c) of the letter agreement is amended to read as follows:
(c) "Pro Forma Taxable Income (Loss)" shall mean the net
income of the Company as shown on the audited financial statements of
the Company for the fiscal year in question excluding any gain or loss
from the sale or other disposition of Company owned real estate, radio
stations (including FCC licenses, goodwill and other intangibles as
well as real and tangible assets associated therewith) or other
business units, adjusted for book vs. tax permanent differences but not
adjusted for book vs. tax timing differences. For example, 20% of
certain travel and entertainment expenses are not deductible expenses
for tax purposes and are a book vs. tax permanent difference. Therefore
the net income of the Company must be increased by the non-deductible
portion of such expenses in computing "Pro Forma Taxable Income". On
the other hand the difference between book depreciation (computed on a
straight line basis) and tax depreciation (computed on an accelerated
basis) is a book vs. tax timing difference and is not to be used as an
adjustment to net income of the Company in computing "Pro Forma Taxable
Income". All such book vs. tax differences (both permanent and timing
differences) are identified on the Company's Federal Income Tax Return.
In the event that the Company files an amended tax return which changes
the tax treatment of any such book vs. tax difference from a timing
difference to a permanent difference or vice versa, then the effect of
such change on the Pro Forma Taxable Income for the amended year shall
be reflected by adding (or subtracting as the case may be) to or from
the Pro Forma Taxable Income of the year in which such amended tax
return is filed, instead of making any adjustment to the Pro Forma
Taxable Income for the amended year.
<PAGE> 8
Page Two
2. The definition of Adjusted Net income contained in
paragraph 3 (e) of the agreement is amended to read as follows:
(e) "Adjusted Net Income" shall mean net income of
the Company as shown on the audited financial statements of
the Company for the fiscal year in question excluding any gain
or loss from the sale or other disposition of Company owned
real estate, radio stations (including FCC licenses, goodwill
and other intangibles as well as real and tangible assets
associated therewith) or other business units, plus charges or
expenses for depreciation or amortization (exclusive of
amortization of format change expenses) less Normal Capital
Replacements (as defined above) and, so long as the Company is
taxed as a Subchapter S corporation, less the Shareholders
Subchapter S Tax Obligation or plus the Shareholders
Subchapter S Tax Benefit (as defined above) as the case may
be.
3. These changes shall be effective January 1, 1994.
4. Except as modified above, the letter agreement dated
December 28, 1992 shall remain in full force and effect.
Please confirm your agreement to the foregoing by signing and
returning a copy of this memo.
Sincerely,
/s/ Joseph M. Field
Joseph M. Field
Agreed:
/s/ Eugene D. Levin
Eugene D. Levin
Date 8/2/94
<PAGE> 9
MEMORANDUM
TO: John C. Donlevie and Eugene D. Levin
FROM: Joseph M. Field
DATE: September 8, 1994
IN RE: Incentive Compensation Calculation
In connection with the calculation of the incentive
compensation which you are to receive based upon the special distribution paid
to shareholders of the Company on August 2, 1994, we have discussed the issue of
the amount of state tax obligation that the shareholders may have relating to
the tax on the gain on the sale of the assets of KRXX-FM - Minneapolis and
KOQL-FM - Oklahoma City. The taxation of this gain in the various states is not
free from doubt. The Company has adopted a position with respect to such state
tax obligation, which tax counsel to the Company has advised is a reasonable
position. Based upon this position, the total income tax obligation of the
shareholders relating to the sale of the assets referenced above is
$8,022,582.00. Of that amount the obligation for state income taxes is
$593,159.00.
This memo will confirm that we have agreed to compute the
incentive compensation on the basis of the state tax obligation of the
shareholders determined in accordance with the above-referenced position.
However, in the event that the state tax obligation of the shareholders with
respect to such sales is increased either through final audit or settlement,
then each of you has agreed that the incentive compensation payable as a result
of said special distribution would be recomputed and in the event the incentive
compensation bonus is reduced as a result of such recomputation, your
compensation at the time of such recomputation will be reduced by the amount of
the reduction in the incentive bonus.
Please confirm your agreement to the foregoing by signing and
returning the enclosed copy of this memo.
AS AGREED:
/s/ Eugene D. Levin /s/ John C. Donlevie
Eugene D. Levin John C. Donlevie
<PAGE> 10
MEMORANDUM
MEMO TO: Gene Levin
FROM: Joe Field
DATE: August 7, 1996
RE: Incentive Compensation
This will confirm that we have agreed to change the formula for
incentive compensation set forth in the memorandum dated 12/28/92 as modified by
memos dated 3/17/94 and 9/8/94 to eliminate the effects of the deferral of
program format change expenses and to change the treatment of amortization of
financing costs.
We have also agreed that amortization of financing costs should not be
added back to net income in order to determine ANI. This adjustment will be made
retroactive to years ending 1992 and thereafter. As a result of this change the
ANI base set forth in the memo dated 12/28/92 is amended to the sum of
$1,194,440.00.
The net adjustment in incentive for fiscal years ending 1993 and 1994,
using the new ANI base and eliminating all effects for deferral of program
format change costs results in a net additional payment to you of $2,888.00.
Please confirm your agreement to the above changes by signing and
returning the enclosed copy of this memo. If you have any questions regarding
this memo please call me.
ACCEPTED AND AGREED:
BY: /s/ Eugene D. Levin
DATE: 8/6/96
<PAGE> 1
EXHIBIT 10.07
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
AMONG
ENTERTAINMENT COMMUNICATIONS, INC.,
TUSCALOOSA BROADCASTING, INC.,
SINCLAIR RADIO OF PORTLAND LICENSEE, INC.
AND
SINCLAIR RADIO OF ROCHESTER LICENSEE, INC.
DATED AS OF
JANUARY 26, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS .................................................2
ARTICLE II. SALE AND PURCHASE ...........................................7
2.1. TRANSFER OF ASSETS ...................................................7
2.2. EXCLUDED ASSETS ......................................................9
3. PURCHASE PRICE ......................................................11
2.4. ESCROW ..............................................................11
2.5. PAYMENT .............................................................11
2.6. ALLOCATION OF PURCHASE PRICE ........................................11
ARTICLE III. LIABILITIES ................................................12
3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM ...............................12
3.2. OTHER LIABILITIES ...................................................12
3.3. NON-ASSIGNABLE STATION CONTRACTS ....................................12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES .............................13
4.1. SELLERS' REPRESENTATIONS ............................................13
4.2. ENTERCOM'S REPRESENTATIONS ..........................................22
ARTICLE V. CONDITIONS .................................................24
5.1. MUTUAL CONDITIONS ...................................................24
5.2. ENTERCOM'S CONDITIONS ...............................................25
5.3. SELLERS' CONDITIONS .................................................25
ARTICLE VI. COVENANTS AND AGREEMENTS ...................................26
6.1. AFFIRMATIVE COVENANTS OF SELLERS ....................................26
6.2. NEGATIVE COVENANTS OF SELLERS .......................................28
6.3. AFFIRMATIVE COVENANTS OF ENTERCOM ...................................28
6.4. MUTUAL COVENANTS OF SELLERS AND ENTERCOM ............................29
6.5. NO CONTROL BY ENTERCOM ..............................................30
ARTICLE VII. PREPARATION FOR CLOSING ....................................30
7.1. APPLICATION TO COMMISSION ...........................................30
7.2. INSPECTION BY ENTERCOM ..............................................30
7.3. HART-SCOTT-RODINO NOTIFICATION ......................................31
ARTICLE VIII. CLOSING ....................................................31
8.1. CLOSING .............................................................31
8.2. ADJUSTMENTS .........................................................31
8.3. CLOSING DELIVERIES TO ENTERCOM ......................................33
8.4. CLOSING DELIVERIES TO SELLERS .......................................34
8.5. COVENANTS OF FURTHER ASSURANCE ......................................35
8.6. DAMAGE TO PROPERTY ..................................................35
8.7. TAXES ON TRANSACTION ................................................35
ARTICLE IX. TERMINATION, DEFAULT AND INDEMNIFICATION ...................36
9.1. TERMINATION BY REASON OTHER THAN DEFAULT ............................36
(iii)
<PAGE> 3
9.2. EFFECT OF TERMINATION BY REASON OTHER THAN DEFAULT ..................36
9.3. DEFAULT .............................................................36
9.4. REMEDIES OF SELLERS .................................................37
9.5. ENTERCOM'S REMEDIES .................................................37
9.6. LIQUIDATED DAMAGES NOT A PENALTY ....................................37
9.7. INDEMNIFICATION .....................................................38
ARTICLE X. GENERAL PROVISIONS .........................................40
10.1. EXPENSES OF THE PARTIES .............................................40
10.2. BROKERS .............................................................40
10.3. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES ...............40
10.4. AMENDMENT AND WAIVER ................................................41
10.5. ASSIGNMENT ..........................................................41
10.6. EFFECT OF THIS AGREEMENT ............................................41
10.7. HEADINGS ............................................................41
10.8. COUNTERPARTS ........................................................41
10.9. GOVERNING LAW .......................................................41
10.10. NOTICES .............................................................41
10.11. STATION EMPLOYEES ...................................................43
10.12. SECTION 1031 ASSET EXCHANGE .........................................43
(iv)
<PAGE> 4
EXHIBITS
A Form of Time Brokerage Agreement
B Form of Sinclair Communications, Inc. Guarantee
C Form of Escrow Agreement
D Form of Indemnification Escrow Agreement
E Forms of Bill of Sale and Assignment of Assets, Assignments of FCC
Licenses, Assignment of Contracts and Leases, and Assumption Agreement
F Form of Sellers' Corporate Legal Opinion
G Form of Sellers' FCC Legal Opinion
H Form of Entercom's Legal Opinion
SCHEDULES
2.1.1 FCC Licenses
2.1.2 Real and Leased Property
2.1.3 Tangible Personal Property
2.1.5 Program Contracts
2.1.6 Trade-out Agreements
2.1.8 Operating Contracts
2.1.9 Vehicles
2.2.11 Miscellaneous Excluded Assets
4.1.6 Changes or Events
4.1.7 Litigation
4.1.8 Permitted Encumbrances
4.1.9 FCC Matters
4.1.14 Employee Benefit Plans
4.1.15 Labor Relations
4.1.16 Environmental Matters
4.1.17 Insurance
4.1.19 Matters Regarding the Heritage Agreement
4.2.3 Entercom's Qualifications as Assignee
(v)
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT made and entered into this 26th day of
January, 1998 by and among, TUSCALOOSA BROADCASTING, INC., a Maryland
corporation (hereinafter "Tuscaloosa"), SINCLAIR RADIO OF PORTLAND LICENSEE,
INC., a Maryland corporation ("SRPLI"), SINCLAIR RADIO OF ROCHESTER LICENSEE,
INC., a Maryland corporation ("SRRLI"), (Tuscaloosa, SRPLI and SRRLI are
sometimes collectively referred to herein as "Sellers"), and ENTERTAINMENT
COMMUNICATIONS, INC., a Pennsylvania corporation (hereinafter "Entercom").
W I T N E S S E T H:
WHEREAS, pursuant to authorizations duly granted and issued by the
Federal Communications Commission (the "Commission"), certain subsidiaries (the
"Operating Subsidiaries") of HMC Acquisition Corp., a Delaware corporation
("HMC" and collectively with the Operating Subsidiaries, "Heritage") presently
own and operate radio stations KKSN(AM), Vancouver, Washington, KKSN-FM,
Portland, Oregon, KKRH(FM), Salem, Oregon, WKLX(FM), WBEE(FM) and WBBF(AM),
Rochester, New York, and WQRV(FM), Avon, New York (each, a "Station" and
collectively, the "Stations"); and
WHEREAS, on August 20, 1997, Heritage Media Corporation, formerly
the parent of the Operating Subsidiaries, merged with and into HMC, a
wholly-owned subsidiary of The News Corporation, Limited ("News Corp."); and
WHEREAS, Sinclair Broadcast Group, Inc. ("Sinclair") has agreed,
pursuant to an Asset Purchase Agreement, among Sinclair and certain subsidiaries
of Heritage, dated as July 16, 1997 (as such agreement may be amended from time
to time, the "Heritage Agreement"), to acquire the assets owned, leased or used
by Heritage or such subsidiaries in connection with the business and operations
of the Stations and other radio and television stations; and
WHEREAS, Tuscaloosa, SRPLI and SRRLI are wholly-owned subsidiaries
of Sinclair and will acquire the Stations pursuant to one or more assignments of
Sinclair's rights and obligations under the Heritage Agreement from Sinclair to
Tuscaloosa, SRPLI and SRRLI; and
WHEREAS, Entercom and Sellers have agreed, subject to the prior
acquisition of the Stations by Sellers, prior approval by the Commission and
certain other conditions, to transfer and assign the assets, properties, rights,
privileges, licenses and all other authorizations used in connection with or
relating to the Stations from Sellers to Entercom as hereinafter set forth; and
<PAGE> 6
WHEREAS, Entercom may elect to accomplish such transfer in whole or
part as the acquisition of replacement property in a deferred like-kind exchange
under Section 1031 of the Code; and
WHEREAS, concurrently with the execution of this Agreement, (i)
Entercom and Sellers are entering into a Time Brokerage Agreement substantially
in the form of Exhibit A hereto (the "TBA") providing for the programming and
sale by Entercom, upon the acquisition by Sellers of the Station, of
substantially all of the broadcast time available on the Stations and (ii)
Sinclair Communications, Inc., a Maryland corporation and wholly-owned
subsidiary of Sinclair ("SCI"), is delivering a guarantee substantially in the
form of Exhibit B hereto (the "Sinclair Guarantee") of certain of Sellers'
obligations under this Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and of the representations and warranties hereinafter set forth and
for other good and valuable consideration, the parties, intending to be legally
bound hereby, agree as follows:
ARTICLE 1.
DEFINITIONS
As used herein, the following terms shall have the following
respective meanings:
"ADJUSTMENT TIME" shall mean 12:00:01 a.m. eastern standard time on
the Closing Date.
"AGREEMENT" shall mean this Asset Purchase Agreement.
"APPLICATIONS" shall have the meaning set forth in Section 7.1
hereof.
"BENEFIT ARRANGEMENT" means any benefit arrangement, obligation,
custom, or practice, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors, other than any
obligation, arrangement, custom or practice that is a Plan, including, without
limitation, employment agreements, executive compensation arrangements,
incentive programs or arrangements, sick leave, vacation pay, plant closing
benefits, salary continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock option or purchase, hospitalization, medical insurance, life insurance,
tuition reimbursement or scholarship programs, perquisite, company cars, any
plans subject to Code Section 125 and any plans providing benefits or payments
in the event of a change of control, change in ownership, or sale of a
substantial portion (including all or substantially all) of the assets of any
business or portion thereof, in each case with respect to any present or former
employees, directors, or agents.
"CLOSING" shall mean the event of consummation of the transactions
contemplated by this Agreement as more fully described in Article VIII of this
Agreement.
2
<PAGE> 7
"CLOSING DATE" shall mean the date specified for Closing in Section
8.1 hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMISSION" shall mean the Federal Communications Commission.
"DOJ" shall mean the Antitrust Division of the United States
Department of Justice.
"ENCUMBRANCES" shall mean any mortgages, pledges, liens, security
interests, defects in title, easements, rights-of-way, encumbrances,
restrictions and any other matter affecting title.
"ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended by the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section
9601 et seq.; the Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 2601
et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1802 et
seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section
9601 et seq.; the Clean Water Act ("CWA"), 33 U.S.C. Section 1251 et seq.; the
Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; the Clean Air Act
("CAA"), 42 U.S.C. Section 7401 et seq.; the Occupational Safety and Health Act
("OSHA"), 29 U.S.C. Section 651 et seq.; or any other applicable federal, state,
or local laws relating to Hazardous Materials generation, production, use,
storage, treatment, transportation or disposal, or the protection of the
environment from Hazardous Materials.
"ENTERCOM" shall mean the corporation identified as such in the
Preamble to this Agreement and any Qualified Intermediary to which Entercom may
elect to assign all or part of its rights hereunder pursuant to Section 10.12
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and all laws promulgated pursuant thereto or in connection
therewith.
"ERISA AFFILIATE" shall mean any person that, together with any
other person, would be or was prior to March 17, 1997 treated as a single
employer under Section 414 of the Code or Section 4001 of ERISA.
"FINAL ORDER" shall mean an action by the Commission upon any
application including, without limitation, the Applications, for its consent,
approval or authorization, which action has not been reversed, stayed, enjoined,
set aside, annulled or suspended, and with respect to which action, no protest,
petition to deny, petition for rehearing or reconsideration, appeal or request
for stay is pending, and as to which action the time for filing of any such
protest, petition, appeal or request and any period during which the Commission
may reconsider or review such action on its own authority has expired.
3
<PAGE> 8
"FTC" shall mean the United States Federal Trade Commission.
"HAZARDOUS MATERIALS" shall mean any wastes, substances, or
materials (whether solids, liquids or gases) that are deemed hazardous, toxic,
pollutants, or contaminants, including without limitation, substances defined as
"hazardous waste," "hazardous substances," "toxic substances," "radioactive
materials," or other similar designations in, or otherwise subject to regulation
under, any Environmental Laws.
"HERITAGE" shall mean HMC and the Operating Subsidiaries.
"HERITAGE AGREEMENT CLOSING DATE" shall mean the latest date on
which all of the Stations are acquired by Sinclair under the Heritage Agreement,
whether or not all stations subject to the Heritage Agreement are acquired on
such date.
"HERITAGE AGREEMENT DATE" shall mean July 16, 1997.
"HMC" shall mean the corporation identified as such in the Preamble
to this Agreement.
"KNOWLEDGE" shall mean the actual knowledge of the party to whom
such knowledge is imputed or the knowledge that the party should have upon
reasonable investigation in light of the facts and circumstances available to
such party.
"LIABILITIES" shall mean, as to any Person, all debts, adverse
claims, liabilities and obligations, direct, indirect, absolute or contingent of
such Person, whether accrued, vested or otherwise, whether in contract, tort,
strict liability or otherwise and whether or not actually reflected, or required
by generally accepted accounting principles to be reflected, in such Person's
balance sheets or other books and records.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
the business, assets or financial condition of the Stations taken as a whole,
except for any such material adverse effect resulting from (a) general economic
conditions applicable to the radio broadcast industry, (b) general conditions in
the markets in which the Stations operate or (c) circumstances that are not
likely to recur and either have been substantially remedied or can be
substantially remedied without substantial cost or delay.
"MULTIEMPLOYER PLAN" shall mean any Plan described in Section 3(37)
of ERISA.
"NEWS CORP." shall mean The News Corporation Limited, a South
Australian corporation.
4
<PAGE> 9
"ORDINARY COURSE OF BUSINESS" shall mean, with respect to any
person, the ordinary course of business consistent with past practices of such
person both with respect to type and amount; any actions taken pursuant to the
requirements of law or contracts existing on the date hereof shall be deemed to
be action in the Ordinary Course of Business.
"PERMITTED ENCUMBRANCES" shall mean (a) Encumbrances of a landlord
or other statutory lien not yet due and payable, or a landlord's lien arising in
the Ordinary Course of Business, (b) Encumbrances arising in connection with
equipment or maintenance financing or leasing under the terms of the Station
Contracts set forth on the Schedules which have been made available to Entercom,
(c) Encumbrances arising pursuant to the terms of leases on Real Property or
Leased Property as set forth on Schedule 2.1.1 and Schedule 2.1.8 which are
subject to any lease or sublease to a third party, (d) Encumbrances for taxes
not yet due and payable or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
in accordance with generally accepted accounting principles, (e) Encumbrances
that do not materially detract from the value of any of the Assets or materially
interfere with the use thereof as currently used, or (f) those Encumbrances on
Schedule 4.1.8.
"PLAN" means any plan, program or arrangement, whether or not
written, that is or was an "employee benefit plan" as such term is defined in
Section 3(3) of ERISA and (a) which was or is established or maintained by
Heritage, Sellers or any ERISA Affiliate of such parties; (b) to which Heritage,
Sellers contributed or was obligated to contribute or to fund or provide
benefits or had any liability (whether actual or contingent) with respect to any
of its assets or otherwise; or (c) which provides or promises benefits to any
person who performs or who has performed services for Heritage, Sellers and
because of those services is or has been (i) as participant therein or (ii)
entitled to benefits thereunder.
"PORTLAND STATIONS" shall mean KKSN(AM), KKSN-FM and KKRH(FM).
"PRORATION ITEMS" shall mean any power and utility charges, business
and license fees (including retroactive adjustments thereof), sales and service
charges, commissions, special assessments, and rental payments and personal and
real estate taxes and assessments with respect to the Real Property, taxes
(except for taxes arising from the transfer of the Assets hereunder), deposits,
Trade-out Agreements, accrued vacation, unused sick leave and other similar
prepaid and deferred items and any other operating expenses incurred in the
Ordinary Course of Business. The parties acknowledge and agree that there shall
be excluded from Proration Items the following: (a) except as otherwise provided
in the TBA, severance pay relating to any employee of the Stations who shall
have been terminated prior to the Closing Date, and (b) any Liabilities not
being assumed by Entercom in accordance with Section 3.1.
"QUALIFIED INTERMEDIARY" shall mean a party described in U.S.
Treasury Regulations Section 1.1031(k)-1(g)(4).
5
<PAGE> 10
"QUALIFIED PLAN" shall mean a Plan that satisfies, or is intended to
satisfy, the requirements for tax qualification described in Section 401 of the
Code including, without limitation, any Plan that was terminated on or after
July 1, 1989, as to which a person may have any actual or contingent liability.
"ROCHESTER STATIONS" shall mean WKLX(FM), WBEE(FM), WBBF(AM) and
WQRV(FM).
"SCI" shall mean the corporation identified as such in the Preamble
to this Agreement.
"SELLERS" shall mean Tuscaloosa, SRPLI and SRRLI.
"SELLERS' KNOWLEDGE" shall mean, except as otherwise expressly
provided in Section 4.1.16.1 of this Agreement, the knowledge of the Sellers,
Sinclair, SCI or any of their respective affiliates, officers, directors,
partners, agents, representatives or consultants.
"SINCLAIR" shall mean the corporation identified as such in the
Preamble to this Agreement.
"SINCLAIR GUARANTEE" shall mean the guarantee, substantially in the
form of Exhibit B hereto, dated of even date herewith, providing for the
guarantee by SCI of Sellers' obligations under this Agreement.
"STATIONS" shall mean (i) the frequency modulation (FM) radio
broadcast station licensed by the Commission to Portland, Oregon broadcasting on
97.1 MHz and currently assigned the call letters KKSN-FM, (ii) the amplitude
modulation (AM) radio broadcast station licensed by the Commission to Vancouver,
Washington broadcasting on 910 kHz and currently assigned the call letters
KKSN(AM), (iii) the frequency modulation (FM) radio broadcast station licensed
by the Commission to Salem, Oregon broadcasting on 105.1 MHz and currently
assigned the call letters KKRH(FM), (iv) the frequency modulation (FM) radio
broadcast station licensed by the Commission to Rochester, New York broadcasting
on 98.9 MHz and currently assigned the call letters WKLX(FM), (v) the frequency
modulation (FM) radio broadcast station licensed by the Commission to Rochester,
New York broadcasting on 92.5 MHz and currently assigned the call letters
WBEE(FM), (vi) the frequency modulation (FM) radio broadcast station licensed by
the Commission to Avon, New York broadcasting on 93.3 MHz and currently assigned
the call letters WQRV(FM) and (vii) the amplitude modulation (AM) radio
broadcast station licensed by the Commission to Rochester, New York broadcasting
on 950 kHz and currently assigned the call letters WBBF(AM).
"SRPLI" shall mean the corporation identified as such in the
Preamble to this Agreement.
6
<PAGE> 11
"SRRLI" shall mean the corporation identified as such in the
Preamble to this Agreement.
"TBA" shall mean the Time Brokerage Agreement, substantially in the
form of Exhibit A hereto, dated of even date herewith, providing for the
programming by and sale to Entercom of substantially all of the broadcast time
available on the Stations upon acquisition thereof by Sellers.
"TUSCALOOSA" shall mean the corporation identified as such in the
Preamble to this Agreement.
"WELFARE PLAN" shall mean an "employee welfare benefit plan" as such
term is defined in Section 3(1) of ERISA.
ARTICLE 2.
SALE AND PURCHASE
2.1. TRANSFER OF ASSETS.
Subject to the terms and conditions set forth in this Agreement, at
the Closing Sellers shall transfer, convey, grant, assign and deliver to
Entercom, free and clear of all Encumbrances (other than Permitted Encumbrances)
and Entercom shall buy, accept and receive from Sellers, all right, title and
interest in, to and under all real, personal and mixed assets, rights, benefits
and privileges, both tangible and intangible, owned, leased, used or useful in
connection with the business and operations of the Stations (collectively, the
"Assets"), but excluding the Excluded Assets described in Section 2.2.
The Assets shall include, without limitation, all right, title and
interest in, to and under the following:
2.1.1. FCC LICENSES.
All licenses, permits and other authorizations issued by the
Commission to Heritage, prior to the Heritage Agreement Closing Date, or issued
to Sellers or Sinclair after such date, for the operation of the Stations (the
"FCC Licenses"), including without limitation those listed in Schedule 2.1.1.
and all applications therefor, together with any renewals, extensions or
modifications thereof and additions thereto.
2.1.2. REAL AND LEASED PROPERTY INTERESTS.
(a) All the real property owned by Heritage, prior to
the Heritage Agreement Closing Date, or owned by Sellers or Sinclair, after such
date, and related to the business and operations of the Stations including,
without limitation, all land, fee interests,
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easements and other interests of every kind and description in real property,
buildings, structures, fixtures, appurtenances, towers and antennae, and other
improvements thereon owned by Heritage, prior to the Heritage Agreement Closing
Date, or owned by Sellers or Sinclair, after such date, and used or useful in
connection with the business and operations of the Stations ("Real Property"),
including, without limitation, all of those items listed in Schedule 2.1.2.
(b) All the real property leasehold interests of
Heritage, prior to the Heritage Agreement Closing Date, or the real property
leasehold interests of Sellers or Sinclair, after such date, related to the
business and operations of the Stations, including, without limitation, leases
and subleases of any land, easements and other real property leasehold interests
of every kind and description in real property, buildings, structures, fixtures,
appurtenances, towers and antennae, and other improvements thereon leased by
Heritage, prior to the Heritage Agreement Closing Date, or leased by Sellers or
Sinclair, after such date, in connection with the business and operations of the
Stations ("Leased Property"), including, without limitation, all of those items
listed in Schedule 2.1.2.
2.1.3. TANGIBLE PERSONAL PROPERTY.
All of the furniture, fixtures, furnishings, machinery,
computers, equipment, inventory, spare parts, supplies, office materials and
other tangible property of every kind and description owned, leased or used by
Heritage, prior to the Heritage Agreement Closing Date, or owned, leased or used
by Sellers or Sinclair, after such date, in connection with the business and
operations of the Stations, together with any replacements thereof and additions
thereto made before the Closing, and less any retirements or dispositions
thereof made before the Closing in the Ordinary Course of Business, including,
without limitation, those items which have a book value in excess of Five
Thousand Dollars ($5,000), all of which as of the Heritage Agreement Date are
set forth and identified in Schedule 2.1.3.
2.1.4. INTELLECTUAL PROPERTY.
All of the service marks, copyrights, franchises, trademarks,
trade names, jingles, slogans, logotypes and other similar intangible assets
maintained, owned, leased or used by Heritage, prior to the Heritage Agreement
Closing Date, or maintained, owned, leased or used by Sellers or Sinclair, after
such date, in connection with the business and operations of the Stations
(including any and all applications, registrations extensions and renewals
relating thereto) (the "Intellectual Property"), and all of the rights, benefits
and privileges associated therewith including, without limitation, the right to
use the call letters for the Stations.
2.1.5. PROGRAM CONTRACTS.
The program licenses and contracts under which Heritage, prior
to the Heritage Agreement Closing Date, or under which Sellers or Sinclair,
after such date, are authorized to broadcast programs on the Stations
(collectively the "Program Contracts")
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including, without limitation, (a) all program (cash and non-cash) licenses and
contracts listed on Schedule 2.1.5, and (b) any other such program contracts
that have been or will be entered into between the date of the Heritage
Agreement and the Closing Date in accordance with the terms of the Heritage
Agreement and this Agreement.
2.1.6. TRADE-OUT AGREEMENTS. All contracts and agreements
(excluding Program Contracts) pursuant to which commercial air time on the
Stations has been sold, traded or bartered in consideration for any property or
services in lieu of or in addition to cash (collectively, the "Trade-out
Agreements"), including, without limitation, those set forth and identified in
Schedule 2.1.6.
2.1.7. BROADCAST TIME SALES AGREEMENT. All contracts and
agreements pursuant to which commercial air time has been sold on the Stations
for cash (collectively the "Time Sales Agreements").
2.1.8. OPERATING CONTRACTS. All other operating contracts and
agreements relating to the business or operations of the Stations, all material
such contracts as of the Heritage Agreement Date being listed on Schedule 2.1.8.
(including, without limitation, all employment agreements and talent contracts,
all leases and subleases relating to the Leased Property, all agreements
relating to any motor vehicles, all network affiliation agreements and all
national and local advertising representation agreements for the Stations),
together with all contracts and agreements that have been or will be entered
into between the Heritage Agreement Date and the Closing Date in accordance with
the terms of the Heritage Agreement and this Agreement (collectively, the
"Operating Contracts" and together with the Program Contracts, Trade-out
Agreements and the Time Sales Agreements, the "Station Contracts").
2.1.9. VEHICLES. All automotive equipment and motor vehicles
maintained, owned, leased or otherwise used by Heritage, prior to the Heritage
Agreement Closing Date, or maintained, owned, leased or otherwise used by
Sellers or Sinclair, after such date, in connection with the business and
operations of the Stations, including, without limitation, those set forth and
described in Schedule 2.1.9.
2.1.10. FILES AND RECORDS. All engineering, business and other
books, papers, logs, files and records pertaining to the business and operations
of the Stations, but not the organizational documents and records described in
Section 2.2.7.
2.1.11. AUXILIARY FACILITIES. All translators, earth stations,
and other auxiliary facilities, and all applications therefor owned, leased or
otherwise used or useful by Heritage, prior to the Heritage Agreement Closing
Date, or used or useful by Sellers or Sinclair, after such date, in connection
with the business and operations of the Stations.
2.1.12. PERMITS AND LICENSES. All permits, approvals, orders,
authorizations, consents, licenses, certificates, franchises, exemptions of, or
filings or registrations with, any court or governmental authority (other than
the Commission) in any jurisdiction, which have been issued or granted to or are
owned or used or useful by Heritage, prior to the Heritage Agreement Closing
Date, or which have been issued or granted to or are owned or used or useful by
Sellers or Sinclair, after such date, in connection with the business and
operations of the Stations, and all pending applications therefor.
2.1.13. GOODWILL. The business of the Stations as a "going
concern," customer relationships and goodwill, if any.
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EXCLUDED ASSETS. Notwithstanding anything to the contrary in
this Agreement, there shall be excluded from the Assets and retained by Sellers,
to the extent in existence as of the Closing Date for a particular Station, the
following assets (collectively, the "Excluded Assets").
2.2.1. CASH. All cash, cash equivalents or deposits held by
Sellers, all interest payable in connection with any such cash, cash equivalents
or deposits or short term investments, bank balances and rights in and to bank
accounts, marketable and other securities of Sellers.
2.2.2. ACCOUNTS RECEIVABLE. Except as otherwise provided in
the TBA, all Accounts Receivable arising out of the business and operations of
the Stations by Sellers prior to the Adjustment Time.
2.2.3. PERSONAL PROPERTY DISPOSED OF. All tangible personal
property disposed of or consumed in the Ordinary Course of Business by Heritage
or by Sellers as permitted by the Heritage Agreement or this Agreement.
2.2.4. INSURANCE. All contracts of insurance and all insurance
plans and the assets thereof.
2.2.5. EMPLOYEE PLANS AND ASSETS. All Plans, Benefit
Arrangements (except for any Station Contracts, Proration Items or other matters
which are specifically assumed by Entercom pursuant to the terms hereof),
Qualified Plans and Welfare Plans and the assets hereof.
2.2.6. RIGHT TO TAX REFUNDS. Any and all claims of Sellers
with respect to any tax refunds.
2.2.7. CERTAIN BOOKS AND RECORDS All of (a) the Stations'
originals of account books of original entry, (b) duplicated copies of any
books, records, accounts, checks, payment records, tax records (including
payroll, unemployment, real estate and other tax records) and other similar
books, records and information relating to the operation of the business of the
Stations prior to the Closing, and (c) all records and documents relating to any
Excluded Assets maintained by or in the possession of Sellers; provided, in each
case, that (i) prior to the Heritage Agreement Closing Date, to the extent
permitted under the Heritage Agreement and (ii) at and after the Heritage
Agreement Closing Date, without such limitation, Entercom shall be permitted
full access to all such books and records and to make copies thereof upon
reasonable request.
2.2.8. THIRD-PARTY CLAIMS. All rights and claims of Sellers,
whether mature, contingent or otherwise, against third parties relating to the
Assets or the Stations, whether in tort, contract, or otherwise.
2.2.9. DEPOSIT AND PREPAID EXPENSES. All deposits and prepaid
expenses related to Sellers' ownership or operation of the Stations, provided,
however, any deposit and prepaid expenses shall be included in the Assets
conveyed pursuant hereto to the extent that Sellers receive a credit therefor in
the calculation of the Proration Amount pursuant to Section 8.2.
2.2.10. NAMES. Any and all rights to use the names "Heritage
Broadcasting," "Heritage Media," "Tuscaloosa," "Tuscaloosa Broadcasting,"
"Sinclair," or "Sinclair Communications" and any logo or variation thereof and
the goodwill associated therewith.
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2.2.11. MISCELLANEOUS EXCLUDED ASSETS. The assets listed and
identified on Schedule 2.2.11.
PURCHASE PRICE. The Purchase Price for the Assets is the sum
of ONE HUNDRED TWENTY SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($126,500,000).
ESCROW. For and in partial consideration of the execution and
delivery of this Agreement, simultaneously with the execution and delivery of
this Agreement, Entercom is depositing in escrow with an escrow agent (the
"Escrow Agent") an irrevocable standby letter of credit (in form satisfactory to
Sellers and for the benefit of Sellers ) in the amount of NINE MILLION FOUR
HUNDRED EIGHTY SEVEN THOUSAND FIVE HUNDRED DOLLARS ($9,487,500) (the "Letter of
Credit"), to secure Entercom's obligations described herein, in accordance with
the terms and conditions of an escrow agreement substantially in the form
attached as Exhibit C hereto (the "Escrow Agreement"). The Escrow Agent shall be
a bank or financial institution with a combined capital and surplus of at least
$100,000,000.00.
2.5. PAYMENT. The Purchase Price to be paid by Entercom shall be
payable in cash delivered at the Closing by wire transfer of immediately
available federal funds to the account of Sellers at such financial institution
as Sellers shall specify in writing.
2.6. ALLOCATION OF PURCHASE PRICE. Entercom and Sellers agree that
the aggregate fair market value of the Assets (the "Aggregate Fair Market
Value") will be appraised by the appraisal firm of BIA Consulting, Inc. ("BIA")
(the "Appraisal"). All costs and expenses of BIA in preparing the Appraisal
shall be borne one-half by Entercom and one-half by Sellers. The parties
acknowledge that a draft Appraisal has been prepared by BIA prior to the date of
this Agreement, and that Sellers and Entercom will cooperate to finalize such
Appraisal. Entercom shall prepare IRS Form 8594 reflecting the Aggregate Fair
Market Value as found by BIA and such other information as required by the form,
and shall forward it within 30 days after Closing to Sellers for their approval,
which approval shall not be withheld unreasonably. Entercom and Sellers shall
each file with their respective federal income tax return for the tax year in
which the Closing occurs, IRS Form 8594 containing the information agreed upon
by the parties pursuant to the this Section 2.6. Entercom agrees to report the
purchase of the Assets and each of Sellers agrees to report the sale of such
assets for income tax purposes in a manner consistent with the information
agreed upon by the parties pursuant to this Section 2.6 and contained in its IRS
Form 8594. In the event either or both of the parties elects to treat all or a
portion of the Assets transferred as part of a deferred like-kind exchange under
Section 1031 of the Code, each party shall, in completing any IRS Forms 8824
that the party might be required to file with the IRS, reflect the values for
the Assets as determined pursuant to this Section 2.6. The parties expressly
agree that Seventy Six Million Dollars ($76,000,000) of the Purchase Price shall
be allocated to the Portland Stations, and Fifty Million Five Hundred Thousand
Dollars ($50,500,000) of the Purchase Price shall be allocated to the Rochester
Stations. Notwithstanding any other provision of this Agreement, the provisions
of this Section 2.6 shall survive the Closing without limitation.
ARTICLE
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LIABILITIES
ASSUMPTION OF LIABILITIES BY ENTERCOM. From and after the
Closing Date, Entercom shall assume, pay, perform, and discharge the following
Liabilities (collectively, the "Assumed Liabilities") of Sellers:
The Liabilities arising out of events occurring on or
after the Closing Date related to the businesses or operations of the Stations
or Entercom's ownership of the Assets;
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All Liabilities arising out of events occurring on or
after the Closing Date with respect to the FCC Licenses;
All Liabilities arising on or after the Closing Date
under the Station Contracts (including, without limitation, Trade-out
Agreements) pursuant to their terms (except for Liabilities for any breaches
thereunder by Sellers or Heritage occurring prior to the Closing Date); and
All those Liabilities for which, and only to the extent,
that Entercom receives the benefit of a Proration Item in accordance with
Section 8.2 hereof.
OTHER LIABILITIES. Except for the Assumed Liabilities or as
otherwise expressly provided in the TBA, Entercom does not and shall not assume
any other Liabilities of any kind or description.
NON-ASSIGNABLE STATION CONTRACTS.
Sellers shall, beginning immediately upon execution of
this Agreement, take all reasonable action required to obtain all consents,
approvals and agreements of any third parties necessary to authorize, approve or
permit the consummation of the transactions contemplated by this Agreement,
including, without limitation, any consent of the parties to the Station
Contracts designated as necessary in Schedule 2.1.8 in order to consummate the
transactions contemplated hereby (collectively, the "Restricted Contracts").
Notwithstanding anything to the contrary set forth in this Agreement or
otherwise, to the extent that the consent or approval of any third party is
required under any Restricted Contract, Sellers shall only be required to use
reasonable efforts (not involving the payment by Sellers of any money to any
party to any such Restricted Contract, except to the extent required by Section
3.3.2) to obtain such consents and approvals, and in the event that Sellers fail
to obtain any such consent or approval, Entercom shall have no right to
terminate this Agreement.
Notwithstanding anything to the contrary in Section
3.3.1, Sellers shall retain, until such time as any required consents shall have
been obtained by Sellers, all rights to and obligations under any Station
Contract which requires the consent of any other party thereto for assignment to
Entercom if such consent has not been obtained on the Closing Date (the
"Deferred Contract"). Until the assignment of the Deferred Contract, (i) Sellers
shall continue to use all commercially reasonable efforts and Entercom shall
cooperate with Sellers to obtain the consent and/or to remove any other
impediments to such assignment, and (ii) Sellers and Entercom agree to cooperate
in any lawful arrangement to provide (to the extent permitted without breach of
the
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Deferred Contract) that Entercom shall receive the benefits of such interest
after the Closing Date to the same extent as if it were Sellers; provided,
however, (y) if Entercom shall fail to receive such benefits after the Closing
Date for any leased property that is a main transmitter tower site or a studio
site for any Station (the "Designated Properties"), Sellers agree to make such
payments as are necessary for Entercom to receive such benefits and/or necessary
to receive such consents for assignment as long as the aggregate amount of all
such payments does not exceed Seventy Five Thousand Dollars ($75,000) for all
such Designated Properties under this Agreement and (z) Entercom shall, at its
sole discretion, not be obligated to perform the obligations under any Deferred
Contract if it is not also receiving all of the benefits thereunder. If,
subsequent to the Closing, Sellers shall obtain any consent required to assign
any Deferred Contract, the Deferred Contract for which consent to assign has
been obtained shall at that time be deemed to be conveyed, granted, bargained,
sold, transferred, setover, assigned, released, delivered and confirmed to
Entercom, without need of further action by Sellers or of future documentation.
ARTICLE
REPRESENTATIONS AND WARRANTIES
SELLERS' REPRESENTATIONS. Sellers hereby represent and warrant
to Entercom that:
CORPORATE STANDING. Tuscaloosa, SRPLI and SRRLI are
corporations, duly organized, validly existing and in good standing under the
laws of the states of their respective organizations, and are duly qualified to
do business and are in good standing in any jurisdiction where it owns or
operates a radio station and in each other jurisdiction where such qualification
is necessary, except for those jurisdictions where the failure to be so
qualified could not, individually or in the aggregate, have a material adverse
effect.
AUTHORIZATION OF AGREEMENT; NO BREACH. Tuscaloosa, SRPLI
and SRRLI have the corporate power and authority to execute, deliver and perform
this Agreement and such other agreements as are necessary to consummate the
transactions contemplated hereby. Subject to the receipt of the consents and
approvals required elsewhere herein, this Agreement constitutes the valid and
binding obligation of each of Tuscaloosa, SRPLI and SRRLI, enforceable against
each in accordance with its terms, except as such enforceability may be limited
by bankruptcy and laws affecting the enforcement of creditors'
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rights generally or equitable principles. Assuming the said consents and
approvals are obtained, neither such execution, delivery and performance nor
compliance by each Seller with the terms and provisions hereof will conflict
with or result in a breach of any of the terms, conditions or provisions of the
organizational documents of such entities or any judgment, order, injunction,
decree, regulation or ruling of any court or any other governmental authority to
which each is subject or any material agreement or contract to which each is a
party or to which each is subject, or constitute a material default thereunder.
QUALIFICATIONS AS ASSIGNOR. Sellers know of no facts
which, under the Communications Act of 1934, as amended, or the existing rules
and regulations of the Commission, would disqualify Heritage or Sellers as an
assignor of the FCC Licenses to be assigned by each under the Heritage Agreement
or hereunder, as applicable.
ABSENCE OF CONFLICTING ORDERS. Neither Seller is subject
to any judgment, award, order, writ, injunction, arbitration decision or decree
which prohibits or prevents the performance of this Agreement or the
consummation of any transaction contemplated under this Agreement, and there is
no litigation, administrative action, arbitration, proceeding or investigation
pending, or to Sellers' Knowledge, threatened, against any Seller or affecting
any Seller in any federal, state or local court or before any administrative
agency or arbitrator that would adversely affect Sellers' ability to perform
their obligations under this Agreement or would hinder the consummation of the
transactions contemplated hereunder.
FINANCIAL STATEMENTS: UNDISCLOSED
LIABILITIES.
Sellers have provided to Entercom an unaudited balance
sheet of the Stations as of November 30, 1997 (the "Balance Sheet") and an
unaudited statement of income and operating cash flows for the ten month period
ending November 30, 1997, in each case, provided
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to Sellers by Heritage. To Sellers' Knowledge, the financial statements referred
to in this Section 4.1.5.1 (a) present fairly in all material respects the
financial condition of its Stations as of the date and the results of operations
and operating cash flows for the period indicated and (b) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except that the financial statements referred to in this Section 4.1.5.1
do not contain all footnotes and cash flow information from investing and
financing activities required under generally accepted accounting principles and
are subject to customary year-end adjustments).
To Sellers' Knowledge, there exist no Liabilities of the
Stations relating to, or arising out of, the business or operations of such
Stations, contingent or absolute, matured or unmatured, known or unknown, except
(a) as reflected on the Balance Sheet and (b) for Liabilities that (i) were
incurred after November 30, 1997 (the "Current Balance Sheet Date") in the
Ordinary Course of Business, or (ii) were not required to be reflected on the
Balance Sheet in accordance with generally accepted accounting principles
applied on a consistent basis.
ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth and described in Schedule 4.1.6, (i) to Sellers' Knowledge, after the
Current Balance Sheet Date through the date hereof there has been no, (ii) to
Sellers' Knowledge, from the date hereof through the Heritage Agreement there
will be no, and (iii) except as may be caused by Entercom pursuant to the TBA,
after the Heritage Agreement Closing Date there will be no, Material Adverse
Effect. Since the Current Balance Sheet Date, the business of the Stations has
been conducted in the Ordinary Course of Business. After the Heritage Agreement
Closing Date, Sellers will not have, and to Sellers' Knowledge, Heritage has not
(a) incurred any extraordinary loss of, or injury to, any of its Assets as the
result of any fire, explosion, flood, windstorm, earthquake, labor trouble,
riot, accident, act of God or public enemy or armed forces, or other casualty;
(b) incurred, or become subject to, any Liability, except current Liabilities
incurred in the Ordinary Course of Business; (c) discharged or satisfied any
Encumbrance or paid any Liability other than current Liabilities shown in the
Balance Sheet, current Liabilities incurred since the Current Balance Sheet Date
in the Ordinary Course of Business and Liabilities (including, without
limitation, partial and complete prepayments) arising under any credit or loan
agreement between such parties and their lenders; (d) mortgaged, pledged or
subjected to any Encumbrance any of the Assets (except for Permitted
Encumbrances); (e) made any material change in any method of accounting or
accounting practice; (f) sold, leased, assigned or otherwise transferred any of
the material Assets other than obsolete Assets which have been replaced
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by suitable replacements; (g) made any material increase in compensation or
benefits payable to any employee other than in the Ordinary Course of Business;
or (h) made any agreement to do any of the foregoing.
ABSENCE OF LITIGATION. Except as set forth on Schedule
4.1.7, as of the date hereof, there is no material or, to Sellers' Knowledge,
immaterial, action, suit, investigation, claim, arbitration, litigation or
similar proceeding, nor any order, decree or judgment pending or, to Sellers'
Knowledge, threatened, against Sinclair, Sellers, the Assets or the Stations
before any governmental authority.
ASSETS. Except for the Excluded Assets, the Assets
include all of the assets or property used or useful in the businesses of the
Stations as presently operated. Except for leased or licensed Assets, at and
after the Heritage Agreement Closing Date, Sellers or one of them will be the
owners of, and will have good title to, the Assets free and clear of any
Encumbrances, except for Permitted Encumbrances (including, without limitation,
those items set forth on Schedule 4.1.8). At the Closing, Entercom shall acquire
good title to, and all right, title and interest in and to the Assets, free and
clear of all Encumbrances, except for the Permitted Encumbrances.
FCC MATTERS. At and after the Heritage Agreement Closing
Date, Sellers or one of them will hold the FCC Licenses listed as held on
Schedule 2.1.1. Such FCC Licenses constitute all of the licenses, permits and
authorizations from the Commission which have been issued to Heritage that are
required for the business and operations of the Stations. Except as set forth on
Schedule 4.1.9, such FCC Licenses are valid and in full force and effect through
the dates set forth on Schedule 2.1.1, unimpaired by any condition, other than
as set forth in the FCC Licenses. Except as set forth on Schedule 4.1.9, no
application, action or proceeding is pending for the renewal or modification of
any of the FCC Licenses and, except for actions or proceedings affecting radio
broadcast stations or the radio industry generally, no application, complaint,
action or proceeding is pending or, to Sellers' Knowledge, threatened, that may
result in (a) the revocation, modification, non-renewal or suspension of any of
such FCC Licenses, or (b) the issuance of a cease-and-desist order. To Sellers'
Knowledge, except as set forth in Schedule 4.1.9, no facts, conditions or events
exist relating to Heritage, Sellers, or the Stations that would reasonably be
expected to cause the Commission to revoke any FCC License or not to grant any
pending applications for renewal of the FCC Licenses or to deny the assignment
of the FCC Licenses to Entercom as provided for in this Agreement.
REAL PROPERTY.
At and after the Heritage Agreement Closing Date,
Sellers or one of them will have good and marketable fee simple title to all fee
estates included in the Real Property
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and good title to all other owned Real Property, in each case free and clear of
all Encumbrances, except for Permitted Encumbrances.
At and after the Heritage Agreement Closing Date,
Sellers or one of them will have a valid leasehold interest in all Leased
Property listed as leased in Schedule 2.1.2. Schedule 2.1.2 lists all leases and
subleases pursuant to which any of the Leased Property is leased. At and after
the Heritage Agreement Closing Date, Sellers or one of them will be the owner
and holder of all the Leased Property purported to be granted by such leases and
subleases. At and after the Heritage Agreement Closing Date, each such lease and
sublease will be valid as to Sellers or one of them and, to Sellers' Knowledge,
will constitute a legal and binding obligation of, and will be legally
enforceable against, each party thereto and grants the leasehold interest it
purports to grant, including any rights to nondisturbance and peaceful and quiet
enjoyment that may be contained therein. At and after the Heritage Agreement
Closing Date, Sellers or one of them will be, and to Sellers' Knowledge, all
other parties will be, in compliance in all material respects with the
provisions of such leases and subleases.
The Real Property and the Leased Property listed in
Schedule 2.1.2 constitute all of the real property owned, leased or used in the
business and operations of the Stations which is material to the business and
operations of the Stations.
To Sellers' Knowledge, no portion of the Real Property
or any building, structure, fixture or improvement thereon is the subject of, or
affected by, any condemnation, eminent domain or inverse condemnation proceeding
currently instituted or pending or threatened. To Sellers' Knowledge and to the
extent that such documents are in Sellers' possession, Sellers have delivered to
Entercom true, correct and complete copies of the following documents with
respect to the Real Property and Leased Property: (i) deeds, by which a fee
interest in any of the Real Property and Leased Property has been received; (ii)
leases, by which any of the Real Property is leased; (iii) title insurance
policies or commitments; (iv) surveys; and (v) inspection reports or other
instruments or reports, including, without limitation, any phase I or phase II
environmental reports or other similar environmental reports, surveys or
assessments (including any and all amendments and other modifications of such
instruments).
INTELLECTUAL PROPERTY. At and after the Heritage
Agreement Closing Date, Sellers or one of them will possess adequate rights,
licenses and authority to use all Intellectual Property necessary to conduct the
business of the Stations as presently conducted. At and after the Heritage
Agreement Closing Date, Sellers or one of them will have good title to all
Intellectual Property that each owns, free and clear of any Encumbrances, except
for Permitted Encumbrances. At and after the Heritage Agreement Closing Date, no
Seller will be obligated to pay any royalty or other fees to anyone with respect
to the Intellectual Property. No Seller has, and to Sellers' Knowledge, Heritage
has not, received any written notice to the effect that any service
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rendered or to be rendered by Heritage or any of Sellers relating to the
business of the Stations may infringe, or that such parties are otherwise
infringing, on any Intellectual Property right or other legally protectable
right of another. No director, officer or employee of Heritage or Sellers has
any interest in any Intellectual Property.
STATION CONTRACTS. Complete and correct copies of the
Station Contracts set forth in Schedules 2.1.5, 2.1.6 and 2.1.8 (which schedules
are true and correct in all material respects) have been made available to
Entercom and (a) at and after the Heritage Agreement Closing Date, each such
material Station Contract and, to Sellers' Knowledge, each such immaterial
Station Contract, will be in full force and effect and will constitute a legal,
valid and binding obligation of the parties thereto; (b) at and after the
Heritage Agreement Closing Date, each Seller which has become subject to a
Station Contract will not be in breach or default in any material respect of the
terms thereto; (c) at and after the Heritage Agreement Closing Date, none of the
material rights under any such Station Contract of each Seller which has become
subject thereto will be subject to termination, nor will a default occur, as a
result of the consummation of the transactions contemplated hereby, except to
the extent that failure to obtain the prior consent to assignment thereof of any
party thereto shall or could be interpreted to constitute a termination or
modification of or a default under any such Station Contract; and (d) to
Sellers' Knowledge, no other party to any such Station Contract is in breach or
default in any material respect of the terms thereunder.
TAXES. Each Seller has (or, in the case of returns
becoming due after the date hereof and on or before the Closing Date, will have
prior to the Closing Date) duly filed all material tax returns required to be
filed on or before the Closing Date with respect to all material taxes
applicable to the ownership or operation of the Stations by Sellers. In the case
of any tax returns which receive an extension for their date of filing, such tax
returns will be considered due on, and not considered required to be filed
before, the extended due date. To Sellers' Knowledge, all tax returns are (or,
in the case of returns becoming due after the date hereof and on or before the
Closing Date, will be) true and complete in all material respects. Sellers: (a)
have paid all taxes due to any governmental authority as indicated on the tax
returns applicable to the ownership
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or operation of the Stations by Sellers; or (b) have established (or, in the
case of amounts becoming due after the date hereof but prior to the Closing Date
will have established) adequate reserves (in conformity with generally accepted
accounting principles consistently applied) for the payment of taxes applicable
to the ownership or operation of the Stations by Sellers.
EMPLOYEE BENEFIT PLANS.
Schedule 4.1.14 lists all Plans and Benefit Arrangements
(exclusive of severance arrangements and retention agreements) maintained or
contributed to for the benefit of the employees of the Stations (collectively,
the "Benefit Plans"). Each Benefit Plan maintained or contributed to by Sellers,
and, to Sellers' Knowledge, each Benefit Plan maintained or contributed to by
Heritage, has been maintained in material compliance with its terms and with
ERISA, the Code and other applicable laws.
Schedule 4.1.14 sets forth a list of all Qualified Plans
maintained or contributed to by Sellers, and to Sellers' Knowledge, all
Qualified Plans maintained or contributed to by Heritage, in each case, for the
benefit of the employees of the Stations. All such Qualified Plans and any
related trust agreements or annuity agreements (or any other funding document)
have been maintained in material compliance with ERISA and the Code (including,
without limitation, the requirements for tax qualification described in Section
401 thereof), other than any Multiemployer Plan. To Sellers' Knowledge, any
trusts established under such Plans are exempt from federal income taxes under
Section 501(a) of the Code.
Schedule 4.1.14 sets forth a list of all funded Welfare
Plans maintained or contributed to by Sellers, and to Sellers' Knowledge, all
funded Welfare Plans maintained or contributed to by Heritage, in each case,
that provide benefits to current or former employees of the Stations or their
beneficiaries. To Sellers' Knowledge, the funding under each Welfare Plan does
not exceed and has not exceeded the limitations under Sections 419A(b) and
419A(c) of the Code. At and after the Heritage Agreement Closing Date, Sellers
will not be, and to Sellers' Knowledge, Heritage is not, subject to taxation on
the income of any Welfare Plan's welfare benefit fund (as such term is defined
in Section 419(e) of the Code) under Section 419A(g) of the Code, which Welfare
Plan has been maintained or contributed to by any such party.
Sellers have no, and to Sellers' Knowledge, Heritage has
no, post-retirement medical life insurance or other benefits promised, provided
or otherwise due now or in the future to current, former or retired employees of
the Stations.
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Except as set forth in Schedule 4.1.14, at and after the
Heritage Agreement Closing Date, Sellers will have, and to Sellers' Knowledge,
Heritage has (a) filed or caused to be filed all returns and reports on the
Plans that each such party is required to file and (b) paid or made adequate
provision for all fees, interest, penalties, assessments or deficiencies that
have become due pursuant to those returns or reports or pursuant to any
assessment or adjustment that has been made relating to those returns or
reports. All other fees, interest, penalties and assessments that are payable by
or for Heritage and Sellers have been or will be timely reported, fully paid and
discharged. There will be no unpaid fees, penalties, interest or assessments due
from Sellers, and to Sellers' Knowledge, there are no unpaid fees, penalties,
interest or assessments due from Heritage or from any other person, in each
case, that are or could become an Encumbrance on any of its Assets or could
otherwise adversely affect the businesses or operations of the Stations or the
Assets. At and after the Heritage Agreement Closing Date, Sellers or one of them
will have, and to Sellers' Knowledge, Heritage has, collected or withheld all
amounts that are required to be collected or withheld by each such party to
discharge its obligations, and all of those amounts have been paid to the
appropriate governmental authority or set aside in appropriate accounts for
future payment when due. Sellers have furnished to Entercom true and complete
copies of all documents setting forth the terms and funding of each Plan.
Except as set forth in Schedule 4.1.14, at and after the
Heritage Agreement Closing Date, none of Sellers or any ERISA Affiliate of such
parties will have, and none of Heritage or any ERISA Affiliate of Heritage has
ever, sponsored or maintained, had any obligation to sponsor or maintain, or had
any liability (whether actual or contingent, with respect to any of its assets
or otherwise) with respect to any Plan subject to Section 302 of ERISA or
Section 412 of the Code or Title IV of ERISA (including any Multiemployer Plan).
At and after the Heritage Agreement Closing Date, none of Sellers or any ERISA
Affiliate of such parties will have, and none of Heritage or any ERISA Affiliate
of Heritage (since January 1, 1989) has, terminated or withdrawn from or sought
a funding waiver with respect to any plan subject to Title IV of ERISA, and no
facts exist that could reasonably be expected to cause such actions in the
future; no accumulated funding deficiency (as defined in Code Section 412),
whether or not waived, exists with respect to any such plan; no reportable event
(as defined in ERISA Section 4043) has occurred with respect to any such plan
(other than events for which reporting is waived); all costs of any such plans
have been provided for on the basis of consistent methods in accordance with
sound actuarial assumptions and practices, and the assets of each such plan, as
of its last valuation date, exceeded its "Benefits Liabilities" (as defined in
ERISA Section 4001(a)(16)); and, since the last valuation date for each such
plan, no such plan has been amended or changed to increase the amounts of
benefits thereunder and, to Sellers' Knowledge, there has been no event that
would reduce the excess of assets over benefit liabilities; and except as set
forth in Schedule 4.1.14, at and after the Heritage Agreement Closing Date, none
of Sellers or any ERISA Affiliate of such parties will have, and none of
Heritage or any ERISA Affiliate of Heritage has ever, made or been obligated to
make, or reimbursed or been obligated to reimburse another employer for,
contributions to any Multiemployer Plan.
No claims or lawsuits are pending or, to Sellers'
Knowledge, threatened, by, against, or relating to any Benefit Plan. To Sellers'
Knowledge, the Benefit Plans
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are not presently under audit or examination (nor has notice been received of a
potential audit or examination) by the Internal Revenue Service, the Department
of Labor, or any other governmental agency or entity and no matters are pending
with respect to any Qualified Plan under the Internal Revenue Service's
Voluntary Compliance Resolution program, its Closing Agreement Program, or other
similar programs.
To Sellers' Knowledge, with respect to each Plan, there
has occurred no non-exempt "prohibited transaction" (within the meaning of
Section 4975 of the Code) or transaction prohibited by Section 406 of ERISA or
breach of any fiduciary duty described in Section 404 of ERISA that would, if
successful, result in any liability for Sellers. Sellers will take no action
that would result in such a liability between the date hereof and the Closing
Date.
At and after the Heritage Agreement Closing Date,
Sellers will have no liability, and to Sellers' Knowledge, Heritage has no
liability (whether actual, contingent, with respect to any of the Assets or
otherwise) with respect to any employee benefit plan that is not a Benefit Plan
(exclusive of severance arrangements and retention agreements) or with respect
to any employee benefit plan sponsored or maintained (or which has been or
should have been sponsored or maintained) by any ERISA Affiliate of such
parties.
At and after the Heritage Agreement Closing Date, all
group health plans of Sellers and their ERISA Affiliates will have been, and all
group health plans of Heritage and its ERISA Affiliates have been, operated in
material compliance with the requirements of Sections 4980B (and its
predecessor) and 5000 of the Code, and Sellers have provided or will have
provided before the Closing Date, to individuals entitled thereto, all required
notices and coverage pursuant to Section 4980B with respect to any "qualifying
event" (as defined therein) occurring before or on the Closing Date.
LABOR RELATIONS. Sellers have made available to Entercom
a true and complete list of all employees engaged in the business or operations
of the Stations as of the date set forth on the list, together with such
employee's position, salary and date of hire. Schedule 4.1.15 lists all written
employment contracts of Heritage and Sellers related to employees of the
Stations and all written agreements, plans, arrangements, commitments and
understandings pursuant to which Heritage has, or at and after the Heritage
Agreement Closing Date, pursuant to which Sellers will have, severance
obligations related to employees at the Stations. Except as set forth on
Schedule 4.1.15, no labor union or other collective bargaining unit represents
or, to Sellers' Knowledge, claims to represent, any of the employees of the
Station. Except as set forth in Schedule 4.1.15, there are no strikes, work
stoppages, grievance proceedings, union organization efforts, or other
controversies pending between Heritage or Sellers, and any union or collective
bargaining unit representing
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(or, to Sellers' Knowledge, claiming to represent) the employees at the
Stations. At and after the Heritage Agreement Closing Date, Sellers will be, and
Heritage is, in compliance with all laws relating to the employment or the
workplace, including, without limitation, provisions relating to wages, hours,
collective bargaining, safety and health, work authorization, equal employment
opportunity, immigration and the withholding of income taxes, unemployment
compensation, worker's compensation, employee privacy and right to know and
social security contributions, except for any noncompliance which would not have
a Material Adverse Effect. Except as set forth herein, there are no collective
bargaining agreements relating to the Stations or the business and operations
thereof.
ENVIRONMENTAL MATTERS.
Except as set forth in Schedule 4.1.16, to Sellers'
Knowledge (which knowledge is based on the items set forth on Schedule 4.1.16),
Heritage is, and at and after the Heritage Agreement Closing Date, Sellers will
be, in material compliance with, and the Real Property and all improvements
thereon are in material compliance with, all Environmental Laws.
Except as set forth in Schedule 4.1.16, there are no
pending or, to Sellers' Knowledge, threatened, actions, suits, claims, or other
legal proceedings based on (and none of Sellers have received any written notice
of any complaint, order, directive, citation, notice of responsibility, notice
of potential responsibility, or information request from any governmental
authority arising out of or attributable to): (a) the current or past presence
at any part of the Real Property of Hazardous Materials; (b) the current or past
release or threatened release into the environment from the Real Property
(including, without limitation, into any storm drain, sewer, septic system or
publicly owned treatment works) of any Hazardous Materials; (c) the off-site
disposal of Hazardous Materials originating on or from the Real Property or the
businesses or Assets of the Stations; (d) any facility operations or procedures
of the Stations since Heritage's ownership thereof which do not conform to
requirements of the Environmental Laws; or (e) any violation of Environmental
Laws at any part of the Real Property arising from activities of the Stations
since Heritage's ownership thereof involving Hazardous Materials. At and after
the Heritage Agreement Closing Date, Sellers will have been, and to Sellers'
Knowledge, Heritage has been, duly issued all material permits, licenses,
certificates and approvals required under any Environmental Law.
INSURANCE. Schedule 4.1.17 contains a true and complete
list and brief summary of all policies of title, property, fire, casualty,
liability, life, workmen's compensation, libel and slander, and other forms of
insurance of any kind relating to the Assets or the business and operations of
the
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Stations. To Sellers' Knowledge, all such policies: (a) are in full force and
effect; (b) are sufficient for compliance in all material respects by Heritage
with all requirements of law and of all material agreements to which Heritage is
a party; and (c) are valid, outstanding, and enforceable policies and Heritage
is not in default in any material respect thereunder. Between the Heritage
Agreement Closing Date and the Closing Date of this Agreement, Sellers will
carry insurance relating to the Assets or the business and operations of the
Stations such that this Section 4.1.17 would be true after substituting
"Sellers" for "Heritage" in each instance. All such insurance of Sellers shall
provide for full replacement cost coverage of any tangible property that is lost
or damaged due to an insured event or cause.
REPORTS. All material returns, reports and statements
that the Station will be required to file with the Commission or any
governmental agency after the date of this Agreement, and to Sellers' Knowledge,
all material returns, reports and statements that the Stations have been
required to file with the Commission or any governmental agency through the date
of this Agreement, have been or will be timely filed, and all reporting
requirements of the Commission and other governmental authorities having
jurisdiction thereof have been or will be complied with by Sellers and, to
Sellers' Knowledge, by Heritage, in each case, in all material respects. All
such reports, returns and statements to be filed after the date hereof will be
complete and correct in all material respects as filed and, to Sellers'
Knowledge, all such reports, returns and statements that have been filed through
the date of this Agreement, are complete and correct in all material reports as
filed. At and after the Heritage Agreement Closing Date all documents required
by the Commission to be deposited by Sellers. and, to Sellers' Knowledge, all
documents required by the Commission to be deposited by Heritage since the
period of operation of the Stations by Heritage, in each case, in the public
file of the Stations (as defined in the rules and regulations of the Commission)
have been or will be deposited therein.
HERITAGE AGREEMENT. Except as set forth on Schedule
4.1.19, Sinclair and its affiliates have not waived any of their rights under
the Heritage Agreement related to the Stations. Sinclair is unaware of any
material breach or misrepresentation by Heritage or News Corp. under
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the Heritage Agreement. Sinclair is not in material breach of, and has not
defaulted under, any of the terms of the Heritage Agreement (unless waived or
consented to in writing by Heritage and described on Schedule 4.1.19). The
Heritage Agreement constitutes the valid and binding obligation of Sinclair,
enforceable against Sinclair and, by assignments, against Sellers, in accordance
with its terms, except as such enforceability may be limited by bankruptcy and
laws affecting the enforcement of creditors' rights generally or equitable
principles. Sinclair is not, and, to Seller's Knowledge, Heritage and News Corp.
are not, subject to any judgment, award, order, writ, injunction, arbitration
decision or decree which prohibits the performance of the Heritage Agreement or
the consummation of any transaction contemplated under the Heritage Agreement,
and, except as disclosed on Schedule 4.1.19, there is no litigation,
administrative action, arbitration, proceeding or investigation pending or, to
Sellers' Knowledge, threatened, against Heritage, News Corp., Sinclair or
Sellers or affecting such parties in any federal, state or local court, or
before any administrative agency or arbitrator that would adversely affect the
ability of Sinclair, Sellers, Heritage or News Corp. to consummate, or that
would prohibit, the transactions contemplated under the Heritage Agreement
related to the Stations.
INTERPRETATION OF CERTAIN PROVISIONS. Sellers have not
relied and are not relying on the specification of any dollar amount in any
representation or warranty made in this Agreement or any Schedule hereto to
indicate that such amounts, or higher or lower amounts, are or are not material,
and agree not to assert in any dispute or controversy between the parties hereto
that specification of such amounts indicates or is evidence as to whether or not
any obligation, item or matter is or is not material for purposes of this
Agreement and the transactions contemplated hereby.
ENTERCOM'S REPRESENTATIONS. Entercom represents and
warrants to Sellers that:
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CORPORATE STANDING. Entercom is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and at the Closing Date will have the corporate
power and authority to conduct its business as proposed to be conducted and upon
the acquisition of the Assets will be duly qualified to do business in any
jurisdiction where it owns and operates a radio station and in each other
jurisdiction where such qualification is necessary, except for those
jurisdictions where the failure to be so qualified could not, individually or in
the aggregate, have a material adverse effect.
AUTHORIZATION OF AGREEMENT: NO BREACH. Entercom has the
corporate power and authority to execute, deliver and perform this Agreement and
such other agreements as are necessary to consummate the transactions
contemplated hereby. Subject to the receipt of the consents and approvals
required elsewhere herein, this Agreement constitutes the valid and binding
obligation of Entercom, enforceable against Entercom in accordance with its
terms, except as such enforceability may be limited by bankruptcy and laws
affecting the enforcement of creditors' rights generally or equitable
principles. Assuming the said consents and approvals are obtained, neither such
execution, delivery and performance nor compliance by Entercom with the terms
and provisions hereof will conflict with or result in a breach of any of the
terms, conditions or provisions of the organizational documents of Entercom or
any judgment, order, injunction, decree, regulation or ruling of any court or
any other governmental authority to which Entercom is subject or any material
agreement or contract to which Entercom is a party or to which it is subject, or
constitute a material default thereunder.
QUALIFICATION AS ASSIGNEE. Except as disclosed in
Schedule 4.2.3, Entercom is, and pending Closing will remain, legally,
financially and otherwise qualified under the Communications Act of 1934, as
amended (the "Communications Act") and all rules, regulations and policies of
the Commission to acquire and operate the Stations. Except as disclosed in
Schedule 4.2.3, there are no facts
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or proceedings which would reasonably be expected to disqualify Entercom under
the Communications Act or otherwise from acquiring or operating any of the
Stations or would cause the Commission not to approve the assignment of the FCC
Licenses to Entercom. Except as disclosed in Schedule 4.2.3, Entercom has no
knowledge of any fact or circumstance relating to Entercom or any of Entercom's
Affiliates that would reasonably be expected to (a) cause the filing of any
objection to the assignment of the FCC Licenses to Entercom, (b) lead to a delay
in the processing by the Commission of the applications for such assignment or
(c) lead to a material delay in the processing by the Commission of the renewals
of the FCC Licenses for the Portland Stations or the Rochester Stations. Except
as disclosed in Schedule 4.2.3, no waiver of any Commission rule or policy is
necessary to be obtained for the grant of the applications for the assignment of
the FCC Licenses to Entercom, nor will processing pursuant to any exception or
rule of general applicability be requested or required in connection with the
consummation of the transactions herein.
ABSENCE OF CONFLICTING ORDERS. Entercom is not subject
to any judgment, award, order, writ, injunction, arbitration decision or decree
which prohibits the performance of this Agreement or the consummation of any
transaction contemplated under this Agreement, and there is no litigation,
administrative action, arbitration, proceeding or investigating pending, or to
the knowledge of Entercom, threatened, against Entercom or affecting Entercom in
any federal, state or local court, or before any administrative agency or
arbitrator that would adversely affect Entercom's ability to perform its
obligations under this Agreement or would hinder the consummation of the
transactions contemplated hereunder.
AVAILABILITY OF FUNDS. Entercom will have available on
the Closing Date sufficient funds to enable it to consummate the transactions
contemplated hereby.
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WARN ACT. Entercom is not planning or contemplating, and
has not made or taken, any decisions or actions concerning the employees of the
Stations after the Closing Date that would require the service of notice under
the Worker Adjustment and Retraining Act of 1988, as amended.
NO OUTSIDE RELIANCE. Entercom has not relied and is not
relying on any statement, representation or warranty not made in this Agreement,
any Schedule hereto or any certificate to be delivered to Entercom at the
Closing pursuant to this Agreement. Entercom is not relying on any projections
or other predictions contained or referred to in materials (other than the
Schedules) that have been or may hereafter be provided to Entercom or any of its
Affiliates, agents or representatives, and Sellers make no representations or
warranties with respect to any such projections or other predictions.
INTERPRETATION OF CONCERN PROVISIONS. Entercom has not
relied and is not relying on the specifications of any dollar amount in any
representation or warranty made in this Agreement or any Schedule hereto to
indicate that such amounts, or higher or lower amounts, are or are not material,
and agrees not to assert in any dispute or controversy between the parties
hereto that specification of such amounts indicates or is evidence as to whether
or not any obligation, item or matter is or is not material for purposes of this
Agreement and the transactions contemplated hereby.
ARTICLE
CONDITIONS
MUTUAL CONDITIONS. Performance of the obligations of the
parties under this Agreement and the Closing of the transaction provided for
herein are and shall be subject to the occurrence and concurrence of the express
conditions precedent that:
5.1.1. The Stations shall have been acquired by Sellers from
Heritage pursuant to the Heritage Agreement; and
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5.1.2. The Commission has granted its consent and approval in
writing to the assignment to Entercom of the FCC Licenses as contemplated
hereby, such consent to be free of any material adverse condition, and the
Commission's consent shall have become a Final Order, provided, that if no
objection or petition to deny has been filed against the Applications and if
Entercom's lenders consent to Closing upon FCC consent prior to such consent
becoming a Final Order, then the condition set forth in this Section 5.1.2 will
be deemed to be satisfied upon the consent and approval of the Commission; and
5.1.3. The waiting period (as it may be extended) applicable
to the transfer of the Assets under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act") shall have expired or been earlier
terminated.
5.1.4. No statute, rule or regulation, or order of any court
or administrative agency, shall be in effect which restrains or prohibits
Entercom or Sellers, or any one of them, from consummating the transactions
contemplated hereby.
ENTERCOM'S CONDITIONS. Performance of the obligations of
Entercom under this Agreement and the Closing of the transactions provided for
herein also are and shall be subject to the occurrence of each of the following
express conditions precedent, each of which may be waived by Entercom, that:
The applications for the renewal of the FCC Licenses of each of the
Portland Stations and the Rochester Stations shall have been granted without any
material adverse condition, and such grants shall have become Final Orders; and
The representations and warranties contained in Section 4.1 hereof
shall be true and correct at and as of the Closing Date as if made on and as of
such date except to the extent that they speak as of a particular date or time
other then the Closing Date (in which case such representations and warranties
shall be true and correct as of such date or time); provided, that the failure
of such representations and warranties to be true and correct at and as of the
Closing Date shall only be a condition to Entercom's obligations hereunder if
such failures involve costs, damages and/or expenditures in excess of $1,265,000
(as determined by a qualified independent third party), provided, further, that
if such amount is less than $1,265,000 but more than $150,000, such amount shall
be placed in escrow on the Closing Date pursuant to an indemnification escrow
agreement, the form of which is attached hereto as Exhibit D hereto, to secure
Sellers' indemnification obligations under Section 9.7.1 hereunder; and
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<PAGE> 34
All of the terms, covenants and conditions to be complied with
and performed by each Seller on or prior to the Closing Date shall have been
complied with or performed in all material respects; and
There shall have been no material adverse change relating to
the material FCC Licenses of any of the Stations (other than WBBF(AM)).
SELLERS' CONDITIONS. Performance of the obligations of Sellers
under this Agreement and the Closing of the transactions provided for herein
also are and shall be subject to the occurrence of each of the following express
conditions precedent, each of which may be waived by any Seller, that:
The representations and warranties contained in Section 4.2
hereof shall be true and correct at and as of the Closing Date in all material
respects as if made on and as of such date except to the extent they speak as of
a particular date or time other than the Closing Date (in which case such
representations and warranties shall be true and correct in all material
respects as of such date or time); and
All of the terms, covenants and conditions to be complied with
and performed by Entercom on or prior to the Closing Date (including delivery of
the Purchase Price) shall have been complied with or performed in all material
respects.
Entercom shall have complied in all material respects with its
obligations to pay Monthly Payments (as defined in the TBA) and to reimburse
Sellers for capital expenditures for the Stations under Section 1.2 and Schedule
1.2 of the TBA.
ARTICLE
COVENANTS AND AGREEMENTS.
AFFIRMATIVE COVENANTS OF SELLERS. During the period from the
date of this Agreement to the Closing Date, Sellers shall:
Should Sellers acquire any Station or operate any Station
prior to the sale of such Station to Entercom pursuant to this Agreement,
Sellers shall conduct the business and operations of such Station at least in
accordance with the provisions of Sections 6.1.1 through and including 6.1.12
and Sections 6.2.1 through and including 6.2.12 under the Heritage Agreement.
Subject to the provisions of the TBA, cooperate with Entercom
in connection with its review, analysis and monitoring of the Assets and the
operations
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<PAGE> 35
of the Stations to the end that an efficient transfer of the Assets may be made
at Closing and the business of the Stations may continue on an uninterrupted
basis. Sellers or one of them shall obtain Entercom's consent, such consent not
to be unreasonably withheld, prior to the exercise of Sellers' or any of their
rights under the Heritage Agreement as such rights pertain to the Stations
(other than the right to consummate the acquisition of the Stations upon
satisfaction of all conditions thereto). In addition to providing information
required hereunder or reasonably requested by the other parties hereto, Sellers
agree promptly to notify Entercom of any material problems or developments of
which any Seller becomes aware with respect to any of the Assets or the business
of any of the Stations.
Use their reasonable best efforts to cause Heritage to
prosecute, or to prosecute with the Commission, the applications for renewal of
the FCC Licenses for the Portland Stations and the Rochester Stations, such that
the applications are granted without any material adverse condition and, to the
extent reasonably possible, on or prior to the date for expiration of such FCC
Licenses.
Use reasonable best efforts to enforce all of its rights under
the Heritage Agreement as such rights pertain to the Stations, including,
without limitation, causing Heritage to act in conformity with the Heritage
Agreement and requiring Heritage to conduct the business of the Stations in the
Ordinary Course of Business in accordance with the terms of the Heritage
Agreement, except where such would not have a material adverse effect on the
business and operations of any Station, and, to the extent consistent with the
foregoing, in the same manner in which the same have heretofore been conducted
with the intent of preserving the ongoing operations and business of the
Stations.
Use their reasonable best efforts to close the transactions
contemplated by the Heritage Agreement as they pertain to the Stations in a
timely fashion consistent with the terms of such agreement. Sellers shall
enforce their rights to the fullest extent possible under the Heritage Agreement
as they pertain to the Stations, unless otherwise directed by Entercom.
To the extent that Sinclair or Sellers receive notifications
from Heritage with respect to the Stations under the Heritage Agreement or
otherwise becomes aware of any breach of any representation, warranty, covenant
or agreement in the Heritage Agreement or the failure to satisfy any condition
in such agreement, in each case with respect to the Stations, Sellers shall
promptly notify Entercom, and thereafter use reasonable best efforts to enforce,
perform or waive any provision of the Heritage Agreement pertaining to the
Stations as may be reasonably requested by Entercom, provided, that Sellers
shall not be obligated to take any action at Entercom's request inconsistent
with their rights and obligations under the Heritage Agreement.
To the extent permitted under the Heritage Agreement, at
Closing Sellers will assign any and all rights with respect to the Stations that
it may have against Heritage, News Corp., and their respective subsidiaries to
Entercom. Entercom acknowledges that the assignment of such rights by Sellers
requires the prior written consent of Heritage, which consent
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Heritage may withhold in its sole discretion. In this regard, Sellers will use
their reasonable efforts (without obligation to spend any amount of money) to
obtain any consent of Heritage or News Corp. required to assign such rights to
Entercom prior to the Closing Date. The failure of Sellers to obtain such
consent shall not limit Entercom's obligation to close if all other conditions
precedent to Entercom's obligations have been satisfied or waived; however, in
such case, Sellers shall fully enforce their rights which relate to the Stations
against Heritage and News Corp. under the Heritage Agreement at Entercom's
request, and this covenant shall survive the Closing for the period that
Sinclair has any rights under the Heritage Agreement. Any proceeds received by
Sellers from the exercise of their rights which relate to the Stations against
Heritage and News Corp. and their respective subsidiaries shall be paid over to
Entercom within five (5) business days of receipt by Sellers, less any
reasonable costs and expenses of enforcement incurred by Sellers in such
exercise.
At all times, maintain strict confidentiality with respect to
all documents and information furnished to Sellers by or on behalf of Entercom.
Nothing shall be deemed to be confidential information that: (a) is known to
Sellers at the time of its disclosure to Sellers; (b) becomes publicly known or
available other than through disclosure by Sellers; (c) is received by Sellers
from a third party not actually known by Sellers to be bound by a
confidentiality agreement with or obligation to Entercom; or (d) is
independently developed by Sellers. Notwithstanding the foregoing provisions of
this Section 6.1.8, Sellers may disclose such confidential information (a) to
the extent required or deemed advisable to comply with applicable laws; (b) to
its officers, directors, employees, representatives, financial advisors,
attorneys, accountants, and agents with respect to the transactions contemplated
hereby (so long as such parties agree to maintain the confidentiality of such
information); and (c) to any governmental authority in connection with the
transactions contemplated hereby. In the event this Agreement is terminated,
Sellers will return to Entercom all documents and other material prepared or
furnished by Entercom relating to the transactions contemplated hereunder,
whether obtained before or after the execution of this Agreement.
NEGATIVE COVENANTS OF SELLERS. Unless Entercom has given its
prior consent in writing, which consent shall not be unreasonably withheld or
delayed, Sellers shall not, directly or indirectly, during the period from the
date of this Agreement to the Closing Date:
Except as set forth on Schedule 4.1.19 hereto, fail to comply
with the terms of, waive any of Sellers' rights under or consent to any actions
requiring Sinclair's or Sellers' consent under the Heritage Agreement related to
the Stations.
Fail to consummate the acquisition of the Stations upon the
occurrence or waiver of all conditions precedent thereto under the Heritage
Agreement.
AFFIRMATIVE COVENANTS OF ENTERCOM. During the period from the
date of this Agreement to the Closing Date (or solely in the case of Section
6.3.4, from and after the Closing Date), Entercom shall:
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Use reasonable efforts to obtain its lenders' consent to
Closing of this Agreement upon the consent and approval of the Commission of the
Applications but prior to such consent and approval becoming a Final Order.
At all times prior to the Closing, maintain strict
confidentiality with respect to all documents and information furnished to
Entercom by or on behalf of Sellers. Nothing shall be deemed to be confidential
information that: (a) is known to Entercom at the time of its disclosure to
Entercom; (b) becomes publicly known or available other than through disclosure
by Entercom; (c) is received by Entercom from a third party not actually known
by Entercom to be bound by a confidentiality agreement with or obligation to
Sellers; or (d) is independently developed by Entercom. Notwithstanding the
foregoing provisions of this Section 6.3.2, Entercom may disclose such
confidential information (a) to the extent required or deemed advisable to
comply with applicable laws; (b) to its officers, directors, partners,
employees, representatives, financial advisors, attorneys, accountants, agents,
underwriters, lenders, investors and any other potential sources of financing
with respect to the transactions contemplated hereby (so long as such parties
agree to maintain the confidentiality of such information); and (c) to any
governmental authority in connection with the transactions contemplated hereby.
In the event this Agreement is terminated, Entercom will return to Sellers all
documents and other material prepared or furnished by Sellers relating to the
transactions contemplated by this Agreement, whether obtained before or after
the execution of this Agreement.
Take all corporate action (including, without limitation, all
shareholder action), under the laws of any state having jurisdiction over
Entercom necessary to effectuate the transactions contemplated by this
Agreement.
From and after the Closing Date, cause to be afforded to
representatives of Sellers reasonable access during normal business hours to the
offices, books and records, contracts and reports of the Stations, as Sellers
shall from time to time reasonably request; provided, however, that (a) such
investigation shall only be upon reasonable notice and shall not unreasonably
disrupt the personnel or operations of Entercom or the Stations, and (b) under
no circumstances shall Entercom be required to provide access to Sellers or any
representatives of Sellers (i) any information or materials subject to
confidentiality agreements with third parties required to be kept confidential
by applicable laws, or (ii) any privileged attorney-client communications or
attorney work product. All requests for access to the offices, books and
records, contracts and reports of the Stations shall be made to such
representatives as Entercom shall designate in writing, who shall be solely
responsible for coordinating all such requests and all access permitted
hereunder. Entercom agrees not to dispose of any books and records, contracts
and reports of the Stations which relate to the operations of the Stations
during the period during which the Stations were owned by Sellers without
consulting with Sellers prior to disposal thereof and taking any reasonable
action requested by Sellers with respect to retention and transfer to Sellers
thereof.
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MUTUAL COVENANTS OF SELLERS AND ENTERCOM.
DISCLOSURE SCHEDULES. Sellers and Entercom acknowledge and
agree that Sellers shall have the right from time to time after the date hereof
to update or correct solely Schedules 2.1.5, 2.1.6, 2.1.8, 2.1.9 and 4.1.17
attached hereto solely to reflect actions by Sellers after the date hereof which
are not prohibited by Section 6.1 hereof. The inclusion of any fact or item on a
Schedule referenced by a particular section in this Agreement shall, should the
existence of the fact or item or its contents, be relevant to any other section,
be deemed to be disclosed with respect to such other section whether or not an
explicit cross-reference appears in the Schedules.
BULK SALES LAWS. Entercom hereby waives compliance by Sellers,
in connection with the transactions contemplated hereby, with the provisions of
any applicable bulk transfer laws.
TAX MATTERS. Sellers and Entercom each represent, warrant,
covenant and agree with each other that for tax purposes the sale of Assets
described herein is not effective until the Closing Date. Sellers and Entercom
agree that all Tax returns and reports shall be filed consistent with the sale
of assets taking place on the Closing Date.
PRESERVATION OF BOOKS AND RECORDS. For a period of three (3)
years after the Closing Date, Sellers agree not to dispose of, and agree to
provide Entercom reasonable access to, any material books or records in Sellers'
possession immediately after the Closing Date that relate to the business or
operation of the Stations prior to the Closing Date.
NO CONTROL BY ENTERCOM. Subject to the provisions of the TBA,
nothing contained in this Agreement shall give to Entercom any right to control
the operations of the Stations prior to the Closing Date. Any advice, counsel or
consent given to Sellers by Entercom under this Article VI will not mitigate,
detract from or otherwise affect Sellers' representations, warranties or
obligations under this Agreement. Any advice, counsel or consent given to
Entercom by Sellers under this Article VI will not mitigate, detract from or
otherwise affect Entercom's representations, warranties or obligations under
this Agreement.
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ARTICLE
PREPARATION FOR CLOSING
APPLICATION TO COMMISSION. The parties hereto bind themselves
to use all reasonable efforts, and to cooperate with each other, in seeking the
consent and approval of the Commission to the assignment of all FCC Licenses, as
herein provided; and Sellers and Entercom agree that each shall diligently and
promptly prepare, sign and file with the Commission within five (5) business
days from the date of this Agreement any and all applications requisite or
desirable to procure such consent and approval (the "Applications"); and
diligently and promptly to prepare and submit to the Commission all information,
data, exhibits, amendments, resolutions, statements and other material necessary
or proper in connection with the Applications; and diligently to pursue the
grant of a Final Order approving such Applications by the Commission. With
respect to the foregoing, Sellers hereby agree, commit and bind themselves to
prepare and deliver to Entercom on or before five (5) days from the date of this
Agreement Sellers' portions of all applications and documents necessary for
filing with the Commission to obtain the consent and approval of the Commission
as required to permit the consummation of the transactions contemplated by this
Agreement.
INSPECTION BY ENTERCOM. To the extent permitted under the
Heritage Agreement, during the period from the date of this Agreement to the
Heritage Agreement Closing Date, and between the period from the Heritage
Agreement Closing Date and the Closing Date, Sellers shall afford engineers,
attorneys, accountants and other consultants and/or representatives of Entercom
free access during normal business hours to the employees, offices, studios,
transmitter site, equipment, records and other documents pertaining to the
Stations and furnish Entercom with all information concerning said Stations as
Entercom may reasonably request, including but not limited to applications,
responses to the Commission inquiries, and other documents filed by Sellers with
the Commission. Without limiting the foregoing, Entercom shall have the right,
subject to the limitations set forth above and at its sole expense, to perform
such phase I and phase II environmental site assessments of any real property
for the Stations included within the Assets, and upon receipt
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of such assessments agrees to deliver a copy of each to Sellers. No right of
termination for Entercom shall arise as a result of any issue identified in such
environmental site assessments (unless a separate cause for termination under
other provisions of this Agreement may provide such a right); however, following
the Closing Date, if Entercom performs remediation for any issues specifically
identified in such environmental site assessments requiring remediation under
any Environmental Law, Sellers shall reimburse Entercom for the costs and
expenses of such remediation, up to a maximum aggregate amount of $250,000,
subject to the limitations on indemnification set forth in Section 9.7.4.
HART-SCOTT-RODINO NOTIFICATION. As promptly as practicable and
no later than five (5) business days after the date hereof, the parties hereto
shall take all steps reasonably necessary to file and shall participate in the
filing of all requisite documents and notifications required to be filed
pursuant to the HSR Act. The parties will jointly request early termination of
any required waiting period under the HSR Act unless mutually agreed otherwise.
The parties agree diligently to take and fully cooperate in the taking of, all
necessary and proper steps, and provide any additional information reasonably
requested in order to obtain promptly the expiration of the waiting period under
the HSR Act.
ARTICLE
CLOSING
CLOSING. Closing shall take place at the time and place agreed
to by the parties hereto. It is expressly contemplated hereunder that Entercom
shall have no right to close on the acquisition of less than all the Stations
without the consent of Sellers. In the absence of agreement thereon and except
as modified elsewhere herein, the Closing shall take place by mail at 10:00
a.m., Eastern Time, at the offices of Latham & Watkins, 1001 Pennsylvania
Avenue, N.W., Suite 1300, Washington, D.C. 2004, on a date selected by Entercom
within ten (10) business days after the later of: (a) the satisfaction or waiver
of each condition to closing contained herein (other than such conditions as can
only be satisfied at the Closing); and (b) the expiration of any period of
extension for Closing provided elsewhere in this Agreement. If such date falls
on a
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Saturday, Sunday or legal holiday in the State of New York, then such Closing
shall take place as provided herein on the next business day.
ADJUSTMENTS.
Except as otherwise provided in the TBA, and subject to the
terms and conditions of Section 8.2.2, at least five (5) days prior to the
Closing Date, Sellers shall make a good faith estimate of the adjustment to the
Purchase Price customary in radio broadcast station transactions for Proration
Items (the "Proration Amount") to reflect that all Proration Items of all
Stations shall be apportioned between Entercom and Sellers in accordance with
the principle that Sellers shall receive the benefit of all revenues, refunds,
deposits (other than deposits for Program Contracts which shall be prorated
based on the percentage of the term that the program was aired on such Stations
before the Closing Date and the percentage available to be aired on and after
the Closing Date) and prepaid expenses, and shall be responsible for all
expenses, costs and liabilities allocable to the conduct of the businesses or
operations of such Stations for the period prior to the Closing Date, and
Entercom shall receive the benefit of all revenues, refunds, deposits and
prepaid expenses, and shall be responsible for all expenses, costs and
liabilities allocable to the conduct of the businesses or operations of such
Stations from and after the Closing Date; provided, however, that there shall be
no adjustment or proration for any negative or positive net trade balance except
to the extent that the negative net trade balance for the Stations exceeds
$50,000. Determinations pursuant to this Section 8.2.1, shall be made in
accordance with generally accepted accounting principles consistently applied
for the period prior to the Closing Date.
Within ninety (90) days after the Closing Date, Entercom shall
deliver to Sellers in writing and in reasonable detail a good faith final
determination of the Proration Amount determined as of the Closing Date under
Section 8.2.1 (the "Final Proration Amount"). Sellers shall assist Entercom in
making such determination, and Entercom shall provide Sellers with reasonable
access to the properties, books and records relating to the Stations for the
purpose of determining the Final Proration Amount. Sellers shall have the right
to review the computations and workpapers used in connection with Entercom's
preparation of the Final Proration Amount. If Sellers disagree with the amount
of the Final Proration Amount determined by Entercom, Sellers shall so notify
Entercom in writing within thirty (30) days after the date of receipt of
Entercom's Final Proration Amount, specifying in detail any point of
disagreement; provided however, that if Sellers fail to notify Entercom in
writing of Sellers' disagreement within such thirty (30) day period, Entercom's
determination of the Final Proration Amount shall be final, conclusive and
binding on Sellers and Entercom. After the receipt of any notice of
disagreement, Entercom and Sellers shall negotiate in good faith to resolve any
disagreements regarding the Final Proration Amount. If any such disagreement
cannot be resolved by Sellers and Entercom within thirty (30) days after
Entercom has received notice from Sellers of the existence of such disagreement,
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Entercom and Sellers shall jointly select a nationally recognized independent
public accounting firm (which has not performed any service for either Entercom
or Sellers or any of their respective subsidiaries at anytime during the two (2)
year period prior to the date such firm is selected (the "Accounting Firm")), to
review Entercom's determination of the Final Proration Amount and to resolve as
soon as possible all points of disagreement raised by Sellers. All
determinations made by the Accounting Firm with respect to the Final Proration
Amount shall be final, conclusive and binding on Entercom and Sellers. The fees
and expenses of the Accounting Firm incurred in connection with any such
determination shall be shared one-half by Entercom and one-half by Sellers.
Upon determination of the Final Proration Amount, the appropriate
party owing any prorations shall pay such amounts in cash, within two (2)
business days following the final determination of the Final Proration Amount.
Any amounts paid pursuant to this Section 8.2.2 shall be by wire transfer of
immediately available funds for credit to the recipient at a bank account
identified by such recipient in writing.
Entercom and Sellers agree that prior to the date of the final
determination of the Final Proration Amount pursuant to this Section 8.2.2 (by
the Accounting Firm or otherwise), neither party will destroy any records
pertaining to, or necessary for, the final determination of the Final Proration
Amount.
CLOSING DELIVERIES TO ENTERCOM. At or before the Closing,
Sellers or one of them, as the case may be, shall deliver to Entercom the
following items and documents in form satisfactory to counsel for Entercom and
properly executed, unless Entercom shall waive in whole or in part in writing
such delivery and then only to the extent of such waiver:
One or more Bills of Sale and assignments and other
instruments of transfer and conveyance, substantially in the form attached
hereto as Exhibit E, transferring to Entercom the Assets to be sold, transferred
or assigned hereunder and the rights and interests under the Station Contracts
being assigned to Entercom hereunder, copies of all consents from third parties
to the assignment of Station Contracts received prior to the Closing Date (if
any), and estoppel certifications received prior to the Closing Date (if any) by
the other parties to such Station Contracts that Sellers are not then in default
under the terms of the Station Contract to which such other party is a party.
An assignment of all right, title and interest of Sellers in
and to the FCC Licenses and all pending applications relating to the Stations
before the Commission, substantially in the form attached hereto as Exhibit E.
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All keys to and actual possession of all of the Assets, in the
same condition as the same now is, except for ordinary wear and tear thereof,
unless disposed of or otherwise altered as permitted by this Agreement.
Certified copies of resolutions of the Board of Directors and
shareholders (if required by law) of each of Sellers, duly authorizing the
execution, delivery and performance of this Agreement and all documents to be
executed and delivered by each Seller at the Closing and thereafter, and
certified copies of resolutions of the Board of Directors of Sinclair, duly
authorizing the execution, delivery and performance of the SCI Guarantee.
Certificates signed by authorized officers of each Seller
(each certificate being applicable to each Seller only), to the effect that no
act or omission by each Seller, or state of facts contrary to the agreements,
representations and warranties made herein by each Seller has been taken or has
occurred and that, subject to Section 5.2.2 of this Agreement, said
representations and warranties are true and correct at and as of the Closing
Date as if made on and as of the time of Closing Date, except to the extent that
said representations and warranties speak as of a particular date or time other
than the Closing Date (in which case such representations and warranties shall
be true and correct as of such date or time).
The consents of any public authorities or third persons that
may be required in connection with the performance of this Agreement.
All books, records, public files, contracts, leases,
Commission filings, correspondence, files and other documents in Sellers'
possession relating to and necessary or appropriate to the operation of the
Stations, excluding however, accounting records relating to Sellers' period of
ownership (provided Entercom is given copies thereof).
A special warranty deed in recordable form transferring to
Entercom a fee simple interest in any owned real property included within the
Assets and a commitment to issue extended coverage policies of title insurance
(ATLA owners and Mortgagee's policy-Form 1970, if available or Form 1984 or 1990
with 1970 endorsements), for the benefit of insuring good and marketable title
to such real property free and clear of all liens and encumbrances issued by a
title insurance company reasonably acceptable to Entercom and in the amount
allocated to such real property hereunder, subject to standard title exceptions
and survey exceptions, none of which will impair or interfere with the continued
use of such real property as such is currently used. All fees and expenses for
the issuance of such title insurance policies shall be paid for by Entercom.
To the extent Sellers have obtained such consent, the consent
of Heritage and/or News Corp., as necessary, to the assignment of the rights
related to the Stations under the Heritage Agreement to Entercom.
Instructions to the Escrow Agent to deliver the original Letter of
Credit to Entercom promptly after the Closing.
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Opinions of Thomas & Libowitz, P.A., counsel to Sellers, and of
Fisher, Wayland, Cooper, Leader & Zaragoza, regulatory counsel to Sellers,
substantially in the forms attached hereto as Exhibits F and G.
CLOSING DELIVERIES TO SELLERS. At the Closing, Entercom shall
deliver to Sellers the Purchase Price as set forth in Section 2.5 allocated
between Sellers as Sellers shall direct and deliver the following items and
documents in form satisfactory to counsel for Sellers and properly executed
unless each Seller waives in whole or part in writing a delivery and then only
to the extent of such waiver:
One or more Agreements whereby Entercom assumes and agrees to
pay when due any Liabilities of each Seller specifically required to be assumed
by Entercom hereunder, substantially in the form attached hereto as Exhibit E.
Certified copies of the resolutions of the Board of Directors
of Entercom approving and ratifying this Agreement and all transactions
contemplated by this Agreement.
A certificate signed by the President or any Vice President of
Entercom to the effect that with respect to any matter which would prevent
Entercom from consummating the Closing, no act or omission of Entercom or state
of facts contrary to the agreements, representations and warranties made herein
by Entercom has been taken or has occurred and that said representations and
warranties are true and correct at and as of the Closing Date in all material
respects as if made on and as of Closing Date, except to the extent that said
representations and warranties speak as of a particular date or time other than
the Closing Date (in which case such representations and warranties shall be
true and correct in all material respects as of such date or time).
An opinion of John C. Donlevie, General Counsel to Entercom,
substantially in the form attached hereto as Exhibit H.
COVENANTS OF FURTHER ASSURANCE. At and after the time of
Closing, upon request of Entercom or Sellers, as the case may be, the parties
shall take such reasonable action and deliver to the party so requesting such
further instruments of assignment, conveyance or transfer or other documents of
further assurance as in the opinion of counsel for either Sellers or Entercom
may be reasonably necessary to evidence the full and effective transfer,
conveyance and assignment of the Assets and possession thereof to Entercom.
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DAMAGE TO PROPERTY. If, at the time of Closing, any of the
real or tangible personal property included in the Assets shall have suffered
loss or damage for which Entercom is not responsible under the term of the TBA,
Sellers shall use their reasonable efforts to repair, replace or restore the
same prior to Closing. In the event that such repair, replacement or restoration
cannot be completed prior to the date scheduled for Closing, then, except as
provided immediately below, Closing shall occur and Sellers shall assign to
Entercom their rights to all insurance proceeds relating to such loss or damage.
In the event such loss or damage is uninsured or so material as to prevent one
of the Stations (other than WBBF(AM)) from using its studios or any of its
transmitter facilities in the normal course, consistent with past practices,
Closing shall be deferred until the completion of such repair, replacement or
restoration by Sellers to the extent that the Station's or Stations' studios and
transmitter facilities are again useable in the normal course, consistent with
past practices, and such delay shall not give rise to a right to terminate this
Agreement as provided in Section 9.1.4 hereof.
TAXES ON TRANSACTION. All sales, purchase, transfer, use or
documentary taxes, if any, payable by reason of this Agreement or any of the
transactions contemplated hereby or the sale, transfer or delivery of any of the
Assets to Entercom, whether or not imposed on Entercom or Sellers, shall be paid
one-half by Entercom and one-half by Sellers promptly when due.
ARTICLE
TERMINATION, DEFAULT AND INDEMNIFICATION
TERMINATION BY REASON OTHER THAN DEFAULT. This Agreement may
be terminated by any party hereto not then in default hereunder at the time of
such termination upon written notice to the other party if:
The Commission denies or designates for hearing any of the
Applications or any portion thereof by Final Order; or
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Events occur which give rise to a specific right hereunder to
terminate this Agreement by the party seeking to terminate; or
Other than as a result of a default by the party seeking to
terminate, any material condition set forth herein to the obligation of the
party seeking to terminate this Agreement to complete the transaction has not
been satisfied or complied with by the Closing Date and has not been waived by
the party seeking to terminate; or
By either party, subject to Section 8.6 hereof, if the
Commission does not grant its consent and approval to the Applications and the
waiting period required under the HSR Act has not expired or been terminated by
the date that is six months after the date of this Agreement and the TBA has not
commenced by such six-month anniversary, provided, that if an issue has been
raised before the Commission, the DOJ or the FTC concerning either Sellers, or
any of their predecessors, on the one hand, or Entercom, on the other hand, and
such issue has delayed the consent and approval of the Commission or the
expiration or termination of the waiting period contemplated by the foregoing
clause, then the party to which such issue relates shall not be permitted to
terminate the Agreement pursuant to this provision on such six-month anniversary
date. If the TBA has commenced within the six-month period set forth above, the
period for termination by either party pursuant to this Section 9.1.4 shall be
one (1) year, provided, that on such one-year anniversary date, either party
may, subject to Section 8.6 hereof, terminate this Agreement even if an issue
has been raised before the Commission concerning such party and such issue has
delayed the consent and approval of the Commission.
EFFECT OF TERMINATION BY REASON OTHER THAN DEFAULT. If this
Agreement is duly terminated by either party as provided in Section 9.1, then
the Letter of Credit shall be returned to Entercom and all obligations of either
party to the other shall cease and both parties shall be fully and finally
released herefrom.
DEFAULT. The following shall constitute a default hereunder:
If any of the representations or warranties of a party
contained herein is inaccurate or breached in any material respect; or
If any of the obligations to be performed hereunder by a party
hereto is not performed during the period or at or before the time specified
herein for such performance.
REMEDIES OF SELLERS.
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In the event of a default by Entercom, which is not waived by
Sellers, Sellers shall have the following remedies:
Prior to Closing, Sellers may, as their sole remedy, by
written notice to Entercom terminate this Agreement in which event Seller shall
be entitled to receive the proceeds of the Letter of Credit as liquidated
damages in full and final settlement of all claims under this Agreement, and
there shall be no other or further obligations, liabilities or remedies of the
parties hereunder.
In the event Closing occurs hereunder, Sellers' remedy for any
default by Entercom shall be indemnification pursuant to Section 9.7 hereof.
ENTERCOM'S REMEDIES. In the event of a default by either
Seller hereunder, which is not waived by Entercom, Entercom shall have the
following remedies:
Prior to Closing, subject to the provisions regarding failures
of representations and warranties contained in Section 5.2.2 hereof, Entercom
may by written notice to Sellers terminate this Agreement in which event
Entercom shall be entitled to recover from Sellers, jointly and severally, any
damages Entercom sustained as a result of the default by such breaching Seller
hereunder.
Prior to Closing, Entercom may seek specific performance by
Sellers of Sellers' obligations hereunder and shall also be entitled to any
other remedy available at law or in equity, including without limitation the
recovery of any damages (including attorneys fees and costs) incurred by
Entercom as a result of the default by Sellers hereunder. Each Seller covenants
that under such circumstances it shall not assert in defense of an action
seeking specific performance of this Agreement in favor of Entercom that
Entercom has available adequate remedies at Law.
In the event Closing occurs hereunder, Entercom's remedy for
any default by Sellers shall be indemnification pursuant to Section 9.7 hereof.
LIQUIDATED DAMAGES NOT A PENALTY. With respect to the
liquidated damages as described and provided for in Section 9.4.1 hereof,
Sellers and Entercom hereby acknowledge and agree that the damage that may be
suffered by Sellers in the event of a default by Entercom hereunder is not
readily ascertainable and that such liquidated damages as of the date hereof are
a
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reasonable estimate of such damages and are intended to compensate Sellers for
any such damage and are not to be construed as a penalty.
INDEMNIFICATION.
BY SELLERS. Subject to Sections 9.7.4 and 10.3, from and after
the Closing Date, Sellers shall, jointly and severally, indemnify, defend and
hold Entercom and its officers, directors, employees and affiliates harmless
from, against and with respect to any and all loss, damage, claim, obligation,
assessment, cost, liability, and reasonable expense (including, without
limitation, reasonable attorney's fees and reasonable costs and expenses
incurred in investigating, preparing, defending against or prosecuting any
litigation or claim, action, suit, proceeding or demand) of any kind or
character (a "Loss") incurred, suffered, sustained or required to be paid by any
of them and resulting from, related to or arising out of:
any breach of any of the covenants, representations or
warranties made by Sellers in or pursuant to this Agreement, or in any
agreement, document or instrument executed and delivered pursuant
hereto or in connection with the Closing hereunder;
any failure by Sellers to perform or observe, or to have
performed or observed, in full, any covenant, agreement or condition to
be performed or observed by them pursuant to this Agreement or in any
agreement, document or instrument executed and delivered by or on
behalf of them in connection with the Closing hereunder;
any and all Liabilities of Sellers, except for Liabilities to
be assumed or retained by Entercom under the terms of this Agreement;
or
Sellers' operation or ownership of the Assets prior to the
Adjustment Time, including any and all obligations and liabilities
arising under the FCC Licenses or the Station Contracts which accrue or
relate to a period of time prior to the Adjustment Time; or
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1. BY ENTERCOM. If Closing does not occur due to a default by
Entercom in its obligation to complete such Closing hereunder, Sellers' remedy
shall be liquidated damages pursuant to Section 9.4 hereof. Provided Closing
occurs hereunder, subject to Section 10.3, Entercom shall indemnify, defend and
hold Sellers and their respective officers, directors, employees and affiliates
harmless from, against and with respect to any Loss (as defined in Section
9.7.1) incurred, suffered, sustained or required to be paid by any of them and
resulting from, related to or arising out of:
1. any breach of any of the covenants, representations or
warranties made by Entercom in or pursuant to this Agreement or in any
agreement, document or instrument executed and delivered pursuant
hereto or in connection with the Closing hereunder;
2. any failure by Entercom to perform or observe, or to have
performed or observed, in full, any covenant, agreement or condition to
be performed or observed by it pursuant to this Agreement or in any
agreement, document or instrument executed and delivered by or on
behalf of it in connection with the Closing hereunder; or
3. any and all Liabilities of Entercom except for Liabilities
to be assumed or retained by Sellers under the terms of this Agreement;
or
4. Entercom's operation or ownership of the Assets after the
Adjustment Time, including any and all Liabilities arising under the
FCC Licenses or the Station Contracts assumed by Entercom which accrue
after the Adjustment Time or which relate to or arise out of events
occurring after the Adjustment Time.
1. PROCEDURES. Any party seeking indemnification under this
Agreement (the "Indemnified Party") shall promptly give the party from whom
indemnification is sought (the "Indemnifying Party") written notice of any claim
or the commencement of any action or proceeding for which the Indemnified Party
may seek indemnification, and the Indemnified Party shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting from such claim, unless injunctive relief is sought against the
Indemnified Party in which case the Indemnified Party shall have the right to
join in any defense. The Indemnified Party's failure to give the Indemnifying
Party notice under this clause shall not preclude the Indemnified Party from
seeking indemnification from the Indemnifying Party except to the extent that
the
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Indemnified Party's failure has materially prejudiced the Indemnifying Party's
ability to defend the claim or litigation. The Indemnifying Party shall not
settle any claim for which the Indemnified Party seeks indemnification or
consent to entry of any judgment in litigation arising from such a claim without
obtaining a written release of the Indemnified Party from all liability in
respect of such claim or litigation. If the Indemnifying Party shall not assume
the defense of any such claim or litigation resulting therefrom, or if
injunctive relief is sought against the Indemnified Party, the Indemnified Party
may defend against or settle such claim or litigation in such manner as it may
deem appropriate, and in such cases, upon a written demand therefore, the
Indemnifying Party shall promptly reimburse the Indemnified Party for the amount
of all reasonable expenses, legal or otherwise, incurred by the Indemnified
Party in connection with the defense against or settlement of such claim or
litigation. In addition, if the Indemnifying Party shall not assume the defense
of any such claim or litigation resulting therefrom, or if injunctive relief is
sought against the Indemnified Party, and if no settlement of the claim or
litigation is made, upon written demand therefor, the Indemnifying Party shall
promptly reimburse the Indemnified Party for the amount of any judgment rendered
with respect to such claim or in such litigation and for all reasonable
expenses, legal or otherwise, incurred by the Indemnified Party in the defense
against such claim or litigation.
2. LIMITS ON INDEMNIFICATION. Notwithstanding any other
provision hereof, Entercom shall not be entitled to make a claim against Sellers
for indemnification under this Agreement until the aggregate amount of such
claims by Entercom exceeds One Hundred Fifty Thousand Dollars ($150,000) (the
"Threshold"), provided, that once the Threshold has been exceeded, Entercom
shall be entitled to seek from Sellers, jointly and severally, the full amount
of such claims. The amount of the Threshold shall have no bearing on any
determination as to what constitutes "material" for purposes of this Agreement.
In addition, notwithstanding any other provision of this Agreement to the
contrary, in no event shall a Loss include a party's incidental, consequential
or punitive damages, regardless of the theory of recovery.
ARTICLE 3.
GENERAL PROVISIONS
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<PAGE> 51
4. EXPENSES OF THE PARTIES. Except as otherwise expressly
provided herein, all expenses involved in the preparation, authorization and
consummation of this Agreement, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants in connection
therewith and in connection with applications to the Commission hereunder, shall
be borne solely by the party who shall have incurred the same, and the other
party shall have no liability in respect thereof. The foregoing notwithstanding,
the parties agree to pay in equal shares (i) any filing fees of the Commission
relating to the filing of the Applications, (ii) fees related to notifications
under the HSR Act or to any other governmental agency and (iii) fees and
expenses of the Escrow Agent under the Escrow Agreement and the Indemnification
Escrow Agreement. In addition, (y) assuming Sellers obtain the consent of
Geraghty & Miller to allow Entercom and its lenders to rely upon the phase I
environmental site assessment performed for the Real Property and identified on
Schedule 4.1.16, Entercom agrees to pay one-half of the total cost of such phase
I environmental site assessment performed by Geraghty & Miller and (z) Entercom
shall pay all of the cost involved in the update by Geraghty & Miller of such
phase I environmental site assessment (as contemplated by Section 4.1.16.1),
provided that Entercom shall receive a dollar-for-dollar credit against any
amount paid by Entercom pursuant to clause (y) above.
5. BROKERS. Each party hereto represents and warrants to the
other party hereto that it has not incurred any Liability, contingent or
otherwise, for brokerage or finders' fees or agents commissions or other like
payment in connection with this Agreement or the transactions contemplated
hereby for which the other party will have any Liability, and each party hereto
agrees to indemnify and hold the other party hereto harmless against and in
respect to any such Liability based in any way on any agreement, arrangement or
understanding claimed to have been made by such party with any third party.
6. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. The
provisions hereof which by their terms are to be performed and observed after
the Closing Date and the several representations, warranties, indemnities and
agreements of Entercom and Sellers herein contained shall survive the Closing
Date hereunder for one (1) year
47
<PAGE> 52
following the Closing Date. No claim for indemnification may be made pursuant to
Article IX after the survival period set forth in this Section 10.3 (except that
all claims which are properly asserted prior to the expiration of the survival
period set forth in this Section 10.3 shall survive with respect to such claims
until the final resolution thereof).
7. AMENDMENT AND WAIVER. This Agreement cannot be changed or
terminated orally. Any amendment of modification hereof must be in writing
signed by the party against whom enforcement is sought. No waiver of compliance
with any provision or condition hereof, and no consent provided for herein,
shall be effective unless evidenced by an instrument in writing duly executed by
the party sought to be charged with such waiver or consent.
8. ASSIGNMENT. Entercom shall have the right to assign all or
any portion of its rights under this Agreement to any entity under common
control with Entercom or a Qualified Intermediary under Section 1031 of the
Code, provided, that no such assignment shall relieve Entercom of its
obligations hereunder. Other than as expressly set forth above, no party may
assign all or any portion of its rights under the Agreement without the prior
written consent of the other parties hereto.
9. EFFECT OF THIS AGREEMENT. This Agreement, together with the
exhibits and schedules hereto and a letter agreement, among Entercom and SCI,
dated of even date herewith, sets forth the entire understanding of the parties
and supersedes any and all prior written or oral agreements, arrangements or
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by either party
which is not embodied in this Agreement or the letter agreement referred to
above, and neither party shall be bound by, or be liable for, any alleged
representation, promise, inducement or statement of intention not embodied
herein unless same shall have been made subsequent hereto, shall be in writing
and shall be signed by the party to be charged therewith. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns.
48
<PAGE> 53
10. HEADINGS. The article or section headings of this
Agreement are for convenience of reference only and do not form a part of and do
not in any way modify, interpret or construe the intention of the parties.
11. COUNTERPARTS. This Agreement may be executed in one or
more counterparts and all such counterparts shall be construed as one and the
same instrument.
12. GOVERNING LAW. The construction and performance of this
Agreement shall be governed by the laws of the State of New York, excluding
choice of law provisions thereunder.
13. NOTICES. Any notice, report, demand, waiver or consent
required or permitted hereunder shall be in writing and shall be given by hand
delivery, by prepaid registered or certified mail, with return receipt
requested, by an established national overnight courier providing proof of
delivery for next business day delivery or by telecopy addressed as follows:
If to Sellers:
David D. Smith, President
Sinclair Communications, Inc.
2000 West 41st Street
Baltimore, MD 21211-1420
Telecopy Number: (410) 467-5043
49
<PAGE> 54
with copies to:
Robert Quicksilver, General Counsel
Sinclair Communications, Inc.
2000 West 41st Street
Baltimore, MD 21211-1420
Telecopy Number: (410) 662-4707
Steven A. Thomas, Esq.
Thomas & Libowitz, P.A.
100 Light Street, Suite 1100
Baltimore, MD 21202
Telecopy Number: (410) 752-2046
If to Entercom:
Joseph M. Field, President
Entertainment Communications, Inc.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Telecopy Number: (610) 660-5620
50
<PAGE> 55
with copies to:
John C. Donlevie, General Counsel
Entertainment Communications, Inc.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Telecopy Number: (610) 660-5620
Joseph D. Sullivan, Esq.
Latham & Watkins
1001 Pennsylvania Avenue, N.W., Suite 1300
Washington, D.C. 20004
Telecopy Number: (202) 637-2201
The date of any such notice and service thereof shall be deemed to be: (i) the
day of delivery if hand delivered or delivered by overnight courier; (ii) the
day of delivery as indicated on the return receipt if dispatched by mail, or
(iii) the date of telecopy transmission as indicated on the telecopier
transmission report provided that any telecopy transmission shall not be
effective unless a paper copy is sent by overnight courier on the date of the
telecopy transmission. Either party may change its address for the purpose of
notice by giving notice of such change in accordance with the provisions of this
section.
14. STATION EMPLOYEES. Subject to the terms of the TBA,
Sellers agree that for a period of one year after the Commencement Date of the
TBA, neither they nor any of their affiliates, successors or assignees will
employ or solicit for employment, or counsel others to solicit for employment,
any current employee of the Stations that Entercom employs after the Closing;
provided, that if Entercom terminates any employee of the Stations, such
restrictions shall not apply to any such terminated employees.
15. SECTION 1031 ASSET EXCHANGE. Entercom may elect to effect
the acquisition of all or part of the Assets as part of a deferred like-kind
exchange under Section 1031 of the Code, in lieu of buying such assets
hereunder; provided, that the consummation of this Agreement is not predicated
or conditioned on such exchange. If Entercom so elects, it shall provide notice
to Sellers of its election,
51
<PAGE> 56
and thereafter (i) may at any time at or prior to Closing assign its rights
under this Agreement to a "qualified intermediary" as defined in Treas. Reg.
Section 1.1031(k)-1(g)(4), subject to all of Sellers' rights and obligations
hereunder and (ii) shall promptly provide written notice of such assignment to
all parties hereto; provided, that no such assignment shall relieve Entercom of
its obligations hereunder. Notwithstanding the assignment of Entercom's rights
hereunder, the parties acknowledge and agree that the representations,
warranties and covenants of Sellers hereunder are for the benefit of Entercom
and shall remain enforceable by Entercom against Sellers in accordance with the
terms hereof. Sellers shall cooperate with all reasonable requests of Entercom
and the "qualified intermediary" in arranging and effecting the exchange as one
which qualifies under Section 1031 of the Code; provided, that Sellers shall
incur no additional costs, expenses, delays or liabilities in connection with
this transaction as a result of or in connection with the exchange. Without
limiting the generality of the foregoing, if Entercom has given notice of its
intention to effect the acquisition of all or part of the Assets as part of a
tax-deferred exchange, Sellers shall (i) promptly provide Entercom with written
acknowledgment of such notice and (ii) at Closing, accept payment for all or
that portion of the Assets for which like-kind exchange treatment is sought by
Entercom from the "qualified intermediary" rather than from Entercom (which
payment shall discharge the obligation of Entercom hereunder to make payment for
such assets) and transfer, assign and convey such assets to Entercom.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
52
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their duly authorized corporate officers on the date first written
above.
TUSCALOOSA:
TUSCALOOSA BROADCASTING, INC.
By:
Title:
SRPLI:
SINCLAIR RADIO OF PORTLAND
LICENSEE, INC.
By:
Title:
SRRLI:
SINCLAIR RADIO OF ROCHESTER
LICENSEE, INC.
By:
Title:
ENTERCOM
ENTERTAINMENT COMMUNICATIONS,
INC.
By:
Title:
53
<PAGE> 1
EXHIBIT 10.08
TIME BROKERAGE AGREEMENT
by and among
ENTERTAINMENT COMMUNICATIONS, INC.,
TUSCALOOSA BROADCASTING, INC.,
SINCLAIR RADIO OF PORTLAND LICENSEE, INC.
and
SINCLAIR RADIO OF ROCHESTER LICENSEE, INC.
Dated as of January 26, 1998
<PAGE> 2
TABLE OF SCHEDULES AND EXHIBITS
Schedule 1.1 Programming
Schedule 1.2 Compensation
Schedule 2.1 Programming Policy Statement
Schedule 4.1 Excluded Contracts
Schedule 11.1 Time Broker's Actions and Proceedings
Schedule 11.2 Licensee's Actions and Proceedings
(i)
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I. - SALE OF TIME........................................................................................ 1
Section 1.1. Broadcast of Programming......................................................... 1
Section 1.2. Payment.......................................................................... 2
Section 1.3. Term............................................................................. 2
ARTICLE II. - PROGRAMMING AND OPERATING STANDARDS AND PRACTICES.................................................. 2
Section 2.1. Compliance with Standards........................................................ 2
Section 2.2. Political Broadcasts............................................................. 2
Section 2.3. Handling of Communications....................................................... 3
Section 2.4. Preemption....................................................................... 3
Section 2.5. Broadcasting Obligations of Licensee............................................. 3
Section 2.6. Rights in Programs............................................................... 4
Section 2.7. "Payola" and "Plugola"........................................................... 4
Section 2.8. Advertising and Programming...................................................... 5
Section 2.9. Format and Transmitter Locations................................................. 5
Section 2.10. Compliance with Laws............................................................ 5
Section 2.11. Certifications.................................................................. 6
ARTICLE III. - RESPONSIBILITY FOR EMPLOYEES AND EXPENSES......................................................... 6
Section 3.1. Time Broker's Employees.......................................................... 6
Section 3.2. Licensee's Employees............................................................. 6
Section 3.3. Time Broker's Expenses........................................................... 6
Section 3.4. Operating Expenses............................................................... 7
Section 3.5. Employee Matters................................................................. 7
ARTICLE IV. - ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS........................................................ 9
Section 4.1. Assignment....................................................................... 9
Section 4.2. Proration........................................................................ 10
Section 4.3. Accounts Receivable.............................................................. 10
ARTICLE V. - OPERATION OF STATION................................................................................ 11
ARTICLE VI. - GRANT OF LICENSES.................................................................................. 12
Section 6.1. License to Use Station Facilities................................................ 12
Section 6.2. License of Intellectual Property................................................. 12
ARTICLE VII. - INDEMNIFICATION................................................................................... 12
Section 7.1. Indemnification Rights........................................................... 12
Section 7.2. Procedures....................................................................... 13
</TABLE>
(i)
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII. - DEFAULT.......................................................................................... 14
Section 8.1. Time Broker Events of Default.................................................... 14
Section 8.2. Licensee's Events of Default..................................................... 14
Section 8.3. Cure Periods..................................................................... 14
Section 8.4. Other Defaults................................................................... 15
ARTICLE IX. - TERMINATION........................................................................................ 15
Section 9.1. Termination...................................................................... 15
Section 9.2. Certain Matters Upon Termination................................................. 16
ARTICLE X. - REMEDIES............................................................................................ 17
ARTICLE XI. - CERTAIN REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE PARTIES................................................................. 17
Section 11.1. Representations and Warranties of Time Broker................................... 17
Section 11.2. Representations, Warranties and Covenants of Licensee........................... 18
ARTICLE XII. - MISCELLANEOUS..................................................................................... 19
Section 12.1. Modification and Waiver......................................................... 19
Section 12.2. No Waiver; Remedies Cumulative.................................................. 19
Section 12.3. Construction.................................................................... 19
Section 12.4. Headings........................................................................ 20
Section 12.5. Successors and Assigns.......................................................... 20
Section 12.6. Force Majeure................................................................... 20
Section 12.7. Broker.......................................................................... 20
Section 12.8. Counterpart Signatures.......................................................... 20
Section 12.9. Notices......................................................................... 20
Section 12.10. Effect of this Agreement....................................................... 22
Section 12.11. Severability................................................................... 22
Section 12.12. No Joint Venture............................................................... 22
Section 12.13. Damage to Stations............................................................. 22
Section 12.14. Noninterference................................................................ 23
Section 12.15. Regulatory Changes............................................................. 23
</TABLE>
(ii)
<PAGE> 5
TIME BROKERAGE AGREEMENT
This Time Brokerage Agreement (this "Agreement") is made as of
the 26th day of January, 1998, by and among Entertainment Communications, Inc.,
a Pennsylvania corporation ("Time Broker"), and Tuscaloosa Broadcasting, Inc., a
Maryland corporation ("Tuscaloosa"), Sinclair Radio of Portland Licensee, Inc.,
a Maryland corporation ("SRPLI") and Sinclair Radio of Rochester Licensee, Inc.,
a Maryland corporation ("SRRLI") (Tuscaloosa, SRPLI and SRRLI are sometimes
collectively referred to herein as "Licensee").
Upon the consummation of the transactions contemplated by that
certain Asset Purchase Agreement, dated July 16, 1997, among Sinclair Broadcast
Group, Inc. ("Sinclair") and various subsidiaries of Heritage Media Corporation
("HMC") (control of which subsidiaries, on August 20, 1997, was transferred to
William G. Evans, Trustee) (HMC is sometimes collectively referred to with its
subsidiaries as "Heritage"), SRPLI will become the licensee of broadcast
stations KKSN(AM), Vancouver, Washington, KKSN-FM, Portland, Oregon and
KKRH(FM), Salem, Oregon (collectively, the "Portland Stations"), and SRRLI will
become the licensee of broadcast stations WKLX(FM), Rochester, New York,
WBEE(FM), Rochester, New York, WBBF(AM), Rochester, New York and WQRV(FM), Avon,
New York (collectively, the "Rochester Stations" and together with the Portland
Stations, the "Stations"). Time Broker and Licensee desire to enter into an
agreement providing for the programming and sale, upon the acquisition by
Licensee of the Stations from Heritage, of substantially all of the broadcast
time of the Stations to Time Broker, subject to and in compliance with the rules
and policies of the Federal Communications Commission (the "FCC").
Simultaneously herewith, Time Broker and Licensee are entering
into an Asset Purchase Agreement (the "Purchase Agreement") providing for the
acquisition by Time Broker of the Stations.
Accordingly, in consideration of the foregoing and of the
mutual promises, covenants, and conditions set forth below, the parties agree as
follows:
ARTICLE I.
SALE OF TIME
Section 1.1. Broadcast of Programming.
Effective upon the date (the "Commencement Date") that is the
later to occur of (a) the date that Licensee acquires the Stations from Heritage
or (b) the date that is ten (10) business days after the expiration or early
termination of any waiting period applicable to the transfer of the Stations to
Time Broker under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), Licensee shall broadcast on the Stations, or cause to
be
<PAGE> 6
broadcast on the Stations, programs which are presented to it by Time Broker as
described in greater detail on Schedule 1.1 (the "Programming").
Section 1.2. Payment.
Time Broker shall pay Licensee for broadcast of the
Programming the amounts set forth in Schedule 1.2 (the "Monthly Payment"),
subject to adjustment as set forth in Sections 2.4 and 2.5 below. All payments
shall be made by wire transfer of immediately-available funds by the last
business day of each calendar month, in arrears, to which such payment pertains.
Section 1.3. Term.
This Agreement shall commence on the Commencement Date and
shall terminate on the earlier of (i) 12:01 a.m. on the Closing Date (as defined
in the Purchase Agreement) under the Purchase Agreement, (ii) the date the
Purchase Agreement is terminated, or (iii) the date this Agreement is terminated
pursuant to Section 9.1 hereof.
ARTICLE II.
PROGRAMMING AND OPERATING STANDARDS AND PRACTICES
Section 2.1. Compliance with Standards.
All Programming delivered by Time Broker during the term of
this Agreement shall be in accordance with applicable statutes, FCC requirements
and the programming policies set forth on Schedule 2.1. Licensee reserves the
right to refuse to broadcast any Programming containing matter which the
Licensee believes is unsuitable or not consistent with the needs and interests
of its service area or may be violative of any right of any third party, or
which may constitute a "personal attack" as that term is and has been defined by
the FCC or which Licensee reasonably determines is, or in the reasonable opinion
of Licensee may be deemed to be, indecent (and not broadcast during the safe
harbor for indecent programming established by the FCC) or obscene by the FCC or
any court or other regulatory body with authority over Licensee or the Station.
Section 2.2. Political Broadcasts.
Time Broker shall maintain and deliver to Licensee all records
and information required by the FCC to be placed in the public inspection files
of the Stations pertaining to the broadcast of political programming and
controversial issue advertisements, in accordance with the provisions of
Sections 73.1212 and 73.3526 of the FCC's rules, and agrees to broadcast
sponsored programming addressing political issues or controversial subjects of
public importance, in accordance with the provisions of Section 73.1212 of the
FCC's rules. Time Broker shall consult and cooperate with Licensee and adhere to
all applicable statutes and the rules, regulations and policies of the FCC, as
announced from time to time, with respect to the
2
<PAGE> 7
carriage of political advertisements and programming and the charges permitted
therefor. Time Broker shall promptly provide to Licensee such documentation
relating to such programming as Licensee is required to maintain in its public
inspection files or as Licensee shall reasonably request. Licensee shall be
responsible for the maintenance of the public inspection files of the Stations.
Section 2.3. Handling of Communications.
Time Broker shall cooperate with Licensee in promptly
responding to all mail, cables, telegrams or telephone calls directed to the
Stations in connection with the Programming provided by Time Broker or any other
matter relevant to its responsibilities hereunder. Promptly upon receipt, Time
Broker shall provide copies of all such correspondence to Licensee. Time Broker
shall promptly advise Licensee of any public or FCC complaint or inquiry known
to Time Broker concerning such Programming, and shall provide Licensee with
copies of any letters to Time Broker from the public, including complaints
concerning such Programming. Upon Licensee's request, Time Broker shall provide
Licensee with such information as will allow Licensee to respond to such
complaints and inquiries. Notwithstanding the foregoing, Licensee shall handle
all matters or inquiries relating to FCC complaints and any other matters
required to be handled by Licensee under the rules and regulations of the FCC.
Section 2.4. Preemption.
Licensee may, from time to time, preempt portions of the
Programming to broadcast emergency information or programs it deems would better
serve the public interest. Time Broker shall be notified at least one week in
advance of any preemption of any of the Programming for the purpose of
broadcasting programs Licensee deems necessary to better serve the public
interest unless such advance notice is impossible or impractical, in which case
Licensee shall notify Time Broker promptly upon making such determination. In
the event of any such preemption, Time Broker shall be entitled to a credit
against any other amounts due Licensee under this Agreement in an amount equal
to the product of (a) the Monthly Payment and (b) the result of dividing the
number of hours so affected by the aggregate number of hours available for
Programming during such month. Licensee represents and covenants that preemption
pursuant to this Section 2.4 shall only occur to the extent Licensee deems
necessary to carry out its obligations as an FCC licensee, and expressly agrees
that its right of preemption shall not be exercised for the commercial advantage
of Licensee or others.
Section 2.5. Broadcasting Obligations of Licensee.
During the term of this Agreement, except as set forth in
Sections 2.1 and 2.4 and this Section 2.5, Licensee will broadcast the
Programming in its entirety (including commercials), without interruption,
deletion or addition of any kind:
3
<PAGE> 8
(i) Licensee may temporarily refrain from broadcasting the
Programming from the main transmitter of each Station between the hours of 12:30
a.m. and 5:30 a.m. (or at such other time in the event that weather conditions
or contractual arrangements relating to transmitter sites dealing with the
exposure of humans to RF radiation so require or as may otherwise be required
under compelling circumstances that cannot be rescheduled between the hours of
12:30 a.m. and 5:30 a.m.) in order to perform normal, customary and routine
maintenance on the Station's main transmitting facilities; provided, that
Licensee shall provide written notice to Time Broker of its intent to refrain
from broadcasting the Programming from the main transmitter of each Station at
least forty-eight (48) hours in advance, except when an emergency requires such
suspension, and provided further that Licensee shall use its best efforts to
minimize the impact, frequency and duration of such interruptions, including
without limitation by way of use of any auxiliary transmitter that may be
available for the applicable Station; and
(ii) Licensee may temporarily cease broadcasting the
Programming from the main transmitter of each Station as a result of a technical
malfunction, natural disaster, act of public enemy, act of God, or any other
cause beyond the control of Licensee; provided that in any such case, Licensee
will act expediently and use its best efforts to resume the broadcast of the
Programming from the main transmitter of each Station as quickly as the
applicable circumstances will allow, and will use its best efforts to broadcast
the Programming from any auxiliary transmitter that may be available for the
applicable Station.
In the event of any interruption pursuant to this Section
(other than (a) interruption pursuant to Section 2.5(i) occurring between the
hours of 12:30 a.m. and 5:30 a.m. and (b) interruption pursuant to Section
2.5(ii)), if Licensee is not able to broadcast the Programming from an available
auxiliary transmitter, Time Broker shall be entitled to a credit against the
Monthly Payment or any other sums due hereunder, in an amount equal to the
product of (a) the Monthly Payment and (b) the result of dividing the number of
hours so affected by the aggregate number of hours available for Programming
during such month.
Section 2.6. Rights in Programs.
All right, title and interest in and to the Programming, and
the right to authorize the use of the Programming in any manner and in any media
whatsoever, shall be and remain vested at all times solely in Time Broker.
Section 2.7. "Payola" and "Plugola".
Time Broker agrees that it will not accept any gift, gratuity
or other consideration, including, but not limited to, a commission, discount,
bonus, material supplies or other merchandise, services or labor (collectively,
the "Consideration"), directly or indirectly, from any person or company for the
playing of records, the presentation of any programming or the broadcast of any
commercial announcement over the Stations unless the payor is identified in the
4
<PAGE> 9
program for which Consideration was provided as having paid for or furnished
such Consideration, in accordance with the Communications Act of 1934, as
amended (the "Communications Act") and the FCC requirements. It is further
understood and agreed that no commercial message, plugs, or undue reference
shall be made in programming presented over the Stations to any business
venture, profit-making activity or other interest (other than non-commercial
announcements for bona fide charities, church activities or other public service
activities) unless the payor is identified in the program for which
Consideration was provided as having paid for or furnished such Consideration,
in accordance with the Communications Act and the FCC requirements. In addition,
Time Broker agrees that it will take steps, including the continuation of
Licensee's system for periodic execution of affidavits, reasonably designed to
assure that it, its employees and agents comply with this Section 2.7.
Section 2.8. Advertising and Programming.
Beginning with the Commencement Date, Time Broker shall be
solely responsible for any expenses incurred in connection with and shall be
entitled to all revenue from the sale of advertising or program time in the
Programming. Except as otherwise provided herein, Time Broker does not assume
any obligation of Licensee under any contract or advertising arrangement entered
into by Licensee on or after the Commencement Date. Licensee shall indemnify
Time Broker for the amount of any lost revenue caused by any sale of advertising
time made by Licensee that would lower the Station's lowest unit charge for
political advertising.
Section 2.9. Format and Transmitter Locations.
During the term of this Agreement, except as otherwise
consented to in writing by Licensee or as otherwise provided in the following
sentence, Time Broker agrees that it will not make any material changes in the
Stations' existing programming formats or seek to change the location of any of
the Stations' studio or transmitting facilities. Notwithstanding the foregoing,
(i) the parties expressly agree that Time Broker, in its sole discretion, is
permitted during the term of this Agreement to exchange the programming formats
on KKSN(AM) and KFXX(AM) (which is owned and operated by Time Broker) (it being
understood that, should this Agreement terminate other than as a result of the
Closing (as defined in the Purchase Agreement) under the Purchase Agreement,
Time Broker shall, promptly upon such termination, change the programming
formats on each such station back to their programming formats substantially as
they exist on the date of this Agreement) and (ii) Licensee agrees that it will
not unreasonably withhold consent to any request by Time Broker to change the
programming format for WBBF(AM).
Section 2.10. Compliance with Laws.
At all times during the term of this Agreement, Time Broker
and Licensee shall comply in all material respects with all applicable federal,
state and local laws, rules and regulations.
5
<PAGE> 10
Section 2.11. Certifications.
Pursuant to Section 73.3555(a)(3)(ii) of the FCC's rules,
Licensee certifies that it maintains ultimate control over the Station's
facilities, including specifically control over station finances, personnel and
programming, and Time Broker certifies that this Agreement complies with the
provisions of Section 73.3555(a) of the FCC's rules.
ARTICLE III.
RESPONSIBILITY FOR EMPLOYEES AND EXPENSES
Section 3.1. Time Broker's Employees.
Time Broker shall employ and be responsible for the payment of
salaries, taxes, insurance and all other costs related to all personnel used in
the production of the Programming. Except as provided in Section 3.5 with
respect to Transferred Employees, Time Broker will not incur any liability on
account of Licensee's employees arising and accruing prior to the Commencement
Date including, without limitation, any such liability on account of
unemployment insurance contributions, termination and severance payments,
accrued sick leave or accrued vacation.
Section 3.2. Licensee's Employees.
Licensee shall employ and be responsible for the payment of
salaries, taxes, insurance and all other costs related to the personnel
necessary to fulfill its obligations as Licensee and under this Agreement, and
to produce Licensee's programming on the Stations subject to reimbursement as
provided in Schedule 1.2. Time Broker shall have no authority and shall not
supervise persons in the employ of Licensee after the Commencement Date.
Licensee acknowledges that its employees may have access to certain confidential
information of Time Broker. Licensee shall, therefore, inform its employees of
the confidential nature of such information and require that each such employee
keep such information confidential.
Section 3.3. Time Broker's Expenses.
Time Broker shall pay for all costs associated with the
production and delivery of the Programming, including but not limited to (i) all
ASCAP, BMI, SESAC and other copyright fees, (ii) any expenses incurred in
connection with its sale of advertising time hereunder (including without
limitation sales commissions) in connection with the Programming and (iii) the
salaries, taxes, insurance and related costs for all of Time Broker's personnel
used in the production of the Programming and all of Time Broker's sales
personnel (including salespeople, traffic personnel, and programming staff).
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Section 3.4. Operating Expenses.
Licensee shall be responsible for the payment when due of all
fees and expenses relating to operation and maintenance of the Stations to the
extent necessary for Licensee to maintain the licensed transmitting capability
of the Stations and to fulfill its obligations as an FCC licensee, including,
without limitation, salaries, benefits and similar expenses for Licensee's
employees, Licensee's federal, state and local taxes, rent, utilities (excluding
telephone), maintenance and repairs at each of the Station's transmitter and
studio sites, any capital expense at each of the Station's transmitter and
studio sites, insurance on the Stations' equipment, insurance deductibles on
claims on the Stations' equipment, and ad valorem property taxes, subject to
reimbursement as provided in Schedule 1.2.
Section 3.5. Employee Matters.
On the Commencement Date, Time Broker shall offer employment
to each of the employees of the Stations (including those on leave of absence,
whether short-term, long-term, family, maternity, disability, paid, unpaid or
other), other than those employees that are retained by Licensee pursuant to
Section 3.2 above during the term of this Agreement, at a comparable salary,
position and place of employment as held by each such employee immediately prior
to the Commencement Date (such employees who are given such offers of employment
are referred to herein as the "Transferred Employees"). Nothing in this Section
3.5.1 is intended to guarantee employment for any Transferred Employee for any
length of time after the Commencement Date.
(i) Except as provided otherwise in this Section 3.5, Licensee
shall pay, discharge and be responsible for (a) all salary and wages arising out
of or relating to the employment of the employees of the Stations prior to the
Commencement Date and (b) any employee benefits arising under the Benefit Plans
(as defined in the Purchase Agreement) of Licensee and their Affiliates during
the period prior to the Commencement Date. From and after the Commencement Date,
Time Broker shall pay, discharge and be responsible for all salary, wages and
benefits arising out of or relating to the employment of the Transferred
Employees by Time Broker on and after the Commencement Date. Time Broker shall
be responsible for all severance Liabilities (as such term is defined in the
Purchase Agreement), and all COBRA Liabilities for any Transferred Employees of
the Stations terminated on or after the Commencement Date.
(ii) Time Broker shall cause all Transferred Employees as of
the Commencement Date to be eligible to participate in the "employee welfare
benefit plans" and "employee pension benefit plans" (as defined in Section 3(1)
and 3(2) of ERISA, respectively) of Time Broker in which similarly situated
employees of Time Broker are generally eligible to participate; provided,
however, that all Transferred Employees and their spouses and dependents shall
be eligible for coverage immediately after the Commencement Date (and shall not
be
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excluded from coverage on account of any preexisting condition) to the extent
provided under such plans with respect to Transferred Employees.
(iii) For purposes of any length of service requirements,
waiting periods, vesting periods or differential benefits based on length of
service in any such plan for which a Transferred Employee may be eligible after
the Commencement Date, Time Broker shall ensure that, to the extent permitted by
law, service by such Transferred Employee with Heritage, Licensee or any
Affiliate of Heritage or Licensee shall be deemed to have been service with the
Time Broker. In addition, Time Broker shall ensure that each Transferred
Employee receives credit under any welfare benefit plan of Time Broker for any
deductibles or co-payments paid by such Transferred Employee and his or her
dependents for the current plan year under a plan maintained by Heritage or
Licensee or any Affiliate of Heritage or Licensee. Time Broker shall grant
credit to each Transferred Employee for all sick leave in accordance with the
policies of Time Broker applicable generally to its employees after giving
effect to service for Heritage or Licensee as service for Time Broker. To the
extent taken into account in determining prorations under Section 4.2 hereunder,
Time Broker shall assume and discharge Licensee's liabilities for the payment of
all unused vacation leave accrued by Transferred Employees as of the
Commencement Date. To the extent any claim with respect to such accrued vacation
leave is lodged against Licensee, with respect to any Transferred Employee, Time
Broker shall indemnify, defend and hold harmless Licensee from and against any
and all losses, directly or indirectly, as a result of, or based upon or arising
from the same, up to the amount of the proration credit received by Time Broker
under Section 4.2 for such items.
(iv) [Intentionally omitted]
(v) As soon as practicable following the Commencement Date,
Time Broker shall establish and maintain a defined contribution plan or plans
(which may be a preexisting plan or plans) (the "Time Broker's Plan") intended
to be qualified under Section 401(a) and 401(k) of the Internal Revenue Code of
1986, as amended (the "Code"), for the benefit of the Transferred Employees.
Effective as of the Commencement Date, Licensee shall cause appropriate
amendments to be made to its defined contribution plan or plans (the "Licensee's
Plan") to provide that the Transferred Employees shall be fully vested in their
accounts under the Licensee's Plan. As soon as practicable after the
Commencement Date, Time Broker shall take all necessary action to qualify Time
Broker's Plan under the applicable provisions of the Code (including but not
limited to Section 401), if it is not yet so qualified, and Time Broker and
Licensee shall make any and all filings and submissions to the appropriate
governmental agencies required to be made by them in connection with the
transfer of assets described hereafter. As soon as practicable following the
earlier of the receipt of a favorable determination letter from the Internal
Revenue Service regarding the qualified status of both the Licensee's Plan and
the Time Broker's Plan (each as amended to the date of transfer) or sooner, if
Licensee and Time Broker so agree, Licensee shall cause to be transferred to
Time Broker's Plan, in cash, all of the individual account balances of
Transferred Employees under the Licensee's Plan, including any outstanding plan
participant loan receivables allocated to such accounts.
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(vi) Subject to Section 3.2, Time Broker acknowledges and
agrees that Time Broker's obligations pursuant to this Section 3.5 are in
addition to, and not in limitation of, Time Broker's obligation to assume the
employment contracts set forth on Schedule 2.1.8 to the Purchase Agreement.
(vii) Except as otherwise provided in this Section 3.5 or in
any employment, severance or retention agreements of any Transferred Employees,
all Transferred Employees shall be at-will employees, and Time Broker may
terminate their employment or change their terms of employment at will. No
employee (or beneficiary of any employee) of Seller may sue to enforce the terms
of this Agreement, including specifically this Section 3.5, and no employee or
beneficiary shall be treated as a third party beneficiary of this Agreement.
Except to the extent provided for herein, Time Broker may cover the Transferred
Employees under existing or new benefit plans, programs, and arrangements, and
may amend or terminate any such plans, programs, or arrangements at any time.
(viii) Upon the Closing (as defined in the Purchase Agreement)
of the Purchase Agreement, Time Broker shall offer employment to each of the
employees of the Stations that have been retained during the term of this
Agreement by Licensee pursuant to Section 3.2. Such offer of employment will be
at a comparable salary, position and place of employment as held by each such
employee immediately prior to the Closing Date (as defined in the Purchase
Agreement) (such employees who are given such offers of employment are referred
to herein as the "Closing Date Transferred Employees"). Nothing in this Section
3.5.9 is intended to guarantee employment for any such Closing Date Transferred
Employee for any length of time after the Closing Date (as defined in the
Purchase Agreement). Upon the Closing (as defined in the Purchase Agreement) of
the Purchase Agreement, the provisions of Sections 3.5.2 through and including
3.5.8 of this Agreement shall also apply to such Closing Date Transferred
Employees after substituting (i) "Closing Date Transferred Employees" for
"Transferred Employees," in each instance, and (ii) "Closing Date" for
"Commencement Date," in each instance.
ARTICLE IV.
ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS
Section 4.1. Assignment.
On the Commencement Date, Licensee shall assign to Time Broker
all Station Contracts (as defined in the Purchase Agreement) other than those
contracts and other agreements identified on Schedule 4.1 (the "Excluded
Contracts"). All such Station Contracts to be assigned hereunder are referred to
collectively as the "Assigned Contracts." Time Broker shall assume, pay,
perform, and discharge all liabilities arising on or after the Commencement Date
under the Assigned Contracts (including, without limitation, Trade-out
Agreements) pursuant to their terms (except for liabilities for any breaches
thereunder by Licensee or Heritage occurring prior to the Commencement Date).
Licensee has provided Time Broker with true and
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complete copies, including amendments, of the Assigned Contracts. The Assigned
Contracts are freely assignable, or, if consent of the other contracting party
to the assignment is required, Licensee shall make reasonable best efforts to
obtain all such consents prior to the Commencement Date. Subject to and in
compliance with the provisions of Section 3.3 of the Purchase Agreement, to the
extent that any such consents are not obtained prior to the Commencement Date,
during the period between the Commencement Date and the date that Licensee
obtains such consent, the parties shall cooperate to cause Time Broker to
receive the benefit of the Assigned Contract in exchange for performance by Time
Broker of all of Licensee's obligations under such Assigned Contract (including
but not limited to the payment to Licensee of all amounts due under the Assigned
Contract on and after the Commencement Date for services provided by Licensee).
Section 4.2. Proration.
All expenses and income arising under the Assigned Contracts
shall be prorated between Licensee and Time Broker as of the Commencement Date
in a manner such that the costs and benefits thereunder through the date before
the Commencement Date shall be for the account of Licensee and, thereafter,
during the term of this Agreement, for the account of Time Broker. With respect
to any items of salary, accrued vacation or other benefits relating to
Transferred Employees, such prorations shall also include an amount payable for
applicable payroll taxes. Such proration shall include an adjustment for
Trade-out Agreements (as defined in the Purchase Agreement) which are included
in the Assigned Contracts only to the extent that any Net Negative Trade Balance
(as defined below) for the Stations exceeds $50,000. "Net Negative Trade
Balance" means the extent, if any, to which the value (at current rates for time
on each Station as of the Commencement Date) of unfulfilled obligations of the
Station under Trade-out Agreements exceed the stated consideration yet to be
received by the Station pursuant to such Trade-out Agreements. Such prorations
shall be completed and any necessary payments on account of such prorations paid
within sixty (60) days of the Commencement Date. If any disagreement with
respect to the proration of such income and expenses cannot be resolved by the
parties, Licensee and Time Broker will select a certified public accountant
knowledgeable in the broadcast industry to resolve the dispute. The parties will
use their best efforts in good faith to cause to occur as expeditiously as
possible the appointment of the certified public accountant, and once appointed,
the resolution of the dispute. The resolution of such accountant shall be
binding on the parties and subject to judicial enforcement. Payment of the cost
of the accountant shall be shared equally between Time Broker and Licensee.
Section 4.3. Accounts Receivable.
All cash accounts receivable for broadcasts on the Stations
which occur prior to the Commencement Date (the "Accounts Receivable") shall
belong to Licensee and all Accounts Receivable for Programming which occurs
thereafter shall belong to Time Broker. Within ten business (10) days following
the Commencement Date, Licensee shall deliver to Time Broker a schedule of Cash
Accounts Receivable for the Stations as of the Commencement Date, by
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accounts and the amounts then owing (the "Schedule of Accounts Receivable").
Time Broker agrees to use its reasonable efforts (with at least the care and
diligence that Time Broker uses to collect its own accounts receivable) to
collect for Licensee its Accounts Receivable as shown on the Schedule of
Accounts Receivable delivered by Licensee for a period of one hundred fifty
(150) days following the Commencement Date; provided, that Time Broker's
obligation to collect the Accounts Receivable shall survive the Closing Date (as
defined in the Purchase Agreement) to the extent necessary for Time Broker to
collect the Accounts Receivable for a period of one hundred fifty (150) days
following the Commencement Date. All payments received by Time Broker from any
customer whose name appears in the Schedule of Accounts Receivable shall be
first applied to the oldest balance then due on the Accounts Receivable unless
the account debtor indicates in writing that payment is to be applied otherwise
due to a dispute over an Account Receivable. Time Broker shall keep accurate
records of the payment received by it on such Accounts Receivable and Licensee
shall have access at reasonable times to Time Broker's records to verify such
status of the Accounts Receivable. On the fifth day following the last day of
each month during such one hundred fifty (150) day period (or, if any such day
is a Saturday, Sunday or holiday, on the next day on which banking transactions
are resumed), Time Broker shall remit to Licensee collections received by Time
Broker with respect to the Accounts Receivable. Any Accounts Receivable that
have not been collected within such one hundred fifty (150) day period shall be
reassigned, without recourse to Time Broker, to Licensee, together with all
records in connection therewith, whereupon Licensee may pursue collection
thereof in such manner as it, in its sole discretion, may determine. Time Broker
shall not make any referral or compromise of any Accounts Receivable to a
collection agency or attorney for collection and shall not compromise for less
than full value any Account Receivable without the prior written consent of
Licensee. Except to remit collected Accounts Receivable in accordance herewith,
Time Broker shall have no liability or obligation to Licensee with respect to
the collection of its accounts and shall not be obligated to take any action to
collect such accounts.
ARTICLE V.
OPERATION OF STATION
Notwithstanding any provision of this Agreement to the
contrary, Licensee shall retain full authority and power with respect to the
management and operation of the Stations during the term of this Agreement.
Licensee shall employ the General Manager of the Stations and such other
personnel as Licensee determines may be necessary to fulfill its obligations as
a licensee under the Communications Act and its obligations in accordance with
Section 3.2 hereof. Licensee shall retain full authority and control over the
policies, programming and operations of the Stations, including, without
limitation, the decision whether to preempt Programming in accordance with
Section 2.4 hereof. Licensee shall have ultimate responsibility to effectuate
compliance with the Communications Act and with FCC rules, regulations and
policies. In no event shall Time Broker or its employees represent, depict,
describe or portray Time Broker as the licensee of the Stations.
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ARTICLE VI.
GRANT OF LICENSES
Section 6.1. License to Use Station Facilities.
Effective as of the Commencement Date, Licensee grants Time
Broker permission to access and use all of the studio and office space and other
facilities of the Stations ("Station Facilities") and all equipment and
furnishings contained therein ("Station Equipment") as reasonably necessary for
the production and broadcasting of the Programming and sales and administration
relating thereto, in accordance with the terms set forth in this Article VI.
Time Broker shall not remove from the Station Facilities or modify any Station
Equipment owned by or leased or licensed to Licensee without Licensee's prior
written consent, such consent not to be unreasonably withheld. Licensee shall
not license the use of the Station Facilities to any other party during the term
of this Agreement; and Time Broker's use of the Station Facilities shall be
exclusive except for Licensee's right to use such facilities as it deems
appropriate in connection with the satisfaction of its obligations as the
Licensee of the Station, including the use of such facilities and adequate
office space for the employees of Licensee that are required for Licensee to
comply with its obligations under Sections 3.2 and 5 hereof. Time Broker shall
use due care in the use of any property of Licensee. Time Broker shall indemnify
Licensee for any damage (normal wear and tear excepted) to Licensee's property
caused by Time Broker or any employee, contractor, agent or guest of Time
Broker. Time Broker shall have the right to install any additional equipment at
the Station Facilities deemed by Time Broker to be necessary to deliver the
Programming. If this Agreement shall terminate other than pursuant to the
Closing under the Purchase Agreement, Time Broker shall, promptly after such
termination, remove all such equipment and make all repairs necessitated by such
removal.
Section 6.2. License of Intellectual Property.
Effective as of the Commencement Date and subject to the terms
of any existing license agreement, Licensee grants Time Broker the right to use
all intellectual property owned by or licensed to Licensee and used solely in
the operation of the Stations (including, but not limited to, logos, jingles,
promotional materials, call signs and goodwill). Time Broker shall own all
trademarks, service marks, trade names, characters, formats, jingles,
promotional materials, logos and positioning statements which Time Broker
develops for the Programming during the term of this Agreement.
ARTICLE VII.
INDEMNIFICATION
Section 7.1. Indemnification Rights.
Each party will indemnify and hold harmless the other party,
and the directors, officers, partners, employees, agents and affiliates of such
other party, from and against any and
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all liability, including without limitation reasonable attorneys' fees arising
out of or incident to (i) any breach by such party of a representation, warranty
or covenant made herein, (ii) the programming produced or furnished by such
party hereunder, or (iii) the conduct of such party, its employees, contractors
or agents (including negligence) in performing its or their obligations
hereunder. Without limiting the generality of the foregoing, each party will
indemnify and hold harmless the other party, and the directors, officers,
partners, employees, agents and affiliates of such other party, from and against
any and all liability for libel, slander, infringement of trademarks, trade
names, or program titles, violation of rights of privacy, and infringement of
copyrights and proprietary rights resulting from the programming produced or
furnished by it hereunder. The parties' indemnification obligations hereunder
shall survive any termination or expiration of this Agreement.
Section 7.2. Procedures.
Any party seeking indemnification under this Agreement (the
"Indemnified Party") shall promptly give the party from whom indemnification is
sought (the "Indemnifying Party") written notice of any claim or the
commencement of any action or proceeding for which the Indemnified Party may
seek indemnification, and the Indemnified Party shall permit the Indemnifying
Party to assume the defense of any such claim or any litigation resulting from
such claim, unless injunctive relief is sought against the Indemnified Party in
which case the Indemnified Party shall have the right to join in any defense.
The Indemnified Party's failure to give the Indemnifying Party notice under this
clause shall not preclude the Indemnified Party from seeking indemnification
from the Indemnifying Party except to the extent that the Indemnified Party's
failure has materially prejudiced the Indemnifying Party's ability to defend the
claim or litigation. The Indemnifying Party shall not settle any claim for which
the Indemnified Party seeks indemnification or consent to entry of any judgment
in litigation arising from such a claim without obtaining a written release of
the Indemnified Party from all liability in respect of such claim or litigation.
If the Indemnifying Party shall not assume the defense of any such claim or
litigation resulting therefrom, or if injunctive relief is sought against the
Indemnified Party, the Indemnified Party may defend against or settle such claim
or litigation in such manner as it may deem appropriate, and in such cases, upon
a written demand therefore, the Indemnifying Party shall promptly reimburse the
Indemnified Part for the amount of all reasonable expenses, legal or otherwise,
incurred by the Indemnified Party in connection with the defense against or
settlement of such claim or litigation. In addition, if the Indemnifying Party
shall not assume the defense of any such claim or litigation resulting
therefrom, or if injunctive relief is sought against the Indemnified Party, and
if no settlement of the claim or litigation is made, upon written demand
therefor, the Indemnifying Party shall promptly reimburse the Indemnified Party
for the amount of any judgment rendered with respect to such claim or in such
litigation and for all reasonable expenses, legal or otherwise, incurred by the
Indemnified Party in the defense against such claim or litigation.
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ARTICLE VIII.
DEFAULT
Section 8.1. Time Broker Events of Default.
The occurrence of any of the following, after the expiration
of the applicable cure periods, if any, will be deemed to be an Event of Default
by Time Broker under this Agreement: (a) Time Broker's failure to timely pay any
Monthly Payment provided for in Section 1.2 or other payments required
hereunder; (b) except as otherwise provided for in this Agreement, the failure
of Time Broker to supply the Programming; (c) any termination of this Agreement
by Time Broker other than as permitted in Section 9.1; or (d) the issuance by
the FCC of an order designating an evidentiary hearing which arises out of,
relates to or is attributable solely to the acts or omissions of Time Broker
under this Agreement but excluding issues which are based upon Licensee's
conduct hereunder for which Time Broker may be held responsible.
Section 8.2. Licensee's Events of Default.
The occurrence of any of the following, after the expiration
of the applicable cure periods, if any, will be deemed to be an Event of Default
by Licensee under this Agreement: (a) except as otherwise provided for in this
Agreement, the failure of Licensee to broadcast the Programming; (b) any
termination of this Agreement by Licensee other than as permitted in Section
9.1; or (c) the issuance by the FCC of an order designating an evidentiary
hearing which arises out of, relates to or is attributable solely to the acts or
omissions of Licensee under this Agreement or during any period prior to the
Commencement Date during which Licensee owns the Stations, but excluding issues
which are based upon Time Broker's conduct hereunder for which Licensee may be
held responsible.
Section 8.3. Cure Periods.
The cure periods before any event listed in Sections 8.1 or
8.2 shall become an Event of Default are as follows:
(i) Payment by Time Broker. The Monthly Payment or other
payments required hereunder to be paid to Licensee must be received by Licensee
within five (5) business days after Licensee gives written notice of non-payment
to Time Broker.
a. Certain Matters. There shall be no cure period for
(i) the matters relating to the FCC set forth in Sections 8.1(d) or 8.2(c)
hereof, (ii) a termination by Time Broker described in Section 8.1(c); or (iii)
a termination by Licensee described in Section 8.2(b) hereof.
b. Programs and Broadcast Matters. With respect to Time
Broker's failure to provide the Programming referred to in Section 8.1(b) hereof
or Licensee's failure to
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broadcast the Programming referred to in Section 8.2(a) hereof, the period
allowed for cure shall be three business days from the giving of written notice
of such failure to the defaulting party by the non-defaulting party.
Section 8.4. Other Defaults.
For any other breach of a representation, warranty or covenant
made herein that is not listed in Sections 8.1 or 8.2, a party's sole remedy
shall be indemnification pursuant to Article VII hereof.
ARTICLE IX.
TERMINATION
This Agreement shall automatically terminate upon the
expiration of the term of this Agreement as set forth in Section 1.3. In
addition, this Agreement shall terminate as provided below.
Section 9.1. Termination.
In addition to other remedies available at law or equity, this
Agreement may be terminated by either Licensee or Time Broker by written notice
to the other, specifying an effective date of termination which is not less than
seven (7) days nor more than ninety (90) days from the date such notice is
given, if the party seeking to terminate is not then in material default or
breach hereof, upon either:
(i) an uncured Event of Default, or
(ii) as provided in Section 12.15, or
(iii) upon the event that the party not seeking to terminate
makes a general assignment for the benefit of creditors, files or has filed
against it a petition for bankruptcy, reorganization or an arrangement for the
benefit of creditors, or for the appointment of a receiver, trustee or similar
creditors' representative for the property or assets of such party under any
federal or state insolvency law, which if filed against such party has not been
dismissed within sixty (60) days thereof.
In the event that the non-defaulting party does not exercise
such right of termination by giving such written notice within sixty (60) days
of the occurrence of an uncured Event of Default, then the Event of Default
giving rise to such right of termination shall be deemed waived and the
Agreement shall continue in full force and effect.
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Section 9.2. Certain Matters Upon Termination.
(i) Upon any termination of this Agreement, Licensee shall
have no further obligation to provide to Time Broker any broadcast time or
broadcast transmission facilities and Time Broker shall have no further
obligations to make any payments to Licensee under Section 1.2 hereof. Upon any
termination, Time Broker shall be responsible for all debts and obligations of
Time Broker to third parties based upon the purchase of air time and use of
Licensee's transmission facilities including, without limitation, accounts
payable, barter agreements and unaired advertisements, but not for Licensee's
federal, state and local income and business franchise tax liabilities or taxes
levied upon Licensee's personal property. Notwithstanding anything herein to the
contrary, to the extent that any invoice, bill or statement submitted to
Licensee after the termination of this Agreement or any payment made by Time
Broker prior to the termination of this Agreement relates to expenses incurred
in operating the Stations, for periods both before and after the termination of
this Agreement, such expenses shall be prorated between Licensee and Time Broker
in accordance with the principle that Time Broker shall be responsible for
expenses allocable to the period prior to the termination of this Agreement and
Licensee shall be responsible for expenses allocable to the period on and after
the termination of this Agreement. Such proration shall include an adjustment
for Time Broker's Trade-out Agreements only to the extent that Time Broker's Net
Negative Trade Balance exceeds $50,000. Each party agrees to reimburse the other
party for expenses paid by the other party to the extent appropriate to
implement the proration of expenses pursuant to the preceding sentence.
If this Agreement terminates other than as a result of the
Closing (as defined in the Purchase Agreement), Time Broker shall (i) assign to
Licensee and Licensee shall assume all Assigned Contracts (including those
employment contracts assumed by Time Broker pursuant to this Agreement) and all
renewals, replacements or other contracts entered in the ordinary course of
business relating to the Stations and customary for radio stations of similar
type between the Commencement Date and the date of termination of this Agreement
("Supplemental Contracts") in effect on the date of such termination or
expiration; (ii) be responsible for only those obligations under the Assigned
Contracts and Supplemental Contracts arising on or after the Commencement Date
and prior to the termination of this Agreement and, (iii) terminate, and
Licensee shall hire, all Transferred Employees in accordance with the principles
set forth in Section 3.5, except that, for purposes of this Section 9.2(b)(iii),
"Transferred Employees" shall not include any employees hired by Time Broker
pursuant to Section 3.5 who also perform substantial services for other stations
in the applicable market operated by Time Broker.
Notwithstanding anything in Section 7.1 to the contrary, no
expiration or termination of this Agreement shall terminate the obligation of
each party to indemnify the other for claims under Article VII hereof or limit
or impair any party's rights to receive payments due and owing hereunder on or
before the date of such termination.
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ARTICLE X.
REMEDIES
In addition to a party's rights of termination hereunder (and
in addition to any other remedies available to it or provided under law), in the
event of an uncured Event of Default with respect to either party, the other may
seek specific performance of this Agreement, in which case the defaulting party
shall waive the defense in any such suit that the other party has an adequate
remedy at law and interpose no opposition, legal or otherwise, as to the
propriety of specific performance as a remedy hereunder.
ARTICLE XI.
CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PARTIES
Section 11.1. Representations and Warranties of Time Broker.
Time Broker hereby represents and warrants to Licensee as
follows:
(i) Corporate Organization. Time Broker is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its jurisdiction of organization and is duly qualified to do business in and is
in good standing in any jurisdiction where it owns or operates a radio station
and in each other jurisdiction where such qualification is necessary, except for
those jurisdictions where the failure to be so qualified could not, individually
or in the aggregate, have a material adverse effect on the ability of Time
Broker to perform its obligations hereunder.
(ii) Authorization of Agreement; No Breach. Time Broker has
the corporate power and authority to execute, deliver and perform this
Agreement. This Agreement constitutes the valid and binding obligation of Time
Broker, enforceable against Time Broker in accordance with its terms, except as
such enforceability may be limited by bankruptcy and laws affecting the
enforcement of creditors' rights generally or equitable principles. Assuming the
consents and approvals required elsewhere herein are obtained, neither such
execution, delivery and performance nor compliance by Time Broker with the terms
and provisions hereof will conflict with or result in a breach of any of the
terms, conditions or provisions of the organizational documents of Time Broker
or any judgment, order, injunction, decree, regulation or ruling of any court or
any other governmental authority to which Time Broker is subject or any material
agreement or contract to which Time Broker is a party or to which it is subject,
or constitute a material default thereunder.
(iii) Actions and Proceedings. Except as disclosed in Schedule
11.1, Time Broker is not subject to any judgment, award, order, writ,
injunction, arbitration decision or decree which prohibits the performance of
this Agreement or the consummation of any
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transaction contemplated under this Agreement, and there is no litigation,
administrative action, arbitration, proceeding or investigation pending, or to
the knowledge of Time Broker, threatened, against Time Broker or affecting Time
Broker in any federal, state or local court, or before any administrative agency
or arbitrator that would adversely affect Time Broker's ability to perform its
obligations under this Agreement or would prohibit the consummation of the
transactions contemplated hereunder.
(iv) Qualifications. Time Broker is qualified in accordance
with the Communications Act and the rules and policies of the FCC to enter into
this Agreement and provide Programming on the Stations in accordance with its
terms. Between the date hereof and the termination of this Agreement, either by
the Closing of the Purchase Agreement or the earlier termination in accordance
with Article IX hereof, Time Broker will not take any action that Time Broker
knows, or has reason to believe, would disqualify it from providing programming
on the Stations pursuant to this Agreement.
Section 11.2. Representations, Warranties and Covenants of
Licensee.
Licensee hereby represents, warrants and covenants to Time
Broker as follows:
(i) Corporate Organization. Tuscaloosa, SRPLI and SRRLI are
corporations, duly organized, validly existing and in good standing under the
laws of the states of their respective organizations, and are duly qualified to
do business and are in good standing in any jurisdiction where they own or
operate a radio station and in each other jurisdiction where such qualification
is necessary, except for those jurisdictions where the failure to be so
qualified could not, individually or in the aggregate, have a material adverse
effect on the ability of Tuscaloosa, SRPLI or SRRLI to perform their obligations
hereunder.
(ii) Authorization of Agreement; No Breach. Tuscaloosa, SRPLI
and SRRLI have the corporate power and authority to execute, deliver and perform
this Agreement. This Agreement constitutes the valid and binding obligation of
each of Tuscaloosa, SRPLI and SRRLI, enforceable against each in accordance with
its terms, except as such enforceability may be limited by bankruptcy and laws
affecting the enforcement of creditors' rights generally or equitable
principles. Assuming the consents and approvals required elsewhere herein are
obtained and that this Agreement is filed with the FCC, neither such execution,
delivery and performance nor compliance by Tuscaloosa, SRPLI and SRRLI with the
terms and provisions hereof will conflict with or result in a breach of any of
the terms, conditions or provisions of the organizational documents of such
entities or any judgment, order, injunction, decree, regulation or ruling of any
court or any other governmental authority to which each is subject or any
material agreement or contract to which each is a party or to which they are
subject, or constitute a material default thereunder.
(iii) Actions and Proceedings. Except as disclosed in Schedule
11.2, none of Tuscaloosa, SRPLI or SRRLI is subject to any judgment, award,
order, writ, injunction,
18
<PAGE> 23
arbitration decision or decree which prohibits or prevents the performance of
this Agreement or the consummation of any transaction contemplated under this
Agreement, and there is no litigation, administrative action, arbitration,
proceeding or investigation pending, or to the knowledge of Tuscaloosa, SRPLI or
SRRLI, threatened, against each or affecting each in any federal, state or local
court or before any administrative agency or arbitrator that would adversely
affect Tuscaloosa's, SRPLI's or SRRLI's ability to perform their obligations
under this Agreement or would prohibit the consummation of the transactions
contemplated hereunder.
(iv) Maintenance of Current Operations. The Stations'
transmission equipment shall be maintained by Tuscaloosa, SRPLI and SRRLI in a
condition consistent with good engineering practices and in compliance in all
material respects with the Communications Act and all other applicable rules,
regulations and technical standards of the FCC.
(v) Other Agreements. During the term of this Agreement,
Tuscaloosa, SRPLI and SRRLI will not enter into any other time brokerage,
program provision, local management or similar agreement with any third party
with respect to the Stations.
ARTICLE XII.
MISCELLANEOUS
Section 12.1. Modification and Waiver.
No modification or waiver of any provision of this Agreement
shall in any event be effective unless the same shall be in writing signed by
the party against whom the waiver is sought to be enforced, and then such waiver
and consent shall be effective only in the specific instance and for the purpose
for which given.
Section 12.2. No Waiver; Remedies Cumulative.
Except as otherwise provided herein, no failure or delay on
the part of Licensee or Time Broker in exercising any right or power hereunder
shall operate as a waiver thereof, nor any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, shall preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of Licensee
and Time Broker herein provided are cumulative and are not exclusive of any
rights or remedies which they may otherwise have.
Section 12.3. Construction.
The construction and performance of this Agreement shall be
governed by the laws of the State of New York, excluding choice of law
provisions thereunder, and the obligations of the parties hereto are subject to
all federal, state or municipal laws or regulations
19
<PAGE> 24
now or hereafter in force and to the regulations of the FCC and all other
governmental bodies or authorities presently or hereafter duly constituted.
Section 12.4. Headings.
The headings contained in this Agreement are included for
convenience only and no such heading shall in any way alter the meaning of any
provision.
Section 12.5. Successors and Assigns.
Any party may assign all or any part of this Agreement or the
rights and obligations hereunder to a person or entity controlling, controlled
by or under common control with such party, provided that any such assignment
shall not relieve such party of its obligations hereunder. Except as otherwise
provided herein, this Agreement and the rights and obligations hereunder may not
be assigned by any party hereto without the prior written consent of the other
parties hereto, which consent shall not be unreasonably withheld. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns.
Section 12.6. Force Majeure.
The parties acknowledge and agree that a party will not be
liable for any failure to timely perform any of its obligations under this
Agreement if such failure is due, in whole or in part, directly or indirectly,
to accidents, fires, floods, governmental actions, war, civil disturbances,
other causes beyond such party's control or any other occurrence which would
generally be considered an event of force majeure.
Section 12.7. Broker.
The parties agree to indemnify and hold each other harmless
against any claims from any broker or finder based upon any agreement,
arrangement, or understanding alleged to have been made by the indemnifying
party.
Section 12.8. Counterpart Signatures.
This Agreement may be signed in one or more counterparts.
Section 12.9. Notices.
Any notice, report, demand, waiver or consent required or
permitted hereunder shall be in writing and shall be given by hand delivery, by
prepaid registered or certified mail, with return receipt requested, by an
established national overnight courier providing proof of delivery for next
business day delivery or by telecopy addressed as follows:
20
<PAGE> 25
If the notice is to Time Broker:
Entertainment Communications, Inc.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Attention: Joseph M. Field, President
Telecopy Number: (610) 660-5641
With copies to:
John C. Donlevie, General Counsel
Entertainment Communications, Inc.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Telecopy Number: (610) 660-5641
Joseph D. Sullivan, Esq.
Latham & Watkins
1001 Pennsylvania Ave., N.W., Suite 1300
Washington, D.C. 20004
Telecopy Number: (202) 637-2201
If the notice is to Licensee:
Sinclair Communications, Inc.
2000 West 41st Street
Baltimore, MD 21211-1420
Attention: David Amy, Chief Financial Officer
Telecopy Number: (410) 467-5043
With copies to:
Robert E. Quicksilver, General Counsel
Sinclair Communications, Inc.
2000 West 41st Street
Baltimore, MD 21211-1420
Telecopy Number: (410) 662-4707
Steven A. Thomas, Esq.
Thomas & Libowitz
100 Light Street, 11th Floor
Baltimore, MD 21202-1053
Telecopy Number: (410) 752-2046
The date of any such notice and service thereof shall be
deemed to be: (i) the day of delivery if hand delivered or delivered by
overnight courier; (ii) the day of delivery as indicated on the return receipt
if dispatched by mail; or (iii) the date of telecopy transmission as
21
<PAGE> 26
indicated on the telecopier transmission report provided that any telecopy
transmission shall not be effective unless a paper copy is sent by overnight
delivery on the date of the telecopy transmission. Either party may change its
address for the purpose of notice by giving notice of such change in accordance
with the provisions of this Section.
Section 12.10. Effect of this Agreement.
This Agreement and the Purchase Agreement, together with the
exhibits and schedules hereto and thereto and a letter agreement among Time
Broker and Sinclair Communications, Inc. dated of even date herewith, set forth
the entire understanding of the parties and supersede any and all prior written
or oral agreements, arrangements or understandings relating to the subject
matter hereof. No representation, promise, inducement or statement of intention
has been made by either party which is not embodied in this Agreement, the
Purchase Agreement or the letter agreement referenced above and neither party
shall be bound by, or be liable for, any alleged representation, promise,
inducement or statement of intention not embodied herein unless same shall have
been made subsequent hereto in writing and signed by the party to be charged
therewith. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns.
Section 12.11. Severability.
Except as expressly set forth in Section 12.15, if any
provision contained in this Agreement is held to be invalid, illegal or
unenforceable in any respect by any court or other authority, then such
provision shall be deemed limited to the extent that such court or other
authority deems it reasonable and enforceable, and as so limited shall remain in
full force and effect. In the event that such court or other authority shall
deem any such provision wholly unenforceable, this shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had not been contained herein.
Section 12.12. No Joint Venture.
The parties agree that nothing herein shall constitute a joint
venture or agency between them. The parties acknowledge that call letters,
trademarks and other intellectual property shall at all times remain the
property of the respective parties and that neither party shall obtain any
ownership interest in the other party's intellectual property by virtue of this
Agreement (subject to Section 6.2).
Section 12.13. Damage to Stations.
In the event of damage or destruction to any of the
Stations (other than damage or destruction caused by Time Broker), Licensee
shall proceed to repair, replace or restore the applicable Station to its former
condition as promptly as is commercially reasonable. If Time
22
<PAGE> 27
Broker causes damage or destruction to any of the Stations, Time Broker shall
proceed to repair, replace or restore the applicable Station to its former
condition as promptly as is commercially reasonable. If Time Broker must
undertake repairs, replacements or restorations pursuant to the previous
sentence, Licensee shall reimburse Time Broker for the cost of such repairs,
replacements or restorations out of the proceeds from any insurance policies
maintained by Licensee that are received by Licensee as a result of such damage
or destruction. Licensee shall use reasonable efforts to effect the maximum
possible recovery for such damage or destruction under such insurance policies.
Section 12.14. Noninterference.
During the term of this Agreement, neither Licensee nor any of
their employees shall take any actions that might impair the operations of Time
Broker conducted hereunder, except to the extent expressly contemplated by this
Agreement or as otherwise required by law.
Section 12.15. Regulatory Changes.
In the event of any order or decree of an administrative
agency or court of competent jurisdiction, including without limitation any
material change or clarification in FCC rules, policies, or precedent, that
would cause this Agreement to be invalid or violate any applicable law, and such
order or decree has become effective and has not been stayed, the parties will
use their respective best efforts and negotiate in good faith to modify this
Agreement to the minimum extent necessary so as to comply with such order or
decree without material economic detriment to either party, and this Agreement,
as so modified, shall then continue in full force and effect. In the event that
the parties are unable to agree upon a modification of this Agreement so as to
cause it to comply with such order or decree without material economic detriment
to either party, then this Agreement shall be terminated.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
23
<PAGE> 28
IN WITNESS WHEREOF, the parties have executed this Time
Brokerage Agreement as of the date first above written.
ENTERTAINMENT COMMUNICATIONS, INC.
By:
-------------------------------
Title:
TUSCALOOSA BROADCASTING, INC.
By:
-------------------------------
Title:
SINCLAIR RADIO OF PORTLAND
LICENSEE , INC.
By:
-------------------------------
Title:
SINCLAIR RADIO OF ROCHESTER
LICENSEE , INC.
By:
-------------------------------
Title:
24
<PAGE> 29
SCHEDULE 1.1
PROGRAMMING
The Programming shall consist of one hundred sixty-six (166)
hours per week on each of the Stations in an entertainment format to be chosen
by Time Broker, subject to Article II of this Agreement. The Programming shall
include (a) news and weather information; (b) public service announcements; (c)
an announcement in form sufficient to meet the station identification
requirements of the FCC at the beginning of each hour; (d) an announcement at
the beginning of each segment of Programming to indicate that program time has
been purchased by Time Broker; and (e) any other announcement that may be
required by applicable law or regulation. Time Broker shall maintain and deliver
to Licensee copies of all programming information, including, without
limitation, information concerning portions of the Programming that are
responsive to issues of public importance identified to Time Broker by Licensee,
necessary for Licensee to maintain its FCC public inspection file, and all other
records required to be kept by FCC rule or policy. Time Broker shall have the
sole and exclusive right to sell advertising to be included in the Programming
and shall be entitled to retain all the revenues derived from the sale thereof,
provided, however, that Licensee shall be entitled to sell such time as it deems
necessary to comply with the political advertising rules of the FCC in the event
the Programming does not comply with such rules.
Notwithstanding any other provision of this Agreement, Time
Broker recognizes that Licensee has certain obligations to broadcast programming
to meet the needs and interests of the communities of license for the Stations.
Licensee shall have the right to air specific programming on issues of local
importance to the communities. Nothing in this Agreement shall abrogate the
unrestricted authority of Licensee to discharge its obligations to the public
and to comply with the laws, rules and policies of the FCC with respect to
meeting the ascertained needs and interests of the public. Accordingly, Licensee
may air or cause Time Broker to produce and present under Licensee's supervision
two (2) hours a week on each of the Stations such public affairs programming
that responds to the needs and interests of listeners in each such Station's
community of license. Such public affairs programming shall be presented between
6:00 a.m. and 9:00 a.m. on Saturdays and/or Sundays or at such other times as
the public interest may require.
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<PAGE> 30
SCHEDULE 1.2
COMPENSATION
(A) Beginning on the Commencement Date, Time Broker shall pay
a monthly fee (the "Monthly Payment") in the amount of the Monthly Projected
Broadcast Cash Flow (as defined below) for the Stations. The "Monthly Projected
Broadcast Cash Flow" for the Stations shall be the broadcast cash flow for the
Stations that is projected by the parties in good faith for the term of this
Agreement, and is expressly agreed to equal $631,500 per month.
In the event that the Commencement Date occurs on a day other
than the first day of a month, the initial Monthly Payment shall be an amount
equal to the Monthly Payment as determined above multiplied by a ratio, the
numerator of which is the number of days between the Commencement Date and the
end of the month in which the Commencement Date occurs and the denominator of
which is the number of days in the month in which the Commencement Date occurs.
In the event that the day in which the term of this Agreement ends is not the
last day of a month, the Monthly Payment for the month in which such day occurs
shall be similarly prorated.
(B) Except as otherwise provided in this Agreement
(specifically including Paragraph (C) to this Schedule 1.2 below), Time Broker
shall reimburse Licensee for all of its ordinary and customary expenses
(excluding only Licensee's federal, state and local income taxes) incurred in
operating the Stations (the "Operating Expenses"), including but not limited to,
rent, utilities (excluding telephone expenses incurred by Licensee), maintenance
and repairs at each of the Stations' studio and transmitter sites, insurance on
the Stations' equipment, insurance deductibles on claims on the Stations'
equipment payable in respect of damage to the Stations' equipment caused by Time
Broker, and ad valorem property taxes. Licensee shall bill Time Broker for such
Operating Expenses on a monthly basis by delivery of a statement in reasonable
detail with back-up invoices, payment for which shall be due within thirty (30)
days of such billing.
(C) During the term of this Agreement, Licensee shall make all
capital expenditures required to maintain the Stations consistent with past
practice of the Stations and as required to make the Stations operate in full
compliance with all FCC rules and regulations. At the Closing of the Purchase
Agreement, Time Broker shall reimburse Licensee for all costs of such capital
expenditures.
2
<PAGE> 31
SCHEDULE 2.1
PROGRAMMING POLICY STATEMENT
Time Broker agrees to cooperate with Licensee in the
broadcasting of programs of the highest possible standard of excellence and for
this purpose to observe the following regulations in the preparation, writing
and broadcasting of its programs. Further, Time Broker agrees that all material
broadcast on the Stations shall comply with all federal, state and local
applicable laws, rules and regulations.
1 1. No Plugola or Payola. The broadcast of any material
for which any money, service or other valuable
consideration is directly or indirectly paid, or
promised to or charged or accepted by, the Time
Broker, from any person, shall be prohibited, unless,
at the time the same is broadcast, it is announced as
paid for or furnished by such person.
2. Political Broadcasting. Within thirty (30) days of
the Commencement Date, Time Broker shall distribute
to all parties making requests for the purchase of
political time on the Stations, and provide Licensee
with, a written political advertising disclosure
statement which fully and accurately discloses how
the Time Broker sells programming and advertising
time and which makes parties purchasing political
programming and advertising time fully aware of the
lowest unit charge provisions of Section 315 of the
Communications Act. In addition, at least thirty (30)
days before the start of any primary or election
campaign, Time Broker will clear with the Stations'
general manager the rate Time Broker will charge for
the time to be sold to candidates to make certain
that the rate charged is in conformance with the
applicable law and station policy.
3. Required Announcements. Time Broker shall broadcast
(i) announcements in a form satisfactory to Licensee
at the beginning of each hour to identify the
Stations and (ii) any other announcements that may be
required by law, regulation, or Licensee's station
policy.
4. No Illegal Announcements. No announcements,
broadcasts or promotions prohibited by federal, state
or local law shall be made over the Stations. This
prohibition specifically includes, but is not limited
to, any and all unlawful programming or other
broadcast material concerning tobacco or alcohol
related products. The airing of any broadcast
material concerning contests, lotteries or games must
be conducted in accordance with all applicable law,
including FCC rules and regulations. Any obscene,
indecent, or fraudulent programming is prohibited.
All sponsored programming or other broadcast material
must be identified in accordance with applicable law,
including FCC rules and regulations.
1
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5. Licensee Discretion Paramount. In accordance with the
Licensee's responsibility under the Communications
Act and the rules and regulations of the FCC,
Licensee reserves the right to reject or terminate
any programming (including advertising) proposed to
be presented or being presented over the Stations
which is in conflict with station policy or which in
Licensee's or its general manager's reasonable
judgment would not serve the public interest.
In any case where questions of policy or interpretation arise,
Time Broker should submit the same to Licensee for decision before making any
commitments in connection therewith.
2
<PAGE> 33
SCHEDULE 4.1
EXCLUDED CONTRACTS
[To be provided by Sinclair]
1
<PAGE> 1
EXHIBIT 10.09
EXECUTION COPY
LOAN AGREEMENT
by and among
ENTERTAINMENT COMMUNICATIONS, INC.,
as the Borrower,
KEY CORPORATE CAPITAL INC.,
as Administrative Agent and Documentation Agent,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Syndication Agent,
and
THE FINANCIAL INSTITUTIONS LISTED HEREIN
AS OF FEBRUARY 13, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1 DEFINITIONS.....................................................................................1
1.1 Definitions................................................................................1
1.2 Other Terms...............................................................................19
1.3 Accounting Provisions.....................................................................19
SECTION 2 THE LOANS......................................................................................20
2.1 The Commitment and the Loans..............................................................20
2.2 Letters of Credit.........................................................................21
2.3 Making and Continuation/Conversion of the Loans...........................................26
2.4 The Notes.................................................................................27
2.5 Fees......................................................................................27
2.6 Prepayment................................................................................28
2.7 Reserves or Deposit Requirements, Etc.....................................................32
2.8 Tax Law, Increased Costs, Etc.............................................................32
2.9 Eurodollar Deposits Unavailable or Interest Rate
Unascertainable................................................................................33
2.10 Changes in Law Rendering LIBOR Loans Unlawful............................................33
2.11 Funding..................................................................................33
2.12 Indemnity................................................................................33
2.13 Capital Adequacy.........................................................................34
2.14 Taxes....................................................................................34
2.15 Incremental Commitment...................................................................36
SECTION 3 INTEREST; PAYMENTS.............................................................................36
3.1 Interest..................................................................................36
3.2 Manner of Payments........................................................................37
SECTION 4 CLOSING........................................................................................38
SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE BORROWER.................................................38
5.1 Organization and Powers...................................................................39
5.2 Authorization.............................................................................39
5.3 Financial Statements......................................................................40
5.4 Projections...............................................................................40
5.5 Capitalization of the Borrower and its
Subsidiaries...................................................................................40
5.6 Title to Properties; Patents, Trademarks, Etc.............................................41
5.7 Litigation; Proceedings...................................................................41
5.8 Taxes.....................................................................................41
5.9 Absence of Conflicts......................................................................42
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
5.10 Indebtedness.............................................................................42
5.11 Compliance...............................................................................43
5.12 Statements Not Misleading................................................................43
5.13 Consents or Approvals....................................................................44
5.14 Material Contracts and Commitments.......................................................44
5.15 Employee Benefit Plans...................................................................45
5.16 Licenses and Operating Agreements........................................................45
5.17 Material Restrictions....................................................................46
5.18 Investment Company Act...................................................................46
5.19 Absence of Material Adverse Effect.......................................................46
5.20 Defaults.................................................................................46
5.21 Real Estate..............................................................................46
5.22 Securities Laws..........................................................................46
5.23 Insurance................................................................................46
5.24 Labor Matters............................................................................47
5.25 Environmental Compliance.................................................................47
5.26 Solvency.................................................................................49
5.27 Subordinated Purchase Agreement..........................................................50
SECTION 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BANKS...............................................50
6.1 Compliance................................................................................50
6.2 Security Agreements.......................................................................51
6.3 Pledge Agreements.........................................................................51
6.4 Financing Statements......................................................................52
6.5 Subsidiary Guaranty.......................................................................52
6.6 Opinion of Borrower's Counsel.............................................................52
6.7 Consummation of Acquisition Agreements....................................................52
6.8 Financial Information.....................................................................52
6.9 Borrowing Request.........................................................................53
6.10 Insurance Certificates...................................................................53
6.11 Corporate and Partnership Documents......................................................54
6.12 Lien Searches, Consents and Releases of Liens............................................54
6.13 No Order, Judgment or Decree.............................................................54
6.14 No Material Adverse Effect...............................................................54
6.15 Fee Letters..............................................................................54
6.16 Legal Approval...........................................................................55
6.17 Other Documents..........................................................................55
SECTION 7 AFFIRMATIVE COVENANTS OF THE BORROWER..........................................................55
7.1 Use of Proceeds...........................................................................55
7.2 Continued Existence; Maintenance of Rights and
Licenses; Compliance with Law..................................................................55
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
7.3 Insurance.................................................................................55
7.4 Obligations and Taxes.....................................................................56
7.5 Financial Statements and Reports..........................................................57
7.6 Notices...................................................................................59
7.7 Maintenance of Property...................................................................60
7.8 Information and Inspection................................................................60
7.9 Maintenance of Liens......................................................................60
7.10 Title To Property........................................................................61
7.11 Environmental Compliance and Indemnity...................................................61
7.12 Rate Hedging Obligations.................................................................63
7.13 FCC Consents.............................................................................63
SECTION 8 NEGATIVE COVENANTS OF THE BORROWER....................................................64
8.1 Indebtedness. ...........................................................................64
8.2 Liens.....................................................................................65
8.3 Guaranties................................................................................65
8.4 Rental and Conditional Sale Obligations...................................................66
8.5 Real Property Interests...................................................................66
8.6 Capitalized Lease Obligations.............................................................66
8.7 Capital Expenditures......................................................................66
8.8 Notes, Accounts Receivable and Claims.....................................................66
8.9 Capital Distributions; Restrictions on Payments to
Stockholders..............................................................................67
8.10 Disposal of Property; Mergers; Acquisitions;
Reorganizations..........................................................................68
8.11 Investments..............................................................................72
8.12 Amendment of Governing Documents.........................................................73
8.13 Financial Covenants......................................................................73
8.14 Management Agreements and Fees...........................................................75
8.15 Fiscal Year..............................................................................75
8.16 ERISA....................................................................................75
8.17 Affiliates...............................................................................75
8.18 Change of Name, Identity or Structure....................................................76
8.19 Amendments or Waivers....................................................................76
8.20 Issuance or Transfer of Capital Stock....................................................76
8.21 Change in Business.......................................................................76
8.22 Regulation U.............................................................................76
8.23 License Subsidiaries.....................................................................77
8.24 Subordinated Debt........................................................................77
SECTION 9 EVENTS OF DEFAULT..............................................................................78
9.1 Non-Payment...............................................................................78
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
9.2 Failure of Performance in Respect of Other
Obligations...............................................................................78
9.3 Breach of Warranty........................................................................78
9.4 Cross-Defaults............................................................................78
9.5 Assignment for Benefit of Creditors.......................................................79
9.6 Bankruptcy................................................................................79
9.7 Appointment of Receiver; Liquidation......................................................79
9.8 Judgments.................................................................................79
9.9 Impairment of Collateral; Invalidation of any Loan
Document..................................................................................79
9.10 Termination of License or Operating Agreement............................................80
9.11 Change of Control........................................................................81
9.12 Condemnation.............................................................................81
9.13 Cessation of Operations..................................................................81
9.14 Subordination............................................................................81
9.15 Material Adverse Effect..................................................................81
SECTION 10 REMEDIES.......................................................................................82
10.1 Optional Defaults........................................................................82
10.2 Automatic Defaults.......................................................................82
10.3 Performance by the Banks.................................................................83
10.4 Other Remedies...........................................................................83
10.5 Enforcement and Waiver by the Banks......................................................83
SECTION 11 THE ADMINISTRATIVE AGENT.......................................................................83
11.1 Appointment..............................................................................83
11.2 Powers...................................................................................84
11.3 General Immunity.........................................................................84
11.4 Action on Instructions of the Banks......................................................84
11.5 Employment of Agents and Counsel.........................................................85
11.6 Reliance on Documents; Counsel...........................................................85
11.7 Administrative Agent's Reimbursement and
Indemnification..........................................................................85
11.8 Rights as a Bank.........................................................................85
11.9 Bank Credit Decision.....................................................................86
11.10 Successor Administrative Agent..........................................................86
11.11 Ratable Sharing.........................................................................87
11.12 Actions by the Administrative Agent and the
Banks...................................................................................87
SECTION 12 MISCELLANEOUS..................................................................................88
12.1 Construction.............................................................................88
12.2 Further Assurance........................................................................88
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C>
12.3 Expenses of the Administrative Agent and the
Banks; Indemnification...................................................................88
12.4 Notices..................................................................................90
12.5 Waiver and Release by the Borrower. .....................................................91
12.6 Right of Set Off.........................................................................91
12.7 Successors and Assigns; Participations...................................................92
12.8 Applicable Law...........................................................................94
12.9 Binding Effect and Entire Agreement......................................................94
12.10 Counterparts............................................................................94
12.11 Survival of Agreements..................................................................94
12.12 Modification............................................................................94
12.13 Separability............................................................................95
12.14 Section Headings........................................................................95
12.15 Enforcement.............................................................................95
12.16 Termination.............................................................................96
12.17 FCC Compliance..........................................................................96
12.18 Jury Trial Waiver.......................................................................97
12.19 Sale as a Going Concern.................................................................98
12.20 Marshaling; Payments Set Aside..........................................................98
</TABLE>
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<PAGE> 7
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of February 13, 1998,
by and among ENTERTAINMENT COMMUNICATIONS, INC., a Pennsylvania corporation (the
"Borrower"), the BANKS (as that term is defined below), KEY CORPORATE CAPITAL
INC., as documentation agent and administrative agent (the "Administrative
Agent"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
syndication agent (the "Syndication Agent").
R E C I T A L S:
The Borrower desires to borrow from the Banks up to $300,000,000
(subject to increase under certain circumstances up to $350,000,000) on a
reducing revolving credit basis, the proceeds of which will be used to refinance
amounts outstanding under the Loan Agreement dated as of August 1, 1996, as
amended, among the Borrower, KeyBank National Association, as agent, and the
financial institutions which are a party thereto, to fund certain acquisitions
and for capital expenditures and working capital purposes in the operations of
the Borrower.
A G R E E M E N T S:
Accordingly, the Borrower, the Banks, the Administrative Agent and the
Syndication Agent agree as follows:
SECTION 1 DEFINITIONS.
1.1 Definitions. All terms typed with leading capitals are terms
defined in this Agreement. For the purposes of this Agreement, the terms defined
in this Section 1 shall have the meanings set out below.
"Acquisition Agreements" means the Armak Purchase Agreement, the ARS
Purchase Agreement, the Capital Broadcasting Purchase Agreement, the Gator
Purchase Agreement and the Sinclair Purchase Agreement and any other purchase or
exchange agreement pursuant
<PAGE> 8
to which the Borrower or any of its Subsidiaries is to acquire a Station
pursuant to a Permitted Acquisition.
"Acquisition Capital Expenditures" means Capital Expenditures incurred
by the Borrower or any of its Subsidiaries with respect to a radio station which
are incurred within twelve months following the acquisition of such radio
station.
"Affiliate" means, with respect to any Person (a) any other Person
which is directly or indirectly controlled by, under common control with or
controlling the first specified Person; (b) a Person owning beneficially or
controlling 10% or more of the equity interest in such other Person; (c) any
officer, director or partner of such other Person; or (d) any spouse or relative
(by blood, adoption or marriage) of any such individual Person. The term
"control" means possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person whether through
the ownership of voting securities, partnership interests, by contract or
otherwise.
"Agents" means the Administrative Agent and the Syndication
Agent.
"Applicable Margin" means, as of any date of determination, the
percentage determined from the following table based upon the Leverage Ratio:
<TABLE>
<CAPTION>
Leverage Ratio: Applicable Margin Applicable Margin
for Base Rate for LIBOR Loans:
Loans:
<S> <C> <C>
Greater than 0.875% 2.125%
6.50:1.0 but less
than or equal to
7.00:1.0:
Greater than 0.625% 1.875%
6.00:1.0 but less
than or equal to
6.50:1.0:
</TABLE>
- 2 -
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C> <C>
Greater than 0.250% 1.500%
5.50:1.0 but less
than or equal to
6.00:1.0:
Greater than 0.000% 1.250%
5.00:1.0 but less
than or equal to
5.50:1.0:
Greater than 0.000% 1.125%
4.50:1.0 but less
than or equal to
5.00:1.0:
Greater than 0.000% 1.000%
4.00:1.0 but less
than or equal to
4:50:1.0:
Greater than 0.000% 0.750%
3.50:1.0 but less
than or equal to
4.00:1.0:
Less than or equal 0.000% 0.500%
to 3.50:1.0:
</TABLE>
"Armak Purchase Agreement" means the Asset Purchase Agreement, dated
January 23, 1998, between Armak Broadcasters, Inc. and the Borrower pursuant to
which the Borrower is to acquire substantially all of the assets relating to
radio stations KRQT, Castle Rock, Washington and KBAM, Longview, Washington for
a purchase price of approximately $1,000,000.
"ARS Purchase Agreement" means the Letter Agreement, dated November 24,
1997, among American Radio Systems Corporation ("ARS"), the License Partnership
and the Borrower pursuant to which the License Partnership and the Borrower will
exchange the FCC Licenses of KRXQ, Roseville, California, plus $4,500,000 in
cash for the FCC Licenses of KRAK, Sacramento, California, plus certain
intellectual property relating to KSSJ and also pursuant
- 3 -
<PAGE> 10
to which ARS will purchase from the Borrower the KRXQ transmitter site for
$750,000 in cash.
"Asset Sale" means the sale, exchange, transfer or other disposition by
the Borrower or any of its Subsidiaries to any Person of any of the stock,
partnership interests or other equity interests of any Subsidiary or any other
assets of the Borrower or any Subsidiary, other than (a) the sale of assets in
one transaction or a series of transactions with an aggregate value which does
not exceed in any fiscal year an amount equal to $2,000,000; (b) the sale in the
ordinary course of business of assets held for resale in the ordinary course of
business or the trade in or replacement of assets in the ordinary course of
business; and (c) the sale, exchange, transfer or other disposition from the
Borrower to a wholly owned Subsidiary or from one wholly owned Subsidiary to
another wholly owned Subsidiary.
"Banking Day" means a day on which the main office of the
Administrative Agent is open to the public for the transaction of business, and
on which, with respect to any LIBOR Loan, banks are open for business in London,
England, and quoting deposit rates for dollar deposits.
"Banks" means the financial institutions listed on the signature pages
of this Agreement and their respective successors and assigns; the term "Banks"
shall include the Issuing Bank.
"Base Rate" means the rate of interest determined and publicly
announced by KeyBank from time to time as its prime rate at its main office in
Cleveland, Ohio. The prime rate functions as a reference rate index, and KeyBank
may charge borrowers more or less than the prime rate. The Base Rate will
automatically change as and when such prime rate changes.
"Base Rate Loans" means those Loans described in Section 2.1 on which
the Borrower shall pay interest at a rate based on the Base Rate.
"Benefit Arrangement" means any pension, profit-sharing, thrift, or
other retirement plan, medical, hospitalization, vision, dental, life,
disability or other insurance or benefit plan, deferred compensation, stock
ownership, stock purchase,
- 4 -
<PAGE> 11
stock option, performance share, bonus, fringe benefit, savings or other
incentive plan, severance plan or other similar plan, agreement, arrangement or
understanding, to which the Borrower or any member of the Controlled Group is,
or in the preceding six years was, required to contribute on behalf of its
employees or directors, whether or not such plan, agreement, arrangement or
understanding is subject to ERISA.
"Borrower Pledge Agreement" has the meaning assigned to it in Section
6.3(a).
"Borrower Security Agreement" has the meaning assigned to it in Section
6.2.
"Broadcast Cash Flow" for any period means Operating Cash Flow for such
period plus the aggregate administrative, legal, accounting, management and
overhead expenses attributable to the corporate management of the Borrower for
such period.
"Capital Broadcasting Purchase Agreement" means the Asset Purchase
Agreement, dated September 18, 1997, between Capital Broadcasting, Inc. and the
Borrower pursuant to which the Borrower will acquire substantially all of the
assets relating to the communications tower business operating at 2800 Wallace,
Kansas City, Missouri for a purchase price of approximately $2,100,000.
"Capital Distribution" means any payment or distribution made,
liability incurred or other consideration given for the purchase, acquisition,
redemption or retirement of any stock, partnership interest or other equity
interest of the Borrower or any of its Subsidiaries or as a dividend, return of
capital or other payment or distribution of any kind to a shareholder or partner
of the Borrower or any of its Subsidiaries in respect of the Borrower's or such
Subsidiary's stock or partnership interests.
"Capital Expenditures" means any payments by a Person for or in
connection with the rental, lease, purchase, construction or use of any real or
personal property the value or cost of which, under GAAP, should be capitalized
and appear on such Person's balance sheets in the category of property, plant or
equipment, without regard to the manner in which such payments or the
- 5 -
<PAGE> 12
instrument pursuant to which they are made are characterized by such Person or
any other Person; provided, however, that neither (a) the capitalized portion of
the purchase price payable in connection with a Permitted Acquisition, nor (b)
expenditures of proceeds of casualty insurance policies reasonably and promptly
applied to replace insured assets, shall constitute a Capital Expenditure for
purposes of this Agreement.
"Capitalized Lease Obligations" means, as to any Person, the
obligations of such Person to pay rent or other amounts under leases of, or
other agreements conveying the right to use real or personal property, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person, prepared in accordance with GAAP.
"Closing" and "Closing Date" have the meanings assigned to them in
Section 4.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"Collateral Documents" means all promissory notes, letters of credit,
agreements, assignments, guaranties, mortgages, financing statements,
certificates and other instruments and documents which are required by this
Agreement or any other Collateral Document to be executed or delivered by or on
behalf of the Borrower, any of its Subsidiaries or any other Person.
"Commitment" has the meaning assigned to it in Section 2.1(a).
"Controlled Group" means a controlled group of entities which are
treated as a single employer under Sections 414(b), 414(c) or 414(m) of the Code
of which the Borrower or any of its Subsidiaries is a part.
"Default Interest Rate" means a rate of interest equal to the sum of
the Base Rate plus the Applicable Margin plus 2.00% per annum.
"Discount Rate" means, with respect to a prepayment or conversion of a
LIBOR Loan on a date other than the last day of its Interest Period, a rate
equal to the interest rate (as of the
- 6 -
<PAGE> 13
date of prepayment) on United States Treasury obligations in a like amount as
such Loan and with a maturity approximately equal to the period between the
prepayment or conversion date and the last day of the Interest Period of such
Loan, as determined by the Administrative Agent.
"Distributions to Pay Tax Liabilities" means Capital Distributions to a
shareholder of the Borrower to enable such shareholder to pay his Tax Liability
for any tax year.
"Environmental Claim" means, with respect to any Person, any written or
oral notice, claim, demand, request for information, citation, summons, order or
other communication (each, a "claim") by any other Person alleging or asserting
the liability of the recipient of such claim for investigatory costs, cleanup
costs, governmental response costs, damages to natural resources or other
property or health, personal injuries, fines or penalties arising out of, based
on or resulting from (a) the presence, or Release, of any Hazardous Material at
or from any location, whether or not owned by such Person, or (b) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law. The term "Environmental Claim" shall include, without limitation, any claim
by any governmental authority for enforcement, cleanup, removal, response,
remedial or other actions or damages pursuant to any applicable Environmental
Law, and any claim by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
the presence or Release of Hazardous Materials or arising from alleged injury or
threat of injury to health, safety or the environment.
"Environmental Laws" means all provisions of law, statutes, ordinances,
rules, regulations, permits, licenses, judgments, writs, injunctions, decrees,
orders, awards and standards promulgated by the government of the United States
of America or by any state or municipality thereof or by any court, agency,
instrumentality, regulatory authority or commission of any of the foregoing
concerning health, safety and protection of, or regulation of the emission,
release or discharge of substances into, the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
- 7 -
<PAGE> 14
"Event of Default" means any of the events specified in Section 9.
"Excess Cash Flow" for any fiscal year of the Borrower means Operating
Cash Flow for such fiscal year, minus the sum of the following without
duplication: (a) all actual cash principal payments required to be made as a
result of scheduled Commitment reductions on the Loans pursuant to Sections 2.1
and 2.6(b)(i) during such fiscal year, plus (b) all principal payments required
to be made by the Borrower and its Subsidiaries on Total Debt (other than the
Loans) during such fiscal year, plus (c) all Interest Expense of the Borrower
and its Subsidiaries incurred during such fiscal year, plus (d) Capital
Expenditures paid or incurred by the Borrower and its Subsidiaries during such
fiscal year, plus (e) federal, state and local income taxes incurred during such
fiscal year and Distributions to Pay Tax Liabilities made during such fiscal
year and to be made after such fiscal year with respect to income of the
Borrower for such fiscal year, plus (f) the increase, if any, in Working Capital
as of the end of such fiscal year over Working Capital as of the end of the
prior fiscal year, plus (g) $1,000,000.
"FCC" means the Federal Communications Commission or any governmental
authority at any time substituted therefor.
"Fee Letters" means collectively the letter agreement dated December
26, 1997, among the Borrower, the Agents and BancAmerica Robertson Stephens, and
the letter agreement dated December 26, 1997, between the Borrower and the
Administrative Agent.
"Field Family" means (a) Joseph M. Field, David J. Field, Marie H.
Field and Nancy E. Field and any of their respective spouses, (b) any other
relative or spouse of any relative of Joseph M. Field who, directly or
indirectly, holds any of the Borrower's Common Stock (or beneficial interest
therein) or rights to acquire any such Common Stock and (c) any trust which
holds any of the Borrower's Common Stock or rights to acquire any such Common
Stock for the benefit of any Person identified in clause (a) or (b) of this
definition.
"Final Order" means an action or order issued by the FCC (a) which has
not been reversed, stayed, enjoined, set aside, annulled or suspended, and (b)
with respect to which (i) no
- 8 -
<PAGE> 15
requests or petitions have been filed for administrative or judicial review,
reconsideration, rehearing, appeal or stay, and the time for filing any such
requests or petitions and for the FCC to set aside the action on its own motion
has expired, (ii) in the event of review, reconsideration or appeal, the time
for further review, reconsideration or appeal has expired, and (iii) no appeal
to a court or request for stay by a court of such action is pending or in
effect, and, if any deadline for filing any such appeal or request is designated
by statute or rule, it has passed.
"Fixed Charge Coverage Ratio" means, as of the end of any quarter, the
ratio of Operating Cash Flow for the four quarter period then ended to the sum
of (a) all Projected Debt Service as of the end of such quarter, plus (b)
Capital Expenditures (other than Acquisition Capital Expenditures and Project
Capital Expenditures) incurred by the Borrower and its Subsidiaries in such four
quarter period, plus (c) any federal, state or local income taxes incurred by
the Borrower or any of its Subsidiaries during such four quarter period, plus
(d) any Capital Distributions (including, without limitation, Distributions to
Pay Tax Liabilities) made by the Borrower in such four quarter period.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States, consistently applied.
"Gator Purchase Agreement" means the Asset Purchase Agreement, dated
January 23, 1998 between Gator Broadcasting Corporation and the Borrower
pursuant to which the Borrower is to acquire substantially all of the assets
relating to radio station WRRX, Micanopy, Florida for a purchase price of
approximately $2,000,000, plus $850,000 and expenses (not to exceed $150,000)
relating to the upgrade of WRRX to a Class C-2 Station in the event the FCC
licenses such upgrade by Final Order.
"Guarantor" means one who pledges its credit or property in any manner,
or otherwise becomes responsible for the payment or other performance of the
indebtedness, contract or other obligation of another Person and includes
(without limitation) any guarantor (whether of payment or of collection),
surety, co-maker, endorser or one who agrees conditionally or otherwise
- 9 -
<PAGE> 16
to make any purchase, loan or investment in order thereby to enable another to
prevent or correct a default of any kind and one who has endorsed (otherwise
than for collection or deposit in the ordinary course of business), or has
discounted with recourse or agreed (contingently or otherwise) to purchase or
repurchase or otherwise acquire or become liable for, any Indebtedness.
"Guaranty" shall have the meaning assigned to it in Section 6.5.
"Hazardous Material" means, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain polychlorinated biphenyls ("PCBs"), (b) any chemicals or other
materials or substances that are now or hereafter become defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (c) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited, limited
or regulated under any Environmental Law.
"Indebtedness" of any Person means, without duplication, all
liabilities, obligations and reserves, contingent or otherwise, which, in
accordance with GAAP, would be reflected as a liability on a balance sheet
(excluding trade accounts payable and accrued expenses arising in the ordinary
course of business), and (without duplication) (a) all obligations of such
Person for borrowed money or with respect to deposits or advances of any kind,
(b) all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to assets
purchased by such Person, (e) all obligations of such Person issued or assumed
as the deferred purchase price of property or services, (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the obligations secured thereby have
been
- 10 -
<PAGE> 17
assumed by such Person, (g) all obligations or liabilities in respect of which
such Person is a Guarantor, (h) all Capitalized Lease Obligations of such
Person, (i) all Rate Hedging Obligations, and (j) all obligations of such Person
as an account party to reimburse any Person in respect of letters of credit
(including the Letters of Credit) or bankers' acceptances. The Indebtedness of
any Person shall include any recourse Indebtedness of any partnership in which
such Person is a general partner.
"Interest Expense" shall mean, for any period, the gross interest
expense incurred by the Borrower and its Subsidiaries in respect of their
Indebtedness for such period (other than interest incurred on the Indebtedness
under the Subordinated Purchase Agreement), determined on a consolidated basis,
all fees payable under Section 2.5 or the Fee Letters (other than any one time
closing fees) and any other fees, charges, commissions and discounts in respect
of Indebtedness, including fees payable in connection with the Letters of
Credit. For purposes of the foregoing, net payments made or received by the
Borrower with respect to Rate Hedging Obligations shall be included in the
computation of gross interest expense.
"Interest Period" means, with respect to any LIBOR Loan, the period
selected by the Borrower, commencing on the date such Loan is made, continued or
converted and ending on the last day of such period as selected by the Borrower.
The Interest Period for each LIBOR Loan shall be one, two, three or six months;
provided, however, that whenever the last day of such Interest Period would
otherwise occur on a day other than a Banking Day, the last day of such Interest
Period shall occur on the next succeeding Banking Day; provided, further, that
if such extension of time would cause the last day of such Interest Period to
occur in the next calendar month, the last day of such Interest Period shall
occur on the next preceding Banking Day. The Borrower shall not select any
Interest Period which extends beyond any date on which a scheduled payment is or
may be required to be made pursuant to Sections 2.1 or 2.6(b)(i) unless the sum
of the amount available to be drawn under the Commitment plus the aggregate
principal balance of all Base Rate Loans and all LIBOR Loans with Interest
Periods ending prior to such date is at least equal to the maximum amount that
is, or may be, required to be paid on such date.
- 11 -
<PAGE> 18
"Issuing Bank" means KCCI in its capacity as the issuer of the Letters
of Credit, or any successor issuer of the Letters of Credit.
"KCCI" means Key Corporate Capital Inc., a Michigan corporation.
"KeyBank" means KeyBank National Association.
"Letters of Credit" has the meaning assigned to it in Section 2.2.
"Leverage Ratio", as of any date, means the ratio of Total Debt as of
such date to Operating Cash Flow for the four quarter period then ended or most
recently ended.
"LIBOR" means the average (rounded upwards, if necessary, to the
nearest 1/16th of 1%) of the per annum rates at which deposits in immediately
available funds in United States dollars for the relevant Interest Period and in
an amount approximately equal to the Loan to be disbursed or to remain
outstanding during such Interest Period, as the case may be, are offered to the
Administrative Agent by leading banks in the London Eurodollar market,
determined as of 11:00 a.m. London time (or as soon thereafter as practicable),
two Banking Days prior to the beginning of the relevant Interest Period.
"LIBOR Loans" means those Loans described in Section 2.1 on which the
Borrower shall pay interest at a rate based on the applicable LIBOR Rate.
"LIBOR Rate" means a rate per annum equal to the quotient obtained
(rounded upwards, if necessary, to the nearest 1/100th of 1%) by dividing (a)
the applicable LIBOR by (b) 1.00 minus the LIBOR Reserve Percentage.
"LIBOR Reserve Percentage" means for any day that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, without limitation, all basic,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in
- 12 -
<PAGE> 19
reserve requirements) for a member bank of the Federal Reserve System in respect
of Eurocurrency Liabilities (as that term is defined in Regulation D of the
Board of Governors of the Federal Reserve System, as in effect from time to
time). The LIBOR Rate shall be adjusted automatically on and as of the effective
date of any change in the LIBOR Reserve Percentage.
"License" means any authorization, permit, consent, franchise,
ordinance, registration, certificate, license, agreement or other right filed
with, granted by, or entered into by a federal, state or local governmental
authority which permits or authorizes the acquisition, construction or operation
of a radio broadcasting station, or any part of a radio broadcasting station or
which is required for the acquisition, ownership or operation of any Station.
"License Partnership" means ECI License Company, L.P., a Pennsylvania
limited partnership, of which the Borrower is the sole general partner with a
99% partnership interest, and ECI Investors Corporation, a Delaware corporation,
is the sole limited partner with a 1% partnership interest.
"License Subsidiary" means the License Partnership and each other
Subsidiary formed pursuant to Section 8.10(b)or (c) solely for the purpose of
holding Licenses issued by the FCC.
"Licensing Authority" means a governmental authority which has granted
or issued a License.
"Lien" as applied to the property of any Person means: (a) any
mortgage, lien, pledge, charge, lease constituting a Capitalized Lease
Obligation, conditional sale or other title retention agreement, or other
security interest or encumbrance of any kind in respect of any property of such
Person, or upon the income or profits therefrom; (b) any arrangement, express or
implied, under which any property of such Person is transferred, sequestered or
otherwise identified for the purpose of subjecting the same to the payment of
Indebtedness in priority to the payment of the general, unsecured creditors of
such Person; (c) the filing of, or any agreement to give, any financing
statement under the Uniform Commercial Code or its equivalent of any
jurisdiction in respect of Indebtedness; and (d) in the case of securities or
other equity interests, any purchase option, call
- 13 -
<PAGE> 20
or similar right of a third party with respect to such securities or other
equity interests.
"Loans" has the meaning assigned to it in Section 2.1(a).
"Management Agreement" means the Management and License Agreement dated
as of December 23, 1992, between the Borrower and the License Partnership and
any amendments thereto.
"Material Adverse Effect" means a material adverse effect upon or
change in (a) the properties, assets, business, operations, financial condition
or prospects of the Borrower or any of its Subsidiaries or on the ability of the
Borrower or any such Subsidiary to conduct its business (other than matters
reflected in the audited financial statements contained in Exhibit B attached
hereto or otherwise disclosed herein), (b) the ability of the Borrower, any of
the Borrower's Subsidiaries or any other party to a Collateral Document (other
than either Agent or any Bank) to perform its obligations hereunder or under any
other Collateral Document to which it is a party, (c) the validity or
enforceability of this Agreement, the Notes or any other Collateral Document, or
(d) the rights or remedies of the Agents or the Banks under this Agreement, the
Notes or any other Collateral Document or at law or in equity.
"Net Earnings" means, with respect to the Borrower, the consolidated
net income (or deficit) of the Borrower and its Subsidiaries for the period
involved, after taxes incurred and after all proper charges and reserves
(excluding, however, non-recurring special charges and credits), all as
determined in accordance with GAAP.
"Notes" has the meaning assigned to it in Section 2.4.
"Obligations" means any obligation of the Borrower or any of its
Subsidiaries (a) to pay to the Banks the principal of and interest on the Loans
in accordance with the terms hereof and of the Notes, including, without
limitation, any interest accruing after the date of any filing by the Borrower
or any Subsidiary of any petition in bankruptcy or the commencing of bankruptcy,
insolvency or similar proceedings with respect to the Borrower or any of its
Subsidiaries, regardless of whether such interest is allowable as a claim in any
such proceeding; (b) in respect of
- 14 -
<PAGE> 21
the contingent liability of the Borrower under all outstanding Letters of Credit
and in respect of the contingent liability of the Borrower to KCCI under the
Sinclair Letter of Credit; (c) in respect of any net Rate Hedging Obligations
owing to any Bank or any Affiliate of any Bank; (d) to pay, satisfy or perform
any other liability or obligation to either Agent or any Bank, arising under
this Agreement or any Collateral Document, whether now existing or hereafter
incurred by reason of future advances or otherwise, matured or unmatured, direct
or contingent, joint or several, including any extensions, modifications or
renewals thereof and substitutions therefor, and including without limitation
all fees, indemnification amounts, costs and expenses, including interest
thereon and reasonable attorneys' fees, incurred by either Agent or any Bank for
the protection, preservation or enforcement of its rights and remedies arising
hereunder or under the Collateral Documents; (e) to repay to the Banks all
amounts advanced at any time by the Banks hereunder or under any Collateral
Document, including, without limitation, advances for principal or interest
payments to prior secured parties, mortgagees, lienors or other Persons, or for
taxes, levies, insurance, rent or repairs to, or maintenance or storage of, any
of the property of the Borrower or any of its Subsidiaries; (f) to perform any
covenant or agreement made with the Banks pursuant to this Agreement or any
Collateral Document; or (g) to take any other action in respect of any other
liability of any nature of the Borrower or any of its Subsidiaries to the Banks
under this Agreement or any Collateral Document.
"Operating Agreement" means any programming agreement, time brokerage,
local marketing or similar agreement, franchise agreement, lease or other
agreement relating to the operation of a Station by the Borrower or any of its
Subsidiaries, the termination or adverse modification of which could have a
Material Adverse Effect.
"Operating Cash Flow" means, during any period, the consolidated Net
Earnings of the Borrower for such period (excluding, to the extent included in
Net Earnings, (i) the effect of any exchange of advertising time for non-cash
consideration, such as merchandise or services, (ii) any other non-cash income
or expense (including the cumulative effect of a change in accounting principles
and extraordinary items), and (iii) any gains or losses net of taxes from sales,
exchanges and
- 15 -
<PAGE> 22
other dispositions of property not in the ordinary course of business, including
non-recurring charges relating to such exchanges or dispositions), minus any
non-operating income (other than interest income and investment income), plus
the sum of (a) depreciation on or obsolescence of fixed or capital assets and
amortization of intangibles and leasehold improvements for such period, plus (b)
Interest Expense incurred in such period plus interest incurred on the
Indebtedness under the Subordinated Purchase Agreement, plus (c) federal, state
and local income taxes incurred in such period to the extent deducted in
calculating Net Earnings in such period (other than any such tax Distributions
resulting from any gains from sales and exchanges and other distributions not in
the ordinary course of business), plus (d) the costs relating to discontinued
operations, all on a consolidated basis and computed on the accrual method. For
purposes of calculating Operating Cash Flow in any period (other than for
purposes of calculating Excess Cash Flow):
(A) any acquisition of any Station, and any sale or other
disposition of any Station, which occurs during such period shall be deemed to
have occurred on the first day of such period;
(B) Operating Cash Flow shall be increased by the difference,
if positive, of $167,000 minus the product of $13,917 times the number of months
in the period from March 1, 1997, through the end of the period for which
Operating Cash Flow is being calculated;
(C) Operating Cash Flow shall be increased by the difference,
if positive, of $339,000 minus the product of $28,250 times the number of months
in the period from March 1, 1997, through the end of the period for which
Operating Cash Flow is being calculated;
(D) Operating Cash Flow shall be increased by the difference,
if positive, of $2,800,000 minus the product of $233,333 times the number of
months in the period from May 1, 1997, through the end of the period for which
Operating Cash Flow is being calculated;
(E) Operating Cash Flow shall be increased by the difference,
if positive, of $400,000 minus the product of $33,333 times the number of months
in the period from May 1, 1997,
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<PAGE> 23
through the end of the period for which Operating Cash Flow is being calculated;
(F) Operating Cash Flow shall be increased by the difference,
if positive, of $802,000 minus the product of $66,833 times the number of months
in the period from March 1, 1998, through the end of the period for which
Operating Cash Flow is being calculated;
(G) For periods after the date on which the Borrower acquires
radio stations KKSN-AM, KKSN-FM and KKRH-FM pursuant to the Sinclair Purchase
Agreement, Operating Cash Flow shall be increased by the difference, if
positive, of $323,000 minus the product of $26,917 times the number of months in
the period from the first day of the third full calendar month after the date on
which the Borrower acquires such stations through the end of the period for
which Operating Cash Flow is being calculated; and
(H) Operating Cash Flow shall be calculated as if the License
Partnership were a wholly owned Subsidiary of the Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation or any
governmental authority at any time substituted therefor.
"Pension Plan" means an employee pension benefit plan as defined in
Section 3(2) of ERISA which is subject to the provisions of Section 302 or Title
IV of ERISA or Section 412 of the Code.
"Permitted Acquisition" has the meaning assigned to it in Section
8.10(b).
"Permitted Lien" means any of the following Liens:
(a) Liens for taxes or assessments and similar charges, which
are either not delinquent or being contested diligently and in good faith by
appropriate proceedings, and (i) as to which the Borrower or its affected
Subsidiary has set aside adequate reserves in accordance with GAAP on its books
and (ii) which do not entail any significant risk of loss, forfeiture,
foreclosure or sale of the property subject thereto;
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<PAGE> 24
(b) statutory Liens, such as mechanic's, materialman's,
warehouseman's, landlord's, artisan's, workman's, contractor's, carrier's or
other like Liens, (i) incurred in good faith in the ordinary course of business,
(ii) which are either not delinquent or are being contested diligently and in
good faith by appropriate proceedings, (iii) as to which the Borrower or its
affected Subsidiary has set aside adequate reserves in accordance with GAAP on
its books or bonded satisfactorily to the Administrative Agent and (iv) which do
not entail any significant risk of loss, forfeiture, foreclosure or sale of the
property subject thereto;
(c) encumbrances consisting of zoning restrictions, easements,
licenses, reservations, provisions, covenants, conditions, waivers, restrictions
on the use of real property or minor irregularities of title, provided that none
of such encumbrances materially impairs the use or value of any property in the
operation of the Borrower's or any of its Subsidiaries' business;
(d) Liens securing conditional sale, rental or purchase money
obligations permitted under Section 8.4 and Capitalized Lease Obligations
permitted under Section 8.6 (and protective UCC-1 financing statements filed by
lessors in connection therewith under leases not intended as security), but only
in the property which is the subject of such obligations;
(e) Liens arising under or pursuant to this Agreement or any
Collateral Document or otherwise securing any Obligation;
(f) Liens in respect of judgments or awards with respect to
which the Borrower or any of its Subsidiaries is, in good faith, prosecuting an
appeal or proceeding for review and with respect to which a stay of execution
upon such appeal or proceeding for review has been secured, and as to which
judgments or awards the Borrower or such Subsidiary has established adequate
reserves in accordance with GAAP on its books or has bonded in a manner
satisfactory to the Administrative Agent;
(g) pledges or deposits made in the ordinary course of
business to secure payment of worker's compensation, or to participate in any
fund in connection with worker's compensation,
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<PAGE> 25
unemployment insurance, old-age pensions or other social security programs;
(h) Liens granted to secure the performance of bids, tenders,
contracts, leases, public or statutory obligations, surety, customs, appeal and
performance bonds and other similar obligations and not incurred in connection
with the borrowing of money, the obtaining of advances or the payment of the
deferred purchase price of any property; and
(i) any other Liens listed on Exhibit F hereto or to which the
Required Banks have consented in writing.
"Person" shall include natural persons, corporations, business trusts,
associations, companies, limited liability companies, joint ventures and
partnerships.
"Plan" means any employee benefit plan, as defined under Section 3(3)
of ERISA, established or maintained by the Borrower or any member of the
Controlled Group or any such Plan to which the Borrower or any member of the
Controlled Group is, or in the last six years was, required to contribute on
behalf of its employees.
"Pledge Agreements" means the Borrower Pledge Agreement and the
Subsidiary Pledge Agreements.
"Possible Default" means an event, condition, situation or thing which
constitutes, or which with the lapse of any applicable grace period or the
giving of notice or both would constitute, an Event of Default.
"Prepayment Premium" with respect to the prepayment or conversion of
any LIBOR Loan or any other receipt or recovery of any LIBOR Loan prior to the
end of the applicable Interest Period, whether by voluntary prepayment,
acceleration, conversion to a Base Rate Loan or otherwise, means an amount equal
to the sum of (a) the present value (discounted at the Discount Rate) of the
product of (i) the excess, if any, of the rate of interest applicable to such
Loan pursuant to Section 3.1 hereof at the time of such prepayment or conversion
on the principal amount so prepaid, converted or accelerated, as the case may
be, over the Discount Rate, as determined by the Administrative Agent,
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<PAGE> 26
multiplied by (ii) the principal amount so prepaid, converted or accelerated, as
the case may be, multiplied by (iii) a fraction, the numerator of which is the
number of days remaining in the related Interest Period and the denominator of
which is 360 (taking into consideration the applicable compounding for the
frequency of installment payments of the Loans being prepaid), plus (b)
reasonable out-of-pocket costs and expenses incurred by the Banks and the
Administrative Agent with respect to such prepayment.
"Project Capital Expenditures" means Capital Expenditures incurred with
respect to a radio station for (i) the construction or relocation of Station
facilities; (ii) the construction of new tower and transmitting equipment; and
(iii) the upgrade of radio signals, which are incurred no earlier than twelve
months after the acquisition of such Station.
"Projected Debt Service" means, as of the end of any quarter, the sum
of (a) all principal payments required to be made on the Loans pursuant to
Sections 2.1(b) and 2.6(b)(i) during the four quarter period following such
date, (b) all principal payments required to be made by the Borrower and its
Subsidiaries on Total Debt, other than the Loans, during such subsequent four
quarter period, and (c) all Interest Expense during such subsequent four quarter
period. In calculating Projected Debt Service, (i) the interest rate in effect
in such subsequent period on any Indebtedness which does not bear interest at a
rate which is fixed for the entire subsequent period shall be deemed to be the
interest rate in effect on such Indebtedness as of the date of determination,
and (ii) for the purpose of determining the amount of principal payments
required on the Loans pursuant to Section 2.1(b) and 2.6(b)(i) in future
periods, it shall be assumed that the principal amount of Loans outstanding as
of the date of determination will be outstanding for the subsequent four quarter
period, subject to any required Commitment reductions.
"Quarterly Date" means the last day of each of the Borrower's fiscal
quarters.
"Ratable Share" means, with respect to any Bank, its pro rata share of
the Commitment, the Letters of Credit or the Loans, as such pro rata share may
be modified pursuant to Section 2.15
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<PAGE> 27
or by assignment pursuant to Section 12.7. As of the date of this Agreement, the
Ratable Shares of the Banks shall be as listed on Schedule 1.1 attached hereto.
"Rate Hedging Obligations" means any and all obligations of the
Borrower, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
agreements, devices or arrangements designed to protect the Borrower from the
fluctuations of interest rates, including interest rate exchange or swap
agreements, interest rate cap or collar protection agreements, and interest rate
options, puts and warrants, and (b) any and all cancellations, buy backs,
reversals, terminations or assignments of any of the foregoing.
"Regulatory Change" means the adoption of or any change in federal,
state or local treaties, laws, rules or regulations or the adoption of or change
in any interpretations, guidelines, directives or requests of or under any
federal, state or local treaties, laws, rules or regulations (whether or not
having the force of law) by any court, governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Reportable Event" means a reportable event as that term is defined in
Title IV of ERISA, excluding, however, such events as to which the PBGC by
regulation has waived the requirement of Section 4043(a) of ERISA that it be
notified within thirty days of the occurrence of such event (provided that a
failure to meet the minimum funding standard of Section 412 of the Code and of
Section 302 of ERISA shall be a Reportable Event regardless of the issuance of
any such waivers in accordance with Section 412(d) of the Code).
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<PAGE> 28
"Required Banks" means, at any time, Banks holding at least 51% of the
then aggregate unpaid principal amount of the Notes and the stated amount of the
outstanding Letters of Credit, or, if no principal amount of the Notes or any
Letter of Credit is then outstanding, Banks having at least 51% of the
Commitment.
"Security Agreements" means the Borrower Security Agreement and the
Subsidiary Security Agreement.
"Sinclair Letter of Credit" means the letter of credit issued by KCCI
for the account of the Borrower in connection with the Sinclair Purchase
Agreement.
"Sinclair Purchase Agreement" means the Asset Purchase Agreement, dated
January 26, 1998, among Tuscaloosa Broadcasting, Inc., Sinclair Radio of
Portland Licensee, Inc., Sinclair Radio of Rochester Licensee, Inc., the
Borrower and the License Partnership pursuant to which the Borrower and the
License Partnership will acquire substantially all of the assets relating to
radio stations KKSN-AM/FM, Portland, Oregon, KKRH, Salem, Oregon, WKLX, WBEE,
WBBF, Rochester, New York, and WQRV, Avon, New York for a purchase price of
approximately $126,500,000.
"Stations" means, as of any date, the radio broadcasting stations owned
by the Borrower or any of its Subsidiaries as of such date; all auxiliary
stations owned or operated in connection with the foregoing or any other
communications station owned or operated at such time by the Borrower or any of
its Subsidiaries.
"Subordinated Debt" means all Indebtedness of the Borrower incurred
pursuant to the provisions of Section 8.1(g). Indebtedness owing to the
Subordinated Lender pursuant to the Subordinated Purchase Agreement shall not
constitute Subordinated Debt.
"Subordinated Lender" means Chase Equity Associates, L.P. and any other
holder of Indebtedness of the Borrower under the Subordinated Purchase Agreement
or any of the notes issued pursuant thereto.
"Subordinated Purchase Agreement" means the Convertible Subordinated
Note Purchase Agreement dated as of May 21, 1996,
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<PAGE> 29
between the Borrower and Chase Equity Associates, L.P., as the same may be
amended to the extent permitted in Section 8.19.
"Subsidiary" means each partnership, corporation or limited liability
company, the majority of the outstanding partnership interests, capital stock,
membership interests or voting power of which is (or upon the exercise of all
outstanding warrants, options and other rights would be) owned, directly or
indirectly, at the time in question by the Borrower.
"Subsidiary Pledge Agreements" has the meaning assigned to it in
Section 6.3(b).
"Subsidiary Security Agreement" has the meaning assigned to it in
Section 6.2.
"Tax Liability" means the aggregate federal and state income tax
liability for any tax year (exclusive of penalties and interest) of a
shareholder of the Borrower which arises from the allocation to such shareholder
for income tax purposes of taxable income and/or taxable gain of the Borrower
for the tax year in question, calculated by assuming that all such income is
taxed at the highest marginal rate for federal and state income tax purposes to
which any shareholder is subject. Income and losses from any prior or succeeding
year shall not be considered in making such calculation.
"Termination Date" means February 13, 2006.
"Total Debt" means (a) all Indebtedness of the Borrower and its
Subsidiaries for borrowed money, including, without limitation, the Loans, (b)
all Capitalized Lease Obligations of the Borrower and its Subsidiaries, (c) all
other Indebtedness of the Borrower or any of its Subsidiaries represented by
notes or drafts representing extensions of credit or on which interest is
typically charged, (d) all obligations of the Borrower and its Subsidiaries
evidenced by bonds, debentures, notes or other similar instruments (including
all such obligations to which any property or asset owned by the Borrower or any
of its Subsidiaries is subject, whether or not the obligation secured thereby
shall have been assumed), (e) all obligations of the Borrower and its
Subsidiaries under conditional sale or other title retention agreements relating
to purchased assets, (f) all
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<PAGE> 30
obligations of the Borrower and its Subsidiaries which are incurred, issued or
assumed as the deferred purchase price of property or services and which are
payable over a period in excess of one year, (g) all obligations or liabilities
in respect of which the Borrower or any of its Subsidiaries is a Guarantor, (h)
at any time after the occurrence and during the continuance of an event of
default under any agreement of the Borrower or any of its Subsidiaries governing
Rate Hedging Obligations, the aggregate amount payable by the Borrower or such
Subsidiary under such agreement, and (i) all obligations of the Borrower and its
Subsidiaries as an account party to reimburse any Person in respect of letters
of credit (including the Letters of Credit) or bankers' acceptances; provided,
however, that the amounts outstanding under the Subordinated Purchase Agreement
and the notes issued pursuant thereto shall not constitute Total Debt.
"Working Capital" means, as of any date, the excess of the consolidated
current assets, other than cash, of the Borrower and its Subsidiaries over their
consolidated current liabilities, other than the current portion of long term
debt, as of such date.
1.2 Other Terms. Except as otherwise specifically provided in this
Agreement, each term not otherwise expressly defined herein which is defined in
the Uniform Commercial Code, as amended (the "UCC") as adopted in any applicable
jurisdiction shall have the meaning assigned to it in the UCC in effect in such
jurisdiction. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. All references herein to
Sections, Schedules or Exhibits shall be deemed to be references to Sections of,
and Schedules and Exhibits to, this Agreement unless the context shall otherwise
require. Whenever any agreement, promissory note or other instrument or document
is defined in this Agreement, such definition shall be deemed to mean and
include, from and after the date of any amendment, restatement or modification
thereof, such agreement, promissory note or other instrument or document as so
amended, restated or modified. All terms defined in this Agreement in the
singular shall have comparable meanings when used in the plural and vice versa.
The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
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<PAGE> 31
1.3 Accounting Provisions. All accounting terms used in this Agreement
which are not expressly defined herein shall have the respective meanings given
to them in accordance with GAAP, all computations shall be made in accordance
with GAAP, and all balance sheets and other financial statements shall be
prepared in accordance with GAAP.
SECTION 2 THE LOANS.
2.1 The Commitment and the Loans.
(a) Subject to the terms and conditions hereof, during the
period from the Closing Date up to but not including the Termination Date, the
Banks severally, but not jointly, shall make loans to the Borrower in such
amounts as the Borrower may from time to time request but not exceeding in
aggregate principal amount at any one time outstanding $300,000,000 (as such
amount may be (i) increased pursuant to Section 2.15 or (ii) reduced pursuant to
Section 2.1(d), 2.6 or any other provision of this Agreement, from time to time,
the "Commitment"); provided, however, that in no event shall the aggregate
principal amount of such loans plus the aggregate stated amount of the Letters
of Credit exceed the Commitment. All amounts borrowed by the Borrower pursuant
to this Section 2.1(a) and all amounts drawn under any Letter of Credit and not
repaid may be referred to hereinafter collectively as the "Loans." Each Loan
requested by the Borrower shall be funded by the Banks in accordance with their
Ratable Shares of the requested Loan. A Bank shall not be obligated hereunder to
make any additional Loan if immediately after making such Loan, the aggregate
principal balance of all Loans made by such Bank plus such Bank's Ratable Share
of any outstanding Letters of Credit would exceed such Bank's Ratable Share of
the Commitment. The Loans may be comprised of Base Rate Loans or LIBOR Loans, as
provided in Section 2.3.
(b) On each date set forth in the table below, the Commitment
shall automatically reduce by that percentage of the Commitment (as in effect on
June 30, 2000, before giving effect to the reduction required by this Section
2.1(b) on that date) set forth for such date in such table:
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<PAGE> 32
<TABLE>
<CAPTION>
Year February 13 March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C> <C>
2000 0% 0% 1.25% 1.25% 1.25%
2001 0% 1.25% 3.75% 3.75% 3.75%
2002 0% 3.75% 5% 5% 5%
2003 0% 5% 5% 5% 5%
2004 0% 5% 5% 5% 5%
2005 0% 5% 5% 5% 5%
2006 all
remaining
principal
</TABLE>
(c) Prior to the Termination Date, the Borrower may, at its
option, from time to time prepay all or any portion of the Loans, subject to the
provisions of Section 2.6, and the Borrower may reborrow from time to time
hereunder amounts so paid up to the amount of the Commitment in effect at the
time of reborrowing.
(d) At any time prior to the Termination Date, by written
notice to the Administrative Agent no later than 11:00 A.M. Cleveland, Ohio time
five Banking Days prior to such termination or reduction, the Borrower may
permanently terminate, or from time to time permanently reduce, the Commitment.
Such notice shall be in writing or by telephonic communication confirmed by
telecopy or other facsimile transmission on the same day as such telephone
notice. Any such partial reduction hereunder shall be in an amount which is not
less than $1,000,000 or an integral multiple of $500,000 in excess thereof. The
Administrative Agent shall notify the Banks of any such reduction or termination
of the Commitment.
(e) All Loans, together with all interest accrued thereon,
shall be paid in full no later than the Termination Date.
(f) All reductions of the Commitment pursuant to Section
2.1(d), 2.6(c) or any other provision of this Agreement
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<PAGE> 33
shall be permanent reductions, and the Commitment shall not be increased.
2.2 Letters of Credit.
(a) Issuance. Subject to the terms and conditions hereof,
including the provisions of Section 6, the Borrower may request that the Issuing
Bank issue, from time to time, and the Issuing Bank agrees to issue, from time
to time, letters of credit in an aggregate stated amount not exceeding
$15,000,000 (the "Letters of Credit"). No Letter of Credit shall be issued for a
term of more than three hundred sixty-four days, and no Letter of Credit shall
have an expiration date which is later than the Termination Date. No Letter of
Credit shall be issued if after giving effect to such issuance, the sum of the
outstanding principal balance of the Loans (including amounts drawn on Letters
of Credit and not repaid), plus the aggregate stated amount of outstanding
Letters of Credit, would exceed the Commitment. Each Letter of Credit shall be
issued in the manner and on the conditions set forth in this Section 2.2 and
Section 6.
(b) Application. Each request for a Letter of Credit shall be
made to the Issuing Bank by an application on the Issuing Bank's standard form
or in such other manner as the Issuing Bank may approve. Promptly following the
issuance of any Letter of Credit, the Issuing Bank shall notify the
Administrative Agent and the Banks of such issuance.
(c) Participation by the Banks.
(i) By the issuance of a Letter of Credit and
without any further action on the part of the Issuing Bank, the Administrative
Agent or the other Banks in respect thereof, the Issuing Bank hereby grants to
each other Bank, and each other Bank hereby agrees to acquire from the Issuing
Bank, a participation in such Letter of Credit equal to such Bank's Ratable
Share of the stated amount of such Letter of Credit, effective upon the issuance
of such Letter of Credit; provided, however, that no Bank shall be required to
acquire participations in any Letter of Credit that would result in its Ratable
Share of the sum of outstanding Loans plus the stated amount of all outstanding
Letters of Credit to be greater than its Ratable
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<PAGE> 34
Share of the Commitment. In consideration and in furtherance of the foregoing,
each Bank hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of the Issuing Bank, in accordance with
Section 2.2(d), such Bank's Ratable Share of each amount disbursed pursuant to a
Letter of Credit; provided, that payment by the Issuing Bank under such Letter
of Credit against presentation of such draft or document shall not have
constituted gross negligence or willful misconduct of the Issuing Bank.
(ii) Each Bank acknowledges and agrees that its
obligation to acquire participations pursuant to paragraph (i) above in respect
of Letters of Credit is absolute and unconditional and shall not be affected by
any circumstances whatsoever, including the occurrence and continuance of an
Event of Default or Possible Default, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever.
(d) Letter of Credit Disbursements.
(i) If the Administrative Agent has not received
from the Borrower the payment permitted pursuant to paragraph (ii) of this
Section 2.2(d) by 11:00 a.m., Cleveland time, on the date on which the Issuing
Bank has notified the Borrower that payment of a draft presented under any
Letter of Credit will be made, as provided in such paragraph (ii), the
Administrative Agent shall promptly notify the Issuing Bank and each other Bank
of the disbursement to be made under such Letter of Credit and, in the case of
each Bank, its Ratable Share of such disbursement. Each Bank shall pay to the
Administrative Agent, not later than 1:00 P.M., Cleveland time, on such date
(or, if the Issuing Bank shall elect to defer reimbursement from the Banks
hereunder, such later date as the Issuing Bank shall specify by notice to the
Administrative Agent and the Banks), such Bank's Ratable Share of such
disbursement, which the Administrative Agent shall promptly pay to the Issuing
Bank. The Administrative Agent will promptly remit to each Bank its share of any
amount subsequently received by the Administrative Agent from the Borrower in
respect of such disbursement; provided that amounts so received for the account
of any Bank prior to payment by such Bank of amounts required to be paid by it
hereunder in respect of any disbursement shall be remitted to the Issuing Bank.
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<PAGE> 35
(ii) If the Issuing Bank shall receive any draft
presented under any Letter of Credit, the Issuing Bank shall give notice thereof
as provided in paragraph (iii) below. If the Issuing Bank shall pay any draft
presented under a Letter of Credit, the Borrower may (but shall not be required
to) pay to the Administrative Agent, for the account of the Issuing Bank, an
amount equal to the amount of such draft before 11:00 A.M., Cleveland time, on
the Banking Day on which the Issuing Bank shall have notified the Borrower that
payment of such draft will be made. The Administrative Agent will promptly pay
any such amounts received by it to the Issuing Bank.
(iii) The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit to ascertain that the same appear on their face
to be in substantial conformity with the terms and conditions of such Letter of
Credit. The Issuing Bank shall as promptly as reasonably practicable give oral
notification, confirmed in writing, to the Administrative Agent and the Borrower
of such demand for payment and the determination by the Issuing Bank as to
whether such demand for payment was in accordance with the terms and conditions
of such Letter of Credit and whether the Issuing Bank has made or will make a
disbursement thereunder, provided that the failure to give such notice shall not
relieve the Borrower of its obligation to reimburse such disbursement, and the
Administrative Agent shall promptly give each Bank notice thereof.
(iv) Any amounts paid by the Issuing Bank on any
Letter of Credit shall be deemed to be a Loan for all purposes of this Agreement
and shall bear interest from the date of payment by the Issuing Bank at the
rates provided in Section 3.1 until paid in full.
(e) Obligation to Repay Letter of Credit Disbursements, etc.
The Borrower assumes all risks in connection with the Letters of Credit and the
Borrower's obligation to repay each disbursement under a Letter of Credit shall
be absolute, unconditional and irrevocable under any and all circumstances and
irrespective of:
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<PAGE> 36
(i) any lack of validity or enforceability of any
Letter of Credit;
(ii) the existence of any claim, setoff, defense
or other right which the Borrower or any other person may at any time have
against the beneficiary under any Letter of Credit, the Administrative Agent,
the Issuing Bank or any other Bank (other than the defense of payment in
accordance with the terms of this Agreement or a defense based on the gross
negligence or willful misconduct of the Issuing Bank) or any other Person in
connection with this Agreement or any other agreement or transaction;
(iii) any draft or other document presented under
a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect
other than a defense based on the willful misconduct or gross negligence of the
Issuing Bank; and
(iv) any other circumstance or event whatsoever,
whether or not similar to any of the foregoing that does not result from the
willful misconduct or gross negligence of the Issuing Bank.
It is understood that in making any payment under a Letter of Credit
(A) the Issuing Bank's exclusive reliance as to any and all matters set forth
therein, including reliance on the amount of any draft presented under such
Letter of Credit, whether or not the amount due to the beneficiary equals the
amount of such draft and whether or not any documents presented pursuant to such
Letter of Credit prove to be insufficient in any respect, if such document on
its face appears to be in order, and whether or not any such Letter of Credit
proves to be forged or invalid or any statement therein proves to be inaccurate
or untrue in any respect whatsoever, shall, in each case, not in and of itself
be deemed willful misconduct or gross negligence of the Issuing Bank and (B) any
noncompliance in any immaterial respect of the documents presented under a
Letter of Credit with the terms thereof, shall, in each case, not in and of
itself be deemed willful misconduct or gross negligence of the Issuing Bank.
(f) Indemnification. The Borrower shall: (i) indemnify and
hold the Administrative Agent and each Bank (including the Issuing Bank)
harmless from any loss resulting
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<PAGE> 37
from any claim, demand or liability which may be asserted against the
Administrative Agent or such Bank in connection with actions taken under any
Letter of Credit, and (ii) reimburse the Administrative Agent or such Bank for
any fees or other reasonable expenses paid or incurred by the Administrative
Agent or such Bank in connection with any Letter of Credit, other than any loss
or expense resulting from the Administrative Agent's or such Bank's willful
misconduct or gross negligence.
(g) Security. Upon the occurrence of any Event of Default, the
Borrower shall, upon demand, pay to the Issuing Bank the stated amount of all
outstanding Letters of Credit, which amount the Issuing Bank shall hold as
security for the obligations incurred under the Letters of Credit, this
Agreement and the Notes. The payment by the Borrower of such security shall not
terminate the obligations of the Borrower under this Section 2.2, but the stated
amount of such Letters of Credit to the extent of such security payment shall
not be deemed to be Indebtedness for purposes of determining the Borrower's
compliance with the covenants set forth in Section 8.13 or for determining the
Applicable Margin.
(h) Additional Costs. If any Regulatory Change shall either
(i) impose upon, modify, require, make or deem applicable to the Issuing Bank,
the Administrative Agent or any Bank (or its holding company) any reserve
requirement, special deposit requirement, insurance assessment or similar
requirement against or affecting any Letter of Credit issued or to be issued
hereunder, or (ii) subject the Issuing Bank, the Administrative Agent or any
Bank to any tax (other than taxes imposed on the net income of the
Administrative Agent, the Issuing Bank or such other Bank), charge, fee,
deduction or withholding of any kind whatsoever, or (iii) impose any condition
upon or cause in any manner the addition of any supplement to or increase of any
kind to the Issuing Bank's, the Administrative Agent's or any Bank's (or its
holding company's) capital or cost base for issuing such Letter of Credit which
results in an increase in the capital requirement supporting such Letter of
Credit, or (iii) impose upon, modify, require, make or deem applicable to the
Issuing Bank, the Administrative Agent or any Bank (or its holding company) any
capital requirement, increased capital requirement or similar requirement such
as the deeming of such Letters of Credit to be assets held by the Issuing Bank,
the Administrative
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Agent or such Bank (or its holding company) for capital calculation or other
purposes and the result of any events referred to in (i), (ii), (iii) or (iv)
above shall be to increase the costs or decrease the benefit in any way to the
Issuing Bank, the Administrative Agent or a Bank (or its holding company) of
issuing, maintaining or participating in such Letters of Credit, then and in
such event the Borrower shall, within ten days after the mailing of written
notice of such increased costs and/or decreased benefits to the Administrative
Agent and the Borrower, pay to the Issuing Bank, the Administrative Agent or
such Bank all such additional amounts which in the Issuing Bank's, the
Administrative Agent's or such Bank's good faith calculation as allocated to
such Letters of Credit, shall be sufficient to compensate it (or its holding
company) for all such increased costs and/or decreased benefits. The Issuing
Bank's, the Administrative Agent's or such Bank's calculation shall be
conclusive absent manifest error.
(i) Fees. Each Letter of Credit shall be issued for a fee
equal to the product of the Applicable Margin applicable to LIBOR Loans as of
the date of issuance thereof times the stated amount thereof, payable upon
issuance. The fee shall be payable to the Administrative Agent for the benefit
of the Banks in accordance with their Ratable Shares. If any Letter of Credit is
drawn upon prior to its expiration date, the Banks shall reimburse to the
Borrowers that portion of the fee allocable to the period from the date of the
draw to the expiration date, calculated in accordance with the Issuing Bank's
standard letter of credit procedures. In addition, the Borrower shall pay to the
Issuing Bank for its own account its standard charges for the issuance of
letters of credit and for draws upon letters of credit, which charges, as of the
date hereof, are as follows: (i) $200 per Letter of Credit, payable upon
issuance and (ii) $100 per Letter of Credit, payable upon a draw under such
Letter of Credit.
2.3 Making and Continuation/Conversion of the Loans.
(a) Making of the Loans.
(i) Each Loan shall be made by the Banks in such
amount as the Borrower shall request, provided that each borrowing shall be in
an amount which is a minimum of (A), with
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respect to any LIBOR Loan, $3,000,000, and integral multiples of $500,000 in
excess thereof, and (B) with respect to any Base Rate Loan, $1,000,000 and
integral multiples of $500,000 in excess thereof or such lesser amount as may be
equal to the then unused portion of the Commitment. The obligation of the Banks
to make any Loan is conditioned upon the fact that (x) no Possible Default or
Event of Default shall then exist or immediately after the Loan would exist; (y)
all of the Collateral Documents shall still be in full force and effect; and (z)
the representations and warranties contained herein and in the Collateral
Documents shall be true and correct in all material respects as if made on and
as of the date of such borrowing, except to the extent that any thereof
expressly relate to an earlier date.
(ii) Loans shall be effected at the principal
banking office of the Administrative Agent in Cleveland, Ohio, and shall be made
at such times as the Borrower may request by notice to the Administrative Agent
no later than 11:00 A.M. Cleveland, Ohio time (A) three Banking Days prior to
the date of a requested LIBOR Loan and (B) one Banking Day prior to the date of
a requested Base Rate Loan. Such notices shall be in writing, or by telephonic
communication confirmed by telecopy or other facsimile transmission on the same
day as the telephone request, and shall specify the proposed date and the amount
of the requested Loan, whether it is to bear interest initially based upon the
Base Rate or the LIBOR Rate, and the Interest Period thereof, if applicable.
(iii) Upon receipt of each borrowing notice for a
Loan, the Administrative Agent shall promptly notify each Bank of the type,
Interest Period, if applicable, amount and date of the proposed borrowing. Not
later than 11:00 A.M. Cleveland time, on the date of a proposed borrowing of a
Loan, each Bank shall provide the Administrative Agent at its address specified
in Section 12.4 hereof with immediately available funds covering such Bank's
Ratable Share of such Loan, and the Administrative Agent shall pay over such
immediately available funds to the Borrower.
(b) Conversion/Continuation of the Loans. At the Borrower's
election pursuant to notice given to the Administrative Agent not later than
11:00 A.M. Cleveland, Ohio time three Banking Days prior to such conversion or
continuation,
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any Base Rate Loan may be converted to, or any LIBOR Loan may be continued as, a
LIBOR Loan as requested by the Borrower; provided, however, that each conversion
shall be in an amount which is a minimum of $3,000,000, and integral multiples
of $1,000,000 in excess thereof; and provided, further, that no Loan may be
continued as or converted to a LIBOR Loan at any time that an Event of Default
or Possible Default exists. If the Borrower has not delivered to the
Administrative Agent such notice with respect to any terminating Interest Period
at least three Banking Days prior to the end of such Interest Period, the
affected LIBOR Loan shall convert to a Base Rate Loan at the end of such
Interest Period.
(c) Number of Interest Rate Options. In no event shall the
Borrower have more than five LIBOR Loans outstanding at any time.
2.4 The Notes. All Loans shall be evidenced by separate promissory
notes payable to the Banks substantially in the form attached hereto as Exhibit
A to be duly executed and delivered by the Borrower at or prior to the Closing
in the aggregate principal amount of the Commitment (such notes, together with
any notes issued in connection with the issuance of a Letter of Credit being
referred to hereinafter as the "Notes"). The Banks may, and are hereby
authorized by the Borrower to, set forth on the grids attached to the Notes, or
in other comparable records maintained by them, the amount of each Loan, all
payments and prepayments of principal and interest received, the current
outstanding principal balance, and other appropriate information. The aggregate
unpaid amount of any Loan set forth in any records maintained by a Bank with
respect to a Note shall be presumptive evidence of the principal amount owing
and unpaid on such Note. Failure of a Bank to record the principal amount of any
Loan on the grid(s) attached to a Note shall not limit or otherwise affect the
obligation of the Borrower hereunder or under such Note to repay the principal
amount of such Loan and all interest accruing thereon.
2.5 Fees.
(a) Commitment Fees. The Borrower shall pay to the
Administrative Agent for the benefit of the Banks a non-refundable commitment
fee of 0.375% per annum (based on a year
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having 360 days and actual days elapsed) on the excess of the aggregate average
daily undisbursed amount of the Commitment over the aggregate stated amount of
the Letters of Credit then outstanding; provided, however, that the commitment
fee shall be 0.25% per annum for any day on which the Leverage Ratio is less
than or equal to 5.0 to 1.0. Such commitment fee shall (i) commence to accrue as
of the Closing Date and continue for each day to and including the Termination
Date, (ii) be in addition to any other fee required by the terms and conditions
of this Agreement, (iii) be payable quarterly in arrears on each Quarterly Date
and on the date the Commitment is terminated, and (iv) be shared by the Banks in
accordance with their Ratable Shares of the Commitment.
(b) Other Fees. The Borrower shall pay to the Agents such
other fees as are set forth in the Fee Letters.
2.6 Prepayment.
(a) Voluntary Prepayments. By notice to the Administrative
Agent (which shall be in writing or by telephonic communication confirmed by
telecopy or other facsimile transmission on the same day as such telephone
notice) no later than 11:00 A.M. Cleveland, Ohio time on the Banking Day prior
to such prepayment (with respect to any Base Rate Loan) or on the third Banking
Day prior to such prepayment (with respect to any LIBOR Loan), the Borrower may,
at its option, prepay the Loans in whole at any time or in part from time to
time without penalty or premium (except that any such prepayment of any LIBOR
Loan shall be made together with the applicable Prepayment Premium); provided,
however, that each partial prepayment shall be in the aggregate principal amount
of not less than $1,000,000 or an integral multiple of $500,000 in excess
thereof.
(b) Mandatory Prepayments.
(i) Reduction of Commitment. If at any time the
sum of the outstanding principal amount of the Loans plus the stated amount of
all outstanding Letters of Credit exceeds the Commitment, the Borrower shall
immediately prepay the Loans, without penalty or premium (except that any such
prepayment of any LIBOR Loan shall be made together with the applicable
Prepayment Premium), in an amount necessary to cause the sum of
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the outstanding principal amount of the Loans plus the stated amount of all
outstanding Letters of Credit not to exceed the Commitment. All accrued interest
on the amount prepaid shall be paid with the prepayment.
(ii) Excess Cash Flow. If the Leverage Ratio as
of the end of any fiscal year of the Borrower ending on or after September 30,
2000, is 5.0 to 1.0 or greater, then within one hundred twenty-five days after
the end of such fiscal year the Borrower shall make a mandatory prepayment of
the Loans in an amount equal to 50% of Excess Cash Flow, if any, for such fiscal
year. Mandatory prepayments made pursuant to this Section 2.6(b)(ii) shall be
determined from the annual financial statements for such fiscal year delivered
by the Borrower pursuant to Section 7.5(a) and shall be accompanied by a
certificate signed by a financial officer of the Borrower setting forth the
calculations from which the amount of such prepayment was determined.
(iii) Proceeds of Asset Sales.
(A) Subject to paragraph (B) below, if, as
of the end of the quarter most recently ended prior to the consummation of any
Asset Sale, the Leverage Ratio was greater than 5.5 to 1.0, then the Borrower
shall make a mandatory prepayment of the Loans in that amount (not to exceed the
cash proceeds of such Asset Sale, net of any reasonable costs directly incurred
in connection with such Asset Sale and any taxes payable by the Borrower or its
stockholders in connection with such Asset Sale) which, had it been prepaid at
the end of such quarter and applied to the Loans, would have caused the Leverage
Ratio to equal 5.5 to 1.0, and the balance of such net proceeds shall be applied
in accordance with the provisions of the following sentence as if the Leverage
Ratio as of the end of such quarter had been less than 5.5 to 1.0. If, as of the
end of the quarter most recently ended prior to the consummation of any Asset
Sale, the Leverage Ratio was less than or equal to 5.5 to 1.0, then the Borrower
shall not be required to make such a mandatory prepayment of the Loans, so long
as (I) no Event of Default or Possible Default exists as of the date of such
Asset Sale or at the date of the reinvestment of such proceeds and (II) the
Borrower reinvests such proceeds by making a Permitted Acquisition within twelve
months of the date of consummation of
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such Asset Sale. If any such Event of Default or Possible Default exists or if
such proceeds are not so reinvested within such twelve month period, then the
Borrower shall make a mandatory prepayment of the Loans in an amount equal to
the cash proceeds of such Asset Sale, net of any reasonable costs directly
incurred in connection with such Asset Sale and any taxes payable by the
Borrower or its stockholders in connection with such Asset Sale. Together with
any prepayment required by this Section 2.6(b)(iii), the Borrower shall deliver
to the Administrative Agent a certificate executed by a financial officer of the
Borrower setting forth the calculation of the net cash proceeds of such Asset
Sale, including a calculation of the taxes payable by the Borrower or its
stockholders in respect of such sale. Such prepayment shall be made
simultaneously with the consummation of such Asset Sale.
(B) Notwithstanding the foregoing provisions
of this Section 2.6(b)(iii), the Borrower shall not be required to make a
mandatory prepayment of the Loans in connection with the consummation of an
Asset Sale if (I) the Asset Sale is structured as an exchange of like-kind
property under Section 1031 of the Code to the maximum extent possible under
Section 1031 (a "Like Kind Exchange"), (II) the property acquired in the
Like-Kind Exchange is a radio station located in one of the top 75 markets, as
ranked by Metro Survey Area as determined by The Arbitron Company, or in a
market in which the Borrower or one of its Subsidiaries already owns a Station,
(III) no Possible Default or Event of Default exists at the time of such Asset
Sale or would exist after giving effect thereto, and (IV) the Borrower shall
have delivered to the Administrative Agent a certificate of a financial officer
of the Borrower in form and substance satisfactory to the Administrative Agent
which shall contain calculations demonstrating on a pro forma basis the
Borrower's compliance with the financial covenants set forth in Section 8 after
giving effect to such Asset Sale. If the Borrower desires to effect a Like-Kind
Exchange, at or prior to closing the disposition of any Station pursuant to this
paragraph, the Borrower shall (A) establish a "qualified escrow account" within
the meaning of Treas. Reg. Section 1.1031(k)-1(g)(3) with a "qualified
intermediary" within the meaning of Treas. Reg. Section 1.1031(k)-1(g)(4) (the
"Qualified Intermediary"), which account shall be governed by an escrow
agreement complying with the requirements of Treas. Reg. Section 1.1031(k)-1(g)
(4) and 1.1031(k)-1(g)(6), and
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enter into an "exchange agreement" within the meaning of Treas. Reg. Section
1.1031(k)-1(g)(4)(iii)(B) with the Qualified Intermediary and (B) deliver to the
Administrative Agent, as soon as reasonably practicable but in no event later
than the closing of the transfer or other disposition of such Station by the
Borrower or one of its Subsidiaries, a pledge of its rights in the escrow
agreement in form and substance reasonably satisfactory to the Administrative
Agent which governs the "qualified escrow account" and the proceeds thereof. No
later than immediately before the consummation of the closing of the transfer or
other disposition of such Station by the Borrower or one of its Subsidiaries,
the Administrative Agent shall release any and all liens of the Administrative
Agent or the Banks in the cash proceeds from the transfer or other disposition
of such Station for the period necessary (but no longer than necessary) to
comply with the requirements of Treas. Reg. Section 1.1031(k)-1(g)(6). The terms
of the escrow agreement governing the "qualified escrow account" shall, among
other things, provide that immediately upon the occurrence of any event set
forth in Treas. Reg. Section 1.1031(k)-1(g)(6)(ii) or (iii), the cash proceeds
from the transfer or other disposition of such Station, together with any
interest thereon, net of any reasonable costs directly incurred by the Borrower
or its Subsidiary in connection with the transactions contemplated by the
Like-Kind Exchange, and any taxes payable by the Borrower or its stockholders
with respect to such transactions and Like-Kind Exchange, shall be released to
the Administrative Agent, to the extent of any then outstanding balance of the
Loans, to be applied as provided in Section 2.6(c) hereof.
(iv) Insurance Proceeds. Within 180 days after
the date of receipt of any cash payments in excess of $250,000 under any
insurance policy maintained by the Borrower or any of its Subsidiaries which
have not been reinvested in assets of a kind then used or usable in the business
of the Borrower or such Subsidiary or used to maintain the business of the
Borrower and its Subsidiaries as going concerns as a consequence of any business
interruption, the Borrower shall make a mandatory prepayment of the Loans in the
amount of such unreinvested or unused proceeds; provided, however, that
notwithstanding any of the foregoing to the contrary, upon and during the
continuance of any Event of Default or Possible Default, all such insurance
proceeds, regardless of reinvestment or other use, received by
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the Borrower or any Subsidiary shall be applied as a prepayment of the Loans.
(v) Net Equity Proceeds. If the Borrower issues
or sells any shares of its capital stock or other equity interests or securities
convertible into or exercisable for any shares of its capital stock or other
equity interests, and if as of the end of the quarter most recently ended prior
to such issuance or sale (the "Test Date") the Leverage Ratio was greater than
5.5 to 1.0, then the Borrower shall make a mandatory prepayment of the Loans.
Such prepayment shall be in an amount (not to exceed the cash proceeds of such
issuance or sale, net of any reasonable costs directly incurred in connection
with such issuance or sale) equal to the sum of (A) if the Leverage Ratio as of
the Test Date was greater than 6.5 to 1.0, the amount of such proceeds which,
had it been prepaid on the Test Date and applied to the Loans, would have caused
the Leverage Ratio to equal 6.5 to 1.0, plus (B) that amount (not to exceed 50%
of the balance of such proceeds after applying the provisions of clause (A) to
the extent applicable) which, had it been prepaid on the Test Date (and after
giving effect to the payment, if any, pursuant to clause (A)) and applied to the
Loans, would have caused the Leverage Ratio to equal 5.5 to 1.0.
(vi) Subordinated Purchase Agreement. If any
Indebtedness of the Borrower under the Subordinated Purchase Agreement is
outstanding on April 21, 2004 (unless the Subordinated Purchase Agreement has
been amended in accordance with the provisions of Section 8.19 to extend the
final maturity date thereunder to a date that is at least six months later than
the Termination Date), or if the Borrower fails to comply in any material
respect with any of the provisions of Section 7.14, it shall make a mandatory
prepayment of the Loans in the amount of all then outstanding principal together
with all accrued interest and all other amounts then owing hereunder, under any
Note and under any other Collateral Document.
(c) Application of Prepayments; Reduction of Commitment.
(i) Application to Prepayment Premium, Accrued
Interest and Principal. All prepayments made pursuant to this Section 2.6 shall
be applied first to any Prepayment Premium then
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due, then to accrued interest in accordance with the Administrative Agent's
standard operating procedures and then to the principal outstanding under the
Loans. For purposes of the calculation of interest and the determination of
whether any Prepayment Premium is due in connection with any such prepayment,
such principal prepayments shall be applied first to the Base Rate Loans and
then to the LIBOR Loans with the shortest remaining Interest Periods.
(ii) Reduction of Commitment and Loans. Any
mandatory prepayment of the Loans pursuant to Sections 2.6(b)(ii), (iii), (iv),
(v) or (vi) shall cause the Commitment to be immediately, automatically and
permanently reduced by the amount of such prepayment, and no amount so prepaid
may be reborrowed. Each such mandatory prepayment of the Loans (other than a
prepayment pursuant to Section 2.6(b)(v)) shall be applied to the subsequent
Commitment reductions set forth in Section 2.1(b) in the inverse order of
maturity. Mandatory prepayments made pursuant to Section 2.6(b)(v) shall be
applied to all subsequent Commitment reductions set forth in Section 2.1(b) pro
rata.
(d) Prepayment Premium. The Borrower shall pay to the
Administrative Agent, for the benefit of the Banks, the applicable Prepayment
Premium upon any prepayment or conversion (whether voluntary or involuntary) of
any LIBOR Loan not made on the last day of the applicable Interest Period.
2.7 Reserves or Deposit Requirements, Etc. If at any time any
Regulatory Change (including without limitation, Regulation D of the Board of
Governors of the Federal Reserve System) shall impose any reserve and/or special
deposit requirement (other than reserves included in the LIBOR Reserve
Percentage, the effect of which is reflected in the interest rate of any LIBOR
Loan) against assets held by, or deposits in or for the amount of any loans by,
any Bank, and the result of the foregoing is to increase the cost (whether by
incurring a cost or adding to a cost) to such Bank of taking or maintaining
hereunder any LIBOR Loan or to reduce the amount of principal, interest or fees
received by such Bank with respect to any such Loan, then such Bank shall notify
the Administrative Agent and the Borrower of such occurrence. Thereafter, upon
demand by such Bank the Borrower shall pay to such Bank additional amounts
sufficient to
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compensate and indemnify such Bank for such increased cost or reduced amount. A
statement as to the increased cost or reduced amount as a result of any event
mentioned in this Section shall be submitted by such Bank to the Administrative
Agent and the Borrower and shall, in the absence of manifest error, be
conclusive and binding as to the amount thereof.
2.8 Tax Law, Increased Costs, Etc. In the event that by reason of any
Regulatory Change, any Bank shall, with respect to this Agreement or any
transaction under this Agreement, be subjected to any tax, levy, impost, charge,
fee, duty, deduction or withholding of any kind whatsoever (other than any tax
imposed upon the net income of such Bank and other than changes in franchise
taxes), and if any such measure or any other similar measure shall result in an
increase in the costs to such Bank of making or maintaining any LIBOR Loan or in
a reduction in the amount of principal or interest ultimately receivable by such
Bank in respect of such Loan, then such Bank shall notify the Administrative
Agent and the Borrower stating the reasons therefor. The Borrower shall
thereafter pay to such Bank within ten days after written demand such additional
amounts as will compensate such Bank for such increased cost or reduced amount.
A statement as to any such increased cost or reduced amount shall be submitted
by such Bank to the Administrative Agent and the Borrower and shall, in the
absence of manifest error, be conclusive and binding as to the amount thereof.
2.9 Eurodollar Deposits Unavailable or Interest Rate Unascertainable.
If any Bank determines that dollar deposits of the relevant amount for the
relevant Interest Period are not available to it in the applicable Eurodollar
market or that, by reason of circumstances affecting such market, adequate and
reasonable means do not exist for ascertaining the LIBOR Rate applicable to such
Interest Period, or that the LIBOR Rate does not adequately reflect the cost to
such Bank of making such Loan, as the case may be, such Bank shall promptly give
notice of such determination to the Administrative Agent and the Borrower, and
any request for a new LIBOR Loan or notice of conversion of an existing Loan to
a LIBOR Loan given thereafter or previously given by the Borrower and not yet
made or converted shall be deemed a notice to make a Base Rate Loan.
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2.10 Changes in Law Rendering LIBOR Loans Unlawful. If at any time
any Regulatory Change shall make it unlawful for any Bank to fund any LIBOR Loan
which it has committed to make hereunder with moneys obtained in the applicable
Eurodollar market, such Bank shall notify the Administrative Agent and the
Borrower, and the obligation of the Banks to fund such Loan shall, upon the
happening of such event, forthwith be suspended for the duration of such
illegality. If any such change makes it unlawful for any Bank to continue in
effect the funding in the applicable Eurodollar market of any LIBOR Loan
previously made by it hereunder, such Bank shall, upon the happening of such
event, notify the Administrative Agent and the Borrower thereof in writing
stating the reasons therefor, and the Borrower shall, on the earlier of (a) the
last day of the then current Interest Period or (b) if required by such
Regulatory Change on such date as shall be specified in such notice, either
convert all such Loans to Base Rate Loans or prepay all such Loans in full.
2.11 Funding. Any Bank may, but shall not be required to, make
LIBOR Loans hereunder with funds obtained outside the United States.
2.12 Indemnity. Without prejudice to any other provisions of
Sections 2.7 through Section 2.11, but without duplication, the Borrower hereby
agrees to indemnify each Bank against any loss or expense which it may sustain
or incur as a consequence of the Borrower's failure to borrow any LIBOR Loan
requested pursuant to this Agreement or any default by the Borrower in payment
when due of any amount due hereunder in respect of any LIBOR Loan, including,
but not limited to, any premium or penalty actually incurred by such Bank in
respect of funds borrowed by it for the purpose of making or maintaining such
Loan, as determined by such Bank. A statement as to any such loss or expense
shall be submitted by such Bank to the Borrower for payment under the aforesaid
indemnification, with a copy to the Administrative Agent, which statement shall,
in the absence of manifest error, be conclusive and binding as to the amount
thereof.
2.13 Capital Adequacy. If any Bank shall determine that any
Regulatory Change regarding capital adequacy or compliance by such Bank (or its
lending office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any governmental authority, central
bank or comparable
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agency has the effect of reducing the rate of return on such Bank's capital (or
on the capital of such Bank's holding company) as a consequence of its
obligations hereunder to a level below that which such Bank (or its holding
company) could have achieved but for such Regulatory Change or compliance
(taking into consideration such Bank's policies or the policies of its holding
company with respect to capital adequacy) by an amount which such Bank deems to
be material, then from time to time, within ten days after demand by such Bank,
the Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank (or its holding company) for such reduction. Such Bank will
designate a different lending office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the sole
judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate
of such Bank claiming compensation under this Section and setting forth the
additional amount to be paid to it hereunder shall be conclusive in the absence
of manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods. Failure on the part of any Bank to demand
compensation for any reduction in return on capital with respect to any period
shall not constitute a waiver of such Bank's rights to demand compensation for
any reduction in return on capital in such period or in any other period. The
protection of this Section shall be available to each Bank regardless of any
possible contention of the invalidity or inapplicability of the law, regulation
or other condition which shall have been imposed.
2.14 Taxes.
(a) Without duplication of any other Section of this
Agreement including, without limitation Section 2.8, all sums payable by the
Borrower hereunder or under the Notes or in respect of the Letters of Credit,
whether of principal, interest, fees, expenses or otherwise, shall be paid in
full, free of any deductions or withholdings for any and all present and future
taxes, levies, imposts, stamps, duties, fees, assessments, deductions,
withholdings, and other governmental charges and all liabilities with respect
thereto (collectively referred to as "Taxes"). If the Borrower is prohibited by
law from making payments hereunder or under the Notes or in respect of the
Letters of Credit free of such deductions or withholdings, then the Borrower
shall pay such additional amount as may be necessary
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in order that the actual amount received by the Banks after such deduction or
withholding shall equal the full amount stated to be payable hereunder or under
the Notes or in respect of the Letters of Credit. The Borrower shall pay
directly to all appropriate taxing authorities any and all present and future
Taxes, and all liabilities with respect thereto imposed by law or by any taxing
authority on or with regard to any aspect of the transactions contemplated by
this Agreement or the execution and delivery of this Agreement or the Notes or
the issuance of the Letters of Credit, except for any Taxes or other liabilities
that the Borrower is contesting in good faith by appropriate proceedings,
provided that the Borrower hereby indemnifies the Administrative Agent and the
Banks and holds them harmless from and against any and all liabilities, fees or
additional expense with respect to or resulting from any delay in paying, or
omission to pay, Taxes. Within thirty days after the payment by the Borrower of
any Taxes, the Borrower shall furnish the Administrative Agent with the original
or a certified copy of the receipt evidencing payment thereof, together with any
other information the Administrative Agent may reasonably require to establish
to its satisfaction that full and timely payment of such Taxes has been made.
Each Bank shall notify the Borrower and the Administrative Agent of any payment
of Taxes required or requested of it and shall give due consideration to any
advice or recommendation given in response thereto by the Borrower, and upon
notice from such Bank that Taxes or any liability relating thereto (including
penalties and interest) have been paid, the Borrower shall pay or reimburse such
Bank therefor within ten days of such notice. The foregoing to the contrary
notwithstanding, in no event shall any Bank receive any amount pursuant to this
Section in excess of the amount required to be paid by it in respect of any
Taxes. Without prejudice to the survival of any other agreement of the Borrower
hereunder, the agreements and obligations of the Borrower contained in this
Section shall survive the payment in full of principal and interest hereunder
and under the Note.
(b) Upon the timely request of the Borrower, each Bank
shall execute and deliver to the Borrower, prior to the due date of any sum
payable by the Borrower under this Agreement, one or more (as the Borrower may
reasonably request) United States Internal Revenue Service Forms 4224, Forms
1001, Forms W-8 or Forms W-9, or any applicable successor form, as may be
appropriately applicable to such Bank and which such Bank is
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lawfully able and legally required to execute and deliver. Notwithstanding the
provisions of Sections 2.8 or 2.14(a) to the contrary, the Borrower shall have
no obligation to increase any sum payable in respect of any Tax pursuant to such
Sections to the extent such Bank has failed to deliver to the Borrower any such
Forms reasonably requested by the Borrower pursuant to this Section which is
applicable to such Bank and which such Bank is lawfully able and legally
required to execute and deliver.
2.15 Incremental Commitment. At any time prior to June 30, 2000,
the Borrower may solicit from the Banks an increase in the Commitment of up to
$50,000,000; provided, however, that the Borrower may not request such increase
at any time that a Possible Default or an Event of Default has occurred and is
continuing. With such solicitation, the Borrower shall deliver to the
Administrative Agent and the Banks revised projections for the period from the
date of such solicitation through the Termination Date which shall be in form
and substance reasonably satisfactory to the Administrative Agent and shall
demonstrate the Borrower's ability to timely repay the Loans, assuming the
Commitment as increased pursuant to this Section is fully drawn, and to comply
with the financial covenants contained in Section 8. No Bank shall be obligated
to increase its share of the Commitment beyond the maximum amount it has agreed
to lend as of the Closing Date, and no Bank shall be removed as a Bank for
failure to agree to such increase. If any Bank desires to participate in such
increase in the Commitment (a "Consenting Bank"), such Bank shall notify the
Administrative Agent and the Borrower of the amount by which it desires to
increase its commitment hereunder. The Commitment shall be increased by the
aggregate amount that the Consenting Banks are willing to increase their
respective commitments hereunder, but in no event shall the Commitment by
increased pursuant to this Section by more than $50,000,000. The aggregate
increase in the Commitment shall be shared pro rata by all Consenting Banks or
in such other ratio as the Consenting Banks agree among themselves. The Borrower
shall deliver to each Consenting Bank a new Note reflecting the increase in its
commitment hereunder. The Ratable Shares of all of the Banks shall be adjusted
to reflect such increase in the Commitment, and Schedule 1.1 shall be deemed
modified to reflect such adjustment to the Ratable Shares of the Banks. Any fees
payable in connection with such increase in the Commitment shall be payable only
to the Agents, with respect to
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fees payable to the Agents, and to the Consenting Banks, in their
capacity as Consenting Banks.
SECTION 3 INTEREST; PAYMENTS.
3.1 Interest.
(a) Subject to Section 3.1(c), prior to maturity, Loans
that are LIBOR Loans shall bear interest at the LIBOR Rate plus the Applicable
Margin, and Loans that are Base Rate Loans shall bear interest at the Base Rate
plus the Applicable Margin.
(b) The Applicable Margin shall be determined by the
Administrative Agent quarterly, and upon the making of each Loan and issuance of
each Letter of Credit in an amount in excess of $5,000,000, based on the
financial statements and the Compliance Certificate delivered to the Banks
pursuant to Sections 7.5(b) and (d) (in the case of a quarterly determination)
and the compliance certificate delivered pursuant to Section 6.8(c) (in the case
of determination of the Applicable Margin upon the making of a Loan or issuance
of a Letter of Credit). Any change in the interest rate on the Loans due to a
change in the Applicable Margin shall be effective on the fifth Banking Day
after delivery of such financial statements or compliance certificate; provided,
however, that if any such quarterly financial statements and compliance
certificate indicate an increase in the Applicable Margin and such financial
statements and certificate are not provided within the time period required in
Section 7.5(b), the increase in the interest rate due to such change in the
Applicable Margin shall be effective retroactively as of the fifth Banking Day
after the date on which such financial statements and certificate were due.
Until delivery of financial statements for the first fiscal quarter of the
Borrower ending after the Closing, for purposes of calculating the Applicable
Margin, the Leverage Ratio shall be determined, after giving effect to the Loans
made on and after the Closing Date, from the certificate delivered to the
Administrative Agent pursuant to Section 6.8(c). The Borrower shall deliver to
the Banks with each set of quarterly financial statements which indicate a
change in the Applicable Margin a notice with respect to such change, which
notice shall set forth the calculation of, and the supporting evidence for, such
change.
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(c) Upon the occurrence of any Event of Default, the
entire outstanding principal amount of each Loan and (to the extent permitted by
law) unpaid interest thereon and all other amounts due hereunder shall bear
interest from the date of occurrence of such Event of Default until the earlier
of the date such Loan is paid in full and the date on which such Event of
Default is cured or waived in writing at the Default Interest Rate which shall
be payable upon demand.
(d) Interest shall be computed on a Three Hundred Sixty
day year basis calculated for the actual number of days elapsed. Interest
accrued on each Base Rate Loan shall be paid quarterly in arrears on each
Quarterly Date after the date hereof until such Loan is paid in full, and
interest accrued on each LIBOR Loan shall be paid on the last day of the
Interest Period thereof and, in addition, if such Interest Period is more than
three months, on the day that would have been the last day of such Interest
Period if such Interest Period had been three months.
(e) The rate of interest payable on any Note from time to
time shall in no event exceed the maximum rate, if any, permissible under
applicable law. If the rate of interest payable on any Note is ever reduced as a
result of the preceding sentence and any time thereafter the maximum rate
permitted by applicable law shall exceed the rate of interest provided for on
such Note, then the rate provided for on such Note shall be increased to the
maximum rate permitted by applicable law for such period as is required so that
the total amount of interest received by the holder of such Note is that which
would have been received by such holder but for the operation of the preceding
sentence.
3.2 Manner of Payments.
(a) Prior to each Quarterly Date and the end of each
Interest Period, the Administrative Agent shall render a statement to the
Borrower of all amounts due to the Banks for principal, interest and fees
hereunder. All amounts listed on each such statement shall be due and payable on
the Quarterly Date or, for LIBOR Loans, the last day of such Interest Period, in
respect of which such statement was sent. As to all other Obligations which
become due and payable other than on a fixed
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date by their terms, the Administrative Agent shall advise the Borrower by a
written statement that they are due and payable, and the Borrower shall pay the
same within five days of receipt of such statement. Any failure by the
Administrative Agent to render any such statement or give any such advice shall
in no way relieve the Borrower of any liability for or obligation to pay any
amount due and payable hereunder.
(b) Whenever any payment to be made hereunder, including
without limitation any payment to be made on a Note, shall be stated to be due
on a day which is not a Banking Day, such payment may be made on the next
succeeding Banking Day, and such extension of time shall in each case be
included in the computation of the interest payable on such Note.
(c) Unless otherwise provided in this Agreement, all
payments or prepayments made or due hereunder or under the Notes shall be made
in immediately available funds by federal funds wire transfer, and without
setoff, deduction or counterclaim, to the Administrative Agent prior to 11:00
A.M., Cleveland time, on the date when due, at its offices at 127 Public Square,
Cleveland, Ohio 44114, or at such other place as may be designated by the
Administrative Agent. Funds received after 1:00 P.M., Cleveland time, shall be
deemed to have been received on the next Banking Day. To the extent any such
payment is made for the ratable benefit of the Banks, the Administrative Agent
shall promptly distribute such payment to the Banks in accordance with their
respective Ratable Shares.
SECTION 4 CLOSING.
The closing of the transactions contemplated by this Agreement shall
take place at the offices of the Administrative Agent at 127 Public Square,
Cleveland, Ohio 44114 on or about February 13, 1998, or such other date and
place as to which the parties may agree (the "Closing" and the "Closing Date").
Subject to the terms and conditions hereof, upon the fulfillment or waiver in
writing of all the conditions precedent set out in Section 6 below, and the
delivery to the Administrative Agent of the Notes, the Banks shall make such
Loans as the Borrower may request.
SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
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To induce the Banks to enter into this Agreement and to make the Loans,
the Borrower represents and warrants as follows:
5.1 Organization and Powers.
(a) The Borrower is a corporation, duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. The Borrower is duly qualified or registered to conduct business
and in good standing under the laws of each other jurisdiction in which the
character of its business or the ownership of its assets makes such
qualification or registration necessary, except where failure to so qualify or
register could not reasonably be expected to have a Material Adverse Effect. The
Borrower has all requisite power and authority to own and operate its
properties, to carry on its business as now conducted and proposed to be
conducted, to enter into and perform the Acquisition Agreements, this Agreement,
the Collateral Documents to which it is a party and all other documents to be
executed by it in connection with the transactions contemplated hereby and
thereby, to acquire the additional Stations pursuant to the Acquisition
Agreements and to carry out the terms hereof and thereof.
(b) As of the date hereof, the Borrower has no
Subsidiaries other than the License Partnership. The License Partnership is a
limited partnership, duly organized, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania and is duly qualified and in good
standing under the laws of each other jurisdiction in which the character of its
business or the ownership of its assets makes such qualification or registration
necessary. All of the Licenses issued by the FCC in connection with the
ownership and operation of the Stations, including the Stations being acquired
pursuant to the Acquisition Agreements, have been, or at the closing under the
respective Acquisition Agreements will be, duly assigned to the License
Partnership. The Borrower is the sole general partner of the License Partnership
with a 99% partnership interest. ECI Investors Corporation, a Delaware
corporation, is the sole limited partner of the License Partnership with a 1%
partnership interest. The License Partnership has no assets, other than Licenses
relating to the Stations and the Management Agreement, has no commitments,
obligations or liabilities (other than
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obligations under the Management Agreement), has no employees and engages in no
business (except pursuant to the Management Agreement).
5.2 Authorization. All necessary corporate, partnership,
shareholder or other actions on the part of the Borrower and its Subsidiaries to
authorize the execution and delivery of the Acquisition Agreements, this
Agreement and the Collateral Documents and the performance of the respective
obligations of the Borrower and its Subsidiaries herein and therein have been
taken. The Acquisition Agreements, this Agreement and each Collateral Document
are valid and legally binding upon each of the Borrower and its Subsidiaries, to
the extent it is a party thereto, and enforceable in accordance with their
respective terms, except to the extent that the enforceability hereof and
thereof may be limited by bankruptcy, insolvency or like laws affecting
creditors rights generally and by the application of general equitable
principles.
5.3 Financial Statements. Exhibit B attached hereto contains (a)
the audited consolidated financial statements of the Borrower and its
Subsidiaries for the fiscal years ending September 30, 1995, September 30, 1996,
and September 30, 1997, and (b) the unaudited consolidated financial statements
of the Borrower and its Subsidiaries as of December 31, 1997, and for the three
month period then ended (the "Financial Statements"). The Financial Statements
are true and complete in all material respects (including, without limitation, a
disclosure of all material contingent liabilities) and present fairly the
financial condition and results of operations of the Borrower and its
Subsidiaries, as of the dates and for the periods indicated and have been
prepared in accordance with GAAP, subject in the case of statements for interim
periods to normal year-end adjustments and the absence of footnotes.
5.4 Projections. Exhibit C attached hereto contains the Borrower's
projections for the fiscal years 1998 through 2005. Such projections were
prepared by the Borrower in good faith on the basis of assumptions the Borrower
believes were reasonable in light of the conditions existing at the time of
preparation thereof and remain reasonable as of the date hereof, and as of the
date hereof there are no facts which are known to the
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Borrower which the Borrower believes would cause a material adverse change in
such projections.
5.5 Capitalization of the Borrower and its Subsidiaries. The
capitalization of the Borrower and the License Partnership as of the Closing
Date is as set forth on Exhibit D attached hereto. All of the issued and
outstanding capital stock of the Borrower has been duly and validly issued and
is fully paid and nonassessable. None of the capital stock of the Borrower has
been issued in violation of the Securities Act of 1933, as amended, or the
securities or "Blue Sky" or any other applicable laws, rules or regulations of
any applicable jurisdiction. Except as set forth on Exhibit D, as of the Closing
Date, neither the Borrower nor any of its Subsidiaries has any commitment or
obligation, either firm or conditional, to issue, deliver, purchase or sell,
under any offer, option agreement, bonus agreement, purchase plan, incentive
plan, compensation plan, warrant, conversion rights, contingent share agreement,
shareholders agreement, partnership agreement or otherwise, any shares of its
capital stock, partnership interests or other equity securities or securities
convertible into shares of capital stock, partnership interests or other equity
securities.
5.6 Title to Properties; Patents, Trademarks, Etc. The Borrower
and each of its Subsidiaries have, and will have after giving effect to the
closings under the Acquisition Agreements, good and marketable title to all of
their assets, whether real or personal, tangible or intangible, free and clear
of any Liens or adverse claims, except Permitted Liens. The Borrower and each of
its Subsidiaries own or possess, and will own or possess after giving effect to
the closings under the Acquisition Agreements, the valid right to use all the
patents, patent applications, patent and know-how licenses, inventions,
technology, permits, trademark registrations and applications, trademarks,
service marks, trade names, copyrights, product designs, applications, formulae,
processes, circulation, and other subscriber lists, industrial property rights
and licenses and rights in respect of the foregoing used or necessary for the
conduct of its business (collectively, "proprietary rights"). The Borrower is
not aware of any existing or threatened infringement or misappropriation of (a)
any such proprietary rights of others by the Borrower or any of its Subsidiaries
or (b) any proprietary rights of the Borrower or any of its Subsidiaries by
others.
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5.7 Litigation; Proceedings. Except as disclosed on Exhibit E
attached hereto, there is no action, suit, complaint, proceeding, inquiry or
investigation at law or in equity, or by or before any court or governmental
instrumentality or agency, nor any order (including, without limitation, any
order to show cause or order of forfeiture), decree or judgment in effect,
pending or, to the best of the Borrower's knowledge, threatened against or
affecting the Borrower, any of its Subsidiaries, any Station or any of the
properties or rights relating to any Station which could reasonably be expected
to have a Material Adverse Effect. No Person has filed or, to the best of the
Borrower's knowledge, threatened to file, any material competing application,
petition to deny or other opposition against any application, including any
renewal application, filed or to be filed by the Borrower or any of its
Subsidiaries.
5.8 Taxes. Except as disclosed on Exhibit E attached hereto, all
Federal, state and local tax returns, reports and statements (including, without
limitation, those relating to income taxes, withholding, social security and
unemployment taxes, sales and use taxes, and franchise taxes) required to be
filed by the Borrower or any of its Subsidiaries have been properly filed with
the appropriate governmental agencies in all jurisdictions in which such
returns, reports and statements are required to be filed, which returns, reports
and statements are complete and accurate, and all taxes and other impositions
due and payable have been timely paid prior to the date on which any fine,
penalty, interest, late charge or loss may be added thereto for non-payment
thereof except where contested in good faith and by appropriate proceedings. As
of the Closing Date, neither the Borrower nor any of its Subsidiaries has filed
with the Internal Revenue Service or any other governmental authority any
agreement or other document extending or having the effect of extending the
period for assessment or collection of any Federal, state, local or foreign
taxes or other impositions. All tax deficiencies asserted or assessments made as
a result of any examinations conducted by the Internal Revenue Service or any
other governmental authority relating to the Borrower or any of its Subsidiaries
have been fully paid or are being contested in accordance with the provisions of
Section 7.4. Proper and accurate amounts have been withheld by the Borrower and
its Subsidiaries from its employees for all periods to fully comply
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with the tax, social security and unemployment withholding provisions of
applicable Federal, state, local and foreign law. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of any
taxes or other governmental charges are adequate.
5.9 Absence of Conflicts. The execution, delivery and performance
of the Acquisition Agreements, this Agreement and the Collateral Documents and
all actions and transactions contemplated hereby and thereby will not (a)
violate, be in conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under (i) any provision of the
Articles of Incorporation or By-Laws or any shareholders agreement or other
organizational document of the Borrower or any of its Subsidiaries or the
Certificate of Limited Partnership or the Limited Partnership Agreement of the
License Partnership, (ii) any arbitration award or any order of any court or of
any other governmental agency or authority binding on the Borrower or any of its
Subsidiaries, (iii) any License of the Borrower or any of its Subsidiaries or
under which the Borrower or any of its Subsidiaries operates or will operate
after giving effect to the closings under the Acquisition Agreements, (iv) any
applicable law, rule, order or regulation (including without limitation, (A) the
Communications Act of 1934, as amended, (B) any law, rule, regulation or policy
of the FCC or any other Licensing Authority or (C) regulations G, T, U or X of
the Board of Governors of the Federal Reserve System) or (v) any Operating
Agreement, the Subordinated Purchase Agreement or other material agreement,
instrument or document relating to a Station or to which the Borrower or any of
its Subsidiaries is a party, or by which the Borrower or any of its Subsidiaries
or any of their properties is bound, or (b) result in the creation or imposition
of any Lien of any nature whatsoever, other than those Liens arising hereunder
or under the Collateral Documents, upon any of the properties of the Borrower or
any of its Subsidiaries.
5.10 Indebtedness. As of the Closing Date, the Borrower has no
Indebtedness of any nature, whether due or to become due, absolute, contingent
or otherwise, including Indebtedness for taxes and any interest or penalties
relating thereto, which exceeds in the aggregate, $150,000, except (a) the
liability to pay legal and accounting fees and reasonable closing expenses in
connection with this Agreement and the Acquisition Agreements,
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(b) the Obligations, (c) Indebtedness incurred in the ordinary course of
business since September 30, 1997, (d) as disclosed in the Financial Statements,
and (e) as disclosed on Exhibit F attached hereto. The License Partnership has
no Indebtedness of any nature, whether due or to become due, absolute,
contingent or otherwise, including Indebtedness for taxes and any interest or
penalties relating thereto, except for the obligations arising under the
Management Agreement.
5.11 Compliance. Except as disclosed in Exhibit E attached hereto,
neither the Borrower nor any of its Subsidiaries nor the ownership, construction
or operation of any Station is in material violation of any License or any
statute, ordinance, law, rule, regulation or order of the United States of
America or the FCC (including, without limitation, applicable federal laws and
the rules, regulation, policies and orders of the FCC relating to foreign
ownership restrictions or to limitations on the nature and number of media
outlets that may be held under common ownership or control), the Federal
Aviation Administration or any other federal, state, county, municipal or other
governmental agency or authority applicable to the Borrower or any of its
Subsidiaries, their properties, the ownership, construction or operation of any
Station or the conduct of their business. Neither the Borrower nor any of its
Subsidiaries nor the ownership, construction or operation of any Station is in
violation or has breached in any material respect the provisions of the
Subordinated Purchase Agreement or any indenture, License, Operating Agreement,
note, lease or other instrument or document to which it is a party or by which
it is bound, nor does there exist any material default, or any event or
condition which, upon notice or lapse of time, or both, would become a material
default, under the Subordinated Purchase Agreement or any such indenture,
License, Operating Agreement, note, lease, or other instrument or document. The
Borrower and each of its Subsidiaries have the legal right and authority to
conduct their respective businesses as now conducted or proposed to be
conducted.
5.12 Statements Not Misleading. No statement, representation or
warranty made by the Borrower or any of its Subsidiaries in or pursuant to this
Agreement or the Schedules or Exhibits attached hereto or any of the Collateral
Documents contains any untrue statement of a material fact, nor omits to
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state a material fact necessary to make such statement not misleading in light
of the circumstances under which such statement was made, or otherwise violates
any federal or state securities laws, rules or regulations. There is no fact
known to the Borrower (other than matters of a general economic nature or
relating to the broadcasting industry generally or matters reflected in the
audited financial statements contained in Exhibit B attached hereto or otherwise
disclosed herein) that has had or could reasonably be expected to have a
Material Adverse Effect.
5.13 Consents or Approvals. No consent, approval or authorization
of, or filing, registration or qualification with, any governmental authority or
any other Person (including, without limitation, the FCC and any other Licensing
Authority) is required to be obtained by the Borrower or any of its Subsidiaries
in connection with the execution, delivery or performance of the Acquisition
Agreements or this Agreement or any of the Collateral Documents, including
without limitation, in connection with the granting of Liens in the Borrower's
partnership interest in the License Partnership or in the capital stock or the
assets of the Borrower and its Subsidiaries, which has not already been obtained
or completed, except for (a) the filing with the FCC of this Agreement and
certain of the Collateral Documents pursuant to FCC rules, which shall be
accomplished within the required time period after the Closing, (b) the filing
of financing statements and other actions expressly required to be taken
pursuant to the Collateral Documents, (c) the consent of the FCC to the extent
required in connection with the exercise by the Administrative Agent or the
Banks of their rights and remedies hereunder or under the Collateral Documents
and (d) the consent of the FCC to the consummation of the Acquisition
Agreements.
5.14 Material Contracts and Commitments. Exhibit G attached hereto
contains a true and complete description of all material contracts and
commitments of the Borrower or any of its Subsidiaries or which relate to a
Station, as of the Closing Date, whether oral or written, including, without
limitation, (a) any security agreement, pledge agreement, mortgage or guaranty;
(b) any material management, construction supervision, service or employment
agreements, conditional sale contract or lease of personal property which
involves expenditures in excess of
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$1,000,000 in any single case; (c) any collective bargaining agreement; (d) any
material contract or commitment for the future purchase or sale of goods which
involves expenditures in excess of $1,000,000 in any single case; (e) any
contract or commitment which involves a material Capital Expenditure in excess
of $1,000,000 in any single case; (f) all Licenses; and (g) all Operating
Agreements. To the best of the Borrower's knowledge, except as disclosed on
Exhibit G, as of the Closing Date, all of the items listed on Exhibit G are in
full force and effect without material default. Exhibit G further identifies
each such contract which requires consent to the granting of a Lien in favor of
the Administrative Agent for the benefit of the Banks on the rights of the
Borrower or its Subsidiaries under such contract. The Borrower has made
available to the Administrative Agent true and complete copies of each of the
above.
5.15 Employee Benefit Plans. Exhibit H contains a true and complete
list of all Plans maintained by the Borrower or any member of the Controlled
Group. Neither the Borrower nor any member of the Controlled Group has or will
have, as of the closings under the Acquisition Agreements, any liability, or
reasonably anticipates any liability, of any kind (other than current expenses
incurred in the ordinary course of business) in excess, in the aggregate, of
$150,000, to or in respect of any Plan or Benefit Arrangement, which liability
is not reflected in the financial statements included in Exhibit B attached
hereto. With respect to the Plans and Benefit Arrangements maintained by the
Borrower or any member of the Controlled Group: (a) each Plan that is intended
to be qualified under Code Section 401(a) is so qualified and has been so
qualified since its adoption, and each trust forming a part thereof is exempt
from tax under Code Section 501(a); (b) each Plan complies in all material
respects with all applicable requirements of law, has been administered in
accordance with its terms and all required contributions have been made; (c)
neither the Borrower nor any member of the Controlled Group knows or has reason
to know that the Borrower or any member of the Controlled Group has engaged in a
transaction which would subject it to any material tax, penalty or liability
under ERISA or the Code for any prohibited transaction; (d) no Plan is subject
to the minimum funding requirements under ERISA Section 302 or Code Section 412,
is a multiemployer plan (as defined in ERISA Section 4001(a)(3)), is a defined
benefit plan (as defined under ERISA Section 3(35) or Code Section 414(j)), or
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is a multiple employer plan (as defined in ERISA Section 4063). No Plan or
Benefit Arrangement maintained by the Borrower or any member of the Controlled
Group is a multiple employer welfare arrangement (as defined in ERISA Section
3(40)).
5.16 Licenses and Operating Agreements. The Licenses and Operating
Agreements shown on Exhibit G constitute all of the Licenses and Operating
Agreements which, as of the Closing Date, are necessary for the lawful
ownership, construction or operation of the Stations and of the other businesses
of the Borrower and its Subsidiaries in the manner and to the full extent they
are currently owned, constructed or operated. Exhibit G sets forth a correct and
complete list, as of the Closing Date, of the expiration date of each License
and of each pending application for a License. Except as specified on Exhibit G,
all of the Licenses relating to the Stations and all other Licenses of the
Borrower and its Subsidiaries have been duly and validly issued or assigned to
and are legally held by the Borrower or one of its Subsidiaries and are in full
force and effect without condition except those of general application. All such
Licenses have been issued in compliance with all applicable laws and
regulations, are legally binding and enforceable in accordance with their terms
and are in good standing. Except as set forth on Exhibit E, the Borrower knows
of no facts or conditions which would constitute grounds for any Licensing
Authority to deny any pending application for a License, to suspend, revoke,
materially adversely modify, designate for a hearing, annul, fail to renew on or
before its renewal date, or renew for less than a full license period any
License or to impose a material financial penalty on the Borrower or any of its
Subsidiaries.
5.17 Material Restrictions. Except as set forth in Exhibit M
attached hereto, neither the Borrower nor any of its Subsidiaries is a party to
any agreement or other instrument or subject to any other restriction which has
had or could reasonably be expected to have a Material Adverse Effect.
5.18 Investment Company Act. The Borrower (a) is not an investment
company as that term is defined in the Investment Company Act of 1940, as
amended, (b) does not directly or indirectly control, and is not directly or
indirectly controlled by, a company which is an investment company as that term
is
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defined in such act and (c) is not otherwise subject to regulation under such
act.
5.19 Absence of Material Adverse Effect. No Material Adverse Effect
has occurred since September 30, 1997.
5.20 Defaults. No Possible Default or Event of Default now exists
or will exist upon the making of any Loan.
5.21 Real Estate. Exhibit I attached hereto lists all real estate
owned as of the Closing Date by the Borrower or any of its Subsidiaries and all
leases pursuant to which the Borrower or any of its Subsidiaries has acquired,
as of the Closing Date, a leasehold interest in real estate. Exhibit I lists the
use of such owned and leased property in the Borrower's or its Subsidiary's
operations.
5.22 Securities Laws. No proceeds of any Loan will be used by the
Borrower or any of its Subsidiaries to acquire any security in any transaction
which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as
amended. Neither the registration of any security under the Securities Act of
1933, as amended, or the securities laws of any state, nor the qualification of
an indenture in respect thereof under the Trust Indenture Act of 1939, as
amended, is required in connection with the consummation of this Agreement or
the Acquisition Agreements or the execution and delivery of the Notes.
5.23 Insurance. All policies of insurance of any kind or nature
owned by or issued to the Borrower or any of its Subsidiaries are in compliance
with the requirements of Section 7.3 and are in full force and effect. In the
past three years neither the Borrower nor any of its Subsidiaries has been
refused insurance for which it applied or had any policy of insurance terminated
(except at its own request).
5.24 Labor Matters. Except as set forth in Exhibit N attached
hereto, there are no material strikes, unfair labor practice charges or other
material labor disputes or grievances pending or, to the best of the Borrower's
knowledge, threatened against the Borrower, any of its Subsidiaries or any
Station. The Borrower has not received any written complaints or knowledge of
any threatened complaints, nor to the best of the Borrower's
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knowledge, are any such complaints on file with any Federal, state or local
governmental agency, alleging employment discrimination by the Borrower or any
of its Subsidiaries or in connection with any Station which would, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
All payments due under any collective bargaining agreement to which the Borrower
or any of its Subsidiaries is a party have been paid or accrued as a liability
on the books of the Borrower or such Subsidiary.
5.25 Environmental Compliance.
Except as set forth in Exhibit J attached hereto and giving effect to
the consummation of the Acquisition Agreements:
(a) The Borrower and each of its Subsidiaries have
obtained all material permits, licenses and other authorizations which are
required under all Environmental Laws. The Borrower and each of its Subsidiaries
is in material compliance with all terms and conditions of all such permits,
licenses and authorizations and are also in material compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Environmental
Law or in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
including, without limitation, all Environmental Laws in all jurisdictions in
which the Borrower or such Subsidiary owns or operates a Station, a facility or
site, arranges or has arranged for disposal or treatment of Hazardous Materials,
solid waste or other wastes, accepts or has accepted for transport any Hazardous
Materials, solid waste or other wastes or holds or has held any interest in real
property or otherwise.
(b) No material Environmental Claim has been issued, no
complaint has been filed, no penalty has been assessed and no litigation,
proceeding, investigation or review is pending or, to the best of the Borrower's
knowledge, threatened by any Person with respect to any alleged failure by the
Borrower, any of its Subsidiaries or any property owned by the Borrower or any
Subsidiary to comply with any Environmental Law or to have any permit, license
or authorization required in connection with the conduct of the business of the
Borrower or any of its
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Subsidiaries or with respect to any generation, treatment, storage, recycling,
transportation, use, disposal or Release of any Hazardous Materials generated by
the Borrower or any of its Subsidiaries or with respect to any real property in
which the Borrower or any of its Subsidiaries holds or has held an interest or
any past or present operation of the Borrower or any of its Subsidiaries.
(c) There are no Environmental Laws requiring any
material work, repairs, construction, Capital Expenditures or other remedial
work of any nature whatsoever, with respect to any real property in which the
Borrower or any of its Subsidiaries holds or has held an interest or any past or
present operation of the Borrower or any Subsidiary.
(d) Neither the Borrower nor any of its Subsidiaries has
handled any Hazardous Material, on any property now or previously owned or
leased by the Borrower or any of its Subsidiaries to an extent that it has, or
could reasonably be expected to have, a Material Adverse Effect.
(e) To the best of the Borrower's knowledge:
(i) no PCBs or asbestos is present at any
property now or previously owned or any premises now or previously leased by the
Borrower or any of its Subsidiaries;
(ii) no underground storage tanks for Hazardous
Materials, active or abandoned, are now or were previously operated at any
property now or previously owned by the Borrower or any of its Subsidiaries,
and, with respect to premises now or previously leased by the Borrower or any of
its Subsidiaries, no underground storage tanks for Hazardous Materials, active
or abandoned, are now or were previously operated by the Borrower or any of its
Subsidiaries;
(iii) no Hazardous Materials have been Released,
in a reportable quantity, where such a quantity has been established by statute,
ordinance, rule, regulation or order, at, on or under any property now or
previously owned by the Borrower or any of its Subsidiaries; and
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(iv) no Hazardous Materials have been otherwise
Released at, on or under any property now or previously owned or any premises
now or previously leased by the Borrower or any of its Subsidiaries to an extent
that it has, or could reasonably be expected to have, a Material Adverse Effect.
(f) Neither the Borrower nor any of its Subsidiaries has
transported or arranged for the transportation of any Hazardous Material to any
location that is listed on the National Priorities List ("NPL") under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), listed for possible inclusion on the NPL by the
Environmental Protection Agency in the Comprehensive Environmental Response and
Liability Information System, as provided for by 40 C.F.R. Section 300.5
("CERCLIS"), or on any similar state or local list or that is the subject of
Federal, state or local enforcement actions or other investigations that may
lead to Environmental Claims against the Borrower or any of its Subsidiaries.
(g) No Hazardous Material generated by the Borrower or
any of its Subsidiaries has been recycled, treated, stored, disposed of or
Released by the Borrower or any of its Subsidiaries at any location.
(h) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of the Borrower or any of its
Subsidiaries and no property now or previously owned or premises leased by the
Borrower or any of its Subsidiaries is listed or proposed for listing on the
National Priorities list promulgated pursuant to CERCLA, on CERCLIS or on any
similar state list of sites requiring investigation or clean-up.
(i) There are no Liens arising under or pursuant to any
Environmental Laws on any of the property owned or premises leased by the
Borrower or any of its Subsidiaries, and no government actions have been taken
or are in process which could subject any of such property to such Liens, and
neither the Borrower nor any of its Subsidiaries would be required to place any
notice or restriction relating to the presence of Hazardous Materials at any
property owned by it in any deed to such property.
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(j) Neither the Borrower nor any of its Subsidiaries has
retained or assumed any liabilities (contingent or otherwise) in respect of any
Environmental Claims under the terms of any contract or agreement or by
operation of law as a result of the sale of assets or stock.
(k) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or which are in
the possession of the Borrower or any of its Subsidiaries in relation to any
property or facility now or previously owned or leased by the Borrower or such
Subsidiary which have not been made available to the Banks.
5.26 Solvency. The Borrower has received, or has the right
hereunder to receive, consideration which is the reasonable equivalent value of
the obligations and liabilities that the Borrower has incurred to the Banks. The
Borrower is not insolvent as defined in Section 101 of Title 11 of the United
States Code or any applicable state insolvency statute, nor, after giving effect
to the consummation of the transactions contemplated herein and in the
Acquisition Agreements, will the Borrower be rendered insolvent by the execution
and delivery of this Agreement, the Notes or the Collateral Documents to the
Banks. The Borrower is not engaged or about to engage in any business or
transaction for which the assets retained by it shall be an unreasonably small
capital, taking into consideration the obligations to the Banks incurred
hereunder. The Borrower does not intend to, nor does it believe that it will,
incur debts beyond its ability to pay them as they mature.
5.27 Subordinated Purchase Agreement. There has been no amendment
to, or waiver of any provision of, the Subordinated Purchase Agreement since
August 1, 1996. No default has occurred under the Subordinated Purchase
Agreement or will exist after giving effect to the execution, delivery and
performance of this Agreement.
SECTION 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BANKS.
The obligations of the Banks to make any Loan and to issue any Letter
of Credit and the performance by the Banks of the other actions to be taken by
them on or after the Closing Date
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are subject to the fulfillment or waiver in writing of each of the following
conditions precedent. The Borrower shall deliver to the Administrative Agent
copies for each Bank of each document, instrument or other item to be delivered
pursuant to this Section 6.
6.1 Compliance. All of the representations and warranties of the
Borrower and its Subsidiaries herein and in the Collateral Documents shall be
true in all material respects on and as of the Closing Date, the date of
issuance of any Letter of Credit and the date of any subsequent Loan (other than
a Loan resulting from the funding of a Letter of Credit), as if made on and as
of such date (except to the extent that such representations and warranties
expressly relate to an earlier date, in which case such representations and
warranties shall be true in all material respects as of such earlier date) both
before and after giving effect to the making of the proposed loan or the
issuance of the proposed Letter of Credit. The Borrower and its Subsidiaries
shall have performed and shall be in compliance with all the provisions of this
Agreement and each Collateral Document, and no Possible Default or Event of
Default shall have occurred and be continuing, on and as of the Closing Date and
the date of any subsequent Loan (other than a Loan resulting from the funding of
a Letter of Credit) or the issuance of a Letter of Credit, before and after
giving effect to the making of the proposed Loan or the issuance of the proposed
Letter of Credit. On the Closing Date and on the date of each subsequent Loan
(other than a Loan resulting from the funding of a Letter of Credit) and the
date of issuance of any Letter of Credit, the Borrower shall deliver to the
Banks a certificate, dated as of such date, and signed by an executive officer
of the Borrower, certifying compliance with the conditions of this Section 6.1.
Each request by the Borrower for a Loan shall, in and of itself, constitute a
representation and warranty that the Borrower, as of the date of such Loan, is
in compliance with this Section.
6.2 Security Agreements. The Borrower shall have executed and
delivered to the Administrative Agent a Security Agreement in form and substance
satisfactory to the Administrative Agent (the "Borrower Security Agreement"),
granting to the Administrative Agent, for the benefit of the Banks, a first
priority security interest in substantially all of the Borrower's personal
property; and the Borrower Security Agreement, and the security
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interests granted pursuant thereto, shall be in full force and effect. The
License Partnership shall have executed and delivered to the Administrative
Agent a Security Agreement in form and substance satisfactory to the
Administrative Agent (the "Subsidiary Security Agreement"), granting to the
Administrative Agent, for the benefit of the Banks, a first priority security
interest in substantially all of the License Partnership's personal property;
and the Subsidiary Security Agreement, and the security interests granted
pursuant thereto, shall be in full force and effect.
6.3 Pledge Agreements.
(a) All of the stockholders of the Borrower shall have
executed and delivered to the Administrative Agent a Pledge Agreement in form
and substance satisfactory to the Administrative Agent (the "Borrower Pledge
Agreement"), granting to the Administrative Agent, for the benefit of the Banks,
a first priority security interest in all of the issued and outstanding capital
stock of the Borrower; such stockholders shall have delivered to the
Administrative Agent stock certificates evidencing all of such capital stock and
stock powers, duly endorsed in blank, with respect thereto; the Borrower and
such stockholders shall have taken all other actions as may be required to
effect the grant and perfection of the Administrative Agent's security interest
in such capital stock; and the Borrower Pledge Agreement, and the security
interests granted pursuant thereto, shall be in full force and effect.
(b) The Borrower shall have executed and delivered to the
Administrative Agent a Pledge Agreement in form and substance satisfactory to
the Administrative Agent (together with any pledge agreements executed and
delivered pursuant to Section 8.10(b) or (c), collectively, the "Subsidiary
Pledge Agreements"), granting to the Administrative Agent, for the benefit of
the Banks, a first priority security interest in all of the issued and
outstanding partnership interests in the License Partnership held by the
Borrower; the Borrower shall have taken all actions as may be required to effect
the grant and perfection of the Administrative Agent's security interest in such
partnership interests; and such Subsidiary Pledge Agreement, and the security
interests granted pursuant thereto, shall be in full force and effect.
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6.4 Financing Statements. Any financing statements required by the
Security Agreements and the Pledge Agreements shall have been filed for record
with the appropriate governmental authorities.
6.5 Subsidiary Guaranty. The License Partnership shall have
executed and delivered to the Administrative Agent, for the benefit of the
Banks, a guaranty (the "Guaranty"), in form and substance satisfactory to the
Administrative Agent, pursuant to which the License Partnership shall guarantee
the Obligations of the Borrower to the Banks.
6.6 Opinion of Borrower's Counsel. On the Closing Date, the
Administrative Agent shall have received the favorable written opinions of
general counsel to the Borrower and the Subsidiaries, of Pennsylvania counsel to
the Borrower and the Subsidiaries and of FCC counsel to the Borrower and the
Subsidiaries, in each case dated the Closing Date, addressed to the Banks and in
form and substance satisfactory to the Administrative Agent.
6.7 Consummation of Acquisition Agreements. On or prior to the
date on which any Loan is made hereunder the proceeds of which will be used to
pay any part of the purchase price of a Permitted Acquisition, the Borrower
shall have delivered to the Administrative Agent a certified copy of the
Acquisition Agreement, and of all agreements, documents and instruments entered
into in connection therewith, relating to such Permitted Acquisition. The
transactions contemplated by such Acquisition Agreement shall have been
consummated, or shall be consummated simultaneously with the making of such
Loan, without the waiver of any material term or condition by any party thereto,
and, except as expressly permitted by the Administrative Agent, the FCC consent
to the assignment of the FCC Licenses relating to Stations being acquired
pursuant to such Permitted Acquisition shall have become a Final Order. Without
limiting the foregoing sentence, the Borrower or a Subsidiary of the Borrower
shall have purchased pursuant to such Acquisition Agreement substantially all of
the assets being acquired free and clear of all Liens, except Permitted Liens.
The consummation of the transactions contemplated by such Acquisition Agreement
shall be completed in a manner satisfactory to the Administrative Agent, and the
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Administrative Agent shall have received conformed copies or photocopies of all
documents relating thereto. The Borrower shall use its reasonable best efforts
to cause all opinions and certificates of the seller under such Acquisition
Agreement delivered in connection with such closing to be addressed to the
Banks.
6.8 Financial Information.
(a) Agreed Upon Procedures Report. On or prior to the
date on which any Loan is made hereunder the proceeds of which will be used to
pay any part of the purchase price of a Permitted Acquisition, the purchase
price of which is in excess of $10,000,000, the Borrower shall have delivered to
the Administrative Agent a report, in form and substance satisfactory to the
Administrative Agent relating to the financial condition of the stations being
acquired pursuant to such Permitted Acquisition, signed by an accounting or
consulting firm acceptable to the Administrative Agent and prepared in
accordance with the procedures reasonably requested by the Administrative Agent.
(b) Pro Forma Financial Statements. On the Closing Date,
the Borrower shall have delivered to the Administrative Agent (i) a consolidated
pro forma balance sheet as of December 31, 1997 and income statement, for the
twelve month period then ended, after giving effect to the closing under this
Agreement, which pro forma financial statements may contain certain adjustments
acceptable to the Administrative Agent and described therein and (ii) a
certificate in form and substance satisfactory to the Administrative Agent
showing in detail the calculation of the Applicable Margin (using pro forma
twelve month trailing cash flow as of December 31, 1997) after giving effect to
the closings under this Agreement.
(c) Compliance Certificate. On, or one Banking Day prior
to, the date of each borrowing hereunder of $5,000,000 or more, the date of each
issuance of a Letter of Credit with a stated amount of $5,000,000 or more, and,
to the extent requested by the Administrative Agent, the date of any other
borrowing hereunder or issuance of a Letter of Credit, the Borrower shall have
delivered to the Administrative Agent a pro forma compliance certificate using
the most recently available quarterly financial
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statements in form and substance satisfactory to the Administrative Agent
showing the Leverage Ratio as the date of such borrowing or issuance of a Letter
of Credit and the Borrower's compliance on a pro forma basis with the financial
covenants set forth in Section 8.
(d) Subordinated Purchase Agreement. On the Closing Date,
the Borrower shall have provided to the Administrative Agent evidence
satisfactory to the Administrative Agent that the execution, delivery and
performance of this Agreement and the incurrence of Indebtedness by the Borrower
hereunder are permitted pursuant to Section 7.2(a) and Section 7.7(c) of the
Subordinated Purchase Agreement.
6.9 Borrowing Request. On the date of each Loan, the Borrower
shall have delivered to the Administrative Agent a borrowing request,
substantially in the form attached hereto as Exhibit O, for such Loan in form
and substance satisfactory to the Administrative Agent, setting forth (a) the
application of the proceeds of such Loan, (b) evidence that such application is
permitted pursuant to Section 7.1, (c) the recipient, the amount of the payment
and the wire transfer instructions, and (d) a certificate from a financial
officer of the Borrower, in form and substance acceptable to the Administrative
Agent, that the entire amount of such Loan, together with the aggregate amount
of all outstanding Loans, constitutes "Senior Debt" as that term is defined in
the Subordinated Purchase Agreement.
6.10 Insurance Certificates. On the Closing Date, the Borrower
shall have furnished to the Administrative Agent certificates of insurance
together with copies, if requested by the Administrative Agent, of all policies
or other satisfactory evidence that the insurance required by Section 7.3 is in
full force and effect.
6.11 Corporate and Partnership Documents. On the Closing Date, the
Borrower shall deliver to the Administrative Agent the following:
(a) certificates of good standing for the Borrower and
the License Partnership from the Secretary of State of the Commonwealth of
Pennsylvania and from the Secretary of State of each other state in which the
Borrower or the License Partnership
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is qualified or registered to do business, in each case dated as
of a date as near to the Closing Date as practicable;
(b) a certificate signed by the Secretary or Assistant
Secretary of the Borrower, dated as of the Closing Date, certifying that
attached thereto are true and complete copies of (i) the Articles of
Incorporation and By-Laws of the Borrower, (ii) the Certificate of Limited
Partnership and the Limited Partnership Agreement of the License Partnership;
and (iii) resolutions adopted by the Board of Directors of the Borrower
authorizing the execution, delivery and performance of this Agreement, the
Collateral Documents and the Obligations;
(c) incumbency certificates for the Borrower and the
License Partnership; and
(d) such other documents as any Bank may reasonably
request in connection with the proceedings taken by the Borrower or any of its
Subsidiaries authorizing this Agreement and the Collateral Documents.
6.12 Lien Searches, Consents and Releases of Liens. The
Administrative Agent shall have received: (a) certified copies of UCC, judgment
and tax lien search reports listing all effective financing statements and other
Liens on any of the property of the Borrower or any Subsidiary, (b) consents to
the granting of Liens in all Operating Agreements and other material contracts
and leases of the Borrower and each of its Subsidiaries, which by their terms
require such consent, and (c) releases of any existing Liens encumbering any
assets of the Borrower or any of its Subsidiaries, except for Permitted Liens.
6.13 No Order, Judgment or Decree. No order, judgment or decree of
any court, arbitrator or governmental authority shall purport to enjoin or
restrain the Banks from making the Loans.
6.14 No Material Adverse Effect. There shall have occurred no
Material Adverse Effect since September 30, 1997.
6.15 Fee Letters. The Borrower shall have paid all fees, expenses
and other amounts due pursuant hereto and pursuant to the Fee Letters.
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6.16 Legal Approval. All legal matters incident to this Agreement
and the consummation of the transactions contemplated hereby shall be
satisfactory to Dow, Lohnes & Albertson, PLLC, special counsel to the
Administrative Agent.
6.17 Other Documents. The Administrative Agent shall have received
all Collateral Documents duly executed, and each Bank shall have received such
other certificates, opinions, agreements and documents, in form and substance
satisfactory to it, as it may reasonably request.
SECTION 7 AFFIRMATIVE COVENANTS OF THE BORROWER.
The Borrower agrees with the Banks that so long as this Agreement shall
remain in effect or any of the Obligations shall remain unpaid or to be
performed, or any Letter of Credit remains outstanding, it shall perform and
comply with the affirmative covenants contained in this Section.
7.1 Use of Proceeds. The Borrower shall use the proceeds of the
Loans only for the following purposes: (a) to refinance on the Closing Date
existing indebtedness under the Borrower's senior secured credit facility, (b)
to fund draws on the Letters of Credit, (c) to pay all or a portion of the
purchase price of Permitted Acquisitions, (d) for Capital Expenditures, (e) for
Capital Distributions permitted pursuant to Section 8.9, (f) to fund investments
permitted pursuant to Section 8.11(g), and (g) for general corporate and working
capital purposes.
7.2 Continued Existence; Maintenance of Rights and Licenses;
Compliance with Law. The Borrower shall, and shall cause each of its
Subsidiaries to, do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its corporate or partnership existence and its
material rights and Licenses. Without limiting the generality of the foregoing,
the Borrower shall, and shall cause each of its Subsidiaries to, maintain in
full force and effect, until termination in accordance with their respective
terms, any and all Licenses, Operating Agreements and other material contracts
and other rights necessary to operate the Stations, not breach or violate the
same in any material respect, and take all actions which may be required to
comply in all material respects with all applicable laws, statutes, rules,
regulations, orders and decrees
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now in effect or hereafter promulgated by any governmental authority. The
Borrower shall, and shall cause each of its Subsidiaries to, obtain, renew and
extend all of the foregoing rights, Licenses and the like which may be necessary
for the continuance of the operation of the Stations.
7.3 Insurance. The Borrower shall, and shall cause each of its
Subsidiaries to, keep its insurable properties insured to the full replacement
cost thereof at all times by financially sound and reputable insurers reasonably
acceptable to the Administrative Agent, and maintain such other insurance, to
such extent and against such risks, including fire, lightning, vandalism,
malicious mischief, flood (to the extent required by the Administrative Agent,
if any of the Borrower's or any of its Subsidiaries' property is located in an
identified flood hazard area, in which insurance has been made available
pursuant to the National Flood Insurance Act of 1968) and other risks insured
against by extended coverage, as is customary with companies in the broadcasting
business. All such insurance shall be in amounts sufficient to prevent the
Borrower or any of its Subsidiaries from becoming a coinsurer, shall name the
Administrative Agent, for the benefit of the Banks, as loss payee and may
contain loss deductible provisions which shall not exceed $100,000 (or, in the
case of earthquake, flood and windstorm coverage, $250,000). The Borrower shall
maintain, for itself and its Subsidiaries, in full force and effect liability
insurance, business interruption insurance, errors and omissions insurance,
general accident and public liability insurance and all other insurance as is
usually carried by companies engaged in the same or similar businesses similarly
situated against claims for personal or bodily injury, death or property damage
occurring upon, in, about or in connection with the use or operation of any
property or motor vehicles owned, occupied, controlled or used by the Borrower,
its Subsidiaries and their employees or agents, or arising in any other manner
out of the business conducted by the Borrower and its Subsidiaries. All of such
insurance shall be in amounts reasonably satisfactory to the Administrative
Agent and shall be obtained and maintained by means of policies with generally
recognized, responsible insurance companies authorized to do business in such
states as may be necessary depending upon the locations of the Borrower's and
its Subsidiaries' assets and shall name the Administrative Agent, for the
benefit of the Banks, as an additional insured or loss payee, as the case may
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be. The insurance to be provided may be blanket policies. Each policy of
insurance shall be written so as not to be subject to cancellation or
substantial modification without not less than thirty days advance written
notice to the Administrative Agent. The Borrower shall furnish the
Administrative Agent annually with certificates or other evidence satisfactory
to the Administrative Agent that the insurance required hereby has been obtained
and is in full force and effect and, prior to the expiration of any such
insurance, the Borrower shall furnish the Administrative Agent with evidence
satisfactory to the Administrative Agent that such insurance has been renewed or
replaced. The Borrower shall, upon request of the Administrative Agent, furnish
the Administrative Agent such information about such insurance as the
Administrative Agent may from time to time reasonably request.
7.4 Obligations and Taxes. The Borrower shall, and shall cause
each of its Subsidiaries to, pay or perform all of its material Indebtedness and
other material liabilities and obligations in a timely manner in accordance with
normal business practices and with the terms governing the same. The Borrower
shall, and shall cause each of its Subsidiaries to, comply with the terms and
covenants of all material agreements and all material leases of real or personal
property and shall keep them all in full force and effect until termination
thereof in accordance with their respective terms. The Borrower shall, and shall
cause each of its Subsidiaries to, pay and discharge promptly all taxes,
assessments and governmental charges or levies imposed upon it or in respect of
its property before the imposition of any penalty, as well as all lawful claims
for labor, materials, supplies or other matters which, if unpaid, might become a
Lien or charge upon such properties or any part thereof; provided, however, that
neither the Borrower nor any of its Subsidiaries shall be required to pay and
discharge any such tax, assessment, charge, levy or claim so long as (a) the
validity thereof is being contested diligently and in good faith by appropriate
proceedings and the enforcement thereof is stayed, pending the outcome of such
proceedings, (b) the Borrower or such Subsidiary has set aside on its books
adequate reserves in accordance with GAAP with respect thereto, and (c) such
contest will not endanger the Lien of the Administrative Agent or the Banks in
any of the Borrower's or such Subsidiary's assets.
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7.5 Financial Statements and Reports. The Borrower shall, and
shall cause each of its Subsidiaries to, maintain true and complete books and
records of account in accordance with GAAP. The Borrower shall furnish to the
Administrative Agent, for delivery to the Banks, the following financial
statements and projections at the following times:
(a) As soon as available, but in no event later than
ninety days after the end of each fiscal year of the Borrower, the Borrower
shall furnish (i) audited consolidated financial statements, including audited
consolidated balance sheets and income and expense statements, of the Borrower
and its Subsidiaries as of the close of such fiscal year reflecting the results
of their operations during such fiscal year, and a consolidated statement of
cash flows for such fiscal year, together with such additional statements,
schedules and footnotes as are customary in a complete accountant's report; such
financial statements shall be certified by independent certified public
accountants selected by the Borrower and acceptable to the Administrative Agent,
and the opinion of such accountants shall be unqualified; and (ii) a statement
signed by such accountants to the effect that in connection with their
examination of such financial statements they have reviewed the provisions of
this Agreement and have no knowledge of any event or condition which constitutes
an Event of Default or Possible Default or, if they have such knowledge,
specifying the nature and period of existence thereof; provided, however, that
in issuing such statement, such independent accountants shall not be required to
go beyond normal auditing procedures conducted in connection with their opinion
referred to above;
(b) As soon as available, but in no event later than
forty-five days after the end of each fiscal quarter of the Borrower (or, in the
case of the last quarter of the Borrower's fiscal year, sixty days after the end
of such quarter), the Borrower shall furnish unaudited consolidated and
consolidating financial statements, including consolidated and consolidating
balance sheets and income and expense statements, of the Borrower and its
Subsidiaries as of the end of such period reflecting the results of their
operations during such period and for the then elapsed portion of the fiscal
year, and a consolidated statement of cash flows for the portion of the fiscal
year ended with the last day of such quarter; all such financial statements
shall be
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in form and detail satisfactory to the Administrative Agent, and
shall be certified as to accuracy and completeness by a financial
officer of the Borrower;
(c) As soon as available, but in no event later than
forty-five days after the end of each month (or, in the case of the last month
of the Borrower's fiscal year, sixty days after the end of such month), the
Borrower shall furnish unaudited statements of income and expense for each
Station, which shall contain a comparison with the budget or projections for
such period and a comparison to the comparable period for the prior year, and
which shall be certified by a financial officer of the Borrower; such financial
statements for the twelfth month of each fiscal year may be preliminary
statements;
(d) The financial statements required under (a) and (b)
above shall be accompanied by a compliance certificate in the form attached
hereto as Exhibit K of a financial officer of the Borrower (i) setting forth the
computations showing compliance with the financial covenants set forth in
Section 8 below, and (ii) certifying that no Possible Default or Event of
Default has occurred, or if any Possible Default or Event of Default has
occurred, stating the nature thereof and the actions the Borrower intends to
take in connection therewith;
(e) The Borrower shall furnish (i) no later than thirty
days after the commencement of each fiscal year, an annual operating budget or
fiscal projections for such fiscal year, and (ii) promptly upon preparation
thereof, any material revisions of such annual budget or fiscal projections;
(f) Promptly upon their becoming available, the Borrower
shall furnish (i) copies of any periodic or special reports filed by the
Borrower or any of its Subsidiaries with the FCC or any other federal, state or
local governmental agency or authority if such reports indicate any material
change in the ownership of the Borrower or such Subsidiary, or any materially
adverse change in the business, operations, affairs or condition of the Borrower
or such Subsidiary, and (ii) copies of any material notices and other material
communications from the FCC or any other federal, state or local governmental
agency or authority which specifically relate to the Borrower, any of its
Subsidiaries, any Station or any material License, and the
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substance of which relates to a matter that could reasonably be
expected to have a Material Adverse Effect;
(g) The Borrower shall furnish (i) upon request, promptly
after the filing thereof with the Internal Revenue Service, copies of each
annual report with respect to each Plan established or maintained by the
Borrower or any member of the Controlled Group for each plan year, including (A)
where required by law, a statement of assets and liabilities of such Plan as of
the end of such plan year and statements of changes in fund balance and in
financial position, or a statement of changes in net assets available for plan
benefits, for such plan year, certified by an independent public accountant
satisfactory to the Administrative Agent, and (B) if prepared by or available to
the Borrower, an actuarial statement of such Plan applicable to such plan year,
certified by an enrolled actuary of recognized standing acceptable to the
Administrative Agent; and (ii) promptly after receipt thereof, a copy of any
notice the Borrower or a member of the Controlled Group may receive from the
Department of Labor or the Internal Revenue Service with respect to any Plan
(other than notices of general application) which could result in a material
liability to the Borrower; the Borrower will promptly notify the Banks of any
material taxes assessed, proposed to be assessed or which the Borrower has
reason to believe may be assessed against the Borrower or any member of the
Controlled Group by the Internal Revenue Service with respect to any Plan or
Benefit Arrangement; and
(h) Upon the Administrative Agent's written request, such
other information about the financial condition, properties and operations of
the Borrower or any of its Subsidiaries as any Bank may from time to time
reasonably request.
7.6 Notices. The Borrower shall give the Administrative Agent, for
distribution to the Banks, notice (a) within five days after its receipt of
notice thereof, of any action, suit, investigation or proceeding by or against
the Borrower or any of its Subsidiaries, which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect, including, without
limitation, any material admonition, censure or adverse citation or order by the
FCC or any other governmental authority or regulatory agency, (b) within three
days after its receipt of notice thereof, (i) of any action or event
constituting an event of default or violation of the Subordinated
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Purchase Agreement, or any License, Operating Agreement or other material
contract to which the Borrower or any of its Subsidiaries is a party or by which
the Borrower or any such Subsidiary is bound, and (ii) of any competing
application, petition to deny or other opposition to any license renewal
application filed by the Borrower or any of its Subsidiaries with the FCC, if
such event of default, violation or other matter could reasonably be expected to
have a Material Adverse Effect, (c) within three days after its receipt of
notice thereof, of the occurrence of any Possible Default or Event of Default
and the actions the Borrower intends to take in connection therewith, (d) within
five days after its receipt of notice thereof, of any cancellation of or any
material amendment to any of the insurance policies maintained in accordance
with the requirements of this Agreement, except for cancellations and amendments
that occur in the ordinary course of business, (e) promptly after the occurrence
thereof, of any material, adverse change in the business or financial condition
of the Borrower or any of its Subsidiaries, and (f) promptly after the
occurrence thereof, of any material strike, labor dispute, slow down or work
stoppage due to a labor disagreement (or any material development regarding any
thereof) affecting the Borrower or any of its Subsidiaries.
7.7 Maintenance of Property. The Borrower shall, and shall cause
each of its Subsidiaries to, at all times maintain and preserve its towers,
machinery, equipment, motor vehicles, fixtures and other property in good
working order, condition and repair, normal wear and tear excepted, and in
compliance with all material applicable standards, rules or regulations imposed
by any governmental authority or agency (including, without limitation, the FCC,
the Federal Aviation Administration or any other Licensing Authority) or policy
of insurance, except for such property which, in the judgment of the Borrower,
is no longer necessary to the business of the Borrower or any of its
Subsidiaries.
7.8 Information and Inspection. The Borrower shall furnish to the
Administrative Agent and the Banks from time to time, promptly upon request,
information reasonably requested by the Administrative Agent or any Bank
pertaining to any covenant, provision or condition hereof, or to any matter
connected with the books, records, operations, financial condition, properties,
activities or business of the Borrower or of any of its
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Subsidiaries. At all reasonable times, the Borrower shall permit any authorized
representative designated by any Bank to visit and inspect any of the properties
of the Borrower or any of its Subsidiaries, and their books and records, and to
take extracts therefrom and make copies thereof, and to discuss the Borrower's
and its Subsidiaries' affairs, finances and accounts with the management of the
Borrower and its Subsidiaries and with the Borrower's independent accountants.
7.9 Maintenance of Liens. The Borrower shall do all things
necessary or requested by the Administrative Agent to preserve and perfect the
Liens of the Administrative Agent, for the benefit of the Banks, arising
pursuant hereto and pursuant to the Collateral Documents as first Liens, except
for Permitted Liens, and to insure that the Administrative Agent, for the
benefit of the Banks, has a Lien on substantially all of the personal property
of the Borrower and its Subsidiaries. If the Borrower issues any capital stock
prior to the termination of the Borrower Pledge Agreement pursuant to Section
8.10(c), it shall cause the holder of such stock to pledge such stock to the
Administrative Agent, for the benefit of the Banks, as security for the
Obligations pursuant to a pledge agreement in form and substance satisfactory to
the Administrative Agent. If the Borrower or any of its Subsidiaries enters into
a new Operating Agreement or other material contract which prohibits the
assignment thereof or the granting of a security interest therein without the
consent of the other party, the Borrower shall use its best efforts to obtain
the written consent of such other party to the grant to the Administrative
Agent, for the benefit of the Banks, of a security interest therein pursuant to
the Security Agreements; provided, however, that the Borrower shall not be
obligated to accept any material adverse change in any such agreement or
contract or expend a material amount in attempting to obtain such consent.
7.10 Title To Property. The Borrower shall, and shall cause each of
its Subsidiaries to, own and hold title to all of its assets in its own name and
not in the name of any nominee.
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7.11 Environmental Compliance and Indemnity.
(a) The Borrower shall, and shall cause each of its
Subsidiaries to, comply in all material respects with any and all Environmental
Laws, including, without limitation, all Environmental Laws in jurisdictions in
which the Borrower or any of its Subsidiaries owns or operates a facility or
site, arranges for disposal or treatment of Hazardous Materials, solid waste or
other wastes, accepts for transport any Hazardous Materials, solid wastes or
other wastes or holds any interest in real property or otherwise. Neither the
Borrower nor any of its Subsidiaries shall cause or allow the Release of
Hazardous Materials, solid waste or other wastes on, under or to any real
property in which the Borrower or such Subsidiary holds any interest or performs
any of its operations, in material violation of any Environmental Law. The
Borrower shall notify the Banks promptly after its receipt of notice thereof, of
any Environmental Claim which the Borrower receives involving any potential or
actual material liability of the Borrower or any of its Subsidiaries arising in
connection with any noncompliance with or violation of the requirements of any
Environmental Law or a material Release or threatened Release of any Hazardous
Materials, solid waste or other waste into the environment. The Borrower shall
promptly notify the Banks (i) of any material Release of Hazardous Material on,
under or from the real property in which the Borrower or any of its Subsidiaries
holds or has held an interest, upon the Borrower's learning thereof by receipt
of notice that the Borrower or any of its Subsidiaries is or may be liable to
any Person as a result of such Release or that the Borrower or such Subsidiary
has been identified as potentially responsible for, or is subject to
investigation by any governmental authority relating to, such Release, and (ii)
of the commencement or threat of any judicial or administrative proceeding
alleging a violation of any Environmental Laws.
(b) If the Administrative Agent at any time has a
reasonable basis to believe that there may be a violation of any Environmental
Law by, or any liability arising thereunder of, the Borrower or any of its
Subsidiaries or related to any real property owned, leased or operated by the
Borrower or any of its Subsidiaries or real property adjacent to such real
property, which violation or liability could reasonably be expected to have a
Material Adverse Effect, then the Borrower shall, upon request from the
Administrative Agent, provide the Administrative Agent
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with such reports, certificates, engineering studies or other written material
or data as the Administrative Agent may require so as to satisfy the
Administrative Agent that the Borrower or such Subsidiary is in material
compliance with all applicable Environmental Laws.
(c) The Borrower shall defend, indemnify and hold the
Agents and the Banks, and their respective officers, directors, shareholders,
employees, agents, affiliates, successors and assigns harmless from and against
all costs, expenses, claims, demands, damages, penalties and liabilities of
every kind or nature whatsoever incurred by them (including reasonable attorneys
fees) arising out of, resulting from or relating to (i) the noncompliance of the
Borrower, any of its Subsidiaries or any property owned or leased by the
Borrower or any of its Subsidiaries with any Environmental Law, or (ii) any
investigatory or remedial action involving the Borrower, any of its Subsidiaries
or any property owned or leased by the Borrower or any of its Subsidiaries and
required by Environmental Laws or by order of any governmental authority having
jurisdiction under any Environmental Laws, or (iii) any injury to any person
whatsoever or damage to any property arising out of, in connection with or in
any way relating to the breach of any of the environmental warranties or
covenants contained in this Agreement or any facts or circumstances that cause
any of the environmental representations or warranties contained in this
Agreement to cease to be true, or (iv) the existence, treatment, storage,
Release, generation, transportation, removal, manufacture or other handling of
any Hazardous Material on or affecting any property owned or leased by the
Borrower or any of its Subsidiaries, or (v) the presence of any
asbestos-containing material or underground storage tanks, whether in use or
closed, under or on any property owned or leased by the Borrower or any of its
Subsidiaries; provided, however, that the foregoing indemnity shall not apply to
any such costs, expenses, claims, demands, damages, penalties or liabilities
that are determined in a final non-appealable order of a court of competent
jurisdiction to have arisen solely out of the gross negligence or willful
misconduct of the indemnified person.
7.12 Rate Hedging Obligations. The Borrower shall within forty-five
days after the Closing enter into, and shall at all times thereafter maintain in
full force and effect, agreements having an initial term of at least three years
and in form and
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substance reasonably satisfactory to the Administrative Agent regarding Rate
Hedging Obligations so that the sum of the notional amount subject to such
agreements plus the outstanding principal amount of Indebtedness of the Borrower
which bears interest at a fixed rate equals at all times at least 50% of the
principal amount of Total Debt then outstanding.
7.13 FCC Consents. The Borrower acknowledges that certain
transactions contemplated by this Agreement or the Collateral Documents, and
certain actions which may be taken by the Administrative Agent or the Banks in
the exercise of their rights under this Agreement or the Collateral Documents,
may require the consent of the FCC. If counsel to the Administrative Agent
determines that the consent of the FCC is required in connection with the
execution, delivery and performance of any of the aforesaid documents or any
documents delivered to the Administrative Agent or the Banks in connection
therewith or as a result of any action which may be taken pursuant thereto, then
the Borrower, at its sole cost and expense, shall use its best efforts, and
shall cause its Subsidiaries to use their best efforts, to secure such consent
and to cooperate with the Administrative Agent and the Banks in any action
commenced by the Administrative Agent or the Banks to secure such consent. The
Borrower shall not take any action, and shall not permit any of its Subsidiaries
to take any action, which interferes with the exercise or completion of any such
action taken by the Administrative Agent or the Banks. The Borrower further
consents to the transfer of control or assignment of Licenses to a receiver or
trustee or similar official or to any purchaser of the collateral securing the
Loans pursuant to any public or private sale, judicial sale, foreclosure or
exercise of other remedies available to the Administrative Agent or the Banks as
permitted by applicable law upon the occurrence of an Event of Default.
7.14 Subordinated Purchase Agreement. The Borrower shall deliver to
the Administrative Agent no later than October 31, 2003, a plan satisfactory to
the Banks holding at least 66 2/3% of the Commitment, including the Agents,
setting forth the method by which the Borrower intends either to raise funds
sufficient to pay in full the Indebtedness outstanding under the Subordinated
Purchase Agreement on its scheduled payment date or to restructure such
Indebtedness so that its scheduled payment date is no earlier than six months
after the Termination Date. Such
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plan shall be consistent with the terms and conditions of this Agreement. Such
plan shall set forth the time periods within which the Borrower will have
accomplished the various steps necessary to implement its plan, such as (a) the
obtaining of a commitment from the Subordinated Lender to restructure such
Indebtedness to have a final maturity no earlier than six months after the
Termination Date or (b) receiving an executed subscription agreement pursuant to
which a potential new stockholder agrees to purchase new shares of the Borrower
or (c) receiving an executed contribution agreement pursuant to which an
existing shareholder agrees to contribute to the capital of the Borrower.
Thereafter, the Borrower shall perform in accordance with the time limits set
forth in such plan, so that on the scheduled payment date, the Borrower will
either have funds sufficient to pay such Indebtedness in full or will have
restructured such Indebtedness in a manner acceptable to the Banks holding at
least 66 2/3% of the Commitment, including the Agents.
SECTION 8 NEGATIVE COVENANTS OF THE BORROWER.
The Borrower agrees with the Banks that so long as this Agreement shall
remain in effect or any of the Obligations shall remain unpaid or to be
performed, or any Letter of Credit remains outstanding, the Borrower shall not,
directly or indirectly, take any of the actions set out in this Section 8 nor
permit any of the conditions set out herein to occur.
8.1 Indebtedness. The Borrower shall not, and shall not permit any
of its Subsidiaries to, incur, create, assume or permit to exist any
Indebtedness, except:
(a) the Obligations;
(b) Indebtedness permitted under Sections 8.4, 8.5 or 8.6
hereof and any other Indebtedness secured by a Permitted Lien;
(c) unsecured trade accounts payable and other unsecured
current Indebtedness incurred in the ordinary course of business (but excluding
any Indebtedness for borrowed money);
(d) Indebtedness for taxes, assessments, governmental
charges, liens or similar claims to the extent that payment
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thereof shall not be required to be made by the provisions of
Section 7.4;
(e) Indebtedness incurred in respect of Rate Hedging
Obligations required pursuant to Section 7.12;
(f) Indebtedness of the Borrower owing to the
Subordinated Lender incurred pursuant to the terms of the Subordinated Purchase
Agreement as in effect on the date hereof;
(g) Subordinated Debt of the Borrower so long as (i) no
principal is payable on such Indebtedness prior to the date that is at least six
months after the Termination Date, (ii) the aggregate principal amount of all
Indebtedness incurred pursuant to this clause 8.1(g) does not exceed at any time
$150,000,000, (iii) the terms and conditions of all agreements, documents and
instruments evidencing or governing such Indebtedness, including the terms and
conditions of subordination, shall be satisfactory to the Required Banks, (iv)
the Borrower shall have delivered to the Administrative Agent and the Banks
revised projections for the period from the incurrence of such Indebtedness
through the Termination Date which shall be in form and substance reasonably
satisfactory to the Administrative Agent and shall demonstrate the Borrower's
ability to comply with the financial covenants contained in Section 8, and the
Borrower shall have demonstrated to the satisfaction of the Administrative Agent
that the Borrower will be in compliance with all of the covenants contained
herein after giving effect to the incurrence of such Indebtedness, (v) no
Possible Default or Event of Default exists at the time of incurrence of such
Indebtedness or would exist after giving effect thereto, and (vi) the Borrower
shall have delivered to the Administrative Agent a certificate of a financial
officer of the Borrower in form and substance satisfactory to the Administrative
Agent which shall contain calculations demonstrating on a pro forma basis the
Borrower's compliance with the financial covenants set forth in this Section 8
after giving effect to the incurrence of such Indebtedness;
(h) Indebtedness arising under the Sinclair Letter of
Credit; and
(i) existing Indebtedness listed on Exhibit F.
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8.2 Liens. The Borrower shall not, and shall not permit any of its
Subsidiaries to, incur, create, assume or permit to exist any Lien of any nature
whatsoever on any property or assets now owned or hereafter acquired by the
Borrower or any of its Subsidiaries, other than Permitted Liens. The Borrower
shall not, and shall not permit any of its Subsidiaries to, enter into or permit
to exist any arrangement or agreement, other than pursuant to this Agreement or
any Collateral Document, which directly or indirectly prohibits the Borrower or
any of its Subsidiaries from creating or incurring any Lien on any of its
assets, other than (a) leases and agreements regarding purchase money
Indebtedness permitted pursuant to Section 8.4 (so long as such prohibition only
relates to the asset which is subject to such lease or which secure such
Indebtedness), (b) provisions in agreements which prohibit the assignment of
such agreements and (c) restrictions on the creation of Liens contained in the
Subordinated Purchase Agreement as in effect as of the date hereof.
8.3 Guaranties. The Borrower shall not, and shall not permit any
of its Subsidiaries to, become a Guarantor for any Person, except with respect
to (a) endorsements of negotiable instruments for collection in the ordinary
course of business, (b) the Guaranty, and (c) contingent obligations incurred in
the ordinary course of business with respect to surety and appeal bonds,
performance and return-of-money bonds and other similar obligations not
exceeding at any time outstanding $1,000,000 in aggregate liability.
8.4 Rental and Conditional Sale Obligations. The Borrower shall
not, and shall not permit any of its Subsidiaries to, incur, create, assume or
permit to exist, with respect to any personal property, any conditional sale
obligation, any purchase money obligation, any rental obligation, any purchase
money security interest or any other arrangement for the use of personal
property of any other Person, which in any such case has an unexpired term of
not less than one year, other than an arrangement constituting a Capitalized
Lease Obligation, if the aggregate amount payable by the Borrower and its
Subsidiaries pursuant to all such arrangements in any fiscal year would exceed
the sum of $1,000,000 plus the amount of any such obligations incurred pursuant
to a Permitted Acquisition.
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8.5 Real Property Interests. The Borrower shall not, and shall not
permit any of its Subsidiaries to, be obligated under, enter into, assume or
permit to exist any lease or rental obligation for real property (other than any
lease or rental obligation where the Borrower receives rent from sublessees in
an amount in excess of the rents payable by the Borrower to the lessor) which
has an unexpired term of not less than one year, if the aggregate amount payable
in respect of all such arrangements by the Borrower and its Subsidiaries in any
fiscal year would exceed the sum of $4,500,000 plus the amount of any such
obligations incurred pursuant to a Permitted Acquisition.
8.6 Capitalized Lease Obligations. The Borrower shall not, and shall
not permit any of its Subsidiaries to, incur, create, assume or permit to exist
Capitalized Lease Obligations if the aggregate amount payable by the Borrower
and its Subsidiaries in respect of all such Capitalized Lease Obligations in any
fiscal year would exceed the sum of $2,000,000 plus the amount of any such
obligations incurred pursuant to a Permitted Acquisition.
8.7 Capital Expenditures. The Borrower and its Subsidiaries shall not
make Project Capital Expenditures (i) in fiscal year 1998 which exceed in the
aggregate $8,000,000, or (ii) in any fiscal year thereafter which exceed in the
aggregate $5,000,000 (the amount permitted in any year pursuant to this sentence
being referred to as the "Base Amount" for such year). If the Base Amount for
any year exceeds the aggregate amount of Project Capital Expenditures actually
made by the Borrower and its Subsidiaries in such year (such excess being
referred to as the "Excess Amount"), then the Borrower and its Subsidiaries may
make Project Capital Expenditures in the immediately succeeding year (but not in
any year thereafter) in excess of the Base Amount for such succeeding year in an
amount not to exceed the Excess Amount for the prior year.
8.8 Notes, Accounts Receivable and Claims. The Borrower shall not, and
shall not permit any of its Subsidiaries to, sell, discount or otherwise dispose
of any note, account receivable or other right to receive payment, with or
without recourse, except for collection in the ordinary course of business; or
fail to timely assert any claim, cause of action or contract right which it
possesses against any third party or agree to settle or compromise any such
claim, cause of action or contract right except in any case in the exercise of
good business judgment and
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except for settlements or compromises made in the reasonable exercise of
business judgment in the ordinary course of business.
8.9 Capital Distributions; Restrictions on Payments to Stockholders.
(a) The Borrower shall not, and shall not permit any of its
Subsidiaries to, make, or declare or incur any liability to make, any Capital
Distribution, except that:
(i) any Subsidiary of the Borrower may make Capital
Distributions to the Borrower or to a wholly owned Subsidiary of the Borrower;
(ii) so long as the Borrower has not ceased to be treated as
an "S corporation" under the Code, the Borrower may make Distributions to pay
Tax Liabilities for the then current or immediately previous tax year of the
Borrower (or any prior year that the Borrower was an "S corporation" if such
Distribution is a result of an Internal Revenue Service audit adjustment) so
long as: (A) prior to each such distribution, a financial officer of the
Borrower has provided the Administrative Agent with a certificate in form and
substance reasonably satisfactory to the Administrative Agent stating the amount
of each Tax Liability for which a distribution is to be made (which certificate
will also explain in reasonable detail the basis for and method of calculating
the Tax Liability); (B) such distribution has been specifically approved by a
written resolution of the Board of Directors of the Borrower; (C) no Possible
Default or Event of Default arising under Section 9.1 exists at the time of
making such distribution or would exist after giving effect thereto; and (D)
such distributions shall not be made more frequently than four times in any four
quarter period for state income taxes or more than five times in any four
quarter period for federal income taxes;
(iii) the Borrower may make Capital Distributions to its
stockholders in any fiscal year in an aggregate amount which does not exceed
$305,000 for such fiscal year, multiplied each year on the anniversary hereof by
the percentage increase, if any, in the U.S. Department of Labor, Bureau of
Labor Statistics Consumer Price Index (the "CPI") (if the CPI ceases to exist or
is substantially changed, the Administrative Agent shall substitute a similar
index), so long as: (A) the Borrower shall
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have demonstrated to the satisfaction of the Administrative Agent that the
Borrower will be in compliance with all of the covenants contained herein after
giving effect to such distribution; (B) no Possible Default or Event of Default
exists at the time of making such distribution or would exist after giving
effect thereto; (C) the Borrower shall have delivered to the Administrative
Agent a certificate of a financial officer of the Borrower using the most
recently available quarterly financial statements in form and substance
satisfactory to the Administrative Agent which shall contain calculations
demonstrating on a pro forma basis the Borrower's compliance with the financial
covenants set forth in this Section 8 after giving effect to such distribution;
and (D) such distributions shall not be made more frequently than once per year;
and
(iv) the Borrower may make Capital Distributions to its
stockholders in any fiscal year, so long as:
(A) the Leverage Ratio is less than 5.0 to 1.0 as of the
end of the most recently ended fiscal year of the Borrower (as determined by the
annual financial statements provided pursuant to Section 7.5(a)) and as of the
date of any such distribution and after giving effect thereto;
(B) such distributions shall not exceed an amount equal
to the Excess Cash Flow as of the end of the immediately preceding year;
(C) the Borrower shall have demonstrated to the
satisfaction of the Administrative Agent that the Borrower will be in compliance
with all of the covenants contained herein after giving effect to such
distribution;
(D) no Possible Default or Event of Default exists at
the time of making such distribution or would exist after giving effect thereto;
(E) the Borrower shall have delivered to the
Administrative Agent a certificate of a financial officer of the Borrower in
form and substance satisfactory to the Administrative Agent which shall contain
calculations demonstrating on a pro forma basis the Borrower's compliance with
the financial covenants set forth in this Section 8 after giving effect to such
distribution; and
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(F) such distributions shall only be made once per year
within the sixty day period commencing with the date on which the Administrative
Agent receives the Borrower's annual financial statements for the fiscal year
most recently ended prior to such distribution.
(b) The Borrower shall not permit any of its Subsidiaries to agree
to or to be subject to any restriction on its ability to make Capital
Distributions or loans or other asset transfers to its stockholders other than
restrictions imposed by applicable law and the restrictions set forth in this
Section.
8.10 Disposal of Property; Mergers; Acquisitions; Reorganizations.
(a) Except as provided in paragraphs (b) and (c) below, the
Borrower shall not, and shall not permit any of its Subsidiaries to, (i)
dissolve or liquidate; (ii) sell, lease, transfer or otherwise dispose of any
material portion of its properties and assets to any Person, except for (A) the
disposition of assets in the ordinary course of business in an aggregate amount
not to exceed $2,000,000 in any transaction or related series of transactions,
(B) the disposition of any asset which, in the good faith exercise of its
business judgment, the Borrower determines is no longer useful in the conduct of
its or its Subsidiaries' business, and (C) the exchange of a Station in
connection with a Permitted Acquisition, subject to the satisfaction of the
provisions of Section 2.6(b)(iii); (iii) be a party to any consolidation,
merger, recapitalization or other form of reorganization; (iv) make any
acquisition of all or substantially all the assets of any Person, or of a
business division or line of business of any Person, or of any other assets
constituting a going business; (v) create, acquire or hold any Subsidiary (other
than the License Partnership), or (vi) be or become a party to any joint venture
or other partnership except as set forth on Exhibit L attached hereto.
(b) The Borrower may make the acquisitions contemplated in the
Acquisition Agreements subject to its compliance with clauses (iv), (v), (vi),
(vii) and (viii) below. In addition, the Borrower may make acquisitions of
substantially all of the assets of any radio station or tower site or of all of
the capital stock or other equity interests of a Person which
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owns a radio station or tower site, subject to the satisfaction of the following
conditions (the acquisitions pursuant to the Acquisition Agreements and any
other acquisition which satisfies all of the following conditions being referred
to hereinafter as a "Permitted Acquisition"):
(i) such radio station or tower site shall be located in a
market in which the Borrower or a wholly owned Subsidiary of the Borrower owns a
Station or in one of the 75 largest Metro Survey Areas, as determined by The
Arbitron Company;
(ii) the Borrower shall have given to the Administrative
Agent notice of such acquisition at least five days prior to executing any
binding commitment with respect thereto, which notice shall state the additional
amounts, if any, by which the Borrower proposes to increase the dollar
limitations set forth in Sections 8.4, 8.5 and 8.6; and the Agents and the
Required Banks shall have received evidence satisfactory to them that the
structure of the transaction shall satisfy all material, applicable legal and
regulatory requirements relating to such acquisition;
(iii) the Borrower shall have demonstrated to the satisfaction
of the Administrative Agent that the Borrower will be in compliance with all of
the covenants contained herein after giving effect to such acquisition and that
no Event of Default or Possible Default then exists or would exist after giving
effect to such acquisition, and the Borrower shall have delivered to the
Administrative Agent within ten days prior to the consummation of such
acquisition an acquisition report signed by an executive officer of the Borrower
in form and substance satisfactory to the Administrative Agent which shall
contain (A) calculations demonstrating on a pro forma basis the Borrower's
compliance with the financial covenants set forth in this Section 8 after giving
effect to such acquisition, and (B) projections for the Borrower for a five year
period after the closing of such acquisition giving effect to the acquisition
and including a statement of sources and uses of funds for such acquisition
showing, among other things, the source of financing for the acquisition;
(iv) all FCC Licenses acquired in connection with such
acquisition shall be transferred immediately upon consummation of such
acquisition to the License Partnership or to
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a direct wholly owned Subsidiary of the Borrower which shall have no other
assets or liabilities;
(v) the Borrower shall have delivered to the Administrative
Agent UCC, judgment and tax lien searches for each relevant jurisdiction and
shall have taken any actions as may be necessary or reasonably requested by the
Administrative Agent to grant to the Administrative Agent, for the benefit of
the Banks, perfected Liens in all personal property acquired by the Borrower or
any of its Subsidiaries in such acquisition pursuant to the Collateral
Documents, subject to no prior Liens except Permitted Liens;
(vi) if the Borrower acquires a Subsidiary or creates a
Subsidiary (including a License Subsidiary) pursuant to or in connection with
such acquisition,
(A) such Subsidiary shall be directly wholly owned by
the Borrower;
(B) the Borrower shall pledge to the Administrative
Agent, for the benefit of the Banks, all of the stock or other securities or
equity interests of such acquired or created Subsidiary pursuant to
documentation in form and substance satisfactory to the Administrative Agent;
and
(C) such acquired or created Subsidiary shall execute
and deliver to the Administrative Agent, for the benefit of the Banks, a
guaranty of all of the Obligations of the Borrower, in form and substance
satisfactory to the Administrative Agent, and shall grant to the Administrative
Agent, for the benefit of the Banks, a first priority, perfected lien or
security interest in substantially all of its personal property subject to no
prior Liens except for Permitted Liens, pursuant to documentation in form and
substance satisfactory to the Administrative Agent;
(vii) the Borrower shall have delivered to the Administrative
Agent evidence reasonably satisfactory to the Administrative Agent to the effect
that all approvals, consents or authorizations required in connection with such
acquisition (including the formation of any License Subsidiary and the transfer
of FCC Licenses to such Subsidiary) from any Licensing Authority or other
governmental authority shall have been
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obtained and, except as expressly permitted by the Administrative Agent, that
any consent of the FCC shall have become a Final Order, and such opinions as the
Administrative Agent may reasonably request as to the Liens granted to the
Administrative Agent, for the benefit of the Banks, as required pursuant to this
Section, as to any required regulatory approvals for such acquisition and as to
such other matters as the Administrative Agent may reasonably request; and
(viii) if the Borrower has consummated the reorganization
contemplated by Section 8.10(c), the Borrower shall cause such acquisition to be
consummated by a Subsidiary and not by it.
(c) As of the date of this Agreement, all of the assets of each
Station, other than the FCC Licenses, are owned by the Borrower, and all of the
FCC Licenses of the Stations are owned by the License Partnership. The Borrower
desires to create new Subsidiaries and contribute all of its operating assets
relating to the Stations and all of the FCC Licenses held by the License
Partnership to such Subsidiaries. The Borrower shall have the right to so
reorganize subject to the satisfaction of all of the following conditions:
(i) each new Subsidiary shall be directly and wholly owned
by the Borrower;
(ii) all of the FCC Licenses of the Stations shall be
transferred to one or more of such newly created Subsidiaries which shall have
no other assets or liabilities, and upon such transfer, the License Partnership
shall be dissolved and liquidated;
(iii) the Borrower shall pledge to the Administrative Agent,
for the benefit of the Banks, all of the stock or other securities or equity
interests of such acquired or created Subsidiaries pursuant to documentation in
form and substance satisfactory to the Administrative Agent; and
(iv) such acquired or created Subsidiaries shall execute and
deliver to the Administrative Agent, for the benefit of the Banks, a guaranty of
all of the Obligations of the Borrower, in form and substance satisfactory to
the Administrative Agent, and shall grant to the Administrative
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Agent, for the benefit of the Banks, a first priority, perfected lien or
security interest in substantially all of their personal property subject to no
prior Liens except for Permitted Liens, pursuant to documentation in form and
substance satisfactory to the Administrative Agent; and
(v) the Borrower and its Subsidiaries shall take such other
actions as the Administrative Agent may reasonably request in connection with
such reorganization.
Upon completion of such reorganization, so long as all operating assets and
Licenses relating to all of the Stations have been contributed to such newly
created Subsidiaries, the Administrative Agent shall terminate the Borrower
Pledge Agreement and release the stock certificates held by it pursuant to that
agreement.
8.11 Investments. The Borrower shall not, and shall not permit any of
its Subsidiaries to, purchase or otherwise acquire, hold or invest in any stock
or other securities or evidences of indebtedness of, or any interest or
investment in, or make or permit to exist any loans or advances to, any other
Person, except:
(a) direct obligations of the United States Government maturing
within one year;
(b) certificates of deposit of a member bank of the Federal
Reserve System having capital, surplus and undivided profits in excess of
$2,000,000,000;
(c) any investment in commercial paper which at the time of such
investment is assigned the highest quality rating in accordance with the rating
systems employed by either Moody's Investors Service, Inc. or Standard & Poor's
Corporation;
(d) money market funds;
(e) securities received pursuant to a plan of reorganization
adopted in an insolvency proceeding or otherwise in immaterial amounts in
exchange for accounts receivable of the entity which is the subject of such
insolvency proceeding generated in the ordinary course of the Borrower's or any
of its Subsidiaries' business;
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<PAGE> 97
(f) investments in the License Partnership and in Subsidiaries
created pursuant to Section 8.10(b) and (c); and
(g) investments having an aggregate cost for all investments made
pursuant to this clause (g) of not to exceed $4,000,000, so long as: (i) no
Event of Default or Possible Default exists as of the date of making any such
investment or would exist after giving effect thereto, (ii) the Borrower shall
have given notice to the Administrative Agent of each such investment at least
fifteen days prior to making such investment, (iii) each such investment shall
be structured so that it is non-recourse to the Borrower and its Subsidiaries
and that neither the Borrower nor any of its Subsidiaries shall have any
liability or obligation, contingent or otherwise, in respect of such investment,
and (iv) each such investment shall be pledged to the Administrative Agent for
the benefit of the Banks pursuant to documentation in form and substance
satisfactory to the Administrative Agent as security for the Obligations.
8.12 Amendment of Governing Documents. The Borrower shall not, and
shall not permit any of its Subsidiaries to, amend, modify or supplement its
Certificate or Articles of Incorporation, By-Laws, Certificate of Limited
Partnership, partnership agreement or other organizational or governing
documents or any shareholders or security holders agreement, unless required by
law, in any manner that is adverse to the interests of the Banks (as may be
reasonably determined by the Banks).
8.13 Financial Covenants.
(a) Total Leverage Ratio. The Borrower shall not permit the
Leverage Ratio at any time during any period listed in Column A below to be
greater than the ratio set forth in Column B below opposite such period:
<TABLE>
<CAPTION>
Column A Column B
- -------- --------
Period: Permitted Ratio:
- ------- ----------------
<S> <C>
Closing through March 31, 7.0:1.0
1999:
</TABLE>
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<PAGE> 98
<TABLE>
<S> <C>
April 1, 1999, through March 6.5:1.0
31, 2000:
April 1, 2000, through March 6.0:1.0
31, 2001:
April 1, 2001, through March 5.5:1.0
31, 2002:
April 1, 2002, through March 5.0:1.0
31, 2003:
April 1, 2003, through March 4.5:1.0
31, 2004:
April 1, 2004, and thereafter: 4.0:1.0
</TABLE>
(b) Senior Leverage Ratio. The Borrower shall not permit the ratio
of the outstanding principal amount of the Loans as of any date in any period
listed in Column A below to Operating Cash Flow for the four quarter period then
ended or then most recently ended (i) to be greater than the ratio set forth in
Column B below opposite such period if at such time the Borrower has
Subordinated Debt outstanding, or (ii) to be greater than the ratio set forth in
Column C below opposite such period if at such time the Borrower has no
Subordinated Debt outstanding:
<TABLE>
<CAPTION>
Column A Column B Column C
- -------- -------- --------
Period: Permitted Ratio if Permitted Ratio if
Subordinated Debt: No Subordinated
Debt:
- ------- ------------------ ------------------
<S> <C> <C>
Closing through 6.0:1.0 6.5:1.0
March 31, 1999:
April 1, 1999, 5.5:1.0 6.0:1.0
through March 31,
2000:
April 1, 2000, 5.0:1.0 5.5:1.0
through March 31,
2001:
</TABLE>
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<PAGE> 99
<TABLE>
<S> <C> <C>
April 1, 2001, 4.5:1.0 5.0:1.0
through March 31,
2002:
April 1, 2002, 4.0:1.0 4.5:1.0
through March 31,
2003:
April 1, 2003, 3.5:1.0 4.0:1.0
through March 31,
2004:
April 1, 2004, and 3.0:1.0 3.5:1.0
thereafter:
</TABLE>
(c) Fixed Charge Coverage Ratio. The Borrower shall not permit the
Fixed Charge Coverage Ratio as of the end of any fiscal quarter to be less than
1.05 to 1.00.
(d) Operating Cash Flow to Interest Expense. The Borrower shall
not permit the ratio of Operating Cash Flow for any four quarter period to
Interest Expense for such four quarter period (the "Interest Coverage Ratio) to
be less than 2.0 to 1.0. The Borrower shall not permit the Interest Coverage
Ratio calculated on a pro forma basis as of the date of consummation of any
Permitted Acquisition for the four quarter period then ended or most recently
ended as if such acquisition had occurred on the first day of such four quarter
period to be less than 1.75 to 1.00.
(e) Broadcast Cash Flow Concentration. The Borrower shall not
permit the Broadcast Cash Flow attributable to the Stations in any one market
for any four quarter period to exceed 60% of the total Broadcast Cash Flow for
such period.
8.14 Management Agreements and Fees.
(a) Except for agreements permitted pursuant to Section 8.14(b),
the Borrower shall not, and shall not permit any of its Subsidiaries to, make or
enter into, or pay any management fees pursuant to, any so-called management or
service agreement or joint operating agreement whereby management, supervision
or control of its business, or any significant aspect thereof, shall be
delegated to or placed in any Person other than the Borrower,
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an employee of the Borrower or any Subsidiary. The Borrower shall not, and shall
not permit any of its Subsidiaries to, make or enter into, or receive any
management fees pursuant to, any so-called management or service agreement or
joint operating agreement whereby management, supervision or control of the
business of any other Person (other than a Subsidiary of the Borrower), or any
significant aspect thereof, shall be delegated to or placed in the Borrower or
any of its Subsidiaries.
(b) Without the prior written consent of the Administrative Agent,
the Borrower shall not, and shall not permit any of its Subsidiaries to, enter
into, or otherwise be obligated under any local marketing agreement (other than
with respect to Stations being acquired pursuant to Permitted Acquisitions),
time brokerage agreement, program service agreement, joint sales agreement,
facilities leasing agreement or similar arrangement; provided, however, that the
Borrower may enter into any such arrangements with respect to any AM Station
owned by it upon written notice to the Administrative Agent.
8.15 Fiscal Year. The Borrower shall not, and shall not permit any
Subsidiary to, change its fiscal year.
8.16 ERISA. Neither the Borrower nor any member of the Controlled Group
shall fail to make any contributions which are required pursuant to the terms of
any Plan or any Benefit Arrangement. Neither the Borrower nor any member of the
Controlled Group shall contribute to or agree to contribute to any Plan which is
(a) subject to the minimum funding requirements under ERISA Section 302 or Code
Section 412; (b) a multiemployer plan (as defined in ERISA Section 4001(a)(3));
(c) a defined benefit plan (as defined under ERISA Section 3(35) or Code Section
414(j)); (d) a multiple employer plan (as defined in ERISA Section 4063); or (e)
a multiple employer welfare arrangement (as defined in ERISA Section 3(40)).
8.17 Affiliates. The Borrower shall not, and shall not permit any of
its Subsidiaries to, enter into any transaction or agreement with any Affiliate
of the Borrower or pay any compensation or salary to any such Person unless such
transaction or agreement is in the ordinary course of and pursuant to the
reasonable requirements of the business of the Borrower or any of its
Subsidiaries and the terms of such transaction or agreement are not
substantially less favorable to the Borrower or such
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<PAGE> 101
Subsidiary than could be obtained in an arms-length transaction with an
unaffiliated third party or unless the amount paid to such person is not
substantially in excess of the fair value of the services rendered by such
person.
8.18 Change of Name, Identity or Structure. The Borrower shall not, and
shall not permit any of its Subsidiaries to, change its name, identity or
corporate or partnership structure without thirty days prior written notice to
the Administrative Agent.
8.19 Amendments or Waivers. The Borrower shall not, and shall not
permit any of its Subsidiaries to, amend, alter or modify, or consent to or
suffer any amendment, alteration or modification of, the Subordinated Purchase
Agreement or any notes or other documents or agreements issued or entered into
pursuant to the Subordinated Purchase Agreement, or any Acquisition Agreement,
License, Operating Agreement or other material contract to which the Borrower or
such Subsidiary is a party without the prior written consent of all of the Banks
if such amendment, alteration or modification imposes any significantly more
onerous term or condition on the Borrower than is contained in such agreement,
note, document, License or contract as of the date hereof or is otherwise
materially adverse to the Banks, or without the prior written consent of the
Required Banks if such amendment, alteration or modification does not impose any
more onerous term or condition on the Borrower than is contained in such
agreement, note, document, License or contract as of the date hereof and is not
otherwise materially adverse to the Borrower or the Banks, in either case as
reasonably determined by the Administrative Agent.
8.20 Issuance or Transfer of Capital Stock. The Borrower shall not
permit any of its Subsidiaries to sell or issue any capital stock, partnership
interests or other equity interests or any warrants, options or other securities
convertible into or exercisable for any capital stock, partnership interests or
other equity interests, and the Borrower shall not permit any of its
Subsidiaries to permit the transfer of any capital stock, partnership interests
or other such equity interests.
8.21 Change in Business. The Borrower shall not, and shall not permit
any of its Subsidiaries to, change the nature of its business in any material
respect. Neither the Borrower nor any
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<PAGE> 102
of its Subsidiaries shall engage in any business other than the ownership and
operation of radio stations and other activities incidental or related thereto.
8.22 Regulation U. The Borrower shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, (a) apply any part of the proceeds
of the Loans to the purchasing or carrying of any "margin stock" within the
meaning of Regulations G, T, U or X of the Federal Reserve Board, or any
regulations, interpretations or rulings thereunder, (b) extend credit to others
for the purpose of purchasing or carrying any such margin stock, or (c) retire
Indebtedness which was incurred to purchase or carry any such margin stock.
8.23 License Subsidiaries. The Borrower shall not, and shall not permit
any Subsidiary (other than a License Subsidiary) to, hold any FCC Licenses, but
rather shall cause all FCC Licenses relating to the Stations to be issued to and
held by a License Subsidiary. The Borrower shall not permit the License
Partnership or any other License Subsidiary to (a) incur, create, assume or
permit to exist any Indebtedness other than pursuant to the Guaranty and the
other Collateral Documents, (b) incur, create, assume or permit to exist any
Lien of any nature whatsoever on any property or assets now owned or hereafter
acquired by it except in favor of the Administrative Agent, for the benefit of
the Banks, (c) make any Capital Expenditures, (d) acquire any assets other than
the Licenses, (e) conduct any business, or (f) hire or engage any employees,
except, in the case of the License Partnership, pursuant to the Management
Agreement.
8.24 Subordinated Debt. The Borrower shall not redeem, discharge, pay,
prepay or defease all or any portion of the principal of any Subordinated Debt
prior to the payment in full in cash of all Obligations. The Borrower shall not
redeem, discharge, pay, prepay or defease all or any portion of the principal or
interest of any Indebtedness owing to the Subordinated Lender, prior to the
payment in full in cash of all Obligations, except that (a) the Borrower may
issue Redemption Notes and Put Notes in the forms attached to the Subordinated
Purchase Agreement in effect as of the date hereof and (b) the Borrower may
issue shares of common stock to the Subordinated Lender pursuant to the terms of
the Convertible Subordinated Notes in the forms attached to the Subordinated
Purchase
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<PAGE> 103
Agreement in effect as of the date hereof so long as such shares of common stock
are pledged to the Administrative Agent for the benefit of the Banks as security
for the Obligations. The Borrower shall not, and shall not elect to, make any
payment of principal on any Subordinated Debt, or any payment of principal or
interest on any Indebtedness owing to the Subordinated Lender (including,
without limitation, any payment of the Mandatory Redemption Obligations or the
Put Obligation, as those terms are defined in the Subordinated Purchase
Agreement), in cash. The Borrower shall not exercise any right of first offer or
right of first refusal under Article X of the Subordinated Purchase Agreement.
Except as expressly provided in a plan approved by the Banks pursuant to Section
7.14, the Borrower shall not take any action in violation of any of the
provisions of Article XII of the Subordinated Purchase Agreement. The Borrower
shall not, pursuant to clause (b) of the definition of the term "Senior Debt" in
the Subordinated Purchase Agreement, designate any Indebtedness (other than the
Obligations) as Senior Debt.
SECTION 9 EVENTS OF DEFAULT.
The occurrence of any one or more of the following events, whether
voluntarily or involuntarily or by operation of law, shall constitute an Event
of Default hereunder:
9.1 Non-Payment. The Borrower shall fail to pay when due, whether by
acceleration of maturity or otherwise, any installment of principal due
hereunder or under any Note or shall fail to pay within three days of the date
when due, whether by acceleration of maturity or otherwise, any installment of
interest due hereunder or under any Note or any fee or other payment obligation
in respect of the Obligations.
9.2 Failure of Performance in Respect of Other Obligations. (a) The
Borrower shall fail to observe, perform or be in compliance with any of the
provisions of Section 8, Section 7.1, Section 7.3, Section 7.8 or the first
sentence of Section 7.2; or (b) the Borrower, any of its Subsidiaries or any
other party to a Collateral Document (other than the Administrative Agent or a
Bank) shall fail to observe, perform or be in compliance with the terms of any
Obligation, covenant or agreement (other than those referred to in Section 9.1,
Section 8, Section 7.1, Section 7.3, Section 7.8 or the first sentence of
Section 7.2) to be observed, performed or complied with by the Borrower, any of
its
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<PAGE> 104
Subsidiaries or such other party hereunder or under any Collateral Document and,
provided that such failure is of a type which can be cured, such failure shall
continue and not be cured for thirty days after: (i) written notice thereof from
the Administrative Agent or a Bank; or (ii) the Administrative Agent or the
Banks are notified thereof or should have been notified thereof pursuant to the
provisions of Section 7.6 hereof, whichever is earlier.
9.3 Breach of Warranty. Any financial statement, representation,
warranty, statement or certificate made or furnished by the Borrower, any of its
Subsidiaries or any other party to a Collateral Document (other than the
Administrative Agent or a Bank) in or in connection with this Agreement or any
Collateral Document, or as an inducement to the Administrative Agent or the
Banks to enter into this Agreement and the Collateral Documents, including,
without limitation, those in Section 5 above, shall have been false, incorrect
or incomplete when made or deemed made in any material respect.
9.4 Cross-Defaults. Any Change in Control or Event of Default, as those
terms are defined in the Subordinated Purchase Agreement as in effect as of the
date hereof, shall occur; or the Borrower or any of its Subsidiaries shall
default in any payment due on any Total Debt in excess of $250,000 and such
default shall continue for more than the period of grace, if any, applicable
thereto; or the Borrower or any of its Subsidiaries shall default in the
performance of or compliance with any term of any evidence of such Total Debt or
of any mortgage, indenture or other agreement relating thereto, and any such
default shall continue for more than the period of grace, if any, specified
therein if such default causes, or permits the holder thereof to cause, the
acceleration of such Total Debt.
9.5 Assignment for Benefit of Creditors. The Borrower or any of its
Subsidiaries shall make an assignment for the benefit of its creditors, or shall
admit its insolvency or shall fail to pay its debts generally as such debts
become due.
9.6 Bankruptcy. Any petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended, shall be filed by
or against the Borrower or any of its Subsidiaries or any proceeding shall be
commenced by or against the Borrower or any of its Subsidiaries with respect to
relief
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under the provisions of any other applicable bankruptcy, insolvency or other
similar law of the United States or any State providing for the reorganization,
winding-up or liquidation of Persons or an arrangement, composition, extension
or adjustment with creditors; provided, however, that no Event of Default shall
be deemed to have occurred if any such involuntary petition or proceeding shall
be discharged within sixty days of its filing or commencement.
9.7 Appointment of Receiver; Liquidation. A receiver or trustee shall
be appointed for the Borrower or any of its Subsidiaries or for any substantial
part of its assets, and such receiver or trustee shall not be discharged within
sixty days of his appointment; any proceedings shall be instituted for the
dissolution or the full or partial liquidation of the Borrower or any of its
Subsidiaries and such proceedings shall not be dismissed or discharged within
sixty days of their commencement; or the Borrower or any of its Subsidiaries
shall discontinue its business.
9.8 Judgments. The Borrower or any of its Subsidiaries shall incur
non-appealable final judgments for the payment of money aggregating at any one
time in excess of $1,000,000 (to the extent not covered by insurance) and shall
not discharge (or make adequate provision for the discharge of) the same within
a period of thirty days unless, pending further proceedings, execution thereon
has been effectively stayed; or a non-monetary judgment or order shall be
rendered against the Borrower or any of its Subsidiaries that could reasonably
be expected to have a Material Adverse Effect, and there shall be any period in
excess of thirty consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect.
9.9 Impairment of Collateral; Invalidation of any Loan Document. (i) A
creditor of the Borrower or of any of its Subsidiaries shall obtain possession
of any significant portion of the collateral for the Obligations by any means,
including, without limitation, levy, distraint, replevin or self-help, or any
creditor shall establish or obtain any right in such collateral which is equal
or senior to a Lien of the Administrative Agent, for the benefit of the Banks,
in such collateral; or (ii) any material damage to, or loss, theft or
destruction of, any material collateral for the Loans shall
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occur, except to the extent such loss, damage or injury is covered by insurance;
or (iii) subject to Section 8.10(c), the Administrative Agent, for the benefit
of the Banks, shall cease to have a first priority perfected lien (except for
Permitted Liens) in all of the issued and outstanding capital stock of the
Borrower and each corporate Subsidiary of the Borrower, in all of the issued and
outstanding partnership interests in the License Partnership held by the
Borrower, in all of the issued and outstanding partnership interests or other
equity interests in each other Subsidiary of the Borrower and in substantially
all of the properties and assets of the Borrower and each Subsidiary; or (iv)
any Lien granted or created or purported to be granted or created by this
Agreement or any Collateral Document shall cease or fail to be perfected with
respect to any significant portion of the collateral purported to be covered
thereby; or (v) this Agreement, any Note or any Collateral Document ceases to be
a legal, valid and binding agreement or obligation enforceable against any party
thereto (including the Banks or the Administrative Agent) in accordance with its
terms, or shall be terminated, invalidated, set aside or declared ineffective or
inoperative and such cessation, termination, invalidity, set aside or
declaration could reasonably be expected to have a Material Adverse Effect; or
(vi) the Borrower, any Subsidiary or any member of the Field Family shall
contest or deny the validity or enforceability of any Collateral Document to
which it is a party or any lien, security interest or obligation purported to be
created thereby.
9.10 Termination of License or Operating Agreement. The FCC or any
other Licensing Authority shall (a) revoke, terminate, substantially and
adversely modify or fail to renew any material License relating to a Station, or
(b) designate any material License for hearing or commence proceedings to
suspend, revoke, terminate or substantially and adversely modify any such
License and such proceedings shall not be dismissed or discharged within sixty
days; or the Borrower or the License Partnership shall be required pursuant to a
final non-appealable order to sell or otherwise dispose of any Station; or any
Operating Agreement or any other agreement which is necessary to the operation
of a Station shall be revoked or terminated or materially, adversely modified
and not replaced by a substitute acceptable to the Required Banks within thirty
days of such revocation, termination or modification.
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9.11 Change of Control. Joseph M. Field and his immediate family,
including his wife, his children, the spouses of his children and his
grandchildren, or trusts created for the benefit of any of the foregoing, shall
cease to own collectively 51% of the voting capital stock of the Borrower; or a
period of ninety days shall elapse during which neither Joseph M. Field nor
David J. Field nor a successor executive having expertise and experience in the
broadcasting industry comparable to that of Joseph M. Field or David J. Field
shall be the President and Chief Executive Officer of the Borrower; or the
Borrower shall cease to own a 99% general partnership interest in the License
Partnership (unless all the Licenses held by the License Subsidiary have been
transferred to a wholly owned Subsidiary of the Borrower pursuant to Section
8.10(c) hereof).
9.12 Condemnation. Any court, government or governmental agency shall
condemn, seize or otherwise appropriate, or take custody or control of any
substantial portion of the assets of the Borrower or any of its Subsidiaries
pursuant to a final, non-appealable order unless such taking could not
reasonably be expected to have a Material Adverse Effect.
9.13 Cessation of Operations. The Borrower's on-the-air broadcast
operations at any Station (other than a Station which has not, in the four
quarter period most recently ended prior to the date of determination,
contributed at least 5% to the Operating Cash Flow of the Borrower) shall be
interrupted at any time for more than forty-eight hours, whether or not
consecutive, during any period of five consecutive days, unless (a) the
broadcasting operations of all or substantially all of the radio stations in the
relevant market also are interrupted for a like period of time, or (b) the
Borrower shall be receiving during such period of interruption insurance
sufficient to assure that its per diem Operating Cash Flow during such period is
a least equal to that which could reasonably have been expected during such
period but for the interruption.
9.14 Subordination. The Borrower, the Subordinated Lender or any other
obligee of Subordinated Debt shall fail to comply with the subordination
provisions of the Subordinated Purchase Agreement, any other agreement or
instrument governing or evidencing such Subordinated Debt or any separate
subordination agreement, and the Administrative Agent shall have determined that
such failure to comply could reasonably be expected to have
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a material adverse effect on the Borrower or on its ability to perform its
obligations hereunder or under the Collateral Documents or on the rights and
remedies of the Administrative Agent and the Banks hereunder or under the
Collateral Documents.
9.15 Material Adverse Effect. Any event or circumstance shall occur or
fail to occur or any action shall be taken or fail to be taken if the result of
such occurrence or failure to occur or such action or failure to take action
could reasonably be expected to have a material adverse effect on the ability of
the Borrower to perform its obligations hereunder or under any of the Collateral
Documents.
SECTION 10 REMEDIES.
Notwithstanding any contrary provision or inference herein or
elsewhere,
10.1 Optional Defaults. If any Event of Default referred to in
Section 9.1 through and including Section 9.4 or Section 9.8 through and
including Section 9.15 shall occur, the Issuing Bank shall not be required to
issue any additional Letters of Credit, and the Administrative Agent, with the
consent of the Required Banks, upon written notice to the Borrower, may
(a) terminate the Commitment and the credit hereby
established and forthwith upon such election the obligations of the Banks to
make any further Loans hereunder (other than Loans resulting from the funding of
Letters of Credit) immediately shall be terminated, and/or
(b) accelerate the maturity of the Loans and all other
Obligations, whereupon all Obligations shall become and thereafter be
immediately due and payable in full without any presentment or demand and
without any further or other notice of any kind, all of which are hereby waived
by the Borrower, and/or
(c) demand the payment to the Issuing Bank of the aggregate
stated amount of the outstanding Letters of Credit, which amount the Issuing
Bank shall hold as security for the obligations incurred under the Letters of
Credit.
10.2 Automatic Defaults. If any Event of Default referred to
in Sections 9.5-9.7 shall occur,
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(a) the Commitment and the credit hereby established shall
automatically and forthwith terminate, and the Banks thereafter shall be under
no obligation to grant any further Loans hereunder (other than Loans resulting
from the funding of Letters of Credit), and
(b) the principal of and interest on the Notes, then outstanding,
and all of the other Obligations shall thereupon become and thereafter be
immediately due and payable in full, all without any presentment, demand or
notice of any kind, which are hereby waived by the Borrower, and
(c) the Issuing Bank shall not be required to issue any additional
Letters of Credit, and the aggregate stated amount of the outstanding Letters of
Credit shall be immediately payable by the Borrower to the Issuing Bank, which
amount the Issuing Bank shall hold as security for the obligations incurred
under the Letters of Credit.
10.3 Performance by the Banks. If at any time the Borrower or any of
its Subsidiaries fails or refuses to pay or perform any material obligation or
duty to any third Person, except for payments which are the subject of bona fide
disputes in the ordinary course of business, the Administrative Agent or the
Banks may, in their sole discretion, but shall not be obligated to, pay or
perform the same on behalf of the Borrower or such Subsidiary, and the Borrower
shall promptly repay all amounts so paid, and all costs and expenses so
incurred. This repayment obligation shall become one of the Obligations of the
Borrower hereunder and shall bear interest at the Default Interest Rate.
10.4 Other Remedies. Upon the occurrence of an Event of Default, the
Administrative Agent and the Banks may exercise any other right, power or remedy
as may be provided herein, in the Notes or in any other Collateral Document, or
as may be provided at law or in equity, including, without limitation, the right
to recover judgment against the Borrower for any amount due either before,
during or after any proceedings for the enforcement of any security or any
realization upon any security.
10.5 Enforcement and Waiver by the Banks. The Administrative Agent and
the Banks shall have the right at all
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times to enforce the provisions of this Agreement and all Collateral Documents
in strict accordance with the terms hereof and thereof, notwithstanding any
conduct or custom on the part of the Administrative Agent or the Banks in
refraining from so doing at any time, unless the Administrative Agent or the
Banks shall have waived such enforcement in writing in respect of a particular
instance. The failure of the Administrative Agent or the Banks at any time to
enforce their rights under such provisions shall not be construed as having
created a custom or course of dealing in any way contrary to the specific
provisions of this Agreement or the Collateral Documents, or as having in any
way modified or waived the same. All rights, powers and remedies of the
Administrative Agent and the Banks are cumulative and concurrent and the
exercise of one right, power or remedy shall not be deemed a waiver or release
of any other right, power or remedy.
SECTION 11 THE AGENTS.
11.1 Appointment. KCCI is hereby appointed documentation agent and
administrative agent hereunder, and each of the Banks irrevocably authorizes
KCCI to act as the documentation agent and administrative agent of such Bank.
Bank of America National Trust and Savings Association is hereby appointed
syndication agent hereunder, and each of the Banks irrevocably authorizes Bank
of America National Trust and Savings Association to act as the syndication
agent of such Bank. The Agents agree to act as such upon the express conditions
contained in this Section 11. Neither the Administrative Agent nor the
Syndication Agent shall have a fiduciary relationship in respect of any Bank by
reason of this Agreement.
11.2 Powers. The Administrative Agent shall have and may exercise such
powers hereunder as are specifically delegated to it by the terms hereof,
together with such powers as are reasonably incidental thereto. The
Administrative Agent shall not have any implied duties or any obligation to the
Banks to take any action hereunder except any action specifically provided by
this Agreement to be taken by the Administrative Agent.
11.3 General Immunity. Neither the Administrative Agent, nor the
Syndication Agent nor any of their respective directors, officers, affiliates,
agents or employees shall be liable to the Banks or any Bank for any action
taken or omitted
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to be taken by it or them hereunder or in connection herewith except for its or
their own gross negligence or wilful misconduct. Without limiting the foregoing,
neither the Administrative Agent, nor the Syndication Agent nor any of their
respective directors, officers, affiliates, agents or employees shall be
responsible for, or have any duty to examine (a) the genuineness, execution,
validity, effectiveness, enforceability, value or sufficiency of this Agreement,
any Collateral Document, or any other document or instrument furnished pursuant
to or in connection with this Agreement or any Collateral Document, (b) the
collectibility of any amounts owed by the Borrower or any of its Subsidiaries,
(c) any recitals, statements, reports, representations or warranties made in
connection with this Agreement or any Collateral Document, (d) the performance
or satisfaction by the Borrower or any Subsidiary of any covenant or agreement
contained herein or in any Collateral Document, (e) any failure of any party to
this Agreement to receive any communication sent, including any telegram,
teletype, bank wire, cable, radiogram or telephone message sent or any writing,
application, notice, report, statement, certificate, resolution, request, order,
consent letter or other instrument or paper or communication entrusted to the
mails or to a delivery service, or (f) the assets or liabilities or financial
condition or results of operations or business or credit-worthiness of the
Borrower or any of its Subsidiaries. The Administrative Agent shall not be bound
to ascertain or inquire as to the performance or observance of any of the terms
of this Agreement or any Collateral Document.
11.4 Action on Instructions of the Banks. The Administrative Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Banks
(subject to Section 11.12 hereof), and such instructions shall be binding upon
all the Banks and all holders of the Notes; provided, however, that the
Administrative Agent shall not be required to take any action which exposes it
to personal liability or which is contrary to this Agreement or applicable law.
The foregoing provisions of this Section 11.4 shall not limit in any way the
exercise by any Bank of any right or remedy granted to such Bank pursuant to the
terms of this Agreement or any Collateral Document. Except as otherwise
expressly provided herein, any reference in this Agreement to action by the
Banks shall be deemed to be a reference to the Required Banks.
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11.5 Employment of Agents and Counsel. The Administrative Agent may
execute any of its duties as Administrative Agent hereunder by or through
employees, agents and attorneys-in-fact and shall not be answerable to the
Banks, except as to money or securities received by it or its authorized agents,
for the default or misconduct of any such agents or attorneys-in-fact selected
by it with reasonable care.
11.6 Reliance on Documents; Counsel. The Administrative Agent shall be
entitled to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper, document or other communication believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and, with respect to legal matters, upon the opinion of counsel
selected by the Administrative Agent, which counsel may be employees of the
Administrative Agent, concerning all matters pertaining to the agency hereby
created and its duties hereunder.
11.7 Administrative Agent's Reimbursement and Indemnification. The
Banks agree to reimburse and indemnify the Administrative Agent (which
indemnification shall be shared by the Banks ratably in proportion to their
respective Ratable Shares of the Loans) (a) for any amounts not reimbursed by
the Borrower for which the Administrative Agent is entitled to reimbursement by
the Borrower hereunder or under any Collateral Document, (b) for any other
expenses reasonably incurred by the Administrative Agent on behalf of the Banks,
in connection with the preparation, execution, delivery, administration,
amendment or enforcement hereof or of any of the Collateral Documents and (c)
for any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent in any way relating to or arising out of this Agreement,
any Collateral Document or any other document related hereto or thereto or the
transactions contemplated hereby or the enforcement of any of the terms hereof
or thereof or of any such other documents, provided that no Bank shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the Administrative Agent.
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11.8 Rights as a Bank. With respect to its Ratable Share of the
Commitment, the Loans made by it, the Letters of Credit issued by the Issuing
Bank and the Notes issued to it, each of the Administrative Agent and the
Syndication Agent shall have the same rights and powers hereunder as any Bank
and may exercise the same as though it were not the Administrative Agent or the
Syndication Agent, as the case may be, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Administrative Agent and the
Syndication Agent in their individual capacities. Each of the Administrative
Agent and the Syndication Agent may accept deposits from, lend money to, and
generally engage in any kind of banking or trust business with the Borrower or
any of its Subsidiaries as if it were not the Administrative Agent or the
Syndication Agent hereunder.
11.9 Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Bank and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other
Collateral Documents. Each Bank also acknowledges that it will, independently
and without reliance upon the Administrative Agent or any other Bank and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Collateral Documents. The Administrative Agent
shall not be required to keep the Banks informed as to the performance or
observance by the Borrower and its Subsidiaries of this Agreement or any other
document referred to or provided for herein or to inspect the properties or
books of the Borrower or any of its Subsidiaries. Except for notices, reports
and other documents and information expressly required to be furnished to the
Banks by the Administrative Agent hereunder, the Administrative Agent shall not
have any duty or responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or business of the
Borrower or any of its Subsidiaries which may come into its possession.
11.10 Successor Administrative Agent.
(a) The Administrative Agent may, without the consent of the
Borrower or the other Banks, assign its rights and obligations as Administrative
Agent hereunder and under the
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Collateral Documents to its parent or to any wholly owned subsidiary of its
parent which has capital and retained earnings of at least $500,000,000, and
upon such assignment, the former Administrative Agent shall be deemed to have
retired, and such wholly owned subsidiary shall be deemed to be a successor
Administrative Agent.
(b) The Administrative Agent may resign at any time by giving
written notice thereof to the Banks. Upon any such resignation, the Required
Banks shall have the right to appoint a successor Administrative Agent with the
consent of the Borrower so long as no Event of Default or Possible Default has
occurred and is continuing. If no successor Administrative Agent shall have been
so appointed by the Required Banks and shall have accepted such appointment
within thirty days after the notice of resignation, then the retiring
Administrative Agent may appoint a successor Administrative Agent. Such
successor Administrative Agent shall be a commercial bank having capital and
retained earnings of at least $500,000,000.
(c) Upon the acceptance of any appointment as the Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the assigning or retiring
Administrative Agent, and the assigning or retiring Administrative Agent shall
be discharged from its duties and obligations hereunder. After any assigning or
retiring Administrative Agent's resignation hereunder as the Administrative
Agent, the provisions of this Section 11 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Administrative Agent hereunder.
11.11 Ratable Sharing. All principal and interest payments on Loans and
commitment fees received by the Administrative Agent shall be remitted to the
Banks in accordance with their Ratable Shares. Any amounts received by the
Administrative Agent or any other Bank upon the sale of any collateral for the
Loans or upon the exercise of any remedies hereunder or under any of the
Collateral Documents or upon the exercise of any right of setoff shall be
remitted to the Banks in accordance with their Ratable Shares of the Loans;
provided, however, that, solely for purposes of the sharing of any amounts
received by the Administrative Agent or any other Bank, if at the
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time of any such receipt the Borrower has defaulted under any agreements
regarding Rate Hedging Obligations entered into pursuant to Section 7.12 with
any Bank or any Affiliate of any Bank, then the Ratable Share of the affected
Bank shall be proportionately increased and the Ratable Shares of the other
Banks shall be proportionately decreased based upon the amount due to the
affected Bank (or such Bank's Affiliate) pursuant to such agreements. If any
Bank shall obtain any payment hereunder (whether voluntary, involuntary, through
exercise of any right of set-off or otherwise) in excess of its Ratable Share,
then such Bank shall immediately remit such excess to the other Banks pro rata.
11.12 Actions by the Administrative Agent and the Banks. The
Administrative Agent shall take formal action following the occurrence of a
Possible Default or an Event of Default only upon the agreement of the Required
Banks; provided, however, that if the Administrative Agent gives notice to the
Banks of a Possible Default or an Event of Default, and the Required Banks
cannot agree (which agreement shall not be unreasonably withheld) on a mutual
course of action within thirty days following such notice, the Administrative
Agent may (but shall not be required to) pursue such legal rights and remedies
against the Borrower as it deems necessary and appropriate to protect the Banks
and any collateral under the circumstances; provided, further, however, that
nothing in this Section shall permit the Administrative Agent to take any action
which pursuant to Section 12.12 would require the consent of all of the Banks
without such consent of all of the Banks.
SECTION 12 MISCELLANEOUS.
12.1 Construction. The provisions of this Agreement shall be in
addition to those of the Collateral Documents and to those of any other
guaranty, security agreement, note or other evidence of the liability relating
to the Borrower held by the Banks, all of which shall be construed as
complementary to each other. Nothing contained herein shall prevent the
Administrative Agent or the Banks from enforcing any or all of such instruments
in accordance with their respective terms. Each right, power or privilege
specified or referred to in this Agreement or in any Collateral Document is in
addition to any other rights, powers or privileges that the Administrative Agent
or the Banks may otherwise have or acquire by operation of law, by other
contract
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or otherwise. No course of dealing in respect of, nor any omission or delay in
the exercise of, any right, power or privilege by the Administrative Agent or
the Banks shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any further or other exercise thereof or of any other,
as each right, power or privilege may be exercised independently or concurrently
with others and as often and in such order as the Administrative Agent or the
Banks may deem expedient. Notwithstanding any other provision of this Agreement,
the Borrower shall not be required to pay any amount of interest pursuant hereto
which is in excess of the maximum amount permitted by law.
12.2 Further Assurance. From time to time, the Borrower shall, and
shall cause its Subsidiaries to, execute and deliver to the Banks such
additional documents and take such actions as the Administrative Agent may
reasonably require to carry out the purposes of this Agreement or any of the
Collateral Documents, or to preserve and protect the rights of the
Administrative Agent and the Banks hereunder or thereunder.
12.3 Expenses of the Administrative Agent and the Banks;
Indemnification.
(a) Whether or not the transactions contemplated by this Agreement
are consummated, the Borrower shall pay the costs and expenses, including the
reasonable fees and disbursements of the Administrative Agent's special counsel,
incurred by the Administrative Agent and the Banks in connection with (i) the
negotiation, preparation, amendment or enforcement of this Agreement and the
Collateral Documents and any amendment or modification thereof and the closing
of the transactions contemplated hereby and thereby; (ii) the perfection of the
Liens granted pursuant hereto and pursuant to the Collateral Documents; (iii)
the making of the Loans and issuance of the Letters of Credit hereunder; (iv)
the negotiation, preparation or enforcement of any other document in connection
with this Agreement, the Collateral Documents or the Loans made hereunder; (v)
any proceeding brought or formal action taken by the Administrative Agent or the
Banks to enforce any provision of this Agreement or any Collateral Document, or
to enforce or exercise any right, power or remedy hereunder or thereunder; or
(vi) any action which may be taken or instituted by any Person against the
Administrative Agent or any Bank as a result of any
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of the foregoing; provided, however, that notwithstanding the foregoing, the
Borrower shall not be responsible for the costs and expenses, including legal
fees, of any Bank other than the Administrative Agent in respect of any period
prior to the occurrence of a Possible Default. The estimated fees and expenses
of the Administrative Agent's special counsel through the Closing shall be paid
on the Closing Date.
(b) The Borrower hereby indemnifies and holds harmless each Agent
and each Bank and their respective directors, officers, employees, agents,
counsel, subsidiaries and affiliates (the "Indemnified Persons") from and
against any and all claims, losses, liabilities, obligations, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever (including, without limitation, reasonable attorneys
fees) which may be imposed on, incurred by, or asserted against any Indemnified
Person in any way relating to or arising out of this Agreement, the Collateral
Documents, or any of them, or the Loans made pursuant hereto, or the Letters of
Credit issued pursuant hereto, or the use of the proceeds of the Loans or any of
the transactions contemplated hereby or thereby or the ownership or operation of
the Stations or any of the other assets of the Borrower or its Subsidiaries or
the breach by the Borrower or any of its Subsidiaries of any of the
representations, warranties, covenants and agreements contained herein or in any
Collateral Document; provided, however, that the Borrower shall not be liable to
any Indemnified Person, if there is a final judicial determination that such
claims, losses, liabilities, obligations, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulted solely from the
gross negligence or willful misconduct of such Indemnified Person; and provided,
further, that notwithstanding the foregoing, the Borrower shall not be
responsible for the costs and expenses, including legal fees, of any Bank other
than the Administrative Agent in respect of any period prior to the occurrence
of a Possible Default which legal fees are incurred by such Bank in connection
with the negotiation, preparation, amendment or modification of this Agreement
and the Collateral Documents and the closing of the transactions contemplated
hereby and thereby.
12.4 Notices. Except as otherwise expressly provided herein, all
notices, demands and requests required or permitted to be given under the
provisions of this Agreement shall be in writing and shall be deemed to have
been duly delivered and
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received (a) on the date of personal delivery, (b) on the date of receipt (as
shown on the return receipt) if mailed by registered or certified mail, postage
prepaid and return receipt requested, (c) on the next business day after
delivery to a courier service that guarantees delivery on the next business day
if the conditions to the courier's guarantee are complied with, or (d) on the
date of receipt by telecopy, in each case addressed as follows:
TO THE ADMINISTRATIVE AGENT:
Key Corporate Capital Inc.
127 Public Square
M/C OH-01-127-0602
Cleveland, Ohio 44114-1306
Attention: Media and Telecommunications Finance
Division
Telecopy: 216-689-4666
Copy to:
Timothy J. Kelley, Esq.
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Ave., N.W., Suite 800
Washington, D.C. 20036
Telecopy: 202-776-2222
TO THE SYNDICATION AGENT:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
555 South Flower Street
Los Angeles, California 90071
Attention: Matthew Koenig
Telecopy: 213-228-2641
TO THE BANKS, AT THE ADDRESSES LISTED ON THE SIGNATURE
PAGES HEREOF OR IN THE ASSIGNMENT INSTRUMENT DELIVERED
PURSUANT TO SECTION 12.7(b)
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TO THE BORROWER OR ANY OF ITS SUBSIDIARIES:
Entertainment Communications, Inc.
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
Attention: David J. Field, Senior Vice President
Telecopy: 610-660-5620
Copy to:
John C. Donlevie, Esq.
Executive Vice President and General Counsel
Entertainment Communications, Inc.
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
Telecopy: 610-660-5620
or to such other address or addresses as the party to which such notice is
directed may have designated in writing to the other parties hereto.
12.5 Waiver and Release by the Borrower. Neither the Administrative
Agent, nor the Syndication Agent, nor any Bank, nor any Affiliate, officer,
director, employee, attorney, or agent of the Administrative Agent, the
Syndication Agent or any Bank shall have any liability with respect to, and the
Borrower hereby waives, releases and agrees not to sue any of them upon, any
claim for any special, indirect, incidental or consequential damages suffered or
incurred by the Borrower or any of its Subsidiaries in connection with, arising
out of, or in any way related to, this Agreement or any of the Collateral
Documents, or any of the transactions contemplated by this Agreement or any of
the Collateral Documents, unless arising from the gross negligence or willful
misconduct of such Person as determined by a final judgment of a court of
competent jurisdiction.
12.6 Right of Set Off. Upon the occurrence and during the continuance
of any Event of Default, each Bank is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set-off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Bank or an
Affiliate of such Bank to or for the credit or the account of the Borrower or
any of its Subsidiaries against
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any and all of the obligations of the Borrower or any of its Subsidiaries now or
hereafter existing hereunder or under any Collateral Document, irrespective of
whether or not such Bank shall have made any demand hereunder or under any
Collateral Document and although such obligations may be unmatured. Such Bank
agrees promptly to notify the Administrative Agent and the Borrower after any
such set-off and application made by such Bank; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Banks under this Section are in addition to other
rights and remedies (including without limitation, other rights of set-off)
which the Banks may have. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in
the Notes may exercise rights of set-off or counterclaim and other rights with
respect to such participation as fully as if such holder of a participation were
a direct creditor of the Borrower or any of its Subsidiaries in the amount of
such participation.
12.7 Successors and Assigns; Participations.
(a) Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party; provided, however, that the Borrower may not assign or
transfer any of its rights or obligations hereunder or under the Notes without
the prior written consent of all of the Banks and the Administrative Agent.
(b) Each Bank may assign all or any part of any of its Loans, its
Notes, and its share of the Commitment and the Letters of Credit with the
consent of the Borrower and the Administrative Agent, which consent shall not be
unreasonably withheld; provided that (i) no such consent by the Borrower shall
be required (A) for any such assignment by any Bank to an Affiliate of such
Bank, (B) if, at the time of such assignment, an Event of Default or Possible
Default has occurred and is continuing, (C) in the case of any assignment to
another branch or a principal office of a Bank, or (D) for any such assignment
to another Bank or an Affiliate of another Bank; (ii) any such partial
assignment shall be in an amount at least equal to $5,000,000; and (iii) each
such assignment shall be made by a Bank in such manner that the same portion of
its Loans, its Notes, its share of the Commitment and its participation in the
Letters of Credit is assigned to the assignee. Upon execution
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and delivery by the assignor and the assignee to the Borrower and the
Administrative Agent of an instrument in writing pursuant to which such assignee
agrees to become a "Bank" hereunder (if not already a Bank) having the share of
the Commitment, the Loans and the Letters of Credit specified in such
instrument, and upon consent thereto by the Administrative Agent and the
Borrower (to the extent required), the assignee shall have, to the extent of
such assignment (unless otherwise provided in such assignment with the consent
of the Administrative Agent), the obligations, rights and benefits of a Bank
hereunder holding the share of the Commitment, the Loans and the Letters of
Credit (or portions thereof) assigned to it (in addition to the share of the
Commitment, the Loans and the Letters of Credit, if any, theretofore held by
such assignee) and the assigning Bank shall, to the extent of such assignment,
be released from the share of the Commitment and the obligations hereunder so
assigned.
(c) Upon its receipt of an assignment pursuant to Section 12.7(b)
above duly executed by an assigning Bank and the assignee, together with any
Notes subject to such assignment and the Administrative Agent's standard
processing and recordation fee of $3,500, the Administrative Agent shall, if
such assignment has been completed, accept such assignment. Within five business
days after receipt of such notice, the Borrower, at the Borrower's own expense,
shall execute and deliver to the Administrative Agent in exchange for the
surrendered Notes new Notes to the order of the assignee in an amount equal to
the share of the Commitment, the Loans and the Letters of Credit assumed by the
assignee and, if the assigning Bank has retained a portion of the Commitment,
the Loans and the Letters of Credit hereunder, new Notes to the order of the
assigning Bank in an amount equal to the share of the Commitment and the Loans
retained by it hereunder. Such new Notes shall be in an aggregate principal
amount equal to the aggregate principal amount of such surrendered Notes, shall
be dated the effective date of such assignment and shall otherwise be in
substantially the form of Exhibit A hereto. Cancelled Notes shall be returned to
the Borrower.
(d) A Bank may sell or agree to sell to one or more other Persons
(each, a "Participant") a participation in all or any part of any Loans held by
it, or in its share of the Commitment and the Letters of Credit. Except as
otherwise provided in the last sentence of this Section 12.7(d), no
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Participant shall have any rights or benefits under this Agreement or any Note
or any other Collateral Documents (the Participant's rights against such Bank in
respect of such participation to be those set forth in the agreements executed
by such Bank in favor of the Participant). All amounts payable by the Borrower
to any Bank under Section 2 hereof in respect of Loans held by it, and its share
of the Commitment and of the Letters of Credit, shall be determined as if such
Bank had not sold or agreed to sell any participations in such Loans and share
of the Commitment, and as if such Bank were funding each of such Loans and its
share of the Commitment in the same way that it is funding the portion of such
Loans and its share of the Commitment in which no participations have been sold.
In no event shall a Bank that sells a participation agree with the Participant
to take or refrain from taking any action hereunder or under any other
Collateral Document except that such Bank may agree with the Participant that it
will not, without the consent of the Participant, agree to any modification,
supplement or waiver hereof or of any of the other Collateral Documents to the
extent that the same, under Section 12.12 hereof, requires the consent of each
Bank. The Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.7 through 2.14 and Section 12.6 with respect to its
participating interest.
(e) In addition to the assignments and participations permitted
under the foregoing provisions of this Section 12.7, any Bank may assign and
pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any Operating Circular issued by such Federal Reserve
Bank. No such assignment shall release the assigning Bank from its obligations
hereunder.
(f) A Bank may furnish any information concerning the Borrower and
its Subsidiaries in the possession of such Bank from time to time to assignees
and participants (including prospective assignees and participants).
(g) Anything in this Section 12.7 to the contrary notwithstanding,
no Bank may assign or participate any interest in any Loan held by it hereunder
to the Borrower or any of its Affiliates without the prior written consent of
all of the Banks.
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12.8 Applicable Law. This Agreement and the Collateral Documents, and
the duties, rights, powers and remedies of the parties hereto and thereto, shall
be construed in accordance with, and governed by, the laws of the State of Ohio,
without regard to the conflicts of laws provisions thereof, except to the extent
that any Collateral Document provides that the local law of another jurisdiction
governs the grant, perfection or enforcement of the Liens granted pursuant to
such Collateral Document.
12.9 Binding Effect and Entire Agreement. This Agreement shall inure to
the benefit of, and shall be binding upon, the respective successors and
permitted assigns of the parties hereto. This Agreement, the Schedules and
Exhibits hereto, which are hereby incorporated in this Agreement, and the
Collateral Documents constitute the entire agreement among the parties on the
subject matter hereof.
12.10 Counterparts. This Agreement may be executed in any number of
counterparts or duplicate originals, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
12.11 Survival of Agreements. All covenants, agreements,
representations and warranties made herein or in any Collateral Document shall
survive any investigation and the Closing and shall continue in full force and
effect so long as any of the Obligations remain to be performed or paid or the
Banks have any obligation to advance sums or issue Letters of Credit hereunder
or any Letter of Credit remains outstanding.
12.12 Modification. Any term of this Agreement or of the Notes may be
amended and the observance of any term of this Agreement or of the Notes may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Borrower and the Required
Banks; provided, however, that no such amendment or waiver or other action
shall, without the prior written consent of all of the Banks or the holders of
all of the Notes at the time outstanding, (a) extend the maturity or reduce the
principal amount of, or reduce the rate or extend the time of payment of
interest on, or reduce the amount or extend the time of payment of any principal
installment of, any Note, (b) reduce the amount or extend the time of payment of
the commitment fees or the fees
- 117 -
<PAGE> 124
shared by the Banks and payable in respect of Letters of Credit, (c) change the
Commitment or the Ratable Share of any Bank (other than any change in Commitment
or Ratable Share resulting from (i) the sale of a participation in or assignment
of any Bank's interest in the Commitment and Loans in accordance with subsection
12.7 or (ii) an increase in the Commitment pursuant to Section 2.15), (d) change
the percentage referred to in the definition of "Required Banks" contained in
Section 1.1, (e) amend this Section 12.12, (f) amend or waive compliance with
Section 2.1(b) or 2.6(b), or (g) release any collateral for the Loans except in
connection with a sale or other disposition permitted pursuant to Section 8.10;
and provided, further, that notwithstanding the foregoing provisions of this
Section 12.12, this Agreement and the Notes may be amended or modified in the
manner contemplated by Section 12.7 for the purpose of permitting any Bank to
assign its interest, rights and obligations hereunder to another Person if the
appropriate assignment agreement or counterparts thereof are executed by the
Borrower (to the extent required), the Administrative Agent and the appropriate
Bank assignor and assignee. Any amendment or waiver effected in accordance with
this Section 12.12 shall be binding upon each holder of any Note at the time
outstanding, each future holder of any Note and the Borrower.
12.13 Separability. If any one or more of the provisions contained in
this Agreement or any Collateral Document should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of all
remaining provisions shall not in any way be affected or impaired. Any provision
of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
12.14 Section Headings. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
12.15 Enforcement. The Borrower (a) hereby irrevocably submits to the
jurisdiction of the state courts of the State of Ohio and to the jurisdiction of
the United States District Court for the Northern District of Ohio, for the
purpose
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<PAGE> 125
of any suit, action or other proceeding arising out of or based upon this
Agreement or any Collateral Document or the subject matter hereof or thereof
brought by the Administrative Agent or the Banks or their successors or assigns
and (b) hereby waives, and agrees not to assert, by way of motion, as a defense,
or otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the suit, action
or proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement or any Collateral
Document or the subject matter hereof or thereof may not be enforced in or by
such court, and (c) hereby waives and agrees not to seek any review by any court
of any other jurisdiction which may be called upon to grant an enforcement of
the judgment of any such Ohio state or federal court. The Borrower hereby
consents to service of process by registered mail at the address to which
notices are to be given. The Borrower agrees that its submission to jurisdiction
and its consent to service of process by mail is made for the express benefit of
the Administrative Agent and the Banks. Final judgment against the Borrower in
any such action, suit or proceeding may be enforced in other jurisdictions by
suit, action or proceeding on the judgment, or in any other manner provided by
or pursuant to the laws of such other jurisdiction; provided, however, that the
Administrative Agent or the Banks may at their option bring suit, or institute
other judicial proceedings, against the Borrower or any of its assets in any
state or federal court of the United States or of any country or place where the
Borrower, or such assets, may be found.
12.16 Termination. This Agreement shall terminate when all amounts due
hereunder, under the Notes and under each Collateral Document shall have been
indefeasibly paid in full in cash and all other Obligations hereunder or
thereunder shall have been fully performed, so long as no Letters of Credit are
then outstanding and the Banks have no further obligation to advance sums or
issue Letters of Credit hereunder. Upon such termination, at the request of the
Borrower, the Administrative Agent and the Banks shall release all Liens granted
herein or in any Collateral Document at the Borrower's expense and return all
collateral held pursuant hereto or to any Collateral Document without recourse
or representation. Notwithstanding anything to the contrary contained herein,
each expense reimbursement and
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<PAGE> 126
indemnification provision in this Agreement or in any Collateral Document shall
survive the repayment in full of the Loans and the termination of this
Agreement.
12.17 FCC Compliance.
(a) Notwithstanding anything herein or in any of the Collateral
Documents to the contrary, but without limiting or waiving the Borrower's or any
of its Subsidiaries' obligations hereunder or under any of the Collateral
Documents, the Administrative Agent's and the Banks' remedies hereunder and
under the Collateral Documents are subject to compliance with the Communications
Act of 1934, as amended, and to all applicable rules, regulations and policies
of the FCC, and neither the Administrative Agent nor the Banks will take any
action pursuant to this Agreement or any of the Collateral Documents that will
constitute or result in any assignment of a License issued by the FCC or any
change of control of the Borrower or any of its Subsidiaries which owns any FCC
License if such assignment of License or change of control would require under
then existing law (including the written rules and regulations promulgated by
the FCC), the prior approval of the FCC, without first obtaining such approval
of the FCC. This Agreement, the Collateral Documents and the transactions
contemplated hereby and thereby do not and will not constitute, create, or have
the effect of constituting or creating, directly or indirectly, actual or
practical ownership of the Borrower or any of its Subsidiaries by the
Administrative Agent or the Banks or control, affirmative or negative, direct or
indirect, of the Borrower or any of its Subsidiaries by the Administrative Agent
or the Banks, over the management or any other aspect of the operation of the
Borrower or any of its Subsidiaries, which ownership and control remain
exclusively and at all times in the stockholders and directors of the Borrower
and its Subsidiaries until such time as the Administrative Agent and the Banks
have complied with such law, rules, regulations and policies.
(b) Furthermore, the parties acknowledge their intent that, upon
the occurrence of an Event of Default, the Banks shall receive, to the fullest
extent permitted by applicable law and governmental policy (including, without
limitation, the rules, regulations and policies of the FCC), all rights
necessary or desirable to obtain, use or sell the Licenses and the collateral
securing the Loans, and to exercise all remedies available to
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<PAGE> 127
them under this Agreement, the Collateral Documents, the Uniform Commercial Code
or other applicable law. Therefore, the parties agree that, in the event of
changes in law or governmental policy occurring after the date hereof that
affect in any manner the Administrative Agent's or the Banks' rights of access
to, or use or sale of, the Licenses or such collateral, or the procedures
necessary to enable the Administrative Agent or the Banks to obtain such rights
of access, use or sale, the Administrative Agent, the Banks and the Borrower
shall amend this Agreement and the Collateral Documents in such manner as the
Administrative Agent shall reasonably request, in order to provide the
Administrative Agent and the Banks such rights to the greatest extent possible
consistent with then applicable law and governmental policy.
12.18 Jury Trial Waiver. THE BORROWER, THE AGENTS AND THE BANKS EACH
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN THE BANKS AND THE BORROWER
ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR THE
NOTES OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE BORROWER, THE AGENTS
AND THE BANKS ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER
INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER
IN THEIR RELATED FUTURE DEALINGS. THE BORROWER, THE AGENTS AND THE BANKS FURTHER
WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (UNLESS EXPRESSLY MODIFIED IN
WRITING BY ALL PARIES HERETO), AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, THE COLLATERAL DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
- 121 -
<PAGE> 128
12.19 Sale as a Going Concern. Notwithstanding anything to the contrary
in this Agreement, the Security Agreements, the Pledge Agreements or any other
Collateral Document, the Administrative Agent and the Banks acknowledge that the
value of each Station as a going concern is, as of the date hereof,
significantly greater than the sum of the values of the individual collateral
used in the operation of that Station in which the Administrative Agent, for the
benefit of the Banks, has been granted a lien or security interest. Therefore,
the Administrative Agent and the Banks agree that upon any foreclosure of their
liens or security interests in the assets of such Station pursuant to the
Collateral Documents, they shall first attempt to sell such Station as a going
concern and that they shall not sell such collateral separately unless (a) the
Borrower or any of its Subsidiaries (or any of their respective agents,
representatives or employees) has refused to cooperate fully in connection with
the Administrative Agent's or the Banks' exercise of their remedies hereunder,
(b) the Administrative Agent has attempted to sell such Station as a going
concern and, after reasonable efforts, has not been able to do so, or (c) the
Administrative Agent determines in its sole discretion that selling such Station
as a going concern is not feasible for any reason or is not likely to permit the
Administrative Agent or the Banks to raise sufficient funds to pay in full the
Obligations secured by the Collateral Documents. Notwithstanding anything herein
to the contrary, the Administrative Agent and the Banks shall have the right, in
their sole discretion, but subject to the terms and conditions of the Collateral
Documents, (i) to sell any Station or group of Stations individually without
being required to sell all of the Stations in one transaction, and (ii) to
exercise their remedies under the Pledge Agreements prior to any exercise of
remedies under the other Collateral Documents provided that anything to the
contrary herein notwithstanding the exercise of such remedies shall be conducted
in a commercially reasonable manner.
12.20 Marshaling; Payments Set Aside. Subject to Section 12.19, the
Administrative Agent and the Banks shall not be under any obligation to marshal
any assets in favor of the Borrower or any other Person or against or in payment
of any or all of the Obligations. To the extent that the Borrower or any of its
Subsidiaries makes a payment or payments to the Administrative Agent or the
Banks or the Administrative Agent or
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<PAGE> 129
any Bank enforces its security interest or exercises its rights of setoff, and
such payment or payments or the process of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party under any bankruptcy or insolvency law, state or federal law, common
law or equitable cause, then to the extent of such recovery, the Obligations or
part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor, shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement had not occurred.
[SIGNATURE PAGES FOLLOW]
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<PAGE> 130
TO WITNESS THE ABOVE, the Borrower, the Banks and the Agents have
caused this Loan Agreement to be executed by their respective representatives
thereunto duly authorized as of the date first above written.
BORROWER:
ENTERTAINMENT COMMUNICATIONS, INC.
By:___________________________
Name:_________________________
Title:________________________
BANKS:
KEY CORPORATE CAPITAL INC.
By:___________________________
Name: Kristen K. St. Pierre
Title: Vice President
Address: 127 Public Square
Cleveland, Ohio 44114-1306
Attention: Media and Telecommunications Finance
Division
BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION
By:___________________________
Name:_________________________
Title:________________________
Address: 555 South Flower Street, 10th Floor
Los Angeles, California 90071
Attention: Matthew Koenig
<PAGE> 131
CIBC OPPENHEIMER CORP.
By:___________________________
Name:_________________________
Title:________________________
Address: 425 Lexington Avenue
New York, New York 10017
Attention: Pam Poutre
FIRST UNION NATIONAL BANK
By:___________________________
Name:_________________________
Title:________________________
Address: One First Union Center
DC5-NC 0735
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Russ Herakovich
FLEET BANK, N.A.
By:___________________________
Name:_________________________
Title:________________________
Address: Media & Communications Group
1185 Avenue of the Americas, 16th Floor
Mailstop: NY/NY/S16K
New York, New York 10036
Attention: Eric Meyer
<PAGE> 132
U.S. BANK, N.A.
By:___________________________
Name:_________________________
Title:________________________
Address: 1420 Fifth Avenue, 10th Floor
Seattle, Washington 98101
Attention: Matthew S. Thoreson
BANK OF MONTREAL
By:___________________________
Name:_________________________
Title:________________________
Address: 430 Park Avenue
New York, New York 10022
Attention: Ola Anderssen
COMPAGNIE FINANCIERE DE CIC
ET DE L'UNION EUROPEENNE
By:___________________________
Name:_________________________
Title:________________________
By:___________________________
Name:_________________________
Title:________________________
Address: 520 Madison Avenue,
37th Floor
New York, New York 10022
Attention: Brian O'Leary
<PAGE> 133
FIRST HAWAIIAN BANK
By:___________________________
Name:_________________________
Title:________________________
Address: Media Finance Division
999 Bishop St., 11th Floor
Honolulu, Hawaii 96813
Attention: Jim Polk
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:___________________________
Name:_________________________
Title:________________________
Address: 200 South Orange Avenue
Mail Code SOAB4
Orlando, Florida 32802
Attention: David Miller
UNION BANK OF CALIFORNIA, N.A.
By:___________________________
Name:_________________________
Title:________________________
Address: 445 South Figueroa Street
Los Angeles, California 90071
Attention: Kevin Sampson
ISSUING BANK:
KEY CORPORATE CAPITAL INC.
By:___________________________
Name: Kristen K. St. Pierre
Title: Vice President
<PAGE> 134
ADMINISTRATIVE AGENT:
KEY CORPORATE CAPITAL INC.
By:___________________________
Name: Kristen K. St. Pierre
Title: Vice President
SYNDICATION AGENT:
BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION
By:___________________________
Name: ________________________
Title: _______________________
<PAGE> 135
LIST OF SCHEDULES AND EXHIBITS
Schedule 1.1 Ratable Shares of the Banks
Exhibit A Form of Note
Exhibit B Financial Statements
Exhibit C Projections
Exhibit D Capitalization
Exhibit E Proceedings, Litigation, Non-
Compliance with Law; Tax Matters
Exhibit F Liens and Indebtedness
Exhibit G Schedule of Contracts, Commitments,
Material Agreements, licenses and
Consents
Exhibit H ERISA Liabilities and Plans
Exhibit I Real Estate
Exhibit J Environmental Matters
Exhibit K Form of Compliance Certificate
Exhibit L Existing Interests in Partnerships
and Joint Ventures
Exhibit M Potential Material Adverse
Contracts
Exhibit N Material Labor Disputes
Exhibit O Request for Borrowing
<PAGE> 136
SCHEDULE 1.1
Ratable Shares
<TABLE>
<CAPTION>
Bank: Ratable Share of Commitment
- ----- and Loans:
---------------------------
<S> <C>
KEY CORPORATE CAPITAL INC. 13.3333%
BANK OF AMERICA, NATIONAL
TRUST AND SAVINGS ASSOCIATION 13.3333%
CIBC INC. 11.2500%
FIRST UNION NATIONAL BANK 11.2500%
FLEET BANK, N.A. 11.2500%
BANK OF MONTREAL 11.2500%
COMPAGNIE FINANCIERE DE CIC
ET DE L'UNION EUROPEENNE 6.6667%
SUNTRUST BANK,
CENTRAL FLORIDA, N.A. 6.6667%
UNION BANK OF CALIFORNIA, N.A. 6.6667%
U.S. BANK, N.A. 5.0000%
FIRST HAWAIIAN BANK 3.3333%
--------
Total: 100.000%
=======
</TABLE>
<PAGE> 137
EXHIBIT A
FORM OF AMENDED AND RESTATED REDUCING REVOLVING CREDIT NOTE
$______________ October 8, 1998
FOR VALUE RECEIVED, ENTERCOM COMMUNICATIONS CORP., a Pennsylvania
corporation (the "Maker"), hereby promises to pay to the order of [BANK] (the
"Payee"), on or before February 13, 2006, in the manner and at the place
provided in the Loan Agreement, as that term is defined below, the principal sum
of $______________, or if less, the outstanding balance of the Loans, as that
term is defined in the Loan Agreement described below, made by the Payee.
The unpaid principal balance of this Note shall bear interest prior to
maturity at the rates determined in accordance with the provisions of that
certain Loan Agreement dated as of February 13, 1998, as amended by the First
Amendment to Loan Agreement, dated as of October 8, 1998, among the Maker, Key
Corporate Capital Inc., as Administrative Agent, Bank of America National Trust
and Savings Association, as Syndication Agent, the Payee and the other financial
institutions as may from time to time be parties thereto (as the same may be
further amended, modified, extended or restated from time to time, the "Loan
Agreement"). Interest accrued on each Base Rate Loan shall be paid quarterly in
arrears on each Quarterly Date after the date hereof until such Loan is paid in
full, and interest accrued on each LIBOR Loan shall be paid on the last day of
the Interest Period thereof and, in addition, if such Interest Period is more
than three months, on the day that would have been the last day of such Interest
Period if such Interest Period had been three months.
This Note is an amendment and restatement of the Reducing Revolving Credit
Note dated February 13, 1998, of the Maker to the Payee (the "Original Note")
and not a replacement, substitution or repayment thereof. The indebtedness and
liabilities of the Maker under the Original Note evidenced hereby
<PAGE> 138
remain in full force and effect as amended, renewed and extended hereby.
This Note is subject to voluntary and mandatory prepayment in whole or in
part at the times and in the manner specified in the Loan Agreement.
The Payee may enter all amounts of principal borrowed, paid or prepaid at
any time on the grid annexed hereto or on any separate record thereof maintained
by the Payee.
This Note evidences indebtedness of the Maker to the Payee arising under
the Loan Agreement, to which reference is hereby made for a statement of the
rights of the Payee and the duties and obligations of the Maker in relation
thereto, but neither this reference to the Loan Agreement nor any provision
thereof shall affect or impair the absolute and unconditional obligation of the
Maker to pay the principal of and interest on this Note when due.
The principal of and all interest on this Note shall be paid as provided
in the Loan Agreement in immediately available funds constituting lawful money
of the United States of America, not later than 11:00 A.M. (Cleveland time) on
the day when due.
Upon the occurrence of any Event of Default, the entire outstanding
principal amount of this Note and (to the extent permitted by law) unpaid
interest shall bear interest from the date of occurrence of such Event of
Default until the earlier of the date such amount is paid in full and the date
on which such Event of Default is cured or waived in writing at the Default
Interest Rate which shall be payable on demand.
Subject to the provisions of Section 10 of the Loan Agreement, the entire
unpaid principal balance of this Note, together with all interest accrued
thereon, shall become immediately due and payable upon the occurrence of an
Event of Default. Upon the occurrence of any Event of Default, the holder hereof
shall have all of the rights, powers and remedies provided in the Loan Agreement
or in any Collateral Document or at law or in equity. Failure of the Payee or
any holder of this Note to exercise any such right or remedy available hereunder
or under the Loan Agreement or any Collateral Document or at law or in
- 2 -
<PAGE> 139
equity shall not constitute a waiver of the right to exercise subsequently such
option or such other right or remedy.
The payment of this Note is secured by certain Security Agreements,
certain Pledge Agreements and a Guaranty, all as more fully identified in the
Loan Agreement.
To the extent permitted by law, the Maker and each endorser of this Note,
and their respective heirs, successors, legal representatives and assigns,
hereby severally waive presentment; protest and demand; notice of protest,
demand, dishonor and nonpayment; and diligence in collection, and agree to the
application of any bank balance as payment or part payment of this Note or as an
offset hereto as provided in the Loan Agreement, and further agree that the
holder hereof may release all or any part of the collateral given as security
for this Note or any rights of the holder thereunder and may amend this Note
(with the consent of the Maker), without notice to, and without in any way
affecting the liability of, the Maker or any endorser of this Note, and their
respective heirs, successors, legal representatives and assigns.
If at any time the indebtedness evidenced by this Note is collected
through legal proceedings or this Note is placed in the hands of attorneys for
collection, the Maker and each endorser of this Note, and their respective
heirs, successors, legal representatives and assigns, hereby jointly and
severally agree to pay all costs and expenses (including reasonable attorneys'
fees if permitted by law) incurred by the holder of this Note in collecting or
attempting to collect such indebtedness.
The rate of interest payable on this Note from time to time shall in no
event exceed the maximum rate permissible under applicable law. If the rate of
interest payable on this Note is ever reduced as a result of the preceding
sentence and at any time thereafter the maximum rate permitted by applicable law
shall exceed the rate of interest provided for on this Note, then the rate
provided for on this Note shall be increased to the maximum rate permitted by
applicable law for such period as is required so that the total amount of
interest received by the Payee is that which would have been received by the
Payee but for the operation of the preceding sentence.
- 3 -
<PAGE> 140
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
PROVISIONS OF, THE LAW OF THE STATE OF OHIO, WITHOUT REGARD TO THE CONFLICTS OF
LAW PRINCIPLES THEREOF.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Loan Agreement.
ENTERCOM COMMUNICATIONS CORP.
By:___________________________
Name:_________________________
Title:________________________
- 4 -
<PAGE> 141
REVOLVING CREDIT GRID
_____________________
________________________________________________________________________________
AMOUNT AMOUNT UNPAID OFFICER'S
DATE BORROWED PAID BALANCE INITIALS
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
- 5 -
<PAGE> 142
EXHIBIT D
TO
LOAN AGREEMENT
AMONG
ENTERCOM COMMUNICATIONS CORP.,
KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND
DOCUMENTATION AGENT,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
SYNDICATION AGENT,
AND
THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO
Capitalization of the Borrower
Loan Agreement Section 5.5
Authorized Shares:
Voting Common Stock 180,000
Non-Voting Common Stock 180,000
-------
Total 360,000
Issued and Outstanding Shares:
Voting Common Stock 72,750
Non-Voting Common Stock 43,650
-------
Total 116,400
Capitalization of the License Partnership:
Interests Held By
99% General Partnership Interest The Borrower
1% Limited Partnership Interest ECI
Investors Corporation
<PAGE> 143
Commitments:
The Borrower has committed to issue shares of the capital stock of the Borrower
pursuant to the terms of the Subordinated Purchase Agreement and documents
executed in connection therewith.
<PAGE> 144
EXHIBIT E
TO
LOAN AGREEMENT
AMONG
ENTERCOM COMMUNICATIONS CORP.,
KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND
DOCUMENTATION AGENT,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
SYNDICATION AGENT,
AND
THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO
Litigation; Proceedings; Compliance; Tax Matters
Loan Agreement Section 5.7, 5.8 and 5.11
The following litigation, proceedings and non-compliance with law are disclosed
pursuant to Section 5.7 and 5.11 of the Loan Agreement:
1 Complaint of gender-based discrimination filed by Karen Szabo in the
United States District Court for the Western District of Pennsylvania
on January 14, 1997. The Borrower has answered the Complaint, denying
the allegations, discovery has concluded and Borrower's Motion for
Summary Judgment has been filed. The Borrower does not anticipate an
outcome from this claim that would have a Material Adverse Effect on
the Borrower.
2 Complaint of gender-based discrimination filed by Cassidy Haus with the
Equal Employment Opportunity Commission ("EEOC") on January 25, 1995.
The EEOC dismissed her complaint and provided Ms. Haus with notice of
her right to sue, but she has not yet exercised such right. The
Borrower does not anticipate an outcome from this claim that would have
a Material Adverse Effect on the Borrower.
3 Various Workers' Compensation claims which are being handled
by Borrower's insurance company.
4 The FCC recently denied a Petition for Review of Staff Action
relating to the license renewal by the FCC of Station KISW,
<PAGE> 145
which Petition had been filed on November 13, 1996 by Vincent L.
Hoffart, Sr. The Petition has the effect of preventing the granted
license renewal for KISW from becoming a Final Order. The time for
filing an appeal to the United States Court of Appeals for the D.C.
Circuit has not expired. In addition, Borrower's FCC counsel received
in the mail an informal objection purportedly filed by Mr. Hoffart
against the 1997 application for renewal of the license for Station
KISW, which application has been granted by the FCC. The staff of the
FCC has informally advised Borrower's FCC counsel that the FCC has no
record of the filing of Mr. Hoffart's latest objection.
5 The Borrower from time to time may be exposed to claims by government
entities for escheat claims and for sales, excise, and similar taxes.
6 The Borrower received a notice from the Kansas City office of the
United States Environmental Protection Agency ("EPA") regarding
liability for 61 pounds of PCB containing materials disposed of by the
Borrower in the early 1980's, originating at a Station in Minnesota
which Borrower sold in 1995, at a licensed incinerator disposal
facility in Kansas City. The site is the subject of an EPA cleanup and
cost recovery operation. EPA has verbally informed the Borrower's
counsel that the Borrower will likely qualify for de minimis status,
and that the Borrower's liability should be less than $10,000. The
Borrower has also been verbally informed that the total cleanup cost
for this site is estimated to be between $12,000,000 to $15,000,000.
7 A complaint alleging race discrimination filed by Ruby
Aquino with the EEOC on April 1, 1998. The EEOC dismissed
the complaint on August 6, 1998. Ms. Aquino has ninety (90)
days from that date to file a law suit in a state or federal
court.
8 A complaint alleging gender and age discrimination filed by Rick Bauman
in the Superior Court of Washington for King County on July 23, 1998.
The case was removed to the United States District Court for the
Western District of Washington at Seattle and Borrower has filed an
answer with that Court denying the substantive allegations asserted.
Discovery is ongoing. The matter is covered under the Borrower's
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<PAGE> 146
Employment Practices Liability Insurance policy, which has a $50,000
deductible. The Borrower does not anticipate an outcome from this claim
that would have a Material Adverse Effect on the Borrower.
9 A complaint alleging defamation filed by Terry Reed, Janis Reed, and
Ann Funk, on behalf of themselves and others similarly situated in the
United States District Court for the Western District of Missouri
Southern Division on August 7, 1998. The Borrower intends to file an
answer with the District Court denying the substantive allegations
asserted. The matter is covered under the Borrower's Broadcasters
Errors and Omissions Insurance policy, which has a $10,000 deductible.
The Borrower does not anticipate an outcome from this claim that would
have a Material Adverse Effect on the Borrower.
10 A complaint alleging gender discrimination filed by Alison Miller in
the Superior Court of California for Sacramento County on August 19,
1998. The case was removed to the United States District Court for the
Eastern District of California on September 16, 1998. The Borrower
intends to file an answer with the District Court denying the
substantive allegations asserted. The matter is covered under the
Borrower's Employment Practices Liability Insurance policy, which has a
$50,000 deductible. The Borrower does not anticipate an outcome from
this claim that would have a Material Adverse Effect on the Borrower.
11 In June, 1998, the Borrower received a letter from an attorney
representing Scott Stone, who claims to have been injured at a concert
sponsored by the Borrower's station KNDD in Seattle. No amount has been
demanded and the matter has been turned over to the Borrower's
insurance company, who will provide coverage for this claim. The
Borrower does not anticipate an outcome from this claim that would have
a Material Adverse Effect on the Borrower.
- 3 -
<PAGE> 147
EXHIBIT F
TO
LOAN AGREEMENT
AMONG
ENTERCOM COMMUNICATIONS CORP.,
KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND
DOCUMENTATION AGENT,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
SYNDICATION AGENT,
AND
THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO
Indebtedness; Liens
Loan Agreement Sections 1.1, 5.10, and 8.1
In addition to Permitted Liens and Liabilities disclosed elsewhere in this Loan
Agreement, Entercom's Assets are subject to liens and the Borrower has incurred
liabilities as follows:
The following liabilities which the Borrower has or will from time to
time incur are disclosed pursuant to Section 5.10 of the Loan Agreement: (i) all
material leases and contracts which have been disclosed in this Agreement; (ii)
On February 8, 1996 the Borrower entered into a preliminary agreement for the
Borrower to acquire the assets of radio station KWOD-FM, Sacramento, California,
subject to approval by the Borrower's Board of Directors and lenders and the
FCC, for the purchase price of $25,000,000; (iii) all other obligations and
liabilities disclosed in this Loan Agreement and the exhibits and schedules
hereto; (iv) Management and License Agreement with ECI License Company, L.P., a
limited partnership dated December 23, 1992, as amended April 13, 1993, March 3,
1994, June 1, 1994, April 18, 1995, September 1, 1995, March 6, 1996, and August
1, 1996; (v) Interest Rate Agreement with Society National Bank dated May 12,
1995; (vi) employment agreement with Joseph M. Field dated as of January 1,
1989; (vii) contracts relating to the operation of the stations in the ordinary
course of business including without limitation contracts for: (a) Arbitron and
similar services; (b) Tapscan, Strata and similar computer ratings programming
licenses; (c) AP, UPI and similar news services; (d) station traffic and
accounting software licenses; (e) employment agreements with on-air talent;
- 4 -
<PAGE> 148
(f) ASCAP, BMI, SESAC and similar music licensing agreements; (g) Metro Traffic
and similar traffic and information services; (h) Unistar, ABC, Westwood One and
similar news network affiliation agreements; (i) national sales representation
agreements; (j) contracts for television, direct mail, outdoor and other
advertising type services promoting the stations; (k) contracts for audience,
market and music research relating to the operation of the stations; and (l)
contracts for sports broadcast rights.
- 5 -
<PAGE> 149
EXHIBIT G
TO
LOAN AGREEMENT
AMONG
ENTERCOM COMMUNICATIONS CORP.,
KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND
DOCUMENTATION AGENT,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
SYNDICATION AGENT,
AND
THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO
Material Contracts and Commitments; Licenses and Operating
Agreements
Loan Agreement Sections 5.14 and 5.16
The following material contracts and commitments, licenses and operating
agreements are disclosed pursuant to paragraph 5.14 and 5.16 of the Loan
Agreement:
1. All agreements and leases disclosed elsewhere in this Loan
Agreement.
2. The FCC licenses listed in the attachment to this Exhibit G.
3. The Entercom 401(k) Savings and Retirement Plan.
4. Management and License Agreement between ECI License Company, L.P., a
Pennsylvania limited partnership and Entertainment Communications,
Inc., dated December 23, 1992, as amended April 13, 1993, March 3,
1994, June 1, 1994, September 1, 1995, March 6, 1996, and August 1,
1996.
5. West Tiger Mountain Master Antenna Owners Operating Agreement, dated
July 26, 1988, Station Five Addition dated December 23, 1991, Station
Six Addition, dated June 4, 1992, Station Seven Addition, dated January
16, 1997, Station Eight Addition, dated January 16, 1997, and Station
Nine Addition, dated January 16, 1997.
<PAGE> 150
6. The Borrower has entered into construction contracts relating to studio
expansion projects in Seattle and Gainesville. In connection therewith,
the Borrower has ordered substantial amounts of equipment to be
installed in the expanded studios. All of the costs relating to this
construction and equipment have been estimated and are included in the
capital budgets provided to the Banks.
7. Asset Purchase Agreement, dated August 13, 1998, among CBS Radio, Inc.,
CBS Radio License, Inc. and Borrower pursuant to which Borrower and
License Partnership will acquire substantially all of the assets
relating to radio stations WEEI and WRKO, Boston, Massachusetts
("Boston I Transaction").
8. Asset Purchase Agreement, dated August 13, 1998, among CBS Radio, Inc.,
CBS Radio License, Inc. and Borrower pursuant to which Borrower and
License Partnership will acquire substantially all of the assets
relating to radio stations WAAF and WWTM, Worcester, Massachusetts and
WEGQ, Lawrence, Massachusetts ("Boston II Transaction").
9. Asset Purchase Agreement, dated August 13, 1998, among CBS Radio, Inc.,
CBS Radio License, Inc. and Borrower pursuant to which Borrower and
License Partnership will sell substantially all of the assets relating
to radio stations WYUU, Safety Harbor, Florida and WLLD, Holmes Beach,
Florida ("Tampa Transaction").
10. Agreement, dated February 1, 1995, with Football Northwest, LLC
(Seattle Seahawks) whereby Borrower is granted radio broadcast rights
for the Seattle Seahawks franchise of the National Football League.
11. Interim Agreement, dated February 28, 1997, with the Kansas
City Local of the American Federation of Television and Radio
Artists ("AFTRA"). Negotiations for final collective
bargaining agreement are ongoing.
12. Interim Agreement, dated February 28, 1997, with the Seattle
Local of the AFTRA. Negotiations for final collective
bargaining agreement are ongoing.
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<PAGE> 151
13. Radio Broadcast Rights Agreement, dated March 5, 1998, with Kansas City
Royals Baseball Corporation whereby Borrower is granted radio broadcast
rights for the Kansas City Royals franchise of Major League Baseball.
14. Mariners/KIRO Radio Agreement, dated March 6, 1998, with The Baseball
Club of Seattle, L.P. d/b/a Seattle Mariners Baseball Club whereby
Borrower is granted radio broadcast rights for the Seattle Mariners
franchise of Major League Baseball.
15. Agreement, dated January 26, 1998, with Madison Square Garden Network
whereby Borrower is granted radio broadcast rights for New York Yankees
franchise of Major League Baseball. [To be acquired from CBS in Boston
II Transaction.]
16. Agreement, dated March 14, 1994, with Boston Celtics whereby
Borrower is granted radio broadcast rights for Boston Celtics
franchise of National Basketball Association. [To be acquired
from CBS in Boston I Transaction.]
17. Agreement, dated December 14, 1994, with Boston College
whereby Borrower is granted radio broadcast rights for Boston
College football, basketball and hockey games. [To be
acquired from CBS in Boston I Transaction.]
18. Agreement, dated April, 1997, with Boston Red Sox whereby
Borrower is granted radio broadcast rights for Boston Red Sox
franchise of Major League Baseball. [To be acquired from CBS
in Boston I Transaction.]
19. Agreement, undated, with New England Patriots whereby Borrower
is granted radio broadcast rights for New England Patriots
franchise of National Football League. (Currently being
renegotiated for new three season term). [To be acquired from
CBS in Boston I Transaction.]
20. Asset Purchase Agreement, dated September 30, 1998, with Pinnacle
Towers, Inc., pursuant to which Borrower will sell its interests in the
communications tower located in Bradenton, Florida (formerly WLLD's
main transmitter site) for the sum of $300,000 ("Pinnacle
Transaction").
- 3 -
<PAGE> 152
EXHIBIT H
TO
LOAN AGREEMENT
AMONG
ENTERCOM COMMUNICATIONS CORP.,
KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND
DOCUMENTATION AGENT,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
SYNDICATION AGENT,
AND
THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO
ERISA Liabilities and Plans
Loan Agreement Section 5.15
The following are the Employee Benefit Plans disclosed pertaining to Section
5.15 of the Loan Agreement (for a more complete description, please see the
attached Entercom Employee Handbook):
1. The Borrower maintains a medical, dental, life, and LTD
insurance plan for its employees and certain employees'
dependents.
2. The Borrower's termination policy.
3. The Borrower's vacation policy.
4. The Borrower's leave policy.
5. Borrower's 401(k) Savings and Retirement Plan, a copy of the summary
booklet describing this plan is attached.
6. Borrower's Section 125 Medical Spending Account Plan and
Dependent Care Spending Account Plan.
<PAGE> 153
EXHIBIT I
TO
LOAN AGREEMENT
AMONG
ENTERCOM COMMUNICATIONS CORP.,
KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND
DOCUMENTATION AGENT,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
SYNDICATION AGENT,
AND
THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO
Real Estate
Loan Agreement Section 5.21
A. The following is the real estate owned by Borrower:
California
1 KSEG transmitter site at 701 North Market Boulevard,
Sacramento, Sacramento County, California.
2 KCTC nighttime transmitter site at 7907 Antelope North Road,
Sacramento County, California.
Florida
3 WYUU main transmitter site at 12700 Park Boulevard, Seminole,
Pinellas County, Florida. [This property is to be sold to CBS
in the Tampa Transaction.]
4 WKTK studio site at 1440 N.E. Waldo Road, Gainesville, Alachua
County, Florida.
5 WKTK main transmitter site at Route 1, Morriston, Levy County,
Florida.
6 WKTK transmitter site at County Road 343, Gulf Hammock, Levy
County, Florida.
<PAGE> 154
Kansas
7 KCMO/KLTH/KMBZ studio and KMBZ transmitter site at 4935 Belinder
Road, Westwood, Johnson County, Kansas.
8 WDAF transmitter site at 8105 Mission Road, Prairie
Village, Johnson County, Kansas.
Massachusetts
9 WEEI transmitter site at 1555 Central Avenue, Needham,
Norfolk County, Massachusetts. [To be acquired in
Boston I Transaction.]
10 WRKO transmitter site at 8 Great Meadow Road,
Burlington, Middlesex County, Massachusetts. [To be
acquired in Boston I Transaction.]
11 WWTM transmitter site at 181 Moreland Street, Worcester,
Worcester County, Massachusetts. [To be acquired in
Boston II Transaction.]
Missouri
12 Approximately 50 acres of undeveloped land (adjacent to
former KCMO transmitter site) at 400 N.E. Cookingham
Road, Kansas City, Clay County, Missouri.
13 KCMO transmitter site at 12416 North Eastern Road,
Kansas City, Clay County, Missouri.
New York
14 WBBF transmitter site at 2670 South Clinton Avenue,
Rochester, Monroe County, New York.
Oregon
15 KFXX transmitter site at 15351 S.E. Johnson Road,
Clackamas, Clackamas County, Oregon.
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<PAGE> 155
Pennsylvania
16 Easement for Spring Hill tower site at 2500 East Lane,
Pittsburgh, Allegheny County, Pennsylvania.
Washington
17 KEDO transmitter site at 3379 Olive Way, Longview,
Cowlitz County, Washington.
18 KLYK transmitter site at 3684 Mt. Brynion Road, Kelso,
Cowlitz County, Washington.
19 KEDO/KLYK studios at 1130 14th Avenue, Longview, Cowlitz
County, Washington.
20 KNDD transmitter site at Cougar Mountain, 6501 173rd
Avenue, S.E., Issaquah, Washington.
21 KNWX transmitter site at 22841 Dockton Road, S.W.,
Vashon, King County, Washington.
22 KIRO transmitter site at 23410 Dockton Road, S.W.,
Vashon, King County, Washington.
23 Easement for KIRO transmitter site at Queen Anne Hill,
Seattle, King County, Washington.
24 KISW studio at 712 Aurora Avenue North, Seattle, King
County, Washington.
25 KISW transmitter site at 9201 Roosevelt Way North,
Seattle, King County, Washington.
26 KBAM transmitter site at 966 Lone Oak Road, Seattle,
Cowlitz County, Washington.
B. The following are all of the real estate sites (excluding
sales offices, news bureau offices, storage warehouses, and
parking lots) leased by Borrower:
California
- 3 -
<PAGE> 156
1 KXOA transmitter site at 820 West Delano Street, Sacramento
County, California leased pursuant to Lease with California State
University at Sacramento, dated March 7, 1985.
2 KRXQ/KDND/KSEG/KCTC/KSSJ studios at 5345 Madison Avenue,
Sacramento, California, Suite 100 leased pursuant to Lease with
DeMartini Joint Account, dated November 1, 1988, as amended, and
Suite 300 leased pursuant to Lease with DeMartini Joint Account,
dated March 13, 1995, as
amended.
3 KBYA transmitter site at 5831 Rosebud Lane, Sacramento,
California pursuant to Lease with American Tower Systems, L. P.,
dated June 23, 1997.
4 KCTC daytime transmitter site at 3802 Garden Highway, Sacramento
County, California leased pursuant to Lease with American Tower
Systems Corporation, dated January
1, 1998.
5 KRXQ transmitter site at 14600 Clarkesville Road, Folsom,
Sacramento County, California leased pursuant to Lease with
American Tower Systems, L.P., dated September
16, 1998.
Florida
6 WYUU studio at 9721 Executive Center Drive, St.
Petersburg, Pinellas County, Florida, leased pursuant to
Lease with Koger Management, Inc., dated April 24, 1995, as
amended.
7 WYUU auxiliary transmitter site at 10608 Gandy
Boulevard, St. Petersburg, Pinellas County, Florida
leased pursuant to Lease with Lodestar Site Management,
Inc., dated November 1, 1993.
8 WISP main transmitter site at 4301 32nd Street, N.W., Bradenton,
Manatee County, Florida land leased pursuant to Ground Lease with
Steven A. Wilson and Maureen B.
Wilson, dated December 1, 1989.
- 4 -
<PAGE> 157
9 WSKY studio at Budd Office Park, 900 N.W. Eighth Avenue,
Gainesville, Alachua County, Florida leased pursuant to
Lease with Harvey M. Budd, commencing November 1, 1991,
as amended.
10 WSKY studio at Centroplex Office Park, 3600 N.W. 43rd
Street, Gainesville, Alachua County, Florida leased
pursuant to Lease with Cameo Homes of Florida, Inc.,
commencing November 15, 1998.
11 WRRX transmitter site at Alachua County, Florida leased pursuant
to Lease with Tower Properties of Florida, Inc., dated December
22, 1995.
12 WRRX transmitter site at Alachua County, Florida leased pursuant
to Lease with Tower Properties of Florida, Inc., dated March,
1996.
Kansas
13 KUDL auxiliary transmitter site at 6230 Eby Street, Merriam,
Johnson County, Kansas leased pursuant to Lease with TeleCom
Towers Mid-Atlantic, L.P., dated July 24,
1990.
Massachusetts
14 WEEI/WRKO/WEGQ studio site at 116 Huntington Avenue, Boston,
Suffolk County, Massachusetts leased pursuant to Lease with
JMB/Urban Huntington Limited Partnership, dated September 30,
1993, as amended. [To be acquired in Boston I Transaction.]
15 WAAF/WWTM studio site at Two Westborough Business Park, 200
Friberg Parkway, Westborough, Worcester County, Massachusetts
leased pursuant to Lease with Westboro Two Trust, dated May 26,
1995, as amended. [To be acquired in Boston II Transaction.]
16 WAAF tower site (ground) at Asnebumskit Hill, Paxton, Worcester
County, Massachusetts leased pursuant to Lease with Radio Tower
Communications Corp., dated January 1, 1996. [To be acquired in
Boston II Transaction.]
- 5 -
<PAGE> 158
17 WAAF tower site at Asnebumskit Hill, Paxton, Worcester
County, Massachusetts leased pursuant to Lease with Paul
and Eileen Flynn, dated February 18, 1982. [To be
acquired in Boston II Transaction.]
18 WEGQ tower site at 100 Lakeland Park Drive, Peabody,
Essex County, Massachusetts leased pursuant to Lease
with American Tower Systems, L. P., dated August 8,
1996. [To be acquired in Boston II Transaction.]
Missouri
19 KYYS tower site at 23rd Street and Topping Avenue, Kansas City,
Jackson County, Missouri leased pursuant to Lease with KMBC
Division of the Hearst Corporation, dated October 9, 1989.
20 KCMO(AM) tower site at 125 East 32nd Street, Kansas City, Jackson
County, Missouri leased pursuant to Lease with Meredith
Corporation, dated June 21, 1983.
21 KUDL transmitter site land at 2800 Wallace, Kansas City, Jackson
County, Missouri leased pursuant to Ground Lease with Bonanza
Gardens Investments, Inc., dated June 23, 1986, as amended.
22 WDAF RPU antenna site at 3030 Summit, Kansas City, Jackson
County, Missouri leased pursuant to Lease with CBS Radio, Inc.,
dated January 1, 1998.
New York
23 WBEE transmitter site at 1427 Five Mile Line Road, Penfield,
Monroe County, New York leased pursuant to Lease with Vincent A.
Lopopolo, dated May 13, 1980, which includes an option to
purchase.
24 WBEE/WBBF/WKLX studios at Suite 500, B. Forman Building,
Midtown Plaza, Rochester, Monroe County, New York leased
pursuant to Lease with McCurdy & Company, Inc., dated
July 1, 1983, as amended.
- 6 -
<PAGE> 159
25 WQRV studio at 5620 South Lima Road, Avon, Livingston County, New
York, leased pursuant to Lease with Radio Livingston, L.P., dated
December 26, 1996.
26 WKLX transmitter site at 281 Colfax Street, Rochester, Monroe
County, New York leased pursuant to Lease with Sky Broadcasting
of Rochester, Inc., dated August 3, 1987.
27 WQRV transmitter (land) site at 6425 East Avon-Lima Road, Avon,
Livingston County, New York leased pursuant to Ground Lease with
Alfred B. Ulrop, dated June 2, 1992.
28 WQRV transmitter (tower) site at 6425 East Avon-Lima
Road, Avon, Livingston County, New York leased pursuant
to Lease with Genesee County Video Corp., dated July 1,
1993.
Oregon
29 KGON/KNRK/KFXX studios at 706 S.W. Bancroft Street, Multnomah
County, Portland, Oregon pursuant to Lease with T & E
Investments, dated May 5, 1997.
30 KNRK transmitter site at Mt. Scott, 9790 S.E. East View Drive,
Happy Valley, Clackamas County, Oregon leased pursuant to Lease
with Portland General Electric Company, dated October 8, 1992, as
amended.
31 KGON transmitter site at S.W.19th Avenue and Seymour Street,
Portland, Multnomah County, Oregon leased pursuant to Lease with
KSGO/KGON, Inc., dated October 15, 1992.
32 KNRK auxiliary transmitter site at Mt. Scott, Mt. Scott
Water Tower, S.E. Ridgeway Drive, Happy Valley,
Clackamas County, Oregon leased pursuant to Lease with
American Radio Systems Corporation, dated November 14,
1997.
33 KKSN(AM/FM)/KRSK studios at 888 S.W. Fifth Avenue,
Portland, Multnomah County, Oregon leased pursuant to
- 7 -
<PAGE> 160
Lease with Pioneer Office Limited Partnership, dated February 22,
1993, as amended.
34 KRSK transmitter (land) site at High Camp Road, Mollala,
Clackamas County, Oregon leased pursuant to Ground Lease with
Cavenham Forest Industries, Inc., dated September 1, 1986, as
amended.
35 KKSN(FM) transmitter (tower) site at 4700 Council Crest Drive,
Portland, Multnomah County, Oregon leased pursuant to Lease with
KSGO/KGON, Inc., dated October 16, 1989.
36 KKSN(AM) transmitter (land) site at 4618 N.E. 158th
Street, Portland, Multnomah County, Oregon leased pursuant to
Ground Lease with Don W. Burden, dated January 18, 1980, as
amended.
Pennsylvania
37 Borrower's corporate offices at 401 City Avenue, Suite 409, Bala
Cynwyd, Montgomery County, Pennsylvania leased pursuant to Lease
with The Equitable Life Assurance Company of the United States,
dated July 24, 1995, as amended.
Washington
38 KBSG/KMTT/KNDD/KIRO transmitter (land) site at West Tiger
Mountain, Issaquah, Washington leased pursuant to Permit with
Weyerhaeuser Company, dated January 1, 1988, as amended.
39 KMTT/KNDD/KIRO transmitter (antenna) site at West Tiger Mountain,
Issaquah, Washington used pursuant to Master Antenna Owners
Agreement, dated July 26, 1988, as amended.
40 KNDD/KMTT studios at Metropolitan Park West, 1100 Olive Way,
Seattle, Washington pursuant to Lease with Benaroya Capital
Corporation, dated August 29, 1984, as amended.
- 8 -
<PAGE> 161
41 KBSG studio at Metropolitan Park East, 1730 Minor Avenue,
Seattle, Washington leased pursuant to Lease with Benaroya
Capital Company, LLC, dated August 7, 1998, as amended.
42 KRQT studio site at Advocate Building, 21 Cowlitz West, Castle
Rock, Washington leased pursuant to Lease with Gary and Valorie
Kennedy, dated September 1, 1993.
43 KIRO/KNWX studios at 1820 Eastlake Avenue, Seattle, King County,
Washington leased pursuant to Lease with Barnard Family Limited
Partnership, dated May 26, 1995, as amended.
44 KMTT (FM) auxiliary transmitter site at 8971 S.E. View
Park, Port Orchard, Kitsap County, Washington pursuant
to Lease with Pacific Lutheran University, dated
February 28, 1991.
45 KMTT translator site at 413 Lilly Road, N.E., Olympia,
Thurston County, Washington leased pursuant to Lease
with Sisters of Providence in Washington d/b/a St. Peter
Hospital, dated July 1, 1993.
46 KBSG(AM) transmitter (daytime) (land) site at 1408 West Main
Street, Auburn, Washington leased pursuant to Ground Lease with
Garre Family Trust, dated November 2, 994.
47 KBSG(AM) transmitter (nighttime) (land) site at 3102 Black
Diamond Road, Auburn, Washington leased pursuant to Ground Lease
with Dennis Garre & Robert Barkshire, dated June 19, 1989.
48 KBSG(FM) transmitter site at Indian Hill, Tacoma, Pierce County,
Washington leased pursuant to Lease with Western
Tele-Communications, Inc., dated April 8, 1987.
49 KBSG RPU site at Bremerton, Kitsap County, Washington leased
pursuant to Lease with Kelly Television Company, dated October
26, 1995.
- 9 -
<PAGE> 162
50 KNDD transmitter (standby license to use road) site at Cougar
Mountain, Issaquah, King County, Washington access pursuant to
License with Ratelco Properties Corp., dated August 1, 1996.
51 KNDD transmitter (access road) site at Cougar Mountain, Issaquah,
Washington access pursuant to Grant of Easement for Access and
Power Lines with U.S. West Communications, Inc., dated August 28,
1998.
52 KISW transmitter site at Cougar Mountain, Issaquah, Washington
leased pursuant to Lease with Ratelco Properties Corporation,
dated October 1, 1995.
53 KISW translator site at 2724 Alki Avenue, S.W., Seattle,
Washington leased pursuant to Lease with Les D. Pritchett, dated
July 8, 1996.
54 KISW translator site at 3440 Belvidere S.W. Seattle,
Washington leased pursuant to Lease with Gary Crow,
dated May 30, 1997.
55 KRQT transmitter (land) site at Abernathy Mountain, Cowlitz
County, Washington leased pursuant to Ground Lease with
Mid-Valley Resources, Inc., dated May 1, 1993.
56 KRQT transmitter site at 3701 Mt. Brynion Road, Kelso,
Washington leased pursuant to Lease with Northwest Tower
Systems, dated December 7, 1993.
- 10 -
<PAGE> 163
EXHIBIT J
TO
LOAN AGREEMENT
AMONG
ENTERCOM COMMUNICATIONS CORP.,
KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND
DOCUMENTATION AGENT,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
SYNDICATION AGENT,
AND
THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO
Environmental Compliance
Loan Agreement Section 5.25
1. All matters disclosed in Environmental audits and reports supplied to
Administrative Agent, including small amounts of asbestos at several sites
recently acquired by the Borrower.
2. Borrower was the Lessee of a transmitter site on Three
Sisters Mountain, Pierce County, Washington, where two
underground diesel oil storage tanks were located. As part
of Borrower's vacation of this site in 1993 and sale of its
tower and building to Motorola, Borrower removed these tanks.
In the process of the removal and certification of these
tanks minor soil contamination from overfill spillage over
the years was discovered. This contamination was remedied
and all necessary governmental certifications of the site
were obtained prior to the turnover to Motorola.
3. During the period 1986 through approximately 1990 the Borrower conducted a
program to remove all PCB's from the Borrower's transmission equipment.
This process was completed using licensed transporters and incineration
facilities. Certificates of destruction for all removed material were
obtained. No spills were involved.
4. Borrower maintains an underground storage tank at its West
Tiger Mountain transmitter site near Issaquah, Washington.
This tank holds diesel fuel for the emergency generator, is a
<PAGE> 164
double-walled tank and is in full compliance with all laws and regulations
relating to underground tanks.
5. The KIRO-AM transmitter site located in King County, Washington contains
an underground storage tank. The tank belongs to the Federal Emergency
Management Agency (FEMA), which is responsible for the tank. The tank
stores diesel fuel for the FEMA emergency generator made available to
KIRO-AM.
6. The Army Corps. of Engineers recently removed, on behalf of FEMA, an
underground storage tank located at the KFXX transmitter site in Oregon
City, Oregon. The tank belonged to FEMA, who was responsible for the tank.
The tank stored diesel fuel for the FEMA emergency generator made
available to KFXX. Soil testing at the site of removal did not indicate
any contamination.
7. Bonneville International Corporation, prior owner of KMBZ removed a 300
gallon underground diesel fuel storage tank located at the KMBZ studio and
transmitter site in Westwood, Kansas and replaced it with a new
double-walled tank complying with all laws and regulations relating to
underground tanks. No soil contamination was observed during this process.
8. The Borrower received a notice from the Kansas City office of the United
States Environmental Protection Agency ("EPA") regarding liability for 61
pounds of PCB containing materials disposed of by the Borrower in the
early 1980's, originating at a Station in Minnesota which Borrower sold in
1995, at a licensed incinerator disposal facility in Kansas City. The site
is the subject of an EPA cleanup and cost recovery operation. EPA has
verbally informed the Borrower that it will likely qualify for de minimis
status, in which case, the Borrower's liability should be less that
$10,000. The Borrower has also been verbally informed that the total
cleanup cost for this site is estimated to be between $12,000,000 to
$15,000,000.
9. Several years ago, a leaking underground storage tank ("LUST") was
removed from the WDAF transmitter site at 8105
- 2 -
<PAGE> 165
Mission Road, Prairie Village, Kansas. The contaminated soil surrounding
the LUST was also removed. However, the Kansas Department of Environmental
Protection has not issued a closure certification for the site and may
require further soil remediation. The prior owner of the site, Citicasters
Co. ("Citicasters"), is pursuing closure of the site with the State of
Kansas and American Radio Systems Corporation ("ARS") remains liable to
pay any remediation costs imposed upon Borrower in connection therewith.
10. Asbestos containing materials ("ACM") which had been identified inside the
transmitter building at the WDAF transmitter site at 8105 Mission Road,
Prairie Village, Kansas have been removed by a licensed remediation firm.
ARS, pursuant to its contractual obligation, has reimbursed Borrower for
the full cost of such remediation.
11. A LUST also exists at a secondary WDAF tower site at 3030 Summit, Kansas
City, Missouri. WDAF's presence at the site is de minimis (two RPU's are
located on the tower and no WDAF owned equipment is present in any
buildings at the site) and ARS remains liable for the costs of any
remediation which might be imposed upon Borrower in connection therewith.
12. An underground storage tank and a leaking aboveground storage tank were
removed, in the mid 1990's, from the WBBF transmitter site located at 2670
South Clinton Avenue, Rochester, New York. Some soil contamination was
noted and removed at the time the tanks were removed. The New York
Department of Environmental Conservation ("NYDEC") did not require
remediation. The Borrower has been verbally advised by Heritage Media
Corporation, prior owner of WBBF, that the site has now been removed by
NYDEC from a list of potential contaminated sites, however, no documents
confirming that assertion have been received by Borrower.
13. Various environmental conditions at the WEEI transmitter site at 1555
Central Avenue, Needham, Massachusetts have been identified in Phase I
Environmental Site Assessment Report delivered to Borrower in connection
with the
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<PAGE> 166
Boston I Transaction ("WEEI Report"). The WEEI Report recommends:
(a) sampling and analysis of on-site well water for contaminants
associated with an adjacent on-site septic system leach field;
(b) cleanup of lubricating oil stain on concrete pad beneath
emergency generator located in transmitter building; (c) further
analysis of tower paint, and soil beneath tower, for lead
content, and, if necessary, remediation of same; (d) sampling and
analysis of suspected asbestos containing materials in thermal
pipe wrap in boiler room of transmitter building, and, if
necessary, remediation of same; and (e) sampling and analysis of
soil around Boston Edison substation transformer for PCBs, and if
necessary, remediation of same (unless Boston Edison informs
environmental consultant that such transformer never contained
PCBs).
14. Various environmental conditions at the WRKO transmitter
site at 8 Great Meadow Road, Burlington, Massachusetts
have been identified in Phase I Environmental Site
Assessment Reports delivered to Borrower in connection
with the Boston I Transaction ("WRKO Reports"). The
WRKO Reports recommend: (a) further analysis of tower
paint for lead content, and, if necessary, remediation
of same; (b) further analysis of suspected asbestos
containing materials in thermal pipe wrap inside
transmitter building, and, if necessary, remediation of
same; and (c) further analysis of subsurface soil and
groundwater due to down gradient position of transmitter
site and close proximity to several hazardous waste and
CERCLIS list sites in area.
15. Various environmental conditions at the WWTM transmitter
site at 181 Moreland Street, Worcester, Massachusetts
have been identified in Phase I Environmental Site
Assessment Reports delivered to Borrower in connection
with the Boston II Transaction ("WWTM Reports"). The
WWTM Reports recommend: (a) further analysis of tower
paint for lead content, and, if necessary, remediation
of same; and (b) further analysis of suspected asbestos
containing materials in floor tile and mastic inside
transmitter building, and, if necessary, remediation of
same.
- 4 -
<PAGE> 167
EXHIBIT L
TO
LOAN AGREEMENT
AMONG
ENTERCOM COMMUNICATIONS CORP.,
KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND
DOCUMENTATION AGENT,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
SYNDICATION AGENT,
AND
THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO
Existing Interests in Partnerships and Joint Ventures
Loan Agreement Section 8.10
The following Partnerships, Joint Ventures and other agreements are permitted
under this Loan Agreement:
1. All Partnerships and Joint Venture type agreements disclosed elsewhere in
this Loan Agreement and the Exhibits hereto.
2. Any Partnership or Joint Venture Agreements for the operation of a
multiplexed or common antenna facility similar to those disclosed on
Exhibit G hereto.
3. Local Marketing Agreements, Time Brokerage Agreements and similar
agreements for the operation of any Station to the extent permitted
pursuant to Section 8.14(b), including without limitation the Time
Brokerage Agreements with CBS Radio, Inc. relating to the operation of the
Stations to be acquired by Borrower in the Boston I Transaction and Boston
II Transaction, and relating to the Stations to be sold by Borrower in the
Tampa Transaction.
4. Joint Sales Agreements and similar agreements with other broadcasters for
the sale of broadcast advertising time, including without limitation the
Joint Sales Agreement with Classic Radio, Inc., dated May 20, 1997,
relating to KING(FM), Seattle, Washington.
<PAGE> 168
EXHIBIT N
TO
LOAN AGREEMENT
AMONG
ENTERCOM COMMUNICATIONS CORP.,
KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND
DOCUMENTATION AGENT,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
SYNDICATION AGENT,
AND
THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO
Material Labor Disputes
Loan Agreement Section 5.24
The following labor matters are disclosed pursuant to Section 5.24 of the Loan
Agreement:
1. Karen Szabo filed a complaint of gender-based discrimination in the United
States District Court for the Western District of Pennsylvania on January
14, 1997. The Borrower has answered the Complaint, denying the
allegations, discovery has concluded, and Borrower's Motion for Summary
Judgment has been filed. The Borrower does not anticipate an outcome from
this claim that would have a material adverse effect on the Borrower.
2. Cassidy Haus filed a complaint of gender-based discrimination with the
Equal Employment Opportunity Commission ("EEOC") on January 25, 1995. The
EEOC dismissed her complaint and provided Ms. Haus with notice of her
right to sue, but she has no yet exercised such right. The Borrower does
not anticipate an outcome from this claim that would have a material
adverse effect on the Borrower.
3. Ruby Aquino filed a complaint of race-based discrimination with the EEOC
on April 1, 1998. The EEOC dismissed the complaint on August 6, 1998.
<PAGE> 169
4. Rick Bauman filed a complaint alleging gender and age discrimination in
the Superior Court of Washington for King County on July 23, 1998. The
case was removed to the United States District Court for the Western
District of Washington at Seattle and Borrower has filed an answer with
that Court denying the substantive allegations asserted. Discovery is
ongoing. The Borrower does not anticipate an outcome from this claim that
would have a material adverse effect on the Borrower.
5. Alison Miller filed a complaint alleging gender discrimination in the
Superior Court of California for Sacramento County on August 19, 1998. The
case was removed to the United States District Court for the Eastern
District of California on September 16, 1998. The Borrower intends to file
an answer with the District Court denying the substantive allegations
asserted. The Borrower does not anticipate an outcome from this claim that
would have a material adverse effect on the Borrower.
6. Borrower has been negotiating for sometime with AFTRA regarding the terms
of a collective bargaining agreement for the programming employees at
KIRO(AM/FM) and KNWX(AM), Seattle, Washington. AFTRA has begun a publicity
campaign to try to force the Borrower to change its position on certain
issues. Although talk of a strike has circulated, no formal strike vote
has been taken.
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<PAGE> 170
ACKNOWLEDGMENT AND AGREEMENT OF STOCKHOLDERS
Each of the undersigned hereby certifies that it is a stockholder of
Entercom Communications Corp., a Pennsylvania corporation (the "Borrower"), and
consents to the execution and delivery by the Borrower of the foregoing First
Amendment to Loan Agreement and the Amended Notes described therein and
acknowledges and agrees that the Borrower Pledge Agreement and each other
Collateral Document (as those terms are defined in the Loan Agreement, and as
such documents may be amended from time to time) to which it is a party, and all
of its respective obligations thereunder, remain in full force and effect, and
that the security interests granted pursuant to the Borrower Pledge Agreement
secure all of the Obligations, as increased pursuant to the First Amendment to
Loan Agreement.
STOCKHOLDERS:
JOSEPH M. FIELD
MARIE H. FIELD
S. GORDON ELKINS TRUSTEE, U/D/T
DATED OCTOBER 9, 1992 FBO MARIE H. FIELD
DAVID J. FIELD
MARIE H. FIELD & NANCY E. FIELD, TRUSTEES
U/I 12/23/76 FOR DAVID J. FIELD
S. GORDON ELKINS AND DAVID J. FIELD,
TRUSTEES U/D/T OF JOSEPH M. FIELD
DTD 9/30/92 FBO DAVID J. FIELD
NANCY E. FIELD
MARIE H. FIELD & DAVID J. FIELD,
TRUSTEES U/I DATED 12/23/76 FOR NANCY E. FIELD
S. GORDON ELKINS AND NANCY E. FIELD,
TRUSTEES U/D/T OF JOSEPH M. FIELD DTD
9/30/92 FBO NANCY E. FIELD
HERBERT KEAN
MARJORIE K. FRADIN
JON SAMUEL KEAN
THOMAS H. GINLEY, JR., JT, WROS
EMMA F. GINLEY, JT, WROS
IRENE K. BARBIERI
DANIEL M. KRAUS
AGNES G. AYELLA
DAVID J. FIELD AND S. GORDON ELKINS, TRUSTEES U/D/T OF JOSEPH M.
FIELD DATED APRIL 24, 1998, F/B/O THE ISSUE OF DAVID J. FIELD
<PAGE> 171
DAVID J. FIELD AND S. GORDON ELKINS, TRUSTEES U/D/T OF JOSEPH M.
FIELD DATED APRIL 24, 1998, F/B/O THE ISSUE OF NANCY E. FIELD
JOSEPH M. FIELD, TRUSTEE U/D/T OF DANIEL M. KRAUS DATED JULY 21,
1998, F/B/O SIDONIE KAZENEL
JOHN SAMUEL KEAN AND MARJORIE KEAN FRADIN TRUSTEES U/D/T OF
HERBERT KEAN DATED JULY 14, 1998, FBO THE ISSUE OF HERBERT KEAN
BY:__________________________________
John C. Donlevie,
By Power of Attorney from each of such Stockholders
<PAGE> 172
ACKNOWLEDGMENT AND AGREEMENT OF SUBSIDIARIES
Each of the undersigned hereby certifies that it is a Subsidiary of
Entercom Communications Corp. (the "Borrower") and hereby consents to the
execution and delivery by the Borrower of the foregoing First Amendment to Loan
Agreement and the Amended Notes described therein and acknowledges and agrees
that the Subsidiary Guaranty, the Subsidiary Security Agreement and each other
Collateral Document (as those terms are defined in the Loan Agreement, as such
documents may be amended from time to time) to which it is a party, and all of
its respective obligations thereunder, remain in full force and effect, that the
security interests granted pursuant to the Subsidiary Security Agreement secure
all of the Obligations, as increased pursuant to the First Amendment to Loan
Agreement, and that all such Obligations shall be Guaranteed Obligations for all
purposes of the Subsidiary Guaranty.
ECI LICENSE COMPANY, L.P.
By:___________________________
Name:_________________________
Title:________________________
ECI LICENSE COMPANY, LP
By:___________________________
Name:_________________________
Title:________________________
ENTERCOM ROCHESTER, INC.
By:___________________________
Name:_________________________
Title:________________________
ENTERCOM BOSTON, INC.
<PAGE> 173
By:___________________________
Name:_________________________
Title:________________________
ENTERCOM BOSTON, LLC
By:___________________________
Name:_________________________
Title:________________________
ENTERCOM BOSTON LICENSE, LLC
By:___________________________
Name:_________________________
Title:________________________
ENTERCOM PORTLAND, LLC
By:___________________________
Name:_________________________
Title:________________________
ENTERCOM PORTLAND LICENSE, LLC
By:___________________________
Name:_________________________
Title:________________________
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<PAGE> 174
ACKNOWLEDGMENT AND AGREEMENT OF PARTNERS
Each of the undersigned hereby certifies that it is a partner of ECI
License Company, L.P., a Pennsylvania limited partnership (the "License
Partnership"), and consents to the execution and delivery by the Borrower of the
foregoing First Amendment to Loan Agreement and the Amended Notes described
therein and acknowledges and agrees that the Subsidiary Pledge Agreement and
each other Collateral Document (as those terms are defined in the Loan
Agreement, as such documents may be amended from time to time) to which it is a
party, and all of its respective obligations thereunder, remain in full force
and effect, and that the security interests granted pursuant to the Subsidiary
Pledge Agreement secure all of the Obligations, as increased pursuant to the
First Amendment to Loan Agreement.
ECI INVESTORS CORPORATION
By:___________________________
Name:_________________________
Title:________________________
ENTERCOM COMMUNICATIONS CORP.
By:___________________________
Name:_________________________
Title:________________________
<PAGE> 175
FIRST AMENDMENT TO LOAN AGREEMENT
This FIRST AMENDMENT TO LOAN AGREEMENT is made and entered into as
of October 8, 1998, by and among ENTERCOM COMMUNICATIONS CORP., a Pennsylvania
corporation formerly known as "Entertainment Communications, Inc." (the
"Borrower"), the FINANCIAL INSTITUTIONS listed on the signature pages hereof
(the "Banks"), KEY CORPORATE CAPITAL INC., as Administrative Agent and
Documentation Agent (the "Administrative Agent"), and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as Syndication Agent.
RECITALS
A. The Borrower, the Agents and the Banks entered into a Loan
Agreement dated as of February 13, 1998 (the "Original Agreement"), pursuant to
which the Banks agreed to make available to the Borrower loans of up to
$300,000,000 on a reducing revolving credit basis. The Original Agreement, as
amended hereby, may be referred to hereinafter as the "Loan Agreement."
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to them in the Loan Agreement.
B. The Borrower desires to increase the amount of the Commitment
to $350,000,000 pursuant to Section 2.15 of the Original Agreement, and add
additional Banks. In addition, the Borrower has requested that if it consummates
an initial public offering, (i) it be permitted to make a distribution to its
existing shareholders in the amount of approximately $95,000,000, (ii) it not be
required to make a mandatory prepayment of any portion of the proceeds of such
offering, and (iii) certain other changes be made to the Original Agreement.
Subject to the terms and conditions of this Amendment, the Agents and the Banks
have agreed to such requests.
AGREEMENTS
<PAGE> 176
In consideration of the foregoing Recitals and of the covenants
and representations contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrower, the Agents and the Banks agree as follows:
1. Amendments. Subject to the satisfaction of the conditions set
forth in Section 2 of this Amendment, the Original Agreement shall be amended as
follows:
(a) The definition of the term "Excess Cash Flow" in Section
1.1 shall be amended by adding the phrase "(excluding deferred income taxes)"
after the words "income taxes" in clause (e) thereof.
(b) The definition of the term "Fixed Charge Coverage Ratio"
in Section 1.1 shall be amended (i) by adding the phrase "(excluding deferred
income taxes)" after the words "income taxes" in clause (c) thereof and (ii) by
deleting the current text of clause (d) thereof and replacing it with the
following: "(d) any Capital Distributions (including, without limitation,
Distributions to Pay Tax Liabilities, but excluding the Capital Distribution
made pursuant to Section 8.9(a)(v)) made by the Borrower in such four quarter
period".
(c) The definition of the term "Leverage Ratio" in Section
1.1 shall be amended in its entirety to read as follows:
"Leverage Ratio", as of any date, means the ratio of
Total Debt as of such date to Operating Cash Flow for the four
quarter period then ended or most recently ended; provided,
however, that in calculating the Leverage Ratio, Total Debt
shall be reduced by an amount equal to the QI Proceeds.
(d) The definition of the term "Operating Cash
Flow" in Section 1.1 shall be amended in its entirety to read as follows:
"Operating Cash Flow" means, during any period, the
consolidated Net Earnings of the Borrower for such period
(excluding, to the extent included in Net Earnings, (i) the
effect of any
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<PAGE> 177
exchange of advertising time for non-cash consideration, such
as merchandise or services, (ii) any other non-cash income or
expense (including the cumulative effect of a change in
accounting principles and extraordinary items), and (iii) any
gains or losses net of taxes from sales, exchanges and other
dispositions of property not in the ordinary course of
business, including non-recurring charges relating to such
exchanges or dispositions), minus any non- operating income
(other than interest income and investment income), plus the
sum of (a) depreciation on or obsolescence of fixed or capital
assets and amortization of intangibles and leasehold
improvements for such period, plus (b) Interest Expense
incurred in such period plus interest incurred on the
Indebtedness under the Subordinated Purchase Agreement, plus
(c) federal, state and local income taxes incurred in such
period to the extent deducted in calculating Net Earnings in
such period (other than any such taxes resulting from any
gains from sales and exchanges and other distributions not in
the ordinary course of business), plus (d) the costs relating
to discontinued operations, all on a consolidated basis and
computed on the accrual method. For purposes of calculating
Operating Cash Flow in any period (other than for purposes of
calculating Excess Cash Flow):
(A) any acquisition of any Station, and any sale or
other disposition of any Station, which occurs during such
period shall be deemed to have occurred on the first day of
such period;
(B) Operating Cash Flow shall be increased by the
difference, if positive, of $802,000 minus the product of
$66,833 times the number of months in the period from March 1,
1998, through the end of the period for which Operating Cash
Flow is being calculated;
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<PAGE> 178
(C) Operating Cash Flow shall be increased by the
difference, if positive, of $323,000 minus the product of
$26,917 times the number of months in the period from May 1,
1998, through the end of the period for which Operating Cash
Flow is being calculated;
(D) Operating Cash Flow for any period that includes
May 31, 1998, shall be increased by an amount equal to
$550,000;
(E) Operating Cash Flow shall be increased by the
difference, if positive, of $250,000 minus the product of
$20,833 times the number of months in the period from the date
of closing of the acquisition by the Borrower or any of its
Subsidiaries of radio stations WAAF(FM), WWTM(AM) and WEGQ(FM)
from CBS Radio, Inc., CBS Radio License, Inc. and ARS
Acquisition II, Inc. (collectively, the "Boston II Sellers")
pursuant to the Asset Purchase Agreement, dated as of August
13, 1998, among the Boston II Sellers and the Borrower,
through the end of the period for which Operating Cash Flow is
being calculated;
(F) Due to sports rights losses attributable to the
radio stations to be acquired pursuant to the Boston I
Purchase Agreement, Operating Cash Flow for any period which
includes any of the twelve full months prior to the
consummation of the transactions contemplated by the Boston I
Purchase Agreement shall be increased by an amount per month
for each such month in such period which amount per month
shall be set forth in a statement presented to the
Administrative Agent at the closing of such acquisition, which
statement shall be certified by the Borrower's chief financial
officer and acceptable to the Administrative Agent; and
(G) Operating Cash Flow shall be calculated as if
the License Partnership were a wholly owned Subsidiary of the
Borrower.
- 4 -
<PAGE> 179
(e) The definition of the term "Ratable Share" in Section 1.1
shall be amended in its entirety to read as follows:
"Ratable Share" means, with respect to any Bank, its pro
rata share of the Commitment, the Letters of Credit or the
Loans, as such pro rata share may be modified by assignment
pursuant to Section 12.7. As of the date of the First
Amendment, the Ratable Shares of the Banks shall be as listed
on Schedule 1.1 attached to the First Amendment.
(f) Section 1.1 shall be amended by adding thereto the
following new definitions in the proper alphabetical order:
"Boston I Purchase Agreement" means the Asset Purchase
Agreement, dated as of August 13, 1998, among the Borrower,
CBS Radio, Inc. and CBS Radio License, Inc., pursuant to which
the Borrower or one of its Subsidiaries will acquire radio
stations WEEI(AM) and WRKO(AM).
"First Amendment" means the First Amendment to Loan
Agreement dated as of October 8, 1998, among the Borrower, the
Agents and the Banks.
"QI Proceeds" means, as of any date of determination, an
amount equal to the difference of (a) the amount, if any, that
the Borrower on such date has on deposit with a Qualified
Intermediary (as that term is defined in Section
2.6(b)(iii)(B)) from the proceeds of a disposition of a
Station permitted pursuant to Section 8.10, minus (b) the
amount of tax liability that would have resulted, based on the
Borrower's good faith estimate reasonably satisfactory to the
Administrative Agent, had such disposition not been structured
as a Like-Kind Exchange (as that term is defined in Section
2.6(b)(iii)(B)).
"Qualified IPO" means an underwritten public offering of
the Borrower's common stock that (a)
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<PAGE> 180
is led by a nationally recognized underwriter, (b) is pursuant
to a registration statement filed in accordance with the
Securities Act of 1933, as amended, (c) occurs on or before
March 31, 1999, and (d) yields gross aggregate proceeds to the
Borrower of at least $50,000,000.
"Tampa Purchase Agreement" means the Asset Purchase
Agreement dated as of August 13, 1998, among the Borrower, CBS
Radio, Inc. and CBS Radio License, Inc. relating to the sale
by the Borrower of Stations WYUU(FM) and WLLD(FM).
(g) Subsection 2.1(a) shall be amended in its entirety to read
as follows:
2.1 The Revolving Commitment and the Revolving Loans.
(a) Subject to the terms and conditions hereof, during
the period from the Closing Date up to but not including the
Termination Date, the Banks severally, but not jointly, shall
make loans to the Borrower in such amounts as the Borrower may
from time to time request but not exceeding in aggregate
principal amount at any one time outstanding $350,000,000 (as
such amount may be reduced pursuant to Section 2.1(d), 2.6 or
any other provision of this Agreement, from time to time, the
"Commitment"); provided, however, that in no event shall the
aggregate principal amount of such loans plus the aggregate
stated amount of the Letters of Credit exceed the Commitment.
All amounts borrowed by the Borrower pursuant to this Section
2.1(a) and all amounts drawn under any Letter of Credit and
not repaid may be referred to hereinafter collectively as the
"Loans." Each Loan requested by the Borrower shall be funded
by the Banks in accordance with their Ratable Shares of the
requested Loan. A Bank shall not be obligated hereunder to
make any additional Loan if immediately after making such
Loan, the aggregate principal balance of all Loans made by
such Bank
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<PAGE> 181
plus such Bank's Ratable Share of any outstanding Letters of
Credit would exceed such Bank's Ratable Share of the
Commitment. The Loans may be comprised of Base Rate Loans or
LIBOR Loans, as provided in Section 2.3.
(h) Sections 2.6(b)(iii)(A) and (B) shall be amended by adding
the phrase ", so long as the Borrower has not ceased to be treated as an 'S
corporation' under the Code," after the phrase "or its stockholders" in the 8th,
29th and 35th lines of Section 2.6(b)(iii)(A) and in the last sentence of
Section 2.6(b)(iii)(B).
(i) Section 2.6(b)(v) shall be amended by adding the language
"(other than pursuant to a Qualified IPO")" in the fourth line thereof after the
word "interests."
(j) Section 2.15 is hereby amended by deleting the text
thereof and replacing it with the language: "[Intentionally Omitted]."
(k) Section 3.1(b) shall be amended by adding the following
language at the end of the first sentence thereof:
; provided, however, that the Applicable Margin shall also be
determined on the date of closing of the transactions
contemplated by the Tampa Purchase Agreement on the basis of
information certified by the Borrower and acceptable to the
Administrative Agent and presented to it on such date.
(l) Section 7.12 shall be amended by adding the following
language at the end thereof:
; provided, however, that in calculating Total Debt for
purposes of this Section 7.12, (a) the principal amount of
Loans made to the Borrower on the date of the consummation of
the transactions contemplated by the Boston I Purchase
Agreement and used by the Borrower to pay the purchase price
thereunder shall be excluded for a period of time ending on
the first to occur of the date that is
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<PAGE> 182
thirty days after such consummation and the date on which
funds are deposited with a Qualified Intermediary (as that
term is defined in Section 2.6(b)(iii)(B)) from the proceeds
of the sale contemplated by the Tampa Purchase Agreement (the
"Tampa Contribution Date") and (b) the total amount
contributed to such Qualified Intermediary from the proceeds
of the sale contemplated by the Tampa Purchase Agreement shall
be excluded for so long as such proceeds are held by such
Qualified Intermediary.
(m) Section 8.9(a) shall be amended by adding a new subsection
(v) at the end thereof, which shall read as follows:
(v) if the Borrower consummates a Qualified IPO, the
Borrower may make a Capital Distribution to its stockholders
no later than six months after such consummation in an
aggregate amount which does not exceed the lesser of
$95,000,000 and the net proceeds to the Borrower from such
Qualified IPO, so long as: (A) the Borrower shall have
demonstrated to the satisfaction of the Administrative Agent
that the Borrower will be in compliance with all of the
covenants contained herein after giving effect to such
distribution; (B) no Possible Default or Event of Default
exists at the time of making such distribution or would exist
after giving effect thereto; and (C) the Borrower shall have
delivered to the Administrative Agent a certificate of a
financial officer of the Borrower using the most recently
available quarterly financial statements in form and substance
satisfactory to the Administrative Agent which shall contain
calculations demonstrating on a pro forma basis the Borrower's
compliance with the financial covenants set forth in this
Section 8 after giving effect to such distribution.
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<PAGE> 183
(n) The first paragraph of Section 8.10(c) and Sections
8.10(c)(i) and (ii) shall be amended in their entirety to read as follows:
(c) As of the date of this Agreement, all of the assets
of each Station, other than the FCC Licenses, are owned by the
Borrower, and all of the FCC Licenses of the Stations are
owned by the License Partnership. The Borrower desires (y) to
create new Subsidiaries and contribute all of its operating
assets relating to the Stations to such Subsidiaries and (z)
either to acquire all of the outstanding capital stock and
other equity interests of ECI Investors Corporation, so that
the License Partnership becomes a wholly owned subsidiary of
the Borrower or to create new Subsidiaries and contribute all
of the FCC Licenses held by the License Partnership to such
Subsidiaries. The Borrower shall have the right to so
reorganize subject to the satisfaction of all of the following
conditions:
(i) each new Subsidiary shall be wholly owned by the
Borrower;
(ii) the License Partnership shall be wholly owned
by the Borrower or all of the FCC Licenses of the Stations
shall be transferred to one or more of such newly created
wholly owned Subsidiaries which shall have no other assets or
liabilities, and upon such transfer, the License Partnership
shall be dissolved and liquidated;
(o) Section 8.13(b) shall be amended (i) by adding the phrase
"plus the stated amount of all outstanding Letters of Credit, minus the amount,
if any, of QI Proceeds" after the word "Loans" in the second line thereof and
(ii) by adding the following language at the end thereof:
"provided, however, that for the period of time which is the
lesser of thirty days and the period of time between the
closing of the transactions contemplated by the Boston I
Purchase Agreement
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<PAGE> 184
and the closing of the transactions contemplated by the Tampa
Purchase Agreement, the first ratio in Column C above (for the
period from Closing through March 31, 1999) shall be 7.0:1.0
rather than 6.5:1.0."
(p) Section 8.15 shall be amended in its entirety to read as
follows:
8.15 "Fiscal Year" The Borrower shall not, and shall not
permit any Subsidiary to, change its fiscal year; provided,
however, that the Borrower may change its fiscal year and the
fiscal year of its Subsidiaries to the calendar year.
(q) The second sentence of Section 8.24 shall be amended by
adding the phrase "if such issuance occurs prior to the termination of the
Borrower Pledge Agreement pursuant to Section 8.10(c)" at the end thereof.
(r) Section 9.11 shall be amended (i) by deleting the phrase
"voting capital stock" in the fifth line thereof and replacing it with the
phrase "voting power of the capital stock" and (ii) by deleting the period at
the end of that Section and adding a new clause at the end thereof which shall
read as follows:
; or the Borrower shall cease to own, directly or indirectly,
all of the issued and outstanding capital stock, partnership
interests or other equity interests of each License
Subsidiary.
(s) Section 12.4 shall be amended by deleting each reference
to "Entertainment Communications, Inc." and replacing it with a reference to
"Entercom Communications Corp."
(t) Clause (c) of Section 12.12 shall be amended in its
entirety to read as follows:
(c) change the Commitment or the Ratable Share of any Bank
(other than any change in Commitment or Ratable Share
resulting from the sale of a participation in or assignment of
any Bank's
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<PAGE> 185
interest in the Commitment and Loans in accordance with
subsection 12.7,
(u) Schedule 1.1 and Exhibits D, E, F, G, H, I, J, L and N to
the Original Agreement shall be deleted and replaced with Schedule I attached
hereto.
2. Conditions to Effectiveness. The amendments set forth in
Section 1 shall be effective on such date on which all of the following
conditions are satisfied:
(a) The Borrower shall have executed and delivered to each
Bank an Amended and Restated Reducing Revolving Credit Note (collectively, the
"Amended Notes") in the form attached hereto as Exhibit A.
(b) The Borrower shall have paid all fees of the Agents and
the Banks and payable pursuant to the terms of the Loan Agreement and the Fee
Letters.
(c) The Borrower shall have delivered to the Administrative
Agent a certified copy of resolutions of the Board of Directors of the Borrower
evidencing approval of the execution, delivery and performance of this
Amendment, the Amended Notes and the other documents and instruments required
pursuant hereto.
(d) The stockholders of the Borrower, the License Partnership
and the partners of the License Partnership shall have executed the
Acknowledgments and Agreements attached hereto.
(e) The Borrower shall have delivered to the Administrative
Agent such other documents, instruments and opinions as the Administrative Agent
or any Bank may reasonably request.
3. Representations, Warranties and Events of Default.
(a) Except as amended hereby, the terms, provisions,
conditions and agreements of the Original Agreement are hereby ratified and
confirmed and shall remain in full force and effect. Each and every
representation and warranty of the Borrower set forth in the Original Agreement
(other than those
- 11 -
<PAGE> 186
which by their terms are limited to a specific date) is hereby confirmed and
ratified in all material respects, and such representations and warranties as so
confirmed and ratified shall be deemed to have been made and undertaken as of
the date of this Amendment as well as at the time they were made and undertaken,
except to the extent such representations and warranties have been affected by
events contemplated by or permitted pursuant to the Loan Agreement or as
previously disclosed to the Banks in writing.
(b) The Borrower represents and warrants that:
i) No Event of Default or Possible Default now exists or
will exist immediately following the execution hereof or after giving effect to
the transactions contemplated hereby.
ii) All necessary corporate or stockholder actions on the
part of the Borrower and the stockholders of the Borrower to authorize the
execution, delivery and performance of this Amendment, the Amended Notes and all
other documents or instruments required pursuant hereto or thereto have been
taken; this Amendment, the Amended Notes and each such other document or
instrument have been duly and validly executed and delivered and are legally
valid and binding upon the Borrower and enforceable in accordance with their
respective terms, except to the extent that the enforceability thereof may be
limited by bankruptcy, insolvency or like laws or by general equitable
principles.
iii) The execution, delivery and performance of this
Amendment, the Amended Notes and all other documents and instruments required
pursuant hereto or thereto, and all actions and transactions contemplated hereby
and thereby will not (A) violate, be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under (I) any
provision of the Articles of Incorporation, By-Laws, partnership agreement,
certificate of limited partnership, operating agreement, certificate of
formation or any other governing document of the Borrower or any Subsidiary,
(II) any arbitration award or any order of any court or of any other
governmental agency or authority, (III) any license, permit or authorization
granted to the Borrower or any Subsidiary or under which the Borrower or any
Subsidiary operates, or (IV) any
- 12 -
<PAGE> 187
applicable law, rule, order or regulation, indenture, agreement or other
instrument to which the Borrower or any Subsidiary is a party or by which the
Borrower or any Subsidiary or any of their respective properties is bound and
which has not been waived or consented to, or (B) result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever, except
as expressly permitted in the Loan Agreement, upon any of the properties of the
Borrower or any Subsidiary.
iv) No consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority (including,
without limitation, the FCC and any other Licensing Authority) is required to be
obtained by the Borrower or any Subsidiary in connection with the execution,
delivery or performance of this Amendment, the Amended Notes or any document or
instrument required in connection herewith or therewith which has not already
been obtained or completed.
v) The Borrower is taking such actions and devoting such
resources that, in the good faith exercise of its business judgment, it believes
to be reasonably necessary to permit the proper functioning, in and following
the year 2000, of the computer systems of the Borrower and its Subsidiaries and
equipment containing embedded microchips (including systems and equipment
supplied by others or with which the systems of the Borrower or its Subsidiaries
interface). The Borrower believes that the cost to the Borrower and its
Subsidiaries of such actions and of the reasonably foreseeable consequences of
year 2000 to the Borrower and its Subsidiaries (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) will not
result in an Event of Default or a Material Adverse Effect. The Borrower
believes that, subject to completion of the actions referred to above, the
computer and management information systems of the Borrower and its Subsidiaries
are and, with ordinary course upgrading and maintenance, will continue to be,
sufficient to permit the Borrower and its Subsidiaries to conduct their business
without Material Adverse Effect.
4. Affirmation of the Borrower. The Borrower has executed this
Amendment to consent to the amendments to the Original Agreement made pursuant
hereto and to acknowledge that the security interests and liens granted by the
Borrower to the
- 13 -
<PAGE> 188
Administrative Agent, for the benefit of the Banks, pursuant to the Borrower
Security Agreement, the Subsidiary Pledge Agreement and the other Collateral
Documents to which the Borrower is a party remain in full force and effect and
shall continue to secure all Obligations, as increased pursuant hereto.
5. Fees and Expenses. As required under the Original Agreement,
the Borrower will reimburse the Administrative Agent upon demand for all
out-of-pocket costs, charges and expenses of the Administrative Agent (including
reasonable fees and disbursements of special counsel to the Administrative
Agent) in connection with the preparation, negotiation, execution and delivery
of this Amendment and the other agreements or documents relating hereto or
required hereby.
6. Counterparts. This Amendment may be executed in as many
counterparts as may be convenient and shall become binding when the Borrower,
the Agents and each Bank have executed at least one counterpart.
7. Governing Law. This Amendment shall be a contract made under
and governed by the laws of the State of Ohio, without regard to the conflicts
of law provisions thereof.
8. Binding Effect. This Amendment shall be binding upon and shall
inure to the benefit of the Borrower, the Agents, the Banks and their respective
successors and assigns.
9. Reference to Original Agreement. Except as amended hereby, the
Original Agreement shall remain in full force and effect and is hereby ratified
and confirmed in all respects. On and after the effectiveness of the amendments
to the Original Agreement accomplished hereby, each reference in the Original
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like
import, and each reference to the Original Agreement or the original notes
evidencing the Revolving Loans issued pursuant thereto in any Note or other
Collateral Document, or other agreement, document or instrument executed and
delivered pursuant to the Original Agreement, shall be deemed a reference to the
Original Agreement, as amended hereby, or the Amended Notes, as the case may be.
- 14 -
<PAGE> 189
10. No Other Modifications; Same Indebtedness. The modifications
effected by this Amendment and by the other documents and instruments
contemplated hereby shall not be deemed to provide for or effect a repayment and
re-advance of any of the Loans now outstanding, it being the intention of the
Borrower, the Agents and the Banks that the Loans outstanding under the Original
Agreement, as amended by this Amendment, be and are the same Indebtedness as
that owing under the Original Agreement immediately prior to the effectiveness
hereof.
- 15 -
<PAGE> 190
IN WITNESS WHEREOF, the parties have executed this First Amendment
to Loan Agreement as of the date first above written.
BORROWER:
ENTERCOM COMMUNICATIONS CORP.
By:___________________________
Name:_________________________
Title:________________________
BANKS:
KEY CORPORATE CAPITAL INC.
By:___________________________
Name: Kristen K. St. Pierre
Title: Vice President
BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION
By:___________________________
Name:_________________________
Title:________________________
CIBC INC.
By:___________________________
Name:_________________________
Title:________________________
FIRST UNION NATIONAL BANK
- 16 -
<PAGE> 191
By:___________________________
Name:_________________________
Title:________________________
FLEET BANK, N.A.
By:___________________________
Name:_________________________
Title:________________________
U.S. BANK, N.A.
By:___________________________
Name:_________________________
Title:________________________
BANK OF MONTREAL
By:___________________________
Name:_________________________
Title:________________________
COMPAGNIE FINANCIERE DE CIC
ET DE L'UNION EUROPEENNE
By:___________________________
Name:_________________________
Title:________________________
By:___________________________
Name:_________________________
Title:________________________
FIRST HAWAIIAN BANK
- 17 -
<PAGE> 192
By:___________________________
Name:_________________________
Title:________________________
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:___________________________
Name:_________________________
Title:________________________
UNION BANK OF CALIFORNIA, N.A.
By:___________________________
Name:_________________________
Title:________________________
PROVIDENT BANK OF MARYLAND
By:___________________________
Name:_________________________
Title:________________________
PNC BANK, NATIONAL ASSOCIATION
By:___________________________
Name:_________________________
Title:________________________
SUMMIT BANK
By:___________________________
Name:_________________________
- 18 -
<PAGE> 193
Title:________________________
ISSUING BANK:
KEY CORPORATE CAPITAL INC.
By:___________________________
Name: Kristen K. St. Pierre
Title: Vice President
ADMINISTRATIVE AGENT:
KEY CORPORATE CAPITAL INC.
By:___________________________
Name: Kristen K. St. Pierre
Title: Vice President
SYNDICATION AGENT:
BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION
By:___________________________
Name: ________________________
Title: _______________________
- 19 -
<PAGE> 194
SCHEDULE I TO FIRST AMENDMENT TO LOAN AGREEMENT
SCHEDULE 1.1
Ratable Shares
Ratable Share of Commitment
Bank and Loans:
KEY CORPORATE CAPITAL INC. 12.85714286%
BANK OF AMERICA, NATIONAL
TRUST AND SAVINGS ASSOCIATION 12.85714286%
CIBC INC. 9.64285714%
FIRST UNION NATIONAL BANK 6.78571429%
FLEET BANK, N.A. 9.64285714%
BANK OF MONTREAL 9.64285714%
COMPAGNIE FINANCIERE DE CIC
ET DE L'UNION EUROPEENNE 5.71428571%
SUNTRUST BANK,
CENTRAL FLORIDA, N.A. 5.71428571%
UNION BANK OF CALIFORNIA, N.A. 5.71428571%
U.S. BANK, N.A. 7.14285714%
FIRST HAWAIIAN BANK 2.85714286%
PROVIDENT BANK OF MARYLAND 2.85714286%
PNC BANK, NATIONAL ASSOCIATION 5.71428571%
SUMMIT BANK 2.85714286%
Total: 100.000%
==========
<PAGE> 1
EXHIBIT 10.12
ASSET PURCHASE AGREEMENT
BY AND AMONG
ENTERCOM COMMUNICATIONS CORP.,
CBS RADIO, INC.,
AND
CBS RADIO LICENSE, INC.
DATED AS OF AUGUST 13, 1998
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I. - DEFINITIONS......................................................1
1.1 DEFINITIONS.............................................1
ARTICLE II. - PURCHASE OF ASSETS..............................................5
2.1. PURCHASE AND SALE OF ASSETS.............................5
2.2. ALLOCATION OF VALUES....................................5
2.3. NON-ASSIGNABLE CONTRACTS................................6
ARTICLE III. - LIABILITIES....................................................7
3.1. ASSUMPTION OF LIABILITIES BY CBS........................7
3.2. OTHER LIABILITIES.......................................7
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES..................................8
4.1. BY ENTERCOM.............................................8
4.2. BY CBS.................................................15
ARTICLE V. - CONDITIONS......................................................16
5.1. MUTUAL CONDITIONS......................................16
5.2. CONDITIONS OF CBS......................................17
5.3. CONDITIONS OF ENTERCOM.................................17
5.4. EFFECT OF TIME BROKERAGE AGREEMENT
ON CLOSING CONDITIONS..............................17
ARTICLE VI. - COVENANTS AND OPERATIONS PRIOR TO CLOSING......................18
6.1. COVENANTS OF ENTERCOM..................................18
6.2. NEGATIVE COVENANTS OF ENTERCOM.........................20
6.3. NO CONTROL.............................................21
6.4. NO SOLICITATION OR HIRE OF EMPLOYEES...................21
6.5. COVENANT OF CBS........................................21
6.6. REAL PROPERTY SURVEYS..................................22
(i)
<PAGE> 3
ARTICLE VII. - ACTIONS PRIOR TO CLOSING......................................23
7.1. APPLICATION TO COMMISSION..............................23
7.2. HART-SCOTT-RODINO NOTIFICATION.........................23
7.3. INSPECTION.............................................23
7.4. CONFIDENTIALITY........................................24
ARTICLE VIII. - CLOSING......................................................24
8.1. CLOSING................................................24
8.2. PRORATIONS.............................................25
8.3. CLOSING DELIVERIES TO CBS..............................26
8.4. CLOSING DELIVERIES TO ENTERCOM.........................27
8.5. COVENANTS OF FURTHER ASSURANCES;
AVAILABILITY OF RECORDS............................28
8.6. RISK OF LOSS; DAMAGE TO PROPERTY.......................28
8.7. TAXES ON TRANSACTION...................................28
ARTICLE IX. - TERMINATION, DEFAULT AND INDEMNIFICATION.......................28
9.1. TERMINATION............................................28
9.2. EFFECT OF TERMINATION..................................29
9.3. REMEDIES...............................................29
9.4. INDEMNIFICATION........................................29
ARTICLE X. - ASSET EXCHANGE..................................................32
10.1. POSSIBLE ENTERCOM SECTION 1031 ASSET EXCHANGE..........32
10.2. POSSIBLE CBS SECTION 1031 ASSET EXCHANGE...............32
10.3. INDEPENDENT TRANSACTIONS...............................32
ARTICLE XI. - GENERAL PROVISIONS.............................................33
11.1. EXPENSES OF THE PARTIES................................33
11.2. BROKERS................................................33
11.3. SURVIVAL OF COVENANTS, REPRESENTATIONS,
AND WARRANTIES.....................................33
11.4. CONFIDENTIALITY........................................34
11.5. AMENDMENT AND WAIVER...................................34
11.6. EFFECT OF THIS AGREEMENT...............................34
11.7. TERMS GENERALLY........................................34
11.8. HEADINGS...............................................35
11.9. COUNTERPARTS...........................................35
(ii)
<PAGE> 4
11.10. GOVERNING LAW; JURISDICTION............................35
11.11. BULK SALES LAWS........................................35
11.12. ASSIGNMENT.............................................35
11.13. NOTICES................................................35
11.14. ATTORNEYS' FEES........................................37
(iii)
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT MADE AND ENTERED INTO THIS 13TH
DAY OF AUGUST, 1998, BY AND AMONG ENTERCOM COMMUNICATIONS CORP., A PENNSYLVANIA
CORPORATION (HEREINAFTER "ENTERCOM"), CBS RADIO, INC., A DELAWARE CORPORATION
(HEREINAFTER "CRI"), AND CBS RADIO LICENSE, INC., A DELAWARE CORPORATION
(HEREINAFTER "CRLI") (CRI AND CRLI, COLLECTIVELY, "CBS").
RECITALS
WHEREAS, pursuant to the Station Authorizations, Entercom owns
and operates (directly or indirectly through one or more subsidiaries) radio
stations WYUU(FM), Safety Harbor, Florida, and WLLD(FM), Holmes Beach, Florida
(collectively, the "Stations"), and owns all of the Assets relating to the
Stations; and
WHEREAS, Entercom desires to sell the Station Assets, or at
its election relinquish such assets in a transaction qualifying in whole or in
part as a deferred like-kind exchange; and
WHEREAS, Entercom and CBS have agreed, subject to prior
approval by the Commission and certain other conditions, that Entercom shall
sell, assign, transfer and convey the Assets to CBS or one or more Affiliates
designated by CBS, in the manner and for the consideration described in this
Agreement; and
NOW, THEREFORE, in consideration of the mutual promises herein
contained and of the representations and warranties hereinafter set forth and
for other good and valuable consideration, the parties, intending to be legally
bound hereby, agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. As used herein, the following terms shall have the following
respective meanings:
"ADJUSTMENT TIME" shall mean with respect to each Station,
12:01:00 a.m. Eastern Standard or Daylight Time, as appropriate, on the Closing
Date.
"AFFILIATE" shall mean, with respect to any person or entity,
a person or entity controlling, controlled by or under common control with such
person or entity.
"AGREEMENT" shall mean this Asset Purchase Agreement.
"APPRAISAL" shall have the meaning set forth in Section 2.2.1
hereof.
<PAGE> 6
"ASSETS" shall mean the Property and all of the Authorizations
relating to the Stations.
"ASSIGNMENT APPLICATIONS" shall have the meaning set forth in
Section 7.1 hereof.
"AUTHORIZATIONS" shall mean all of the licenses, permits, and
authorizations granted by the Commission with respect to the operation of the
Stations and all applications for Authorizations for the Stations pending before
the Commission.
"BARTER AGREEMENTS" shall mean contracts for the sale of time
on the Stations in exchange for programming.
"BOSTON I AGREEMENT" shall mean that certain Asset Purchase
Agreement by and among CRI, CRLI, and Entercom for the sale and purchase of
radio stations WRKO(AM) and WEEI(AM), dated as of August 13, 1998.
"BOSTON II AGREEMENT" shall mean that certain Asset Purchase
Agreement by and among CRI, CRLI, ARS Acquisition II, Inc., and Entercom for the
sale and purchase of radio stations WAAF(FM), WWTM(AM), and WEGQ(FM), dated as
of August 13, 1998.
"CBS" shall mean the corporations identified as such in the
Preamble of this Agreement.
"CLOSING" shall mean the event of consummation of the
transactions contemplated by this Agreement as more fully described in Article
VIII of this Agreement.
"CLOSING DATE" shall mean the date that the Closing occurs.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the applicable regulations issued thereunder.
"COMMISSION" shall mean the Federal Communications Commission.
"CONTAMINANT" shall mean and include any pollutant,
contaminant, hazardous material (as defined in any of the Environmental Laws),
toxic substances (as defined in any of the Environmental Laws), asbestos or
asbestos-containing material, urea formaldehyde, polychlorinated biphenyls,
regulated substances and wastes, radioactive materials, and petroleum or
petroleum by-products, including crude oil or any fraction thereof, except that
"Contaminant" shall not include small quantities of maintenance, cleaning and
emergency generator fuel supplies customary for the operation of radio stations
and maintained in compliance with all Environmental Laws in the Ordinary Course
of Business.
2
<PAGE> 7
"CONTRACTS" shall mean all agreements, arrangements,
commitments, and undertakings, written or oral, expressed or implied, relating
to the present or future operation of the Stations except for any Leases,
including without limitation, Time Sales Agreements, Trade Agreements, Barter
Agreements and Miscellaneous Contracts.
"DEFAULT" shall mean the material default by a party hereto in
the performance of its obligations under this Agreement.
"ENTERCOM" shall mean the corporation identified as such in
the Preamble of this Agreement.
"ENVIRONMENTAL LAWS" shall mean any applicable federal, state
or local law, statute, charter, ordinance, rule, or regulation or any
governmental agency interpretation, or policy, including, without limitation,
applicable safety/environmental/health laws such as, but not limited to, the
Resource Conservation and Recovery Act of 1976, Comprehensive Environmental
Response Compensation and Liability Act, Federal Emergency Planning and
Community Right to Know Law, the Clean Air Act, the Clean Water Act, the Toxic
Substance Control Act, and the Occupational Safety and Health Act, as any of the
foregoing have been amended, and any permit, order, directive, court ruling or
order, or consent decree applicable to or affecting the Property or any other
property (real or personal) used by or relating to the Station in question
promulgated or issued pursuant to any Environmental Laws which pertains to,
governs, or controls the generation, storage, remediation, or removal of
Contaminants or otherwise regulates the protection of health and the environment
including, but not limited to, any of the following activities, whether on site
or off site: (i) the emission, discharge, release, spilling, or dumping of any
Contaminant into the air, surface water, ground water, soil, or substrata; or
(ii) the use, generation, processing, sale, recycling, treatment, handling,
storage, disposal, transportation, labeling, or any other management of any
Contaminant.
"FINAL ORDER" shall mean an order or action of the Commission
that, by reason of expiration of time or exhaustion of remedies, is no longer
subject to administrative or judicial reconsideration or review.
"LEASES" shall mean all agreements, arrangements, or
commitments and undertakings, written or oral, express or implied, for the use
or occupation of any real or personal property used in the operation of the
Stations.
"LOSS" shall have the meaning set forth in Section 9.4.1
hereof.
"MISCELLANEOUS CONTRACTS" shall mean Contracts and Leases
entered into in the Ordinary Course of Business, which involve less than
Twenty-Five Thousand Dollars ($25,000.00) individually and less than One Hundred
Fifty-Thousand Dollars ($150,000.00) for all of the Stations in the aggregate,
and which are not included in Schedule 4.1.6.
3
<PAGE> 8
"NON-CONTINUING EMPLOYEES" shall have the meaning set forth in
Section 6.5.1.
"ORDINARY COURSE OF BUSINESS" shall mean the routine conduct
of the business of the Station in question (excluding extraordinary, irregular,
or abnormal transactions) on a basis consistent with the regular practice of
such Station since January 1, 1998.
"PERMITTED ENCUMBRANCES" shall mean: (i) encumbrances for
taxes, assessments, or governmental charges or levies which are not yet due and
payable, or that, subject to adequate security for payment, are being contested;
(ii) easements, rights of way, or other encumbrances disclosed in this
Agreement; (iii) easements, rights of way or other encumbrances that do not have
a material adverse effect on the Assets or the operation of the Stations as
currently operated; (iv) encumbrances imposed by law, such as materialmen's,
mechanic's, carrier's, workmen's, or repairmen's liens or other similar
encumbrances arising in the Ordinary Course of Business, securing obligations
that are not overdue; (v) encumbrances securing indebtedness, which will be
removed prior to or at the Closing; (vi) encumbrances pursuant to Contracts and
Leases to be assumed by CBS pursuant to Section 3.1; and (vii) encumbrances
listed on Schedule 4.1.8.
"PROPERTY" shall mean all of the tangible and intangible
property (other than the Authorizations), located at the Stations (including at
the transmitter sites of the Stations), whether real, personal, or mixed, and
all rights and interests which are used or held by Entercom or any of its
Affiliates and necessary for use primarily in the operation of the Stations as
presently conducted, including: (i) all of the rights, titles, and interests
under the Leases and the Contracts relating to the Stations; (ii) the call
letters, copyrights, trademarks, and other intellectual property associated with
the Stations; (iii) originals or, if unavailable, photocopies, of all files,
records, studies, data, lists, filings, general accounting records, books of
account, computer programs and software, and logs, of every kind, relating to
the operations or business of the Stations; and (iv) all of Entercom's or any of
its Affiliates' rights under manufacturers' and vendors' warranties relating to
items included in the Assets of the Stations; but excluding therefrom those
assets listed on Schedules attached hereto respectively as "Excluded Property."
"PURCHASE PRICE" shall have the meaning set forth in Section
2.1.2.
"REQUIRED CONSENTS" shall mean the consents of third parties
to the Leases and Contracts that are required for the assignment thereof and
that are identified on the Schedules hereto as "Material Leases (or
Contracts)-Consent to Assign Required."
"REQUIRED CURE EXPENSE" shall mean the sum of the amounts
required to be spent by Entercom under Sections 6.1.4, 6.1.5 and 6.6.3 hereof.
"STATIONS" shall collectively mean the following radio
broadcast stations: WYUU(FM), Safety Harbor, Florida and WLLD(FM), Holmes Beach,
Florida or, in the singular form, any one of them.
4
<PAGE> 9
"STATION EMPLOYEES" shall have the meaning set forth in
Section 6.5.1.
"TBA COMMENCEMENT DATE" shall mean the date that the Time
Brokerage Agreement shall become effective.
"TIME BROKERAGE AGREEMENT" shall mean the Time Brokerage
Agreement entered into between Entercom and CBS simultaneously with the
execution of this Agreement relating to the sale to CBS of substantially all of
the broadcast time on the Stations.
"TIME SALES AGREEMENTS" shall mean contracts for the sale of
time on the Stations for cash.
"TRADE AGREEMENTS" shall mean contracts for the sale of time
on the Stations in exchange for merchandise or services used or useful for the
benefit of the Stations, excluding Barter Agreements.
"TRANSFERRED EMPLOYEES" shall have the meaning set forth in
Section 6.5.
"UPSET DATE" shall have the meaning set forth in Section
9.1.1.
ARTICLE II.
PURCHASE OF ASSETS
2.1. PURCHASE AND SALE OF ASSETS.
Subject to the terms and conditions set forth in this
Agreement, at the Closing:
2.1.1. Entercom shall sell, convey, transfer, assign, and deliver or
cause to be sold, conveyed, transferred, assigned, and delivered to CBS the
Assets free and clear of all liens and encumbrances other than Permitted
Encumbrances, and CBS shall acquire and receive same from Entercom.
2.1.2. CBS shall deliver to Entercom cash in the amount of Seventy-Five
Million Dollars ($75,000,000.00) (the "Purchase Price") and Entercom shall
receive same from CBS. The Purchase Price shall be paid by wire transfer at
Closing to the account designated by Entercom in writing at least two (2) days
prior to the Closing.
2.2. ALLOCATION OF VALUES.
2.2.1. The fair market value of the Assets shall be determined and
allocated on the basis of an appraisal (the "Appraisal") prepared by Bond &
Pecaro, or another firm reasonably acceptable to CBS and Entercom, whose fees
and expenses shall be borne equally by Entercom and CBS. The parties shall use
their reasonable best efforts to cause Bond & Pecaro to deliver
5
<PAGE> 10
the Appraisal 10 days before the Closing Date, or failing compliance with such
deadline, as soon thereafter as is practicable, but in all events no later than
30 days after the Closing Date. The Appraisal shall set forth the fair market
value of each material asset included in the Assets.
2.2.2. Each party, as necessary, shall prepare such IRS Forms as are
required by law to be filed with the Internal Revenue Service reflecting the
fair market value of the Assets as determined in accordance with the values set
forth in the Appraisal and the above provisions and shall forward such forms to
the other parties within thirty (30) days after the Closing. Each party, as
necessary, shall file with their respective federal income tax returns for the
tax year in which the Closing occurs such IRS Forms as prepared in accordance
with the foregoing. Each party shall deliver to the other parties hereto a copy
of such IRS Forms as filed with their respective federal income tax return
within thirty (30) days of the filing of such return. The parties hereto hereby
covenant and agree with each other that they will not take a position on any
income tax return that is in any way inconsistent with the terms of this Section
2.2.
2.3. NON-ASSIGNABLE CONTRACTS.
2.3.1. Without limiting or otherwise affecting the rights of any party
hereto, to the extent that any Contract or Lease to be assigned pursuant to this
Agreement is not capable of being assigned without the consent, approval, or
waiver of a third person or entity, nothing in this Agreement will constitute an
assignment or require the assignment thereof except to the extent provided in
this Section 2.3.
2.3.2. With respect to all consents, approvals, and waivers referenced
in Section 2.3.1, Entercom shall use its reasonable best efforts to obtain all
such consents, approvals, and waivers prior to and, if the Closing occurs, as
promptly as practicable after the Closing Date; provided that Entercom shall not
be obligated to pay money to any other contracting party to obtain any such
consent, approval or waiver other than reasonable expenses of the party for any
legal documentation related to the assignment of the Contract or Lease in
question. If the consents, approvals, and waivers are not obtained prior to
Closing, the parties shall use their reasonable best efforts in good faith to
cooperate, and to cause each of their respective Affiliates to cooperate, in
effecting any lawful arrangement to provide to CBS the economic benefits of the
Contracts and Leases for which consents, approvals, and waivers are being sought
after Closing, and to have CBS assume and discharge the obligations under the
Contracts and Leases from and after the Closing Date.
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ARTICLE III.
LIABILITIES
3.1. ASSUMPTION OF LIABILITIES BY CBS.
Except as otherwise provided in the Time Brokerage Agreement,
from and after the Closing Date, CBS shall assume and pay, perform, and
discharge the following liabilities and obligations relating to the Stations:
3.1.1. The liabilities and obligations arising with respect to events
occurring after the Adjustment Time or accruing after the Adjustment Time with
respect to any Leases included in the Assets that are specifically identified on
Schedule 4.1.5 as being assumed by CBS, and such additional Leases as are
permitted to be entered into by Entercom and its Affiliates pursuant to Article
VI hereof;
3.1.2. The liabilities and obligations arising with respect to events
occurring after the Adjustment Time or accruing after the Adjustment Time with
respect to any (a) Contracts included in the Assets that are specifically
identified on Schedule 4.1.6 as being assumed by CBS, (b) Miscellaneous
Contracts, (c) Time Sales Agreements, Trade Agreements, and Barter Agreements
entered into in the Ordinary Course of Business, and (d) such additional
contracts as are permitted to be entered into by Entercom and its Affiliates
pursuant to Article VI hereof;
3.1.3. The liabilities and obligations which arise with respect to
events occurring after the Adjustment Time or which accrue after the Adjustment
Time with respect to the Assets and to the operation of the Stations by CBS; and
3.1.4. All taxes and assessments (other than income and franchise taxes
of Entercom and its Affiliates) that accrue on or with respect to the Assets or
the operation of the Stations after the Adjustment Time.
3.2. OTHER LIABILITIES.
3.2.1. Except as expressly set forth in this Agreement, Entercom shall
be solely responsible for all salaries, benefits and other compensation which
will or may become payable to any Station Employee in respect of any period of
employment prior to the earlier of the TBA Commencement Date or the Adjustment
Time, other than accrued vacation time for Transferred Employees, for which CBS
shall be responsible and for which it will receive a proration credit under
Section 8.2.1. CBS shall be solely responsible for any salaries and other
compensation which will or may become payable to any Transferred Employee in
respect of any period thereafter. CBS will not assume any obligations under
existing leave or severance policies or otherwise have any liability or
obligation for severance pay or other termination benefits of Station Employees,
except for obligations set forth in Contracts to be assumed by CBS pursuant to
this Agreement.
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3.2.2. Except as specifically assumed by CBS pursuant to Section 3.1
and Section 3.2.1 hereof or pursuant to the Time Brokerage Agreement, neither
CBS nor any of its Affiliates shall assume or undertake to pay, satisfy, or
discharge any liabilities, obligations, commitments, or responsibilities of
Entercom or any of its Affiliates.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1. BY ENTERCOM.
Entercom hereby represents and warrants to CBS that:
4.1.1. CORPORATE STANDING.
Entercom is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Pennsylvania and is
qualified to do business in the State of Florida. Entercom has full power and
authority to engage in the business in which it is presently engaged and to make
and perform this Agreement according to its terms.
4.1.2. AUTHORIZATION OF AGREEMENT; NO BREACH.
Entercom has the necessary corporate power and authority to
execute, deliver and perform this Agreement, the Time Brokerage Agreement, and
such other agreements as are necessary to consummate the transactions
contemplated hereby, and, subject to the receipt of the consents and approvals
required elsewhere herein, this Agreement and the Time Brokerage Agreement
constitute the valid and binding obligation of Entercom enforceable against it
in accordance with their terms, except as limited by bankruptcy and insolvency
laws and by laws affecting the enforcement of creditors' rights generally or
equitable principles. Assuming said consents and approvals are obtained, neither
such execution, delivery, and performance nor compliance by Entercom with the
terms and provisions of this Agreement and the Time Brokerage Agreement will
conflict with or result in a breach of any of the terms, conditions, or
provisions of the Articles of Incorporation or By-Laws of Entercom or its
Affiliates or any judgment, order, injunction, decree, regulation, or ruling of
any court or any other governmental authority to which Entercom or any of its
Affiliates is subject or any material agreement or contract to which Entercom or
any of its Affiliates is a party or to which it is subject, or constitute a
material default thereunder.
4.1.3. QUALIFICATION.
An Affiliate of Entercom to be designated as assignor on the
Assignment Applications is qualified as a licensee of the Commission and is, or
at the time of filing the Assignment Applications will be, qualified as the
assignor of the Authorizations to receive a grant of the Assignment Applications
by the Commission. Entercom knows of no facts which
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could reasonably be expected to cause Commission approval of the Assignment
Applications to be denied or materially delayed or which could reasonably be
expected to lead to the filing of a material objection to such Applications.
4.1.4. ENTERCOM ASSETS.
The Assets, taken as a whole, constitute all of the material
property, whether real, personal, or mixed, tangible or intangible, used by
Entercom or its Affiliates in the operation of the Stations except for (i)
property replaced in the Ordinary Course of Business and (ii) those assets
specifically listed on Schedule 4.1.4 under the heading "Excluded Property."
4.1.5. ENTERCOM LEASES.
Except as set forth in Schedule 4.1.5, Entercom has delivered
to CBS true and correct copies of all Leases listed on Schedule 4.1.5 hereto.
There are no other material leases for any items or interests for the use of
real or personal property associated with the Assets or the present operation of
the Stations other than those disclosed on Schedule 4.1.5 hereto.
4.1.6. ENTERCOM CONTRACTS.
Schedule 4.1.6 contains a list of all Contracts now in effect,
written or oral, express or implied, relating to the Assets or the present or
future operation of the Stations, other than as disclosed on Schedule 4.1.5
hereto or other Schedules attached to this Agreement, except for Time Sales
Agreements, Barter Agreements, Trade Agreements, Miscellaneous Agreements and
Contracts that relate solely to Excluded Property. Except as indicated on
Schedule 4.1.6 hereto, Entercom has delivered to CBS true and correct copies of
all Contracts listed on Schedule 4.1.6 hereto.
4.1.7. INTELLECTUAL PROPERTY.
Schedule 4.1.7 hereto lists all material trademarks and
copyrights relating to the operation of the Stations which have been registered
with Federal or State governmental agencies. To Entercom's knowledge, the
operation of the Stations as now conducted does not conflict with any valid
patents, trademarks, trade names, service marks, or copyrights of others in any
way that is reasonably likely to have a material adverse effect on the operation
of the Stations.
4.1.8. TITLE TO PROPERTY.
Except for (i) Permitted Encumbrances, (ii) as disclosed on
Schedule 4.1.8 hereto, and (iii) as provided in the immediately succeeding two
sentences, Entercom has good ownership, right, title, and interest to the
Property including the right to transfer such assets. Entercom has a valid
leasehold interest in all Property leased and used or held for use in
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connection with the operation of the Stations. Entercom has good and marketable
title to the owned real property to be conveyed hereunder, except for Permitted
Encumbrances. Except for Permitted Encumbrances and items disclosed on Schedule
4.1.8 (which Schedule reflects, where appropriate, the Station to which the
disclosed item relates), none of the Property or any of the income or revenue
therefrom is subject to any mortgage, conditional sale agreement, security
interest, lease, lien, hypothecation, pledge, encumbrance, restriction,
liability, charge, claim, or imperfection of title that would materially
adversely affect the continued use of the Property as currently used.
4.1.9. NO DEFAULTS.
Entercom and its Affiliates have complied in all material
respects with all of the terms of the Contracts and the Leases and such
Contracts and Leases are enforceable by Entercom in accordance with their
respective terms, except as such enforcement may be limited by applicable
bankruptcy and similar laws affecting the enforcement of creditors' rights and
general equitable principles affecting the enforcement of equitable remedies
(including within said equitable remedies without limitation the remedy of
specific performance). No event has occurred which with the passage of time or
the giving of notice or both would constitute a material default by Entercom or
any of its Affiliates thereunder. To the knowledge of Entercom, all other
parties to the Contracts and Leases have complied in all material respects with
the provisions thereof and no event has occurred which with the passage of time
or the giving of notice or both would constitute a material default by any such
other party thereunder.
4.1.10. AUTHORIZATIONS AND APPLICATIONS.
Except as disclosed on Schedule 4.1.10, all Authorizations
necessary to the lawful operations of the Stations have been granted and issued
by the Commission to Entercom and are listed on Schedule 4.1.10 attached hereto
and are now in full force and effect. There are no applications of Entercom or
any of its Affiliates relating to the Stations pending with the Commission
except as listed on such Schedule 4.1.10. Entercom and its Affiliates have
performed and complied in all material respects with all of the terms and
conditions of said Authorizations, the Communications Act of 1934, as amended
(the "Communications Act") and all applicable rules, regulations, requirements,
and policies of the Commission relating to the operation of the Stations. Except
as listed on Schedule 4.1.10, no proceedings are pending or, to the knowledge of
any officer of Entercom or any of its Affiliates, threatened, which may result
in the revocation, modification, non-renewal, or suspension of any of said
Authorizations, the denial of any pending applications, the issuance of a cease
and desist order, or the imposition of any other sanction by the Commission to
which the Stations or the Assets are or may be subject. None of Entercom or any
of its Affiliates has reason to believe that the Commission will not renew the
Authorizations of any of the Stations in the ordinary course for a full term
without material qualifications. No renewal of the Authorizations of the
Stations would constitute a major environmental action under the rules of the
Commission in effect as of the date of this Agreement. All ownership reports,
renewal applications, and other material reports and
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documents required to be filed by Entercom and its Affiliates with the
Commission relating to the operation of the Stations have been filed, and all
such reports, applications and documents are true and correct in all material
respects. The Stations are identified by their presently assigned call letters
and, unless otherwise validly authorized by the Commission and disclosed on
Schedule 4.1.10, are operated on their assigned frequencies at the powers and
heights authorized by the Commission. The public inspection files for the
Stations are in substantial compliance with the regulations of the Commission
relating thereto.
4.1.11. PERMITS AND LICENSES.
In addition to the Authorizations, Entercom has obtained and/or holds,
or at Closing will hold, all other governmental permits and licenses necessary
for the lawful operation of the respective Stations. All terms, restrictions,
and requirements of such permits and licenses have been complied with in all
material respects and none of Entercom or any of its Affiliates is in default of
any of same.
4.1.12. COMPLIANCE WITH LAWS.
Entercom and its Affiliates have complied in all material
respects with all orders (to which Entercom or any of its Affiliates is a party
or is subject) and applicable laws, rules, and regulations of all federal, state
and local authorities with respect to the Assets and operation of the Stations.
With respect to the operations of the Stations, none of Entercom or any of its
Affiliates is in default with respect to or in violation of: (a) any judgment,
order, injunction or decree to which Entercom or any of its Affiliates is a
party or is subject; or (b) any rule or regulation of any court, administrative
agency or other governmental authority, in either case in any respect material
to this transaction. All material reports, returns and other documents which
relate in any way to the Assets and which were filed by Entercom or any of its
Affiliates with any administrative agency or governmental authority are true,
correct and complete in all material respects.
4.1.13. LITIGATION AND CLAIMS.
Except as disclosed in Schedule 4.1.13 hereto and except for
rulemaking proceedings applicable to radio broadcast stations generally, no
litigation, proceeding or controversy is pending or, to the knowledge of any
officer of Entercom or any of its Affiliates, threatened against Entercom or any
of its Affiliates, which might materially and adversely affect any material
portion of the Assets, Entercom's or any of its Affiliates' right or power to
transfer the same, the ownership, possession, use or resale of any material
portion of the Assets, or the operation of the Stations by CBS or any assignee
thereof and there is no basis known to Entercom or any of its Affiliates for any
such litigation, proceeding, controversy or claim. No claim has been made or
asserted against Entercom or any of its Affiliates material to this transaction.
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4.1.14. EMPLOYEES.
Set forth on Schedule 4.1.14 is a listing, by department, of
the name, salary or compensation, all other compensation arrangements, and job
title of all employees of Entercom and its Affiliates employed at the Stations
as of August 1, 1998 and whether each such employee is full-time or part-time.
Except as disclosed on Schedule 4.1.14, there are no written contracts for the
employment of any personnel at the Stations. Except as disclosed on Schedule
4.1.14, all employees of Entercom and its Affiliates employed at the Stations
are employed on an "at will" basis.
4.1.15. EMPLOYEE BENEFIT AND RETIREMENT PLANS.
Listed on Schedule 4.1.15 are the material "employee pension
benefit plans" and "employee welfare benefit plans" (as defined respectively in
Sections 3(2) and 3(l) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which Entercom and its Affiliates maintain on behalf of
their employees at the Stations. In all respects material to this transaction,
all "employee pension benefit plans" and "employee welfare benefit plans" listed
on Schedule 4.1.15 hereto comply in all material respects with all applicable
requirements of law and regulation. None of Entercom or any of its Affiliates
has incurred or reasonably expects to incur (either directly or indirectly,
including as a result of any of the transactions contemplated hereby or any
indemnification obligation) any liability (including, without limitation,
withdrawal liability) that could become a liability of CBS, under or pursuant to
Title I or IV of ERISA or the penalty, excise tax or joint and several liability
provisions of the Code relating to employee benefit plans and no event,
transaction or condition has occurred or exists which could result in any such
liability. Entercom and its Affiliates have made all required contributions to
all multi-employer plans within the meaning of Section 3(37) of ERISA.
4.1.16. LABOR RELATIONS.
In all respects material to this transaction, Entercom and its
Affiliates have complied with all applicable laws, rules and regulations
pertaining to the employment of labor, including those relating to wages, hours,
collective bargaining and the payment of or withholding of taxes with respect to
the operations of the Stations, and Entercom and its Affiliates have withheld
all amounts required by law or agreement to be withheld from the wages or
salaries of their employees and are not liable for any arrears of wages or any
tax or withholding or any penalties or interest for failure to comply with any
of the foregoing. Except as disclosed on Schedule 4.1.16, there are no
collective bargaining agreements relating to any employee of Entercom or any of
its Affiliates at the Stations. In addition, except as disclosed on Schedule
4.1.16, none of Entercom or any of its Affiliates has knowledge of any union
organizing activities in the one year period preceding the date of this
Agreement involving or targeting any employees of Entercom or any of its
Affiliates at the Stations.
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4.1.17. INSURANCE.
Entercom has in force adequate fire and other risk insurance
covering the full replacement value of tangible personal property that is part
of the Property and shall cause such insurance to be maintained in full force
until the Closing Date. Entercom also shall maintain in full force until the
Closing Date, adequate workers compensation and general public liability
insurance for the respective Stations in amounts consistent with broadcasting
industry standards for similar stations. As of the date of this Agreement, none
of the Property currently suffers in any way as a result of fire, explosion,
earthquake, accident, fraud, rain, storm, drought, Act of God or public enemy or
any other casualty, whether or not covered by insurance.
4.1.18. BROADCASTING CONTRACTS.
The total value of all unfulfilled obligations in respect of
Trade Agreements and Barter Agreements to be assumed by CBS, whether or not the
Stations have received consideration therefor, shall not be in excess of Five
Hundred Thousand Dollars ($500,000.00) as of the Closing Date. To the extent
that, as of the Closing Date, the excess of the value of unfulfilled obligations
under Trade or Barter Agreements, including any "time bank" provision thereof,
over the value of consideration to be received by the Stations (determined as of
the Closing Date) exceeds One Hundred Thousand Dollars ($100,000.00), CBS shall
be entitled to a positive cash adjustment pursuant to Section 8.2 hereof.
4.1.19. ENVIRONMENTAL COMPLIANCE, POLYCHLORINATED BIPHENYLS, ASBESTOS
AND OTHER TOXIC OR HAZARDOUS SUBSTANCES.
Except as disclosed on Schedule 4.1.19, none of the Property
contains: (i) any asbestos, polychlorinated biphenyls ("PCBs") or any PCB
contaminated oil; (ii) any Contaminants; or (iii) any underground storage tanks.
All of the Property is in substantial compliance with all applicable
Environmental Laws.
4.1.20. FINANCIAL AND OTHER INFORMATION.
Entercom has furnished CBS with profit and loss statements for
calendar year 1997 and the months January through June of 1998 (the "Financial
Statements"). All Financial Statements provided to CBS are true and correct in
all material respects and such Financial Statements fairly present the results
of operation of the Stations for the respective period then ended. There are no
material liabilities, whether known or unknown, contingent or fixed, or
otherwise, associated with the Stations that have not been otherwise disclosed
to CBS to the extent this Agreement requires the disclosure thereof.
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4.1.21. NO INSOLVENCY.
No insolvency proceedings of any character, including without
limitation, bankruptcy, receivership, reorganization, composition, or
arrangement with creditors, voluntary or involuntary, affecting Entercom or any
of its Affiliates or any of their assets or properties are, or within three
years prior to the date hereof have been, pending or, to the best of the
knowledge of Entercom and its Affiliates, threatened, and, within three years
prior to the date hereof, none of Entercom or any of its Affiliates has made an
assignment for the benefit of creditors, nor has Entercom or any of its
Affiliates taken any action with a view to, or which would constitute the basis
for, the institution of any such insolvency proceedings.
4.1.22. CONDITION OF EQUIPMENT.
Except as disclosed on Schedule 4.1.22, the transmission and
studio equipment and other equipment (mechanical and electrical) included within
the Property is, and will be as of the Closing Date, in good repair and working
condition, ordinary wear and tear excepted, and is in material compliance with
all current FCC requirements.
4.1.23. REAL PROPERTY.
Schedule 4.1.23 contains a true and complete list of all real
property used in the operation of the Stations, setting forth the nature of the
interest, the address, and legal description for each parcel of real property
other than leased real property, and whether such parcel is owned or leased.
Except as set forth on Schedule 4.1.23, there are no outstanding options or
rights of first refusal to purchase or lease the owned real property or any
portion thereof or interest therein, there are no outstanding options or rights
of first refusal to sublease the leased real property or any portion thereof or
interest therein, and no other parties are in possession of any such real
property. The real property identified on Schedule 4.1.23 has vehicular access
to a road and is supplied with utilities and other services necessary for the
operation of that portion of the operation of the Stations conducted there. No
real property other than that listed on Schedule 4.1.23 or listed on such
schedule as Excluded Property is used in, held for use in connection with or
necessary for the conduct of, the business or operations of the Stations. To the
knowledge of Entercom and its Affiliates, (i) the improvements of Entercom and
its Affiliates upon such real property and the current use and operation on such
premises by Entercom and its Affiliates conform in all material respects to all
restrictive covenants, conditions, easements, building, subdivision and similar
codes and federal, state and local laws, regulations, rules, orders and
ordinances and none of Entercom or any of its Affiliates has received any notice
of any violation or claimed violation of any such restrictive covenant,
condition or easement, or any building, subdivision or similar code, or any
federal, state or local law, regulation, rule, order or ordinance which, either
individually or in the aggregate, could have a material adverse effect on the
assets, business or financial condition of the Stations, provided that any
lawfully grandfathered condition shall not be deemed to be a material adverse
effect for purposes of this subsection (i);
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(ii) there is no plan, study or effort by any governmental authority or agency
which could reasonably be expected to have a material adverse effect on the
Assets or financial condition of the Stations; and (iii) there are no latent
defects in the real property that could reasonably be expected to have a
material adverse effect on the Assets or financial condition of the Stations.
The improvements of Entercom and its Affiliates upon the real property
identified on Schedule 4.1.23 are in good operating condition and repair, normal
wear and tear excluded. None of Entercom or any of its Affiliates has knowledge
or received notice (i) of any pending, threatened, or contemplated action to
take by eminent domain or otherwise to condemn any portion of the real property
or interest therein or (ii) of any levied, threatened or proposed assessments
for public improvements with respect to the real property.
4.1.24. PAYMENT OF TAXES.
Entercom and its Affiliates have, and as of the Closing Date,
will have, paid and discharged all taxes, assessments, excises and other levies
which are due, including but not limited to any such taxes, assessments,
excises, and levies which, if due and not paid, would interfere with CBS's
enjoyment or use of the Assets or result in a lien, charge, or encumbrance
thereon, excepting such taxes, assessments, and other levies which will not be
due until or after the Closing Date, and which are either to be prorated between
the parties pursuant to the provisions of Section 8.2 hereof or paid or
contested by Entercom pursuant to Section 6.1.6.
4.1.25. REQUIRED CONSENTS.
The only material approvals or consents of persons or entities
not a party to this Agreement that are legally or contractually required to be
obtained by Entercom in connection with the consummation of the transactions
contemplated by this Agreement are those that are (i) set forth on Schedules
4.1.5 and 4.1.6 hereto and (ii) those contemplated by Section 5.1.
4.2. BY CBS.
CBS hereby represents and warrants that:
4.2.1. CORPORATE STANDING.
CRI and CRLI are corporations, duly organized, validly
existing and in good standing under the laws of the State of Delaware. CRLI is
or will be at Closing, qualified to do business in the State of Florida. CRI and
CRLI have full power and authority to engage in the businesses in which they are
presently engaged and to make and perform this Agreement according to its terms.
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4.2.2. AUTHORIZATION OF AGREEMENT; NO BREACH.
CBS has the necessary corporate power and authority, on behalf
of itself, to execute, deliver and perform this Agreement, the Time Brokerage
Agreement and such other agreements as are necessary to consummate the
transactions contemplated hereby, and, subject to the receipt of the consents
and approvals required elsewhere herein, this Agreement and the Time Brokerage
Agreement constitute the valid and binding obligation of CBS, enforceable
against it in accordance with their terms, except as limited by bankruptcy and
insolvency laws and by laws affecting the enforcement of creditors rights
generally or equitable principles. Assuming said consents and approvals are
obtained, neither such execution, delivery, and performance nor compliance by
CBS with the terms and provisions of this Agreement and the Time Brokerage
Agreement will conflict with or result in a breach of any of the terms,
conditions, or provisions of the Articles of Incorporation or Bylaws of CBS, or
any judgment, order, injunction, decree, regulation, or ruling of any court or
any other governmental authority to which CBS is subject or any material
agreement or contract to which CBS is a party or to which it is subject, or
constitute a material default thereunder.
4.2.3. QUALIFICATION.
CRLI is qualified as a licensee of the Federal Communications
Commission and is qualified as the assignee of the Authorizations to receive
Commission approval of the Assignment Applications. CBS knows of no facts
relating to CBS or any of its Affiliates that could reasonably be expected to
cause Commission approval of the Assignment Applications to be denied or
materially delayed or which could reasonably be expected to lead to the filing
of a material objection to such Applications.
4.2.4. LITIGATION AND CLAIMS.
Except as disclosed in Schedule 4.2.4 hereto, no litigation,
proceeding, or controversy is pending or, to the knowledge of any officer of
CBS, threatened, which might affect the ability of CBS to perform its
obligations hereunder, and there is no basis known to CBS for any such
litigation, proceeding, controversy, or claim. No claim has been made or
asserted against CBS material to this transaction.
ARTICLE V.
CONDITIONS
5.1. MUTUAL CONDITIONS.
Performance of the obligations of the parties with respect to
the Stations under this Agreement and the Closing, are and shall be subject to
the occurrence and concurrence of the express conditions precedent that (i) the
Commission has granted its consent and approval in
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writing to the assignment to CBS of the Authorizations issued by the Commission
as contemplated hereby without any materially adverse condition and any
condition as to the timing of consummation of the transactions contemplated
hereby set forth in such consent shall have been satisfied; and (ii) the waiting
periods (as they may be extended) applicable to the transfer of the Assets under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") shall have expired or been earlier terminated.
5.2. CONDITIONS OF CBS.
Performance of the obligations of CBS under this Agreement and
the Closing of the transactions provided for herein are and shall be subject to
the occurrence and concurrence of the express conditions precedent, any of which
may be waived by CBS, that:
5.2.1. All Required Consents have been obtained from the other parties
to the Leases and the Contracts identified on Schedules 4.1.5 and 4.1.6
respectively as "Material Leases (or Contracts)-Consent to Assign Required."
5.2.2. No order, decree or judgment of any court, agency or other
governmental authority shall have been issued based on or arising out of the
conduct, action, inaction, qualifications or status of Entercom or any of its
Affiliates, which would render it unlawful as of the Closing Date to effect the
transactions contemplated by this Agreement in accordance with its terms.
5.3. CONDITIONS OF ENTERCOM.
Performance of the obligations of Entercom under this
Agreement and the Closing of the transactions provided for herein are and shall
be subject to the occurrence and concurrence of the express conditions
precedent, any of which may be waived by Entercom, that:
5.3.1. No order, decree or judgment of any court, agency or other
governmental authority shall have been issued based on or arising out of the
conduct, action, inaction, qualifications or status of CBS or any of its
Affiliates, which would render it unlawful as of the Closing Date to effect the
transactions contemplated by this Agreement in accordance with its terms.
5.4. EFFECT OF TIME BROKERAGE AGREEMENT ON CLOSING CONDITIONS.
To the extent that any party hereto is unable to fulfill any
condition to Closing under this Agreement that could have been fulfilled solely
but for (i) an action taken by another party either pursuant to this Agreement
or the Time Brokerage Agreement or in breach of this Agreement or the Time
Brokerage Agreement or (ii) a failure to take any action that another party was
obligated to take, or, in the exercise of commercial reasonableness, should have
taken,
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pursuant to this Agreement or the Time Brokerage Agreement, such condition to
Closing shall be deemed waived.
ARTICLE VI.
COVENANTS AND OPERATIONS PRIOR TO CLOSING.
6.1. COVENANTS OF ENTERCOM.
Except as otherwise provided in the Time Brokerage Agreement,
during the period from the date of this Agreement to the Closing Date, Entercom
and/or one or more of its Affiliates shall:
6.1.1. Conduct the business and operations of the Stations in the
Ordinary Course of Business and in accordance with all requirements of law and
regulation and, to the extent consistent with the foregoing, in the same manner
in which the same have heretofore been conducted with the intent of preserving
the ongoing operations and business of the Stations.
6.1.2. Cooperate with CBS in connection with its review, analysis, and
monitoring of the Assets and the operation of the Stations to the end that an
efficient transfer of the Assets may be made at Closing and the business of the
Stations and the operation of the Assets may continue on an uninterrupted basis.
In addition to providing information required hereunder or reasonably requested
by the other parties hereto, Entercom agrees to promptly notify the other
parties of any unusual problems or developments of which Entercom becomes aware
with respect to the Assets or the business of the Stations.
6.1.3. Consult with CBS regarding any proposed material changes to the
operation of the Stations to insure continued operation of the Stations as they
are now operated and cooperate with CBS to insure a smooth transfer of ownership
and continuity of operations at Closing.
6.1.4. Obtain and deliver to CBS within ten (10) days hereof at its
expense and permit CBS to obtain within twenty (20) days hereof at its expense,
Phase I Environmental Assessments of all or any of the Property to be conveyed
hereunder and any real property used by the Stations in their operations or for
which CBS could be held responsible under any Environmental Laws. In the event
such Phase I Environmental Assessments disclose any conditions contrary to the
representations and warranties contained in Section 4.1.19, or any potential
that such conditions may exist, then CBS may conduct or have conducted at its
expense additional testing to confirm or negate the existence of any such
conditions. If any such Phase I Environmental Assessment or additional testing
confirms the existence of any such conditions without reference to matters
disclosed on Schedule 4.1.19, Entercom will cause the conditions to be remedied
as quickly as is reasonably possible to the extent required to comply with
applicable Environmental Laws; provided, however, that such remedial action does
not cost in the aggregate in excess of One Million Dollars ($1,000,000.00)
(subject to the last sentence of Section 11.1). In the event that such remedial
action does cost in the aggregate in excess of One Million Dollars
($1,000,000.00)
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(subject to the last sentence of Section 11.1), Entercom may elect not to take
such remedial action.. In such event, CBS may require Entercom to proceed to
Closing and CBS shall receive a proration at Closing, in the amount of One
Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1).
Alternatively, CBS may terminate this Agreement and Entercom shall have no
liability to CBS as a result of such termination. Entercom has furnished to CBS
copies of any environmental reports, title reports, and title insurance policies
in its possession previously prepared for any of the Property which Entercom has
been able to locate through the date hereof, and from the date hereof through
Closing, Entercom shall forward to CBS any additional such reports or policies
it receives or locates. Notwithstanding any other provision of this Agreement,
Entercom shall have no further liability to CBS for any environmental condition
to the extent such condition is disclosed on Schedule 4.1.19 or any Phase I
Environmental Assessment or other testing conducted pursuant to this Section
6.1.4, except as set forth in this Section 6.1.4.
6.1.5. Obtain within 10 days hereof at its expense and deliver to CBS,
commitments from a reputable title insurance company to issue extended coverage
policies of title insurance (ATLA Form 1970 or other form reasonably acceptable
to CBS) with respect to each parcel of real property to be conveyed hereunder,
insuring good and marketable title to such real property (the "Title
Commitments"). In the event CBS notifies Entercom within 10 business days of
receipt of the Title Commitments that the Title Commitments disclose any rights
of way, easements, exceptions or other matters which do not constitute Permitted
Encumbrances and which materially and adversely interfere with the continued use
of such real property as currently used, Entercom will cause the conditions to
be remedied as quickly as is reasonably possible; provided, however, that such
remedial action(s) does not cost in the aggregate in excess of One Million
Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). In the
event that such remedial action does cost in the aggregate in excess of One
Million Dollars ($1,000,000.00), Entercom may elect not to take such remedial
action, and, notwithstanding any other provision of this Agreement, Entercom
shall have no further liability to CBS for any title defect. In such event, CBS
may require Entercom to proceed to Closing and CBS shall receive a proration at
Closing, in the amount of One Million Dollars ($1,000,000.00) (subject to the
last sentence of Section 11.1). Alternatively, CBS may terminate this Agreement
and Entercom shall have no liability to CBS as a result of such termination.
6.1.6. Cooperate with CBS, with respect to the Stations, in its efforts
to employ after the Closing or TBA Commencement Date, as the case may be, any of
the current employees of Entercom and its Affiliates who are employed at the
Stations (the "Station Employees"), including without limitation, allowing CBS
to meet privately with the Station Employees other than Non-Continuing Employees
(as defined in Section 6.5). Entercom and its Affiliates will not interfere with
or attempt to undermine in any way the efforts of CBS to employ such employees.
6.1.7. Pay and discharge when due all taxes due after Closing accrued
or accruing with respect to periods ending on or before the Closing Date, to the
extent such taxes could reasonably be expected to result in a lien or otherwise
interfere with the use or enjoyment of the Station
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Assets; provided, that any such tax may be contested by Entercom in good faith
by appropriate proceedings; provided further that Entercom shall pay any such
taxes found to be due and owing upon completion of such proceedings.
6.2. NEGATIVE COVENANTS OF ENTERCOM.
Unless CBS has given its consent in writing, which consent
shall not be unreasonably withheld, Entercom and it Affiliates shall not,
directly or indirectly, during the period from the date hereof to the Closing
Date:
6.2.1. Except as specifically provided in this Agreement, cancel,
amend, modify adversely, assign, encumber, or in any way discharge or terminate
any of the Leases or Contracts other than in the Ordinary Course of Business
(provided, however, that Entercom shall notify CBS in writing of any such
actions involving a contract that would need to be identified on Schedule
4.1.6).
6.2.2. By any act or omission, surrender, modify adversely, forfeit, or
fail to renew on regular terms any Authorizations for the Stations or take or
omit any action which might result in the Commission instituting any proceedings
for the revocation, suspension or modification of any such Authorizations.
6.2.3. Except in the Ordinary Course of Business, sell or dispose of
any of the Assets; provided that any Assets so disposed of in the Ordinary
Course of Business (other than Assets that are obsolete, worn beyond repair, or
otherwise not suitable for use in either of the Stations and that are not in
use) are replaced with assets of comparable or better functionality.
6.2.4. Suffer or permit the creation of any mortgage, conditional sale
agreement, security interest, lease, lien, hypothecation, pledge, encumbrance,
restriction, liability, charge, claim, or imperfection of title on or with
respect to any of the Assets other than Permitted Encumbrances and those
identified on Schedule 4.1.8 hereto;
6.2.5. Enter into, renew, or modify any Contract relating to the
Stations with an individual value of over Fifty Thousand Dollars ($50,000.00) or
in the aggregate over Two Hundred and Fifty Thousand Dollars ($250,000.00);
other than for Time Sales Agreements, Trade Agreements or Barter Agreements. The
amounts set forth in the preceding sentence shall have no bearing on any
determination as to what constitutes "material" for purposes of this Agreement.
6.2.6. Fail to take any reasonable actions necessary to maintain the
Stations' continuous broadcast operations from their respective main antennae.
6.2.7. Fail to take any reasonable actions necessary to avoid the
happening of or to cure the existence of any material damage to or impairment of
any of the Assets.
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6.2.8. Fail to operate the Stations in conformity in all material
respects with all of the applicable requirements of law and regulation.
6.2.9. Take any action which is materially inconsistent with its
obligations under this Agreement, or that could hinder or delay the consummation
of the transactions contemplated hereby.
Any notification or consent given under this Article VI will not mitigate,
detract from, or otherwise affect the representations, warranties, or
obligations under this Agreement and the consequences of the other party's
acting on any such notification or consent will be solely such other party's
responsibility, except to the extent inherent in the nature of any notification
or consent, or otherwise set forth in the terms thereof.
6.3. NO CONTROL.
Nothing contained in this Agreement or in the Time Brokerage
Agreement shall give CBS any right to control the operations of the Stations
prior to the Closing Date.
6.4. NO SOLICITATION OR HIRE OF EMPLOYEES.
During the period beginning the date of this Agreement and
ending the earlier of eighteen (18) months after the Closing Date, or, as to any
particular Station, upon consummation of any transaction requiring the prior
consent of the Commission on FCC Form 314 or 315, Entercom shall be prohibited
from soliciting or hiring any Transferred Employee (as defined in Section 6.5);
provided, however, that this prohibition shall not apply to any Transferred
Employee hired by CBS and subsequently terminated by CBS without cause.
6.5. COVENANT OF CBS.
6.5.1. Prior to the earlier of the TBA Commencement Date, or the
Closing Date, CBS or its designated Affiliate shall offer employment commencing
on the earlier of the TBA Commencement Date, or the Closing Date to each of the
employees employed by Entercom or its Affiliates at the Stations on such date
(the "Station Employees"), other than those employees specified on Schedule 6.5
(the "Non-Continuing Employees"). The Station Employees accepting such offers
shall be referred to as the "Transferred Employees." "Station Employees" shall
also include any employee of the Station who is on a short-term disability or
other authorized temporary leave from employment by Entercom not in excess of 6
months, and CBS or its designated Affiliate shall offer employment to such
person at such time the person is capable and ready to return to active status,
provided that such person actually returns to active status within such six (6)
month period. Except for any Transferred Employees whose employment contracts
are assumed by CBS under the terms hereof, the terms and conditions of CBS'
employment of the Transferred Employees shall be at-will employment in at least
the same positions, for at least the same direct cash compensation, with medical
insurance effective as of the earlier of the TBA
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Commencement Date or the Closing Date and including coverage for any preexisting
health conditions that would have been covered by the health plan in which the
employee was a participant immediately prior to the earlier of the TBA
Commencement Date or the Closing Date and give effect, in determining any
periodic deductible and maximum out-of-pocket limitations, to claims incurred
and paid by, and amounts reimbursed to, such Transferred Employees prior to the
earlier of the TBA Commencement Date or the Closing Date. For purposes of
determining the amount of any entitlement of any Transferred Employee under CBS'
benefit and vacation plans, CBS will take into account and credit such
Transferred Employee under CBS' benefit and vacation plans with the credit for
service the Transferred Employee received from Entercom immediately prior to the
earlier of the TBA Commencement Date or the Closing Date. With respect to any
welfare benefit plan (as defined in Section 3(1) of ERISA) of CBS for the
benefit of Transferred Employees, CBS shall cause all Transferred Employees who
actively participated in similar plans of Entercom to become a participant in
such welfare benefit plan of CBS as of the earlier of the TBA Commencement Date
or the Closing Date. No provisions of this Agreement shall create any third
party beneficiary rights of any employee or former employee (including any
beneficiary or dependent thereof) of Entercom in respect of continued employment
(or resumed employment) with Entercom or CBS or in respect of any other matter.
6.5.2 Without the prior written consent of Entercom, which shall not be
withheld unreasonably, from and after the date hereof, neither CBS nor any of
its Affiliates shall take any action inconsistent with its obligations under
this Agreement, or that could hinder or delay the consummation of the
transactions contemplated hereby.
6.6. REAL PROPERTY SURVEYS.
6.6.1. Within 30 days of the date hereof, CBS may procure, at its
expense, with respect to each parcel of real property owned by Entercom and used
in connection with the operation of the Stations, a current survey of each such
parcel of real property, prepared by a licensed surveyor, and conforming to
current ATLA Minimum Detail Requirements for Land Title Surveys, disclosing the
location of all improvements, easements, party walls, sidewalks, roadways,
utility lines, transmitting towers, tower guy anchors and other matters
customarily shown on such surveys, and showing vehicular access affirmatively to
public streets and roads (the "Survey").
6.6.2. Within ten (10) business days of receipt of the Surveys, CBS
shall give Entercom copies of the Surveys and notice of any exceptions to
matters revealed by the Surveys that would materially and adversely affect the
Stations as currently operated (the "Objectionable Exceptions"). If CBS fails to
give such notice in a timely manner, CBS shall be deemed to have accepted
matters revealed by the Surveys other than the Objectionable Exceptions
expressly set forth in the notice.
6.6.3. Entercom shall cure or remove any Objectionable Exception within
thirty (30) days from the date of CBS' notice; provided, however, that if
Entercom reasonably determines
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that the cost of removing such Objectionable Exception would exceed One Million
Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1) or that
Entercom through the expenditure of up to One Million Dollars ($1,000,000.00)
(subject to the last sentence of Section 11.1) will be unable to cure or remove
an Objectionable Exception within such 30-day period, then Entercom shall notify
CBS within three (3) business days after such determination, whereupon CBS shall
have the right, exercisable by written notice given to Entercom within three (3)
business days after receipt of Entercom's notice, to elect (i) to agree to
accept the real property covered by such Survey, subject to such of the
Objectionable Exceptions, together with a payment of such sum as is necessary to
remove the Objectionable Exception not to exceed One Million Dollars
($1,000,000.00) (subject to the last sentence of Section 11.1), or (ii) to
terminate this Agreement. If CBS fails to elect option (i) or (ii) above, then
CBS shall be deemed to have elected option (i).
ARTICLE VII.
ACTIONS PRIOR TO CLOSING.
7.1. APPLICATION TO COMMISSION.
The parties hereby bind themselves to use their best efforts,
and to cooperate with each other, in seeking the consent and approval of the
Commission to the assignment of all Authorizations heretofore granted and issued
in connection with the Stations as herein provided; diligently and promptly to
prepare, sign, and file with the Commission within five (5) business days from
the date of this Agreement any and all applications requisite or desirable to
procure such consents and approvals (the "Assignment Applications"); and
diligently and promptly to prepare and submit to the Commission all information,
data, exhibits, amendments, resolutions, statements, and other material
necessary or proper in connection with the Assignment Applications; and
diligently to pursue the grant of a Final Order approving such Assignment
Applications.
7.2. HART-SCOTT-RODINO NOTIFICATION.
As promptly as practicable and no later than ten (10) days
after the date hereof, the parties hereto shall take all steps reasonably
necessary to file and shall participate in the filing of all requisite documents
and notifications required to be filed pursuant to the HSR Act. All filing fees
in connection with such notifications shall be paid one-third by CBS and
two-thirds by Entercom. The parties agree to diligently take and fully cooperate
in the taking of all necessary and proper steps, and provide any additional
information reasonably requested in order to obtain promptly the early
termination of the waiting period under the HSR Act.
7.3. INSPECTION.
During the period from the date of this Agreement to the
Closing Date, Entercom shall, upon reasonable request, afford, or cause to be
afforded, engineers, attorneys, accountants,
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and other consultants and/or representatives of CBS free access in a reasonable
manner during normal business hours to the employees, offices, studios,
transmitter sites, equipment, records, and other documents pertaining to the
Stations and furnish or cause to be furnished CBS with all information
concerning the Stations' affairs as CBS may reasonably request, including but
not limited to applications and other documents filed with the Commission. For
purposes of the foregoing, records shall include, without limitation, any sales,
research, consulting, and ratings reports relating to the Stations.
7.4. CONFIDENTIALITY.
Each party hereby covenants and agrees that in the event the
transactions contemplated by this Agreement are not consummated for any reason
whatsoever, they will, upon request, return to the other party within ten (10)
days from the date of such request, all versions, including copies, of all
information furnished to that party by another party hereto or its
representatives or Affiliates, regardless of whether the same is marked
"confidential" or "proprietary," together with any and all notes, memoranda,
analyses, compilations, studies, or other documents (whether in hard copy or
electronic media) prepared by the receiving party, its directors, officers,
partners, employees, agents, or other representatives (including advisors,
attorneys, accountants, financial advisors, and potential financing sources)
which contain or otherwise reflect such information (the "Confidential
Information"). Each party hereby covenants and agrees to use reasonable efforts
to hold all Confidential Information in confidence and not to disclose, or cause
any representative, agent, or employee to disclose to any third party any
portion of the Confidential Information except as may be required by law or
judicial process, and not to use any portion of the Confidential Information for
its own benefit without the written consent of the providing party. Should a
party receive a request or be required by applicable law to disclose to a court
or other tribunal all or any part of the Confidential Information received from
another party hereto, Entercom and CBS confirm that each will adhere to the
terms and conditions set forth in paragraph 5 of the Confidentiality Agreement,
dated June 9, 1998, between Entercom and CBS. Nothing shall be deemed to be
Confidential Information that: (a) is or becomes generally available to the
public other than as a result of a disclosure by the receiving party or its
representatives; or (b) is or becomes available to the receiving party on a non-
confidential basis from a source rightfully in possession of the information and
which is under no legal, contractual or fiduciary obligation to keep it
confidential.
ARTICLE VIII.
CLOSING
8.1. CLOSING.
Unless otherwise agreed by the parties, the Closing shall take
place at the offices of Latham & Watkins, 1001 Pennsylvania Avenue, N.W., Suite
1300, Washington, D.C. 20004, at 10:00 a.m. on the Closing Date. The Closing
Date shall be the date selected by CBS on at least five (5) business days'
notice to Entercom, which date shall be within six (6) months after
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the satisfaction of the conditions to Closing set forth in Section 5.1, Section
5.2.2 and Section 5.3.1 hereof (the "Outside Closing Date"); provided that once
such conditions are satisfied, if Closing has not occurred prior to the date of
closing under the Boston I Agreement, then Closing will occur on the earlier of
five (5) business days after the closing under the Boston I Agreement or the
Outside Closing Date.
8.2. PRORATIONS.
Within ninety (90) days after Closing, an accounting for each
Station shall be made as follows:
8.2.1. All prepaid income, prepaid expenses, prepayments on any
Contracts and Leases assumed, accrued income, property taxes, and accrued
expenses, including without limitation any accrued expenses for Transferred
Employees (such as accrued vacation time) assumed by CBS up to the Adjustment
Time shall, except as otherwise expressly provided herein or in the Time
Brokerage Agreement, be adjusted and allocated between Entercom and CBS to
reflect the principle that all expenses and income arising from the operation of
the Station up through the Adjustment Time shall be for the account of Entercom,
and all expenses and income arising from the operation of the Station or portion
thereof acquired by CBS after the Adjustment Time shall be for the account of
CBS. Trade and Barter Agreements shall be subject to adjustment or proration
only to the extent provided in Section 4.1.18. Any appropriate proration
required to be made (i) pursuant to Leases referred to in Section 4.1.5, (ii)
pursuant to Contracts referred to in Section 4.1.6, (iii) pursuant to Section
6.1.4, and (iv) pursuant to Section 4.1.18 shall also be reflected in such
accounting. Any amount not paid when due shall bear interest at the rate of ten
percent (10%) per annum.
8.2.2. As soon as practicable following the Closing Date, and in any
event within ninety (90) days thereafter, or at such other time as the parties
agree, CBS shall deliver to Entercom CBS's certificate, setting forth as of the
Adjustment Time, all adjustments to be made as provided in Section 8.2.1 above
as to each Station. CBS shall provide Entercom or its representatives access to
copies of such portions of books and records Entercom may reasonably request
solely for purposes of verifying such adjustments. CBS's certificate shall be
final and conclusive unless objected to by Entercom in writing within thirty
(30) days after delivery. CBS and Entercom shall attempt jointly to reach
agreement as to the amount of the adjustments to be made hereunder within sixty
(60) days after receipt of such written objection, which agreement, if achieved,
shall be binding upon all parties to this Agreement and not subject to dispute
or review.
8.2.3. In the event of a disagreement between CBS and Entercom with
respect to the accounting to be made hereunder, the parties agree that a public
accounting firm chosen jointly by CBS and Entercom shall be the final arbiter of
such disagreement.
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8.2.4. Any amounts due for the adjustments provided for herein shall be
paid within ten (10) business days after final determination.
8.3. CLOSING DELIVERIES TO CBS.
At or before the Closing, Entercom shall deliver or cause to
be delivered to CBS the following items and documents in form reasonably
satisfactory to counsel for CBS and properly executed, unless CBS shall waive in
whole or in part in writing such delivery and then only to the extent of such
waiver:
8.3.1. Entercom shall deliver to CBS such Bills of Sale and assignments
and other instruments of transfer and conveyance, transferring to CBS the
Property to be sold, transferred or assigned hereunder and the rights and
interests under the Leases and Contracts being assigned to CBS hereunder, to the
extent such rights and interests under such leases and contracts have not
previously been assigned to and assumed by CBS under the Time Brokerage
Agreement.
8.3.2. Entercom shall deliver to CBS one or more Special Warranty Deeds
in recordable form transferring to CBS a fee simple interest in each parcel of
owned real property being conveyed to CBS hereunder.
8.3.3. Entercom shall deliver to CBS an assignment of all right, title
and interest of Entercom in and to the Authorizations.
8.3.4. Entercom shall deliver to CBS all keys to and actual possession
of all of the Assets, in the same condition as the same now are, except for
ordinary wear and tear thereof and except as permitted under the Agreement.
8.3.5. Entercom shall deliver to CBS certified copies of resolutions of
the Board of Directors of each Entercom entity, duly authorizing the execution,
delivery, and performance of this Agreement and all documents to be executed and
delivered by Entercom at the Closing, and thereafter.
8.3.6. Entercom shall deliver to CBS certificates signed by an
authorized officer to the effect (a) that no act or omission of Entercom or any
of its Affiliates, or state of facts contrary to the agreements,
representations, and warranties of such party contained herein has been taken or
has occurred and that said representations and warranties of such party, to the
extent they do not speak as of a specific time, are true and correct as of the
Closing Date, with the same effect as if made as of the time of Closing, except
to the extent otherwise permitted hereunder or to the extent such act, omission,
state of facts, untruth or inaccuracy would not have a material adverse effect
on CBS's continued operation of the Stations as currently operated and (b) that
all covenants and agreements contained herein of Entercom have been complied
with in all material respects.
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8.3.7. Entercom shall deliver to CBS the Required Consents relating to
the Leases and Contracts, to the extent not previously delivered under the Time
Brokerage Agreement.
8.3.8. Entercom shall deliver to CBS evidence of the release of all
liens and encumbrances on the Assets to be released at Closing.
8.3.9. Entercom shall deliver to CBS one or more opinions of counsel to
Entercom, dated the Closing Date, in form and substance reasonably satisfactory
to CBS.
8.4. CLOSING DELIVERIES TO ENTERCOM.
At or before the Closing, CBS or an Affiliate of CBS, as
appropriate, shall deliver to Entercom or cause to be delivered the following
items and documents in form reasonably satisfactory to counsel for Entercom and
properly executed, unless Entercom shall waive in whole or in part in writing
such delivery and then only to the extent of such waiver:
8.4.1. CBS shall pay to Entercom the Purchase Price by wire transfer of
immediately available funds.
8.4.2. CBS shall deliver to Entercom certified copies of resolutions of
the Board of Directors of each CBS entity duly authorizing the execution,
delivery, and performance of this Agreement and all documents to be executed and
delivered by such CBS entity at the Closing and thereafter.
8.4.3. CBS shall deliver to Entercom certificates signed by an
authorized officer of each CBS entity to the effect that no act or omission of
such CBS entity or state of facts contrary to the agreements, representations,
and warranties of CBS contained herein has been taken or has occurred and that
said representations and warranties of CBS to the extent they do not speak as of
a specific time are true and correct as of the Closing Date, with the same
effect as if made as of the time of Closing, and that all covenants and
agreements contained herein of CBS have been complied with.
8.4.4. CBS shall deliver to Entercom one or more agreements whereby CBS
assumes and agrees to pay when due any liabilities of Entercom relating to the
Stations specifically assumed by CBS hereunder, including without limitation
those liabilities accruing after the Adjustment Time with respect to those
Leases and Contracts being assumed by CBS hereunder, to the extent such rights
and interests under such liabilities have not previously been and assumed by CBS
under the Time Brokerage Agreement.
8.4.5. CBS shall deliver to Entercom one or more opinions of counsel to
CBS dated the Closing Date, in form and substance reasonably satisfactory to
Entercom.
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8.5. COVENANTS OF FURTHER ASSURANCES; AVAILABILITY OF RECORDS.
At and after the time of Closing, upon request, each party
shall take such action and deliver to the other party such further instruments
of assignment, conveyance, or transfer or other documents of further assurance
as may be reasonably necessary to evidence the full and effective transfer,
conveyance, and assignment of the Assets and possession thereof to the
respective parties, their successors and assigns, and to assure complete
performance of this Agreement in all respects. After the Closing, for a period
of three (3) years, upon request, Entercom shall provide CBS copies of or access
to records relating to the Stations that are needed by CBS for accounting, tax,
or other purposes.
8.6. RISK OF LOSS; DAMAGE TO PROPERTY.
The risk of loss or damage from fire, theft, storm or other
act beyond the control of Entercom to any of the Assets prior to Closing shall
be upon Entercom. If, at the time of Closing, the tangible property to be sold
hereunder shall have suffered such loss or damage to an extent that affects the
value thereof and Entercom shall not have repaired, replaced, or restored same
with property of like kind, quality, and value, CBS shall complete the purchase
and Closing, in which event it shall be entitled to a payment equal to the
greater of (a) the amount necessary to repair, replace, or restore such damaged
property with property of like kind, quality, and value or (b) the amount of any
and all insurance proceeds available to Entercom, if any, collectible by reason
of such loss or damage.
8.7. TAXES ON TRANSACTION.
All sales, purchase, transfer, use, or documentary taxes, if
any, payable by reason of this Agreement or any of the transactions contemplated
hereby or the sale, transfer, or delivery of any of the Assets hereunder,
whether or not imposed on a particular party, shall be paid and borne equally by
Entercom or CBS, either by payment thereof or by reimbursement to the other
party.
ARTICLE IX.
TERMINATION, DEFAULT AND INDEMNIFICATION
9.1. TERMINATION.
This Agreement may be terminated by a party hereto not then in
default hereunder upon written notice to the other parties upon occurrence of
any of the following: (i) the Closing has not occurred by the date that is one
year after the date of this Agreement (the "Upset Date"); (ii) the Commission
denies by Final Order or designates for hearing any of the Assignment
Applications or any portion thereof, (iii) by either party as provided in
Section 7.2; or (iv) any of the conditions set forth in Article V of this
Agreement are not waived by such party and such
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conditions shall not have been satisfied on or before the Upset Date, or shall
have become incapable of satisfaction. This Agreement may be terminated by CBS
as provided in Section 6.1.4, Section 6.1.5 and Section 6.6.3, provided CBS is
not then in default hereunder.
9.2. EFFECT OF TERMINATION.
The termination of this Agreement under Section 9.1 shall not
relieve any party of any liability for breach of this Agreement prior to the
date of termination.
9.3. REMEDIES.
Entercom recognizes that, in the event of a Default by
Entercom, monetary damages alone will not be adequate. Therefore, in the event
of a Default by Entercom, unless CBS is in Default, CBS shall be entitled, in
addition to indemnification pursuant to Section 9.4, to obtain specific
performance of the terms of this Agreement. In any action to enforce
specifically the performance of this Agreement under this Section 9.3, Entercom
shall waive the defense that there is another adequate remedy at law or equity
and agrees that CBS shall have the right to obtain specific performance of
Entercom's obligations under the terms of this Agreement without being required
to prove actual damages, post bond, or furnish other security.
9.4. INDEMNIFICATION.
9.4.1. BY ENTERCOM. Entercom shall indemnify, defend, and hold CBS and
its officers, directors, partners, employees, and Affiliates harmless from,
against, and with respect to any and all loss, damage, claim, obligation,
assessment, cost, liability, and expense (including, without limitation,
reasonable attorneys' fees and costs and expenses incurred in investigating,
preparing, defending against or prosecuting any litigation or claim, action,
suit, proceeding or demand) of any kind or character (a "Loss") (including
without limitation the loss of any of the Authorizations resulting from any
failure by the Commission to renew such Authorizations as a result of events
occurring prior to the Closing Date) incurred, suffered, sustained, or required
to be paid by any of them and resulting from, related to or arising out of:
(a) any breach of any of the covenants, representations or
warranties made by Entercom in or pursuant to this Agreement, or in any
agreement, document, or instrument executed and delivered pursuant hereto;
(b) any failure by Entercom to perform or observe, or to have
performed or observed, in full, any covenant, agreement, or condition to be
performed or observed by it pursuant to this Agreement or in any agreement,
document, or instrument executed and delivered by or on behalf of it pursuant
hereto;
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<PAGE> 34
(c) any and all obligations of Entercom, except for
obligations assumed or required to be assumed by CBS under the terms of this
Agreement or in the Time Brokerage Agreement;
(d) the operation or ownership of the Assets prior to the
Adjustment Time by Entercom and its Affiliates, except for obligations and
liabilities assumed by CBS under the Time Brokerage Agreement; or
(e) Closing by CBS or any of its Affiliates prior to the
grants of the Assignment Applications becoming Final Orders, if the failure of
the grants of the Assignment Applications to become Final Orders is attributable
to any issue raised regarding Entercom or any of its Affiliates. In addition to
the foregoing, in the event that Section 1031(a)(3) of the Code does not apply
to the relinquishment of the Assets (as defined in the Boston I Agreement) and
the acquisition of the Assets, solely due to the fact that Closing does not
occur for reasons unrelated to CBS or its Affiliates by a date that is no more
than 180 days after the date of closing under the Boston I Agreement, then
provided CBS is not in breach hereof, Entercom shall make CBS whole for the loss
sustained from the inapplicability of Section 1031(a)(3) of the Code to the
relinquishment of the Assets (as defined in the Boston Agreement) and the
acquisition of the Assets.
9.4.2. BY CBS. CBS shall indemnify, defend, and hold Entercom and its
officers, directors, partners, employees, and Affiliates harmless from, against
and with respect to any and all items of Loss incurred, suffered, sustained, or
required to be paid by any of them and resulting from, related to or arising out
of:
(a) any breach of any of the covenants, representations, or
warranties made by CBS in or pursuant to this Agreement, or in any agreement,
document, or instrument executed and delivered pursuant hereto;
(b) any failure by CBS to perform or observe, or to have
performed or observed, in full, any covenant, agreement, or condition to be
performed or observed by it pursuant to this Agreement or in any agreement,
document, or instrument executed and delivered by or on behalf of it pursuant
hereto; or
(c) CBS's operation or ownership of the Station Assets after
the Adjustment Time; or
(d) any obligations under any Contracts or Leases assumed by
CBS under Section 3.1 hereof.
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<PAGE> 35
9.4.3. NOTICE AND PROCEDURE IN CONNECTION WITH THIRD PARTY CLAIMS.
If any party has a claim for indemnification hereunder (such
party, an "Indemnitee") arising out of any claim or liability which is asserted
or threatened against it, or any action, suit or proceeding is commenced by any
third party against any Indemnitee which might result in any indemnification
obligations hereunder on behalf of any other party (such other party, an
"Indemnitor"), such Indemnitee shall, within twenty (20) business days from the
receipt of same, give written notice thereof to each such Indemnitor together
with a brief statement of the basis of the claim and a copy of any complaint or
other documents relating to such claim, provided, however, that failure to give
such notice within such twenty (20) business day period shall not affect the
liability of Indemnitor hereunder unless the failure to give such notice within
such period materially and adversely affects Indemnitor's ability to defend
against the claim giving rise to Indemnitee's claim for indemnification or to
cure the default giving rise to such claim. Within twenty (20) days from receipt
of such notice, the Indemnitor shall give the Indemnitee written notice as to
whether the Indemnitor elects to contest any such claim or liability; provided,
however, that during the interim, the Indemnitee shall be entitled to take
reasonable action (which shall not include settlement) with respect to such
claim which it deems necessary to protect against further damage or default with
respect thereto. If an Indemnitor elects to contest any such claim or liability,
it shall be at the cost and expense of the Indemnitor and using professionals
chosen by the Indemnitor. The Indemnitee may participate in the defense of any
claim or liability that an Indemnitor has elected to contest, but such
participation shall be at its own expense. If the Indemnitor does not elect to
assume control or otherwise participate in the defense of any third party claim,
it shall be bound by the results obtained by the Indemnitee with respect to such
claim, including any settlement, subject to the Indemnitor's right to contest
the underlying obligation to indemnify the Indemnitee.
9.4.4. EXCLUSIVITY.
Except as provided in Section 9.1 concerning termination of
this Agreement and Section 9.3 concerning the rights of CBS to specific
performance, subsequent to Closing the right to indemnification hereunder shall
be the exclusive remedy for all claims of damages of any party in connection
with any breach by any other party of its representations, warranties, or
covenants. Subsequent to Closing, the parties hereto agree that no party will be
entitled to consequential or punitive damages as a result of a breach hereof by
any party hereto.
9.4.5. LIMITATIONS.
Except as otherwise provided in this Article IX, any claim
asserted for damages or indemnification hereunder must be submitted to the
Indemnitor in writing within the time periods set forth in Section 11.3 of this
Agreement and any such claim not so asserted shall be waived and barred. No
party shall be entitled to indemnification hereunder unless the aggregate
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<PAGE> 36
amount of its claims for indemnification exceeds One Hundred Thousand Dollars
($100,000) per Station, in which event such party shall be indemnified for the
entire amount owed. This amount shall have no bearing on any determination as to
what constitutes "material" for purposes of this Agreement. No party shall be
entitled to indemnification hereunder for amount in the aggregate greater than
the Purchase Price.
ARTICLE X.
ASSET EXCHANGE
10.1. POSSIBLE ENTERCOM SECTION 1031 ASSET EXCHANGE.
Entercom may elect to effect the transfer and conveyance of
the Assets as part of a deferred like-kind exchange under Section 1031(a)(3) of
the Code in which the Assets are relinquished and other like-kind assets are
identified and acquired with the Purchase Price subsequent to the Closing.
Entercom may at any time at or prior to Closing notify CBS of its election to
effect a deferred like-kind exchange and assign its rights under this Agreement
to a "qualified intermediary" as defined in Treas. Reg.
Section 1.1031(k)-1(g)(4), subject to all of CBS's rights and obligations
hereunder, and shall promptly provide written notice of such assignment to all
parties hereto. In the event Entercom assigns its rights hereunder to a
"qualified intermediary," CBS shall acknowledge in writing the notification by
Entercom of the assignment to the "qualified intermediary" of its rights
hereunder, and CBS shall pay the Purchase Price at Closing to the "qualified
intermediary" rather than to Entercom, which payment shall discharge the
obligation of CBS to make payment for the Assets hereunder.
10.2. POSSIBLE CBS SECTION 1031 ASSET EXCHANGE.
CBS may elect to effect the acquisition of the Assets as part
of a deferred like-kind exchange under Section 1031(a)(3) of the Code, in lieu
of buying such assets hereunder. If CBS so elects, it shall provide notice to
Entercom of its election, and thereafter (i) may at any time at or prior to
Closing assign its rights under this Agreement to a "qualified intermediary" as
defined in Treas. Reg. Section 1.1031(k)-1(g)(4), subject to all of Entercom's
rights and obligations hereunder and (ii) shall promptly provide written notice
of such assignment to all parties hereto. If CBS has given notice of its
intention to effect the acquisition of the Assets as part of an exchange under
Section 1031 of the Code, Entercom shall (i) promptly provide CBS with written
acknowledgment of such notice and (ii) at Closing, accept payment for the Assets
from the "qualified intermediary" rather than from CBS, which payment shall
discharge the obligation of CBS to make payment for the Assets hereunder and
transfer, assign and convey the Assets to CBS or its designated Affiliates.
10.3. INDEPENDENT TRANSACTIONS.
The parties acknowledge and agree that the transactions
contemplated by this Agreement are not contractually interdependent or otherwise
mutually dependent in any way on
32
<PAGE> 37
or with the transactions contemplated by either the Boston I Agreement or the
Boston II Agreement. The parties further acknowledge that neither the Closing
nor any of the rights or obligations of the parties set forth herein are
dependent or conditional on the closing or failure to close the transactions
contemplated by either the Boston I Agreement or the Boston II Agreement, and
that neither the closing of the Boston I or the Boston II Agreement nor any of
the rights or obligations of the parties to such agreements are dependent or
conditional on the occurrence of the Closing or the failure of occurrence of the
Closing.
ARTICLE XI.
GENERAL PROVISIONS
11.1. EXPENSES OF THE PARTIES.
Except as otherwise specifically provided herein, all expenses
involved in the preparation, authorization, and consummation of this Agreement
including, without limitation, all fees and expenses of agents, representatives,
counsel, and accountants in connection therewith and in connection with
applications to the Commission hereunder, shall be borne solely by the party who
shall have incurred the same, and the other party shall have no liability in
respect thereof. The foregoing notwithstanding, the parties agree that any
filing fees of the Commission relating to the filing of the Assignment
Applications shall be divided equally between Entercom and CBS. The parties
agree that the Required Cure Expense shall not exceed One Million Dollars
($1,000,000.00).
11.2. BROKERS.
Each party hereto represents and warrants to the other parties
hereto that it has not incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents commissions or other like
payment in connection with this Agreement or the transactions contemplated
hereby for which the other parties will have any liability, and each party
hereto agrees to indemnify and hold the other parties hereto harmless against
and in respect of any such obligation or liability based in any way on any
agreement, arrangement, or understanding claimed to have been made by such party
with any third party.
11.3. SURVIVAL OF COVENANTS, REPRESENTATIONS, AND WARRANTIES.
The provisions hereof which by their terms are to be performed
and observed after the Closing Date, and the several representations,
warranties, indemnities, and agreements of the parties herein contained, shall
survive the Closing Date hereunder for a period of eighteen (18) months and
shall remain effective and unaltered or unimpaired for such period by any
investigation that may have been or may be made at any time prior to Closing by
or on behalf of any party, except that the representations concerning title,
ERISA, environmental matters, and taxes contained in Sections 4.1.8, 4.1.15,
4.1.19 (other than as provided in Section 6.1.4), and 4.1.24 shall survive until
ninety (90) days after the expiration of the applicable statutes of
33
<PAGE> 38
limitation, and the provisions of Sections 2.2 and Article X shall survive the
Closing without limitation.
11.4. CONFIDENTIALITY.
Each party agrees, except as otherwise required by law or the
rules of the New York Stock Exchange (the "NYSE"), until such time as this
Agreement is made public by filing with the Commission, that it will not
disclose to any third party the fact of or content of this agreement or the
possible exchange of the radio stations involved without the express prior
consent of the other parties. Should a party be required to disclose information
regarding the agreement prior to filing with the Commission because of a
requirement of law or a rule of the NYSE, it will advise the other parties with
reasonable advance notice in writing prior to disclosure.
11.5. AMENDMENT AND WAIVER.
This Agreement cannot be changed or terminated orally. Any
amendment or modification hereof must be in writing signed by the party against
whom enforcement is sought. No waiver of compliance with any provision or
condition hereof, and no consent provided for herein, shall be effective unless
evidenced by an instrument in writing duly executed by the party sought to be
charged with such waiver or consent.
11.6. EFFECT OF THIS AGREEMENT.
This Agreement and the Time Brokerage Agreement set forth the
entire understanding of the parties and supersedes any and all prior written or
oral agreements, arrangements, or understandings relating to the subject matter
hereof. No representation, promise or inducement has been made by either party
which is not embodied in this Agreement, and neither party shall be bound by, or
be liable for, any alleged representation, promise, inducement, or statement of
intention not embodied herein unless same shall have been made subsequent
hereto, shall be in writing, and shall be signed by the party to be charged
therewith. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns.
11.7. TERMS GENERALLY.
(a) Words in the singular shall be held to include the plural
and vice versa and words of one gender shall be held to include the other
genders as the context requires; (b) the terms "hereof," "herein," and
"herewith" or words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all Schedules hereto)
and not to any particular provision of this Agreement, and Article, Section,
Paragraph, and Schedule references are to be Articles, Sections, Paragraphs, and
Schedules to this Agreement unless
34
<PAGE> 39
otherwise specified; and (c) the word "or" shall not be exclusive, except where
the context otherwise requires.
11.8. HEADINGS.
The article or section headings of this Agreement are for
convenience of reference only and do not form a part of and do not in any way
modify, interpret, or construe the intention of the parties.
11.9. COUNTERPARTS.
This Agreement may be executed in one or more counterparts and
all such counterparts shall be construed as one and the same instrument.
Executed documents transmitted by telecopier shall be valid and binding.
11.10. GOVERNING LAW; JURISDICTION.
The construction and performance of this Agreement shall be
governed by the laws of the State of New York without reference to its conflict
of law rules. The parties hereto expressly waive and agree to waive any right to
a jury trial in any controversy or claim arising out of or relating to this
Agreement.
11.11. BULK SALES LAWS.
CBS and its Affiliates waive compliance by Entercom and its
Affiliates with the provisions of the "bulk sales" or similar laws of any state.
Entercom agrees to indemnify CBS and its Affiliates and hold them harmless from
any and all loss, cost, damages, and expenses (including but not limited to
reasonable attorney's fees) sustained by the indemnified parties as a result of
any failure of the indemnifying party to comply with any "bulk sales" or similar
laws.
11.12. ASSIGNMENT.
This Agreement and the rights and obligations hereunder may
not be assigned by any party hereto without the prior written consent of the
other parties hereto, which consent shall not be unreasonably withheld; provided
however, that (x) Entercom may make a collateral assignment of its rights
hereunder for the benefit of its senior lenders and (y) any party may assign all
or any part of this Agreement or the rights and obligations hereunder to an
Affiliate, provided that such assignment shall not relieve such party of its
obligations hereunder.
11.13. NOTICES.
Any notice, report, demand, waiver, or consent required or
permitted hereunder shall be in writing and shall be given by hand delivery, by
prepaid registered or certified mail,
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<PAGE> 40
with return receipt requested, by an established national overnight courier
providing proof of delivery for next business day delivery or by telecopy
addressed as follows:
If to Entercom: Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Attention: Mr. Joseph M. Field, President
Telecopier Number: 610-660-5641
with copies to: John C. Donlevie, Esq., Executive Vice President and
General Counsel
Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Telecopier Number: 610-660-5620
and
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, DC 20004
Attention: Joseph D. Sullivan, Esq.
Telecopier Number: 202-637-2201
If to CBS: CBS Radio
40 West 57th Street
14th Floor
New York, NY 10019
Attention: Mr. Mel Karmazin
Telecopier Number: 212-314-9229
with copies to: General Counsel
CBS Corporation
51 West 52nd Street
New York, NY 10019-6188
Telecopier Number: 212-975-2185
36
<PAGE> 41
and
Leventhal Senter & Lerman, P.L.L.C.
2000 K Street, N.W.
Suite 600
Washington, D.C. 20006
Attention: Steven A. Lerman, Esq.
Telecopier Number: 202-293-7783
The date of any such notice and service thereof shall be
deemed to be: (i) the day of delivery if hand delivered or delivered by
overnight courier; (ii) the day of delivery as indicated on the return receipt
if dispatched by mail, or (iii) the date of telecopy transmission as indicated
on the telecopier transmission report, provided that any telecopy transmission
shall not be effective unless a paper copy is sent by overnight courier on the
date of the telecopy transmission. Any party may change its address for the
purpose of notice by giving notice of such change in accordance with the
provisions of this Section.
11.14. ATTORNEYS' FEES.
In the event of a dispute between or among the parties hereto
arising out of or related to this Agreement or the interpretation or enforcement
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and expenses from the other party.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized corporate officers and their
respective corporate seals thereunto affixed on this the date first written
above.
ENTERCOM COMMUNICATIONS CORP.
By:_______________________________________
Title:____________________________________
CBS RADIO, INC.
By:_______________________________________
Title:____________________________________
37
<PAGE> 42
CBS RADIO LICENSE, INC.
By:_______________________________________
Title:____________________________________
38
<PAGE> 1
EXHIBIT 10.11
- --------------------------------------------------------------------------------
TIME BROKERAGE AGREEMENT
BY AND AMONG
CBS RADIO, INC.,
CBS RADIO LICENSE, INC.,
AND
ENTERCOM COMMUNICATIONS CORP.
DATED AS OF AUGUST 13, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF SCHEDULES AND EXHIBITS
SCHEDULE 1.1 Programming
SCHEDULE 1.2 Compensation
SCHEDULE 2.1 Programming Policy Statement
SCHEDULE 4.1 Time Sales Agreements and Contracts
(i)
<PAGE> 3
TABLE OF CONTENTS
PAGE
ARTICLE I. - SALE OF TIME......................................................1
Section 1.1. Broadcast of Programming..................................1
Section 1.2. Payment...................................................1
Section 1.3. Term......................................................1
ARTICLE II. - PROGRAMMING AND OPERATING STANDARDS AND PRACTICES................2
Section 2.1. Compliance with Standards.................................2
Section 2.2. Political Broadcasts......................................2
Section 2.3. Handling of Communications................................2
Section 2.4. Preemption................................................3
Section 2.5. Broadcasting Obligations of Licensee......................3
Section 2.6. "Payola" and "Plugola"....................................4
Section 2.7. Advertising and Programming...............................4
Section 2.8. Compliance with Laws......................................5
Section 2.9. Certifications............................................5
ARTICLE III. - RESPONSIBILITY FOR EMPLOYEES AND EXPENSES.......................5
Section 3.1. Time Broker's Employees...................................5
Section 3.2. Licensee's Employees......................................5
Section 3.3. Time Broker's Expenses....................................6
Section 3.4. Operating Expenses........................................6
Section 3.5. Time Broker's Insurance...................................6
ARTICLE IV. - ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS......................7
Section 4.1. Assignment................................................7
Section 4.2. Proration.................................................7
Section 4.3. Accounts Receivable.......................................8
ARTICLE V. - OPERATION OF STATION..............................................9
ARTICLE VI. - GRANT OF LICENSES................................................9
Section 6.1. License to Use Stations Facilities........................9
Section 6.2. License of Intellectual Property.........................10
(i)
<PAGE> 4
ARTICLE VII. - INDEMNIFICATION................................................10
Section 7.1. Indemnification Rights...................................10
Section 7.2. Procedures...............................................10
ARTICLE VIII. - DEFAULT.......................................................11
Section 8.1. Time Broker Events of Default............................11
Section 8.2. Licensee's Events of Default.............................12
Section 8.3. Cure Periods.............................................12
Section 8.4. Other Defaults...........................................13
ARTICLE IX. - TERMINATION.....................................................13
Section 9.1. Termination Upon Default.................................13
Section 9.2. Termination Upon Change in FCC Rules.....................13
Section 9.3. Certain Matters Upon Termination.........................13
ARTICLE X. - REMEDIES.........................................................14
ARTICLE XI. - CERTAIN REPRESENTATIONS AND WARRANTIES
OF THE PARTIES..................................................15
Section 11.1. Representations and Warranties of Time Broker............15
Section 11.2. Representations, Warranties and Covenants of
Operator and CRLI........................................16
ARTICLE XII. - MISCELLANEOUS..................................................17
Section 12.1. Modification and Waiver..................................17
Section 12.2. No Waiver; Remedies Cumulative...........................18
Section 12.3. Construction.............................................18
Section 12.4. Headings.................................................18
Section 12.5. Successors and Assigns...................................18
Section 12.6. Force Majeure............................................18
Section 12.7. Broker...................................................19
Section 12.8. Counterpart Signatures...................................19
Section 12.10. Entire Agreement.........................................20
Section 12.11. Severability.............................................21
Section 12.12. No Joint Venture.........................................21
Section 12.13. Damage to Stations.......................................21
Section 12.14. Noninterference..........................................21
(ii)
<PAGE> 5
Section 12.15. Regulatory Changes.......................................21
Section 12.16. Attorneys' Fees..........................................22
(iii)
<PAGE> 6
TIME BROKERAGE AGREEMENT
This Time Brokerage Agreement (this "Agreement") is made as of
the 13th day of August 1998, by and among CBS Radio, Inc., a Delaware
corporation ("Operator"), CBS Radio License, Inc., a Delaware Corporation
("CRLI") (Operator and CRLI are collectively referred to herein as "Licensee")
and Entercom Communications Corp., a Pennsylvania corporation ("Entercom" or
"Time Broker"). CRLI is the licensee of broadcast stations WEEI(AM) and
WRKO(AM), Boston, Massachusetts (collectively, the "Stations"). Concurrently
with the execution of this Agreement, Time Broker, Operator and CRLI are
entering into an Asset Purchase Agreement (the "Purchase Agreement") providing
for the purchase by Time Broker of the Stations, upon the terms and conditions
set forth therein. Time Broker and Licensee desire to enter into an agreement
providing for the sale of substantially all of the broadcast time of the
Stations to Time Broker, subject to and in compliance with the rules and
policies of the Federal Communications Commission (the "FCC").
Accordingly, in consideration of the foregoing and of the
mutual promises, covenants, and conditions set forth below, the parties agree as
follows:
ARTICLE I.
SALE OF TIME
Section 1.1. Broadcast of Programming.
Effective as of five (5) business days after the expiration or
early termination of any waiting period applicable to the transfer of the
Stations to Time Broker under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") (the "Commencement Date"), Licensee shall
broadcast on the Stations, or cause to be broadcast on the Stations, programs
which are presented to it by Time Broker as described in greater detail on
Schedule 1.1 (the "Programming").
Section 1.2. Payment.
Time Broker shall pay Licensee for broadcast of the
Programming the amounts set forth in Schedule 1.2 (the "Monthly Payment"),
subject to adjustment as set forth in Section 2.4 below. All payments shall be
made by wire transfer of immediately-available funds by the last business day of
each calendar month, in arrears, to which such payment pertains. Any amount not
paid when due shall bear interest at the rate of ten percent (10%) per annum.
Section 1.3. Term.
This Agreement shall commence on the Commencement Date and
shall terminate on the earlier of (i) 12:01 a.m. on the Closing Date under the
Purchase Agreement, (ii) the date
<PAGE> 7
the Purchase Agreement is terminated, or (iii) the date this Agreement is
terminated pursuant to Section 9.1 hereof.
ARTICLE II.
PROGRAMMING AND OPERATING STANDARDS AND PRACTICES
Section 2.1. Compliance with Standards.
All Programming delivered by Time Broker and all programming
supplied by Licensee during the term of this Agreement shall be in accordance
with applicable statutes, FCC requirements and the programming policies set
forth on Schedule 2.1. Licensee reserves the right to refuse to broadcast any
Programming containing matter which the Licensee believes is unsuitable or not
consistent with the needs and interests of its service area or may be violative
of any right of any third party, or which may constitute a "personal attack" as
that term is and has been defined by the FCC or which Licensee reasonably
determines is, or in the reasonable opinion of Licensee may be deemed to be,
indecent (and not broadcast during the safe harbor for indecent programming
established by the FCC) or obscene by the FCC or any court or other regulatory
body with authority over Licensee or the Stations. If Time Broker does not
adhere to the foregoing requirements, Licensee may suspend or cancel any
specific program not so in compliance, without any reduction or offset in the
payments due Licensee under this Agreement.
Section 2.2. Political Broadcasts.
Time Broker shall maintain and deliver to Licensee all records
and information required by the FCC to be placed in the public inspection files
of the Stations pertaining to the broadcast of political programming and
advertisements, in accordance with the provisions of Sections 73.1940 and
73.3526 of the FCC's rules, and agrees to broadcast sponsored programming
addressing political issues or controversial subjects of public importance, in
accordance with the provisions of Section 73.1212 of the FCC's rules. Time
Broker shall consult and cooperate with Licensee and adhere to all applicable
statutes and the rules, regulations and policies of the FCC, as announced from
time to time, with respect to the carriage of political advertisements and
programming (including, without limitation, the rights of candidates and, as
appropriate, others to "equal opportunities" and the carriage of contrasting
points of view as mandated by any "fairness" rule with respect to such
"issue-oriented" advertising or programming as may be broadcast) and the charges
permitted therefor. Time Broker shall promptly provide to Licensee such
documentation relating to such programming as Licensee is required to maintain
in its public inspection files or as Licensee shall reasonably request. Licensee
shall be responsible for the maintenance of the public inspection files of the
Stations.
Section 2.3. Handling of Communications.
Time Broker shall cooperate with Licensee in promptly
responding to all mail, cables, telegrams or telephone calls directed to the
Stations in connection with the Programming
2
<PAGE> 8
provided by Time Broker or any other matter relevant to its responsibilities
hereunder. Promptly upon receipt, Time Broker shall provide copies of all such
correspondence to Licensee. Time Broker shall promptly advise Licensee of any
public or FCC complaint or inquiry known to Time Broker concerning such
Programming, and shall provide Licensee with copies of any letters to Time
Broker from the public, including complaints concerning such Programming. Upon
Licensee's request, Time Broker shall broadcast material responsive to such
complaints and inquiries. Notwithstanding the foregoing, Licensee shall handle
all matters or inquiries relating to FCC complaints and any other matters
required to be handled by Licensee under the rules and regulations of the FCC.
Section 2.4. Preemption.
Licensee may, from time to time, preempt portions of the
Programming to broadcast emergency information or programs it deems would better
serve the public interest. Time Broker shall be notified at least one week in
advance of any preemption of any of the Programming for the purpose of
broadcasting programs Licensee deems necessary to serve the public interest
unless such advance notice is impossible or impractical, in which case Licensee
shall notify Time Broker promptly upon making such determination. In the event
of any such preemption, Time Broker shall be entitled to full reimbursement of
damages suffered as a result of such preemption, except in the case of
preemption to cover breaking news or to broadcast emergency information.
Licensee represents and covenants that preemption pursuant to this Section 2.4
shall only occur to the extent Licensee deems necessary to carry out its
obligations as an FCC licensee, and expressly agrees that its right of
preemption shall not be exercised in an arbitrary manner or for the commercial
advantage of Licensee or others.
Section 2.5. Broadcasting Obligations of Licensee.
During the term of this Agreement, except as set forth in
Sections 2.1 and 2.4, Licensee will broadcast the Programming in its entirety
(including commercials), without interruption, deletion or addition of any kind,
except as set forth below:
Licensee may temporarily refrain from broadcasting the
Programming between the hours of 12:30 a.m. and 5:30 a.m. (or at such other time
in the event that weather conditions or contractual arrangements relating to
transmitter sites dealing with the exposure of humans to RF radiation so
require) in order to perform normal, customary and routine maintenance on the
Stations' transmitting facilities; provided that Licensee shall provide written
notice to Time Broker of its intent to refrain from broadcasting the Programming
at least forty-eight (48) hours in advance, except when an emergency requires
such suspension, and provided further that Licensee shall use its best efforts
to minimize the frequency and duration of such interruptions:
(a) Licensee may temporarily cease broadcasting the
Programming as a result of a natural disaster, act of public enemy, act
of God or other event beyond Licensee's control; provided that in any
such case, Licensee
3
<PAGE> 9
will act expediently and use its best efforts to resume the broadcast
of the Programming as quickly as the applicable circumstances will
allow; and
(b) Licensee may temporarily refrain from
broadcasting the Programming on the Stations as a result of a technical
problem with the Stations' transmitting equipment which is beyond
Licensee's control and which is not directly or indirectly the result
of any act or omission of Licensee or any of its employees or agents;
provided that in such case, Licensee will act expediently and use its
best efforts to resume the broadcast of the Programming as quickly as
the applicable circumstances will allow.
Section 2.6. "Payola" and "Plugola".
Time Broker agrees that it will not accept any gift, gratuity
or other consideration, including, but not limited to, a commission, discount,
bonus, material supplies or other merchandise, services or labor (collectively,
the "Consideration"), directly or indirectly, from any person or company for the
playing of records, the presentation of any programming or the broadcast of any
commercial announcement over the Stations unless the payor is identified in the
program for which Consideration was provided as having paid for or furnished
such Consideration, in accordance with the Communications Act of 1934, as
amended (the "Communications Act") and the FCC requirements. It is further
understood and agreed that no commercial message, plugs, or undue reference
shall be made in programming presented over the Stations to any business
venture, profit-making activity or other interest (other than non-commercial
announcements for bona fide charities, church activities or other public service
activities) unless the payor is identified in the program for which
Consideration was provided as having paid for or furnished such Consideration,
in accordance with the Communications Act and the FCC requirements. In addition,
Time Broker agrees that it will take steps, including the continuation of
Licensee's system for periodic execution of affidavits, reasonably designed to
assure that it, its employees and agents comply with this Section 2.7.
Section 2.7. Advertising and Programming.
Beginning with the Commencement Date, Time Broker shall be
solely responsible for any expenses incurred in connection with and shall be
entitled to all revenue from the sale of advertising or program time on the
Stations. Except as otherwise provided herein, Time Broker does not assume any
obligation of Licensee under any contract or advertising arrangement entered
into by Licensee on or after the Commencement Date. Time Broker will advise
Licensee of its lowest unit charge for political advertising, and Licensee shall
not do anything that would lower Time Broker's lowest unit charge.
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Section 2.8. Compliance with Laws.
At all times during the term of this Agreement, Time Broker
and Licensee shall comply in all material respects with all applicable federal,
state and local laws, rules and regulations, including the use of FCC-licensed
operators where such are required.
Section 2.9. Certifications.
Pursuant to Section 73.3555(a)(3)(ii) of the FCC's rules,
Licensee certifies that it maintains ultimate control over the Stations'
facilities, including specifically control over station finances, personnel and
programming, and Time Broker certifies that this Agreement complies with the
provisions of Sections 73.3555 of the FCC's rules.
ARTICLE III.
RESPONSIBILITY FOR EMPLOYEES AND EXPENSES
Section 3.1. Time Broker's Employees.
(a) Time Broker shall employ and be responsible for
the payment of salaries, taxes, insurance and all other costs related
to all personnel used in the production of the Programming. Time Broker
will not incur any liability on account of Licensee's employees arising
and accruing prior to the Commencement Date including, without
limitation, any such liability on account of unemployment insurance
contributions, termination and severance payments, accrued sick leave
or accrued vacation.
(b) Time Broker's and Licensee's obligations with
regard to the hiring by Time Broker of Licensee's employees at the
Stations shall be as set forth in Section 3.2.2 and Section 6.5.1 of
the Purchase Agreement, except as provided herein. As of the
Commencement Date, Licensee shall terminate all of its employees to
whom Time Broker will extend offers of employment, except for those
personnel necessary to fulfill Licensee's obligations under the
Communications Act, the rules of the FCC and other applicable laws and
Non-Continuing Employees (as defined in the Purchase Agreement), if
any. Time Broker shall offer employment to such terminated employees of
Licensee as provided in Section 6.5.1 of the Purchase Agreement.
Section 3.2. Licensee's Employees.
Licensee shall employ and be responsible for the payment of
salaries, employment taxes, insurance and all other costs related to the
personnel necessary to fulfill its obligations as Licensee and to transmit the
Programming. Time Broker shall have no authority and shall not
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supervise persons in the employ of Licensee after the Commencement Date.
Licensee acknowledges that its employees may have access to certain confidential
information of Time Broker. Licensee shall, therefore, inform its employees of
the confidential nature of such information and require that each such employee
keep such information confidential.
Section 3.3. Time Broker's Expenses.
Time Broker shall pay for all costs associated with the
production and delivery of the Programming, including but not limited to (i) all
ASCAP, BMI, SESAC and other copyright fees, (ii) any expenses incurred in
connection with its sale of advertising time hereunder (including without
limitation sales commissions) in connection with the Programming, (iii) the
salaries, employment taxes, insurance and related costs for all personnel used
in the production of the Programming and all sales personnel (including
salespeople, traffic personnel, and programming staff), and (iv) maintenance,
repairs and capital expense (to the extent Licensee is not covered by insurance)
of the Stations' studio equipment; provided however, that if this Agreement is
terminated other than through closing of the Purchase Agreement, Time Broker
will be reimbursed for any capital expenditures made during the term of this
Agreement.
Section 3.4. Operating Expenses.
Except as provided in Section 3.3, Licensee shall be
responsible for the payment when due of all fees and expenses relating to
operation and maintenance of the Stations to the extent necessary for Licensee
to maintain the licensed transmitting capability of the Stations and to fulfill
its obligations as an FCC Licensee, including, without limitation, salaries,
benefits and similar expenses for Licensee's employees, Licensee's federal,
state and local taxes, rent, utilities (excluding telephone), maintenance and
repairs at the Stations' transmitter sites, any capital expense at the Stations'
transmitter and studio sites, insurance on the Stations' equipment, insurance
deductibles on claims on the Stations' equipment, and ad valorem property taxes.
Section 3.5. Time Broker's Insurance.
At all times while this Agreement remains in effect, Time
Broker shall maintain Broadcaster's Liability Insurance with coverage of at
least One Million Dollars ($1,000,000.00) per occurrence, Workers Compensation
insurance and Commercial General Liability insurance with a combined single
limit amount of Five Million Dollars ($5,000,000.00) with insurance companies
that have a Best rating of A or better. Time Broker shall deliver certificates
of insurance periodically to Licensee evidencing that such insurance remains in
effect and such policies shall name Licensee as an additional insured.
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ARTICLE IV.
ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS
Section 4.1. Assignment.
On the Commencement Date, Licensee shall assign to Time Broker
title to all vehicles that are part of the Property (as defined in the Purchase
Agreement) and all Time Sales Agreements, Trade Agreements and Barter Agreements
(as such agreements are defined in the Purchase Agreement), together with those
contracts and other agreements identified on Schedule 4.1 (collectively, the
"Contracts"). Time Broker shall, on and as of the Commencement Date, assume and
become fully liable and responsible for all liabilities and obligations of
Licensee accruing after the Commencement Date under the Contracts. Except as set
forth in the Purchase Agreement, Licensee has provided Time Broker with true and
complete copies, including amendments, of the Contracts. The Contracts are
freely assignable, or, if consent of the other contracting party to the
assignment is required, Licensee shall use its reasonable best efforts to obtain
such consent as promptly as practicable; provided that CBS shall not be
obligated to pay money to any other contracting party to obtain any such
consent, other than reasonable expenses of the party for any legal documentation
related to the assignment of the Contract in question. If Licensee is unable to
obtain any consent necessary to permit the valid assignment of a Contract,
Licensee shall act as Time Broker's agent in connection with such Contract and
the parties shall cooperate to cause Time Broker to receive the benefit of the
Contract in exchange for performance by Time Broker of all of Licensee's
obligations under such Contract (including but not limited to the payment to
Licensee of all amounts due under the Contract on or after the Commencement Date
for services provided by Licensee).
Section 4.2. Proration.
All expenses and income arising under the Contracts shall be
prorated between Licensee and Time Broker as of the Commencement Date in a
manner such that the costs and benefits thereunder through the date before the
Commencement Date shall be for the account of Licensee and, thereafter, during
the term of this Agreement, for the account of Time Broker. Such proration shall
include an adjustment to the extent that the excess of the value of unfulfilled
obligations under Trade Agreements and Barter Agreements (as defined in the
Purchase Agreement), including any "time bank" provisions thereof, over the
value of consideration to be received by the Stations (in each case determined
as of the Commencement Date) (the "Net Negative Trade Balance") exceeds Fifty
Thousand Dollars ($50,000.00) The total value of all unfulfilled obligations in
respect of Trade Agreements and Barter Agreements to be assumed by Entercom,
whether or not the Stations have received consideration therefor, shall not be
in excess of One Million Four Hundred Thousand Dollars ($1,400,000.00) as of the
Closing Date. It is agreed and understood that the proration required hereby
shall include an adjustment for any accrued but unpaid vacation of Licensee's
employees that are hired by Time Broker pursuant to the provisions of Section
3.1(b) hereof. It is further agreed and understood that such proration shall not
include an adjustment for any termination or severance payments or benefits
obligations
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that Licensee is required to pay as a result of the termination of its employees
pursuant to Section 3.1(b) or any sick leave or other similar benefit, and that
Time Broker shall not be responsible for any such termination or severance
payments or benefits obligations except for those incurred on account of
employees hired by Time Broker on or after the Commencement Date pursuant to
Time Broker's severance policy, if any, after the Commencement Date. Such
prorations shall be completed and any necessary payments on account of such
prorations paid within sixty (60) days of the Commencement Date. If any
disagreement with respect to the proration of such income and expenses cannot be
resolved by the parties, Licensee and Time Broker will select a certified public
accountant knowledgeable in the broadcast industry to resolve the dispute. The
parties will use their best efforts in good faith to cause to occur as
expeditiously as possible the appointment of the certified public accountant,
and once appointed, the resolution of the dispute. The resolution of such
accountant shall be binding on the parties and subject to judicial enforcement.
Payment of the cost of the accountant shall be shared equally between Time
Broker and Licensee.
Section 4.3. Accounts Receivable.
All cash accounts receivable for broadcasts on the Stations
which occur prior to the Commencement Date (the "Accounts Receivable") shall
belong to Licensee and for broadcasts which occur thereafter shall belong to
Time Broker. Within ten (10) days following the Commencement Date, Licensee
shall deliver to Time Broker a schedule of Cash Accounts Receivable for the
Stations as of the Commencement Date (the "Schedule of Accounts Receivable").
Time Broker agrees to collect for Licensee its Accounts Receivable as shown on
the Schedule of Accounts Receivable delivered by Licensee for a period of one
hundred fifty (150) days following the Commencement Date. Licensee will provide
Time Broker a power of attorney or other required authorization for the limited
purpose of allowing Time Broker to endorse and deposit checks and other
instruments received in payment of such Accounts Receivable. All payments
received by Time Broker from any customer whose name appears in the Schedule of
Accounts Receivable and who is also a customer of Time Broker shall be credited
as payment of the account or invoice designated by such customer. In the absence
of any such designation by the customer, payments shall be first credited to the
oldest invoice which is not disputed by said customer. Time Broker shall keep
accurate records of the payment received by it on such Accounts Receivable and
Licensee shall have access at reasonable times to Time Broker's records to
verify such status of the Accounts Receivable. Time Broker shall remit to
Licensee on a weekly basis, one week in arrears, amounts previously collected by
Time Broker on such Accounts Receivable, along with a written accounting of
same, including without limitation, to the extent Licensee's traffic and billing
system can produce same, a detailed open Accounts Receivable report reflecting
payments remitted therewith. Any Accounts Receivable that have not been
collected within such one hundred fifty (150) day period shall be returned to
Licensee, together with all records in connection therewith, including without
limitation, to the extent Licensee's traffic and billing system can produce
same, a detailed open Accounts Receivable report reflecting payments remitted
therewith, whereupon Licensee may pursue collection thereof in such manner as
it, in its sole discretion, may determine. Time Broker shall
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not have the right to compromise, settle or adjust the amounts of any such
Accounts Receivable without Licensee's prior written consent. Except to remit
collected Accounts Receivable in accordance herewith, Time Broker shall have no
liability or obligation to Licensee with respect to the collection of its
accounts and shall not be obligated to take any action to collect such accounts.
ARTICLE V.
OPERATION OF STATION
Notwithstanding any provision of this Agreement to the
contrary, Licensee shall retain full authority and power with respect to the
management and operation of the Stations during the term of this Agreement. The
parties agree and acknowledge that Licensee's continued control of the Stations
and their premises is an essential element of the continuing validity and
legality of this Agreement. Accordingly, Licensee shall employ the General
Manager of the Stations and such other personnel as Licensee determines may be
necessary to fulfill its obligations as a licensee under the Communications Act
and its obligations in accordance with Section 3.2 hereof. Licensee shall retain
full authority and control over the policies, programming and operations of the
Stations, including, without limitation, the decision whether to preempt
Programming in accordance with Section 2.4 hereof. Licensee shall have ultimate
responsibility to effectuate compliance with the Communications Act and with FCC
rules, regulations and policies. In no event shall Time Broker or its employees
represent, depict, describe or portray Time Broker as the licensee of the
Stations.
ARTICLE VI.
GRANT OF LICENSES
Section 6.1. License to Use Stations Facilities.
Effective as of the Commencement Date, Licensee grants Time
Broker a license to access and use all of the Stations' studio and office space
and other facilities ("Stations Facilities") and all equipment and furnishings
contained therein ("Stations Equipment") in the production and broadcasting of
the Programming and sales and administration relating thereto, in accordance
with the terms set forth in this Section 6 (the "Time Broker License"). The Time
Broker License shall have a term coterminous with this Agreement. Time Broker
shall not remove from the Stations Facilities or modify any Stations Equipment
in the Stations Facilities owned by or leased or licensed to Licensee without
Licensee's prior written consent, such consent not to be unreasonably withheld.
Licensee shall not license the use of the Stations Facilities to any other party
during the term of the Time Broker License; and Time Broker's use of the
Stations Facilities shall be exclusive except for Licensee's right to use such
facilities as it deems appropriate in connection with the satisfaction of its
obligations as the Licensee of the Stations, including the use of such
facilities and adequate office space for the employees of Licensee that are
required for Licensee to comply with its obligations under Section 3.2 and 5
hereof. Time Broker shall use due care in the use of any property of Licensee.
Time Broker shall
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indemnify Licensee for any damage (normal wear and tear excepted) to Licensee's
property caused by Time Broker or any employee, contractor, agent or guest of
Time Broker.
Section 6.2. License of Intellectual Property.
Effective as of the Commencement Date, Licensee licenses to
Time Broker the exclusive right to use (or, to the extent Licensee does not hold
exclusive rights, the non-exclusive right to use) all intellectual property
owned by or licensed to Licensee and used solely in the operation of the
Stations (including, but not limited to, logos, jingles, promotional materials,
call signs and goodwill) (the "IP License"). In the event of termination of this
Agreement, the IP License shall terminate; provided, however, that Licensee
shall own all trademarks, service marks, trade names, characters, formats,
jingles, promotional materials, logos and positioning statements which Time
Broker develops for the Programming during the term of this Agreement.
ARTICLE VII.
INDEMNIFICATION
Section 7.1. Indemnification Rights.
Each party will indemnify and hold harmless the other party,
and the directors, officers, partners, employees, agents and affiliates of such
other party, from and against any and all liability, including without
limitation reasonable attorneys' fees arising out of or incident to (i) any
breach by such party of a representation, warranty or covenant made herein, (ii)
the programming produced or furnished by such party hereunder, or (iii) the
conduct of such party, its employees, contractors or agents (including
negligence) in performing its or their obligations hereunder. Without limiting
the generality of the foregoing, each party will indemnify and hold harmless the
other party, and the directors, officers, partners, employees, agents and
affiliates of such other party, from and against any and all liability for
libel, slander, infringement of trademarks, trade names, or program titles,
violation of rights of privacy, and infringement of copyrights and proprietary
rights resulting from the programming produced or furnished by it hereunder. The
parties' indemnification obligations hereunder shall survive any termination or
expiration of this Agreement.
Section 7.2. Procedures.
If any party has a claim for indemnification hereunder (such
party, an "Indemnitee") arising out of any claim or liability which is asserted
or threatened against it, or any action, suit or proceeding is commenced by any
third party against any Indemnitee which might result in any indemnification
obligations hereunder on behalf of any other party (such other party, an
"Indemnitor"), such Indemnitee shall, within twenty (20) business days from the
receipt of same, give written notice thereof to each such Indemnitor together
with a brief statement of the basis of the claim and a copy of any complaint or
other documents relating to such claim, provided, however, that failure to give
such notice within such twenty (20) business
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day period shall not affect the liability of Indemnitor hereunder unless the
failure to give such notice within such period materially and adversely affects
Indemnitor's ability to defend against the claim giving rise to Indemnitee's
claim for indemnification or to cure the default giving rise to such claim.
Within twenty (20) days from receipt of such notice, the Indemnitor shall give
the Indemnitee written notice as to whether the Indemnitor elects to contest any
such claim or liability; provided, however, that during the interim, the
Indemnitee shall be entitled to take reasonable action (which shall not include
settlement) with respect to such claim which it deems necessary to protect
against further damage or default with respect thereto. If an Indemnitor elects
to contest any such claim or liability, it shall be at the cost and expense of
the Indemnitor and using professionals chosen by the Indemnitor. The Indemnitee
may participate in the defense of any claim or liability that an Indemnitor has
elected to contest, but such participation shall be at its own expense. If the
Indemnitor does not elect to assume control or otherwise participate in the
defense of any third party claim, it shall be bound by the results obtained by
the Indemnitee with respect to such claim.
ARTICLE VIII.
DEFAULT
Section 8.1. Time Broker Events of Default.
The occurrence of any of the following, after the expiration
of the applicable cure periods, if any, will be deemed to be an Event of Default
by Time Broker under this Agreement: (a) Time Broker's failure to timely pay any
of the Monthly Payment provided for in Section 1.2 or other payments required
hereunder; (b) except as otherwise provided for in this Agreement, the failure
of Time Broker to supply the Programming; (c) any termination of this Agreement
by Time Broker other than as permitted in Section 9.1; or (d) the occurrence of
any of the following which arises out of, relates to or is attributable to the
acts or omissions of Time Broker:
(i) the issuance by the FCC of a Show Cause
Order designating any of the Stations' FCC authorizations for
revocation;
(ii) the issuance by the FCC of an order
designating for an evidentiary hearing the Stations' applications for
renewal of the FCC authorizations;
(iii) the issuance by the FCC of an order
designating for an evidentiary hearing an application for the
assignment of the Stations' FCC authorizations to Time Broker;
(iv) breach of any covenant of Time Broker
which would reasonably be expected to lead or to the revocation or
non-renewal of the FCC authorizations of any of the Stations; or
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(v) a continuing, uncured material breach of
any covenant of Time Broker.
Section 8.2. Licensee's Events of Default.
The occurrence of any of the following, after the expiration
of the applicable cure periods, if any, will be deemed to be an Event of Default
by Licensee under this Agreement: (a) except as otherwise provided for in this
Agreement, the failure of Licensee to broadcast the Programming; (b) any
termination of this Agreement by Licensee other than as permitted in Section
9.1; (c) the issuance by the FCC of an order designating for an evidentiary
hearing an application for the assignment of the Stations' FCC authorizations to
Time Broker which arises out of, relates to or is attributable to the acts or
omissions of Licensee but excluding issues which are based upon Time Broker's
conduct hereunder for which Licensee may be held responsible; or (d) a
continuing, uncured material breach of any covenant of the Licensee.
Section 8.3. Cure Periods.
The cure periods before any event listed in Sections 8.1 or
8.2 shall become an Event of Default are as follows:
(a) Payment by Time Broker. The Monthly Payment or
other payments required hereunder to be paid to Licensee must be
received by Licensee within five (5) days after Licensee gives written
notice of non-payment to Time Broker.
(b) Certain Matters. There shall be no cure period
for (i) the matters relating to the FCC set forth in Sections 8.1(d) or
8.2(c) hereof, (ii) a termination by Time Broker described in Section
8.1(c); or (iii) a termination by Licensee described in Section 8.2(b)
hereof.
(c) Programs and Broadcast Matters. With respect to
Time Broker's failure to provide the Programming referred to in Section
8.1(b) hereof or Licensee's failure to broadcast the Programming
referred to in Section 8.2(a) hereof, the period allowed for cure shall
be three business days from the giving of written notice of such
failure to the defaulting party by the non-defaulting party.
(d) Other Matters. With respect to all matters
capable of being cured other than those described in Sections 8.3(a),
8.3(b) or 8.3(c) above, the cure period shall be ten (10) days after
written notice to the defaulting party is given by the non-defaulting
party or, with respect to matters that through the exercise of
reasonable diligence cannot be cured within such ten (10) day period,
such longer period not to exceed ninety (90) days as is reasonably
necessary to effect such cure through the exercise of reasonable
diligence.
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Section 8.4. Other Defaults.
For any other breach of a representation, warranty or covenant
made herein that is not listed in Sections 8.1 or 8.2, a party's sole remedy
shall be indemnification pursuant to Article VII hereof.
ARTICLE IX.
TERMINATION
This Agreement shall automatically terminate upon the
expiration of the term of this Agreement as set forth in Section 1.3. In
addition, this Agreement shall terminate as provided below.
Section 9.1. Termination Upon Default.
In addition to other remedies available at law or equity, this
Agreement may be terminated by either Licensee or Time Broker by written notice
to the other, specifying an effective date of termination which is not less than
seven (7) days nor more than ninety (90) days from the date such notice is
given, if the party seeking to terminate is not then in material default or
breach hereof, upon an uncured Event of Default. In the event that the
non-defaulting party does not exercise such right of termination by giving such
written notice within sixty (60) days of the occurrence of an uncured Event of
Default, then the Event of Default giving rise to such right of termination
shall be deemed waived and the Agreement shall continue in full force and
effect.
Section 9.2. Termination Upon Change in FCC Rules.
In addition to other remedies available at law or equity, this
Agreement may be terminated by either Licensee or Time Broker by written notice
to the other, specifying an effective date of termination which is not less than
seven (7) days nor more than thirty (30) days from the date such notice is
given, in the event of a change in FCC rules, policies, or precedent that would
cause this Agreement to be in violation thereof and such change is final, in
effect, and has not been stayed, and the parties have been unable, after
negotiating in good faith for at least thirty (30) days, to modify this
Agreement to comply with the change in FCC rules, policies, or precedent.
Section 9.3. Certain Matters Upon Termination.
(a) Upon any termination of this Agreement, Licensee
shall have no further obligation to provide to Time Broker any
broadcast time or broadcast transmission facilities and Time Broker
shall have no further obligations to make any payments to Licensee
under Section 1.2 hereof. Upon any termination, Time Broker shall be
responsible for all debts and obligations of
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Time Broker to third parties based upon the purchase of air time and
use of Licensee's transmission facilities including, without
limitation, accounts payable, barter agreements and unaired
advertisements, but not for Licensee's federal, state and local income
and business franchise tax liabilities or taxes levied upon Licensee's
personal property. Notwithstanding anything herein to the contrary, to
the extent that any invoice, bill or statement submitted to Licensee
after the termination of this Agreement or any payment made by Time
Broker prior to the termination of this Agreement relates to expenses
incurred in operating the Stations, for periods both before and after
the termination of this Agreement, such expenses shall be prorated
between Licensee and Time Broker in accordance with the principle that
Time Broker shall be responsible for expenses allocable to the period
prior to the termination of this Agreement and Licensee shall be
responsible for expenses allocable to the period on and after the
termination of this Agreement. Such proration shall include an
adjustment for Time Broker's Trade Agreements only to the extent that
Time Broker's Net Negative Trade Balance exceeds Fifty Thousand Dollars
($50,000.00). Each party agrees to reimburse the other party for
expenses paid by the other party to the extent appropriate to implement
the proration of expenses pursuant to the preceding sentence.
(b) If this Agreement terminates other than as a
result of the Closing (as defined in the Purchase Agreement), Time
Broker shall (i) assign to Licensee and Licensee shall assume all
Contracts (including those employment contracts assumed by Time Broker
pursuant to this Agreement) and all renewals, replacements or other
contracts entered in the ordinary course of business relating to the
Stations between the Commencement Date and the date of termination of
this Agreement ("Supplemental Contracts") in effect on the date of such
termination or expiration; (ii) assign to Licensee title to vehicles
assigned to Time Broker under Section 4.1; and (iii) be responsible for
only those obligations under the Contracts and Supplemental Contracts
arising on or after the Commencement Date and prior to the termination
of this Agreement.
(c) Notwithstanding anything in Section 7.1 to the
contrary, no expiration or termination of this Agreement shall
terminate the obligation of each party to indemnify the other for
claims under Section 7 hereof or limit or impair any party's rights to
receive payments due and owing hereunder on or before the date of such
termination.
ARTICLE X.
REMEDIES
In addition to a party's rights of termination hereunder (and
in addition to any other remedies available to it or provided under law), in the
event of an uncured Event of Default
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with respect to either party, the other may seek specific performance of this
Agreement, in which case the defaulting party shall waive the defense in any
such suit that the other party has an adequate remedy at law and interpose no
opposition, legal or otherwise, as to the propriety of specific performance as a
remedy hereunder, and agrees that the other party shall have the right to obtain
specific performance of the defaulting party without being required to prove
actual damages, post bond, or furnish other security.
ARTICLE XI.
CERTAIN REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Section 11.1. Representations and Warranties of Time Broker.
Time Broker hereby represents and warrants to Licensee as
follows:
11.1.1. Corporate Organization. Time Broker is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania, is duly qualified to do business in the
Commonwealth of Massachusetts and has full power and authority to conduct its
business as currently conducted.
11.1.2. Authorization; Enforceability. This Agreement
has been duly executed and delivered by Time Broker, and is valid, binding and
enforceable against Time Broker in accordance with its terms. Time Broker has
full right, power, authority and legal capacity to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery and performance of this Agreement and the
consummation of the transactions provided for hereby have been duly authorized
by all necessary action on the part of Time Broker, and no other organizational
or other proceedings on the part of Time Broker are necessary to authorize the
execution or delivery of this Agreement or the transactions contemplated hereby.
11.1.3. No Consent. Except to the extent any of the
Contracts require consent to assignment, no consent of any other party and no
consent, license, approval or authorization of, or exemption by, or filing,
restriction or declaration with, any governmental authority, bureau, agency or
regulatory authority, other than the filing of this Agreement with the FCC and
the expiration or early termination of any applicable waiting period under the
HSR Act, if applicable, is required in connection with the execution, delivery
or performance of this Agreement by Time Broker or will effect the validity or
performance of this Agreement.
11.1.4. No Breach. Neither the execution or delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will constitute or result in the breach of any term, condition or provision of,
or constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of Time Broker pursuant to the
organizational documents of Time Broker, any agreement or other instrument to
which
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Time Broker is a party or by which any part of its property is bound, or violate
any law, regulation, judgment or order binding upon Time Broker.
11.1.5. Actions and Proceedings. There is no judgment
outstanding and no litigation, claim, investigation or proceeding pending
against Time Broker or, to the knowledge of Time Broker, threatened before any
court or governmental agency to restrain or prohibit, or to obtain damages, or
other relief in connection with, this Agreement, the Purchase Agreement or the
consummation of the transactions contemplated hereby or thereby or that might
adversely affect Time Broker's performance under this Agreement.
11.1.6. Qualifications. Time Broker is qualified in
accordance with the Communications Act of 1934, as amended, and the rules and
policies of the FCC to enter into this Agreement and provide programming on the
Stations in accordance with its terms. Between the date hereof and the
termination of this Agreement, either by the Closing of the Purchase Agreement
or the earlier termination in accordance with Article 9 hereof, Time Broker will
not take any action that Time Broker knows, or has reason to believe, would
disqualify it from providing programming on the Stations pursuant to this
Agreement.
Section 11.2. Representations, Warranties and Covenants of
Operator and CRLI.
Operator and CRLI hereby represent, warrant and covenant to
Time Broker as follows:
11.2.1. Corporate Organization. Operator is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware, is duly qualified to do business in the
Commonwealth of Massachusetts and has full power and authority to conduct its
business as currently conducted. CRLI is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware, is duly
qualified to do business in the Commonwealth of Massachusetts and has full power
and authority to conduct its business as currently conducted.
11.2.2. Authorization; Enforceability. This Agreement
has been duly executed and delivered by each of Operator and CRLI, and is valid,
binding and enforceable against each of them in accordance with its terms. Each
of Operator and CRLI has full right, power, authority and legal capacity to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions provided for hereby have been
duly authorized by all necessary action on the part of each of Operator and
CRLI, and no other organizational or other proceedings on the part of Operator
or CRLI are necessary to authorize the execution or delivery of this Agreement
or the transactions contemplated hereby.
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<PAGE> 22
11.2.3. No Consent. Except to the extent any of the
Contracts require consent to assignment, no consent, license, approval or
authorization of or exemption by, or filing, restriction or declaration with,
any governmental authority, bureau, agency or regulatory authority, other than
the filing of this Agreement with the FCC and the expiration or early
termination of any applicable waiting period under the HSR Act, if applicable,
is required in connection with the execution, delivery or performance of this
Agreement or will affect the validity or enforceability of this Agreement.
11.2.4. No Breach. Except to the extent any of the
Contracts require consent to assignment, neither the execution or delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
constitute or result in the breach of any term, condition or provision of, or
constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of Operator or CRLI pursuant to the
organizational documents of Operator or CRLI, any agreement or other instrument
to which Operator or CRLI is a party or by which any part of their property is
bound, or violate any law, regulation, judgment or order binding upon Operator
or CRLI.
11.2.5. Actions and Proceedings. There is no judgment
outstanding and no litigation, claim, investigation or proceeding pending
against Operator or CRLI or, to the knowledge of Operator or CRLI, threatened
before any court or governmental agency to restrain or prohibit, or to obtain
damages or other relief in connection with this Agreement or the consummation of
the transactions contemplated hereby.
11.2.6. Maintenance of Current Operations. The
Stations' transmission equipment shall be maintained by Operator and CRLI in a
condition consistent with good engineering practices and in compliance in all
material respects with the Communications Act and all other applicable rules,
regulations and technical standards of the FCC.
11.2.7. Other Agreements. During the term of this
Agreement, Operator and CRLI will not enter into any other time brokerage,
program provision, local management or similar agreement with any third party
with respect to the Stations.
ARTICLE XII.
MISCELLANEOUS
Section 12.1. Modification and Waiver.
No modification or waiver of any provision of this Agreement
shall in any event be effective unless the same shall be in writing signed by
the party against whom the waiver is sought to be enforced, and then such waiver
and consent shall be effective only in the specific instance and for the purpose
for which given.
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<PAGE> 23
Section 12.2. No Waiver; Remedies Cumulative.
No failure or delay on the part of Licensee or Time Broker in
exercising any right or power hereunder shall operate as a waiver thereof, nor
any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, shall preclude any
other or further exercise thereof or the exercise of any other right or power.
The rights and remedies of Licensee and Time Broker herein provided are
cumulative and are not exclusive of any rights or remedies which they may
otherwise have.
Section 12.3. Construction.
This Agreement shall be construed in accordance with the laws
of the State of New York without reference to conflict of laws principles, and
the obligations of the parties hereto are subject to all federal, state or
municipal laws or regulations now or hereafter in force and to the regulations
of the FCC and all other governmental bodies or authorities presently or
hereafter duly constituted. The parties hereto expressly waive and agree to
waive any right to a jury trial in any controversy or claim arising out of or
relating to this Agreement.
Section 12.4. Headings.
The headings contained in this Agreement are included for
convenience only and no such heading shall in any way alter the meaning of any
provision.
Section 12.5. Successors and Assigns.
Any party may assign all or any part of this Agreement or the
rights and obligations hereunder to a person or entity controlling, controlled
by or under common control with such party, provided that any such assignment
shall not relieve such party of its obligations hereunder. Except as otherwise
provided herein, this Agreement and the rights and obligations hereunder may not
be assigned by any party hereto without the prior written consent of the other
parties hereto, which consent shall not be unreasonably withheld. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns.
Section 12.6. Force Majeure.
The parties acknowledge and agree that a party will not be
liable for any failure to timely perform any of its obligations under this
Agreement if such failure is due, in whole or in part, directly or indirectly,
to accidents, fires, floods, governmental actions, war, civil disturbances,
other causes beyond such party's control or any other occurrence which would
generally be considered an event of force majeure.
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<PAGE> 24
Section 12.7. Broker.
The parties agree to indemnify and hold each other harmless
against any claims from any broker or finder based upon any agreement,
arrangement, or understanding alleged to have been made by the indemnifying
party.
Section 12.8. Counterpart Signatures.
This Agreement may be signed in one or more counterparts.
Section 12.9. Notices.
Any notice, report, demand, waiver or consent required or
permitted hereunder shall be in writing and shall be given by hand delivery, by
prepaid registered or certified mail, with return receipt requested, by an
established national overnight courier providing proof of delivery for next
business day delivery or by telecopy addressed as follows:
If the notice is to Time Broker:
Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Attention: Mr. Joseph M. Field, President
Telecopier Number: 610-660-5641
With a copy to:
John C. Donlevie, Esq.
General Counsel
Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Telecopier Number: 610-660-5620
and
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Attention: Joseph D. Sullivan, Esq.
Telecopier Number: 202-637-2201
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<PAGE> 25
If the notice is to Licensee:
CBS Radio
40 West 57th Street
14th Floor
New York, NY 10019
Attention: Mr. Mel Karmazin
Telecopier Number: 212-314-9229
With copies to:
General Counsel
CBS Corporation
51 West 52nd Street
New York, NY 10019-6188
Telecopier Number: 212-975-2185
and
Leventhal Senter & Lerman, P.L.L.C.
2000 K Street, N.W.
Suite 600
Washington, D.C. 20006
Attention: Steven A. Lerman, Esq.
Telecopier Number: 202-293-7783
The date of any such notice and service thereof shall be deemed to be: (i) the
day of delivery if hand delivered or delivered by overnight courier; (ii) the
day of delivery as indicated on the return receipt if dispatched by mail; or
(iii) the date of telecopy transmission as indicated on the telecopier
transmission report provided that any telecopy transmission shall not be
effective unless a paper copy is sent by overnight courier on the date of the
telecopy transmission. Either party may change its address for the purpose of
notice by giving notice of such change in accordance with the provisions of this
Section.
Section 12.10. Entire Agreement.
This Agreement, the letter agreements between the parties
dated of even date herewith and the Purchase Agreement (including all
attachments, exhibits and schedules) embody the entire agreement between the
parties and there are no other agreements, representations, warranties, or
understandings, oral or written, between them with respect to the subject matter
hereof.
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<PAGE> 26
Section 12.11. Severability.
Except as expressly set forth in Section 12.15, if any
provision contained in this Agreement is held to be invalid, illegal or
unenforceable in any respect by any court or other authority, then such
provision shall be deemed limited to the extent that such court or other
authority deems it reasonable and enforceable, and as so limited shall remain in
full force and effect. In the event that such court or other authority shall
deem any such provision wholly unenforceable, this shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had not been contained herein.
Section 12.12. No Joint Venture.
The parties agree that nothing herein shall constitute a joint
venture between them. The parties acknowledge that call letters, trademarks and
other intellectual property shall at all times remain the property of the
respective parties and that neither party shall obtain any ownership interest in
the other party's intellectual property by virtue of this Agreement (subject to
the IP License set forth in Section 6.2).
Section 12.13. Damage to Stations.
In the event of damage or destruction to the Stations (other
than damage or destruction caused by Time Broker), Licensee shall proceed to
repair, replace or restore the Stations to its former condition as promptly as
is commercially reasonable.
Section 12.14. Noninterference.
During the term of this Agreement, neither Licensee nor any of
their employees shall take any actions that might impair the operations of Time
Broker conducted hereunder, except to the extent expressly contemplated by this
Agreement or as otherwise required by law.
Section 12.15. Regulatory Changes.
In the event of any order or decree of an administrative
agency or court of competent jurisdiction, including without limitation any
material change or clarification in FCC rules, policies, or precedent, that
would cause this Agreement to be invalid or violate any applicable law, and such
order or decree has become effective and has not been stayed, the parties will
use their respective best efforts and negotiate in good faith to modify this
Agreement to the minimum extent necessary so as to comply with such order or
decree without material economic detriment to either party, and this Agreement,
as so modified, shall then continue in full force and effect. In the event that
the parties are unable to agree upon a modification of this
21
<PAGE> 27
Agreement so as to cause it to comply with such order or decree without material
economic detriment to either party, then this Agreement shall be terminated.
Section 12.16. Attorneys' Fees.
In the event of a dispute between or among the parties hereto
arising out of or related to this Agreement or the interpretation or enforcement
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and expenses from the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
CBS RADIO, INC.
By:_______________________
Title:____________________
CBS RADIO LICENSE, INC.
By:_______________________
Title:____________________
ENTERCOM COMMUNICATIONS CORP.
By:_______________________
Title:____________________
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<PAGE> 28
SCHEDULE 1.1
PROGRAMMING
The Programming shall consist of one hundred sixty-four (164)
hours per week on the Stations in an entertainment format to be chosen by Time
Broker, subject to Section 2 of this Agreement. The Programming shall include
(a) news and weather information; (b) public service announcements (including,
at Licensee's directive from time to time, a reasonable number of public service
announcements of local interest supplied by Licensee or produced by Time Broker
under Licensee's supervision); (c) an announcement in form sufficient to meet
the station identification requirements of the FCC at the beginning of each
hour; (d) an announcement at the beginning of each segment of Programming to
indicate that program time has been purchased by Time Broker; and (e) any other
announcement that may be required by applicable law or regulation (including but
not limited to EAS tests). Time Broker shall maintain and deliver to Licensee
copies of all operating and programming information including without limitation
information concerning portions of the Programming that are responsive to issues
of public importance identified to Time Broker by Licensee, EAS announcements,
and station operating logs, necessary for Licensee to maintain its FCC Public
File, and all other records required to be kept by FCC rule or policy. Time
Broker shall have the sole and exclusive right to sell advertising to be
included in the Programming and shall be entitled to retain all the revenues
derived from the sale thereof, provided, however, that Licensee shall be
entitled to sell such time as it deems necessary to comply with the political
advertising rules of the FCC in the event the Programming does not comply with
such rules.
Notwithstanding any other provision of this Agreement, Time
Broker recognizes that Licensee has certain obligations to broadcast programming
to meet the needs and interests of the community of license for the Stations.
Licensee shall have the right to air specific programming on issues of local
importance to the community. Nothing in this Agreement shall abrogate the
unrestricted authority of Licensee to discharge its obligations to the public
and to comply with the laws, rules and policies of the FCC with respect to
meeting the ascertained needs and interests of the public. Accordingly, Licensee
may air or cause Time Broker to produce and present under Licensee's supervision
for not less than two (2) nor more than four (4) hours per week on the Stations
such public affairs programming that responds to the needs and interests of
listeners in the Stations' community of license. Such public affairs programming
shall be presented between 6:00 a.m. and 9:00 a.m. on Saturdays and/or Sundays
or at such other times as the public interest may require. Time Broker will not
change the format of the Stations, and Time Broker shall maintain the Rush
Limbaugh show and Dr. Laura Schlessinger show as part of the programming of
WRKO-AM.
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<PAGE> 29
SCHEDULE 1.2
COMPENSATION
Beginning on the Commencement Date, for each month during
which this Agreement until this Agreement is terminated, Time Broker shall pay a
monthly fee equal to One Hundred Ninety-Five Thousand Dollars ($195,000.00) per
month (the "Monthly Fee").
In the event that the Commencement Date occurs on a day other
than the first day of a month, the initial monthly payment made by Time Broker
shall be an amount equal to the Monthly Fee as determined above multiplied by a
ratio, the numerator of which is the number of days between the Commencement
Date and the end of the month in which the Commencement Date occurs and the
denominator of which is the number of days in the month in which the
Commencement Date occurs; and in the event that the last day of the TBA Payment
Period occurs other than on the last day of a month, the Monthly Payment for the
month in which such day occurs shall be similarly prorated.
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<PAGE> 30
SCHEDULE 2.1
PROGRAMMING POLICY STATEMENT
Time Broker agrees to cooperate with Licensee in the
broadcasting of programs of the highest possible standard of excellence and for
this purpose to observe the following regulations in the preparation, writing
and broadcasting of its programs. Further, Time Broker agrees that all material
broadcast on the Stations shall comply with all federal, state and local
applicable laws, rules and regulations.
No Plugola or Payola. The broadcast of any material for which
any money, service or other valuable consideration is
directly or indirectly paid, or promised to or
charged or accepted by, the Time Broker, from any
person, shall be prohibited, unless, at the time the
same is broadcast, it is announced as paid for or
furnished by such person.
Political Broadcasting. Within thirty (30) days of the
Commencement Date, Time Broker shall provide Licensee
with a written political advertising disclosure
statement which fully and accurately discloses how
the Time Broker sells programming and advertising
time and which makes parties purchasing political
programming and advertising time fully aware of the
lowest unit charge provisions of Section 315 of the
Communications Act. In addition, at least thirty (30)
days before the start of any primary or election
campaign, Time Broker will clear with the Stations'
general manager the rate Time Broker will charge for
the time to be sold to candidates to make certain
that the rate charged is in conformance with the
applicable law and station policy.
Required Announcements. Time Broker shall broadcast (i)
announcements in a form satisfactory to Licensee at
the beginning of each hour to identify the Stations
and (ii) any other announcements that may be required
by law, regulation, or Licensee's station policy.
No Illegal Announcements. No announcements, broadcasts or
promotions prohibited by federal, state or local law
shall be made over the Stations. This prohibition
specifically includes, but is not limited to, any and
all programming or other broadcast material
concerning tobacco or alcohol related products which
are unlawful. The airing of any broadcast material
concerning contests, lotteries or games must be
conducted in accordance with all applicable law,
including FCC rules and regulations. Any obscene,
indecent, or fraudulent programming is prohibited.
All sponsored programming or other broadcast material
must be identified in accordance with applicable law,
including FCC rules and regulations.
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Licensee Discretion Paramount. In accordance with the
Licensee's responsibility under the Communications
Act and the rules and regulations of the FCC,
Licensee reserves the right to reject or terminate
any programming (including advertising) proposed to
be presented or being presented over the Stations
which is in conflict with station policy or which in
Licensee's or its general manager's reasonable
judgment would not serve the public interest.
In any case where questions of policy or interpretation arise,
Time Broker should submit the same to Licensee for decision before making any
commitments in connection therewith.
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<PAGE> 32
SCHEDULE 4.1
TIME SALES AGREEMENTS AND CONTRACTS
All Contracts to be assumed by Entercom under the Purchase
Agreement other than Leases (as defined in the Purchase Agreement) and contracts
relating to operation at the transmitter site for the Stations and employment
contracts with the Licensee's retained employees under Sections 3.1 and 3.2.
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<PAGE> 1
EXHIBIT 10.12
================================================================================
ASSET PURCHASE AGREEMENT
BY AND AMONG
CBS RADIO, INC.,
CBS RADIO LICENSE, INC.,
AND
ENTERCOM COMMUNICATIONS CORP.
DATED AS OF AUGUST 13, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I. - DEFINITIONS
1.1 DEFINITIONS....................................................2
ARTICLE II. - PURCHASE OF ASSETS.............................................6
2.1. PURCHASE AND SALE OF ASSETS....................................6
2.2. ALLOCATION OF VALUES...........................................6
2.3. NON-ASSIGNABLE CONTRACTS.......................................7
ARTICLE III. - LIABILITIES...................................................7
3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM..........................7
3.2. OTHER LIABILITIES..............................................8
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES.................................8
4.1. BY CBS.........................................................8
4.2. BY ENTERCOM...................................................16
ARTICLE V. - CONDITIONS.....................................................17
5.1. MUTUAL CONDITIONS.............................................17
5.2. CONDITIONS OF ENTERCOM........................................18
5.3. CONDITIONS OF CBS.............................................18
5.4. EFFECT OF TIME BROKERAGE AGREEMENT ON CLOSING
CONDITIONS..................................................18
ARTICLE VI. - COVENANTS AND OPERATIONS PRIOR TO CLOSING.....................19
6.1. COVENANTS OF CBS..............................................19
6.2. NEGATIVE COVENANTS OF CBS.....................................21
6.3. NO CONTROL....................................................22
6.4. NO SOLICITATION OR HIRE OF EMPLOYEES
AND PROGRAMMING.............................................22
6.5. COVENANTS OF ENTERCOM.........................................23
6.6. REAL PROPERTY SURVEYS.........................................24
ARTICLE VII. - ACTIONS PRIOR TO CLOSING.....................................25
(i)
<PAGE> 3
7.1. APPLICATION TO COMMISSION.....................................25
7.2. COMPLIANCE WITH CBS FINAL JUDGMENT............................25
7.3. HART-SCOTT-RODINO NOTIFICATION................................25
7.4. INSPECTION....................................................26
7.5. CONFIDENTIALITY...............................................26
ARTICLE VIII. - CLOSING.....................................................27
8.1. CLOSING.......................................................27
8.2. PRORATIONS....................................................27
8.3. CLOSING DELIVERIES TO ENTERCOM................................28
8.4. CLOSING DELIVERIES TO CBS.....................................29
8.5. COVENANTS OF FURTHER ASSURANCES; AVAILABILITY OF
RECORDS.....................................................30
8.6. RISK OF LOSS; DAMAGE TO PROPERTY..............................30
8.7. TAXES ON TRANSACTION..........................................30
ARTICLE IX. - TERMINATION, DEFAULT AND INDEMNIFICATION......................31
9.1. TERMINATION...................................................31
9.2. EFFECT OF TERMINATION.........................................31
9.3. REMEDIES......................................................31
9.4. INDEMNIFICATION...............................................31
ARTICLE X. - INTENTIONS OF THE PARTIES AS TO FORM OF TRANSACTION............34
10.1. CBS' INTENTION................................................34
10.2. ENTERCOM'S INTENTION..........................................34
10.3. INDEPENDENT TRANSACTIONS......................................34
ARTICLE XI. - GENERAL PROVISIONS............................................35
11.1. EXPENSES OF THE PARTIES.......................................35
11.2. BROKERS.......................................................35
11.3. SURVIVAL OF COVENANTS, REPRESENTATIONS,
AND WARRANTIES..............................................35
11.4. CONFIDENTIALITY...............................................36
11.5. AMENDMENT AND WAIVER..........................................36
11.6. EFFECT OF THIS AGREEMENT......................................36
11.7. TERMS GENERALLY...............................................36
11.8. HEADINGS......................................................37
11.9. COUNTERPARTS..................................................37
(ii)
<PAGE> 4
11.10. GOVERNING LAW; JURISDICTION...................................37
11.11. BULK SALES LAWS...............................................37
11.12. ASSIGNMENT....................................................37
11.13. NOTICES.......................................................37
11.14. ATTORNEYS' FEES...............................................39
11.15. TEMPORARY SUBLEASE FOR WBMX...................................39
(iii)
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT MADE AND ENTERED INTO THIS 13TH
DAY OF AUGUST, 1998, BY AND AMONG CBS RADIO, INC., A DELAWARE CORPORATION
("CRI"), CBS RADIO LICENSE, INC., A DELAWARE CORPORATION ("CRLI"), (CRI AND
CRLI, COLLECTIVELY, "CBS"), AND ENTERCOM COMMUNICATIONS CORP., A PENNSYLVANIA
CORPORATION ("ENTERCOM").
RECITALS
WHEREAS, pursuant to the Authorizations, CBS owns and operates
(directly or indirectly through one or more subsidiaries) radio stations
WEEI(AM) and WRKO(AM), Boston, Massachusetts (collectively, the "Stations"), and
owns all of the Assets relating to the Stations;
WHEREAS, Entercom desires to purchase the Assets from CBS;
WHEREAS, CBS is willing to sell the Assets to Entercom;
WHEREAS, CBS and Entercom have agreed, subject to prior
approval by the Commission and certain other conditions, that CBS shall sell,
assign, transfer and convey the Assets to Entercom or one or more Affiliates
designated by Entercom, in the manner and for the consideration described in
this Agreement; and
WHEREAS, CBS is required to notify the United States
Department of Justice ("DOJ") of this Agreement, pursuant to the final judgment
in United States v. CBS Corporation and American Radio Systems Corporation, Civ.
No. 98-0819 (D.D.C. filed March 31, 1998) (the "CBS Final Judgment"), and CBS
may not consummate the sale contemplated hereby unless CBS has received written
notification from DOJ that DOJ does not object to the sale or, in the event that
DOJ objects, until the sale has been approved by the United States District
Court for the District of Columbia (the "Court"). Pursuant to the CBS Final
Judgment, CBS is required to take all steps necessary to operate the Stations as
separate, independent, ongoing, economically viable and active competitors to
the other stations owned by CBS and its Affiliates in the Boston area and must
take all steps necessary to insure that the management of such stations is kept
separate and apart from CBS.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and of the representations and warranties hereinafter set forth and
for other good and valuable consideration, the parties, intending to be legally
bound hereby, agree as follows:
<PAGE> 6
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. As used herein, the following terms shall have the following
respective meanings:
"ADJUSTMENT TIME" shall mean with respect to each Station,
12:01:00 a.m. Eastern Standard or Daylight Time, as appropriate, on the Closing
Date.
"AFTRA CONTRACT" shall have the meaning set forth in Section
3.1.5.
"AFFILIATE" shall mean, with respect to any person or entity,
a person or entity controlling, controlled by or under common control with such
person or entity.
"AGREEMENT" shall mean this Asset Purchase Agreement.
"APPRAISAL" shall have the meaning set forth in Section 2.2.1
hereof.
"ASSETS" shall mean the Property and all of the Authorizations
relating to the Stations.
"ASSIGNMENT APPLICATIONS" shall have the meaning set forth in
Section 7.1 hereof.
"AUTHORIZATIONS" shall mean all of the licenses, permits, and
authorizations granted by the Commission with respect to the operation of the
Stations and all applications for Authorizations for the Stations pending before
the Commission.
"BARTER AGREEMENTS" shall mean contracts for the sale of time
on the Stations in exchange for programming.
"BOSTON II AGREEMENT" shall mean that certain Asset Purchase
Agreement by and among Entercom and CBS and ARS Acquisition II, Inc. for the
sale and purchase of radio stations WAAF(FM), WWTM(AM), and WEGQ(FM), dated as
of August 13, 1998.
"CBS" shall mean the corporations identified as such in the
Preamble of this Agreement.
"CLOSING" shall mean the event of consummation of the
transactions contemplated by this Agreement as more fully described in Article
VIII of this Agreement.
"CLOSING DATE" shall mean the date that the Closing occurs.
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<PAGE> 7
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the applicable regulations issued thereunder.
"COMMISSION" shall mean the Federal Communications Commission.
"CONTAMINANT" shall mean and include any pollutant,
contaminant, hazardous material (as defined in any of the Environmental Laws),
toxic substances (as defined in any of the Environmental Laws), asbestos-or
asbestos-containing material, urea formaldehyde, polychlorinated biphenyls,
regulated substances and wastes, radioactive materials, and petroleum or
petroleum by-products, including crude oil or any fraction thereof, except that
"Contaminant" shall not include small quantities of maintenance, cleaning and
emergency generator fuel supplies customary for the operation of radio stations
and maintained in compliance with all Environmental Laws in the Ordinary Course
of Business.
"CONTRACTS" shall mean all agreements, arrangements,
commitments, and undertakings, written or oral, expressed or implied, relating
to the present or future operation of the Stations except for any Leases,
including without limitation, Time Sales Agreements, Trade Agreements, Barter
Agreements and Miscellaneous Contracts.
"CONTRACT REIMBURSEMENT" shall mean cash in the amount of Five
Million Dollars ($5,000,000.00) as reimbursement paid to Entercom by CBS for
assumption of certain Contracts specified in Schedule 8.3.1.
"DEFAULT" shall mean the material default by a party hereto in
the performance of its obligations under this Agreement.
"ENTERCOM" shall mean the corporation identified as such in
the Preamble of this Agreement.
"ENVIRONMENTAL LAWS" shall mean any applicable federal, state
or local law, statute, charter, ordinance, rule, or regulation or any
governmental agency interpretation or policy, including, without limitation,
applicable safety/environmental/health laws such as, but not limited to, the
Resource Conservation and Recovery Act of 1976, Comprehensive Environmental
Response Compensation and Liability Act, Federal Emergency Planning and
Community Right to Know Law, the Clean Air Act, the Clean Water Act, the Toxic
Substance Control Act, and the Occupational Safety and Health Act, as any of the
foregoing have been amended, and any permit, order, directive, court ruling or
order, or consent decree applicable to or affecting the Property or any other
property (real or personal) used by or relating to the Station in question
promulgated or issued pursuant to any Environmental Laws which pertains to,
governs, or controls the generation, storage, remediation, or removal of
Contaminants or otherwise regulates the protection of health and the environment
including, but not limited to, any of the following activities, whether on site
or off site: (i) the emission, discharge, release, spilling, or dumping of any
Contaminant into the air, surface water, ground water, soil, or
3
<PAGE> 8
substrata; or (ii) the use, generation, processing, sale, recycling, treatment,
handling, storage, disposal, transportation, labeling, or any other management
of any Contaminant.
"FINAL ORDER" shall mean an order or action of the Commission
that, by reason of expiration of time or exhaustion of remedies, is no longer
subject to administrative or judicial reconsideration or review.
"IBEW CONTRACT" shall have the meaning set forth in Section
3.1.5.
"LEASES" shall mean all agreements, arrangements, or
commitments and undertakings, written or oral, express or implied, for the use
or occupation of any real or personal property used in the operation of the
Stations.
"LOSS" shall have the meaning set forth in Section 9.4.1
hereof.
"MISCELLANEOUS CONTRACTS" shall mean Contracts and Leases
entered into in the Ordinary Course of Business, which involve less than Twenty
Five Thousand Dollars ($25,000.00) individually and less than One Hundred Fifty
Thousand Dollars ($150,000.00) for all of the Stations in the aggregate, and
which are not included in Schedule 4.1.6.
"NON-CONTINUING EMPLOYEES" shall have the meaning set forth in
Section 6.5.1.
"ORDINARY COURSE OF BUSINESS" shall mean the routine conduct
of the business of the Station in question (excluding extraordinary, irregular,
or abnormal transactions) on a basis consistent with the regular practice of
such Station since January 1, 1998; provided that any conflict between what is
required of CBS by the definition set forth in the immediately preceding clause
as applied herein and the CBS Final Judgment shall be resolved in favor of the
latter.
"PERMITTED ENCUMBRANCES" shall mean: (i) encumbrances for
taxes, assessments, or governmental charges or levies which are not yet due and
payable, or that, subject to adequate security for payment, are being contested;
(ii) easements, rights of way, or other encumbrances disclosed in this
Agreement; (iii) easements, rights of way or other encumbrances that do not have
a material adverse effect on the Assets or the operation of the Stations as
currently operated; (iv) encumbrances imposed by law, such as materialmen's,
mechanic's, carrier's, workmen's, or repairmen's liens or other similar
encumbrances arising in the Ordinary Course of Business, securing obligations
that are not overdue; (v) encumbrances securing indebtedness, which will be
removed prior to or at the Closing; (vi) encumbrances pursuant to Contracts and
Leases to be assumed by Entercom pursuant to Section 3.1; and (vii) encumbrances
listed on Schedule 4.1.8.
"PROPERTY" shall mean all of the tangible and intangible
property (other than the Authorizations) located at the Stations (including at
the transmitter sites of the Stations), whether real, personal, or mixed, and
all rights and interests which are used or held by CBS or any of its
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Affiliates and necessary for use primarily in the operation of the Stations as
presently conducted, including: (i) all of the rights, titles, and interests
under the Leases and the Contracts relating to the Stations; (ii) the call
letters, copyrights, trademarks, and other intellectual property associated with
the Stations; (iii) originals or, if unavailable, photocopies, of all files,
records, studies, data, lists, filings, general accounting records, books of
account, computer programs and software, and logs, of every kind, relating to
the operations or business of the Stations; and (iv) all of CBS's or any of its
Affiliates' rights under manufacturers' and vendors' warranties relating to
items included in the Assets of the Stations; but excluding therefrom those
assets listed on Schedules attached hereto respectively as "Excluded Property."
"PURCHASE PRICE" shall have the meaning set forth in Section
2.1.2.
"REQUIRED CONSENTS" shall mean the consents of third parties
to the Leases and Contracts that are required for the assignment thereof and
that are identified on the Schedules hereto as "Material Leases (or
Contracts)-Consent to Assign Required."
"REQUIRED CURE EXPENSE" Shall mean the sum of the amounts
required to be spent by CBS under Sections 6.1.4, 6.1.5 and 6.6.3 of this
Agreement and the Boston II Agreement.
"STATIONS" shall collectively mean the following radio
broadcast stations: WEEI(AM), and WRKO(AM), Boston, Massachusetts, or, in the
singular form, any one of them.
"STATION EMPLOYEES" shall have the meaning set forth in
Section 6.5.1.
"TAMPA AGREEMENT" shall mean that certain Asset Purchase
Agreement by and among Entercom and CBS for the sale and purchase of radio
stations WYUU (FM) and WLLD (FM), dated as of August 13, 1998.
"TBA COMMENCEMENT DATE" shall mean the date that the Time
Brokerage Agreement shall become effective.
"TIME BROKERAGE AGREEMENT" shall mean the Time Brokerage
Agreement entered into between CBS and Entercom simultaneously with the
execution of this Agreement relating to the sale to Entercom of substantially
all of the broadcast time on the Stations.
"TIME SALES AGREEMENTS" shall mean contracts for the sale of
time on the Stations for cash.
"TRADE AGREEMENTS" shall mean contracts for the sale of time
on the Stations in exchange for merchandise or services used or useful for the
benefit of the Stations, excluding Barter Agreements.
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"TRANSFERRED EMPLOYEES" shall have the meaning set forth in
Section 6.5.
"UPSET DATE" shall have the meaning set forth in Section
9.1.1.
ARTICLE II.
PURCHASE OF ASSETS
2.1. PURCHASE AND SALE OF ASSETS.
Subject to the terms and conditions set forth in this
Agreement, at the Closing:
2.1.1. CBS shall sell, convey, transfer, assign, and deliver or cause
to be sold, conveyed, transferred, assigned, and delivered to Entercom, or to
such Affiliates as Entercom shall designate, the Assets free and clear of all
liens and encumbrances other than Permitted Encumbrances, and Entercom or such
designated Affiliates shall acquire and receive same from CBS.
2.1.2. Entercom shall deliver to CBS cash in the amount of Eighty-Two
Million Dollars ($82,000,000.00) (the "Purchase Price") and CBS shall receive
same from Entercom. The Purchase Price shall be paid by wire transfer at Closing
to the account designated by CBS in writing at least two (2) days prior to the
Closing.
2.2. ALLOCATION OF VALUES.
2.2.1. The fair market value of the Assets shall be determined and
allocated on the basis of an appraisal (the "Appraisal") prepared by Bond &
Pecaro, or another firm reasonably acceptable to CBS and Entercom, whose fees
and expenses shall be borne equally by CBS and Entercom. The parties shall use
their reasonable best efforts to cause Bond & Pecaro to deliver the Appraisal 10
days before the Closing Date, or failing compliance with such deadline, as soon
thereafter as is practicable, but in all events no later than 30 days after the
Closing Date. The Appraisal shall set forth the fair market value of each
material asset included in the Assets.
2.2.2. Each party, as necessary, shall prepare such IRS Forms as are
required by law to be filed with the Internal Revenue Service reflecting the
fair market value of the Assets as determined in accordance with the values set
forth in the Appraisal and the above provisions and shall forward such forms to
the other parties within thirty (30) days after the Closing. Each party, as
necessary, shall file with their respective federal income tax returns for the
tax year in which the Closing occurs such IRS Forms as prepared in accordance
with the foregoing. Each party shall deliver to the other parties hereto a copy
of such IRS Forms as filed with their respective federal income tax return
within thirty (30) days of the filing of such return. The parties hereto hereby
covenant and agree with each other that they will not take a position on any
income tax return that is in any way inconsistent with the terms of this Section
2.2.
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2.3. NON-ASSIGNABLE CONTRACTS.
2.3.1. Without limiting or otherwise affecting the rights of any party
hereto, to the extent that any Contract or Lease to be assigned pursuant to this
Agreement is not capable of being assigned without the consent, approval, or
waiver of a third person or entity, nothing in this Agreement will constitute an
assignment or require the assignment thereof except to the extent provided in
this Section 2.3.
2.3.2. With respect to all consents, approvals, and waivers referenced
in Section 2.3.1, CBS shall use its reasonable best efforts to obtain all such
consents, approvals, and waivers prior to and, if the Closing occurs, as
promptly as practicable after the Closing Date; provided that CBS shall not be
obligated to pay money to any other contracting party to obtain any such
consent, approval or waiver, other than reasonable expenses of the party for any
legal documentation related to the assignment of the Contract or Lease in
question. If the consents, approvals, and waivers are not obtained prior to
Closing, the parties shall use their reasonable best efforts in good faith to
cooperate, and to cause each of their respective Affiliates to cooperate, in
effecting any lawful arrangement to provide to Entercom or its designated
Affiliates the economic benefits of the Contracts and Leases for which consents,
approvals, and waivers are being sought after Closing, and to have Entercom or
its designated Affiliates assume and discharge the obligations under the
Contracts and Leases from and after the Closing Date.
ARTICLE III.
LIABILITIES
3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM.
Except as otherwise provided in the Time Brokerage Agreement,
from and after the Closing Date, Entercom shall assume and pay, perform, and
discharge the following liabilities and obligations relating to the Stations:
3.1.1. The liabilities and obligations arising with respect to events
occurring after the Adjustment Time or accruing after the Adjustment Time with
respect to any Leases included in the Assets that are specifically identified on
Schedule 4.1.5 as being assumed by Entercom, and such additional Leases as are
permitted to be entered into by CBS and its Affiliates pursuant to Article VI
hereof.
3.1.2. The liabilities and obligations arising with respect to events
occurring after the Adjustment Time or accruing after the Adjustment Time with
respect to any (a) Contracts included in the Assets that are specifically
identified on Schedule 4.1.6 as being assumed by Entercom; (b) Miscellaneous
Contracts; (c) Time Sales Agreements, Trade Agreements, and Barter Agreements
entered into in the Ordinary Course of Business; and (d) such additional
contracts as are permitted to be entered into by CBS and its Affiliates pursuant
to Article VI hereof;
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3.1.3. The liabilities and obligations which arise with respect to
events occurring after the Adjustment Time or which accrue after the Adjustment
Time with respect to the Assets and to the operation of the Stations by Entercom
and/or its designated Affiliates;
3.1.4. All taxes and assessments (other than income and franchise taxes
of CBS and its Affiliates) that accrue on or with respect to the Assets or the
operation of the Stations after the Adjustment Time;
3.1.5. The liabilities and obligations of CBS with respect to the
Stations under (a) the Agreement for Radio Announcers and Artists, June 15, 1996
- - June 14, 1999, between the American Federation of Radio and Television Artists
and American Radio Systems, Inc. (the "AFTRA Contract") from and after the TBA
Commencement Date; and (b) the Agreement, as of May 1, 1997, between American
Radio Systems Corporation and Local 1228 of the International Brotherhood of
Electrical Workers (the "IBEW Contract"). Neither Entercom nor any of its
Affiliates shall assume any obligations under any collective bargaining
agreements other than the AFTRA Contract and the IBEW Contract.
3.2. OTHER LIABILITIES.
3.2.1. Except as expressly set forth in this Agreement, CBS shall be
solely responsible for all salaries, benefits and other compensation which will
or may become payable to any Station Employee in respect of any period of
employment prior to the earlier of the TBA Commencement Date or the Adjustment
Time, other than accrued vacation time for Transferred Employees, for which
Entercom shall be responsible and for which it will receive a proration credit
under Section 8.2.1. Entercom shall be solely responsible for any salaries and
other compensation which will or may become payable to any Transferred Employee
in respect of any period thereafter. Entercom will not assume any obligations
under existing leave or severance policies or otherwise have any liability or
obligation for severance pay or other termination benefits of Station Employees,
except for obligations set forth in Contracts to be assumed by Entercom pursuant
to this Agreement.
3.2.2. Except as specifically assumed by Entercom pursuant to Section
3.1 and Section 3.2.1 hereof or pursuant to the Time Brokerage Agreement,
neither Entercom nor any of its Affiliates shall assume or undertake to pay,
satisfy, or discharge any liabilities, obligations, commitments, or
responsibilities of CBS or any of its Affiliates.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1. BY CBS.
CBS hereby represents and warrants to Entercom that:
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4.1.1. CORPORATE STANDING.
CRI and CRLI are corporations duly organized, validly existing
and in good standing under the laws of the State of Delaware and are qualified
to do business in the Commonwealth of Massachusetts. CRI and CRLI have full
power and authority to engage in the businesses in which they are presently
engaged and to make and perform this Agreement according to its terms.
4.1.2. AUTHORIZATION OF AGREEMENT; NO BREACH.
CBS has the necessary corporate power and authority to
execute, deliver and perform this Agreement, the Time Brokerage Agreement, and
such other agreements as are necessary to consummate the transactions
contemplated hereby, and, subject to the receipt of the consents and approvals
required elsewhere herein, this Agreement and the Time Brokerage Agreement
constitute the valid and binding obligation of CBS enforceable against it in
accordance with their terms, except as limited by bankruptcy and insolvency laws
and by laws affecting the enforcement of creditors' rights generally or
equitable principles. Assuming said consents and approvals are obtained, neither
such execution, delivery, and performance nor compliance by CBS with the terms
and provisions of this Agreement and the Time Brokerage Agreement will conflict
with or result in a breach of any of the terms, conditions, or provisions of the
Articles of Incorporation or By-Laws of CBS or its Affiliates or any judgment,
order, injunction, decree, regulation, or ruling of any court or any other
governmental authority to which CBS or any of its Affiliates is subject or any
material agreement or contract to which CBS or any of its Affiliates is a party
or to which it is subject, or constitute a material default thereunder.
4.1.3. QUALIFICATION.
CRLI is qualified as a licensee of the Commission and is
qualified as the assignor of the Authorizations to receive a grant of the
Assignment Applications by the Commission. CBS knows of no facts which could
reasonably be expected to cause Commission approval of the Assignment
Applications to be denied or materially delayed or which could reasonably be
expected to lead to the filing of a material objection to such Applications.
4.1.4. CBS ASSETS.
The Assets, taken as a whole, constitute all of the material
property, whether real, personal, or mixed, tangible or intangible, used by CBS
or its Affiliates in the operation of the Stations except for (i) property
replaced in the Ordinary Course of Business and (ii) those assets specifically
listed on Schedule 4.1.4 under the heading "Excluded Property." To the knowledge
of CBS, none of the assets listed on Schedule 4.1.4 as pertaining to radio
station WBMX(FM) is used primarily in the operation of any or all of the
Stations.
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4.1.5. CBS LEASES.
Except as set forth in Schedule 4.1.5, CBS has delivered to
Entercom true and correct copies of all Leases listed on Schedule 4.1.5 hereto.
There are no other material leases for any items or interests for the use of
real or personal property associated with the Assets or the present operation of
the Stations other than those disclosed on Schedule 4.1.5 hereto.
4.1.6. CBS CONTRACTS.
Schedule 4.1.6 contains a list of all Contracts now in effect,
written or oral, express or implied, relating to the Assets or the present or
future operation of the Stations, other than those disclosed on Schedule 4.1.5
hereto or other Schedules attached to this Agreement, except for Time Sales
Agreements, Barter Agreements, Trade Agreements, Miscellaneous Agreements and
Contracts that relate solely to Excluded Property. Except as indicated on
Schedule 4.1.6 hereto, CBS has delivered to Entercom true and correct copies of
all Contracts listed on Schedule 4.1.6 hereto,
4.1.7. INTELLECTUAL PROPERTY.
Schedule 4.1.7 hereto lists all material trademarks and
copyrights relating to the operation of the Stations which have been registered
with Federal or State governmental agencies. To CBS's knowledge, the operation
of the Stations as now conducted does not conflict with any valid patents,
trademarks, trade names, service marks, or copyrights of others in any way that
is reasonably likely to have a material adverse effect on the operation of the
Stations.
4.1.8. TITLE TO PROPERTY.
Except for (i) Permitted Encumbrances, (ii) as disclosed on
Schedule 4.1.8 hereto and (iii) as provided in the immediately succeeding two
sentences, CBS has good ownership, right, title, and interest to the Property
including the right to transfer such assets. CBS has a valid leasehold interest
in all Property leased and used or held for use in connection with the operation
of the Stations. CBS has good and marketable title to the owned real property to
be conveyed hereunder, except for Permitted Encumbrances. Except for Permitted
Encumbrances and items disclosed on Schedule 4.1.8 (which Schedule reflects,
where appropriate, the Station to which the disclosed item relates), none of the
Property or any of the income or revenue therefrom is subject to any mortgage,
conditional sale agreement, security interest, lease, lien, hypothecation,
pledge, encumbrance, restriction, liability, charge, claim, or imperfection of
title that would materially adversely affect the continued use of the Property
as currently used.
4.1.9. NO DEFAULTS.
CBS and its Affiliates have complied in all material respects
with all of the terms of the Contracts and the Leases and such Contracts and
Leases are enforceable by CBS in
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accordance with their respective terms, except as such enforcement may be
limited by applicable bankruptcy and similar laws affecting the enforcement of
creditors' rights and general equitable principles affecting the enforcement of
equitable remedies (including within said equitable remedies without limitation
the remedy of specific performance). No event has occurred which with the
passage of time or the giving of notice or both would constitute a material
default by CBS or any of its Affiliates thereunder. To the knowledge of CBS, all
other parties to the Contracts and Leases have complied in all material respects
with the provisions thereof and no event has occurred which with the passage of
time or the giving of notice or both would constitute a material default by any
such other party thereunder.
4.1.10. AUTHORIZATIONS AND APPLICATIONS.
Except as disclosed on Schedule 4.1.10, all Authorizations
necessary to the lawful operations of the Stations have been granted and issued
by the Commission to CBS and are listed on Schedule 4.1.10 attached hereto and
are now in full force and effect. There are no applications of CBS or any of its
Affiliates relating to the Stations pending with the Commission except as listed
on such Schedule 4.1.10. CBS and its Affiliates have performed and complied in
all material respects with all of the terms and conditions of said
Authorizations, the Communications Act of 1934, as amended (the "Communications
Act") and all applicable rules, regulations, requirements, and policies of the
Commission relating to the operation of the Stations. Except as listed on
Schedule 4.1.10, no proceedings are pending or, to the knowledge of any officer
of CBS or any of its Affiliates, threatened, which may result in the revocation,
modification, non-renewal, or suspension of any of said Authorizations, the
denial of any pending applications, the issuance of a cease and desist order, or
the imposition of any other sanction by the Commission to which the Stations or
the Assets are or may be subject. None of CBS or any of its Affiliates has
reason to believe that the Commission will not renew the Authorizations of any
of the Stations in the ordinary course for a full term without material
qualifications. No renewal of the Authorizations of the Stations would
constitute a major environmental action under the rules of the Commission in
effect as of the date of this Agreement. All ownership reports, renewal
applications, and other material reports and documents required to be filed by
CBS and its Affiliates with the Commission relating to the operation of the
Stations have been filed, and all such reports, applications and documents are
true and correct in all material respects. The Stations are identified by their
presently assigned call letters and, unless otherwise validly authorized by the
Commission and disclosed on Schedule 4.1.10, are operated on their assigned
frequencies at the powers and heights authorized by the Commission. The public
inspection files for the Stations are in substantial compliance with the
regulations of the Commission relating thereto.
4.1.11. PERMITS AND LICENSES.
In addition to the Authorizations, CBS has obtained and/or
holds, or at Closing will hold, all other governmental permits and licenses
necessary for the lawful operation of the respective Stations. All terms,
restrictions, and requirements of such permits and licenses have
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been complied with in all material respects and none of CBS or any of its
Affiliates is in default of any of same.
4.1.12. COMPLIANCE WITH LAWS.
CBS and its Affiliates have complied in all material respects
with all orders (to which CBS or any of its Affiliates is a party or is subject)
and applicable laws, rules, and regulations of all federal, state and local
authorities with respect to the Assets and operation of the Stations. With
respect to the operations of the Stations, none of CBS or any of its Affiliates
is in default with respect to or in violation of: (a) any judgment, order,
injunction or decree to which CBS or any of its Affiliates is a party or is
subject; or (b) any rule or regulation of any court, administrative agency or
other governmental authority, in either case in any respect material to this
transaction. All material reports, returns and other documents which relate in
any way to the Assets and which were filed by CBS or any of its Affiliates with
any administrative agency or governmental authority are true, correct and
complete in all material respects.
4.1.13. LITIGATION AND CLAIMS.
Except as disclosed in Schedule 4.1.13 hereto and except for
rulemaking proceedings applicable to radio broadcast stations generally, no
litigation, proceeding or controversy is pending or, to the knowledge of any
officer of CBS or any of its Affiliates, threatened against CBS or any of its
Affiliates, which might materially and adversely affect any material portion of
the Assets, CBS's or any of its Affiliates' right or power to transfer the same,
the ownership, possession, use or resale of any material portion of the Assets,
or the operation of the Stations by Entercom or any assignee thereof and there
is no basis known to CBS or any of its Affiliates for any such litigation,
proceeding, controversy or claim. No claim has been made or asserted against CBS
or any of its Affiliates material to this transaction.
4.1.14. EMPLOYEES.
Set forth on Schedule 4.1.14 is a listing, by department, of
the name, salary or compensation, all other compensation arrangements, and job
title of all employees of CBS and its Affiliates employed at the Stations as of
August 1, 1998, and whether each such employee is (i) full-time or part-time,
(ii) union or non-union, and (iii) whether such employee's services are shared
between any of the Stations and any other station to be retained by CBS. Except
as disclosed on Schedule 4.1.14, there are no written contracts for the
employment of any personnel at the Stations. Except as disclosed on Schedule
4.1.14, all employees of CBS and its Affiliates employed at the Stations are
employed on an "at will" basis.
4.1.15. EMPLOYEE BENEFIT AND RETIREMENT PLANS.
Listed on Schedule 4.1.15 are the material "employee pension
benefit plans" and "employee welfare benefit plans" (as defined respectively in
Sections 3(2) and 3(l) of the
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Employee Retirement Income Security Act of 1974, as amended ("ERISA")), which
CBS and its Affiliates maintain on behalf of their employees at the Stations. In
all respects material to this transaction, all "employee pension benefit plans"
and "employee welfare benefit plans" listed on Schedule 4.1.15 hereto comply in
all material respects with all applicable requirements of law and regulation.
None of CBS or any of its Affiliates has incurred or reasonably expects to incur
(either directly or indirectly, including as a result of any of the transactions
contemplated hereby or any indemnification obligation) any liability (including,
without limitation, withdrawal liability) that could become a liability of
Entercom, under or pursuant to Title I or IV of ERISA or the penalty, excise tax
or joint and several liability provisions of the Code relating to employee
benefit plans and no event, transaction or condition has occurred or exists
which could result in any such liability. CBS and its Affiliates have made all
required contributions to all multi-employer plans within the meaning of Section
3(37) of ERISA.
4.1.16. LABOR RELATIONS.
In all respects material to this transaction, CBS and its
Affiliates have complied with all applicable laws, rules and regulations
pertaining to the employment of labor, including those relating to wages, hours,
collective bargaining and the payment of or withholding of taxes with respect to
the operations of the Stations, and CBS and its Affiliates have withheld all
amounts required by law or agreement to be withheld from the wages or salaries
of their employees and are not liable for any arrears of wages or any tax or
withholding or any penalties or interest for failure to comply with any of the
foregoing. Except as disclosed on Schedule 4.1.16, there are no collective
bargaining agreements relating to any employee of CBS or any of its Affiliates
at the Stations. In addition, except as disclosed on Schedule 4.1.16, none of
CBS or any of its Affiliates has knowledge of any union organizing activities in
the one year period preceding the date of this Agreement involving or targeting
any employees of CBS or any of its Affiliates at the Stations not already
covered by a collective bargaining agreement.
4.1.17. INSURANCE.
CBS has in force adequate fire and other risk insurance
covering the full replacement value of tangible personal property that is part
of the Property and shall cause such insurance to be maintained in full force
until the Closing Date. CBS also shall maintain in full force until the Closing
Date, adequate workers compensation and general public liability insurance for
the respective Stations in amounts consistent with broadcasting industry
standards for similar stations. As of the date of this Agreement, none of the
Property currently suffers in any way as a result of fire, explosion,
earthquake, accident, fraud, rain, storm, drought, Act of God or public enemy or
any other casualty, whether or not covered by insurance.
4.1.18. BROADCASTING CONTRACTS.
The total value of all unfulfilled obligations in respect of
Trade Agreements and Barter Agreements to be assumed by Entercom, whether or not
the Stations have received
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consideration therefor, shall not be in excess of One Million Four Hundred
Thousand Dollars ($1,400,000.00) as of the Closing Date. To the extent that, as
of the Closing Date, the excess of the value of unfulfilled obligations under
Trade or Barter Agreements, including any "time bank" provision thereof, over
the value of consideration to be received by the Stations (determined as of the
Closing Date) exceeds Fifty Thousand Dollars ($50,000.00), Entercom shall be
entitled to a positive cash adjustment pursuant to Section 8.2 hereof.
4.1.19. ENVIRONMENTAL COMPLIANCE, POLYCHLORINATED
BIPHENYLS, ASBESTOS AND OTHER TOXIC OR HAZARDOUS SUBSTANCES.
Except as disclosed on Schedule 4.1.19, none of the Property
contains: (i) any asbestos, polychlorinated biphenyls ("PCBs") or any PCB
contaminated oil; (ii) any Contaminants; or (iii) any underground storage tanks.
All of the Property is in substantial compliance with all applicable
Environmental Laws, except as disclosed on Schedule 4.1.19.
4.1.20. FINANCIAL AND OTHER INFORMATION.
CBS has furnished Entercom with profit and loss statements for
calendar year 1997 and the months January through June of 1998 (the "Financial
Statements"). All Financial Statements provided to Entercom are true and correct
in all material respects and such Financial Statements fairly present the
results of operation of the Stations for the respective period then ended. There
are no material liabilities, whether known or unknown, contingent or fixed, or
otherwise, associated with the Stations that have not been otherwise disclosed
to Entercom to the extent this Agreement requires the disclosure thereof.
4.1.21. NO INSOLVENCY.
No insolvency proceedings of any character, including without
limitation, bankruptcy, receivership, reorganization, composition, or
arrangement with creditors, voluntary or involuntary, affecting CBS or any of
its Affiliates or any of their assets or properties are, or within three years
prior to the date hereof have been, pending or, to the best of the knowledge of
CBS and its Affiliates, threatened, and, within three years prior to the date
hereof, none of CBS or any of its Affiliates has made an assignment for the
benefit of creditors, nor has CBS or any of its Affiliates taken any action with
a view to, or which would constitute the basis for, the institution of any such
insolvency proceedings.
4.1.22. CONDITION OF EQUIPMENT.
Except as disclosed on Schedule 4.1.22, the transmission and
studio equipment and other equipment (mechanical and electrical) included within
the Property is, and will be as of the Closing Date, in good repair and working
condition, ordinary wear and tear excepted, and is in material compliance with
all current FCC requirements.
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4.1.23. REAL PROPERTY.
Schedule 4.1.23 contains a true and complete list of all real
property used in the operation of the Stations, setting forth the nature of the
interest, the address, and legal description for each parcel of real property
(other than leased real property), and whether such parcel is owned or leased.
Except as set forth on Schedule 4.1.23, there are no outstanding options or
rights of first refusal to purchase or lease the owned real property or any
portion thereof or interest therein, there are no outstanding options or rights
of first refusal to sublease the leased real property or any portion thereof or
interest therein, and no other parties are in possession of any such real
property. The real property identified on Schedule 4.1.23 has vehicular access
to a road and is supplied with utilities and other services necessary for the
operation of that portion of the operation of the Stations conducted there. No
real property other than that listed on Schedule 4.1.23 or listed on such
schedule as Excluded Property is used in, held for use in connection with or
necessary for the conduct of, the business or operations of the Stations. To the
knowledge of CBS and its Affiliates, (i) the improvements of CBS and its
Affiliates upon such real property and the current use and operation on such
premises by CBS and its Affiliates conform in all material respects to all
restrictive covenants, conditions, easements, building, subdivision and similar
codes and federal, state and local laws, regulations, rules, orders and
ordinances and none of CBS or any of its Affiliates has received any notice of
any violation or claimed violation of any such restrictive covenant, condition
or easement, or any building, subdivision or similar code, or any federal, state
or local law, regulation, rule, order or ordinance which, either individually or
in the aggregate, could have a material adverse effect on the assets, business
or financial condition of the Stations, provided that any lawfully grandfathered
condition shall not be deemed to be a material adverse effect for purposes of
this subsection (i); (ii) there is no plan, study or effort by any governmental
authority or agency which could reasonably be expected to have a material
adverse effect on the Assets or financial condition of the Stations; and (iii)
there are no latent defects in the real property that could reasonably be
expected to have a material adverse effect on the Assets or financial condition
of the Stations. Except as disclosed on Schedule 4.1.23, the improvements of CBS
and its Affiliates upon the real property identified on Schedule 4.1.23 are in
good operating condition and repair, normal wear and tear excluded. None of CBS
or any of its Affiliates has knowledge or received notice (i) of any pending,
threatened, or contemplated action to take by eminent domain or otherwise to
condemn any portion of the real property or interest therein or (ii) of any
levied, threatened or proposed assessments for public improvements with respect
to the real property.
4.1.24. PAYMENT OF TAXES.
CBS and its Affiliates have, and as of the Closing Date, will
have, paid and discharged all taxes, assessments, excises and other levies which
are due, including but not limited to any such taxes, assessments, excises, and
levies which, if due and not paid, would interfere with Entercom's enjoyment or
use of the Assets or result in a lien, charge, or encumbrance thereon, excepting
such taxes, assessments, and other levies which will not be due
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until or after the Closing Date, and which are either to be prorated between the
parties pursuant to the provisions of Section 8.2 hereof or paid or contested by
CBS pursuant to Section 6.1.6.
4.1.25. REQUIRED CONSENTS.
The only material approvals or consents of persons or entities
not a party to this Agreement that are legally or contractually required to be
obtained by CBS in connection with the consummation of the transactions
contemplated by this Agreement are those that are (i) set forth on Schedules
4.1.5 and 4.1.6 hereto and (ii) those contemplated by Section 5.1.
4.1.26. EVIDENCE OF FINANCIAL CAPABILITY OF ENTERCOM.
CBS acknowledges that Entercom has delivered to it
satisfactory proof of its financial capability to consummate the transactions
contemplated hereby.
4.2. BY ENTERCOM.
Entercom hereby represents and warrants that:
4.2.1. CORPORATE STANDING.
Entercom is a corporation, duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania.
Entercom or one or more Affiliates to which Entercom's rights hereunder are
assigned pursuant to Section 11.13 is, or will be at Closing, qualified to do
business in the Commonwealth of Massachusetts. Entercom has full power and
authority to engage in the business in which it is presently engaged and to make
and perform this Agreement according to its terms.
4.2.2. AUTHORIZATION OF AGREEMENT; NO BREACH.
Entercom has the necessary corporate power and authority, on
behalf of itself, to execute, deliver and perform this Agreement, the Time
Brokerage Agreement and such other agreements as are necessary to consummate the
transactions contemplated hereby, and, subject to the receipt of the consents
and approvals required elsewhere herein, this Agreement and the Time Brokerage
Agreement constitute the valid and binding obligation of Entercom, enforceable
against it in accordance with their terms, except as limited by bankruptcy and
insolvency laws and by laws affecting the enforcement of creditors rights
generally or equitable principles. Assuming said consents and approvals are
obtained, neither such execution, delivery, and performance nor compliance by
Entercom with the terms and provisions of this Agreement and the Time Brokerage
Agreement will conflict with or result in a breach of any of the terms,
conditions, or provisions of the Articles of Incorporation or Bylaws of
Entercom, or any judgment, order, injunction, decree, regulation, or ruling of
any court or any other governmental
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authority to which Entercom is subject or any material agreement or contract to
which Entercom is a party or to which it is subject, or constitute a material
default thereunder.
4.2.3. QUALIFICATION.
Entercom's Affiliate which will be designated as the assignee
of the Authorizations in the Assignment Applications is or upon the filing of
the Assignment Applications will be qualified as a licensee of the Federal
Communications Commission and is or at the time of filing of the Assignment
Applications will be qualified as the assignee of the Authorizations to receive
Commission approval of the Assignment Applications. Entercom knows of no facts
relating to Entercom or any of its Affiliates that could reasonably be expected
to cause Commission approval of the Assignment Application to be denied or
materially delayed or which could reasonably be expected to lead to the filing
of a material objection to such Applications.
4.2.4. LITIGATION AND CLAIMS.
Except as disclosed in Schedule 4.2.4 hereto, no litigation,
proceeding, or controversy is pending or, to the knowledge of any officer of
Entercom, threatened, which might affect the ability of Entercom to perform its
obligations hereunder, and there is no basis known to Entercom for any such
litigation, proceeding, controversy, or claim. No claim has been made or
asserted against Entercom material to this transaction.
ARTICLE V.
CONDITIONS
5.1. MUTUAL CONDITIONS.
Performance of the obligations of the parties with respect to
the Stations under this Agreement and the Closing, are and shall be subject to
the occurrence and concurrence of the express conditions precedent that (i) the
Commission has granted its consent and approval in writing to the assignment to
a designated Affiliate of Entercom of the Authorizations issued by the
Commission as contemplated hereby without any materially adverse condition and
any condition as to the timing of consummation of the transactions contemplated
hereby set forth in such consent shall have been satisfied; (ii) the waiting
periods (as they may be extended) applicable to the transfer of the Assets under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") shall have expired or been earlier terminated; and (iii) any approval
required under the CBS Final Judgment to consummate the transactions
contemplated hereby shall have been received.
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5.2. CONDITIONS OF ENTERCOM.
Performance of the obligations of Entercom under this
Agreement and the Closing of the transactions provided for herein are and shall
be subject to the occurrence and concurrence of the express conditions
precedent, any of which may be waived by Entercom, that:
5.2.1. All Required Consents have been obtained from the other parties
to the Leases and the Contracts identified on Schedules 4.1.5 and 4.1.6
respectively as "Material Leases (or Contracts)-Consent to Assign Required."
5.2.2. No order, decree or judgment of any court, agency or other
governmental authority shall have been issued based on or arising out of the
conduct, action, inaction, qualifications or status of CBS or any of its
Affiliates, which would render it unlawful as of the Closing Date to effect the
transactions contemplated by this Agreement in accordance with its terms.
5.3. CONDITIONS OF CBS.
Performance of the obligations of CBS under this Agreement and
the Closing of the transactions provided for herein are and shall be subject to
the occurrence and concurrence of the express conditions precedent, any of which
may be waived by CBS, that:
5.3.1. No order, decree or judgment of any court, agency or other
governmental authority shall have been issued based on or arising out of the
conduct, action, inaction, qualifications or status of Entercom or any of its
Affiliates, which would render it unlawful as of the Closing Date to effect the
transactions contemplated by this Agreement in accordance with its terms.
5.4. EFFECT OF TIME BROKERAGE AGREEMENT ON CLOSING CONDITIONS.
To the extent that any party hereto is unable to fulfill any
condition to Closing under this Agreement that could have been fulfilled solely
but for (i) an action taken by another party either pursuant to this Agreement
or the Time Brokerage Agreement or in breach of this Agreement or the Time
Brokerage Agreement or (ii) a failure to take any action that another party was
obligated to take, or, in the exercise of commercial reasonableness, should have
taken, pursuant to this Agreement or the Time Brokerage Agreement, such
condition to Closing shall be deemed waived.
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ARTICLE VI.
COVENANTS AND OPERATIONS PRIOR TO CLOSING.
6.1. COVENANTS OF CBS.
Except as otherwise provided in the Time Brokerage Agreement
and in the CBS Final Judgment, during the period from the date of this Agreement
to the Closing Date, CBS and/or one or more of its Affiliates shall:
6.1.1. Conduct the business and operations of the Stations in the
Ordinary Course of Business and in accordance with all requirements of law and
regulation and, to the extent consistent with the foregoing, in the same manner
in which the same have heretofore been conducted with the intent of preserving
the ongoing operations and business of the Stations.
6.1.2. Cooperate with Entercom in connection with its review, analysis,
and monitoring of the Assets and the operation of the Stations to the end that
an efficient transfer of the Assets may be made at Closing, and the business of
the Stations and the operation of the Assets may continue on an uninterrupted
basis. In addition to providing information required hereunder or reasonably
requested by the other parties hereto, CBS agrees to promptly notify the other
parties of any unusual problems or developments of which CBS becomes aware with
respect to the Assets or the business of the Stations.
6.1.3. Consult with Entercom regarding any proposed material changes to
the operation of the Stations to insure continued operation of the Stations as
they are now operated and cooperate with Entercom to insure a smooth transfer of
ownership and continuity of operations at Closing.
6.1.4. Obtain and deliver to Entercom within 10 days hereof at its
expense, and permit Entercom to obtain within 20 days hereof at its expense,
Phase I Environmental Assessments of all or any of the Property to be conveyed
hereunder and any real property used by the Stations in their operations or for
which Entercom could be held responsible under any Environmental Laws. In the
event such Phase I Environmental Assessments disclose any conditions contrary to
the representations and warranties contained in Section 4.1.19, or any potential
that such conditions may exist, then Entercom may conduct or have conducted at
its expense additional testing to confirm or negate the existence of any such
conditions. If any such Phase I Environmental Assessment or additional testing
confirms the existence of any such conditions without reference to matters
disclosed on Schedule 4.1.19, CBS will cause the conditions to be remedied as
quickly as is reasonably possible to the extent required to comply with
applicable Environmental Laws; provided, however, that CBS shall have no
obligation for remedial action with respect to PCB-containing electrical
components at the WRKO transmitter site or to obtain site closure certification
for the underground fuel storage tank removed from the WRKO transmitter site;
and provided further that such remedial action(s) does not cost in the aggregate
in excess of One Million Dollars ($1,000,000.00) (subject to the last sentence
of Section 11.1).
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In the event that such remedial action(s) does cost in the aggregate in excess
of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section
11.1), CBS may elect not to take such remedial action. In such event, Entercom
may require CBS to proceed to Closing and Entercom shall receive a proration at
Closing, in the amount of One Million Dollars ($1,000,000.00) (subject to the
last sentence of Section 11.1). Alternatively, Entercom may terminate this
Agreement and CBS shall have no liability to Entercom as a result of such
termination. CBS has furnished to Entercom copies of any environmental reports,
title reports, and title insurance policies in its possession previously
prepared for any of the Property which CBS has been able to locate through the
date hereof, and from the date hereof through Closing, CBS shall forward to
Entercom any additional such reports or policies it receives or locates.
Notwithstanding any other provision of this Agreement, CBS shall have no further
liability to Entercom for any environmental condition to the extent such
condition is disclosed on Schedule 4.1.19 or any Phase I Environmental
Assessment or other testing conducted pursuant to this Section 6.1.4, except as
provided in this Section 6.1.4.
6.1.5. Obtain within 10 days hereof at its expense and deliver to
Entercom, commitments from a reputable title insurance company to issue extended
coverage policies of title insurance (ALTA Form 1970 or other form reasonably
acceptable to Entercom) with respect to each parcel of real property to be
conveyed hereunder, insuring good and marketable title to such real property
(the "Title Commitments"). In the event Entercom notifies CBS within 10 business
days of receipt of the Title Commitments that the Title Commitments disclose any
rights of way, easements, exceptions or other matters which do not constitute
Permitted Encumbrances and which materially and adversely interfere with the
continued use of such real property as currently used, CBS will cause the
conditions to be remedied as quickly as is reasonably possible; provided,
however, that such remedial action(s) does not cost in the aggregate in excess
of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section
11.1). In the event that such remedial action(s) does cost in the aggregate in
excess of One Million Dollars ($1,000,000.00), CBS may elect not to take such
remedial action, and, notwithstanding any other provision of this Agreement, CBS
shall have no further liability to Entercom for any title defect. In such event,
Entercom may require CBS to proceed to Closing and Entercom shall receive a
proration at Closing, in the amount of One Million Dollars ($1,000,000.00)
(subject to the last sentence of Section 11.1). Alternatively, Entercom may
terminate this Agreement and CBS shall have no liability to Entercom as a result
of such termination.
6.1.6. Cooperate with Entercom, with respect to the Stations, in its
efforts to employ after the Closing, or TBA Commencement Date, as the case may
be, any of the current employees of CBS and its Affiliates who are employed at
the Stations (the "Station Employees"), including without limitation, allowing
Entercom to meet privately with the Station Employees, other than Non-Continuing
Employees (as defined in Section 6.5). CBS and its Affiliates will not interfere
with or attempt to undermine in any way the efforts of Entercom to employ such
employees.
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6.1.7. Pay and discharge when due all taxes due after Closing accrued
or accruing with respect to periods ending on or before the Closing Date, to the
extent such taxes could reasonably be expected to result in a lien or otherwise
interfere with the use or enjoyment of the Assets; provided, that any such tax
may be contested by CBS in good faith by appropriate proceedings; provided
further that CBS shall pay any such taxes found to be due and owing upon
completion of such proceedings.
6.1.8. Prosecute any renewal application filed by it with the
Commission with respect to any of the Stations that are the subject of this
Agreement; (ii) diligently defend against any petition to deny or other filing
seeking denial of such application or against any matter raised sua sponte by
the Commission, and (iii) diligently defend against any petition for
reconsideration, application for review, or other post-grant objection to such
renewal application, in each case with respect to events occurring or accruing
prior to the Closing Date, during the period when the Station in question was
owned by CBS or any of its Affiliates.
6.1.9. Use its reasonable best efforts to determine in cooperation with
Entercom whether any of the assets listed on Schedule 4.1.4 as pertaining to
WBMX(FM) are used or intended for use primarily in the operation of any or all
of the Stations. Upon determining that any such assets are so used or so
intended for use, such assets will become part of the Property to be conveyed
hereunder.
6.2. NEGATIVE COVENANTS OF CBS.
Unless Entercom has given its consent in writing, which
consent shall not be unreasonably withheld, CBS and it Affiliates shall not,
directly or indirectly, during the period from the date hereof to the Closing
Date:
6.2.1. Except as specifically provided in this Agreement, cancel,
amend, modify adversely, assign, encumber, or in any way discharge or terminate
any of the Leases or Contracts other than in the Ordinary Course of Business
(provided, however, that CBS shall notify Entercom in writing of any such
actions involving a contract that would need to be identified on Schedule
4.1.6).
6.2.2. By any act or omission, surrender, modify adversely, forfeit, or
fail to renew on regular terms any Authorizations for the Stations or take or
omit any action which might result in the Commission instituting any proceedings
for the revocation, suspension or modification of any such Authorizations.
6.2.3. Except in the Ordinary Course of Business, sell or dispose of
any of the Assets; provided that any Assets so disposed of in the Ordinary
Course of Business (other than Assets that are obsolete, worn beyond repair, or
otherwise not suitable for use in any of the Stations and that are not in use)
are replaced with assets of comparable or better functionality
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6.2.4. Suffer or permit the creation of any mortgage, conditional sale
agreement, security interest, lease, lien, hypothecation, pledge, encumbrance,
restriction, liability, charge, claim, or imperfection of title on or with
respect to any of the Assets other than Permitted Encumbrances and those
identified on Schedule 4.1.8 hereto;
6.2.5. Enter into, renew, or modify any Contract relating to the
Stations with an individual value of over Fifty Thousand Dollars ($50,000.00) or
in the aggregate over Two Hundred and Fifty Thousand Dollars ($250,000.00);
other than for Time Sales Agreements, Trade Agreements or Barter Agreements,
provided, however, that this restriction shall not apply to renewal or
modification of any collective bargaining agreement governing employees at any
of the Stations, to the extent that such action would constitute a breach of the
terms of such agreement or a violation of applicable law. The amounts set forth
in the preceding sentence shall have no bearing on any determination as to what
constitutes "material" for purposes of this Agreement.
6.2.6. Fail to take any reasonable actions necessary to maintain the
Stations' continuous broadcast operations from their respective main antennae.
6.2.7. Fail to take any reasonable actions necessary to avoid the
happening of or to cure the existence of any material damage to or impairment of
any of the Assets.
6.2.8. Fail to operate the Stations in conformity in all material
respects with all of the applicable requirements of law and regulation.
6.2.9. Take any action which is materially inconsistent with its
obligations under this Agreement, or that could hinder or delay the consummation
of the transactions contemplated hereby.
Any notification or consent given under this Article VI will not mitigate,
detract from, or otherwise affect the representations, warranties, or
obligations under this Agreement and the consequences of the other party's
acting on any such notification or consent will be solely such other party's
responsibility, except to the extent inherent in the nature of any notification
or consent, or otherwise set forth in the terms thereof.
6.3. NO CONTROL.
Nothing contained in this Agreement or in the Time Brokerage
Agreement shall give Entercom any right to control the operations of the
Stations prior to the Closing Date.
6.4. NO SOLICITATION OR HIRE OF EMPLOYEES AND PROGRAMMING.
During the period beginning the date of this Agreement and
ending the earlier of eighteen (18) months after the Closing Date or, as to any
particular Station, upon consummation
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of any transaction requiring the prior consent of the Commission on FCC Form 314
or 315, CBS shall be prohibited from: (i) soliciting or hiring any Transferred
Employee (as defined in Section 6.5); provided, however, that this prohibition
shall not apply to any Transferred Employee hired by Entercom and subsequently
terminated by Entercom without cause; (ii) contracting for, negotiating for, or
soliciting any of the rights relating to the programming content on or
promotional materials related to the Stations listed on Schedule 6.4.
6.5. COVENANTS OF ENTERCOM.
6.5.1. Prior to the earlier of the TBA Commencement Date or the Closing
Date, Entercom or its designated Affiliate shall offer employment commencing on
the earlier of the TBA Commencement Date or the Closing Date to each of the
employees employed by CBS or its Affiliates at the Stations on such date (the
"Station Employees"), other than those employees specified on Schedule 6.5 (the
"Non-Continuing Employees"). The Station Employees accepting such offers shall
be referred to as the "Transferred Employees." "Station Employees" shall also
include any employee of the Station who is on a short-term disability or other
authorized temporary leave from employment by CBS not in excess of 6 months, and
Entercom or its designated Affiliate shall offer employment to such person at
such time the person is capable and ready to return to active status, provided
that such person actually returns to active status within such six (6) month
period. Except for any Transferred Employees whose employment contracts are
assumed by Entercom under the terms hereof, the terms and conditions of
Entercom's employment of the Transferred Employees shall be at-will employment
in at least the same positions, for at least the same direct cash compensation,
with medical insurance effective as of the earlier of the TBA Commencement Date
or the Closing Date and including coverage for any preexisting health conditions
that would have been covered by the health plan in which the employee was a
participant immediately prior to the earlier of the TBA Commencement Date or the
Closing Date and give effect, in determining any periodic deductible and maximum
out-of-pocket limitations, to claims incurred and paid by, and amounts
reimbursed to, such Transferred Employees prior to the earlier of the TBA
Commencement Date or the Closing Date. For purposes of determining the amount of
any entitlement of any Transferred Employee under Entercom's benefit and
vacation plans, Entercom will take into account and credit such Transferred
Employee under Entercom's benefit and vacation plans with the credit for service
the Transferred Employee received from CBS immediately prior to the earlier of
the TBA Commencement Date or the Closing Date. With respect to any welfare
benefit plan (as defined in Section 3(1) of ERISA) of Entercom for the benefit
of Transferred Employees, Entercom shall cause all Transferred Employees who
actively participated in similar plans of CBS to become a participant in such
welfare benefit plan of Entercom as of the earlier of the TBA Commencement Date
or the Closing Date. No provisions of this Agreement shall create any third
party beneficiary rights of any employee or former employee (including any
beneficiary or dependent thereof) of CBS in respect of continued employment (or
resumed employment) with CBS or Entercom or in respect of any other matter.
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6.5.2. Without the prior written consent of CBS, which shall not be
withheld unreasonably, from and after the date hereof, neither Entercom nor any
of its Affiliates shall take any action inconsistent with its obligations under
this Agreement, or that could hinder or delay the consummation of the
transactions contemplated hereby.
6.6. REAL PROPERTY SURVEYS.
6.6.2. Within 30 days of the date hereof, Entercom may procure, at its
expense, with respect to each parcel of real property owned by CBS and used in
connection with the operation of the Stations, a current survey of each such
parcel of real property, 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, transmitting towers, tower guy anchors and other matters
customarily shown on such surveys, and showing vehicular access affirmatively to
public streets and roads (the "Survey").
6.6.3. Within 10 business days of receipt of the Surveys, Entercom
shall give CBS copies of the Surveys and notice of any exceptions to matters
revealed by the Survey that would materially and adversely affect the Stations
as currently operated (the "Objectionable Exceptions"). If Entercom fails to
give such notice in a timely manner, Entercom shall be deemed to have accepted
matters revealed by the Surveys other than the Objectionable Exceptions
expressly set forth in the notice.
6.6.4. CBS shall cure or remove any Objectionable Exception within 30
days from the date of Entercom's notice; provided, however, that if CBS
reasonably determines that the cost of removing such Objectionable Exception
would exceed One Million Dollars ($1,000,000.00) (subject to the last sentence
of Section 11.1) or that CBS through the expenditure of up to One Million
Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1) will be
unable to cure or remove an Objectionable Exception within such 30-day period,
then CBS shall notify Entercom within 3 business days after such determination,
whereupon Entercom shall have the right, exercisable by written notice given to
CBS within 3 business days after receipt of CBS's notice, to elect (i) to agree
to accept the real property covered by such Survey, subject to such of the
Objectionable Exceptions, together with a payment of such sum as is necessary to
remove the Objectionable Exception not to exceed One Million Dollars
($1,000,000.00) (subject to the last sentence of Section 11.1) or (ii) to
terminate this Agreement. If Entercom fails to elect option (i) or (ii) above,
then Entercom shall be deemed to have elected option (i).
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ARTICLE VII.
ACTIONS PRIOR TO CLOSING.
7.1. APPLICATION TO COMMISSION.
The parties hereby bind themselves to use their best efforts,
and to cooperate with each other, in seeking the consent and approval of the
Commission to the assignment of all Authorizations heretofore granted and issued
in connection with the Stations as herein provided; diligently and promptly to
prepare, sign, and file with the Commission within five (5) business days from
the date of this Agreement any and all applications requisite or desirable to
procure such consents and approvals (the "Assignment Applications"); and
diligently and promptly to prepare and submit to the Commission all information,
data, exhibits, amendments, resolutions, statements, and other material
necessary or proper in connection with the Assignment Applications; and
diligently to pursue the grant of a Final Order approving such Assignment
Applications.
7.2. COMPLIANCE WITH CBS FINAL JUDGMENT.
Entercom acknowledges that CBS has provided it with a copy of
the CBS Final Judgment. Within two (2) business days of the date of this
Agreement, CBS shall comply with the notification provisions of Section VII of
the CBS Final Judgment, and both parties shall thereafter comply in all material
respects with all requests for additional information by the DOJ under the CBS
Final Judgment. The parties will attempt in good faith to persuade the DOJ to
provide written notice of no objection to this Agreement. If the DOJ does not
provide written notice of no objection under the CBS Final Judgment, then CBS
may, but shall be under no obligation to, seek the Court's approval of this
Agreement pursuant to Section VII of the CBS Final Judgment. If CBS decides not
to seek Court approval, or if DOJ has not provided written notice of no
objection or the Court's approval has not been obtained by the Upset Date (as
defined in Section 9.1.1.), then either party shall be permitted to terminate
this Agreement as provided in Section 9.1.
7.3. HART-SCOTT-RODINO NOTIFICATION.
As promptly as practicable and no later than ten (10) days
after the date hereof, the parties hereto shall take all steps reasonably
necessary to file and shall participate in the filing of all requisite documents
and notifications required to be filed pursuant to the HSR Act. All filing fees
in connection with such notifications shall be paid by one-third by CBS and
two-thirds by Entercom. The parties agree to diligently take and fully cooperate
in the taking of all necessary and proper steps, and provide any additional
information reasonably requested in order to obtain promptly the early
termination of the waiting period under the HSR Act.
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7.4. INSPECTION.
During the period from the date of this Agreement to the
Closing Date, CBS shall, upon reasonable request, afford, or cause to be
afforded, engineers, attorneys, accountants, and other consultants and/or
representatives of Entercom free access in a reasonable manner during normal
business hours to the employees, offices, studios, transmitter sites, equipment,
records, and other documents pertaining to the Stations and furnish or cause to
be furnished Entercom with all information concerning the Stations' affairs as
Entercom may reasonably request, including but not limited to applications and
other documents filed with the Commission. For purposes of the foregoing,
records shall include, without limitation, any sales, research, consulting, and
ratings reports relating to the Stations.
7.5. CONFIDENTIALITY.
Each party hereby covenants and agrees that in the event the
transactions contemplated by this Agreement are not consummated for any reason
whatsoever, they will, upon request, return to the other party within ten (10)
days from the date of such request, all versions, including copies, of all
information furnished to that party by another party hereto or its
representatives or Affiliates, regardless of whether the same is marked
"confidential" or "proprietary," together with any and all notes, memoranda,
analyses, compilations, studies, or other documents (whether in hard copy or
electronic media) prepared by the receiving party, its directors, officers,
partners, employees, agents, or other representatives (including advisors,
attorneys, accountants, financial advisors, and potential financing sources)
which contain or otherwise reflect such information (the "Confidential
Information"). Each party hereby covenants and agrees to use reasonable efforts
to hold all Confidential Information in confidence and not to disclose, or cause
any representative, agent, or employee to disclose to any third party any
portion of the Confidential Information except as may be required by law or
judicial process, and not to use any portion of the Confidential Information for
its own benefit without the written consent of the providing party. Should a
party receive a request or be required by applicable law to disclose to a court
or other tribunal all or any part of the Confidential Information received from
another party hereto, CBS and Entercom confirm that each will adhere to the
terms and conditions set forth in paragraph 5 of the Confidentiality Agreement,
dated June 9, 1998, between CBS and Entercom. Nothing shall be deemed to be
Confidential Information that: (a) is or becomes generally available to the
public other than as a result of a disclosure by the receiving party or its
representatives; or (b) is or becomes available to the receiving party on a non-
confidential basis from a source rightfully in possession of the information and
which is under no legal, contractual or fiduciary obligation to keep it
confidential.
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ARTICLE VIII.
CLOSING
8.1. CLOSING.
Unless otherwise agreed by the parties, the Closing shall take
place at the offices of Latham & Watkins, 1001 Pennsylvania Avenue, N.W., Suite
1300, Washington, D.C. 20004 at 10:00 a.m., on the Closing Date, which shall be
the date five business days after the satisfaction of the conditions to Closing
set forth in Section 5.1, Section 5.2.2 and Section 5.3.1 hereof.
8.2. PRORATIONS.
Within ninety (90) days after Closing, an accounting for each
Station shall be made as follows:
8.2.1. All prepaid income, prepaid expenses, prepayments on any
Contracts and Leases assumed, accrued income, property taxes, and accrued
expenses, including without limitation any accrued expenses for Transferred
Employees (such as accrued vacation time) assumed by Entercom up to the
Adjustment Time shall, except as otherwise expressly provided herein or in the
Time Brokerage Agreement, be adjusted and allocated between CBS and Entercom to
reflect the principle that all expenses and income arising from the operation of
the Station up through the Adjustment Time shall be for the account of CBS, and
all expenses and income arising from the operation of the Station or portion
thereof acquired by Entercom after the Adjustment Time shall be for the account
of Entercom. Trade and Barter Agreements shall be subject to adjustment or
proration only to the extent provided in Section 4.1.18. Any appropriate
proration required to be made (i) pursuant to Leases referred to in Section
4.1.5, (ii) pursuant to Contracts referred to in Section 4.1.6, (iii) pursuant
to Section 6.1.4, and (iv) pursuant to Section 4.1.18 shall also be reflected in
such accounting. Any amount not paid when due shall bear interest at the rate of
ten percent (10%) per annum.
8.2.2. As soon as practicable following the Closing Date, and in any
event within ninety (90) days thereafter, or at such other time as the parties
agree, Entercom shall deliver to CBS Entercom's certificate, setting forth as of
the Adjustment Time, all adjustments to be made as provided in Section 8.2.1
above as to each Station. Entercom shall provide CBS or its representatives
access to copies of such portions of books and records CBS may reasonably
request solely for purposes of verifying such adjustments. Entercom's
certificate shall be final and conclusive unless objected to by CBS in writing
within thirty (30) days after delivery. Entercom and CBS shall attempt jointly
to reach agreement as to the amount of the adjustments to be made hereunder
within sixty (60) days after receipt of such written objection, which agreement,
if achieved, shall be binding upon all parties to this Agreement and not subject
to dispute or review.
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8.2.3. In the event of a disagreement between Entercom and CBS with
respect to the accounting to be made hereunder, the parties agree that a public
accounting firm chosen jointly by Entercom and CBS shall be the final arbiter of
such disagreement.
8.2.4. Any amounts due for the adjustments provided for herein shall be
paid within ten (10) business days after final determination.
8.3. CLOSING DELIVERIES TO ENTERCOM.
At or before the Closing, CBS shall deliver or cause to be
delivered to Entercom the following items and documents in form reasonably
satisfactory to counsel for Entercom and properly executed, unless Entercom
shall waive in whole or in part in writing such delivery and then only to the
extent of such waiver:
8.3.1. CBS shall pay to Entercom or its designee by wire transfer of
immediately available funds the CBS Contract Reimbursement.
8.3.2. CBS shall deliver to Entercom such Bills of Sale and assignments
and other instruments of transfer and conveyance, transferring to Entercom the
Property to be sold, transferred or assigned hereunder and the rights and
interests under the Leases and Contracts being assigned to Entercom hereunder,
to the extent such rights and interests under such leases and contracts have not
previously been assigned to and assumed by Entercom under the Time Brokerage
Agreement.
8.3.3. CBS shall deliver to Entercom one or more Special Warranty Deeds
in recordable form transferring to Entercom a fee simple interest in each parcel
of owned real property being conveyed to Entercom hereunder.
8.3.4. CBS shall deliver to Entercom an assignment of all right, title
and interest of CBS in and to the Authorizations.
8.3.5. CBS shall deliver to Entercom all keys to and actual possession
of all of the Assets, in the same condition as the same now are, except for
ordinary wear and tear thereof and except as permitted under the Agreement.
8.3.6. CBS shall deliver to Entercom certified copies of resolutions of
the Board of Directors of each CBS entity, duly authorizing the execution,
delivery, and performance of this Agreement and all documents to be executed and
delivered by CBS at the Closing, and thereafter.
8.3.7. CBS shall deliver to Entercom certificates signed by an
authorized officer to the effect (a) that no act or omission of CBS or any of
its Affiliates, or state of facts contrary to the agreements, representations,
and warranties of such party contained herein has been taken or has
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occurred and that said representations and warranties of such party, to the
extent they do not speak as of a specific time, are true and correct as of the
Closing Date, with the same effect as if made as of the time of Closing, except
to the extent otherwise permitted hereunder or to the extent such act, omission,
state of facts, untruth or inaccuracy would not have a material adverse effect
on Entercom's continued operation of the Stations as currently operated and (b)
that all covenants and agreements contained herein of CBS have been complied
with in all material respects.
8.3.8. CBS shall deliver to Entercom the Required Consents relating to
the Leases and Contracts, to the extent not previously delivered under the Time
Brokerage Agreement.
8.3.9. CBS shall deliver to Entercom evidence of the release of all
liens and encumbrances on the Assets to be released at Closing.
8.3.10. CBS shall deliver to Entercom one or more opinions of counsel
to CBS, dated he Closing Date, in form and substance reasonably satisfactory to
Entercom.
8.4. CLOSING DELIVERIES TO CBS.
At or before the Closing, Entercom or an Affiliate of
Entercom, as appropriate, shall deliver to CBS or cause to be delivered the
following items and documents in form reasonably satisfactory to counsel for CBS
and properly executed, unless CBS shall waive in whole or in part in writing
such delivery and then only to the extent of such waiver:
8.4.1. Entercom shall pay to CBS the Purchase Price by wire transfer of
immediately available funds.
8.4.2. Entercom shall deliver to CBS certified copies of resolutions of
the Board of Directors of Entercom duly authorizing the execution, delivery, and
performance of this Agreement and all documents to be executed and delivered by
Entercom at the Closing, and thereafter.
8.4.3. Entercom shall deliver to CBS certificates signed by an
authorized officer to the effect that no act or omission of Entercom or state of
facts contrary to the agreements, representations, and warranties of Entercom
contained herein has been taken or has occurred and that said representations
and warranties of Entercom to the extent they do not speak as of a specific time
are true and correct as of the Closing Date, with the same effect as if made as
of the time of Closing, and that all covenants and agreements contained herein
of Entercom have been complied with.
8.4.4. Entercom shall deliver to CBS one or more agreements whereby
Entercom assumes and agrees to pay when due any liabilities of CBS relating to
the Stations specifically assumed by Entercom hereunder, including without
limitation those liabilities accruing after the
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Adjustment Time with respect to those Leases and Contracts being assumed by
Entercom hereunder, to the extent such rights and interests under such
liabilities have not previously been and assumed by Entercom under the Time
Brokerage Agreement.
8.4.5. Entercom shall deliver to CBS one or more opinions of counsel to
Entercom dated the Closing Date, in form and substance reasonably satisfactory
to CBS.
8.5. COVENANTS OF FURTHER ASSURANCES; AVAILABILITY OF RECORDS.
At and after the time of Closing, upon request, each party
shall take such action and deliver to the other party such further instruments
of assignment, conveyance, or transfer or other documents of further assurance
as may be reasonably necessary to evidence the full and effective transfer,
conveyance, and assignment of the Assets and possession thereof to the
respective parties, their successors and assigns, and to assure complete
performance of this Agreement in all respects. After the Closing, for a period
of three (3) years, upon request, CBS shall provide Entercom copies of or access
to records relating to the Stations that are needed by Entercom for accounting,
tax, or other purposes.
8.6. RISK OF LOSS; DAMAGE TO PROPERTY.
The risk of loss or damage from fire, theft, storm or other
act beyond the control of CBS to any of the Assets prior to Closing, shall be
upon CBS. If, at the time of Closing, the tangible property to be sold hereunder
shall have suffered such loss or damage to an extent that affects the value
thereof and CBS shall not have repaired, replaced, or restored same with
property of like kind, quality, and value, Entercom shall complete the purchase
and Closing, in which event it shall be entitled to a payment equal to the
greater of (a) the amount necessary to repair, replace, or restore such damaged
property with property of like kind, quality, and value or (b) the amount of any
and all insurance proceeds available to CBS, if any, collectible by reason of
such loss or damage.
8.7. TAXES ON TRANSACTION.
All sales, purchase, transfer, use, or documentary taxes, if
any, payable by reason of this Agreement or any of the transactions contemplated
hereby or the sale, transfer, or delivery of any of the Assets hereunder,
whether or not imposed on a particular party, shall be paid and borne equally by
CBS or Entercom, either by payment thereof or by reimbursement to the other
party.
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ARTICLE IX.
TERMINATION, DEFAULT AND INDEMNIFICATION
9.1. TERMINATION.
This Agreement may be terminated by a party hereto not then in
default hereunder upon written notice to the other parties upon occurrence of
any of the following: (i) the Closing has not occurred by the date that is one
year after the date of this Agreement (the "Upset Date"); (ii) the Commission
denies by Final Order or designates for hearing any of the Assignment
Applications or any portion thereof; (iii) by either party as provided in
Section 7.2; or (iv) any of the conditions set forth in Article V of this
Agreement are not waived by such party and such conditions shall not have been
satisfied on or before the Upset Date, or shall have become incapable of
satisfaction. This Agreement may be terminated by Entercom as provided in
Section 6.1.4, Section 6.1.5 and Section 6.6.3, provided Entercom is not then in
default hereunder.
9.2. EFFECT OF TERMINATION.
The termination of this Agreement under Section 9.1 shall not
relieve any party of any liability for breach of this Agreement prior to the
date of termination.
9.3. REMEDIES.
CBS recognizes that, in the event of a Default by CBS,
monetary damages alone will not be adequate. Therefore, in the event of a
Default by CBS, unless Entercom is in Default, Entercom shall be entitled, in
addition to indemnification pursuant to Section 9.4, to obtain specific
performance of the terms of this Agreement. In any action to enforce
specifically the performance of this Agreement under this Section 9.3, CBS shall
waive the defense that there is another adequate remedy at law or equity and
agrees that Entercom shall have the right to obtain specific performance of
CBS's obligations under the terms of this Agreement without being required to
prove actual damages, post bond, or furnish other security.
9.4. INDEMNIFICATION.
9.4.1. BY CBS.
CBS shall indemnify, defend, and hold Entercom and its
officers, directors, partners, employees, and Affiliates harmless from, against,
and with respect to any and all loss, damage, claim, obligation, assessment,
cost, liability, and expense (including, without limitation, reasonable
attorneys' fees and costs and expenses incurred in investigating, preparing,
defending against or prosecuting any litigation or claim, action, suit,
proceeding or demand) of any kind or character (a "Loss") (including without
limitation the loss of any of the Authorizations resulting from any failure by
the Commission to renew such Authorizations as a result of events occurring
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prior to the Closing Date) incurred, suffered, sustained, or required to be paid
by any of them and resulting from, related to or arising out of:
(a) any breach of any of the covenants, representations or
warranties made by CBS in or pursuant to this Agreement, or in any agreement,
document, or instrument executed and delivered pursuant hereto;
(b) any failure by CBS to perform or observe, or to have
performed or observed, in full, any covenant, agreement, or condition to be
performed or observed by it pursuant to this Agreement or in any agreement,
document, or instrument executed and delivered by or on behalf of it pursuant
hereto;
(c) any and all obligations of CBS, except for obligations
assumed or required to be assumed by Entercom under the terms of this Agreement
or in the Time Brokerage Agreement;
(d) the operation or ownership of the Assets prior to the
Adjustment Time by CBS and its Affiliates, except for obligations and
liabilities assumed by Entercom under the Time Brokerage Agreement; or
(e) Closing by Entercom and/or any of its Affiliates prior to
the grants of the Assignment Applications becoming Final Orders, if the failure
of the grants of the Assignment Applications to become Final Orders is
attributable to any issue raised regarding CBS or any of its Affiliates.
9.4.2. BY ENTERCOM.
Entercom shall indemnify, defend, and hold CBS and its
officers, directors, partners, employees, and Affiliates harmless from, against
and with respect to any and all items of Loss incurred, suffered, sustained, or
required to be paid by any of them and resulting from, related to or arising out
of:
(a) any breach of any of the covenants, representations, or
warranties made by Entercom in or pursuant to this Agreement, or in any
agreement, document, or instrument executed and delivered pursuant hereto;
(b) any failure by Entercom to perform or observe, or to have
performed or observed, in full, any covenant, agreement, or condition to be
performed or observed by it pursuant to this Agreement or in any agreement,
document, or instrument executed and delivered by or on behalf of it pursuant
hereto;
(c) Entercom's operation or ownership of the Assets after the
Adjustment Time; or
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(d) any obligations under any Contracts or Leases assumed by
Entercom under Section 3.1 hereof. For purposes of Section 9.4.2(b), Entercom
acknowledges that if it wrongfully fails to close the transactions contemplated
hereby, CBS may not be able to dispose of the Stations in a transaction
qualifying under Section 1031 of the Code, and that Entercom shall indemnify and
hold harmless CBS for damages sustained by CBS if CBS disposes of the Stations
within one year from the date Closing should have occurred and CBS is unable to
do so in a manner that qualifies for tax-deferred treatment under Section 1031
of the Code.
9.4.3. NOTICE AND PROCEDURE IN CONNECTION WITH THIRD PARTY
CLAIMS.
If any party has a claim for indemnification hereunder (such
party, an "Indemnitee") arising out of any claim or liability which is asserted
or threatened against it, or any action, suit or proceeding is commenced by any
third party against any Indemnitee which might result in any indemnification
obligations hereunder on behalf of any other party (such other party, an
"Indemnitor"), such Indemnitee shall, within twenty (20) business days from the
receipt of same, give written notice thereof to each such Indemnitor together
with a brief statement of the basis of the claim and a copy of any complaint or
other documents relating to such claim, provided, however, that failure to give
such notice within such twenty (20) business day period shall not affect the
liability of Indemnitor hereunder unless the failure to give such notice within
such period materially and adversely affects Indemnitor's ability to defend
against the claim giving rise to Indemnitee's claim for indemnification or to
cure the default giving rise to such claim. Within twenty (20) days from receipt
of such notice, the Indemnitor shall give the Indemnitee written notice as to
whether the Indemnitor elects to contest any such claim or liability; provided,
however, that during the interim, the Indemnitee shall be entitled to take
reasonable action (which shall not include settlement) with respect to such
claim which it deems necessary to protect against further damage or default with
respect thereto. If an Indemnitor elects to contest any such claim or liability,
it shall be at the cost and expense of the Indemnitor and using professionals
chosen by the Indemnitor. The Indemnitee may participate in the defense of any
claim or liability that an Indemnitor has elected to contest, but such
participation shall be at its own expense. If the Indemnitor does not elect to
assume control or otherwise participate in the defense of any third party claim,
it shall be bound by the results obtained by the Indemnitee with respect to such
claim, including any settlement, subject to the Indemnitor's right to contest
the underlying obligation to indemnify the Indemnitee.
9.4.4. EXCLUSIVITY.
Except as provided in Section 9.1 concerning termination of
this Agreement and Section 9.3 concerning the rights of Entercom to specific
performance, subsequent to Closing the right to indemnification hereunder shall
be the exclusive remedy for all claims of damages of any party in connection
with any breach by any other party of its representations, warranties, or
covenants. Subsequent to Closing, the parties hereto agree that no party will be
entitled to consequential or punitive damages as a result of a breach hereof by
any party hereto.
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9.4.5. LIMITATIONS.
Except as otherwise provided in this Article IX, any claim
asserted for damages or indemnification hereunder must be submitted to the
Indemnitor in writing within the time periods set forth in Section 11.3 of this
Agreement and any such claim not so asserted shall be waived and barred. No
party shall be entitled to indemnification hereunder unless the aggregate amount
of its claims for indemnification exceeds One Hundred Thousand Dollars
($100,000.00) per Station, in which event such party shall be indemnified for
the entire amount owed. This amount shall have no bearing on any determination
as to what constitutes "material" for purposes of this Agreement. No party shall
be entitled to indemnification hereunder for amount in the aggregate greater
than the Purchase Price.
ARTICLE X.
INTENTIONS OF THE PARTIES AS TO FORM OF TRANSACTION
10.1. CBS' INTENTION.
CBS may elect to transfer and convey the Assets to Entercom in
such a fashion as would permit CBS to effect a deferred like-kind exchange of
the Assets for other like-kind assets to be acquired by CBS after the Closing
with Purchase Price. If CBS so elects, it shall give written notice to Entercom
of its intention to effect such a deferred like-kind exchange, and thereafter
may at any time at or prior to Closing assign its rights under this Agreement to
a "qualified intermediary" as defined in Treas. Reg. Section 1.1031(k)-1(g)(4),
subject to all of Entercom's rights and obligations hereunder, and shall
promptly provide written notice of such assignment to all parties hereto. In the
event CBS assigns its rights hereunder to a "qualified intermediary," Entercom
shall acknowledge in writing the notification by CBS of the assignment to the
"qualified intermediary" of its rights hereunder, and Entercom shall pay the
Purchase Price to the "qualified intermediary" at Closing rather than to CBS,
which payment shall discharge the obligation of Entercom to make payment for the
Assets hereunder.
10.2. ENTERCOM'S INTENTION.
CBS acknowledges that Entercom is purchasing the Assets for
cash and that Entercom does not intend its acquisition of the Assets to be part
of a like-kind exchange by Entercom. Accordingly, without limiting Entercom's
obligation to perform for the benefit of CBS as specifically set forth in
Section 10.1, Entercom shall not be obligated to take any other action at the
request of CBS or the "qualified intermediary" at Closing or otherwise that
would be inconsistent with Entercom's intention to effect a purchase of the
Assets for cash.
10.3. INDEPENDENT TRANSACTIONS.
The parties acknowledge and agree that the transactions
contemplated by this Agreement are not contractually interdependent or otherwise
mutually dependent in any way on
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or with the transactions contemplated by either the Tampa Agreement or the
Boston II Agreement. The parties further acknowledge that neither the Closing
nor any of the rights or obligations of the parties set forth herein are
dependent or conditional on the closing or failure to close the transactions
contemplated by either the Tampa Agreement or the Boston II Agreement, and that
neither the closing of the Tampa Agreement or the Boston II Agreement nor any of
the rights or obligations of the parties to such agreements are dependent or
conditional on the occurrence of the Closing or the failure of occurrence of the
Closing.
ARTICLE XI.
GENERAL PROVISIONS
11.1. EXPENSES OF THE PARTIES.
Except as otherwise specifically provided herein, all expenses
involved in the preparation, authorization, and consummation of this Agreement
including, without limitation, all fees and expenses of agents, representatives,
counsel, and accountants in connection therewith and in connection with
applications to the Commission hereunder, shall be borne solely by the party who
shall have incurred the same, and the other party shall have no liability in
respect thereof. The foregoing notwithstanding, the parties agree that any
filing fees of the Commission relating to the filing of the Assignment
Applications shall be divided equally between CBS and Entercom. The parties
agree that the Required Cure Expense shall not exceed One Million Dollars
($1,000,000.00).
11.2. BROKERS.
Each party hereto represents and warrants to the other parties
hereto that it has not incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents commissions or other like
payment in connection with this Agreement or the transactions contemplated
hereby for which the other parties will have any liability, and each party
hereto agrees to indemnify and hold the other parties hereto harmless against
and in respect of any such obligation or liability based in any way on any
agreement, arrangement, or understanding claimed to have been made by such party
with any third party.
11.3. SURVIVAL OF COVENANTS, REPRESENTATIONS, AND WARRANTIES.
The provisions hereof which by their terms are to be performed
and observed after the Closing Date, and the several representations,
warranties, indemnities, and agreements of the parties herein contained, shall
survive the Closing Date hereunder for a period of eighteen (18) months and
shall remain effective and unaltered or unimpaired for such period by any
investigation that may have been or may be made at any time prior to Closing by
or on behalf of any party, except that the representations concerning title,
ERISA, environmental matters, and taxes contained in Sections 4.1.8, 4.1.15,
4.1.19 (other than as provided in Section 6.1.4), and 4.1.24 shall survive until
ninety (90) days after the expiration of the applicable statutes of
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limitation, and the provisions of Sections 2.2 and Article X shall survive the
Closing without limitation.
11.4. CONFIDENTIALITY.
Each party agrees, except as otherwise required by law or the
rules of the New York Stock Exchange (the "NYSE"), until such time as this
Agreement is made public by filing with the Commission, that it will not
disclose to any third party the fact of or content of this agreement or the
possible exchange of the radio stations involved without the express prior
consent of the other parties. Should a party be required to disclose information
regarding the agreement prior to filing with the Commission because of a
requirement of law or a rule of the NYSE, it will advise the other parties with
reasonable advance notice in writing prior to disclosure.
11.5. AMENDMENT AND WAIVER.
This Agreement cannot be changed or terminated orally. Any
amendment or modification hereof must be in writing signed by the party against
whom enforcement is sought. No waiver of compliance with any provision or
condition hereof, and no consent provided for herein, shall be effective unless
evidenced by an instrument in writing duly executed by the party sought to be
charged with such waiver or consent.
11.6. EFFECT OF THIS AGREEMENT.
This Agreement and the Time Brokerage Agreement set forth the
entire understanding of the parties and supersedes any and all prior written or
oral agreements, arrangements, or understandings relating to the subject matter
hereof. No representation, promise or inducement has been made by either party
which is not embodied in this Agreement, and neither party shall be bound by, or
be liable for, any alleged representation, promise, inducement, or statement of
intention not embodied herein unless same shall have been made subsequent
hereto, shall be in writing, and shall be signed by the party to be charged
therewith. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns.
11.7. TERMS GENERALLY.
(a) Words in the singular shall be held to include the plural
and vice versa and words of one gender shall be held to include the other
genders as the context requires; (b) the terms "hereof," "herein," and
"herewith" or words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all Schedules hereto)
and not to any particular provision of this Agreement, and Article, Section,
Paragraph, and Schedule references are to be Articles, Sections, Paragraphs, and
Schedules to this Agreement unless
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otherwise specified; and (c) the word "or" shall not be exclusive, except where
the context otherwise requires.
11.8. HEADINGS.
The article or section headings of this Agreement are for
convenience of reference only and do not form a part of and do not in any way
modify, interpret, or construe the intention of the parties.
11.9. COUNTERPARTS.
This Agreement may be executed in one or more counterparts and
all such counterparts shall be construed as one and the same instrument.
Executed documents transmitted by telecopier shall be valid and binding.
11.10. GOVERNING LAW; JURISDICTION.
The construction and performance of this Agreement shall be
governed by the laws of the State of New York without reference to its conflict
of law rules. The parties hereto expressly waive and agree to waive any right to
a jury trial in any controversy or claim arising out of or relating to this
Agreement.
11.11. BULK SALES LAWS.
Entercom and its Affiliates waive compliance by CBS and its
Affiliates with the provisions of the "bulk sales" or similar laws of any state.
CBS agrees to indemnify Entercom and its Affiliates and hold them harmless from
any and all loss, cost, damages, and expenses (including but not limited to
reasonable attorney's fees) sustained by the indemnified parties as a result of
any failure of the indemnifying party to comply with any "bulk sales" or similar
laws.
11.12. ASSIGNMENT.
This Agreement and the rights and obligations hereunder may
not be assigned by any party hereto without the prior written consent of the
other parties hereto, which consent shall not be unreasonably withheld; provided
however, that (x) Entercom may make a collateral assignment of their rights
hereunder for the benefit of their senior lenders and (y) any party may assign
all or any part of this Agreement or the rights and obligations hereunder to an
Affiliate, provided that such assignment shall not relieve such party of its
obligations hereunder.
11.13. NOTICES.
Any notice, report, demand, waiver, or consent required or
permitted hereunder shall be in writing and shall be given by hand delivery, by
prepaid registered or certified mail,
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with return receipt requested, by an established national overnight courier
providing proof of delivery for next business day delivery or by telecopy
addressed as follows:
If to CBS: CBS Radio
40 West 57th Street
14th Floor
New York, NY 10019
Attention: Mr. Mel Karmazin
Telecopier Number: 212-314-9229
with copies to: General Counsel
CBS Corporation
51 West 52nd Street
New York, NY 10019-6188
Telecopier Number: 212-975-2185
and
Leventhal Senter & Lerman, P.L.L.C.
2000 K Street, N.W.
Suite 600
Washington, D.C. 20006
Attention: Steven A. Lerman, Esq.
Telecopier Number: 202-293-7783
If to Entercom: Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Attention: Mr. Joseph M. Field, President
Telecopier Number: 610-660-5641
with copies to: John C. Donlevie, Esq., Executive Vice President and
General Counsel
Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Telecopier Number: 610-660-5620
and
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, DC 20004
Attention: Joseph D. Sullivan, Esq.
Telecopier Number: 202-637-2201
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The date of any such notice and service thereof shall be
deemed to be: (i) the day of delivery if hand delivered or delivered by
overnight courier; (ii) the day of delivery as indicated on the return receipt
if dispatched by mail, or (iii) the date of telecopy transmission as indicated
on the telecopier transmission report, provided that any telecopy transmission
shall not be effective unless a paper copy is sent by overnight courier on the
date of the telecopy transmission. Any party may change its address for the
purpose of notice by giving notice of such change in accordance with the
provisions of this Section.
11.14. ATTORNEYS' FEES.
In the event of a dispute between or among the parties hereto
arising out of or related to this Agreement or the interpretation or enforcement
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and expenses from the other party.
11.15. TEMPORARY SUBLEASE FOR WBMX.
In the event that as of Closing Date, CBS has been unable to
move Station WBMX(FM) to its new office space, Entercom shall permit CBS to
continue to occupy that portion of the leased premises under the Lease dated
September 30, 1993, as amended October 31, 1997, as amended January 1, 1995,
between JMB Urban Huntington Limited Partnership and Atlantic Radio, L.P. for
office space at 116 Huntington Avenue, Boston, Massachusetts (the "Office
Lease"), which is currently occupied by WBMX(FM) until a date not later than
April 31, 1999; provided that CBS shall make reasonable commercial efforts to
vacate the premises as soon as possible. CBS shall pay Entercom rent monthly on
the first of each month based on the number of square feet of the premises
occupied by CBS, divided by the total number of square feet under the Office
Lease.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized corporate officers and their
respective corporate seals thereunto affixed on this the date first written
above.
CBS RADIO, INC.
By:_______________________________________
Title:_____________________________________
CBS RADIO LICENSE, INC.
By:_______________________________________
Title:_____________________________________
ENTERCOM COMMUNICATIONS CORP.
By:_______________________________________
Title:_____________________________________
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EXHIBIT 10.13
TIME BROKERAGE AGREEMENT
BY AND AMONG
ENTERCOM COMMUNICATIONS CORP.
CBS RADIO, INC.,
AND
CBS RADIO LICENSE, INC.,
DATED AS OF AUGUST 13, 1998
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TABLE OF SCHEDULES AND EXHIBITS
Schedule 1.1 Programming
Schedule 1.2 Compensation
Schedule 2.1 Programming Policy Statement
Schedule 4.1 Time Sales Agreements and Contracts
(i)
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TABLE OF CONTENTS
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ARTICLE I. - SALE OF TIME.............................................................. 1
SECTION 1.1.BROADCAST OF PROGRAMMING................................. 1
SECTION 1.2.PAYMENT.................................................. 1
SECTION 1.3.TERM..................................................... 2
ARTICLE II. - PROGRAMMING AND OPERATING STANDARDS AND PRACTICES........................ 2
SECTION 2.1.COMPLIANCE WITH STANDARDS................................ 2
SECTION 2.2.POLITICAL BROADCASTS..................................... 2
SECTION 2.3.HANDLING OF COMMUNICATIONS............................... 3
SECTION 2.4.PREEMPTION............................................... 3
SECTION 2.5.BROADCASTING OBLIGATIONS OF LICENSEE..................... 3
SECTION 2.6."PAYOLA" AND "PLUGOLA"................................... 4
SECTION 2.7.ADVERTISING AND PROGRAMMING.............................. 4
SECTION 2.8.COMPLIANCE WITH LAWS..................................... 5
SECTION 2.9.CERTIFICATIONS........................................... 5
ARTICLE III. - RESPONSIBILITY FOR EMPLOYEES AND EXPENSES............................... 5
SECTION 3.1.TIME BROKER'S EMPLOYEES.................................. 5
SECTION 3.2.LICENSEE'S EMPLOYEES..................................... 6
SECTION 3.3.TIME BROKER'S EXPENSES................................... 6
SECTION 3.4.OPERATING EXPENSES....................................... 6
SECTION 3.5.TIME BROKER'S INSURANCE.................................. 6
ARTICLE IV. - ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS.............................. 7
SECTION 4.1.ASSIGNMENT............................................... 7
SECTION 4.2.PRORATION................................................ 7
SECTION 4.3.ACCOUNTS RECEIVABLE...................................... 8
ARTICLE V. - OPERATION OF STATION...................................................... 9
ARTICLE VI. - GRANT OF LICENSES........................................................ 9
SECTION 6.1.LICENSE TO USE STATIONS FACILITIES....................... 9
SECTION 6.2.LICENSE OF INTELLECTUAL PROPERTY......................... 10
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(i)
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ARTICLE VII. - INDEMNIFICATION......................................................... 10
SECTION 7.1.INDEMNIFICATION RIGHTS................................... 10
SECTION 7.2.PROCEDURES............................................... 10
ARTICLE VIII. - DEFAULT................................................................ 11
SECTION 8.1.TIME BROKER EVENTS OF DEFAULT............................ 11
SECTION 8.2.LICENSEE'S EVENTS OF DEFAULT............................. 12
SECTION 8.3.CURE PERIODS............................................. 12
SECTION 8.4.OTHER DEFAULTS........................................... 13
ARTICLE IX. - TERMINATION.............................................................. 13
SECTION 9.1.TERMINATION UPON DEFAULT................................. 13
SECTION 9.2.TERMINATION UPON CHANGE IN FCC RULES..................... 13
SECTION 9.3.CERTAIN MATTERS UPON TERMINATION......................... 14
ARTICLE X. - REMEDIES.................................................................. 15
ARTICLE XI. - CERTAIN REPRESENTATIONS AND WARRANTIES
OF THE PARTIES................................................. 15
SECTION 11.1.REPRESENTATIONS AND WARRANTIES OF TIME BROKER........... 15
SECTION 11.2.REPRESENTATIONS, WARRANTIES AND COVENANTS
OF OPERATOR AND CRLI..................... 16
ARTICLE XII. - MISCELLANEOUS........................................................... 18
SECTION 12.1.MODIFICATION AND WAIVER................................. 18
SECTION 12.2.NO WAIVER; REMEDIES CUMULATIVE.......................... 18
SECTION 12.3.CONSTRUCTION............................................ 18
SECTION 12.4.HEADINGS................................................ 18
SECTION 12.5.SUCCESSORS AND ASSIGNS.................................. 18
SECTION 12.6.FORCE MAJEURE........................................... 19
SECTION 12.7.BROKER.................................................. 19
SECTION 12.8.COUNTERPART SIGNATURES.................................. 19
SECTION 12.9.NOTICES................................................. 19
SECTION 12.10.ENTIRE AGREEMENT....................................... 21
SECTION 12.11.SEVERABILITY........................................... 21
SECTION 12.12.NO JOINT VENTURE....................................... 21
SECTION 12.13.DAMAGE TO STATIONS..................................... 21
SECTION 12.14.NONINTERFERENCE........................................ 21
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(ii)
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SECTION 12.15.REGULATORY CHANGES.................................... 22
SECTION 12.16.ATTORNEYS' FEES....................................... 22
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(iii)
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TIME BROKERAGE AGREEMENT
This Time Brokerage Agreement (this "Agreement") is made as of
the 13th day of August 1998, by and among Entercom Communications Corp., a
Pennsylvania corporation, ("Operator"), and/or Entercom's Affiliate to which the
rights and obligations of Entercom hereunder are assigned ("Entercom Affiliate")
(Operator and/or Entercom Affiliate are collectively referred to herein as
"Licensee"), CBS Radio, Inc., a Delaware corporation ("CRI"), and CBS Radio
License, Inc. ("CRLI") (CRI and CRLI, collectively, "Time Broker"). An Affiliate
of Entercom is the licensee of broadcast stations WYUU(FM), Safety Harbor,
Florida, and WLLD(FM), Holmes Beach, Florida (collectively, the "Stations").
Concurrently with the execution of this Agreement, Time Broker, Operator and ELC
are entering into an Asset Purchase Agreement (the "Purchase Agreement")
providing for the purchase by Time Broker of the Stations, upon the terms and
conditions set forth therein. Time Broker and Licensee desire to enter into an
agreement providing for the sale of substantially all of the broadcast time of
the Stations to Time Broker, subject to and in compliance with the rules and
policies of the Federal Communications Commission (the "FCC").
Accordingly, in consideration of the foregoing and of the
mutual promises, covenants, and conditions set forth below, the parties agree as
follows:
ARTICLE I.
SALE OF TIME
Section 1.1. Broadcast of Programming.
Effective as of six (6) business days after the expiration or
early termination of any waiting period applicable to the transfer of the
Stations to Time Broker under the Hart-Scott- Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") (the "Commencement Date"), Licensee shall
broadcast on the Stations, or cause to be broadcast on the Stations, programs
which are presented to it by Time Broker as described in greater detail on
Schedule 1.1 (the "Programming").
Section 1.2. Payment.
Time Broker shall pay Licensee for broadcast of the
Programming the amounts set forth in Schedule 1.2 (the "Monthly Payment"),
subject to adjustment as set forth in Section 2.4 below. All payments shall be
made by wire transfer of immediately-available funds by the last business day of
each calendar month, in arrears, to which such payment pertains. Any amount not
paid when due shall bear interest at the rate of ten percent (10%) per annum.
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Section 1.3. Term.
This Agreement shall commence on the Commencement Date and
shall terminate on the earlier of (i) 12:01 a.m. on the Closing Date under the
Purchase Agreement, (ii) the date the Purchase Agreement is terminated, or (iii)
the date this Agreement is terminated pursuant to Section 9.1 hereof.
ARTICLE II.
PROGRAMMING AND OPERATING STANDARDS AND PRACTICES
Section 2.1. Compliance with Standards.
All Programming delivered by Time Broker and all programming
supplied by Licensee during the term of this Agreement shall be in accordance
with applicable statutes, FCC requirements and the programming policies set
forth on Schedule 2.1. Licensee reserves the right to refuse to broadcast any
Programming containing matter which the Licensee believes is unsuitable or not
consistent with the needs and interests of its service area or may be violative
of any right of any third party, or which may constitute a "personal attack" as
that term is and has been defined by the FCC or which Licensee reasonably
determines is, or in the reasonable opinion of Licensee may be deemed to be,
indecent (and not broadcast during the safe harbor for indecent programming
established by the FCC) or obscene by the FCC or any court or other regulatory
body with authority over Licensee or the Stations. If Time Broker does not
adhere to the foregoing requirements, Licensee may suspend or cancel any
specific program not so in compliance, without any reduction or offset in the
payments due Licensee under this Agreement.
Section 2.2. Political Broadcasts.
Time Broker shall maintain and deliver to Licensee all records
and information required by the FCC to be placed in the public inspection files
of the Stations pertaining to the broadcast of political programming and
advertisements, in accordance with the provisions of Sections 73.1940 and
73.3526 of the FCC's rules, and agrees to broadcast sponsored programming
addressing political issues or controversial subjects of public importance, in
accordance with the provisions of Section 73.1212 of the FCC's rules. Time
Broker shall consult and cooperate with Licensee and adhere to all applicable
statutes and the rules, regulations and policies of the FCC, as announced from
time to time, with respect to the carriage of political advertisements and
programming (including, without limitation, the rights of candidates and, as
appropriate, others to "equal opportunities" and the carriage of contrasting
points of view as mandated by any "fairness" rule with respect to such
"issue-oriented" advertising or programming as may be broadcast) and the charges
permitted therefor. Time Broker shall promptly provide to Licensee such
documentation relating to such programming as Licensee is required to maintain
in its public inspection files or as Licensee shall reasonably request. Licensee
shall be responsible for the maintenance of the public inspection files of the
Stations.
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Section 2.3. Handling of Communications.
Time Broker shall cooperate with Licensee in promptly
responding to all mail, cables, telegrams or telephone calls directed to the
Stations in connection with the Programming provided by Time Broker or any other
matter relevant to its responsibilities hereunder. Promptly upon receipt, Time
Broker shall provide copies of all such correspondence to Licensee. Time Broker
shall promptly advise Licensee of any public or FCC complaint or inquiry known
to Time Broker concerning such Programming, and shall provide Licensee with
copies of any letters to Time Broker from the public, including complaints
concerning such Programming. Upon Licensee's request, Time Broker shall
broadcast material responsive to such complaints and inquiries. Notwithstanding
the foregoing, Licensee shall handle all matters or inquiries relating to FCC
complaints and any other matters required to be handled by Licensee under the
rules and regulations of the FCC.
Section 2.4. Preemption.
Licensee may, from time to time, preempt portions of the
Programming to broadcast emergency information or programs it deems would better
serve the public interest. Time Broker shall be notified at least one week in
advance of any preemption of any of the Programming for the purpose of
broadcasting programs Licensee deems necessary to serve the public interest
unless such advance notice is impossible or impractical, in which case Licensee
shall notify Time Broker promptly upon making such determination. In the event
of any such preemption, Time Broker shall be entitled to full reimbursement of
damages suffered as a result of such preemption, except in the case of
preemption to cover breaking news or to broadcast emergency information.
Licensee represents and covenants that preemption pursuant to this Section 2.4
shall only occur to the extent Licensee deems necessary to carry out its
obligations as an FCC licensee, and expressly agrees that its right of
preemption shall not be exercised in an arbitrary manner or for the commercial
advantage of Licensee or others.
Section 2.5. Broadcasting Obligations of Licensee.
During the term of this Agreement, except as set forth in
Sections 2.1 and 2.4, Licensee will broadcast the Programming in its entirety
(including commercials), without interruption, deletion or addition of any kind,
except as set forth below:
Licensee may temporarily refrain from broadcasting the
Programming between the hours of 12:30 a.m. and 5:30 a.m. (or at such other time
in the event that weather conditions or contractual arrangements relating to
transmitter sites dealing with the exposure of humans to RF radiation so
require) in order to perform normal, customary and routine maintenance on the
Stations' transmitting facilities; provided that Licensee shall provide written
notice to Time Broker of its intent to refrain from broadcasting the Programming
at least forty-eight (48) hours
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in advance, except when an emergency requires such suspension, and provided
further that Licensee shall use its best efforts to minimize the frequency and
duration of such interruptions:
(a) Licensee may temporarily cease broadcasting the
Programming as a result of a natural disaster, act of public enemy, act
of God or other event beyond Licensee's control; provided that in any
such case, Licensee will act expediently and use its best efforts to
resume the broadcast of the Programming as quickly as the applicable
circumstances will allow; and
(b) Licensee may temporarily refrain from
broadcasting the Programming on the Stations as a result of a technical
problem with the Stations' transmitting equipment which is beyond
Licensee's control and which is not directly or indirectly the result
of any act or omission of Licensee or any of its employees or agents;
provided that in such case, Licensee will act expediently and use its
best efforts to resume the broadcast of the Programming as quickly as
the applicable circumstances will allow.
Section 2.6. "Payola" and "Plugola".
Time Broker agrees that it will not accept any gift, gratuity
or other consideration, including, but not limited to, a commission, discount,
bonus, material supplies or other merchandise, services or labor (collectively,
the "Consideration"), directly or indirectly, from any person or company for the
playing of records, the presentation of any programming or the broadcast of any
commercial announcement over the Stations unless the payor is identified in the
program for which Consideration was provided as having paid for or furnished
such Consideration, in accordance with the Communications Act of 1934, as
amended (the "Communications Act") and the FCC requirements. It is further
understood and agreed that no commercial message, plugs, or undue reference
shall be made in programming presented over the Stations to any business
venture, profit-making activity or other interest (other than non- commercial
announcements for bona fide charities, church activities or other public service
activities) unless the payor is identified in the program for which
Consideration was provided as having paid for or furnished such Consideration,
in accordance with the Communications Act and the FCC requirements. In addition,
Time Broker agrees that it will take steps, including the continuation of
Licensee's system for periodic execution of affidavits, reasonably designed to
assure that it, its employees and agents comply with this Section 2.7.
Section 2.7. Advertising and Programming.
Beginning with the Commencement Date, Time Broker shall be
solely responsible for any expenses incurred in connection with and shall be
entitled to all revenue from the sale of advertising or program time on the
Stations. Except as otherwise provided herein, Time Broker does not assume any
obligation of Licensee under any contract or advertising arrangement entered
into by Licensee on or after the Commencement Date. Time Broker will advise
Licensee
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of its lowest unit charge for political advertising, and Licensee shall not do
anything that would lower Time Broker's lowest unit charge.
Section 2.8. Compliance with Laws.
At all times during the term of this Agreement, Time Broker
and Licensee shall comply in all material respects with all applicable federal,
state and local laws, rules and regulations, including the use of FCC-licensed
operators where such are required.
Section 2.9. Certifications.
Pursuant to Section 73.3555(a)(3)(ii) of the FCC's rules,
Licensee certifies that it maintains ultimate control over the Stations'
facilities, including specifically control over station finances, personnel and
programming, and Time Broker certifies that this Agreement complies with the
provisions of Sections 73.3555 of the FCC's rules.
ARTICLE III.
RESPONSIBILITY FOR EMPLOYEES AND EXPENSES
Section 3.1. Time Broker's Employees.
(a) Time Broker shall employ and be responsible for
the payment of salaries, taxes, insurance and all other costs related
to all personnel used in the production of the Programming. Time Broker
will not incur any liability on account of Licensee's employees arising
and accruing prior to the Commencement Date including, without
limitation, any such liability on account of unemployment insurance
contributions, termination and severance payments, accrued sick leave
or accrued vacation.
(b) Time Broker's and Licensee's obligations with
regard to the hiring by Time Broker of Licensee's employees at the
Stations shall be as set forth in Section 3.2.2 and Section 6.5.1 of
the Purchase Agreement, except as provided herein. As of the
Commencement Date, Licensee shall terminate all of its employees to
whom Time Broker will extend offers of employment, except for those
personnel necessary to fulfill Licensee's obligations under the
Communications Act, the rules of the FCC and other applicable laws and
Non- Continuing Employees (as defined in the Purchase Agreement), if
any. Time Broker shall offer employment to such terminated employees of
Licensee as provided in Section 6.5.1 of the Purchase Agreement.
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Section 3.2. Licensee's Employees.
Licensee shall employ and be responsible for the payment of
salaries, employment taxes, insurance and all other costs related to the
personnel necessary to fulfill its obligations as Licensee and to transmit the
Programming. Time Broker shall have no authority and shall not supervise persons
in the employ of Licensee after the Commencement Date. Licensee acknowledges
that its employees may have access to certain confidential information of Time
Broker. Licensee shall, therefore, inform its employees of the confidential
nature of such information and require that each such employee keep such
information confidential.
Section 3.3. Time Broker's Expenses.
Time Broker shall pay for all costs associated with the
production and delivery of the Programming, including but not limited to (i) all
ASCAP, BMI, SESAC and other copyright fees, (ii) any expenses incurred in
connection with its sale of advertising time hereunder (including without
limitation sales commissions) in connection with the Programming, (iii) the
salaries, employment taxes, insurance and related costs for all personnel used
in the production of the Programming and all sales personnel (including
salespeople, traffic personnel, and programming staff), and (iv) maintenance,
repairs and capital expense (to the extent Licensee is not covered by insurance)
of the Stations' studio equipment; provided however, that if this Agreement is
terminated other than through closing of the Purchase Agreement, Time Broker
will be reimbursed for any capital expenditures made during the term of this
Agreement.
Section 3.4. Operating Expenses.
Except as provided in Section 3.3, Licensee shall be
responsible for the payment when due of all fees and expenses relating to
operation and maintenance of the Stations to the extent necessary for Licensee
to maintain the licensed transmitting capability of the Stations and to fulfill
its obligations as an FCC Licensee, including, without limitation, salaries,
benefits and similar expenses for Licensee's employees, Licensee's federal,
state and local taxes, rent, utilities (excluding telephone), maintenance and
repairs at the Stations' transmitter and studio sites, any capital expense at
the Stations' transmitter and studio sites, insurance on the Stations'
equipment, insurance deductibles on claims on the Stations' equipment, and ad
valorem property taxes.
Section 3.5. Time Broker's Insurance.
At all times while this Agreement remains in effect, Time
Broker shall maintain Broadcaster's Liability Insurance with coverage of at
least One Million Dollars ($1,000,000.00) per occurrence, Workers Compensation
insurance and Commercial General Liability insurance with a combined single
limit amount of Five Million Dollars ($5,000,000.00) with insurance companies
that have a Best rating of A or better. Time Broker shall deliver certificates
of
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insurance periodically to Licensee evidencing that such insurance remains in
effect and such policies shall name Licensee as an additional insured.
ARTICLE IV.
ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS
Section 4.1. Assignment.
On the Commencement Date, Licensee shall assign to Time Broker
title to all vehicles that are part of the Property (as defined in the Purchase
Agreement) and all Time Sales Agreements, Trade Agreements and Barter Agreements
(as such agreements are defined in the Purchase Agreement), together with those
contracts and other agreements identified on Schedule 4.1 (collectively, the
"Contracts"). Time Broker shall, on and as of the Commencement Date, assume and
become fully liable and responsible for all liabilities and obligations of
Licensee accruing after the Commencement Date under the Contracts. Except as set
forth in the Purchase Agreement, Licensee has provided Time Broker with true and
complete copies, including amendments, of the Contracts. The Contracts are
freely assignable, or, if consent of the other contracting party to the
assignment is required, Licensee shall use its reasonable best efforts to obtain
such consent as promptly as practicable; provided that CBS shall not be
obligated to pay money to any other contracting party to obtain any such
consent, other than reasonable expenses of the party for any legal documentation
related to the assignment of the Contract in question. If Licensee is unable to
obtain any consent necessary to permit the valid assignment of a Contract,
Licensee shall act as Time Broker's agent in connection with such Contract and
the parties shall cooperate to cause Time Broker to receive the benefit of the
Contract in exchange for performance by Time Broker of all of Licensee's
obligations under such Contract (including but not limited to the payment to
Licensee of all amounts due under the Contract on or after the Commencement Date
for services provided by Licensee).
Section 4.2. Proration.
All expenses and income arising under the Contracts shall be
prorated between Licensee and Time Broker as of the Commencement Date in a
manner such that the costs and benefits thereunder through the date before the
Commencement Date shall be for the account of Licensee and, thereafter, during
the term of this Agreement, for the account of Time Broker. Such proration shall
include an adjustment to the extent that the excess of the value of unfulfilled
obligations under Trade Agreements and Barter Agreements (as defined in the
Purchase Agreement), including any "time bank" provisions thereof, over the
value of consideration to be received by the Stations (in each case determined
as of the Commencement Date) (the "Net Negative Trade Balance") exceeds One
Hundred Thousand Dollars ($100,000.00). The total value of all unfulfilled
obligations in respect of Trade Agreements and Barter Agreements to be assumed
by Entercom, whether or not the Stations have received consideration therefor,
shall not be in excess of Five Hundred Thousand Dollars ($500,000.00) as of the
Closing Date. It is agreed and understood that the proration required hereby
shall include an adjustment for any
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accrued but unpaid vacation of Licensee's employees that are hired by Time
Broker pursuant to the provisions of Section 3.1(b) hereof. It is further agreed
and understood that such proration shall not include an adjustment for any
termination or severance payments or benefits obligations that Licensee is
required to pay as a result of the termination of its employees pursuant to
Section 3.1(b) or any sick leave or other similar benefit, and that Time Broker
shall not be responsible for any such termination or severance payments or
benefits obligations except for those incurred on account of employees hired by
Time Broker on or after the Commencement Date pursuant to Time Broker's
severance policy, if any, after the Commencement Date. Such prorations shall be
completed and any necessary payments on account of such prorations paid within
sixty (60) days of the Commencement Date. If any disagreement with respect to
the proration of such income and expenses cannot be resolved by the parties,
Licensee and Time Broker will select a certified public accountant knowledgeable
in the broadcast industry to resolve the dispute. The parties will use their
best efforts in good faith to cause to occur as expeditiously as possible the
appointment of the certified public accountant, and once appointed, the
resolution of the dispute. The resolution of such accountant shall be binding on
the parties and subject to judicial enforcement. Payment of the cost of the
accountant shall be shared equally between Time Broker and Licensee.
Section 4.3. Accounts Receivable.
All cash accounts receivable for broadcasts on the Stations
which occur prior to the Commencement Date (the "Accounts Receivable") shall
belong to Licensee and for broadcasts which occur thereafter shall belong to
Time Broker. Within ten (10) days following the Commencement Date, Licensee
shall deliver to Time Broker a schedule of Cash Accounts Receivable for the
Stations as of the Commencement Date (the "Schedule of Accounts Receivable").
Time Broker agrees to collect for Licensee its Accounts Receivable as shown on
the Schedule of Accounts Receivable delivered by Licensee for a period of one
hundred fifty (150) days following the Commencement Date. Licensee will provide
Time Broker a power of attorney or other required authorization for the limited
purpose of allowing Time Broker to endorse and deposit checks and other
instruments received in payment of such Accounts Receivable. All payments
received by Time Broker from any customer whose name appears in the Schedule of
Accounts Receivable and who is also a customer of Time Broker shall be credited
as payment of the account or invoice designated by such customer. In the absence
of any such designation by the customer, payments shall be first credited to the
oldest invoice which is not disputed by said customer. Time Broker shall keep
accurate records of the payment received by it on such Accounts Receivable and
Licensee shall have access at reasonable times to Time Broker's records to
verify such status of the Accounts Receivable. Time Broker shall remit to
Licensee on a weekly basis, one week in arrears, amounts previously collected by
Time Broker on such Accounts Receivable, along with a written accounting of
same, including without limitation, to the extent Licensee's traffic and billing
system can produce same, a detailed open Accounts Receivable report reflecting
payments remitted therewith. Any Accounts Receivable that have not been
collected within such one hundred fifty (150) day period shall be returned to
Licensee, together with all records in connection therewith, including without
limitation, to the
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extent Licensee's traffic and billing system can produce same, a detailed open
Accounts Receivable report reflecting payments remitted therewith, whereupon
Licensee may pursue collection thereof in such manner as it, in its sole
discretion, may determine. Time Broker shall not have the right to compromise,
settle or adjust the amounts of any such Accounts Receivable without Licensee's
prior written consent. Except to remit collected Accounts Receivable in
accordance herewith, Time Broker shall have no liability or obligation to
Licensee with respect to the collection of its accounts and shall not be
obligated to take any action to collect such accounts.
ARTICLE V.
OPERATION OF STATION
Notwithstanding any provision of this Agreement to the
contrary, Licensee shall retain full authority and power with respect to the
management and operation of the Stations during the term of this Agreement. The
parties agree and acknowledge that Licensee's continued control of the Stations
and their premises is an essential element of the continuing validity and
legality of this Agreement. Accordingly, Licensee shall employ the General
Manager of the Stations and such other personnel as Licensee determines may be
necessary to fulfill its obligations as a licensee under the Communications Act
and its obligations in accordance with Section 3.2 hereof. Licensee shall retain
full authority and control over the policies, programming and operations of the
Stations, including, without limitation, the decision whether to preempt
Programming in accordance with Section 2.4 hereof. Licensee shall have ultimate
responsibility to effectuate compliance with the Communications Act and with FCC
rules, regulations and policies. In no event shall Time Broker or its employees
represent, depict, describe or portray Time Broker as the licensee of the
Stations.
ARTICLE VI.
GRANT OF LICENSES
Section 6.1. License to Use Stations Facilities.
Effective as of the Commencement Date, Licensee grants Time
Broker a license to access and use all of the Stations' studio and office space
and other facilities ("Stations Facilities") and all equipment and furnishings
contained therein ("Stations Equipment") in the production and broadcasting of
the Programming and sales and administration relating thereto, in accordance
with the terms set forth in this Section 6 (the "Time Broker License"). The Time
Broker License shall have a term coterminous with this Agreement. Time Broker
shall not remove from the Stations Facilities or modify any Stations Equipment
in the Stations Facilities owned by or leased or licensed to Licensee without
Licensee's prior written consent, such consent not to be unreasonably withheld.
Licensee shall not license the use of the Stations Facilities to any other party
during the term of the Time Broker License; and Time Broker's use of the
Stations Facilities shall be exclusive except for Licensee's right to use such
facilities as it deems appropriate in connection with the satisfaction of its
obligations as the Licensee of the
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Stations, including the use of such facilities and adequate office space for the
employees of Licensee that are required for Licensee to comply with its
obligations under Section 3.2 and 5 hereof. Time Broker shall use due care in
the use of any property of Licensee. Time Broker shall indemnify Licensee for
any damage (normal wear and tear excepted) to Licensee's property caused by Time
Broker or any employee, contractor, agent or guest of Time Broker.
Section 6.2. License of Intellectual Property.
Effective as of the Commencement Date, Licensee licenses to
Time Broker the exclusive right to use (or, to the extent Licensee does not hold
exclusive rights, the non-exclusive right to use) all intellectual property
owned by or licensed to Licensee and used solely in the operation of the
Stations (including, but not limited to, logos, jingles, promotional materials,
call signs and goodwill) (the "IP License"). In the event of termination of this
Agreement, the IP License shall terminate; provided, however, that Licensee
shall own all trademarks, service marks, trade names, characters, formats,
jingles, promotional materials, logos and positioning statements which Time
Broker develops for the Programming during the term of this Agreement.
ARTICLE VII.
INDEMNIFICATION
Section 7.1. Indemnification Rights.
Each party will indemnify and hold harmless the other party,
and the directors, officers, partners, employees, agents and affiliates of such
other party, from and against any and all liability, including without
limitation reasonable attorneys' fees arising out of or incident to (i) any
breach by such party of a representation, warranty or covenant made herein, (ii)
the programming produced or furnished by such party hereunder, or (iii) the
conduct of such party, its employees, contractors or agents (including
negligence) in performing its or their obligations hereunder. Without limiting
the generality of the foregoing, each party will indemnify and hold harmless the
other party, and the directors, officers, partners, employees, agents and
affiliates of such other party, from and against any and all liability for
libel, slander, infringement of trademarks, trade names, or program titles,
violation of rights of privacy, and infringement of copyrights and proprietary
rights resulting from the programming produced or furnished by it hereunder. The
parties' indemnification obligations hereunder shall survive any termination or
expiration of this Agreement.
Section 7.2. Procedures.
If any party has a claim for indemnification hereunder (such
party, an "Indemnitee") arising out of any claim or liability which is asserted
or threatened against it, or any action, suit or proceeding is commenced by any
third party against any Indemnitee which might result in any indemnification
obligations hereunder on behalf of any other party (such other party, an
"Indemnitor"), such Indemnitee shall, within twenty (20) business days from the
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receipt of same, give written notice thereof to each such Indemnitor together
with a brief statement of the basis of the claim and a copy of any complaint or
other documents relating to such claim, provided, however, that failure to give
such notice within such twenty (20) business day period shall not affect the
liability of Indemnitor hereunder unless the failure to give such notice within
such period materially and adversely affects Indemnitor's ability to defend
against the claim giving rise to Indemnitee's claim for indemnification or to
cure the default giving rise to such claim. Within twenty (20) days from receipt
of such notice, the Indemnitor shall give the Indemnitee written notice as to
whether the Indemnitor elects to contest any such claim or liability; provided,
however, that during the interim, the Indemnitee shall be entitled to take
reasonable action (which shall not include settlement) with respect to such
claim which it deems necessary to protect against further damage or default with
respect thereto. If an Indemnitor elects to contest any such claim or liability,
it shall be at the cost and expense of the Indemnitor and using professionals
chosen by the Indemnitor. The Indemnitee may participate in the defense of any
claim or liability that an Indemnitor has elected to contest, but such
participation shall be at its own expense. If the Indemnitor does not elect to
assume control or otherwise participate in the defense of any third party claim,
it shall be bound by the results obtained by the Indemnitee with respect to such
claim.
ARTICLE VIII.
DEFAULT
Section 8.1. Time Broker Events of Default.
The occurrence of any of the following, after the expiration
of the applicable cure periods, if any, will be deemed to be an Event of Default
by Time Broker under this Agreement: (a) Time Broker's failure to timely pay any
of the Monthly Payment provided for in Section 1.2 or other payments required
hereunder; (b) except as otherwise provided for in this Agreement, the failure
of Time Broker to supply the Programming; (c) any termination of this Agreement
by Time Broker other than as permitted in Section 9.1; or (d) the occurrence of
any of the following which arises out of, relates to or is attributable to the
acts or omissions of Time Broker:
(i) the issuance by the FCC of a Show Cause Order
designating any of the Stations' FCC authorizations for revocation;
(ii) the issuance by the FCC of an order designating
for an evidentiary hearing the Stations' applications for renewal of
the FCC authorizations;
(iii) the issuance by the FCC of an order designating
for an evidentiary hearing an application for the assignment of the
Stations' FCC authorizations to Time Broker;
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(iv) breach of any covenant of Time Broker which
would reasonably be expected to lead or to the revocation or
non-renewal of the FCC authorizations of any of the Stations; or
(v) a continuing, uncured material breach of any
covenant of Time Broker.
Section 8.2. Licensee's Events of Default.
The occurrence of any of the following, after the expiration of the
applicable cure periods, if any, will be deemed to be an Event of Default by
Licensee under this Agreement: (a) except as otherwise provided for in this
Agreement, the failure of Licensee to broadcast the Programming; (b) any
termination of this Agreement by Licensee other than as permitted in Section
9.1; (c) the issuance by the FCC of an order designating for an evidentiary
hearing an application for the assignment of the Stations' FCC authorizations to
Time Broker which arises out of, relates to or is attributable to the acts or
omissions of Licensee but excluding issues which are based upon Time Broker's
conduct hereunder for which Licensee may be held responsible; or (d) a
continuing, uncured material breach of any covenant of the Licensee.
Section 8.3. Cure Periods.
The cure periods before any event listed in Sections 8.1 or 8.2 shall
become an Event of Default are as follows:
(a) Payment by Time Broker. The Monthly Payment or
other payments required hereunder to be paid to Licensee must be
received by Licensee within five (5) days after Licensee gives written
notice of non-payment to Time Broker.
(b) Certain Matters. There shall be no cure period
for (i) the matters relating to the FCC set forth in Sections 8.1(d) or
8.2(c) hereof, (ii) a termination by Time Broker described in Section
8.1(c); or (iii) a termination by Licensee described in Section 8.2(b)
hereof.
(c) Programs and Broadcast Matters. With respect to
Time Broker's failure to provide the Programming referred to in Section
8.1(b) hereof or Licensee's failure to broadcast the Programming
referred to in Section 8.2(a) hereof, the period allowed for cure shall
be three business days from the giving of written notice of such
failure to the defaulting party by the non-defaulting party.
(d) Other Matters. With respect to all matters
capable of being cured other than those described in Sections 8.3(a),
8.3(b) or 8.3(c) above, the cure period shall be ten (10) days after
written notice to the defaulting party is
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given by the non-defaulting party or, with respect to matters that
through the exercise of reasonable diligence cannot be cured within
such ten (10) day period, such longer period not to exceed ninety (90)
days as is reasonably necessary to effect such cure through the
exercise of reasonable diligence.
Section 8.4. Other Defaults.
For any other breach of a representation, warranty or covenant
made herein that is not listed in Sections 8.1 or 8.2, a party's sole remedy
shall be indemnification pursuant to Article VII hereof.
ARTICLE IX.
TERMINATION
This Agreement shall automatically terminate upon the
expiration of the term of this Agreement as set forth in Section 1.3. In
addition, this Agreement shall terminate as provided below.
Section 9.1. Termination Upon Default.
In addition to other remedies available at law or equity, this
Agreement may be terminated by either Licensee or Time Broker by written notice
to the other, specifying an effective date of termination which is not less than
seven (7) days nor more than ninety (90) days from the date such notice is
given, if the party seeking to terminate is not then in material default or
breach hereof, upon an uncured Event of Default. In the event that the
non-defaulting party does not exercise such right of termination by giving such
written notice within sixty (60) days of the occurrence of an uncured Event of
Default, then the Event of Default giving rise to such right of termination
shall be deemed waived and the Agreement shall continue in full force and
effect.
Section 9.2. Termination Upon Change in FCC Rules.
In addition to other remedies available at law or equity, this
Agreement may be terminated by either Licensee or Time Broker by written notice
to the other, specifying an effective date of termination which is not less than
seven (7) days nor more than thirty (30) days from the date such notice is
given, in the event of a change in FCC rules, policies, or precedent that would
cause this Agreement to be in violation thereof and such change is final, in
effect, and has not been stayed, and the parties have been unable, after
negotiating in good faith for at least thirty (30) days, to modify this
Agreement to comply with the change in FCC rules, policies, or precedent.
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Section 9.3. Certain Matters Upon Termination.
(a) Upon any termination of this Agreement, Licensee
shall have no further obligation to provide to Time Broker any
broadcast time or broadcast transmission facilities and Time Broker
shall have no further obligations to make any payments to Licensee
under Section 1.2 hereof. Upon any termination, Time Broker shall be
responsible for all debts and obligations of Time Broker to third
parties based upon the purchase of air time and use of Licensee's
transmission facilities including, without limitation, accounts
payable, barter agreements and unaired advertisements, but not for
Licensee's federal, state and local income and business franchise tax
liabilities or taxes levied upon Licensee's personal property.
Notwithstanding anything herein to the contrary, to the extent that any
invoice, bill or statement submitted to Licensee after the termination
of this Agreement or any payment made by Time Broker prior to the
termination of this Agreement relates to expenses incurred in operating
the Stations, for periods both before and after the termination of this
Agreement, such expenses shall be prorated between Licensee and Time
Broker in accordance with the principle that Time Broker shall be
responsible for expenses allocable to the period prior to the
termination of this Agreement and Licensee shall be responsible for
expenses allocable to the period on and after the termination of this
Agreement. Such proration shall include an adjustment for Time Broker's
Trade Agreements only to the extent that Time Broker's Net Negative
Trade Balance exceeds One Hundred Thousand Dollars ($100,000.00). Each
party agrees to reimburse the other party for expenses paid by the
other party to the extent appropriate to implement the proration of
expenses pursuant to the preceding sentence.
(b) If this Agreement terminates other than as a
result of the Closing (as defined in the Purchase Agreement), Time
Broker shall (i) assign to Licensee and Licensee shall assume all
Contracts (including those employment contracts assumed by Time Broker
pursuant to this Agreement) and all renewals, replacements or other
contracts entered in the ordinary course of business relating to the
Stations between the Commencement Date and the date of termination of
this Agreement ("Supplemental Contracts") in effect on the date of such
termination or expiration; (ii) assign to Licensee title to vehicles
assigned to Time Broker under Section 4.1; and (iii) be responsible for
only those obligations under the Contracts and Supplemental Contracts
arising on or after the Commencement Date and prior to the termination
of this Agreement.
(c) Notwithstanding anything in Section 7.1 to the
contrary, no expiration or termination of this Agreement shall
terminate the obligation of each party to indemnify the other for
claims under Section 7 hereof or limit or impair
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any party's rights to receive payments due and owing hereunder on or
before the date of such termination.
ARTICLE X.
REMEDIES
In addition to a party's rights of termination hereunder (and
in addition to any other remedies available to it or provided under law), in the
event of an uncured Event of Default with respect to either party, the other may
seek specific performance of this Agreement, in which case the defaulting party
shall waive the defense in any such suit that the other party has an adequate
remedy at law and interpose no opposition, legal or otherwise, as to the
propriety of specific performance as a remedy hereunder, and agrees that the
other party shall have the right to obtain specific performance of the
defaulting party without being required to prove actual damages, post bond, or
furnish other security.
ARTICLE XI.
CERTAIN REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Section 11.1. Representations and Warranties of Time Broker.
Time Broker hereby represents and warrants to Licensee as
follows:
11.1.1. Corporate Organization. Time Broker is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania, is duly qualified to do business in the
Commonwealth of Massachusetts and has full power and authority to conduct its
business as currently conducted.
11.1.2. Authorization; Enforceability. This Agreement
has been duly executed and delivered by Time Broker, and is valid, binding and
enforceable against Time Broker in accordance with its terms. Time Broker has
full right, power, authority and legal capacity to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery and performance of this Agreement and the
consummation of the transactions provided for hereby have been duly authorized
by all necessary action on the part of Time Broker, and no other organizational
or other proceedings on the part of Time Broker are necessary to authorize the
execution or delivery of this Agreement or the transactions contemplated hereby.
11.1.3. No Consent. Except to the extent any of the
Contracts require consent to assignment, no consent of any other party and no
consent, license, approval or authorization of, or exemption by, or filing,
restriction or declaration with, any governmental authority, bureau, agency or
regulatory authority, other than the filing of this Agreement with the FCC and
the expiration or early termination of any applicable waiting period under the
HSR Act,
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if applicable, is required in connection with the execution, delivery or
performance of this Agreement by Time Broker or will effect the validity or
performance of this Agreement.
11.1.4. No Breach. Neither the execution or delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will constitute or result in the breach of any term, condition or provision of,
or constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of Time Broker pursuant to the
organizational documents of Time Broker, any agreement or other instrument to
which Time Broker is a party or by which any part of its property is bound, or
violate any law, regulation, judgment or order binding upon Time Broker.
11.1.5. Actions and Proceedings. There is no judgment
outstanding and no litigation, claim, investigation or proceeding pending
against Time Broker or, to the knowledge of Time Broker, threatened before any
court or governmental agency to restrain or prohibit, or to obtain damages, or
other relief in connection with, this Agreement, the Purchase Agreement or the
consummation of the transactions contemplated hereby or thereby or that might
adversely affect Time Broker's performance under this Agreement.
11.1.6. Qualifications. Time Broker is qualified in
accordance with the Communications Act of 1934, as amended, and the rules and
policies of the FCC to enter into this Agreement and provide programming on the
Stations in accordance with its terms. Between the date hereof and the
termination of this Agreement, either by the Closing of the Purchase Agreement
or the earlier termination in accordance with Article 9 hereof, Time Broker will
not take any action that Time Broker knows, or has reason to believe, would
disqualify it from providing programming on the Stations pursuant to this
Agreement.
Section 11.2. Representations, Warranties and Covenants of
Operator and CRLI.
Operator and CRLI hereby represent, warrant and covenant to
Time Broker as follows:
11.2.1. Corporate Organization. Operator is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware, is duly qualified to do business in the
Commonwealth of Massachusetts and has full power and authority to conduct its
business as currently conducted. CRLI is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware, is duly
qualified to do business in the Commonwealth of Massachusetts and has full power
and authority to conduct its business as currently conducted.
11.2.2. Authorization; Enforceability. This Agreement
has been duly executed and delivered by each of Operator and CRLI, and is valid,
binding and enforceable against each of them in accordance with its terms. Each
of Operator and CRLI has full right, power, authority and legal capacity to
enter into and perform its obligations under this
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Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions provided
for hereby have been duly authorized by all necessary action on the part of each
of Operator and CRLI, and no other organizational or other proceedings on the
part of Operator or CRLI are necessary to authorize the execution or delivery of
this Agreement or the transactions contemplated hereby.
11.2.3. No Consent. Except to the extent any of the
Contracts require consent to assignment, no consent, license, approval or
authorization of or exemption by, or filing, restriction or declaration with,
any governmental authority, bureau, agency or regulatory authority, other than
the filing of this Agreement with the FCC and the expiration or early
termination of any applicable waiting period under the HSR Act, if applicable,
is required in connection with the execution, delivery or performance of this
Agreement or will affect the validity or enforceability of this Agreement.
11.2.4. No Breach. Except to the extent any of the
Contracts require consent to assignment, neither the execution or delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
constitute or result in the breach of any term, condition or provision of, or
constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of Operator or CRLI pursuant to the
organizational documents of Operator or CRLI, any agreement or other instrument
to which Operator or CRLI is a party or by which any part of their property is
bound, or violate any law, regulation, judgment or order binding upon Operator
or CRLI.
11.2.5. Actions and Proceedings. There is no judgment
outstanding and no litigation, claim, investigation or proceeding pending
against Operator or CRLI or, to the knowledge of Operator or CRLI, threatened
before any court or governmental agency to restrain or prohibit, or to obtain
damages or other relief in connection with this Agreement or the consummation of
the transactions contemplated hereby.
11.2.6. Maintenance of Current Operations. The
Stations' transmission equipment shall be maintained by Operator and CRLI in a
condition consistent with good engineering practices and in compliance in all
material respects with the Communications Act and all other applicable rules,
regulations and technical standards of the FCC.
11.2.7. Other Agreements. During the term of this
Agreement, Operator and CRLI will not enter into any other time brokerage,
program provision, local management or similar agreement with any third party
with respect to the Stations.
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ARTICLE XII.
MISCELLANEOUS
Section 12.1. Modification and Waiver.
No modification or waiver of any provision of this Agreement
shall in any event be effective unless the same shall be in writing signed by
the party against whom the waiver is sought to be enforced, and then such waiver
and consent shall be effective only in the specific instance and for the purpose
for which given.
Section 12.2. No Waiver; Remedies Cumulative.
No failure or delay on the part of Licensee or Time Broker in
exercising any right or power hereunder shall operate as a waiver thereof, nor
any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, shall preclude any
other or further exercise thereof or the exercise of any other right or power.
The rights and remedies of Licensee and Time Broker herein provided are
cumulative and are not exclusive of any rights or remedies which they may
otherwise have.
Section 12.3. Construction.
This Agreement shall be construed in accordance with the laws
of the State of New York without reference to conflict of laws principles, and
the obligations of the parties hereto are subject to all federal, state or
municipal laws or regulations now or hereafter in force and to the regulations
of the FCC and all other governmental bodies or authorities presently or
hereafter duly constituted. The parties hereto expressly waive and agree to
waive any right to a jury trial in any controversy or claim arising out of or
relating to this Agreement.
Section 12.4. Headings.
The headings contained in this Agreement are included for
convenience only and no such heading shall in any way alter the meaning of any
provision.
Section 12.5. Successors and Assigns.
Any party may assign all or any part of this Agreement or the
rights and obligations hereunder to a person or entity controlling, controlled
by or under common control with such party, provided that any such assignment
shall not relieve such party of its obligations hereunder. Except as otherwise
provided herein, this Agreement and the rights and obligations hereunder may not
be assigned by any party hereto without the prior written consent of the other
parties hereto, which consent shall not be unreasonably withheld. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns.
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Section 12.6. Force Majeure.
The parties acknowledge and agree that a party will not be
liable for any failure to timely perform any of its obligations under this
Agreement if such failure is due, in whole or in part, directly or indirectly,
to accidents, fires, floods, governmental actions, war, civil disturbances,
other causes beyond such party's control or any other occurrence which would
generally be considered an event of force majeure.
Section 12.7. Broker.
The parties agree to indemnify and hold each other harmless
against any claims from any broker or finder based upon any agreement,
arrangement, or understanding alleged to have been made by the indemnifying
party.
Section 12.8. Counterpart Signatures.
This Agreement may be signed in one or more counterparts.
Section 12.9. Notices.
Any notice, report, demand, waiver or consent required or
permitted hereunder shall be in writing and shall be given by hand delivery, by
prepaid registered or certified mail, with return receipt requested, by an
established national overnight courier providing proof of delivery for next
business day delivery or by telecopy addressed as follows:
If the notice is to Time Broker:
Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Attention: Mr. Joseph M. Field, President
Telecopier Number: 610-660-5641
With a copy to:
John C. Donlevie, Esq.
General Counsel
Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Telecopier Number: 610-660-5620
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and
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Attention: Joseph D. Sullivan, Esq.
Telecopier Number: 202-637-2201
If the notice is to Licensee:
CBS Radio
40 West 57th Street
14th Floor
New York, NY 10019
Attention: Mr. Mel Karmazin
Telecopier Number: 212-314-9229
With copies to:
General Counsel
CBS Corporation
51 West 52nd Street
New York, NY 10019-6188
Telecopier Number: 212-975-2185
and
Leventhal Senter & Lerman, P.L.L.C.
2000 K Street, N.W.
Suite 600
Washington, D.C. 20006
Attention: Steven A. Lerman, Esq.
Telecopier Number: 202-293-7783
The date of any such notice and service thereof shall be deemed to be: (i) the
day of delivery if hand delivered or delivered by overnight courier; (ii) the
day of delivery as indicated on the return receipt if dispatched by mail; or
(iii) the date of telecopy transmission as indicated on the telecopier
transmission report provided that any telecopy transmission shall not be
effective unless a paper copy is sent by overnight courier on the date of the
telecopy transmission. Either party may change its address for the purpose of
notice by giving notice of such change in accordance with the provisions of this
Section.
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Section 12.10. Entire Agreement.
This Agreement, the letter agreements between the parties
dated of even date herewith and the Purchase Agreement (including all
attachments, exhibits and schedules) embody the entire agreement between the
parties and there are no other agreements, representations, warranties, or
understandings, oral or written, between them with respect to the subject matter
hereof.
Section 12.11. Severability.
Except as expressly set forth in Section 12.15, if any
provision contained in this Agreement is held to be invalid, illegal or
unenforceable in any respect by any court or other authority, then such
provision shall be deemed limited to the extent that such court or other
authority deems it reasonable and enforceable, and as so limited shall remain in
full force and effect. In the event that such court or other authority shall
deem any such provision wholly unenforceable, this shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had not been contained herein.
Section 12.12. No Joint Venture.
The parties agree that nothing herein shall constitute a joint
venture between them. The parties acknowledge that call letters, trademarks and
other intellectual property shall at all times remain the property of the
respective parties and that neither party shall obtain any ownership interest in
the other party's intellectual property by virtue of this Agreement (subject to
the IP License set forth in Section 6.2).
Section 12.13. Damage to Stations.
In the event of damage or destruction to the Stations (other
than damage or destruction caused by Time Broker), Licensee shall proceed to
repair, replace or restore the Stations to its former condition as promptly as
is commercially reasonable.
Section 12.14. Noninterference.
During the term of this Agreement, neither Licensee nor any of
their employees shall take any actions that might impair the operations of Time
Broker conducted hereunder, except to the extent expressly contemplated by this
Agreement or as otherwise required by law.
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Section 12.15. Regulatory Changes.
In the event of any order or decree of an administrative
agency or court of competent jurisdiction, including without limitation any
material change or clarification in FCC rules, policies, or precedent, that
would cause this Agreement to be invalid or violate any applicable law, and such
order or decree has become effective and has not been stayed, the parties will
use their respective best efforts and negotiate in good faith to modify this
Agreement to the minimum extent necessary so as to comply with such order or
decree without material economic detriment to either party, and this Agreement,
as so modified, shall then continue in full force and effect. In the event that
the parties are unable to agree upon a modification of this Agreement so as to
cause it to comply with such order or decree without material economic detriment
to either party, then this Agreement shall be terminated.
Section 12.16. Attorneys' Fees.
In the event of a dispute between or among the parties hereto
arising out of or related to this Agreement or the interpretation or enforcement
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and expenses from the other party.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
CBS RADIO, INC.
By:_____________________
Title:__________________
CBS RADIO LICENSE, INC.
By:______________________
Title:_____________________
ENTERCOM COMMUNICATIONS CORP.
By:_______________________
Title:______________________
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SCHEDULE 1.1
PROGRAMMING
The Programming shall consist of one hundred sixty-four (164)
hours per week on the Stations in an entertainment format to be chosen by Time
Broker, subject to Section 2 of this Agreement. The Programming shall include
(a) news and weather information; (b) public service announcements (including,
at Licensee's directive from time to time, a reasonable number of public service
announcements of local interest supplied by Licensee or produced by Time Broker
under Licensee's supervision); (c) an announcement in form sufficient to meet
the station identification requirements of the FCC at the beginning of each
hour; (d) an announcement at the beginning of each segment of Programming to
indicate that program time has been purchased by Time Broker; and (e) any other
announcement that may be required by applicable law or regulation (including but
not limited to EAS tests). Time Broker shall maintain and deliver to Licensee
copies of all operating and programming information including without limitation
information concerning portions of the Programming that are responsive to issues
of public importance identified to Time Broker by Licensee, EAS announcements,
and station operating logs, necessary for Licensee to maintain its FCC Public
File, and all other records required to be kept by FCC rule or policy. Time
Broker shall have the sole and exclusive right to sell advertising to be
included in the Programming and shall be entitled to retain all the revenues
derived from the sale thereof, provided, however, that Licensee shall be
entitled to sell such time as it deems necessary to comply with the political
advertising rules of the FCC in the event the Programming does not comply with
such rules.
Notwithstanding any other provision of this Agreement, Time
Broker recognizes that Licensee has certain obligations to broadcast programming
to meet the needs and interests of the community of license for the Stations.
Licensee shall have the right to air specific programming on issues of local
importance to the community. Nothing in this Agreement shall abrogate the
unrestricted authority of Licensee to discharge its obligations to the public
and to comply with the laws, rules and policies of the FCC with respect to
meeting the ascertained needs and interests of the public. Accordingly, Licensee
may air or cause Time Broker to produce and present under Licensee's supervision
for not less than two (2) nor more than four (4) hours per week on the Stations
such public affairs programming that responds to the needs and interests of
listeners in the Stations' community of license. Such public affairs programming
shall be presented between 6:00 a.m. and 9:00 a.m. on Saturdays and/or Sundays
or at such other times as the public interest may require. Time Broker will not
change the format of the Stations.
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SCHEDULE 1.2
COMPENSATION
Beginning on the Commencement Date, for each month during
which this Agreement until this Agreement is terminated, Time Broker shall pay a
monthly fee equal to One Hundred Fifty Thousand Dollars ($150,000.00) per month
(the "Monthly Fee").
In the event that the Commencement Date occurs on a day other
than the first day of a month, the initial monthly payment made by Time Broker
shall be an amount equal to the Monthly Fee as determined above multiplied by a
ratio, the numerator of which is the number of days between the Commencement
Date and the end of the month in which the Commencement Date occurs and the
denominator of which is the number of days in the month in which the
Commencement Date occurs; and in the event that the last day of the TBA Payment
Period occurs other than on the last day of a month, the Monthly Payment for the
month in which such day occurs shall be similarly prorated.
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SCHEDULE 2.1
PROGRAMMING POLICY STATEMENT
Time Broker agrees to cooperate with Licensee in the
broadcasting of programs of the highest possible standard of excellence and for
this purpose to observe the following regulations in the preparation, writing
and broadcasting of its programs. Further, Time Broker agrees that all material
broadcast on the Stations shall comply with all federal, state and local
applicable laws, rules and regulations.
No Plugola or Payola. The broadcast of any material for
which any money, service or other valuable
consideration is directly or indirectly paid, or
promised to or charged or accepted by, the Time
Broker, from any person, shall be prohibited, unless,
at the time the same is broadcast, it is announced as
paid for or furnished by such person.
Political Broadcasting. Within thirty (30) days of the
Commencement Date, Time Broker shall provide Licensee
with a written political advertising disclosure
statement which fully and accurately discloses how
the Time Broker sells programming and advertising
time and which makes parties purchasing political
programming and advertising time fully aware of the
lowest unit charge provisions of Section 315 of the
Communications Act. In addition, at least thirty (30)
days before the start of any primary or election
campaign, Time Broker will clear with the Stations'
general manager the rate Time Broker will charge for
the time to be sold to candidates to make certain
that the rate charged is in conformance with the
applicable law and station policy.
Required Announcements. Time Broker shall broadcast (i)
announcements in a form satisfactory to Licensee at
the beginning of each hour to identify the Stations
and (ii) any other announcements that may be required
by law, regulation, or Licensee's station policy.
No Illegal Announcements. No announcements, broadcasts
or promotions prohibited by federal, state or local
law shall be made over the Stations. This prohibition
specifically includes, but is not limited to, any and
all programming or other broadcast material
concerning tobacco or alcohol related products which
are unlawful. The airing of any broadcast material
concerning contests, lotteries or games must be
conducted in accordance with all applicable law,
including FCC rules and regulations. Any obscene,
indecent, or fraudulent programming is prohibited.
All sponsored programming or other broadcast material
must be identified in accordance with applicable law,
including FCC rules and regulations.
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Licensee Discretion Paramount. In accordance with the
Licensee's responsibility under the Communications
Act and the rules and regulations of the FCC,
Licensee reserves the right to reject or terminate
any programming (including advertising) proposed to
be presented or being presented over the Stations
which is in conflict with station policy or which in
Licensee's or its general manager's reasonable
judgment would not serve the public interest.
In any case where questions of policy or interpretation arise,
Time Broker should submit the same to Licensee for decision before making any
commitments in connection therewith.
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SCHEDULE 4.1
TIME SALES AGREEMENTS AND CONTRACTS
All Contracts to be assumed by CBS under the Purchase
Agreement other than Leases (as defined in the Purchase Agreement) and contracts
relating to operation at the transmitter site for the Stations and employment
contracts with the Licensee's retained employees under Sections 3.1 and 3.2.
1
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EXHIBIT 10.14
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BY AND AMONG
CBS RADIO, INC.,
CBS RADIO LICENSE, INC.,
ARS ACQUISITION II, INC.,
AND ENTERCOM COMMUNICATIONS CORP.
DATED AS OF AUGUST 13, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. - DEFINITIONS..........................................................................................2
1.1. DEFINITIONS..................................................................................2
ARTICLE II. - PURCHASE OF ASSETS..................................................................................6
2.1. PURCHASE AND SALE OF ASSETS..................................................................6
2.2. ALLOCATION OF VALUES.........................................................................6
2.3. NON-ASSIGNABLE CONTRACTS.....................................................................7
ARTICLE III. - LIABILITIES........................................................................................7
3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM........................................................7
3.2. OTHER LIABILITIES............................................................................8
ARTICLE IV. - REPRESENTATIONS AND WARRANTIES......................................................................9
4.1. BY CBS.......................................................................................9
4.2. BY ENTERCOM.................................................................................16
ARTICLE V. - CONDITIONS..........................................................................................17
5.1. MUTUAL CONDITIONS...........................................................................17
5.2. CONDITIONS OF ENTERCOM......................................................................18
5.3. CONDITIONS OF CBS...........................................................................18
5.4. EFFECT OF TIME BROKERAGE AGREEMENT ON
CLOSING CONDITIONS......................................................................18
ARTICLE VI. - COVENANTS AND OPERATIONS PRIOR TO CLOSING..........................................................19
6.1. COVENANTS OF CBS............................................................................19
6.2. NEGATIVE COVENANTS OF CBS...................................................................21
6.3. NO CONTROL..................................................................................22
6.4. NO SOLICITATION OR HIRE OF EMPLOYEES
AND PROGRAMMING.........................................................................22
6.5. COVENANTS OF ENTERCOM.......................................................................23
6.6. REAL PROPERTY SURVEYS.......................................................................24
</TABLE>
(i)
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<TABLE>
<CAPTION>
<S> <C>
ARTICLE VII. - ACTIONS PRIOR TO CLOSING..........................................................................24
7.1. APPLICATION TO COMMISSION...................................................................24
7.2. COMPLIANCE WITH CBS FINAL JUDGMENT..........................................................25
7.3. HART-SCOTT-RODINO NOTIFICATION..............................................................25
7.4. INSPECTION..................................................................................25
7.5. CONFIDENTIALITY.............................................................................26
ARTICLE VIII. - CLOSING..........................................................................................26
8.1. CLOSING.....................................................................................26
8.2. PRORATIONS..................................................................................27
8.3. CLOSING DELIVERIES TO ENTERCOM..............................................................28
8.4. CLOSING DELIVERIES TO CBS...................................................................29
8.5. COVENANTS OF FURTHER ASSURANCES;
AVAILABILITY OF RECORDS.................................................................30
8.6. RISK OF LOSS; DAMAGE TO PROPERTY............................................................30
8.7. TAXES ON TRANSACTION........................................................................30
ARTICLE IX. - TERMINATION, DEFAULT AND INDEMNIFICATION..........................................................30
9.1. TERMINATION.................................................................................30
9.2. EFFECT OF TERMINATION.......................................................................31
9.3. REMEDIES....................................................................................31
9.4. INDEMNIFICATION.............................................................................31
ARTICLE X. - ASSET EXCHANGES.....................................................................................34
10.1. POSSIBLE CBS EXCHANGE.......................................................................34
10.2. POSSIBLE ENTERCOM EXCHANGE..................................................................34
10.3. INDEPENDENT TRANSACTIONS....................................................................34
ARTICLE XI. - GENERAL PROVISIONS.................................................................................35
11.2. BROKERS.....................................................................................35
11.3. SURVIVAL OF COVENANTS, REPRESENTATIONS,
AND WARRANTIES..........................................................................35
11.4. CONFIDENTIALITY.............................................................................36
11.5. AMENDMENT AND WAIVER........................................................................36
11.6. EFFECT OF THIS AGREEMENT....................................................................36
11.7. TERMS GENERALLY.............................................................................36
11.8. HEADINGS....................................................................................37
11.9. COUNTERPARTS................................................................................37
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
11.10. GOVERNING LAW; JURISDICTION.................................................................37
11.11. BULK SALES LAWS.............................................................................37
11.12. ASSIGNMENT..................................................................................37
11.13. NOTICES.....................................................................................37
11.14. ATTORNEYS' FEES.............................................................................39
</TABLE>
(iii)
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT MADE AND ENTERED INTO THIS 13TH
DAY OF AUGUST, 1998, BY AND AMONG CBS RADIO, INC., A DELAWARE CORPORATION
("CRI"), CBS RADIO LICENSE, INC., A DELAWARE CORPORATION ("CRLI"), ARS
ACQUISITION II, INC., A DELAWARE CORPORATION ("ARSA") (CRI, CRLI, AND ARSA,
COLLECTIVELY, "CBS"), AND ENTERCOM COMMUNICATIONS CORP., A PENNSYLVANIA
CORPORATION ("ENTERCOM").
RECITALS
WHEREAS, pursuant to the Authorizations, CBS owns and operates
(directly or indirectly through one or more subsidiaries) radio stations
WAAF(FM) and WWTM(AM), Worcester, Massachusetts, and WEGQ(FM), Lawrence,
Massachusetts (collectively, the "Stations"), and owns all of the Assets
relating to the Stations;
WHEREAS, Entercom desires to purchase the Assets from CBS;
WHEREAS, CBS is willing to sell the Assets to Entercom;
WHEREAS, CBS and Entercom have agreed, subject to prior
approval by the Commission and certain other conditions, that CBS shall sell,
assign, transfer and convey the Assets to Entercom or one or more Affiliates
designated by Entercom, in the manner and for the consideration described in
this Agreement; and
WHEREAS, CBS is required to notify the United States
Department of Justice ("DOJ") of this Agreement, pursuant to the final judgment
in United States v. CBS Corporation and American Radio Systems Corporation, Civ.
No. 98-0819 (D.D.C. filed March 31, 1998) (the "CBS Final Judgment"), and CBS
may not consummate the sale contemplated hereby unless CBS has received written
notification from DOJ that DOJ does not object to the sale or, in the event that
DOJ objects, until the sale has been approved by the United States District
Court for the District of Columbia (the "Court"). Pursuant to the CBS Final
Judgment, CBS is required to take all steps necessary to operate the Stations as
separate, independent, ongoing, economically viable and active competitors to
the other stations owned by CBS and its Affiliates in the Boston area and must
take all steps necessary to insure that the management of such stations is kept
separate and apart from CBS.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and of the representations and warranties hereinafter set forth and
for other good and valuable consideration, the parties, intending to be legally
bound hereby, agree as follows:
<PAGE> 6
ARTICLE I.
DEFINITIONS
1.1. DEFINITIONS. As used herein, the following terms shall have the following
respective meanings:
"ADJUSTMENT TIME" shall mean with respect to each Station,
12:01:00 a.m. Eastern Standard or Daylight Time, as appropriate, on the Closing
Date.
"AFTRA CONTRACT" shall have the meaning set forth in Section
3.1.6.
"AFFILIATE" shall mean, with respect to any person or entity,
a person or entity controlling, controlled by or under common control with such
person or entity.
"AGREEMENT" shall mean this Asset Purchase Agreement.
"APPRAISAL" shall have the meaning set forth in Section 2.2.1
hereof.
"ASSETS" shall mean the Property and all of the Authorizations
relating to the Stations.
"ASSIGNMENT APPLICATIONS" shall have the meaning set forth in
Section 7.1 hereof.
"AUTHORIZATIONS" shall mean all of the licenses, permits, and
authorizations granted by the Commission with respect to the operation of the
Stations and all applications for Authorizations for the Stations pending before
the Commission.
"BARTER AGREEMENTS" shall mean contracts for the sale of time
on the Stations in exchange for programming.
"BOSTON I AGREEMENT" shall mean that certain Asset Purchase
Agreement by and among Entercom, CRI and CRLI for the sale and purchase of radio
stations WRKO(AM) and WEEI(AM), Boston, Massachusetts, dated as of August 13,
1998.
"CAPSTAR PURCHASE AGREEMENT" shall mean that certain asset
purchase agreement by and between Capstar Acquisition Company, Inc. and American
Radio Systems Corporation, dated March 6, 1998, for sale and purchase of radio
stations WQSO(FM) and WZNN(AM), Rochester, New Hampshire and WERZ(FM) and
WMYF(AM), Exeter, New Hampshire.
"CBS" shall mean the corporations identified as such in the
Preamble of this Agreement.
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<PAGE> 7
"CLOSING" shall mean the event of consummation of the
transactions contemplated by this Agreement as more fully described in Article
VIII of this Agreement.
"CLOSING DATE" shall mean the date that the Closing occurs.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the applicable regulations issued thereunder.
"COMMISSION" shall mean the Federal Communications Commission.
"CONTAMINANT" shall mean and include any pollutant,
contaminant, hazardous material (as defined in any of the Environmental Laws),
toxic substances (as defined in any of the Environmental Laws), asbestos-or
asbestos-containing material, urea formaldehyde, polychlorinated biphenyls,
regulated substances and wastes, radioactive materials, and petroleum or
petroleum by-products, including crude oil or any fraction thereof, except that
"Contaminant" shall not include small quantities of maintenance, cleaning and
emergency generator fuel supplies customary for the operation of radio stations
and maintained in compliance with all Environmental Laws in the Ordinary Course
of Business.
"CONTRACTS" shall mean all agreements, arrangements,
commitments, and undertakings, written or oral, expressed or implied, relating
to the present or future operation of the Stations except for any Leases,
including without limitation, Time Sales Agreements, Trade Agreements, Barter
Agreements and Miscellaneous Contracts.
"DEFAULT" shall mean the material default by a party hereto in
the performance of its obligations under this Agreement.
"ENTERCOM" shall mean the corporation identified as such in
the Preamble of this Agreement.
"ENVIRONMENTAL LAWS" shall mean any applicable federal, state
or local law, statute, charter, ordinance, rule, or regulation or any
governmental agency interpretation or policy, including, without limitation,
applicable safety/environmental/health laws such as, but not limited to, the
Resource Conservation and Recovery Act of 1976, Comprehensive Environmental
Response Compensation and Liability Act, Federal Emergency Planning and
Community Right to Know Law, the Clean Air Act, the Clean Water Act, the Toxic
Substance Control Act, and the Occupational Safety and Health Act, as any of the
foregoing have been amended, and any permit, order, directive, court ruling or
order, or consent decree applicable to or affecting the Property or any other
property (real or personal) used by or relating to the Station in question
promulgated or issued pursuant to any Environmental Laws which pertains to,
governs, or controls the generation, storage, remediation, or removal of
Contaminants or otherwise regulates the protection of health and the environment
including, but not limited to, any of the following activities, whether on site
or off site: (i) the emission, discharge, release,
3
<PAGE> 8
spilling, or dumping of any Contaminant into the air, surface water, ground
water, soil, or substrata; or (ii) the use, generation, processing, sale,
recycling, treatment, handling, storage, disposal, transportation, labeling, or
any other management of any Contaminant.
"FINAL ORDER" shall mean an order or action of the Commission
that, by reason of expiration of time or exhaustion of remedies, is no longer
subject to administrative or judicial reconsideration or review.
"IBEW CONTRACT" shall have the meaning set forth in Section
3.1.6.
"LEASES" shall mean all agreements, arrangements, or
commitments and undertakings, written or oral, express or implied, for the use
or occupation of any real or personal property used in the operation of the
Stations.
"LOSS" shall have the meaning set forth in Section 9.4.1
hereof.
"MISCELLANEOUS CONTRACTS" shall mean Contracts and Leases
entered into in the Ordinary Course of Business, which involve less than
Twenty-Five Thousand Dollars ($25,000.00) individually and less than $150,000
for all of the Stations in the aggregate, and which are not included in Schedule
4.1.6.
"NON-CONTINUING EMPLOYEES" shall have the meaning set forth in
Section 6.5.1.
"ORDINARY COURSE OF BUSINESS" shall mean the routine conduct
of the business of the Station in question (excluding extraordinary, irregular,
or abnormal transactions) on a basis consistent with the regular practice of
such Station since January 1, 1998; provided that any conflict between what is
required of CBS by the definition set forth in the immediately preceding clause
as applied herein and the CBS Final Judgment shall be resolved in favor of the
latter.
"PERMITTED ENCUMBRANCES" shall mean: (i) encumbrances for
taxes, assessments, or governmental charges or levies which are not yet due and
payable, or that, subject to adequate security for payment, are being contested;
(ii) easements, rights of way, or other encumbrances disclosed in this
Agreement; (iii) easements, rights of way or other encumbrances that do not have
a material adverse effect on the Assets or the operation of the Stations as
currently operated; (iv) encumbrances imposed by law, such as materialmen's,
mechanic's, carrier's, workmen's, or repairmen's liens or other similar
encumbrances arising in the Ordinary Course of Business, securing obligations
that are not overdue; (v) encumbrances securing indebtedness, which will be
removed prior to or at the Closing; (vi) encumbrances pursuant to Contracts and
Leases to be assumed by Entercom pursuant to Section 3.1; and (vii) encumbrances
listed on Schedule 4.1.8.
"PROPERTY" shall mean all of the tangible and intangible
property (other than the Authorizations) located at the Stations (including at
the transmitter sites of the Stations), whether
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<PAGE> 9
real, personal, or mixed, and all rights and interests which are used or held by
CBS or any of its Affiliates and necessary for use primarily in the operation of
the Stations as presently conducted, including: (i) all of the rights, titles,
and interests under the Leases and the Contracts relating to the Stations; (ii)
the call letters, copyrights, trademarks, and other intellectual property
associated with the Stations; (iii) originals or, if unavailable, photocopies,
of all files, records, studies, data, lists, filings, general accounting
records, books of account, computer programs and software, and logs, of every
kind, relating to the operations or business of the Stations; and (iv) all of
CBS's or any of its Affiliates' rights under manufacturers' and vendors'
warranties relating to items included in the Assets of the Stations; but
excluding therefrom those assets listed on Schedules attached hereto
respectively as "Excluded Property."
"PURCHASE PRICE" shall have the meaning set forth in Section
2.1.2.
"REQUIRED CONSENTS" shall mean the consents of third parties
to the Leases and Contracts that are required for the assignment thereof and
that are identified on the Schedules hereto as "Material Leases (or
Contracts)-Consent to Assign Required."
"REQUIRED CURE EXPENSE" shall mean the sum of the amounts
required to be spent by CBS under Sections 6.1.4, 6.1.5 and 6.6.3 of this
Agreement and the Boston I Agreement.
"STATIONS" shall collectively mean the following radio
broadcast stations: WAAF(FM), WWTM(AM), Worcester, Massachusetts, and WEGQ(FM),
Lawrence, Massachusetts, or, in the singular form, any one of them.
"STATION EMPLOYEES" shall have the meaning set forth in
Section 6.5.1.
"TAMPA AGREEMENT" shall mean that certain Asset Purchase
Agreement by and among Entercom and CBS for the sale and purchase of radio
stations WYUU (FM) and WLLD (FM), dated as of August 13, 1998.
"TBA COMMENCEMENT DATE" shall mean the date that the Time
Brokerage Agreement shall become effective.
"TIME BROKERAGE AGREEMENT" shall mean the Time Brokerage
Agreement entered into between Entercom and CBS simultaneously with the
execution of this Agreement relating to the sale to Entercom of substantially
all of the broadcast time on the Stations.
"TIME SALES AGREEMENTS" shall mean contracts for the sale of
time on the Stations for cash.
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<PAGE> 10
"TRADE AGREEMENTS" shall mean contracts for the sale of time
on the Stations in exchange for merchandise or services used or useful for the
benefit of the Stations, excluding Barter Agreements.
"TRANSFERRED EMPLOYEES" shall have the meaning set forth in
Section 6.5.
"UPSET DATE" shall have the meaning set forth in Section
9.1.1.
ARTICLE II.
PURCHASE OF ASSETS
2.1. PURCHASE AND SALE OF ASSETS.
Subject to the terms and conditions set forth in this
Agreement, at the Closing:
2.1.1. CBS shall sell, convey, transfer, assign, and deliver or cause
to be sold, conveyed, transferred, assigned, and delivered to Entercom, or to
such Affiliates as Entercom shall designate, the Station Assets free and clear
of all liens and encumbrances other than Permitted Encumbrances, and Entercom or
such designated Affiliates shall acquire and receive same from CBS.
2.1.2. Entercom shall deliver to CBS cash in the amount of Fifty-Eight
Million Dollars ($58,000,000.00) (the "Purchase Price") and CBS shall receive
same from Entercom. The Purchase Price shall be paid by wire transfer at Closing
to the account designated by CBS in writing at least two (2) days prior to the
Closing.
2.2. ALLOCATION OF VALUES.
2.2.1. The fair market value of the Assets shall be determined and
allocated on the basis of an appraisal (the "Appraisal") prepared by Bond &
Pecaro, or another firm reasonably acceptable to CBS and Entercom, whose fees
and expenses shall be borne equally by CBS and Entercom. The parties shall use
their reasonable best efforts to cause Bond & Pecaro to deliver the Appraisal 10
days before the Closing Date, or failing compliance with such deadline, as soon
thereafter as is practicable, but in all events no later than 30 days after the
Closing Date. The Appraisal shall set forth the fair market value of each
material asset included in the Assets.
2.2.2. Each party, as necessary, shall prepare such IRS Forms as are
required by law to be filed with the Internal Revenue Service reflecting the
fair market value of the Assets as determined in accordance with the values set
forth in the Appraisal and the above provisions and shall forward such forms to
the other parties within thirty (30) days after the Closing. Each party, as
necessary, shall file with their respective federal income tax returns for the
tax year in which the Closing occurs such IRS Forms as prepared in accordance
with the foregoing. Each party shall deliver to the other parties hereto a copy
of such IRS Forms as filed with their
6
<PAGE> 11
respective federal income tax return within thirty (30) days of the filing of
such return. The parties hereto hereby covenant and agree with each other that
they will not take a position on any income tax return that is in any way
inconsistent with the terms of this Section 2.2.
2.3. NON-ASSIGNABLE CONTRACTS.
2.3.1. Without limiting or otherwise affecting the rights of any party
hereto, to the extent that any Contract or Lease to be assigned pursuant to this
Agreement is not capable of being assigned without the consent, approval, or
waiver of a third person or entity, nothing in this Agreement will constitute an
assignment or require the assignment thereof except to the extent provided in
this Section 2.3.
2.3.2. With respect to all consents, approvals, and waivers referenced
in Section 2.3.1, CBS shall use its reasonable best efforts to obtain all such
consents, approvals, and waivers prior to and, if the Closing occurs, as
promptly as practicable after the Closing Date; provided that CBS shall not be
obligated to pay money to any other contracting party to obtain any such
consent, approval or waiver, other than reasonable expenses of the party for any
legal documentation related to the assignment of the Contract or Lease in
question. If the consents, approvals, and waivers are not obtained prior to
Closing, the parties shall use their reasonable best efforts in good faith to
cooperate, and to cause each of their respective Affiliates to cooperate, in
effecting any lawful arrangement to provide to Entercom or its designated
Affiliates the economic benefits of the Contracts and Leases for which consents,
approvals, and waivers are being sought after Closing, and to have Entercom or
its designated Affiliates assume and discharge the obligations under the
Contracts and Leases from and after the Closing Date.
ARTICLE III.
LIABILITIES
3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM.
Except as otherwise provided in the Time Brokerage Agreement,
from and after the Closing Date, Entercom shall assume and pay, perform, and
discharge the following liabilities and obligations relating to the Stations:
3.1.1. The liabilities and obligations arising with respect to events
occurring after the Adjustment Time or accruing after the Adjustment Time with
respect to any Leases included in the Assets that are specifically identified on
Schedule 4.1.5 as being assumed by Entercom, and such additional Leases as are
permitted to be entered into by CBS and its Affiliates pursuant to Article VI
hereof.
3.1.2. The liabilities and obligations arising with respect to events
occurring after the Adjustment Time or accruing after the Adjustment Time with
respect to any (a) Contracts included in the Assets that are specifically
identified on Schedule 4.1.6 as being assumed by
7
<PAGE> 12
Entercom; (b) Miscellaneous Contracts; (c) Time Sales Agreements, Trade
Agreements and Barter Agreements entered into in the Ordinary Course of
Business; and (d) such additional contracts as are permitted to be entered into
by CBS and its Affiliates pursuant to Article VI hereof;
3.1.3. The liabilities and obligations of American Radio Systems
Corporation under Section 6.7 of the Capstar Purchase Agreement;
3.1.3. The liabilities and obligations which arise with respect to
events occurring after the Adjustment Time or which accrue after the Adjustment
Time with respect to the Assets and to the operation of the Stations by Entercom
and/or its designated Affiliates;
3.1.4. All taxes and assessments (other than income and franchise taxes
of CBS and its Affiliates) that accrue on or with respect to the Assets or the
operation of the Stations after the Adjustment Time;
3.1.5. The liabilities and obligations of CBS with respect to the
Stations under (a) the Agreement for Radio Announcers and Artists, June 15, 1996
- - June 14, 1999, between the American Federation of Radio and Television Artists
and American Radio Systems, Inc. (the "AFTRA Contract") from and after the TBA
Commencement Date; and (b) the Agreement, as of May 1, 1997, between American
Radio Systems Corporation and Local 1228 of the International Brotherhood of
Electrical Workers (the "IBEW Contract"). Neither Entercom nor any of its
Affiliates shall assume any obligations under any collective bargaining
agreements other than the AFTRA Contract and the IBEW Contract.
3.2. OTHER LIABILITIES.
3.2.1. Except as expressly set forth in this Agreement, CBS shall be
solely responsible for all salaries, benefits and other compensation which will
or may become payable to any Station Employee in respect of any period of
employment prior to the earlier of the TBA Commencement Date or the Adjustment
Time, other than accrued vacation time for Transferred Employees, for which
Entercom shall be responsible and for which it will receive a proration credit
under Section 8.2.1. Entercom shall be solely responsible for any salaries and
other compensation which will or may become payable to any Transferred Employee
in respect of any period thereafter. Entercom will not assume any obligations
under existing leave or severance policies or otherwise have any liability or
obligation for severance pay or other termination benefits of Station Employees,
except for obligations set forth in Contracts to be assumed by Entercom pursuant
to this Agreement.
3.2.2. Except as specifically assumed by Entercom pursuant to Section
3.1 and Section 3.2.1 hereof or pursuant to the Time Brokerage Agreement,
neither Entercom nor any of its Affiliates shall assume or undertake to pay,
satisfy, or discharge any liabilities, obligations, commitments, or
responsibilities of CBS or any of its Affiliates.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1. BY CBS.
CBS hereby represents and warrants to Entercom that:
4.1.1. CORPORATE STANDING.
CRI, CRLI, and ARSA are corporations duly organized, validly
existing and in good standing under the laws of the State of Delaware and are
qualified to do business in the Commonwealth of Massachusetts. CRI, CRLI, and
ARSA have full power and authority to engage in the businesses in which they are
presently engaged and to make and perform this Agreement according to its terms.
4.1.2. AUTHORIZATION OF AGREEMENT; NO BREACH.
CBS has the necessary corporate power and authority to
execute, deliver and perform this Agreement, the Time Brokerage Agreement, and
such other agreements as are necessary to consummate the transactions
contemplated hereby, and, subject to the receipt of the consents and approvals
required elsewhere herein, this Agreement and the Time Brokerage Agreement
constitute the valid and binding obligation of CBS enforceable against it in
accordance with their terms, except as limited by bankruptcy and insolvency laws
and by laws affecting the enforcement of creditors' rights generally or
equitable principles. Assuming said consents and approvals are obtained, neither
such execution, delivery, and performance nor compliance by CBS with the terms
and provisions of this Agreement and the Time Brokerage Agreement will conflict
with or result in a breach of any of the terms, conditions, or provisions of the
Articles of Incorporation or By-Laws of CBS or its Affiliates or any judgment,
order, injunction, decree, regulation, or ruling of any court or any other
governmental authority to which CBS or any of its Affiliates is subject or any
material agreement or contract to which CBS or any of its Affiliates is a party
or to which it is subject, or constitute a material default thereunder.
4.1.3. QUALIFICATION.
CRLI is qualified as a licensee of the Commission and is
qualified as the assignor of the Authorizations to receive a grant of the
Assignment Applications by the Commission. CBS knows of no facts which could
reasonably be expected to cause Commission approval of the Assignment
Applications to be denied or materially delayed or which could reasonably be
expected to lead to the filing of a material objection to such Applications.
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4.1.4. CBS ASSETS.
The Assets, taken as a whole, constitute all of the material
property, whether real, personal, or mixed, tangible or intangible, used by CBS
or its Affiliates in the operation of the Stations except for (i) property
replaced in the Ordinary Course of Business and (ii) those assets specifically
listed on Schedule 4.1.4 under the heading "Excluded Property." To the knowledge
of CBS, none of the assets listed on Schedule 4.1.4 as pertaining to radio
station WBMX(FM) is used primarily in the operation of any or all of the
Stations.
4.1.5. CBS LEASES.
Except as set forth in Schedule 4.1.5, CBS has delivered to
Entercom true and correct copies of all Leases listed on Schedule 4.1.5 hereto.
There are no other material leases for any items or interests for the use of
real or personal property associated with the Assets or the present operation of
the Stations other than those disclosed on Schedule 4.1.5 hereto.
4.1.6. CBS CONTRACTS.
Schedule 4.1.6 contains a list of all Contracts now in
effect, written or oral, express or implied, relating to the Assets or the
present or future operation of the Stations, other than those disclosed on
Schedule 4.1.5 hereto or other Schedules attached to this Agreement, except for
Time Sales Agreements, Barter Agreements, Trade Agreements, Miscellaneous
Agreements and Contracts that relate solely to Excluded Property. Except as
indicated on Schedule 4.1.6 hereto, CBS has delivered to Entercom true and
correct copies of all Contracts listed on Schedule 4.1.6 hereto.
4.1.7. INTELLECTUAL PROPERTY.
Schedule 4.1.7 hereto lists all material trademarks and
copyrights relating to the operation of the Stations which have been registered
with Federal or State governmental agencies. To CBS's knowledge, the operation
of the Stations as now conducted does not conflict with any valid patents,
trademarks, trade names, service marks, or copyrights of others in any way that
is reasonably likely to have a material adverse effect on the operation of the
Stations.
4.1.8. TITLE TO PROPERTY.
Except for (i) Permitted Encumbrances, (ii) as disclosed on
Schedule 4.1.8 hereto and (iii) as provided in the immediately succeeding two
sentences, CBS has good ownership, right, title, and interest to the Property
including the right to transfer such assets. CBS has a valid leasehold interest
in all Property leased and used or held for use in connection with the operation
of the Stations. CBS has good and marketable title to the owned real property to
be conveyed hereunder, except for Permitted Encumbrances. Except for Permitted
Encumbrances
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and items disclosed on Schedule 4.1.8 (which Schedule reflects, where
appropriate, the Station to which the disclosed item relates), none of the
Property or any of the income or revenue therefrom is subject to any mortgage,
conditional sale agreement, security interest, lease, lien, hypothecation,
pledge, encumbrance, restriction, liability, charge, claim, or imperfection of
title that would materially adversely affect the continued use of the Property
as currently used.
4.1.9. NO DEFAULTS.
CBS and its Affiliates have complied in all material
respects with all of the terms of the Contracts and the Leases and such
Contracts and Leases are enforceable by CBS in accordance with their respective
terms, except as such enforcement may be limited by applicable bankruptcy and
similar laws affecting the enforcement of creditors' rights and general
equitable principles affecting the enforcement of equitable remedies (including
within said equitable remedies without limitation the remedy of specific
performance). No event has occurred which with the passage of time or the giving
of notice or both would constitute a material default by CBS or any of its
Affiliates thereunder. To the knowledge of CBS, all other parties to the
Contracts and Leases have complied in all material respects with the provisions
thereof and no event has occurred which with the passage of time or the giving
of notice or both would constitute a material default by any such other party
thereunder.
4.1.10. AUTHORIZATIONS AND APPLICATIONS.
Except as disclosed on Schedule 4.1.10, all Authorizations
necessary to the lawful operations of the Stations have been granted and issued
by the Commission to CBS and are listed on Schedule 4.1.10 attached hereto and
are now in full force and effect. There are no applications of CBS or any of its
Affiliates relating to the Stations pending with the Commission except as listed
on such Schedule 4.1.10. CBS and its Affiliates have performed and complied in
all material respects with all of the terms and conditions of said
Authorizations, the Communications Act of 1934, as amended (the "Communications
Act") and all applicable rules, regulations, requirements, and policies of the
Commission relating to the operation of the Stations. Except as listed on
Schedule 4.1.10, no proceedings are pending or, to the knowledge of any officer
of CBS or any of its Affiliates, threatened, which may result in the revocation,
modification, non-renewal, or suspension of any of said Authorizations, the
denial of any pending applications, the issuance of a cease and desist order, or
the imposition of any other sanction by the Commission to which the Stations or
the Assets are or may be subject. None of CBS or any of its Affiliates has
reason to believe that the Commission will not renew the Authorizations of any
of the Stations in the ordinary course for a full term without material
qualifications. No renewal of the Authorizations of the Stations would
constitute a major environmental action under the rules of the Commission in
effect as of the date of this Agreement. All ownership reports, renewal
applications, and other material reports and documents required to be filed by
CBS and its Affiliates with the Commission relating to the operation of the
Stations have been filed, and all such reports, applications and documents are
true and correct in all material respects. The Stations are identified by their
presently assigned
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call letters and, unless otherwise validly authorized by the Commission and
disclosed on Schedule 4.1.10, are operated on their assigned frequencies at the
powers and heights authorized by the Commission. The public inspection files for
the Stations are in substantial compliance with the regulations of the
Commission relating thereto.
4.1.11. PERMITS AND LICENSES.
In addition to the Authorizations, CBS has obtained and/or
holds, or at Closing will hold, all other governmental permits and licenses
necessary for the lawful operation of the respective Stations. All terms,
restrictions, and requirements of such permits and licenses have been complied
with in all material respects and none of CBS or any of its Affiliates is in
default of any of same.
4.1.12. COMPLIANCE WITH LAWS.
CBS and its Affiliates have complied in all material respects
with all orders (to which CBS or any of its Affiliates is a party or is subject)
and applicable laws, rules, and regulations of all federal, state and local
authorities with respect to the Assets and operation of the Stations. With
respect to the operations of the Stations, none of CBS or any of its Affiliates
is in default with respect to or in violation of: (a) any judgment, order,
injunction or decree to which CBS or any of its Affiliates is a party or is
subject; or (b) any rule or regulation of any court, administrative agency or
other governmental authority, in either case in any respect material to this
transaction. All material reports, returns and other documents which relate in
any way to the Assets and which were filed by CBS or any of its Affiliates with
any administrative agency or governmental authority are true, correct and
complete in all material respects.
4.1.13. LITIGATION AND CLAIMS.
Except as disclosed in Schedule 4.1.13 hereto and except for
rulemaking proceedings applicable to radio broadcast stations generally, no
litigation, proceeding or controversy is pending or, to the knowledge of any
officer of CBS or any of its Affiliates, threatened against CBS or any of its
Affiliates, which might materially and adversely affect any material portion of
the Assets, CBS's or any of its Affiliates' right or power to transfer the same,
the ownership, possession, use or resale of any material portion of the Assets,
or the operation of the Stations by Entercom or any assignee thereof and there
is no basis known to CBS or any of its Affiliates for any such litigation,
proceeding, controversy or claim. No claim has been made or asserted against CBS
or any of its Affiliates material to this transaction.
4.1.14. EMPLOYEES.
Set forth on Schedule 4.1.14 is a listing, by department, of
the name, salary or compensation, all other compensation arrangements, and job
title of all employees of CBS and its Affiliates employed at the Stations as of
August 1, 1998, and whether each such employee is
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(i) full-time or part-time, (ii) union or non-union, and (iii) whether such
employee's services are shared between any of the Stations and any other station
to be retained by CBS. Except as disclosed on Schedule 4.1.14, there are no
written contracts for the employment of any personnel at the Stations. Except as
disclosed on Schedule 4.1.14, all employees of CBS and its Affiliates employed
at the Stations are employed on an "at will" basis.
4.1.15. EMPLOYEE BENEFIT AND RETIREMENT PLANS.
Listed on Schedule 4.1.15 are the material "employee pension
benefit plans" and "employee welfare benefit plans" (as defined respectively in
Sections 3(2) and 3(l) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which CBS and its Affiliates maintain on behalf of their
employees at the Stations. In all respects material to this transaction, all
"employee pension benefit plans" and "employee welfare benefit plans" listed on
Schedule 4.1.15 hereto comply in all material respects with all applicable
requirements of law and regulation. None of CBS or any of its Affiliates has
incurred or reasonably expects to incur (either directly or indirectly,
including as a result of any of the transactions contemplated hereby or any
indemnification obligation) any liability (including, without limitation,
withdrawal liability) that could become a liability of Entercom, under or
pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and
several liability provisions of the Code relating to employee benefit plans and
no event, transaction or condition has occurred or exists which could result in
any such liability. CBS and its Affiliates have made all required contributions
to all multi-employer plans within the meaning of Section 3(37) of ERISA.
4.1.16. LABOR RELATIONS.
In all respects material to this transaction, CBS and its
Affiliates have complied with all applicable laws, rules and regulations
pertaining to the employment of labor, including those relating to wages, hours,
collective bargaining and the payment of or withholding of taxes with respect to
the operations of the Stations, and CBS and its Affiliates have withheld all
amounts required by law or agreement to be withheld from the wages or salaries
of their employees and are not liable for any arrears of wages or any tax or
withholding or any penalties or interest for failure to comply with any of the
foregoing. Except as disclosed on Schedule 4.1.16, there are no collective
bargaining agreements relating to any employee of CBS or any of its Affiliates
at the Stations. In addition, except as disclosed on Schedule 4.1.16, none of
CBS or any of its Affiliates has knowledge of any union organizing activities in
the one year period preceding the date of this Agreement involving or targeting
any employees of CBS or any of its Affiliates at the Stations not already
covered by a collective bargaining agreement.
4.1.17. INSURANCE.
CBS has in force adequate fire and other risk insurance
covering the full replacement value of tangible personal property that is part
of the Property and shall cause such insurance to be maintained in full force
until the Closing Date. CBS also shall maintain in full
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force until the Closing Date, adequate workers compensation and general public
liability insurance for the respective Stations in amounts consistent with
broadcasting industry standards for similar stations. As of the date of this
Agreement, none of the Property currently suffers in any way as a result of
fire, explosion, earthquake, accident, fraud, rain, storm, drought, Act of God
or public enemy or any other casualty, whether or not covered by insurance.
4.1.18. BROADCASTING CONTRACTS.
The total value of all unfulfilled obligations in respect of
Trade Agreements and Barter Agreements to be assumed by Entercom, whether or not
the Stations have received consideration therefor, shall not be in excess of
Five Hundred Thousand Dollars ($500,000.00) as of the Closing Date. To the
extent that, as of the Closing Date, the excess of the value of unfulfilled
obligations under Trade or Barter Agreements, including any "time bank"
provision thereof, over the value of consideration to be received by the
Stations (determined as of the Closing Date) exceeds One Hundred Thousand
Dollars ($100,000.00), Entercom shall be entitled to a positive cash adjustment
pursuant to Section 8.2 hereof.
4.1.19. ENVIRONMENTAL COMPLIANCE, POLYCHLORINATED
BIPHENYLS, ASBESTOS AND OTHER TOXIC OR HAZARDOUS SUBSTANCES.
Except as disclosed on Schedule 4.1.19, none of the Property
contains: (i) any asbestos, polychlorinated biphenyls ("PCBs") or any PCB
contaminated oil; (ii) any Contaminants; or (iii) any underground storage tanks.
All of the Property is in substantial compliance with all applicable
Environmental Laws, except as disclosed on Schedule 4.1.19.
4.1.20. FINANCIAL AND OTHER INFORMATION.
CBS has furnished Entercom with profit and loss statements for
calendar year 1997 (except for WAAF(FM) and WWTM(AM), for which profit and loss
statements furnished were for the period February 1997 through December, 1997)
and the months January through June of 1998 (the "Financial Statements"). All
Financial Statements provided to Entercom are true and correct in all material
respects and such Financial Statements fairly present the results of operation
of the Stations for the respective period then ended. There are no material
liabilities, whether known or unknown, contingent or fixed, or otherwise,
associated with the Stations that have not been otherwise disclosed to Entercom
to the extent this Agreement requires the disclosure thereof.
4.1.21. NO INSOLVENCY.
No insolvency proceedings of any character, including without
limitation, bankruptcy, receivership, reorganization, composition, or
arrangement with creditors, voluntary or involuntary, affecting CBS or any of
its Affiliates or any of their assets or properties are, or within three years
prior to the date hereof have been, pending or, to the best of the knowledge of
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CBS and its Affiliates, threatened, and, within three years prior to the date
hereof, none of CBS or any of its Affiliates has made an assignment for the
benefit of creditors, nor has CBS or any of its Affiliates taken any action with
a view to, or which would constitute the basis for, the institution of any such
insolvency proceedings.
4.1.22. CONDITION OF EQUIPMENT.
Except as disclosed on Schedule 4.1.22, the transmission and
studio equipment and other equipment (mechanical and electrical) included within
the Property is, and will be as of the Closing Date, in good repair and working
condition, ordinary wear and tear excepted, and is in material compliance with
all current FCC requirements.
4.1.23. REAL PROPERTY.
Schedule 4.1.23 contains a true and complete list of all real
property used in the operation of the Stations, setting forth the nature of the
interest, the address, and legal description for each parcel of real property
(other than leased real property), and whether such parcel is owned or leased.
Except as set forth on Schedule 4.1.23, there are no outstanding options or
rights of first refusal to purchase or lease the owned real property or any
portion thereof or interest therein, there are no outstanding options or rights
of first refusal to sublease the leased real property or any portion thereof or
interest therein, and no other parties are in possession of any such real
property. The real property identified on Schedule 4.1.23 has vehicular access
to a road and is supplied with utilities and other services necessary for the
operation of that portion of the operation of the Stations conducted there. No
real property other than that listed on Schedule 4.1.23 or listed on such
schedule as Excluded Property is used in, held for use in connection with or
necessary for the conduct of, the business or operations of the Stations. To the
knowledge of CBS and its Affiliates, (i) the improvements of CBS and its
Affiliates upon such real property and the current use and operation on such
premises by CBS and its Affiliates conform in all material respects to all
restrictive covenants, conditions, easements, building, subdivision and similar
codes and federal, state and local laws, regulations, rules, orders and
ordinances and none of CBS or any of its Affiliates has received any notice of
any violation or claimed violation of any such restrictive covenant, condition
or easement, or any building, subdivision or similar code, or any federal, state
or local law, regulation, rule, order or ordinance which, either individually or
in the aggregate, could have a material adverse effect on the assets, business
or financial condition of the Stations, provided that any lawfully grandfathered
condition shall not be deemed to be a material adverse effect for purposes of
this subsection (i); (ii) there is no plan, study or effort by any governmental
authority or agency which could reasonably be expected to have a material
adverse effect on the Assets or financial condition of the Stations; and (iii)
there are no latent defects in the real property that could reasonably be
expected to have a material adverse effect on the Assets or financial condition
of the Stations. Except as disclosed on Schedule 4.1.23, the improvements of CBS
and its Affiliates upon the real property identified on Schedule 4.1.23 are in
good operating condition and repair, normal wear and tear excluded. None of CBS
or any of its Affiliates has knowledge or received notice (i) of any pending,
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threatened, or contemplated action to take by eminent domain or otherwise to
condemn any portion of the real property or interest therein or (ii) of any
levied, threatened or proposed assessments for public improvements with respect
to the real property.
4.1.24. PAYMENT OF TAXES.
CBS and its Affiliates have, and as of the Closing Date, will
have, paid and discharged all taxes, assessments, excises and other levies which
are due, including but not limited to any such taxes, assessments, excises, and
levies which, if due and not paid, would interfere with Entercom's enjoyment or
use of the Assets or result in a lien, charge, or encumbrance thereon, excepting
such taxes, assessments, and other levies which will not be due until or after
the Closing Date, and which are either to be prorated between the parties
pursuant to the provisions of Section 8.2 hereof or paid or contested by CBS
pursuant to Section 6.1.6.
4.1.25. REQUIRED CONSENTS.
The only material approvals or consents of persons or entities
not a party to this Agreement that are legally or contractually required to be
obtained by CBS in connection with the consummation of the transactions
contemplated by this Agreement are those that are (i) set forth on Schedules
4.1.5 and 4.1.6 hereto and (ii) those contemplated by Section 5.1.
4.1.26. EVIDENCE OF FINANCIAL CAPABILITY OF ENTERCOM.
CBS acknowledges that Entercom has delivered to it
satisfactory proof of its financial capability to consummate the transactions
contemplated hereby.
4.2. BY ENTERCOM.
Entercom hereby represents and warrants that:
4.2.1. CORPORATE STANDING.
Entercom is a corporation, duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania.
Entercom or one or more Affiliates to which Entercom's rights hereunder are
assigned pursuant to Section 11.13 is, or will be at Closing, qualified to do
business in the Commonwealth of Massachusetts. Entercom has full power and
authority to engage in the business in which it is presently engaged and to make
and perform this Agreement according to its terms.
4.2.2. AUTHORIZATION OF AGREEMENT; NO BREACH.
Entercom has the necessary corporate power and authority, on
behalf of itself, to execute, deliver and perform this Agreement, the Time
Brokerage Agreement and such other
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agreements as are necessary to consummate the transactions contemplated hereby,
and, subject to the receipt of the consents and approvals required elsewhere
herein, this Agreement and the Time Brokerage Agreement constitute the valid and
binding obligation of Entercom, enforceable against it in accordance with their
terms, except as limited by bankruptcy and insolvency laws and by laws affecting
the enforcement of creditors rights generally or equitable principles. Assuming
said consents and approvals are obtained, neither such execution, delivery, and
performance nor compliance by Entercom with the terms and provisions of this
Agreement and the Time Brokerage Agreement will conflict with or result in a
breach of any of the terms, conditions, or provisions of the Articles of
Incorporation or Bylaws of Entercom, or any judgment, order, injunction, decree,
regulation, or ruling of any court or any other governmental authority to which
Entercom is subject or any material agreement or contract to which Entercom is a
party or to which it is subject, or constitute a material default thereunder.
4.2.3. QUALIFICATION.
Entercom's Affiliate which will be designated as the assignee
of the Authorizations in the Assignment Applications is, or upon the filing of
the Assignment Applications will be, qualified as a licensee of the Federal
Communications Commission and is, or at the time of filing of the Assignment
Applications will be, qualified as the assignee of the Authorizations to receive
Commission approval of the Assignment Applications. Entercom knows of no facts
relating to Entercom or any of its Affiliates that could reasonably be expected
to cause Commission approval of the Assignment Application to be denied or
materially delayed or which could reasonably be expected to lead to the filing
of a material objection to such Applications.
4.2.4. LITIGATION AND CLAIMS.
Except as disclosed in Schedule 4.2.4 hereto, no litigation,
proceeding, or controversy is pending or, to the knowledge of any officer of
Entercom, threatened, which might affect the ability of Entercom to perform its
obligations hereunder, and there is no basis known to Entercom for any such
litigation, proceeding, controversy, or claim. No claim has been made or
asserted against Entercom material to this transaction.
ARTICLE V.
CONDITIONS
5.1. MUTUAL CONDITIONS.
Performance of the obligations of the parties with respect to
the Stations under this Agreement and the Closing, are and shall be subject to
the occurrence and concurrence of the express conditions precedent that (i) the
Commission has granted its consent and approval in writing to the assignment to
a designated Affiliate of Entercom of the Authorizations issued by the
Commission as contemplated hereby without any materially adverse condition and
any
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condition as to the timing of consummation of the transactions contemplated
hereby set forth in such consent shall have been satisfied; (ii) the waiting
periods (as they may be extended) applicable to the transfer of the Assets under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") shall have expired or been earlier terminated; and (iii) any approval
required under the CBS Final Judgment to consummate the transactions
contemplated hereby shall have been received.
5.2. CONDITIONS OF ENTERCOM.
Performance of the obligations of Entercom under this
Agreement and the Closing of the transactions provided for herein are and shall
be subject to the occurrence and concurrence of the express conditions
precedent, any of which may be waived by Entercom, that:
5.2.1. All Required Consents have been obtained from the other parties
to the Leases and the Contracts identified on Schedules 4.1.5 and 4.1.6
respectively as "Material Leases (or Contracts)-Consent to Assign Required."
5.2.2. No order, decree or judgment of any court, agency or other
governmental authority shall have been issued based on or arising out of the
conduct, action, inaction, qualifications or status of CBS or any of its
Affiliates, which would render it unlawful as of the Closing Date to effect the
transactions contemplated by this Agreement in accordance with its terms.
5.3. CONDITIONS OF CBS.
Performance of the obligations of CBS under this Agreement and
the Closing of the transactions provided for herein are and shall be subject to
the occurrence and concurrence of the express conditions precedent, any of which
may be waived by CBS, that:
5.3.1. No order, decree or judgment of any court, agency or other
governmental authority shall have been issued based on or arising out of the
conduct, action, inaction, qualifications or status of Entercom or any of its
Affiliates, which would render it unlawful as of the Closing Date to effect the
transactions contemplated by this Agreement in accordance with its terms.
5.4. EFFECT OF TIME BROKERAGE AGREEMENT ON CLOSING CONDITIONS.
To the extent that any party hereto is unable to fulfill any
condition to Closing under this Agreement that could have been fulfilled solely
but for (i) an action taken by another party either pursuant to this Agreement
or the Time Brokerage Agreement or in breach of this Agreement or the Time
Brokerage Agreement or (ii) a failure to take any action that another party was
obligated to take, or, in the exercise of commercial reasonableness, should have
taken,
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pursuant to this Agreement or the Time Brokerage Agreement, such condition to
Closing shall be deemed waived.
ARTICLE VI.
COVENANTS AND OPERATIONS PRIOR TO CLOSING.
6.1. COVENANTS OF CBS.
Except as otherwise provided in the Time Brokerage Agreement
and in the CBS Final Judgment, during the period from the date of this Agreement
to the Closing Date, CBS and/or one or more of its Affiliates shall:
6.1.1. Conduct the business and operations of the Stations in the
Ordinary Course of Business and in accordance with all requirements of law and
regulation and, to the extent consistent with the foregoing, in the same manner
in which the same have heretofore been conducted with the intent of preserving
the ongoing operations and business of the Stations.
6.1.2. Cooperate with Entercom in connection with its review, analysis,
and monitoring of the Assets and the operation of the Stations to the end that
an efficient transfer of the Assets may be made at Closing, and the business of
the Stations and the operation of the Assets may continue on an uninterrupted
basis. In addition to providing information required hereunder or reasonably
requested by the other parties hereto, CBS agrees to promptly notify the other
parties of any unusual problems or developments of which CBS becomes aware with
respect to the Assets or the business of the Stations.
6.1.3. Consult with Entercom regarding any proposed material changes to
the operation of the Stations to insure continued operation of the Stations as
they are now operated and cooperate with Entercom to insure a smooth transfer of
ownership and continuity of operations at Closing.
6.1.4. Obtain and deliver to Entercom within 10 days hereof at its
expense, and permit Entercom to obtain within 20 days hereof at its expense,
Phase I Environmental Assessments of all or any of the Property to be conveyed
hereunder and any real property used by the Stations in their operations or for
which Entercom could be held responsible under any Environmental Laws. In the
event such Phase I Environmental Assessments disclose any conditions contrary to
the representations and warranties contained in Section 4.1.19, or any potential
that such conditions may exist, then Entercom may conduct or have conducted at
its expense additional testing to confirm or negate the existence of any such
conditions. If any such Phase I Environmental Assessment or additional testing
confirms the existence of any such conditions, CBS will cause the conditions to
be remedied as quickly as is reasonably possible to the extent required to
comply with applicable Environmental Laws, provided, however, that such remedial
action(s) does not cost in the aggregate in excess of One Million Dollars
($1,000,000.00) (subject to the last sentence of Section 11.1). In the event
that such remedial action(s) does cost in the
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aggregate in excess of One Million Dollars ($1,000,000.00) (subject to the last
sentence of Section 11.1), CBS may elect not to take such remedial action. In
such event, Entercom may require CBS to proceed to Closing and Entercom shall
receive a proration at Closing, in the amount of One Million Dollars
($1,000,000.00) (subject to the last sentence of Section 11.1). Alternatively,
Entercom may terminate this Agreement and CBS shall have no liability to
Entercom as a result of such termination. CBS has furnished to Entercom copies
of any environmental reports, title reports, and title insurance policies in its
possession previously prepared for any of the Property which CBS has been able
to locate through the date hereof, and from the date hereof through Closing, CBS
shall forward to Entercom any additional such reports or policies it receives or
locates. Notwithstanding any other provision o this Agreement, CBS shall have no
further liability to Entercom for any environmental condition to the extent such
condition is disclosed on Schedule 4.1.19 or any Phase I Environmental
Assessment or other testing conducted pursuant to this Section 6.1.4, except as
set forth in this Section 6.1.4.
6.1.5. Obtain within 10 days hereof at its expense and deliver to
Entercom, commitments from a reputable title insurance company to issue extended
coverage policies of title insurance (ALTA Form 1970 or other form reasonably
acceptable to Entercom) with respect to each parcel of real property to be
conveyed hereunder, insuring good and marketable title to such real property
(the "Title Commitments"). In the event Entercom notifies CBS within 10 business
days of receipt of the Title Commitments that the Title Commitments disclose any
rights of way, easements, exceptions or other matters which do not constitute
Permitted Encumbrances and which materially and adversely interfere with the
continued use of such real property as currently used, CBS will cause the
conditions to be remedied as quickly as is reasonably possible; provided,
however, that such remedial action(s) does not cost in the aggregate in excess
of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section
11.1). In the event that such remedial action(s) does cost in the aggregate in
excess of One Million Dollars ($1,000,000.00), CBS may elect not to take such
remedial action, and, notwithstanding any other provision of this Agreement, CBS
shall have no further liability to Entercom for any title defect. In such event,
Entercom may require CBS to proceed to Closing and Entercom shall receive a
proration at Closing, in the amount of One Million Dollars ($1,000,000.00)
(subject to the last sentence of Section 11.1). Alternatively, Entercom may
terminate this Agreement and CBS shall have no liability to Entercom as a result
of such termination.
6.1.6. Cooperate with Entercom, with respect to the Stations, in its
efforts to employ after the Closing, or TBA Commencement Date, as the case may
be, any of the current employees of CBS and its Affiliates who are employed at
the Stations (the "Station Employees"), including without limitation, allowing
Entercom to meet privately with the Station Employees, other than Non-Continuing
Employees (as defined in Section 6.5). CBS and its Affiliates will not interfere
with or attempt to undermine in any way the efforts of Entercom to employ such
employees.
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6.1.7. Pay and discharge when due all taxes due after Closing accrued
or accruing with respect to periods ending on or before the Closing Date, to the
extent such taxes could reasonably be expected to result in a lien or otherwise
interfere with the use or enjoyment of the Assets; provided, that any such tax
may be contested by CBS in good faith by appropriate proceedings; provided
further that CBS shall pay any such taxes found to be due and owing upon
completion of such proceedings.
6.1.8. Prosecute any renewal application filed by it with the
Commission with respect to any of the Stations that are the subject of this
Agreement; (ii) diligently defend against any petition to deny or other filing
seeking denial of such application or against any matter raised sua sponte by
the Commission, and (iii) diligently defend against any petition for
reconsideration, application for review, or other post-grant objection to such
renewal application, in each case with respect to events occurring or accruing
prior to the Closing Date, during the period when the Station in question was
owned by CBS or any of its Affiliates.
6.1.9. Use its reasonable best efforts to determine in cooperation with
Entercom whether any of the assets listed on Schedule 4.1.4 as pertaining to
WBMX(FM) are used or intended for use primarily in the operation of any or all
of the Stations. Upon determining that any such assets are so used or so
intended for use, such assets will become part of the Property to be conveyed
hereunder.
6.2. NEGATIVE COVENANTS OF CBS.
Unless Entercom has given its consent in writing, which
consent shall not be unreasonably withheld, CBS and it Affiliates shall not,
directly or indirectly, during the period from the date hereof to the Closing
Date:
6.2.1. Except as specifically provided in this Agreement, cancel,
amend, modify adversely, assign, encumber, or in any way discharge or terminate
any of the Leases or Contracts other than in the Ordinary Course of Business
(provided, however, that CBS shall notify Entercom in writing of any such
actions involving a contract that would need to be identified on Schedule
4.1.6).
6.2.2. By any act or omission, surrender, modify adversely, forfeit, or
fail to renew on regular terms any Authorizations for the Stations or take or
omit any action which might result in the Commission instituting any proceedings
for the revocation, suspension or modification of any such Authorizations.
6.2.3. Except in the Ordinary Course of Business, sell or dispose of
any of the Assets; provided that any Assets so disposed of in the Ordinary
Course of Business (other than Assets that are obsolete, worn beyond repair, or
otherwise not suitable for use in any of the Stations and that are not in use)
are replaced with assets of comparable or better functionality.
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6.2.4. Suffer or permit the creation of any mortgage, conditional sale
agreement, security interest, lease, lien, hypothecation, pledge, encumbrance,
restriction, liability, charge, claim, or imperfection of title on or with
respect to any of the Assets other than Permitted Encumbrances and those
identified on Schedule 4.1.8 hereto.
6.2.5. Enter into, renew, or modify any Contract relating to the
Stations with an individual value of over Fifty Thousand Dollars ($50,000.00) or
in the aggregate over Two Hundred and Fifty Thousand Dollars ($250,000.00);
other than for Time Sales Agreements, Trade Agreements or Barter Agreements,
provided, however, that this restriction shall not apply to renewal or
modification of any collective bargaining agreement governing employees at any
of the Stations, to the extent that such action would constitute a breach of the
terms of such agreement or a violation of applicable law. The amounts set forth
in the preceding sentence shall have no bearing on any determination as to what
constitutes "material" for purposes of this Agreement.
6.2.6. Fail to take any reasonable actions necessary to maintain the
Stations' continuous broadcast operations from their respective main antennae.
6.2.7. Fail to take any reasonable actions necessary to avoid the
happening of or to cure the existence of any material damage to or impairment of
any of the Assets.
6.2.8. Fail to operate the Stations in conformity in all material
respects with all of the applicable requirements of law and regulation.
6.2.9. Take any action which is materially inconsistent with its
obligations under this Agreement, or that could hinder or delay the consummation
of the transactions contemplated hereby. Any notification or consent given under
this Article VI will not mitigate, detract from, or otherwise affect the
representations, warranties, or obligations under this Agreement and the
consequences of the other party's acting on any such notification or consent
will be solely such other party's responsibility, except to the extent inherent
in the nature of any notification or consent, or otherwise set forth in the
terms thereof.
6.3. NO CONTROL.
Nothing contained in this Agreement or in the Time Brokerage
Agreement shall give Entercom any right to control the operations of the
Stations prior to the Closing Date.
6.4. NO SOLICITATION OR HIRE OF EMPLOYEES AND PROGRAMMING.
During the period beginning the date of this Agreement and
ending the earlier of eighteen (18) months after the Closing Date or, as to any
particular Station, upon consummation of any transaction requiring the prior
consent of the Commission on FCC Form 314 or 315, CBS shall be prohibited from:
(i) soliciting or hiring any Transferred Employee (as defined in Section
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6.5); provided, however, that this prohibition shall not apply to any
Transferred Employee hired by Entercom and subsequently terminated by Entercom
without cause; (ii) contracting for, negotiating for, or soliciting any of the
rights relating to the programming content on or promotional materials related
to the Stations listed on Schedule 6.4.
6.5. COVENANTS OF ENTERCOM.
6.5.1. Prior to the earlier of the TBA Commencement Date or the Closing
Date, Entercom or its designated Affiliate shall offer employment commencing on
the earlier of the TBA Commencement Date or the Closing Date to each of the
employees employed by CBS or its Affiliates at the Stations on such date (the
"Station Employees"), other than those employees specified on Schedule 6.5 (the
"Non-Continuing Employees"). The Station Employees accepting such offers shall
be referred to as the "Transferred Employees." "Station Employees" shall also
include any employee of the Station who is on a short-term disability or other
authorized temporary leave from employment by CBS not in excess of 6 months, and
Entercom or its designated Affiliate shall offer employment to such person at
such time the person is capable and ready to return to active status, provided
that such person actually returns to active status within such six (6) month
period. Except for any Transferred Employees whose employment contracts are
assumed by Entercom under the terms hereof, the terms and conditions of
Entercom's employment of the Transferred Employees shall be at-will employment
in at least the same positions, for at least the same direct cash compensation,
with medical insurance effective as of the earlier of the TBA Commencement Date
or the Closing Date and including coverage for any preexisting health conditions
that would have been covered by the health plan in which the employee was a
participant immediately prior to the earlier of the TBA Commencement Date or the
Closing Date and give effect, in determining any periodic deductible and maximum
out-of-pocket limitations, to claims incurred and paid by, and amounts
reimbursed to, such Transferred Employees prior to the earlier of the TBA
Commencement Date or the Closing Date. For purposes of determining the amount of
any entitlement of any Transferred Employee under Entercom's benefit and
vacation plans, Entercom will take into account and credit such Transferred
Employee under Entercom's benefit and vacation plans with the credit for service
the Transferred Employee received from CBS immediately prior to the earlier of
the TBA Commencement Date or the Closing Date. With respect to any welfare
benefit plan (as defined in Section 3(1) of ERISA) of Entercom for the benefit
of Transferred Employees, Entercom shall cause all Transferred Employees who
actively participated in similar plans of CBS to become a participant in such
welfare benefit plan of Entercom as of the earlier of the TBA Commencement Date
or the Closing Date. No provisions of this Agreement shall create any third
party beneficiary rights of any employee or former employee (including any
beneficiary or dependent thereof) of CBS in respect of continued employment (or
resumed employment) with CBS or Entercom or in respect of any other matter.
6.5.2. Without the prior written consent of CBS, which shall not be
withheld unreasonably, from and after the date hereof, neither Entercom nor any
of its Affiliates shall take
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any action inconsistent with its obligations under this Agreement, or that could
hinder or delay the consummation of the transactions contemplated hereby.
6.6. REAL PROPERTY SURVEYS.
6.6.1. Within 30 days of the date hereof, Entercom may procure, at its
expense, with respect to each parcel of real property owned by CBS and used in
connection with the operation of the Stations, a current survey of each such
parcel of real property, 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, transmitting towers, tower guy anchors and other matters
customarily shown on such surveys, and showing vehicular access affirmatively to
public streets and roads (the "Survey").
6.6.2. Within 10 business days of receipt of the Surveys, Entercom
shall give CBS copies of the Surveys and notice of any exceptions to matters
revealed by the Survey that would materially and adversely affect the Stations
as currently operated (the "Objectionable Exceptions"). If Entercom fails to
give such notice in a timely manner, Entercom shall be deemed to have accepted
matters revealed by the Surveys other than the Objectionable Exceptions
expressly set forth in the notice.
6.6.3. CBS shall cure or remove any Objectionable Exception within 30
days from the date of Entercom's notice; provided, however, that if CBS
reasonably determines that the cost of removing such Objectionable Exception
would exceed One Million Dollars ($1,000,000.00) (subject to the last sentence
of Section 11.1) or that CBS through the expenditure of up to One Million
Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1) will be
unable to cure or remove an Objectionable Exception within such 30-day period,
then CBS shall notify Entercom within 3 business days after such determination,
whereupon Entercom shall have the right, exercisable by written notice given to
CBS within 3 business days after receipt of CBS's notice, to elect (i) to agree
to accept the real property covered by such Survey, subject to such of the
Objectionable Exceptions, together with a payment of such sum as is necessary to
remove the Objectionable Exception not to exceed One Million Dollars
($1,000,000.00) (subject to the last sentence of Section 11.1), or (ii) to
terminate this Agreement. If Entercom fails to elect option (i) or (ii) above,
then Entercom shall be deemed to have elected option (i).
ARTICLE VII.
ACTIONS PRIOR TO CLOSING.
7.1. APPLICATION TO COMMISSION.
The parties hereby bind themselves to use their best efforts,
and to cooperate with each other, in seeking the consent and approval of the
Commission to the assignment of all Authorizations heretofore granted and issued
in connection with the Stations as herein provided;
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diligently and promptly to prepare, sign, and file with the Commission within
five (5) business days from the date of this Agreement any and all applications
requisite or desirable to procure such consents and approvals (the "Assignment
Applications"); and diligently and promptly to prepare and submit to the
Commission all information, data, exhibits, amendments, resolutions, statements,
and other material necessary or proper in connection with the Assignment
Applications; and diligently to pursue the grant of a Final Order approving such
Assignment Applications.
7.2. COMPLIANCE WITH CBS FINAL JUDGMENT.
Entercom acknowledges that CBS has provided it with a copy of
the CBS Final Judgment. Within two (2) business days of the date of this
Agreement, CBS shall comply with the notification provisions of Section VII of
the CBS Final Judgment, and both parties shall thereafter comply in all material
respects with all requests for additional information by the DOJ under the CBS
Final Judgment. The parties will attempt in good faith to persuade the DOJ to
provide written notice of no objection to this Agreement. If the DOJ does not
provide written notice of no objection under the CBS Final Judgment, then CBS
may, but shall be under no obligation to, seek the Court's approval of this
Agreement pursuant to Section VII of the CBS Final Judgment. If CBS decides not
to seek Court approval, or if DOJ has not provided written notice of no
objection or the Court's approval has not been obtained by the Upset Date (as
defined in Section 9.1.1.), then either party shall be permitted to terminate
this Agreement as provided in Section 9.1.
7.3. HART-SCOTT-RODINO NOTIFICATION.
As promptly as practicable and no later than ten (10) days
after the date hereof, the parties hereto shall take all steps reasonably
necessary to file and shall participate in the filing of all requisite documents
and notifications required to be filed pursuant to the HSR Act. All filing fees
in connection with such notifications shall be paid by one-third by CBS and
two-thirds by Entercom. The parties agree to diligently take and fully cooperate
in the taking of all necessary and proper steps, and provide any additional
information reasonably requested in order to obtain promptly the early
termination of the waiting period under the HSR Act.
7.4. INSPECTION.
During the period from the date of this Agreement to the
Closing Date, CBS shall, upon reasonable request, afford, or cause to be
afforded, engineers, attorneys, accountants, and other consultants and/or
representatives of Entercom free access in a reasonable manner during normal
business hours to the employees, offices, studios, transmitter sites, equipment,
records, and other documents pertaining to the Stations and furnish or cause to
be furnished Entercom with all information concerning the Stations' affairs as
Entercom may reasonably request, including but not limited to applications and
other documents filed with the Commission. For
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purposes of the foregoing, records shall include, without limitation, any sales,
research, consulting, and ratings reports relating to the Stations.
7.5. CONFIDENTIALITY.
Each party hereby covenants and agrees that in the event the
transactions contemplated by this Agreement are not consummated for any reason
whatsoever, they will, upon request, return to the other party within ten (10)
days from the date of such request, all versions, including copies, of all
information furnished to that party by another party hereto or its
representatives or Affiliates, regardless of whether the same is marked
"confidential" or "proprietary," together with any and all notes, memoranda,
analyses, compilations, studies, or other documents (whether in hard copy or
electronic media) prepared by the receiving party, its directors, officers,
partners, employees, agents, or other representatives (including advisors,
attorneys, accountants, financial advisors, and potential financing sources)
which contain or otherwise reflect such information (the "Confidential
Information"). Each party hereby covenants and agrees to use reasonable efforts
to hold all Confidential Information in confidence and not to disclose, or cause
any representative, agent, or employee to disclose to any third party any
portion of the Confidential Information except as may be required by law or
judicial process, and not to use any portion of the Confidential Information for
its own benefit without the written consent of the providing party. Should a
party receive a request or be required by applicable law to disclose to a court
or other tribunal all or any part of the Confidential Information received from
another party hereto, CBS and Entercom confirm that each will adhere to the
terms and conditions set forth in paragraph 5 of the Confidentiality Agreement,
dated June 9, 1998, between CBS and Entercom. Nothing shall be deemed to be
Confidential Information that: (a) is or becomes generally available to the
public other than as a result of a disclosure by the receiving party or its
representatives; or (b) is or becomes available to the receiving party on a non-
confidential basis from a source rightfully in possession of the information and
which is under no legal, contractual or fiduciary obligation to keep it
confidential.
ARTICLE VIII.
CLOSING
8.1. CLOSING.
Unless otherwise agreed by the parties, the Closing shall take
place at the offices of Latham & Watkins, 1001 Pennsylvania Avenue, N.W., Suite
1300, Washington, D.C. 20004, at 10:00 a.m. on the Closing Date. The Closing
Date shall be the date selected by Entercom on at least five (5) business days'
notice to CBS, which date shall be within nine (9) months after the satisfaction
of the conditions to Closing set forth in Section 5.1, Section 5.2.2 and Section
5.3.1 hereof (the "Outside Closing Date"); provided that, once such conditions
are satisfied, if: (a) Closing has not occurred prior to the date of closing
under the Tampa Agreement, and (b) neither CBS nor Entercom has made a Closing
Date Election, as hereinafter defined, then Closing will occur either by ten
(10) business days after the closing under the Tampa Agreement
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or by the Outside Closing Date, whichever is earlier. (The date for the Closing
described in the immediately preceding sentence is hereafter referred to as the
"Provisional Closing Date.") CBS may elect to postpone the Closing Date from the
Provisional Closing Date until the date which is not later than the earlier of
(i) the date which is five (5) days prior to the last day under Code Section
1031(a)(3) on which Entercom may effect an exchange of the Assets (as defined in
the Tampa Agreement) for the Assets or (ii) the Outside Closing Date (the
"Closing Date Election"), by giving notice to Entercom at least seven (7)
business days prior to the Provisional Closing Date. If CBS does not provide
such notice within the time allowed, then CBS shall no longer have the right to
make the Closing Date Election, and Entercom shall have the right to make the
Closing Date Election, by providing written notice to CBS at least five (5)
business days prior to the Provisional Closing Date.
8.2. PRORATIONS.
Within ninety (90) days after Closing, an accounting for each
Station shall be made as follows:
8.2.1. All prepaid income, prepaid expenses, prepayments on any
Contracts and Leases assumed, accrued income, property taxes, and accrued
expenses, including without limitation any accrued expenses for Transferred
Employees (such as accrued vacation time) assumed by Entercom up to the
Adjustment Time shall, except as otherwise expressly provided herein or in the
Time Brokerage Agreement, be adjusted and allocated between CBS and Entercom to
reflect the principle that all expenses and income arising from the operation of
the Station up through the Adjustment Time shall be for the account of CBS, and
all expenses and income arising from the operation of the Station or portion
thereof acquired by Entercom after the Adjustment Time shall be for the account
of Entercom. Trade and Barter Agreements shall be subject to adjustment or
proration only to the extent provided in Section 4.1.18. Any appropriate
proration required to be made (i) pursuant to Leases referred to in Section
4.1.5, (ii) pursuant to Contracts referred to in Section 4.1.6, (iii) pursuant
to Section 6.1.4, and (iv) pursuant to Section 4.1.18 shall also be reflected in
such accounting. Any amount not paid when due shall bear interest at the rate of
ten percent (10%) per annum.
8.2.2. As soon as practicable following the Closing Date, and in any
event within ninety (90) days thereafter, or at such other time as the parties
agree, Entercom shall deliver to CBS Entercom's certificate, setting forth as of
the Adjustment Time, all adjustments to be made as provided in Section 8.2.1
above as to each Station. Entercom shall provide CBS or its representatives
access to copies of such portions of books and records CBS may reasonably
request solely for purposes of verifying such adjustments. Entercom's
certificate shall be final and conclusive unless objected to by CBS in writing
within thirty (30) days after delivery. Entercom and CBS shall attempt jointly
to reach agreement as to the amount of the adjustments to be made hereunder
within sixty (60) days after receipt of such written objection, which agreement,
if achieved, shall be binding upon all parties to this Agreement and not subject
to dispute or review.
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8.2.3. In the event of a disagreement between Entercom and CBS with
respect to the accounting to be made hereunder, the parties agree that a public
accounting firm chosen jointly by Entercom and CBS shall be the final arbiter of
such disagreement.
8.2.4. Any amounts due for the adjustments provided for herein shall be
paid within ten (10) business days after final determination.
8.3. CLOSING DELIVERIES TO ENTERCOM.
At or before the Closing, CBS shall deliver or cause to be
delivered to Entercom the following items and documents in form reasonably
satisfactory to counsel for Entercom and properly executed, unless Entercom
shall waive in whole or in part in writing such delivery and then only to the
extent of such waiver:
8.3.1. CBS shall deliver to Entercom such Bills of Sale and assignments
and other instruments of transfer and conveyance, transferring to Entercom the
Property to be sold, transferred or assigned hereunder and the rights and
interests under the Leases and Contracts being assigned to Entercom hereunder,
to the extent such rights and interests under such leases and contracts have not
previously been assigned to and assumed by Entercom under the Time Brokerage
Agreement.
8.3.2. CBS shall deliver to Entercom one or more Special Warranty Deeds
in recordable form transferring to Entercom a fee simple interest in each parcel
of owned real property being conveyed to Entercom hereunder.
8.3.3. CBS shall deliver to Entercom an assignment of all right, title
and interest of CBS in and to the Authorizations.
8.3.4. CBS shall deliver to Entercom all keys to and actual possession
of all of the Assets, in the same condition as the same now are, except for
ordinary wear and tear thereof and except as permitted under the Agreement.
8.3.5. CBS shall deliver to Entercom certified copies of resolutions of
the Board of Directors of each CBS entity, duly authorizing the execution,
delivery, and performance of this Agreement and all documents to be executed and
delivered by CBS at the Closing, and thereafter.
8.3.6. CBS shall deliver to Entercom certificates signed by an
authorized officer to the effect (a) that no act or omission of CBS or any of
its Affiliates, or state of facts contrary to the agreements, representations,
and warranties of such party contained herein has been taken or has occurred and
that said representations and warranties of such party, to the extent they do
not speak as of a specific time, are true and correct as of the Closing Date,
with the same effect as if made as of the time of Closing, except to the extent
otherwise permitted hereunder or to the
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extent such act, omission, state of facts, untruth or inaccuracy would not have
a material adverse effect on Entercom's continued operation of the Stations as
currently operated and (b) that all covenants and agreements contained herein of
CBS have been complied with in all material respects.
8.3.7. CBS shall deliver to Entercom the Required Consents relating to
the Leases and Contracts, to the extent not previously delivered under the Time
Brokerage Agreement.
8.3.8. CBS shall deliver to Entercom evidence of the release of all
liens and encumbrances on the Assets to be released at Closing.
8.3.9. CBS shall deliver to Entercom one or more opinions of counsel to
CBS, dated the Closing Date, in form and substance reasonably satisfactory to
Entercom.
8.4. CLOSING DELIVERIES TO CBS.
At or before the Closing, Entercom or an Affiliate of
Entercom, as appropriate, shall deliver to CBS or cause to be delivered the
following items and documents in form reasonably satisfactory to counsel for CBS
and properly executed, unless CBS shall waive in whole or in part in writing
such delivery and then only to the extent of such waiver:
8.4.1. Entercom shall pay to CBS the Purchase Price by wire transfer of
immediately available funds.
8.4.2. Entercom shall deliver to CBS certified copies of resolutions of
the Board of Directors of Entercom duly authorizing the execution, delivery, and
performance of this Agreement and all documents to be executed and delivered by
Entercom at the Closing, and thereafter.
8.4.3. Entercom shall deliver to CBS certificates signed by an
authorized officer to the effect that no act or omission of Entercom or state of
facts contrary to the agreements, representations, and warranties of Entercom
contained herein has been taken or has occurred and that said representations
and warranties of Entercom to the extent they do not speak as of a specific time
are true and correct as of the Closing Date, with the same effect as if made as
of the time of Closing, and that all covenants and agreements contained herein
of Entercom have been complied with.
8.4.4. Entercom shall deliver to CBS one or more agreements whereby
Entercom assumes and agrees to pay when due any liabilities of CBS relating to
the Stations specifically assumed by Entercom hereunder, including without
limitation those liabilities accruing after the Adjustment Time with respect to
those Leases and Contracts being assumed by Entercom hereunder, to the extent
such rights and interests under such liabilities have not previously been and
assumed by Entercom under the Time Brokerage Agreement.
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8.4.5. Entercom shall deliver to CBS one or more opinions of counsel to
Entercom dated the Closing Date, in form and substance reasonably satisfactory
to CBS.
8.5. COVENANTS OF FURTHER ASSURANCES; AVAILABILITY OF RECORDS.
At and after the time of Closing, upon request, each party
shall take such action and deliver to the other party such further instruments
of assignment, conveyance, or transfer or other documents of further assurance
as may be reasonably necessary to evidence the full and effective transfer,
conveyance, and assignment of the Assets and possession thereof to the
respective parties, their successors and assigns, and to assure complete
performance of this Agreement in all respects. After the Closing, for a period
of three (3) years, upon request, CBS shall provide Entercom copies of or access
to records relating to the Stations that are needed by Entercom for accounting,
tax, or other purposes.
8.6. RISK OF LOSS; DAMAGE TO PROPERTY.
The risk of loss or damage from fire, theft, storm or other
act beyond the control of CBS to any of the Assets prior to Closing, shall be
upon CBS. If, at the time of Closing, the tangible property to be sold hereunder
shall have suffered such loss or damage to an extent that affects the value
thereof and CBS shall not have repaired, replaced, or restored same with
property of like kind, quality, and value, Entercom shall complete the purchase
and Closing, in which event it shall be entitled to a payment equal to the
greater of (a) the amount necessary to repair, replace, or restore such damaged
property with property of like kind, quality, and value or (b) the amount of any
and all insurance proceeds available to CBS, if any, collectible by reason of
such loss or damage.
8.7. TAXES ON TRANSACTION.
All sales, purchase, transfer, use, or documentary taxes, if
any, payable by reason of this Agreement or any of the transactions contemplated
hereby or the sale, transfer, or delivery of any of the Assets hereunder,
whether or not imposed on a particular party, shall be paid and borne equally by
CBS or Entercom, either by payment thereof or by reimbursement to the other
party.
ARTICLE IX.
TERMINATION, DEFAULT AND INDEMNIFICATION
9.1. TERMINATION.
This Agreement may be terminated by a party hereto not then in
default hereunder upon written notice to the other parties upon occurrence of
any of the following: (i) the Closing has not occurred by the date that is one
year after the date of this Agreement (the "Upset Date"); (ii) the Commission
denies by Final Order or designates for hearing any of the Assignment
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Applications or any portion thereof; (iii) by either party as provided in
Section 7.2; or (iv) any of the conditions set forth in Article V of this
Agreement are not waived by such party and such conditions shall not have been
satisfied on or before the Upset Date, or shall have become incapable of
satisfaction. This Agreement may be terminated by Entercom as provided in
Section 6.1.4, Section 6.1.5 and Section 6.6.3, provided Entercom is not then in
default hereunder.
9.2. EFFECT OF TERMINATION.
The termination of this Agreement under Section 9.1 shall not
relieve any party of any liability for breach of this Agreement prior to the
date of termination.
9.3. REMEDIES.
CBS recognizes that, in the event of a Default by CBS,
monetary damages alone will not be adequate. Therefore, in the event of a
Default by CBS, unless Entercom is in Default, Entercom shall be entitled, in
addition to indemnification pursuant to Section 9.4, to obtain specific
performance of the terms of this Agreement. In any action to enforce
specifically the performance of this Agreement under this Section 9.3, CBS shall
waive the defense that there is another adequate remedy at law or equity and
agrees that Entercom shall have the right to obtain specific performance of
CBS's obligations under the terms of this Agreement without being required to
prove actual damages, post bond, or furnish other security.
9.4. INDEMNIFICATION.
9.4.1. BY CBS.
CBS shall indemnify, defend, and hold Entercom and its
officers, directors, partners, employees, and Affiliates harmless from, against,
and with respect to any and all loss, damage, claim, obligation, assessment,
cost, liability, and expense (including, without limitation, reasonable
attorneys' fees and costs and expenses incurred in investigating, preparing,
defending against or prosecuting any litigation or claim, action, suit,
proceeding or demand) of any kind or character (a "Loss") (including without
limitation the loss of any of the Authorizations resulting from any failure by
the Commission to renew such Authorizations as a result of events occurring
prior to the Closing Date) incurred, suffered, sustained, or required to be paid
by any of them and resulting from, related to or arising out of:
(a) any breach of any of the covenants, representations or
warranties made by CBS in or pursuant to this Agreement, or in any agreement,
document, or instrument executed and delivered pursuant hereto;
(b) any failure by CBS to perform or observe, or to have
performed or observed, in full, any covenant, agreement, or condition to be
performed or observed by it
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pursuant to this Agreement or in any agreement, document, or instrument executed
and delivered by or on behalf of it pursuant hereto;
(c) any and all obligations of CBS, except for obligations
assumed or required to be assumed by Entercom under the terms of this Agreement
or in the Time Brokerage Agreement;
(d) the operation or ownership of the Assets prior to the
Adjustment Time by CBS and its Affiliates, except for obligations and
liabilities assumed by Entercom under the Time Brokerage Agreement; or
(e) Closing by Entercom and/or any of its Affiliates prior to
the grants of the Assignment Applications becoming Final Orders, if the failure
of the grants of the Assignment Applications to become Final Orders is
attributable to any issue raised regarding CBS or any of its Affiliates. For
purposes of Section 9.4.2(b), CBS acknowledges that if it wrongfully fails to
close the transactions contemplated hereby, Entercom may not be able to acquire
the Stations as replacement property for the Assets (as defined in the Tampa
Agreement) in a transaction qualifying under Section 1031 of the Code, and that
CBS shall indemnify and hold harmless Entercom for damages sustained by Entercom
if Entercom is unable to acquire replacement property other than the Stations so
as to obtain tax-deferred treatment under Section 1031 of the Code for the
disposition of the Assets (as defined in the Tampa Agreement).
9.4.2. BY ENTERCOM.
Entercom shall indemnify, defend, and hold CBS and its
officers, directors, partners, employees, and Affiliates harmless from, against
and with respect to any and all items of Loss incurred, suffered, sustained, or
required to be paid by any of them and resulting from, related to or arising out
of:
(a) any breach of any of the covenants, representations, or
warranties made by Entercom in or pursuant to this Agreement, or in any
agreement, document, or instrument executed and delivered pursuant hereto;
(b) any failure by Entercom to perform or observe, or to have
performed or observed, in full, any covenant, agreement, or condition to be
performed or observed by it pursuant to this Agreement or in any agreement,
document, or instrument executed and delivered by or on behalf of it pursuant
hereto;
(c) Entercom's operation or ownership of the Assets after the
Adjustment Time; or
(d) any obligations under any Contracts or Leases assumed by
Entercom under Section 3.1 hereof.
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9.4.3. NOTICE AND PROCEDURE IN CONNECTION WITH THIRD PARTY CLAIMS.
If any party has a claim for indemnification hereunder (such
party, an "Indemnitee") arising out of any claim or liability which is asserted
or threatened against it, or any action, suit or proceeding is commenced by any
third party against any Indemnitee which might result in any indemnification
obligations hereunder on behalf of any other party (such other party, an
"Indemnitor"), such Indemnitee shall, within twenty (20) business days from the
receipt of same, give written notice thereof to each such Indemnitor together
with a brief statement of the basis of the claim and a copy of any complaint or
other documents relating to such claim, provided, however, that failure to give
such notice within such twenty (20) business day period shall not affect the
liability of Indemnitor hereunder unless the failure to give such notice within
such period materially and adversely affects Indemnitor's ability to defend
against the claim giving rise to Indemnitee's claim for indemnification or to
cure the default giving rise to such claim. Within twenty (20) days from receipt
of such notice, the Indemnitor shall give the Indemnitee written notice as to
whether the Indemnitor elects to contest any such claim or liability; provided,
however, that during the interim, the Indemnitee shall be entitled to take
reasonable action (which shall not include settlement) with respect to such
claim which it deems necessary to protect against further damage or default with
respect thereto. If an Indemnitor elects to contest any such claim or liability,
it shall be at the cost and expense of the Indemnitor and using professionals
chosen by the Indemnitor. The Indemnitee may participate in the defense of any
claim or liability that an Indemnitor has elected to contest, but such
participation shall be at its own expense. If the Indemnitor does not elect to
assume control or otherwise participate in the defense of any third party claim,
it shall be bound by the results obtained by the Indemnitee with respect to such
claim, including any settlement, subject to the Indemnitor's right to contest
the underlying obligation to indemnify the Indemnitee.
9.4.4. EXCLUSIVITY.
Except as provided in Section 9.1 concerning termination of
this Agreement and Section 9.3 concerning the rights of Entercom to specific
performance, subsequent to Closing the right to indemnification hereunder shall
be the exclusive remedy for all claims of damages of any party in connection
with any breach by any other party of its representations, warranties, or
covenants. Subsequent to Closing, the parties hereto agree that no party will be
entitled to consequential or punitive damages as a result of a breach hereof by
any party hereto.
9.4.5. LIMITATIONS.
Except as otherwise provided in this Article IX, any claim
asserted for damages or indemnification hereunder must be submitted to the
Indemnitor in writing within the time periods set forth in Section 11.3 of this
Agreement and any such claim not so asserted shall be waived and barred. No
party shall be entitled to indemnification hereunder unless the aggregate amount
of its claims for indemnification exceeds One Hundred Thousand Dollars
($100,000) per Station, in which event such party shall be indemnified for the
entire amount owed. This amount
33
<PAGE> 38
shall have no bearing on any determination as to what constitutes "material" for
purposes of this Agreement. No party shall be entitled to indemnification
hereunder for amount in the aggregate greater than the Purchase Price.
ARTICLE X.
ASSET EXCHANGES
10.1. POSSIBLE CBS EXCHANGE.
Entercom acknowledges that CBS may elect to effect the
transfer and conveyance of the Assets as part of a deferred like-kind exchange
under Section 1031(a)(3) of the Code in which the Assets are relinquished at
Closing in exchange for other like-kind assets to be identified and acquired
after the Closing in whole or in part with the funds constituting the Purchase
Price. If CBS so elects, it shall give written notice to Entercom of its
intention to effect such deferred like-kind exchange, and CBS thereafter may at
any time at or prior to Closing assign its rights under this Agreement to a
"qualified intermediary" as defined in Treas. Reg. Section 1.1031(k)-1(g)(4),
subject to all of Entercom's rights and obligations hereunder, and shall
promptly provide written notice of such assignment to all parties hereto. In the
event CBS assigns its rights hereunder to a "qualified intermediary," Entercom
shall acknowledge in writing the notification by CBS of the assignment to the
"qualified intermediary" of its rights hereunder, and Entercom shall pay the
Purchase Price to the "qualified intermediary" at Closing rather than to CBS,
which payment shall discharge the obligation of Entercom to make payment for the
Assets hereunder.
10.2. POSSIBLE ENTERCOM EXCHANGE.
Entercom may elect to effect the acquisition of the Assets as
part of a deferred like-kind exchange under Section 1031(a)(3) of the Code, in
lieu of buying such assets hereunder. If Entercom so elects, it shall provide
notice to CBS of its election, and thereafter (i) may at any time at or prior to
Closing assign its rights under this Agreement to a "qualified intermediary" as
defined in Treas. Reg. Section 1.1031(k)-1(g)(4), subject to all of CBS' rights
and obligations hereunder and (ii) shall promptly provide written notice of such
assignment to all parties hereto. If Entercom has given notice of its intention
to effect the acquisition of the Assets as part of an exchange under Section
1031 of the Code, CBS shall (i) promptly provide Entercom with written
acknowledgment of such notice and (ii) at Closing, accept payment for the Assets
from the "qualified intermediary" rather than from Entercom, which payment shall
discharge the obligation of Entercom to make payment for the Assets hereunder
and transfer, assign and convey the Assets to Entercom or its designated
Affiliates.
10.3. INDEPENDENT TRANSACTIONS.
The parties acknowledge and agree that the transactions
contemplated by this Agreement are not contractually interdependent or otherwise
mutually dependent in any way on
34
<PAGE> 39
or with the transactions contemplated by either the Tampa Agreement or the
Boston I Agreement. The parties further acknowledge that neither the Closing nor
any of the rights or obligations of the parties set forth herein are dependent
or conditional on the closing or failure to close the transactions contemplated
by either the Tampa Agreement or the Boston I Agreement, and that neither the
closing of the Tampa Agreement or the Boston I Agreement nor any of the rights
or obligations of the parties to such agreements are dependent or conditional on
the occurrence of the Closing or the failure of occurrence of the Closing.
ARTICLE XI.
GENERAL PROVISIONS
11.1. EXPENSES OF THE PARTIES.
Except as otherwise specifically provided herein, all expenses
involved in the preparation, authorization, and consummation of this Agreement
including, without limitation, all fees and expenses of agents, representatives,
counsel, and accountants in connection therewith and in connection with
applications to the Commission hereunder, shall be borne solely by the party who
shall have incurred the same, and the other party shall have no liability in
respect thereof. The foregoing notwithstanding, the parties agree that any
filing fees of the Commission relating to the filing of the Assignment
Applications shall be divided equally between CBS and Entercom. The parties
agree that the Required Cure Expense shall not exceed One Million Dollars
($1,000,000.00).
11.2. BROKERS.
Each party hereto represents and warrants to the other parties
hereto that it has not incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents commissions or other like
payment in connection with this Agreement or the transactions contemplated
hereby for which the other parties will have any liability, and each party
hereto agrees to indemnify and hold the other parties hereto harmless against
and in respect of any such obligation or liability based in any way on any
agreement, arrangement, or understanding claimed to have been made by such party
with any third party.
11.3. SURVIVAL OF COVENANTS, REPRESENTATIONS, AND WARRANTIES.
The provisions hereof which by their terms are to be performed
and observed after the Closing Date, and the several representations,
warranties, indemnities, and agreements of the parties herein contained, shall
survive the Closing Date hereunder for a period of eighteen (18) months and
shall remain effective and unaltered or unimpaired for such period by any
investigation that may have been or may be made at any time prior to Closing by
or on behalf of any party, except that the representations concerning title,
ERISA, environmental matters, and taxes contained in Sections 4.1.8, 4.1.15,
4.1.19 (other than as provided in Section 6.1.4), and 4.1.24 shall survive until
ninety (90) days after the expiration of the applicable statutes of
35
<PAGE> 40
limitation, and the provisions of Sections 2.2 and Article X shall survive the
Closing without limitation.
11.4. CONFIDENTIALITY.
Each party agrees, except as otherwise required by law or the
rules of the New York Stock Exchange (the "NYSE"), until such time as this
Agreement is made public by filing with the Commission, that it will not
disclose to any third party the fact of or content of this agreement or the
possible exchange of the radio stations involved without the express prior
consent of the other parties. Should a party be required to disclose information
regarding the agreement prior to filing with the Commission because of a
requirement of law or a rule of the NYSE, it will advise the other parties with
reasonable advance notice in writing prior to disclosure.
11.5. AMENDMENT AND WAIVER.
This Agreement cannot be changed or terminated orally. Any
amendment or modification hereof must be in writing signed by the party against
whom enforcement is sought. No waiver of compliance with any provision or
condition hereof, and no consent provided for herein, shall be effective unless
evidenced by an instrument in writing duly executed by the party sought to be
charged with such waiver or consent.
11.6. EFFECT OF THIS AGREEMENT.
This Agreement and the Time Brokerage Agreement set forth the
entire understanding of the parties and supersedes any and all prior written or
oral agreements, arrangements, or understandings relating to the subject matter
hereof. No representation, promise or inducement has been made by either party
which is not embodied in this Agreement, and neither party shall be bound by, or
be liable for, any alleged representation, promise, inducement, or statement of
intention not embodied herein unless same shall have been made subsequent
hereto, shall be in writing, and shall be signed by the party to be charged
therewith. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns.
11.7. TERMS GENERALLY.
(a) Words in the singular shall be held to include the plural
and vice versa and words of one gender shall be held to include the other
genders as the context requires; (b) the terms "hereof," "herein," and
"herewith" or words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all Schedules hereto)
and not to any particular provision of this Agreement, and Article, Section,
Paragraph, and Schedule references are to be Articles, Sections, Paragraphs, and
Schedules to this Agreement unless
36
<PAGE> 41
otherwise specified; and (c) the word "or" shall not be exclusive, except where
the context otherwise requires.
11.8. HEADINGS.
The article or section headings of this Agreement are for
convenience of reference only and do not form a part of and do not in any way
modify, interpret, or construe the intention of the parties.
11.9. COUNTERPARTS.
This Agreement may be executed in one or more counterparts and
all such counterparts shall be construed as one and the same instrument.
Executed documents transmitted by telecopier shall be valid and binding.
11.10. GOVERNING LAW; JURISDICTION.
The construction and performance of this Agreement shall be
governed by the laws of the State of New York without reference to its conflict
of law rules. The parties hereto expressly waive and agree to waive any right to
a jury trial in any controversy or claim arising out of or relating to this
Agreement.
11.11. BULK SALES LAWS.
Entercom and its Affiliates waive compliance by CBS and its
Affiliates with the provisions of the "bulk sales" or similar laws of any state.
CBS agrees to indemnify Entercom and its Affiliates and hold them harmless from
any and all loss, cost, damages, and expenses (including but not limited to
reasonable attorney's fees) sustained by the indemnified parties as a result of
any failure of the indemnifying party to comply with any "bulk sales" or similar
laws.
11.12. ASSIGNMENT.
This Agreement and the rights and obligations hereunder may
not be assigned by any party hereto without the prior written consent of the
other parties hereto, which consent shall not be unreasonably withheld; provided
however, that (x) Entercom may make a collateral assignment of their rights
hereunder for the benefit of their senior lenders and (y) any party may assign
all or any part of this Agreement or the rights and obligations hereunder to an
Affiliate, provided that such assignment shall not relieve such party of its
obligations hereunder.
11.13. NOTICES.
Any notice, report, demand, waiver, or consent required or
permitted hereunder shall be in writing and shall be given by hand delivery, by
prepaid registered or certified mail,
37
<PAGE> 42
with return receipt requested, by an established national overnight courier
providing proof of delivery for next business day delivery or by telecopy
addressed as follows:
If to CBS: CBS Radio
40 West 57th Street
14th Floor
New York, NY 10019
Attention: Mr. Mel Karmazin
Telecopier Number: 212-314-9229
with copies to: General Counsel
CBS Corporation
51 West 52nd Street
New York, NY 10019-6188
Telecopier Number: 212-975-2185
and
Leventhal Senter & Lerman, P.L.L.C.
2000 K Street, N.W.
Suite 600
Washington, D.C. 20006
Attention: Steven A. Lerman, Esq.
Telecopier Number: 202-293-7783
If to Entercom: Entercom Communications, Corp.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Attention: Mr. Joseph M. Field, President
Telecopier Number: 610-660-5641
with copies to: John C. Donlevie, Esq., Executive Vice President and
General Counsel
Entercom Communications, Corp.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Telecopier Number: 610-660-5620
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<PAGE> 43
and
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, DC 20004
Attention: Joseph D. Sullivan, Esq.
Telecopier Number: 202-637-2201
The date of any such notice and service thereof shall be
deemed to be: (i) the day of delivery if hand delivered or delivered by
overnight courier; (ii) the day of delivery as indicated on the return receipt
if dispatched by mail, or (iii) the date of telecopy transmission as indicated
on the telecopier transmission report, provided that any telecopy transmission
shall not be effective unless a paper copy is sent by overnight courier on the
date of the telecopy transmission. Any party may change its address for the
purpose of notice by giving notice of such change in accordance with the
provisions of this Section.
11.14. ATTORNEYS' FEES.
In the event of a dispute between or among the parties hereto
arising out of or related to this Agreement or the interpretation or enforcement
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and expenses from the other party.
39
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized corporate officers and their
respective corporate seals thereunto affixed on this the date first written
above.
CBS RADIO, INC.
By:_____________________________________
Title:__________________________________
CBS RADIO LICENSE, INC.
By:_____________________________________
Title:__________________________________
ARS ACQUISITION II, INC.
By:_____________________________________
Title:__________________________________
ENTERCOM COMMUNICATIONS CORP.
By:_____________________________________
Title:__________________________________
40
<PAGE> 1
EXHIBIT 10.15
- --------------------------------------------------------------------------------
TIME BROKERAGE AGREEMENT
BY AND AMONG
CBS RADIO, INC.,
CBS RADIO LICENSE, INC.,
ARS ACQUISITION II, INC.,
AND
ENTERCOM COMMUNICATIONS CORP.
DATED AS OF AUGUST 13, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF SCHEDULES AND EXHIBITS
Schedule 1.1 Programming
Schedule 1.2 Compensation
Schedule 2.1 Programming Policy Statement
Schedule 4.1 Time Sales Agreements and Contracts
<PAGE> 3
TABLE OF CONTENTS
PAGE
ARTICLE I. - SALE OF TIME......................................................1
Section 1.1. Broadcast of Programming..................................1
Section 1.2. Payment...................................................1
Section 1.3. Term......................................................1
ARTICLE II. - PROGRAMMING AND OPERATING STANDARDS AND PRACTICES................2
Section 2.1. Compliance with Standards.................................2
Section 2.2. Political Broadcasts......................................2
Section 2.3. Handling of Communications................................2
Section 2.4. Preemption................................................3
Section 2.5. Broadcasting Obligations of Licensee......................3
Section 2.6. "Payola" and "Plugola"....................................4
Section 2.7. Advertising and Programming...............................4
Section 2.8. Compliance with Laws......................................5
Section 2.9. Certifications............................................5
ARTICLE III. - RESPONSIBILITY FOR EMPLOYEES AND EXPENSES.......................5
Section 3.1. Time Broker's Employees...................................5
Section 3.2. Licensee's Employees......................................5
Section 3.3. Time Broker's Expenses....................................6
Section 3.4. Operating Expenses........................................6
Section 3.5. Time Broker's Insurance...................................6
ARTICLE IV. - ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS......................7
Section 4.1. Assignment................................................7
Section 4.2. Proration.................................................7
Section 4.3. Accounts Receivable.......................................8
ARTICLE V. - OPERATION OF STATION..............................................9
ARTICLE VI. - GRANT OF LICENSES................................................9
Section 6.1. License to Use Stations Facilities........................9
Section 6.2. License of Intellectual Property.........................10
(i)
<PAGE> 4
ARTICLE VII. - INDEMNIFICATION................................................10
Section 7.1. Indemnification Rights...................................10
Section 7.2. Procedures...............................................10
ARTICLE VIII. - DEFAULT.......................................................11
Section 8.1. Time Broker Events of Default............................11
Section 8.2. Licensee's Events of Default.............................12
Section 8.3. Cure Periods.............................................12
Section 8.4. Other Defaults...........................................13
ARTICLE IX. - TERMINATION.....................................................13
Section 9.1. Termination Upon Default.................................13
Section 9.2. Termination Upon Change in FCC Rules.....................13
Section 9.3. Certain Matters Upon Termination.........................13
ARTICLE X. - REMEDIES.........................................................15
ARTICLE XI. - CERTAIN REPRESENTATIONS AND WARRANTIES
OF THE PARTIES..................................................15
Section 11.1. Representations and Warranties of Time Broker............15
Section 11.2. Representations, Warranties and Covenants of Operator
and CRLI.................................................16
ARTICLE XII. - MISCELLANEOUS..................................................17
Section 12.1. Modification and Waiver..................................17
Section 12.2. No Waiver; Remedies Cumulative...........................18
Section 12.3. Construction.............................................18
Section 12.4. Headings.................................................18
Section 12.5. Successors and Assigns...................................18
Section 12.6. Force Majeure............................................18
Section 12.7. Broker...................................................19
Section 12.8. Counterpart Signatures...................................19
Section 12.9. Notices..................................................19
Section 12.10. Entire Agreement.........................................20
Section 12.11. Severability.............................................21
Section 12.12. No Joint Venture.........................................21
Section 12.13. Damage to Stations.......................................21
(ii)
<PAGE> 5
Section 12.14. Noninterference..........................................21
Section 12.15. Regulatory Changes.......................................21
Section 12.16. Attorneys' Fees..........................................22
(iii)
<PAGE> 6
TIME BROKERAGE AGREEMENT
This Time Brokerage Agreement (this "Agreement") is made as of
the 13th day of August 1998, by and among CBS Radio, Inc., a Delaware
corporation ("Operator"), CBS Radio License, Inc., a Delaware Corporation
("CRLI"), ARS Acquisition II, Inc., a Delaware Corporation ("ARSA") (CRI, CRLI
and ARSA are collectively referred to herein as "Licensee") and Entercom
Communications Corp., a Pennsylvania corporation ("Entercom" or "Time Broker").
CRLI is the licensee of broadcast stations WAAF(FM) and WWTM(AM), Worcester,
Massachusetts, and WEGQ(FM), Lawrence, Massachusetts (collectively, the
"Stations"). Concurrently with the execution of this Agreement, Time Broker,
Operator and CRLI are entering into an Asset Purchase Agreement (the "Purchase
Agreement") providing for the purchase by Time Broker of the Stations, upon the
terms and conditions set forth therein. Time Broker and Licensee desire to enter
into an agreement providing for the sale of substantially all of the broadcast
time of the Stations to Time Broker, subject to and in compliance with the rules
and policies of the Federal Communications Commission (the "FCC").
Accordingly, in consideration of the foregoing and of the
mutual promises, covenants, and conditions set forth below, the parties agree as
follows:
ARTICLE I.
SALE OF TIME
Section 1.1. Broadcast of Programming
Effective seven (7) business days after the expiration or
early termination of any waiting period applicable to the transfer of the
Stations to Time Broker under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") (the "Commencement Date"), Licensee shall
broadcast on the Stations, or cause to be broadcast on the Stations, programs
which are presented to it by Time Broker as described in greater detail on
Schedule 1.1 (the "Programming").
Section 1.2. Payment.
Time Broker shall pay Licensee for broadcast of the
Programming the amounts set forth in Schedule 1.2 (the "Monthly Payment"),
subject to adjustment as set forth in Section 2.4 below. All payments shall be
made by wire transfer of immediately-available funds by the last business day of
each calendar month, in arrears, to which such payment pertains. Any amount not
paid when due shall bear interest at the rate of ten percent (10%) per annum.
Section 1.3. Term.
This Agreement shall commence on the Commencement Date and
shall terminate on the earlier of (i) 12:01 a.m. on the Closing Date under the
Purchase Agreement, (ii) the date
<PAGE> 7
the Purchase Agreement is terminated, or (iii) the date this Agreement is
terminated pursuant to Section 9.1 hereof.
ARTICLE II.
PROGRAMMING AND OPERATING STANDARDS AND PRACTICES
Section 2.1. Compliance with Standards.
All Programming delivered by Time Broker and all programming
supplied by Licensee during the term of this Agreement shall be in accordance
with applicable statutes, FCC requirements and the programming policies set
forth on Schedule 2.1. Licensee reserves the right to refuse to broadcast any
Programming containing matter which the Licensee believes is unsuitable or not
consistent with the needs and interests of its service area or may be violative
of any right of any third party, or which may constitute a "personal attack" as
that term is and has been defined by the FCC or which Licensee reasonably
determines is, or in the reasonable opinion of Licensee may be deemed to be,
indecent (and not broadcast during the safe harbor for indecent programming
established by the FCC) or obscene by the FCC or any court or other regulatory
body with authority over Licensee or the Stations. If Time Broker does not
adhere to the foregoing requirements, Licensee may suspend or cancel any
specific program not so in compliance, without any reduction or offset in the
payments due Licensee under this Agreement.
Section 2.2. Political Broadcasts.
Time Broker shall maintain and deliver to Licensee all records
and information required by the FCC to be placed in the public inspection files
of the Stations pertaining to the broadcast of political programming and
advertisements, in accordance with the provisions of Sections 73.1940 and
73.3526 of the FCC's rules, and agrees to broadcast sponsored programming
addressing political issues or controversial subjects of public importance, in
accordance with the provisions of Section 73.1212 of the FCC's rules. Time
Broker shall consult and cooperate with Licensee and adhere to all applicable
statutes and the rules, regulations and policies of the FCC, as announced from
time to time, with respect to the carriage of political advertisements and
programming (including, without limitation, the rights of candidates and, as
appropriate, others to "equal opportunities" and the carriage of contrasting
points of view as mandated by any "fairness" rule with respect to such
"issue-oriented" advertising or programming as may be broadcast) and the charges
permitted therefor. Time Broker shall promptly provide to Licensee such
documentation relating to such programming as Licensee is required to maintain
in its public inspection files or as Licensee shall reasonably request. Licensee
shall be responsible for the maintenance of the public inspection files of the
Stations.
Section 2.3. Handling of Communications.
Time Broker shall cooperate with Licensee in promptly
responding to all mail, cables, telegrams or telephone calls directed to the
Stations in connection with the Programming
2
<PAGE> 8
provided by Time Broker or any other matter relevant to its responsibilities
hereunder. Promptly upon receipt, Time Broker shall provide copies of all such
correspondence to Licensee. Time Broker shall promptly advise Licensee of any
public or FCC complaint or inquiry known to Time Broker concerning such
Programming, and shall provide Licensee with copies of any letters to Time
Broker from the public, including complaints concerning such Programming. Upon
Licensee's request, Time Broker shall broadcast material responsive to such
complaints and inquiries. Notwithstanding the foregoing, Licensee shall handle
all matters or inquiries relating to FCC complaints and any other matters
required to be handled by Licensee under the rules and regulations of the FCC.
Section 2.4. Preemption.
Licensee may, from time to time, preempt portions of the
Programming to broadcast emergency information or programs it deems would better
serve the public interest. Time Broker shall be notified at least one week in
advance of any preemption of any of the Programming for the purpose of
broadcasting programs Licensee deems necessary to serve the public interest
unless such advance notice is impossible or impractical, in which case Licensee
shall notify Time Broker promptly upon making such determination. In the event
of any such preemption, Time Broker shall be entitled to full reimbursement of
damages suffered as a result of such preemption, except in the case of
preemption to cover breaking news or to broadcast emergency information.
Licensee represents and covenants that preemption pursuant to this Section 2.4
shall only occur to the extent Licensee deems necessary to carry out its
obligations as an FCC licensee, and expressly agrees that its right of
preemption shall not be exercised in an arbitrary manner or for the commercial
advantage of Licensee or others.
Section 2.5. Broadcasting Obligations of Licensee.
During the term of this Agreement, except as set forth in
Sections 2.1 and 2.4, Licensee will broadcast the Programming in its entirety
(including commercials), without interruption, deletion or addition of any kind,
except as set forth below:
Licensee may temporarily refrain from broadcasting the
Programming between the hours of 12:30 a.m. and 5:30 a.m. (or at such other time
in the event that weather conditions or contractual arrangements relating to
transmitter sites dealing with the exposure of humans to RF radiation so
require) in order to perform normal, customary and routine maintenance on the
Stations' transmitting facilities; provided that Licensee shall provide written
notice to Time Broker of its intent to refrain from broadcasting the Programming
at least forty-eight (48) hours in advance, except when an emergency requires
such suspension, and provided further that Licensee shall use its best efforts
to minimize the frequency and duration of such interruptions:
(a) Licensee may temporarily cease broadcasting the
Programming as a result of a natural disaster, act of public enemy, act
of God or other event beyond Licensee's control; provided that in any
such case, Licensee
3
<PAGE> 9
will act expediently and use its best efforts to resume the broadcast
of the Programming as quickly as the applicable circumstances will
allow; and
(b) Licensee may temporarily refrain from
broadcasting the Programming on the Stations as a result of a technical
problem with the Stations' transmitting equipment which is beyond
Licensee's control and which is not directly or indirectly the result
of any act or omission of Licensee or any of its employees or agents;
provided that in such case, Licensee will act expediently and use its
best efforts to resume the broadcast of the Programming as quickly as
the applicable circumstances will allow.
Section 2.6. "Payola" and "Plugola".
Time Broker agrees that it will not accept any gift, gratuity
or other consideration, including, but not limited to, a commission, discount,
bonus, material supplies or other merchandise, services or labor (collectively,
the "Consideration"), directly or indirectly, from any person or company for the
playing of records, the presentation of any programming or the broadcast of any
commercial announcement over the Stations unless the payor is identified in the
program for which Consideration was provided as having paid for or furnished
such Consideration, in accordance with the Communications Act of 1934, as
amended (the "Communications Act") and the FCC requirements. It is further
understood and agreed that no commercial message, plugs, or undue reference
shall be made in programming presented over the Stations to any business
venture, profit-making activity or other interest (other than non-commercial
announcements for bona fide charities, church activities or other public service
activities) unless the payor is identified in the program for which
Consideration was provided as having paid for or furnished such Consideration,
in accordance with the Communications Act and the FCC requirements. In addition,
Time Broker agrees that it will take steps, including the continuation of
Licensee's system for periodic execution of affidavits, reasonably designed to
assure that it, its employees and agents comply with this Section 2.7.
Section 2.7. Advertising and Programming.
Beginning with the Commencement Date, Time Broker shall be
solely responsible for any expenses incurred in connection with and shall be
entitled to all revenue from the sale of advertising or program time on the
Stations. Except as otherwise provided herein, Time Broker does not assume any
obligation of Licensee under any contract or advertising arrangement entered
into by Licensee on or after the Commencement Date. Time Broker will advise
Licensee of its lowest unit charge for political advertising, and Licensee shall
not do anything that would lower Time Broker's lowest unit charge.
4
<PAGE> 10
Section 2.8. Compliance with Laws.
At all times during the term of this Agreement, Time Broker
and Licensee shall comply in all material respects with all applicable federal,
state and local laws, rules and regulations, including the use of FCC-licensed
operators where such are required.
Section 2.9. Certifications.
Pursuant to Section 73.3555(a)(3)(ii) of the FCC's rules,
Licensee certifies that it maintains ultimate control over the Stations'
facilities, including specifically control over station finances, personnel and
programming, and Time Broker certifies that this Agreement complies with the
provisions of Sections 73.3555 of the FCC's rules.
ARTICLE III.
RESPONSIBILITY FOR EMPLOYEES AND EXPENSES
Section 3.1. Time Broker's Employees.
(a) Time Broker shall employ and be responsible for
the payment of salaries, taxes, insurance and all other costs related
to all personnel used in the production of the Programming. Time Broker
will not incur any liability on account of Licensee's employees arising
and accruing prior to the Commencement Date including, without
limitation, any such liability on account of unemployment insurance
contributions, termination and severance payments, accrued sick leave
or accrued vacation.
(b) Time Broker's and Licensee's obligations with
regard to the hiring by Time Broker of Licensee's employees at the
Stations shall be as set forth in Section 3.2.2 and Section 6.5.1 of
the Purchase Agreement, except as provided herein. As of the
Commencement Date, Licensee shall terminate all of its employees to
whom Time Broker will extend offers of employment, except for those
personnel necessary to fulfill Licensee's obligations under the
Communications Act, the rules of the FCC and other applicable laws and
Non-Continuing Employees (as defined in the Purchase Agreement), if
any. Time Broker shall offer employment to such terminated employees of
Licensee as provided in Section 6.5.1 of the Purchase Agreement.
Section 3.2. Licensee's Employees.
Licensee shall employ and be responsible for the payment of
salaries, employment taxes, insurance and all other costs related to the
personnel necessary to fulfill its obligations as Licensee and to transmit the
Programming. Time Broker shall have no authority and shall not
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supervise persons in the employ of Licensee after the Commencement Date.
Licensee acknowledges that its employees may have access to certain confidential
information of Time Broker. Licensee shall, therefore, inform its employees of
the confidential nature of such information and require that each such employee
keep such information confidential.
Section 3.3. Time Broker's Expenses.
Time Broker shall pay for all costs associated with the
production and delivery of the Programming, including but not limited to (i) all
ASCAP, BMI, SESAC and other copyright fees, (ii) any expenses incurred in
connection with its sale of advertising time hereunder (including without
limitation sales commissions) in connection with the Programming, (iii) the
salaries, employment taxes, insurance and related costs for all personnel used
in the production of the Programming and all sales personnel (including
salespeople, traffic personnel, and programming staff), and (iv) maintenance,
repairs and capital expense (to the extent Licensee is not covered by insurance)
of the Stations' studio equipment; provided however, that if this Agreement is
terminated other than through closing of the Purchase Agreement, Time Broker
will be reimbursed for any capital expenditures made during the term of this
Agreement.
Section 3.4. Operating Expenses.
Except as provided in Section 3.3, Licensee shall be
responsible for the payment when due of all fees and expenses relating to
operation and maintenance of the Stations to the extent necessary for Licensee
to maintain the licensed transmitting capability of the Stations and to fulfill
its obligations as an FCC Licensee, including, without limitation, salaries,
benefits and similar expenses for Licensee's employees, Licensee's federal,
state and local taxes, rent, utilities (excluding telephone), maintenance and
repairs at the Stations' transmitter sites, any capital expense at the Stations'
transmitter and studio sites, insurance on the Stations' equipment, insurance
deductibles on claims on the Stations' equipment, and ad valorem property taxes.
Section 3.5. Time Broker's Insurance.
At all times while this Agreement remains in effect, Time
Broker shall maintain Broadcaster's Liability Insurance with coverage of at
least One Million Dollars ($1,000,000.00) per occurrence, Workers Compensation
insurance and Commercial General Liability insurance with a combined single
limit amount of Five Million Dollars ($5,000,000.00) with insurance companies
that have a Best rating of A or better. Time Broker shall deliver certificates
of insurance periodically to Licensee evidencing that such insurance remains in
effect and such policies shall name Licensee as an additional insured.
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ARTICLE IV.
ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS
Section 4.1. Assignment.
On the Commencement Date, Licensee shall assign to Time Broker
title to all vehicles that are part of the Property (as defined in the Purchase
Agreement) and all Time Sales Agreements, Trade Agreements and Barter Agreements
(as such agreements are defined in the Purchase Agreement), together with those
contracts and other agreements identified on Schedule 4.1 (collectively, the
"Contracts"). Time Broker shall, on and as of the Commencement Date, assume and
become fully liable and responsible for all liabilities and obligations of
Licensee accruing after the Commencement Date under the Contracts. Except as set
forth in the Purchase Agreement, Licensee has provided Time Broker with true and
complete copies, including amendments, of the Contracts. The Contracts are
freely assignable, or, if consent of the other contracting party to the
assignment is required, Licensee shall use its reasonable best efforts to obtain
such consent as promptly as practicable; provided that CBS shall not be
obligated to pay money to any other contracting party to obtain any such
consent, other than reasonable expenses of the party for any legal documentation
related to the assignment of the Contract in question. If Licensee is unable to
obtain any consent necessary to permit the valid assignment of a Contract,
Licensee shall act as Time Broker's agent in connection with such Contract and
the parties shall cooperate to cause Time Broker to receive the benefit of the
Contract in exchange for performance by Time Broker of all of Licensee's
obligations under such Contract (including but not limited to the payment to
Licensee of all amounts due under the Contract on or after the Commencement Date
for services provided by Licensee).
Section 4.2. Proration.
All expenses and income arising under the Contracts shall be
prorated between Licensee and Time Broker as of the Commencement Date in a
manner such that the costs and benefits thereunder through the date before the
Commencement Date shall be for the account of Licensee and, thereafter, during
the term of this Agreement, for the account of Time Broker. Such proration shall
include an adjustment to the extent that the excess of the value of unfulfilled
obligations under Trade Agreements and Barter Agreements (as defined in the
Purchase Agreement), including any "time bank" provisions thereof, over the
value of consideration to be received by the Stations (in each case determined
as of the Commencement Date) (the "Net Negative Trade Balance") exceeds One
Hundred Thousand Dollars ($100,000.00). The total value of all unfulfilled
obligations in respect of Trade Agreements and Barter Agreements to be assumed
by Entercom, whether or not the Stations have received consideration therefor,
shall not be in excess of Five Hundred Thousand Dollars ($500,000.00) as of the
Closing Date. It is agreed and understood that the proration required hereby
shall include an adjustment for any accrued but unpaid vacation of Licensee's
employees that are hired by Time Broker pursuant to the provisions of Section
3.1(b) hereof. It is further agreed and understood that such proration shall not
include an adjustment for any termination or severance payments or benefits
obligations
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that Licensee is required to pay as a result of the termination of its employees
pursuant to Section 3.1(b) or any sick leave or other similar benefit, and that
Time Broker shall not be responsible for any such termination or severance
payments or benefits obligations except for those incurred on account of
employees hired by Time Broker on or after the Commencement Date pursuant to
Time Broker's severance policy, if any, after the Commencement Date. Such
prorations shall be completed and any necessary payments on account of such
prorations paid within sixty (60) days of the Commencement Date. If any
disagreement with respect to the proration of such income and expenses cannot be
resolved by the parties, Licensee and Time Broker will select a certified public
accountant knowledgeable in the broadcast industry to resolve the dispute. The
parties will use their best efforts in good faith to cause to occur as
expeditiously as possible the appointment of the certified public accountant,
and once appointed, the resolution of the dispute. The resolution of such
accountant shall be binding on the parties and subject to judicial enforcement.
Payment of the cost of the accountant shall be shared equally between Time
Broker and Licensee.
Section 4.3. Accounts Receivable.
All cash accounts receivable for broadcasts on the Stations
which occur prior to the Commencement Date (the "Accounts Receivable") shall
belong to Licensee and for broadcasts which occur thereafter shall belong to
Time Broker. Within ten (10) days following the Commencement Date, Licensee
shall deliver to Time Broker a schedule of Cash Accounts Receivable for the
Stations as of the Commencement Date (the "Schedule of Accounts Receivable").
Time Broker agrees to collect for Licensee its Accounts Receivable as shown on
the Schedule of Accounts Receivable delivered by Licensee for a period of one
hundred fifty (150) days following the Commencement Date. Licensee will provide
Time Broker a power of attorney or other required authorization for the limited
purpose of allowing Time Broker to endorse and deposit checks and other
instruments received in payment of such Accounts Receivable. All payments
received by Time Broker from any customer whose name appears in the Schedule of
Accounts Receivable and who is also a customer of Time Broker shall be credited
as payment of the account or invoice designated by such customer. In the absence
of any such designation by the customer, payments shall be first credited to the
oldest invoice which is not disputed by said customer. Time Broker shall keep
accurate records of the payment received by it on such Accounts Receivable and
Licensee shall have access at reasonable times to Time Broker's records to
verify such status of the Accounts Receivable. Time Broker shall remit to
Licensee on a weekly basis, one week in arrears, amounts previously collected by
Time Broker on such Accounts Receivable, along with a written accounting of
same, including without limitation, to the extent Licensee's traffic and billing
system can produce same, a detailed open Accounts Receivable report reflecting
payments remitted therewith. Any Accounts Receivable that have not been
collected within such one hundred fifty (150) day period shall be returned to
Licensee, together with all records in connection therewith, including without
limitation, to the extent Licensee's traffic and billing system can produce
same, a detailed open Accounts Receivable report reflecting payments remitted
therewith, whereupon Licensee may pursue collection thereof in such manner as
it, in its sole discretion, may determine. Time Broker shall
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not have the right to compromise, settle or adjust the amounts of any such
Accounts Receivable without Licensee's prior written consent. Except to remit
collected Accounts Receivable in accordance herewith, Time Broker shall have no
liability or obligation to Licensee with respect to the collection of its
accounts and shall not be obligated to take any action to collect such accounts.
ARTICLE V.
OPERATION OF STATION
Notwithstanding any provision of this Agreement to the
contrary, Licensee shall retain full authority and power with respect to the
management and operation of the Stations during the term of this Agreement. The
parties agree and acknowledge that Licensee's continued control of the Stations
and their premises is an essential element of the continuing validity and
legality of this Agreement. Accordingly, Licensee shall employ the General
Manager of the Stations and such other personnel as Licensee determines may be
necessary to fulfill its obligations as a licensee under the Communications Act
and its obligations in accordance with Section 3.2 hereof. Licensee shall retain
full authority and control over the policies, programming and operations of the
Stations, including, without limitation, the decision whether to preempt
Programming in accordance with Section 2.4 hereof. Licensee shall have ultimate
responsibility to effectuate compliance with the Communications Act and with FCC
rules, regulations and policies. In no event shall Time Broker or its employees
represent, depict, describe or portray Time Broker as the licensee of the
Stations.
ARTICLE VI.
GRANT OF LICENSES
Section 6.1. License to Use Stations Facilities.
Effective as of the Commencement Date, Licensee grants Time
Broker a license to access and use all of the Stations' studio and office space
and other facilities ("Stations Facilities") and all equipment and furnishings
contained therein ("Stations Equipment") in the production and broadcasting of
the Programming and sales and administration relating thereto, in accordance
with the terms set forth in this Section 6 (the "Time Broker License"). The Time
Broker License shall have a term coterminous with this Agreement. Time Broker
shall not remove from the Stations Facilities or modify any Stations Equipment
in the Stations Facilities owned by or leased or licensed to Licensee without
Licensee's prior written consent, such consent not to be unreasonably withheld.
Licensee shall not license the use of the Stations Facilities to any other party
during the term of the Time Broker License; and Time Broker's use of the
Stations Facilities shall be exclusive except for Licensee's right to use such
facilities as it deems appropriate in connection with the satisfaction of its
obligations as the Licensee of the Stations, including the use of such
facilities and adequate office space for the employees of Licensee that are
required for Licensee to comply with its obligations under Section 3.2 and 5
hereof. Time Broker shall use due care in the use of any property of Licensee.
Time Broker shall
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indemnify Licensee for any damage (normal wear and tear excepted) to Licensee's
property caused by Time Broker or any employee, contractor, agent or guest of
Time Broker.
Section 6.2. License of Intellectual Property.
Effective as of the Commencement Date, Licensee licenses to
Time Broker the exclusive right to use (or, to the extent Licensee does not hold
exclusive rights, the non-exclusive right to use) all intellectual property
owned by or licensed to Licensee and used solely in the operation of the
Stations (including, but not limited to, logos, jingles, promotional materials,
call signs and goodwill) (the "IP License"). In the event of termination of this
Agreement, the IP License shall terminate; provided, however, that Licensee
shall own all trademarks, service marks, trade names, characters, formats,
jingles, promotional materials, logos and positioning statements which Time
Broker develops for the Programming during the term of this Agreement.
ARTICLE VII.
INDEMNIFICATION
Section 7.1. Indemnification Rights.
Each party will indemnify and hold harmless the other party,
and the directors, officers, partners, employees, agents and affiliates of such
other party, from and against any and all liability, including without
limitation reasonable attorneys' fees arising out of or incident to (i) any
breach by such party of a representation, warranty or covenant made herein, (ii)
the programming produced or furnished by such party hereunder, or (iii) the
conduct of such party, its employees, contractors or agents (including
negligence) in performing its or their obligations hereunder. Without limiting
the generality of the foregoing, each party will indemnify and hold harmless the
other party, and the directors, officers, partners, employees, agents and
affiliates of such other party, from and against any and all liability for
libel, slander, infringement of trademarks, trade names, or program titles,
violation of rights of privacy, and infringement of copyrights and proprietary
rights resulting from the programming produced or furnished by it hereunder. The
parties' indemnification obligations hereunder shall survive any termination or
expiration of this Agreement.
Section 7.2. Procedures.
If any party has a claim for indemnification hereunder (such
party, an "Indemnitee") arising out of any claim or liability which is asserted
or threatened against it, or any action, suit or proceeding is commenced by any
third party against any Indemnitee which might result in any indemnification
obligations hereunder on behalf of any other party (such other party, an
"Indemnitor"), such Indemnitee shall, within twenty (20) business days from the
receipt of same, give written notice thereof to each such Indemnitor together
with a brief statement of the basis of the claim and a copy of any complaint or
other documents relating to such claim, provided, however, that failure to give
such notice within such twenty (20) business
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day period shall not affect the liability of Indemnitor hereunder unless the
failure to give such notice within such period materially and adversely affects
Indemnitor's ability to defend against the claim giving rise to Indemnitee's
claim for indemnification or to cure the default giving rise to such claim.
Within twenty (20) days from receipt of such notice, the Indemnitor shall give
the Indemnitee written notice as to whether the Indemnitor elects to contest any
such claim or liability; provided, however, that during the interim, the
Indemnitee shall be entitled to take reasonable action (which shall not include
settlement) with respect to such claim which it deems necessary to protect
against further damage or default with respect thereto. If an Indemnitor elects
to contest any such claim or liability, it shall be at the cost and expense of
the Indemnitor and using professionals chosen by the Indemnitor. The Indemnitee
may participate in the defense of any claim or liability that an Indemnitor has
elected to contest, but such participation shall be at its own expense. If the
Indemnitor does not elect to assume control or otherwise participate in the
defense of any third party claim, it shall be bound by the results obtained by
the Indemnitee with respect to such claim.
ARTICLE VIII.
DEFAULT
Section 8.1. Time Broker Events of Default.
The occurrence of any of the following, after the expiration
of the applicable cure periods, if any, will be deemed to be an Event of Default
by Time Broker under this Agreement: (a) Time Broker's failure to timely pay any
of the Monthly Payment provided for in Section 1.2 or other payments required
hereunder; (b) except as otherwise provided for in this Agreement, the failure
of Time Broker to supply the Programming; (c) any termination of this Agreement
by Time Broker other than as permitted in Section 9.1; or (d) the occurrence of
any of the following which arises out of, relates to or is attributable to the
acts or omissions of Time Broker:
(i) the issuance by the FCC of a Show Cause
Order designating any of the Stations' FCC authorizations for
revocation;
(ii) the issuance by the FCC of an order
designating for an evidentiary hearing the Stations' applications for
renewal of the FCC authorizations;
(iii) the issuance by the FCC of an order
designating for an evidentiary hearing an application for the
assignment of the Stations' FCC authorizations to Time Broker;
(iv) breach of any covenant of Time Broker
which would reasonably be expected to lead or to the revocation or
non-renewal of the FCC authorizations of any of the Stations; or
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(v) a continuing, uncured material breach of
any covenant of Time Broker.
Section 8.2. Licensee's Events of Default.
The occurrence of any of the following, after the expiration
of the applicable cure periods, if any, will be deemed to be an Event of Default
by Licensee under this Agreement: (a) except as otherwise provided for in this
Agreement, the failure of Licensee to broadcast the Programming; (b) any
termination of this Agreement by Licensee other than as permitted in Section
9.1; (c) the issuance by the FCC of an order designating for an evidentiary
hearing an application for the assignment of the Stations' FCC authorizations to
Time Broker which arises out of, relates to or is attributable to the acts or
omissions of Licensee but excluding issues which are based upon Time Broker's
conduct hereunder for which Licensee may be held responsible; or (d) a
continuing, uncured material breach of any covenant of the Licensee.
Section 8.3. Cure Periods.
The cure periods before any event listed in Sections 8.1 or
8.2 shall become an vent of Default are as follows:
(a) Payment by Time Broker. The Monthly Payment or
other payments required hereunder to be paid to Licensee must be
received by Licensee within five (5) days after Licensee gives written
notice of non-payment to Time Broker.
(b) Certain Matters. There shall be no cure period
for (i) the matters relating to the FCC set forth in Sections 8.1(d) or
8.2(c) hereof, (ii) a termination by Time Broker described in Section
8.1(c); or (iii) a termination by Licensee described in Section 8.2(b)
hereof.
(c) Programs and Broadcast Matters. With respect to
Time Broker's failure to provide the Programming referred to in Section
8.1(b) hereof or Licensee's failure to broadcast the Programming
referred to in Section 8.2(a) hereof, the period allowed for cure shall
be three business days from the giving of written notice of such
failure to the defaulting party by the non-defaulting party.
(d) Other Matters. With respect to all matters
capable of being cured other than those described in Sections 8.3(a),
8.3(b) or 8.3(c) above, the cure period shall be ten (10) days after
written notice to the defaulting party is given by the non-defaulting
party or, with respect to matters that through the exercise of
reasonable diligence cannot be cured within such ten (10) day period,
such longer period not to exceed ninety (90) days as is reasonably
necessary to effect such cure through the exercise of reasonable
diligence.
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Section 8.4. Other Defaults.
For any other breach of a representation, warranty or covenant
made herein that is not listed in Sections 8.1 or 8.2, a party's sole remedy
shall be indemnification pursuant to Article VII hereof.
ARTICLE IX.
TERMINATION
This Agreement shall automatically terminate upon the
expiration of the term of this Agreement as set forth in Section 1.3. In
addition, this Agreement shall terminate as provided below.
Section 9.1. Termination Upon Default.
In addition to other remedies available at law or equity, this
Agreement may be terminated by either Licensee or Time Broker by written notice
to the other, specifying an effective date of termination which is not less than
seven (7) days nor more than ninety (90) days from the date such notice is
given, if the party seeking to terminate is not then in material default or
breach hereof, upon an uncured Event of Default. In the event that the
non-defaulting party does not exercise such right of termination by giving such
written notice within sixty (60) days of the occurrence of an uncured Event of
Default, then the Event of Default giving rise to such right of termination
shall be deemed waived and the Agreement shall continue in full force and
effect.
Section 9.2. Termination Upon Change in FCC Rules.
In addition to other remedies available at law or equity, this
Agreement may be terminated by either Licensee or Time Broker by written notice
to the other, specifying an effective date of termination which is not less than
seven (7) days nor more than thirty (30) days from the date such notice is
given, in the event of a change in FCC rules, policies, or precedent that would
cause this Agreement to be in violation thereof and such change is final, in
effect, and has not been stayed, and the parties have been unable, after
negotiating in good faith for at least thirty (30) days, to modify this
Agreement to comply with the change in FCC rules, policies, or precedent.
Section 9.3. Certain Matters Upon Termination.
(a) Upon any termination of this Agreement, Licensee
shall have no further obligation to provide to Time Broker any
broadcast time or broadcast transmission facilities and Time Broker
shall have no further obligations to make any payments to Licensee
under Section 1.2 hereof. Upon
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any termination, Time Broker shall be responsible for all debts and
obligations of Time Broker to third parties based upon the purchase of
air time and use of Licensee's transmission facilities including,
without limitation, accounts payable, barter agreements and unaired
advertisements, but not for Licensee's federal, state and local income
and business franchise tax liabilities or taxes levied upon Licensee's
personal property. Notwithstanding anything herein to the contrary, to
the extent that any invoice, bill or statement submitted to Licensee
after the termination of this Agreement or any payment made by Time
Broker prior to the termination of this Agreement relates to expenses
incurred in operating the Stations, for periods both before and after
the termination of this Agreement, such expenses shall be prorated
between Licensee and Time Broker in accordance with the principle that
Time Broker shall be responsible for expenses allocable to the period
prior to the termination of this Agreement and Licensee shall be
responsible for expenses allocable to the period on and after the
termination of this Agreement. Such proration shall include an
adjustment for Time Broker's Trade Agreements only to the extent that
Time Broker's Net Negative Trade Balance exceeds One Hundred Thousand
Dollars ($100,000.00). Each party agrees to reimburse the other party
for expenses paid by the other party to the extent appropriate to
implement the proration of expenses pursuant to the preceding sentence.
(b) If this Agreement terminates other than as a
result of the Closing (as defined in the Purchase Agreement), Time
Broker shall (i) assign to Licensee and Licensee shall assume all
Contracts (including those employment contracts assumed by Time Broker
pursuant to this Agreement) and all renewals, replacements or other
contracts entered in the ordinary course of business relating to the
Stations between the Commencement Date and the date of termination of
this Agreement ("Supplemental Contracts") in effect on the date of such
termination or expiration; (ii) assign to Licensee title to vehicles
assigned to Time Broker under Section 4.1; and (iii) be responsible for
only those obligations under the Contracts and Supplemental Contracts
arising on or after the Commencement Date and prior to the termination
of this Agreement.
(c) Notwithstanding anything in Section 7.1 to the
contrary, no expiration or termination of this Agreement shall
terminate the obligation of each party to indemnify the other for
claims under Section 7 hereof or limit or impair any party's rights to
receive payments due and owing hereunder on or before the date of such
termination.
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ARTICLE X.
REMEDIES
In addition to a party's rights of termination hereunder (and
in addition to any other remedies available to it or provided under law), in the
event of an uncured Event of Default with respect to either party, the other may
seek specific performance of this Agreement, in which case the defaulting party
shall waive the defense in any such suit that the other party has an adequate
remedy at law and interpose no opposition, legal or otherwise, as to the
propriety of specific performance as a remedy hereunder, and agrees that the
other party shall have the right to obtain specific performance of the
defaulting party without being required to prove actual damages, post bond, or
furnish other security.
ARTICLE XI.
CERTAIN REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Section 11.1. Representations and Warranties of Time Broker.
Time Broker hereby represents and warrants to Licensee as
follows:
11.1.1. Corporate Organization. Time Broker is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania, is duly qualified to do business in the
Commonwealth of Massachusetts and has full power and authority to conduct its
business as currently conducted.
11.1.2. Authorization; Enforceability. This Agreement
has been duly executed and delivered by Time Broker, and is valid, binding and
enforceable against Time Broker in accordance with its terms. Time Broker has
full right, power, authority and legal capacity to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery and performance of this Agreement and the
consummation of the transactions provided for hereby have been duly authorized
by all necessary action on the part of Time Broker, and no other organizational
or other proceedings on the part of Time Broker are necessary to authorize the
execution or delivery of this Agreement or the transactions contemplated hereby.
11.1.3. No Consent. Except to the extent any of the
Contracts require consent to assignment, no consent of any other party and no
consent, license, approval or authorization of, or exemption by, or filing,
restriction or declaration with, any governmental authority, bureau, agency or
regulatory authority, other than the filing of this Agreement with the FCC and
the expiration or early termination of any applicable waiting period under the
HSR Act, if applicable, is required in connection with the execution, delivery
or performance of this Agreement by Time Broker or will effect the validity or
performance of this Agreement.
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11.1.4. No Breach. Neither the execution or delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will constitute or result in the breach of any term, condition or provision of,
or constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of Time Broker pursuant to the
organizational documents of Time Broker, any agreement or other instrument to
which Time Broker is a party or by which any part of its property is bound, or
violate any law, regulation, judgment or order binding upon Time Broker.
11.1.5. Actions and Proceedings. There is no judgment
outstanding and no litigation, claim, investigation or proceeding pending
against Time Broker or, to the knowledge of Time Broker, threatened before any
court or governmental agency to restrain or prohibit, or to obtain damages, or
other relief in connection with, this Agreement, the Purchase Agreement or the
consummation of the transactions contemplated hereby or thereby or that might
adversely affect Time Broker's performance under this Agreement.
11.1.6. Qualifications. Time Broker is qualified in
accordance with the Communications Act of 1934, as amended, and the rules and
policies of the FCC to enter into this Agreement and provide programming on the
Stations in accordance with its terms. Between the date hereof and the
termination of this Agreement, either by the Closing of the Purchase Agreement
or the earlier termination in accordance with Article 9 hereof, Time Broker will
not take any action that Time Broker knows, or has reason to believe, would
disqualify it from providing programming on the Stations pursuant to this
Agreement.
Section 11.2. Representations, Warranties and Covenants of
Operator and CRLI.
Operator and CRLI hereby represent, warrant and covenant to
Time Broker as follows:
11.2.1. Corporate Organization. Operator is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware, is duly qualified to do business in the
Commonwealth of Massachusetts and has full power and authority to conduct its
business as currently conducted. CRLI is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware, is duly
qualified to do business in the Commonwealth of Massachusetts and has full power
and authority to conduct its business as currently conducted.
11.2.2. Authorization; Enforceability. This Agreement
has been duly executed and delivered by each of Operator and CRLI, and is valid,
binding and enforceable against each of them in accordance with its terms. Each
of Operator and CRLI has full right, power, authority and legal capacity to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions provided for hereby have
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been duly authorized by all necessary action on the part of each of Operator and
CRLI, and no other organizational or other proceedings on the part of Operator
or CRLI are necessary to authorize the execution or delivery of this Agreement
or the transactions contemplated hereby.
11.2.3. No Consent. Except to the extent any of the
Contracts require consent to assignment, no consent, license, approval or
authorization of or exemption by, or filing, restriction or declaration with,
any governmental authority, bureau, agency or regulatory authority, other than
the filing of this Agreement with the FCC and the expiration or early
termination of any applicable waiting period under the HSR Act, if applicable,
is required in connection with the execution, delivery or performance of this
Agreement or will affect the validity or enforceability of this Agreement.
11.2.4. No Breach. Except to the extent any of the
Contracts require consent to assignment, neither the execution or delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
constitute or result in the breach of any term, condition or provision of, or
constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of Operator or CRLI pursuant to the
organizational documents of Operator or CRLI, any agreement or other instrument
to which Operator or CRLI is a party or by which any part of their property is
bound, or violate any law, regulation, judgment or order binding upon Operator
or CRLI.
11.2.5. Actions and Proceedings. There is no judgment
outstanding and no litigation, claim, investigation or proceeding pending
against Operator or CRLI or, to the knowledge of Operator or CRLI, threatened
before any court or governmental agency to restrain or prohibit, or to obtain
damages or other relief in connection with this Agreement or the consummation of
the transactions contemplated hereby.
11.2.6. Maintenance of Current Operations. The
Stations' transmission equipment shall be maintained by Operator and CRLI in a
condition consistent with good engineering practices and in compliance in all
material respects with the Communications Act and all other applicable rules,
regulations and technical standards of the FCC.
11.2.7. Other Agreements. During the term of this
Agreement, Operator and CRLI will not enter into any other time brokerage,
program provision, local management or similar agreement with any third party
with respect to the Stations.
ARTICLE XII.
MISCELLANEOUS
Section 12.1. Modification and Waiver.
No modification or waiver of any provision of this Agreement
shall in any event be effective unless the same shall be in writing signed by
the party against whom the waiver is
17
<PAGE> 23
sought to be enforced, and then such waiver and consent shall be effective only
in the specific instance and for the purpose for which given.
Section 12.2. No Waiver; Remedies Cumulative.
No failure or delay on the part of Licensee or Time Broker in
exercising any right or power hereunder shall operate as a waiver thereof, nor
any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, shall preclude any
other or further exercise thereof or the exercise of any other right or power.
The rights and remedies of Licensee and Time Broker herein provided are
cumulative and are not exclusive of any rights or remedies which they may
otherwise have.
Section 12.3. Construction.
This Agreement shall be construed in accordance with the laws
of the State of New York without reference to conflict of laws principles, and
the obligations of the parties hereto are subject to all federal, state or
municipal laws or regulations now or hereafter in force and to the regulations
of the FCC and all other governmental bodies or authorities presently or
hereafter duly constituted. The parties hereto expressly waive and agree to
waive any right to a jury trial in any controversy or claim arising out of or
relating to this Agreement.
Section 12.4. Headings.
The headings contained in this Agreement are included for
convenience only and no such heading shall in any way alter the meaning of any
provision.
Section 12.5. Successors and Assigns.
Any party may assign all or any part of this Agreement or the
rights and obligations hereunder to a person or entity controlling, controlled
by or under common control with such party, provided that any such assignment
shall not relieve such party of its obligations hereunder. Except as otherwise
provided herein, this Agreement and the rights and obligations hereunder may not
be assigned by any party hereto without the prior written consent of the other
parties hereto, which consent shall not be unreasonably withheld. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns.
Section 12.6. Force Majeure.
The parties acknowledge and agree that a party will not be
liable for any failure to timely perform any of its obligations under this
Agreement if such failure is due, in whole or in part, directly or indirectly,
to accidents, fires, floods, governmental actions, war, civil disturbances,
other causes beyond such party's control or any other occurrence which would
generally be considered an event of force majeure.
18
<PAGE> 24
Section 12.7. Broker.
The parties agree to indemnify and hold each other harmless
against any claims from any broker or finder based upon any agreement,
arrangement, or understanding alleged to have been made by the indemnifying
party.
Section 12.8. Counterpart Signatures.
This Agreement may be signed in one or more counterparts.
Section 12.9. Notices.
Any notice, report, demand, waiver or consent required or
permitted hereunder shall be in writing and shall be given by hand delivery, by
prepaid registered or certified mail, with return receipt requested, by an
established national overnight courier providing proof of delivery for next
business day delivery or by telecopy addressed as follows:
If the notice is to Time Broker:
Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Attention: Mr. Joseph M. Field, President
Telecopier Number: 610-660-5641
With a copy to:
John C. Donlevie, Esq.
General Counsel
Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Telecopier Number: 610-660-5620
and
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Attention: Joseph D. Sullivan, Esq.
Telecopier Number: 202-637-2201
19
<PAGE> 25
If the notice is to Licensee:
CBS Radio
40 West 57th Street
14th Floor
New York, NY 10019
Attention: Mr. Mel Karmazin
Telecopier Number: 212-314-9229
With copies to:
General Counsel
CBS Corporation
51 West 52nd Street
New York, NY 10019-6188
Telecopier Number: 212-975-2185
and
Leventhal Senter & Lerman, P.L.L.C.
2000 K Street, N.W.
Suite 600
Washington, D.C. 20006
Attention: Steven A. Lerman, Esq.
Telecopier Number: 202-293-7783
The date of any such notice and service thereof shall be deemed to be: (i) the
day of delivery if hand delivered or delivered by overnight courier; (ii) the
day of delivery as indicated on the return receipt if dispatched by mail; or
(iii) the date of telecopy transmission as indicated on the telecopier
transmission report provided that any telecopy transmission shall not be
effective unless a paper copy is sent by overnight courier on the date of the
telecopy transmission. Either party may change its address for the purpose of
notice by giving notice of such change in accordance with the provisions of this
Section.
Section 12.10. Entire Agreement.
This Agreement, the letter agreements between the parties
dated of even date herewith and the Purchase Agreement (including all
attachments, exhibits and schedules) embody the entire agreement between the
parties and there are no other agreements, representations, warranties, or
understandings, oral or written, between them with respect to the subject matter
hereof.
20
<PAGE> 26
Section 12.11. Severability.
Except as expressly set forth in Section 12.15, if any
provision contained in this Agreement is held to be invalid, illegal or
unenforceable in any respect by any court or other authority, then such
provision shall be deemed limited to the extent that such court or other
authority deems it reasonable and enforceable, and as so limited shall remain in
full force and effect. In the event that such court or other authority shall
deem any such provision wholly unenforceable, this shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had not been contained herein.
Section 12.12. No Joint Venture.
The parties agree that nothing herein shall constitute a joint
venture between them. The parties acknowledge that call letters, trademarks and
other intellectual property shall at all times remain the property of the
respective parties and that neither party shall obtain any ownership interest in
the other party's intellectual property by virtue of this Agreement (subject to
the IP License set forth in Section 6.2).
Section 12.13. Damage to Stations.
In the event of damage or destruction to the Stations (other
than damage or destruction caused by Time Broker), Licensee shall proceed to
repair, replace or restore the Stations to its former condition as promptly as
is commercially reasonable.
Section 12.14. Noninterference.
During the term of this Agreement, neither Licensee nor any of
their employees shall take any actions that might impair the operations of Time
Broker conducted hereunder, except to the extent expressly contemplated by this
Agreement or as otherwise required by law.
Section 12.15. Regulatory Changes.
In the event of any order or decree of an administrative
agency or court of competent jurisdiction, including without limitation any
material change or clarification in FCC rules, policies, or precedent, that
would cause this Agreement to be invalid or violate any applicable law, and such
order or decree has become effective and has not been stayed, the parties will
use their respective best efforts and negotiate in good faith to modify this
Agreement to the minimum extent necessary so as to comply with such order or
decree without material economic detriment to either party, and this Agreement,
as so modified, shall then continue in full force and effect. In the event that
the parties are unable to agree upon a modification of this
21
<PAGE> 27
Agreement so as to cause it to comply with such order or decree without material
economic detriment to either party, then this Agreement shall be terminated.
Section 12.16. Attorneys' Fees.
In the event of a dispute between or among the parties hereto
arising out of or related to this Agreement or the interpretation or enforcement
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and expenses from the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
CBS RADIO, INC.
By:_______________________________________
Title:_____________________________________
CBS RADIO LICENSE, INC.
By:_______________________________________
Title:_____________________________________
ARS ACQUISITION II, INC.
By:_______________________________________
Title:_____________________________________
ENTERCOM COMMUNICATIONS CORP.
By:_______________________________________
Title:_____________________________________
22
<PAGE> 28
SCHEDULE 1.1
PROGRAMMING
The Programming shall consist of one hundred sixty-four (164)
hours per week on the Stations in an entertainment format to be chosen by Time
Broker, subject to Section 2 of this Agreement. The Programming shall include
(a) news and weather information; (b) public service announcements (including,
at Licensee's directive from time to time, a reasonable number of public service
announcements of local interest supplied by Licensee or produced by Time Broker
under Licensee's supervision); (c) an announcement in form sufficient to meet
the station identification requirements of the FCC at the beginning of each
hour; (d) an announcement at the beginning of each segment of Programming to
indicate that program time has been purchased by Time Broker; and (e) any other
announcement that may be required by applicable law or regulation (including but
not limited to EAS tests). Time Broker shall maintain and deliver to Licensee
copies of all operating and programming information including without limitation
information concerning portions of the Programming that are responsive to issues
of public importance identified to Time Broker by Licensee, EAS announcements,
and station operating logs, necessary for Licensee to maintain its FCC Public
File, and all other records required to be kept by FCC rule or policy. Time
Broker shall have the sole and exclusive right to sell advertising to be
included in the Programming and shall be entitled to retain all the revenues
derived from the sale thereof, provided, however, that Licensee shall be
entitled to sell such time as it deems necessary to comply with the political
advertising rules of the FCC in the event the Programming does not comply with
such rules.
Notwithstanding any other provision of this Agreement, Time
Broker recognizes that Licensee has certain obligations to broadcast programming
to meet the needs and interests of the community of license for the Stations.
Licensee shall have the right to air specific programming on issues of local
importance to the community. Nothing in this Agreement shall abrogate the
unrestricted authority of Licensee to discharge its obligations to the public
and to comply with the laws, rules and policies of the FCC with respect to
meeting the ascertained needs and interests of the public. Accordingly, Licensee
may air or cause Time Broker to produce and present under Licensee's supervision
for not less than two (2) nor more than four (4) hours per week on the Stations
such public affairs programming that responds to the needs and interests of
listeners in the Stations' community of license. Such public affairs programming
shall be presented between 6:00 a.m. and 9:00 a.m. on Saturdays and/or Sundays
or at such other times as the public interest may require. Time Broker will not
change the format of the Stations other than WEGQ(FM).
1
<PAGE> 29
SCHEDULE 1.2
COMPENSATION
Beginning on the Commencement Date, for each month during
which this Agreement until this Agreement is terminated, Time Broker shall pay a
monthly fee equal to Three Hundred Ninety-Five Thousand Dollars ($395,000.00)
per month; provided however, if Licensee makes the Closing Date Election under
the Purchase Agreement, the monthly fee for the months of January, February and
March of 1999 shall be Two Hundred Twenty Thousand Dollars ($220,000.00) (the
"Monthly Fee").
In the event that the Commencement Date occurs on a day other
than the first day of a month, the initial monthly payment made by Time Broker
shall be an amount equal to the Monthly Fee as determined above multiplied by a
ratio, the numerator of which is the number of days between the Commencement
Date and the end of the month in which the Commencement Date occurs and the
denominator of which is the number of days in the month in which the
Commencement Date occurs; and in the event that the last day of the TBA Payment
Period occurs other than on the last day of a month, the Monthly Payment for the
month in which such day occurs shall be similarly prorated.
1
<PAGE> 30
SCHEDULE 2.1
PROGRAMMING POLICY STATEMENT
Time Broker agrees to cooperate with Licensee in the
broadcasting of programs of the highest possible standard of excellence and for
this purpose to observe the following regulations in the preparation, writing
and broadcasting of its programs. Further, Time Broker agrees that all material
broadcast on the Stations shall comply with all federal, state and local
applicable laws, rules and regulations.
No Plugola or Payola. The broadcast of any material for which
any money, service or other valuable consideration is
directly or indirectly paid, or promised to or
charged or accepted by, the Time Broker, from any
person, shall be prohibited, unless, at the time the
same is broadcast, it is announced as paid for or
furnished by such person.
Political Broadcasting. Within thirty (30) days of the
Commencement Date, Time Broker shall provide Licensee
with a written political advertising disclosure
statement which fully and accurately discloses how
the Time Broker sells programming and advertising
time and which makes parties purchasing political
programming and advertising time fully aware of the
lowest unit charge provisions of Section 315 of the
Communications Act. In addition, at least thirty (30)
days before the start of any primary or election
campaign, Time Broker will clear with the Stations'
general manager the rate Time Broker will charge for
the time to be sold to candidates to make certain
that the rate charged is in conformance with the
applicable law and station policy.
Required Announcements. Time Broker shall broadcast (i)
announcements in a form satisfactory to Licensee at
the beginning of each hour to identify the Stations
and (ii) any other announcements that may be required
by law, regulation, or Licensee's station policy.
No Illegal Announcements. No announcements, broadcasts or
promotions prohibited by federal, state or local law
shall be made over the Stations. This prohibition
specifically includes, but is not limited to, any and
all programming or other broadcast material
concerning tobacco or alcohol related products which
are unlawful. The airing of any broadcast material
concerning contests, lotteries or games must be
conducted in accordance with all applicable law,
including FCC rules and regulations. Any obscene,
indecent, or fraudulent programming is prohibited.
All sponsored programming or other broadcast material
must be identified in accordance with applicable law,
including FCC rules and regulations.
2
<PAGE> 31
Licensee Discretion Paramount. In accordance with the
Licensee's responsibility under the Communications
Act and the rules and regulations of the FCC,
Licensee reserves the right to reject or terminate
any programming (including advertising) proposed to
be presented or being presented over the Stations
which is in conflict with station policy or which in
Licensee's or its general manager's reasonable
judgment would not serve the public interest.
In any case where questions of policy or interpretation arise,
Time Broker should submit the same to Licensee for decision before making any
commitments in connection therewith.
3
<PAGE> 32
SCHEDULE 4.1
TIME SALES AGREEMENTS AND CONTRACTS
All Contracts to be assumed by Entercom under the Purchase
Agreement other than Leases (as defined in the Purchase Agreement) and contracts
relating to operation at the transmitter site for the Stations and employment
contracts with the Licensee's retained employees under Sections 3.1 and 3.2.
1
<PAGE> 1
EXHIBIT 23.01
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors of
Entercom Communications Corp.
Bala Cynwyd, Pennsylvania
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-61381 of Entercom Communications Corp. of our report dated September 18,
1998 (October 8, 1998 as to Note 12(F) and October 29, 1998 as to Note 6(B)(3)
appearing in the Prospectus, which is a part of this Registration Statement,
and of our report dated September 18, 1998, (October 8, 1998 as to Note 12(F)
and October 29, 1998 as to Note 6(B)(3)) related to the financial statement
schedule included elsewhere in this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
October 30, 1998
<PAGE> 1
Exhibit 23.02
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors of
Entercom Communications Corp.
Bala Cynwyd, Pennsylvania
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-61381 of Entercom Communications Corp. of our report dated June 10, 1998,
appearing in the Prospectus, which is a part of this Registration Statement,
and to the reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
October 30, 1998
<PAGE> 1
Exhibit 23.03
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors of
Entercom Communications Corp.
Bala Cynwyd, Pennsylvania
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-61381 of Entercom Communications Corp. of our report dated May 21, 1998,
appearing in the Prospectus, which is a part of this Registration Statement,
and to the reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
October 30, 1998
<PAGE> 1
Exhibit 23.04
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors of
Entercom Communications Corp.
Bala Cynwyd, Pennsylvania
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-61381 of Entercom Communications Corp. of our report dated May 29, 1998,
appearing in the Prospectus, which is a part of this Registration Statement, and
to the reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Seattle, Washington
October 30, 1998
<PAGE> 1
Exhibit 23.05
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors of
Entercom Communications Corp.
Bala Cynwyd, Pennsylvania
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-61381 of Entercom Communications Corp. of our report dated September 18,
1998, appearing in the Prospectus, which is a part of this Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 30, 1998
<PAGE> 1
Exhibit 23.06
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
Registration Statement under the Securities Act of 1933.
/s/ ARTHUR ANDERSEN LLP
-----------------------
Baltimore, Maryland,
October 30, 1998
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-1-1997
<PERIOD-END> JUN-30-1998
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0
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