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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________to ___________
COMMISSION FILE NUMBER: 001-14461
Entercom Communications Corp.
(Exact name of registrant as specified in its charter)
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PENNSYLVANIA 23-1701044
(State or other jurisdiction of incorporation of organization) (I.R.S. Employer Identification No.)
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401 CITY AVENUE, SUITE 409
BALA CYNWYD, PENNSYLVANIA 19004
(Address of principal executive offices and Zip Code)
(610) 660-5610
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock, $.01 par value - 33,569,953 Shares Outstanding
as of May 5, 2000
Class B Common Stock, $.01 par value - 10,531,805 Shares Outstanding
as of May 5, 2000
Class C Common Stock, $.01 par value - 1,096,836 Shares Outstanding
as of May 5, 2000
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ENTERCOM COMMUNICATIONS CORP.
INDEX
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PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.................................................................................3
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................................11
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk..........................................16
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings...................................................................................17
ITEM 2. Changes in Securities and Use of Proceeds...........................................................17
ITEM 3. Defaults Upon Senior Securities.....................................................................17
ITEM 4. Submission of Matters to a Vote of Security Holders.................................................17
ITEM 5. Other Information...................................................................................17
ITEM 6. Exhibits and Reports on Form 8-K....................................................................18
SIGNATURES ....................................................................................................20
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2
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
ASSETS
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DECEMBER 31, MARCH 31,
1999 2000
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CURRENT ASSETS
Cash and cash equivalents $ 11,262 $ 10,446
Accounts receivable, net of allowance for doubtful accounts 51,926 55,827
Prepaid expenses and deposits 4,247 4,736
Prepaid and refundable federal and state income taxes 4,884
Deferred tax assets 1,773 2,110
Station acquisition deposits 1,212 1,536
----------- -----------
Total current assets 70,420 79,539
----------- -----------
INVESTMENTS, AT FAIR VALUE 9,870 7,717
PROPERTY AND EQUIPMENT - AT COST
Land and land easements and land improvements 9,833 10,178
Building 9,375 9,568
Equipment 66,780 69,155
Furniture and fixtures 11,338 11,507
Leasehold improvements 6,565 6,563
----------- -----------
103,891 106,971
Accumulated depreciation (16,837) (19,170)
----------- -----------
87,054 87,801
Capital improvements in progress 3,369 4,520
----------- -----------
Net property and equipment 90,423 92,321
RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES -NET 1,214,969 1,213,473
DEFERRED CHARGES AND OTHER ASSETS -NET 10,366 10,275
----------- -----------
TOTAL $ 1,396,048 $ 1,403,325
=========== ===========
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
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ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
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DECEMBER 31, MARCH 31,
1999 2000
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CURRENT LIABILITIES
Accounts payable $ 18,380 $ 16,507
Accrued liabilities:
Salaries 6,188 5,044
Interest 1,208 1,525
Other 798 924
Income taxes payable 946
Long-term debt due within one year 10 11
----------- -----------
Total current liabilities 27,530 24,011
----------- -----------
SENIOR DEBT 465,760 472,758
----------- -----------
DEFERRED TAX LIABILITY 91,147 95,849
----------- -----------
Total liabilities 584,437 592,618
----------- -----------
COMPANY-OBLIGATED MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED SECURITIES OF SUBSIDIARY HOLDING SOLELY CONVERTIBLE
DEBENTURES OF THE COMPANY 125,000 125,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock
Class A common stock 333 333
Class B common stock 105 105
Class C common stock 14 14
Additional paid-in capital 744,933 745,735
Accumulated deficit (59,104) (59,190)
Unearned compensation (192) (426)
Accumulated other comprehensive income (loss) 522 (864)
----------- -----------
Total shareholders' equity 686,611 685,707
----------- -----------
TOTAL $ 1,396,048 $ 1,403,325
=========== ===========
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
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ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
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THREE MONTHS ENDED
MARCH 31,
---------------------------
1999 2000
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NET REVENUES $ 39,599 $ 70,877
OPERATING EXPENSES:
Station operating expenses 28,909 46,193
Depreciation and amortization 4,861 10,477
Corporate general and administrative expenses 1,801 3,167
Net expense from time brokerage agreement fees 652 4
Loss on sale of assets 7
------------ ------------
Total operating expenses 36,223 59,848
------------ ------------
OPERATING INCOME 3,376 11,029
------------ ------------
OTHER EXPENSE (INCOME) ITEMS:
Interest expense 3,586 9,390
Financing cost of Company-obligated mandatorily
redeemable convertible preferred securities of
subsidiary holding solely convertible debentures
of the Company 1,953
Interest income (544) (106)
------------ ------------
Total other expense 3,042 11,237
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT) 334 (208)
INCOME TAXES (BENEFIT)
Income taxes (benefit) - C Corporation 791 (122)
Income taxes - S Corporation 125
Deferred income taxes for conversion from an S
to a C Corporation 79,845
------------ ------------
Total income taxes (benefit) 80,761 (122)
------------ ------------
NET LOSS $(80,427) $(86)
============ ============
NET LOSS PER SHARE
Net loss per share - basic and diluted $(2.48) $(0.00)
============ ============
PRO FORMA DATA
PRO FORMA NET INCOME DATA:
Income before income taxes $ 334
Pro forma income taxes 127
------------
PRO FORMA NET INCOME $ 207
============
PRO FORMA EARNINGS PER SHARE:
Pro forma earnings per share - basic and diluted $ 0.01
============
WEIGHTED AVERAGE SHARES:
Basic 32,477,995 45,188,010
Diluted 32,802,870 45,507,861
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
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ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
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THREE MONTHS ENDED
MARCH 31,
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1999 2000
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NET LOSS ($80,427) ($ 86)
OTHER COMPREHENSIVE LOSS (NET OF TAX BENEFIT)
Unrealized losses on investments - net of $0.9
million tax benefit in 2000 -- (1,386)
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COMPREHENSIVE LOSS (80,427) (1,472)
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6
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ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
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THREE MONTHS ENDED
MARCH 31,
1999 2000
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OPERATING ACTIVITIES:
Net loss ($80,427) ($86)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation 1,319 2,366
Amortization of radio broadcasting licenses, other intangibles
and deferred charges 3,542 8,111
Deferred taxes 79,959 4,365
Non-cash stock-based compensation expense 62 204
Loss on disposition of assets 7
Changes in assets and liabilities which provided (used) cash:
Accounts receivable 5,853 (3,901)
Prepaid expenses (43) (489)
Accounts payable, accrued liabilities and income taxes payable (2,287) (7,479)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 7,978 3,098
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INVESTING ACTIVITIES:
Additions to property and equipment (2,281) (2,596)
Purchases of radio station assets (58,187) (8,000)
Deferred charges and other assets (80) (220)
Purchase of investments (157)
Proceeds held in escrow from sale of Tampa stations 75,000
Station acquisition deposits 66 (324)
Proceeds from sale of property, equipment and other assets 21
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NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 14,518 (11,276)
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FINANCING ACTIVITIES:
Net proceeds from initial public offering 236,007
Proceeds from issuance of long-term debt 64,000 12,000
Payments of long-term debt (246,501) (5,002)
Proceeds from issuance of common stock related to an incentive plan 364
Dividends paid to S Corporation shareholders (75,181)
--------- ---------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (21,675) 7,362
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 821 (816)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 6,469 11,262
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,290 $ 10,446
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION ----
Cash paid during the period for:
Interest $ 4,583 $ 9,030
========= =========
Interest paid for TIDES $ 1,953
=========
Income taxes $ 586 $ 400
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SUPPLEMENTAL DISCLOSURES ON NON-CASH INVESTING AND FINANCING ACTIVITIES -
In connection with the Company's Initial Public Offering completed during the
three months ended March 31, 1999, the Convertible Subordinated Note, net of
deferred finance charges, of $96,400 was converted into equity.
In connection with the purchase of the 1% minority interest in ECI License
Company, L.P., the Company issued a short-term note payable in the amount of
$3,100.
In connection with the issuance of certain awards of Restricted Stock for 11,112
shares and 5,000 shares of Class A Common Stock for the three-month periods
ended March 31, 1999 and March 31, 2000, respectively, the Company increased its
additional paid-in-capital by $250 and $266 for the three-month periods ended
March 31, 1999 and March 31, 2000, respectively.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7
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ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 2000
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements for Entercom
Communications Corp. (the "Company") have been prepared in accordance with (1)
generally accepted accounting principles for interim financial information and
(2) the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments, consisting of only normal recurring accruals,
considered necessary for a fair presentation have been included.
This Form 10-Q should be read in conjunction with the financial
statements and notes thereto included in the Company's audited financial
statements as of December 31, 1999, and filed with the Securities and Exchange
Commission (the "SEC") on March 28, 2000 as part of the Company's Form 10-K.
Operating results for the three-month period ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. Certain prior year amounts have been reclassified to
conform to the current year's presentation, which had no effect on net income or
shareholders' equity.
As a result of the revocation of its S Corporation election on
January 28, 1999,and its conversion to a C Corporation, for the three-month
period ended March 31, 1999, the Company recorded a deferred income tax expense
of approximately $79.8 million to reflect the cumulative effect of temporary
differences between the tax and financial reporting bases of the Company's
assets and liabilities attributable to the period prior to its conversion to a C
Corporation.
On January 29, 1999, the Company's Class A Common Stock began trading
on the New York Stock Exchange.
The unaudited pro forma net income and pro forma earnings per share
data reflect adjustments for income taxes as if the Company had been subject to
federal and state income taxes based upon a pro forma effective tax rate of 38%
applied to taxable income before income taxes, which is adjusted for permanent
differences between tax and book income, for the three-month period ending March
31, 1999.
The net loss per share and pro forma earnings per share are
calculated in accordance with Statement of Financial Accounting Standards No.
128 and, are based on the weighted average number of shares of Common Stock
outstanding and dilutive common equivalent shares which include stock options
(using the treasury stock method). For the period ended March 31,2000, the
effect of the conversion of the Convertible Preferred Securities, Term Income
Deferrable Equity Securities ("TIDES") for the calculation of earnings per share
was anti-dilutive.
2. ACQUISITIONS
Completed Acquisitions
For the Three Months Ended March 31, 2000
On February 23, 2000, the Company acquired from the Wichita Stations
Trust ("Wichita Trust"), all of the assets related to radio stations KEYN-FM,
KWCY-FM, KQAM-AM, KFH-AM and KNSS-AM, serving the Wichita, Kansas radio market
for $8.0 million. Broadcasting licenses and other intangibles in the amount of
$6.3 million were recorded in connection with this transaction.
Unaudited Pro Forma Information for Acquisitions
The following unaudited pro forma summary presents the consolidated
results of operations as if the transactions which occurred during the period of
January 1,1999 through March 31, 2000, had all occurred as of January 1, 1999,
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 as of January 1, 1999. These unaudited pro forma results
have been prepared for comparative purposes only and do not purport to be
indicative of (1) what would have occurred had the acquisitions and other
transactions been made as of that date or (2) results which may occur in the
future.
8
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THREE MONTHS ENDED
MARCH 31,
1999 2000
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(AMOUNTS IN THOUSANDS)
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Net Revenues $ 60,010 $ 71,365
Net loss before losses on sale of assets (4,863) (142)
Net loss (4,867) (142)
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3. DEBT
The Company has a bank credit agreement (the "Bank Facility") with a
syndicate of banks which provides for senior secured credit of $650.0 million
consisting of: (1) a $325.0 million reducing revolving credit facility
("Revolver") and (2) a $325.0 million multi-draw term loan ("Term Loan"), to be
fully drawn no later than September 29, 2000, in a maximum of four draws of no
less than $50.0 million each. The Revolver and Term Loan, which mature on
September 30, 2007, each reduce on a quarterly basis beginning September 30,
2002 in quarterly amounts that vary from $12.2 million to $16.3 million for each
loan. As of March 31, 2000, the Company had approximately $472.5 million of
borrowings outstanding under the Bank Facility, in addition to outstanding
Letters of Credit in the amounts of $7.5 million and $5.0 million.
In January, 2000, the Company entered into interest rate collar
transactions with different banks to hedge a portion of its variable rate debt
under the Bank Facility and also to comply with a covenant under the Bank
Facility. Each transaction is comprised of two transactions entered into
simultaneously for a rate cap and for a rate floor. Under these transactions,
the Company's base LIBOR can not exceed the cap nor can the Company's base
LIBOR be less than the floor at the time of any quarterly reset date. The total
notional amount of these transactions is $168.0 million. The interest rates
for the floor varies from 6.25% to 6.34% and the interest rates for the cap
varies from 7.50% to 8.25%, with each of these transactions having a term which
varies from 24 months to 30 months.
4. COMMITMENTS AND CONTINGENCIES
Pending Acquisitions
The Company entered into a preliminary agreement on February 6, 1996,
to acquire the assets of radio station KWOD-FM, Sacramento, California, from
Royce International Broadcasting Corporation ("Royce"), subject to approval by
the FCC, for a purchase price of $25.0 million. Notwithstanding efforts by the
Company to pursue this transaction, Royce has been nonresponsive. On July 28,
1999, the Company commenced a legal action seeking to enforce this agreement,
and subsequently Royce filed a cross-complaint against the Company asking for
damages, an injunction and costs and filed a separate action against the
Company's President. This separate action against the Company's President was
dismissed without leave to amend in February 2000. The Company intends to pursue
its legal action against Royce and seek dismissal of the cross-complaint.
However, the Company cannot determine if and when the transaction might occur.
On December 16, 1999, the Company completed the acquisition of 41 of
46 radio stations from Sinclair Broadcast Group ("Sinclair"). Of the five
remaining radio stations under agreement with Sinclair, the Company expects to
acquire, (1) subject to FCC approval, for $0.6 million, the assets of WKRF-FM
(currently operating under a time brokerage agreement), serving the
Wilkes-Barre/Scranton, Pennsylvania radio market where the Company already owns
eight radio stations and (2) subject to FCC and Department of Justice approval,
for $122.0 million, the assets of KCFX-FM, KQRC-FM, KCIY-FM and KXTR-FM, serving
the Kansas City radio market, where the Company already owns seven radio
stations. In connection with the purchase of the four Kansas City radio
stations, federal broadcasting regulations require the Company to divest three
stations. To comply with these regulations, the Company will sell three stations
for cash (see Note 7). Pursuant to the acquisition of the four Kansas City radio
stations from Sinclair, the purchase price increased by approximately $1.8
million as of March 23, 2000, and will increase by approximately $0.9 million
for each 30 day period thereafter until the later of the closing or the
termination of the agreement.
On February 17, 2000, the Company entered into an agreement to
acquire WHYZ-AM, a radio station serving the Greenville, South Carolina radio
market, from WHYZ Radio, L.P. ("WHYZ") in the amount of $1.5 million in cash. On
May 4, 2000, the Company accepted an offer by WHYZ to terminate this transaction
without penalty to either party.
On February 17, 2000 and March 10, 2000, the Company entered into
separate asset purchase agreements to acquire KDGS-FM and KAYY-FM, two radio
stations serving the Wichita, Kansas radio market from Gary and Viola Violet
("Violet") in the total amount of $5.2 million in cash. It is anticipated that
these transactions will close in the second calendar quarter of 2000.
Contingencies
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.
9
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5. CONVERTIBLE PREFERRED SECURITIES
On September 30, 1999, the Company entered into an agreement to sell
2,500,000 Convertible Preferred Securities, Term Income Deferrable Equity
Securities ("TIDES"), including underwriters' over-allotments at an offering
price of $50.00 per security. Subject to certain deferral provisions, the trust
pays quarterly calendar distributions. The first distribution was paid on
December 31, 1999. The TIDES represent undivided preferred beneficial ownership
interests in the assets of the trust. The trust used the proceeds to purchase
from the Company an equal amount of 6-1/4% Convertible Subordinated Debentures
due 2014. The Company owns all of the common securities issued by the trust. The
trust exists for the sole purpose of issuing the common securities and the
TIDES. The trust is a wholly-owned subsidiary of the Company, with the sole
assets of the trust consisting of the $125.0 million aggregate principal amount
of the Company's 6-1/4% Convertible Subordinated Debentures due September 30,
2014. The Company has entered into several contractual arrangements for the
purpose of fully, irrevocably and unconditionally guaranteeing the trust's
obligations under the TIDES. The holders of the TIDES have a preference with
respect to each distribution and amounts payable upon liquidation, redemption or
otherwise over the holders of the common securities of the trust. Each TIDES is
convertible into shares of the Company's Class A Common Stock at the rate of
1.1364 shares of Class A Common Stock for each TIDES. The Company completed this
offering on October 6, 1999, and issued 2,500,000 TIDES at $50.00 per TIDES. The
net proceeds to the Company after deducting underwriting discounts and other
offering expenses, was $120.5 million.
6. SHAREHOLDERS' EQUITY
During the three months ended March 31, 1999 and the three months
ended March 31, 2000, the Company issued non-qualified options to purchase
798,111 shares and 467,750 shares, respectively, of its Class A Common Stock at
prices ranging from $18.00 to $31.88 and $31.88 to $59.44, respectively, per
share. All of the options become exercisable over a four-year period. In
connection with the grant of options with exercise prices below fair market
value at the time of grant and the grant of options issued to non-employees, the
Company recognized non-cash stock-based compensation expense in the amount of
$52,000 and $173,000 for the three months ended March 31, 1999 and 2000,
respectively.
During the three months ended March 31, 1999 and the three months
ended March 31, 2000, the Company issued certain Restricted Stock awards,
consisting of rights to 11,112 shares and 5,000 shares, respectively, of Class A
Common Stock. Such shares vest ratably on each of the next four anniversary
dates of the grant. In connection with these awards, the Company recognized
non-cash stock-based compensation expense in the amount of $10,400 and $31,000
for the three months ended March 31, 1999 and 2000, respectively.
7. SUBSEQUENT EVENTS
On May 4, 2000, the Company accepted an offer by WHYZ to terminate an
agreement between the Company and WHYZ without penalty to either party (see Note
4).
On May 9, 2000, Chase Capital converted 300,000 shares of Class C
Common Stock to 300,000 shares of Class A Common Stock.
On May 11, 2000, the Company entered into an agreement to sell to
Susquehanna Radio Corp. for $113.0 million in cash, the assets of three radio
stations serving the Kansas City radio market. The three stations consist of two
stations currently owned by the Company, KCMO-AM and KCMO-FM and one station,
KCFX-FM (including the contract rights to broadcast the Kansas City Chief
football games) that is included as part of the four Kansas City stations under
agreement with the Sinclair Broadcast Group (see Note 4). The Company expects to
close on this transaction in the third quarter of the year 2000.
On May 11, 2000, the Company entered into an asset purchase agreement
with Woodward Communications, Inc. to acquire WOLX-FM, WMMM-FM and WYZM-FM for
$14.6 million in cash, serving the Madison, Wisconsin radio market. The Company
expects to close on this transaction in the third quarter of the year 2000.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains, in addition to historical information,
statements by us with regard to our expectations as to financial results and
other aspects of our business that involve risks and uncertainties and may
constitute forward looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These statements reflect our current views and are based on certain assumptions.
Actual results could differ materially from those currently anticipated as a
result of a number of factors, including, but not limited to, the following: (1)
the possibility that our acquisition of the four stations from Sinclair in the
Kansas City market will not be consummated; (2) the highly competitive nature
of, and new technologies in, the radio broadcasting industry; (3) our dependence
upon our Seattle radio stations; (4) the risks associated with our acquisition
strategy generally; (5) the control of us by Joseph M. Field and members of his
immediate family; (6) our vulnerability to changes in federal legislation or
regulatory policy; and (7) those matters discussed below.
GENERAL
Founded in 1968, we are the fourth largest radio broadcasting company
in the United States based upon pro forma 1999 gross revenues derived from the
latest edition of BIA Consulting, Inc., after giving effect to all completed
transactions and acquisitions awaiting approval at the Federal Communications
Commission. We have assembled a nationwide portfolio of 95 owned or operated
stations, including acquisitions that are pending, and after our required
divestiture of three stations in Kansas City. This portfolio consists of 95
stations (61 FM and 34 AM) in 18 markets, including 12 of the country's top 50
radio advertising markets. Our station groups rank among the three largest
clusters, based on Duncan's Radio Market Guide (1999 ed.) 1998 gross revenues,
in 17 of our 18 markets.
A radio broadcasting company's revenues are derived primarily from
the sale of broadcasting time to local and national advertisers. These 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: (1) a station's audience share in the demographic groups targeted by
advertisers, as measured principally by quarterly reports issued by the Arbitron
Ratings Company; (2) the number of radio stations in the market competing for
the same demographic groups; and (3) the supply of and demand for radio
advertising time.
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. We generally incur
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 advertising and promotional spending.
Radio broadcasting companies often derive revenues from time
brokerage agreements and joint sales agreements. In a time brokerage agreement,
a radio station operator will enter into an agreement to provide a substantial
amount of the broadcast programming for a radio station that is owned by a
separate licensee. In a joint sales agreement, a licensed radio station operator
agrees to sell commercial advertising for a radio station that is owned by a
separate licensee. Typically, we use time brokerage agreements and joint sales
agreements to operate radio stations that we have agreed to acquire prior to the
time that the acquisition is completed. We include revenues recognized under a
time brokerage agreement or a similar sales agreement for stations operated by
us prior to acquiring the stations in net revenues, while we reflect operating
expenses associated with these stations in station operating expenses.
Consequently, there is no difference in the method of revenue and operating
expense recognition between a station operated by us under a time brokerage
agreement or joint sales agreement and a station owned and operated by us.
In the following analysis, we discuss broadcast cash flow and after
tax cash flow. Broadcast cash flow consists of operating income before
depreciation and amortization, net expense (income) from time brokerage
agreement fees, corporate general and administrative expenses and gain or loss
on sale of assets. After tax cash flow consists of net income (pro forma after
tax cash flow consists of pro forma net income) minus gain on sale of assets
(net of tax) or plus loss on sale of assets (net of tax benefit), plus the
following: depreciation and amortization, non-cash compensation expense (which
is otherwise included in corporate general and administrative expense) and the
amount of the deferred tax provision (or minus the deferred tax benefit).
Broadcast cash flow margin represents broadcast cash flow as a percentage of net
revenue. Although broadcast cash flow, broadcast cash flow margin and after tax
cash flow are not measures of performance or liquidity calculated in accordance
with generally accepted accounting principles, we believe that these measures
are useful to an investor in evaluating our performance because they are widely
used in the broadcast industry to measure a radio company's operating
performance. However, you should not consider broadcast cash flow, broadcast
cash flow margin and after tax cash flow in isolation or as substitutes for
operating income, cash flows from operating activities or any other measure for
determining our operating performance or liquidity that is calculated in
accordance with generally accepted accounting principles. In addition, because
broadcast cash flow, broadcast cash flow margin and after tax cash flow are not
calculated in accordance with generally accepted accounting principles, they are
not necessarily comparable to similarly titled measures employed by other
companies.
We calculate "same station" growth by (1) comparing the performance
of stations operated by us throughout a relevant period to the performance of
those same stations (whether or not operated by us) in the prior year's
corresponding period excluding the effect of barter revenues and expenses and
discontinued operations and (2) averaging those growth rates
11
<PAGE> 12
for the period presented. "Same station broadcast cash flow margin" is the
broadcast cash flow margin of the stations included in our same station
calculations. For purposes of the following discussion, pro forma net income
represents historical income before income taxes, adjusted as if we were treated
as a C Corporation during all relevant periods at an effective tax rate of 38%,
applied to income before income taxes, including permanent differences between
tax and book income.
RESULTS OF OPERATIONS
The following presents the results of our operations for the three
months ended March 31, 2000 and March 31, 1999, and should be read in
conjunction with our condensed consolidated financial statements and the related
notes included elsewhere in this Form 10-Q. Our results of operations represent
the operations of the radio stations owned or operated pursuant to time
brokerage agreements or joint sales agreements during the relevant periods.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, 1999 MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
NET REVENUES $39,599 $70,877
Increase of $31,278 or 79.0%
--------------------------------------------------------------------
</TABLE>
Net revenues increased 79.0% to $70.9 million for the three months
ended March 31, 2000 from $39.6 million for the three months ended March 31,
1999. Of the increase, $22.4 million is attributable to stations that we
acquired or that we were in the process of acquiring since January 1, 1999. On a
same station basis, net revenues increased 18.9% to $69.7 million from $58.6
million. Same station revenue growth was led by increases in Sacramento,
Seattle, Boston, Norfolk, Milwaukee and Greenville due to improved selling
efforts.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, 1999 MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATION OPERATING EXPENSES $28,909 $46,193
Increase of $17,284 or 59.8%
--------------------------------------------------------------------
Percentage of Net Revenues 73.0% 65.2%
</TABLE>
Station operating expenses increased 59.8% to $46.2 million for the
three months ended March 31, 2000 from $28.9 million for the three months ended
March 31, 1999. Of the increase, $14.9 million is attributable to stations that
we acquired or that we were in the process of acquiring since January 1, 1999.
On a same station basis, station operating expenses increased 7.7 % to $44.9
million from $41.7 million.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, 1999 MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
DEPRECIATION AND AMORTIZATION $4,861 $10,477
Increase of $5,616 or 115.5%
--------------------------------------------------------------------
Percentage of Net Revenues 12.3% 14.8%
</TABLE>
Depreciation and amortization increased 115.5% to $10.5 million for
the three months ended March 31, 2000 from $4.9 million for the three months
ended March 31, 1999. The increase was mainly attributable to our acquisitions
since January 1, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, 1999 MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
CORPORATE GENERAL AND
ADMINISTRATIVE EXPENSES $1,801 $3,167
Increase of $1,366 or 75.8%
--------------------------------------------------------------------
Percentage of Net Revenues 4.5% 4.5%
</TABLE>
Corporate general and administrative expenses increased 75.8% to $3.2
million for the three months ended March 31, 2000 from $1.8 million for the
three months ended March 31, 1999. The increase was mainly attributable to
higher administrative expenses associated with supporting our growth. Also
included is non-cash stock-based compensation expense of $0.2 million for the
three months ended March 31, 2000 and $0.1 million for the three months ended
March 31, 1999.
12
<PAGE> 13
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, 1999 MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
INTEREST EXPENSE (INCLUDING FINANCING
COST OF TIDES) $3,586 $11,343
Increase of $7,757 or 216.3%
--------------------------------------------------------------------
Percentage of Net Revenues 9.1% 16.0%
</TABLE>
Interest expense, including the financing cost on our 6-1/4%
Convertible Preferred Securities Term Income Deferrable Equity Securities
(TIDES), increased 216.3% to $11.3 million for the three months ended March 31,
2000 from $3.6 million for the three months ended March 31, 1999. The increase
in interest expense was mainly attributable to an increase in outstanding
indebtedness used to fund the acquisition of radio station assets and the
financing cost on the TIDES, net of a reduction in outstanding indebtedness due
to the use of the proceeds from our October 1999 Class A Common Stock and TIDES
offerings.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, 1999 MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME TAXES
(BENEFIT) $334 ($208)
Decrease of ($542)
--------------------------------------------------------------------
Percentage of Net Revenues 0.8% (0.3%)
</TABLE>
Income (loss) before income taxes (benefit) decreased to a loss of
$0.2 million for the three months ended March 31, 2000 from income of $0.3
million for the three months ended March 31, 1999. Of the decrease, $8.2 million
is attributable to an increase in net interest expense and financing cost as a
result of the factors described above, offset by an increase in operating income
of $7.7 million.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, 1999 MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
NET LOSS ($80,427) ($86)
Decrease of $80,341
--------------------------------------------------------------------
</TABLE>
Net loss decreased to $0.1 million for the three months ended March
31, 2000 from $80.4 million for the three months ended March 31, 1999. Of the
decrease, $79.8 million is attributable to the recording of a one-time non-cash
deferred income tax expense of $79.8 million as a result of the revocation of
our S Corporation election and our conversion to a C Corporation during the
three months ended March 31, 1999. We recorded this expense to reflect the
cumulative effect of temporary differences between the tax and financial
reporting bases of our assets and liabilities attributable to our conversion to
a C Corporation.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, 1999 MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
NET LOSS TO PRO FORMA NET INCOME $207 ($86)
Decrease of ($293)
--------------------------------------------------------------------
</TABLE>
Net income decreased to a loss of $0.1 million for the three months
ended March 31, 2000 from pro forma net income of $0.2 million for the three
months ended March 31, 1999. Of the decrease, $4.9 million is attributable an
increase in net interest expense and financing cost, net of tax, as a result of
an increase in outstanding indebtedness used to fund the acquisition of radio
stations and the financing cost on the TIDES, net of a reduction in outstanding
indebtedness due to the use of the proceeds from our October 1999 Class A Common
Stock and TIDES offerings, offset by an increase in operating income of $4.6
million, net of tax, due to improved operations of existing radio stations and
the acquisitions of new radio stations.
<TABLE>
<CAPTION>
OTHER DATA THREE MONTHS ENDED
------------------
MARCH 31, 1999 MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
BROADCAST CASH FLOW $10,690 $24,684
Increase of $13,994 or 130.9%
--------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
Broadcast cash flow increased 130.9% to $24.7 million for the three
months ended March 31, 2000 from $10.7 million for the three months ended March
31, 1999. Of the increase, $7.6 million is attributable to stations that we
acquired or that we were in the process of acquiring since January 1, 1999. On a
same station basis, broadcast cash flow increased 46.8% to $24.7 million from
$16.8 million.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, 1999 MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
BROADCAST CASH FLOW MARGIN Increase of 27.0% 34.8%
--------------------------------------------------------------------
</TABLE>
The broadcast cash flow margin increased to 34.8% for the three
months ended March 31, 2000 from 27.0% for the three months ended March 31,
1999. The increase is attributable to improved revenues and expense management.
On a same station basis, our broadcast cash flow margin increased to 35.0% from
29.0%.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, 1999 MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
AFTER TAX CASH FLOW TO PRO FORMA AFTER
TAX CASH FLOW $6,400 $14,968
Increase of $8,568 or 133.9%
--------------------------------------------------------------------
</TABLE>
After tax cash flow increased 133.9% to $15.0 million for the three
months ended March 31, 2000 from pro forma after tax cash flow of $6.4 million
for the three months ended March 31, 1999. The increase is attributable to
improved operations of existing stations and the net effect of newly acquired
properties, taking into consideration pro forma income taxes as though we had
reported as a C Corporation during the entire three month period ended March 31,
1999. The amount of the deferred income tax expense was $4.4 million for the
three months ended March 31, 2000 and the amount of the pro forma deferred
income tax expense was $1.3 million for the three months ended March 31, 1999.
14
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
We use a significant portion of our capital resources to consummate
acquisitions. These acquisitions are funded from one or a combination of the
following sources: (1) our bank facility (described below); (2) the swapping of
our radio stations in transactions which qualify as "like-kind" exchanges under
Section 1031 of the Internal Revenue Code; and (3) internally-generated cash
flow.
Net cash flows provided by operating activities were $3.1 million and
$8.0 million for the three months ended March 31, 2000 and 1999, respectively.
Changes in our net cash flows provided by operating activities are primarily a
result of changes in advertising revenues and station operating expenses, which
are affected by the acquisition of stations during those periods. The
acquisition of 41 radio stations from Sinclair on December 16, 1999 and five
radio stations from Wichita Trust on February 23, 2000, had a significant impact
on the current period's cash flow due to an increase in accounts receivable and
prepaid expenses, offset by an increase in accounts payable, accrued liabilities
and income taxes payable.
Net cash flows used by investing activities were $11.3 million for
the three months ended March 31, 2000 and net cash flows provided by investing
activities were $14.5 million for the three months ended March 31, 1999. Net
cash flows provided by financing activities were $7.4 million and net cash flows
used by financing activities were $21.7 million for the three months ended March
31, 2000 and 1999, respectively. The cash flows for the three months ended March
31, 2000 reflect an acquisition consummated and the related borrowing. The cash
flows for the three months ended March 31, 1999 reflect (1) an acquisition
consummated and the related borrowing; (2) net proceeds from our initial public
offering and the related payment of long-term debt; (3) use of the proceeds from
the sale of the Tampa stations and (4) the partial payment of the distribution
to our S Corporation Shareholders.
On February 23, 2000, we borrowed approximately $7.5 million under
our bank facility to fund the $8.0 million acquisition of five stations in
Wichita. As of March 31, 2000, we had $472.5 million of borrowings outstanding
under our bank facility in addition to outstanding letters of credit in the
amounts of $5.0 million and $7.5 million. A significant amount of this
indebtedness was incurred in connection with the acquisition of 41 of Sinclair's
radio stations in December 1999, for a purchase price of $700.4 million in cash.
We expect to use the credit available under the revolving credit facility and
multi-draw term loan to fund: (1) the remaining assets under the Sinclair
acquisition, including the four Kansas City stations and (2) pending and future
acquisitions. In connection with the Sinclair acquisition, we have agreed to
purchase $5.0 million of advertising time on television stations owned and/or
programmed by Sinclair and its affiliates at prevailing rates over the next five
years. This commitment was $5.0 million as of March 31, 2000. Further, if
Sinclair rightfully terminates the asset purchase agreement for the four Kansas
City stations, Sinclair may be entitled to receive liquidated damages from us in
the maximum amount of $7.0 million. In addition, as of March 23, 2000, the
purchase price increased by approximately $1.8 million and will increase by
approximately $0.9 million for each 30 day period thereafter for so long as the
Kansas City market has not closed.
In addition to debt service and quarterly distributions under the
TIDES, our principal liquidity requirements are for working capital and general
corporate purposes, including capital expenditures, and, if appropriate
opportunities arise, acquisitions of additional radio stations. For the fiscal
year 2000, we estimate that capital expenditures will be between $10.0 and $13.0
million. We believe that cash from operating activities, together with available
revolving and term credit borrowings under our bank facility, should be
sufficient to permit us to meet our financial obligations and fund our
operations. However, we may require additional financing for future
acquisitions, if any, and we can not assure you that we will be able to obtain
such financing on terms considered to be favorable by us.
We entered into our bank facility as of December 16, 1999, with a
syndicate of banks for a $650.0 million in senior credit consisting of: (1) a
$325.0 million reducing revolving credit facility and (2) a $325.0 multi-draw
term loan, to be fully drawn no later than September 29, 2000 in a maximum of
four draws of no less than $50.0 million each. Our bank facility was established
to: (1) refinance existing indebtedness; (2) provide working capital; and (3)
fund corporate acquisitions. At our election, interest on any outstanding
principal accrues at a rate based on either LIBOR plus a spread which ranges
from 0.75% to 2.375% or on the prime rate plus a spread of up to 1.125%,
depending on our leverage ratio. The availability under our revolving credit
facility and term loan, which mature on September 30, 2007, reduces on a
quarterly basis beginning September 30, 2002 in quarterly amounts that vary from
$12.2 million to $16.3 million for each loan. Our bank facility requires us to
comply with certain financial covenants and leverage ratios that are defined
terms within the agreement. We believe we are in compliance with the covenants
and leverage ratios. Our bank facility also provides that at any time prior to
December 31, 2001, we may solicit additional incremental loans of up to $350.0
million, and we will be governed under the same terms as the term loan.
15
<PAGE> 16
RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("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, which are
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. The
accounting for changes in the fair value of a derivative depends on the intended
use of the derivative and the resulting designation. In June, 1999, the FASB
issued SFAS No. 137 which extends the effective date of SFAS No. 133 to fiscal
quarters of fiscal years beginning after June 15, 2000, and should not be
applied retroactively to financial statements of prior periods. Management has
not completed a full evaluation of the applicability of SFAS No. 133.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our bank facility requires us to protect ourselves from interest rate
fluctuations through the use of derivative rate hedging instruments. As a
result, we have entered into various interest rate transactions with various
banks, which we define as "Rate Hedging Transactions", designed to mitigate our
exposure to significantly higher floating interest rates. A rate cap agreement
establishes an upper limit or "cap" for the base LIBOR rate and a rate floor
agreement establishes a lower limit or "floor" for the base LIBOR rate. Several
of the agreements cover a rate cap and a rate floor and have been entered into
simultaneously with the same bank. Swap agreements require that we pay a fixed
rate of interest on the notional amount to a bank and the bank pay to us a
variable rate equal to three-month LIBOR. Currently, we have Rate Hedging
Transactions in place for a total notional amount of $253.0 million.
All of the Rate Hedging Transactions are tied to the three-month
LIBOR interest rate, which may fluctuate significantly on a daily basis. Any
increase in the three-month LIBOR rate results in a more favorable valuation of
each of the Rate Hedging Transactions, while any decrease in the three-month
LIBOR rate results in a less favorable valuation of each of the Rate Hedging
Transactions. The three-month LIBOR rate at March 31, 2000 was higher than the
rate at December 31, 2000. This increase resulted in unrecognized gains by us
from the Rate Hedging Transactions.
See also additional disclosures regarding "Liquidity and Capital
Resources" made under Item 2, above.
16
<PAGE> 17
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are from time to time involved in litigation incidental to the
conduct of our business, but we are not a party to any lawsuit or proceeding
which, in our opinion, is likely to have a material adverse effect on us.
We entered into a preliminary agreement on February 6, 1996, to
acquire the assets of radio station KWOD-FM, Sacramento, California, from Royce
International Broadcasting Corporation, subject to approval by the Federal
Communications Commission, for a purchase price of $25.0 million.
Notwithstanding our efforts to pursue this transaction, the seller was
non-responsive. On July 28, 1999, we commenced a legal action seeking to enforce
this agreement, and subsequently the seller filed a cross-complaint against us
asking for damages, an injunction and costs and filed a separate action against
our President. This separate action against our President was dismissed without
leave to amend in February 2000. We intend to pursue legal action against the
seller and seek dismissal of the cross-complaint. However, we cannot determine
if and when the transaction might occur.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None to report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None to report.
ITEM 5. OTHER INFORMATION
None to report.
17
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.01 Amended and Restated Articles of Incorporation of the
Registrant (2)
3.02 Amended and Restated Bylaws of the Registrant (2)
4.01 Lock-up Release Agreement, dated as of May 6, 1999,
between Chase Equity Associates L.P. and Credit
Suisse Boston Corporation (3)
4.02 Form of Indenture for the Convertible Subordinated
Debentures due 2014 among Entercom Communications
Corp., as issuer and Wilmington Trust Company, as
indenture trustee (4)
10.01 Registration Rights Agreement, dated as of May 21,
1996, between the Registrant and Chase Equity
Associates, L.P. (2)
10.02 Employment Agreement, dated June 25, 1993, between
the Registrant and Joseph M. Field, as amended (2)
10.03 Employment Agreement, dated December 17, 1998,
between the Registrant and David J. Field, as amended
(2)
10.04 Employment Agreement, dated December 17, 1998,
between the Registrant and John C. Donlevie, as
amended (2)
10.05 Employment Agreement, dated November 13, 1998,
between the Registrant and Stephen F. Fisher (2)
10.06 Entercom 1998 Equity Compensation Plan (2)
10.07 Asset Purchase Agreement, dated as of May 11, 2000,
among the Registrant, Entercom Kansas City, LLC,
Entercom Kansas City License, LLC, and Susquehanna
Radio Corp. (See table of contents for list of
omitted schedules and exhibits, which the Registrant
hereby agrees to furnish supplementally to the
Securities and Exchange Commission upon request) (1)
10.08 Credit Agreement, dated as of December 16, 1999,
among Entercom Radio, LLC, as the Borrower, the
Registrant, as a Guarantor, Banc of America
Securities LLC, as Sole Lead Arranger and Book
Manager, Key Corporate Capital, Inc., as
Administrative Agent, and Co-Documentation Agent,
Bank of America, N.A., as Syndication Agent, and
Co-Documentation Agent and the Financial Institutions
listed therein (6)
10.09 Amended and Restated Asset Purchase Agreement, dated
as of August 20, 1999, among the Registrant, Sinclair
Communications, Inc., WCGV, Inc., Sinclair Radio of
Milwaukee Licensee, LLC, Sinclair Radio of New
Orleans Licensee, LLC, Sinclair Radio of Memphis,
Inc., Sinclair Radio of Memphis Licensee, Inc.,
Sinclair Properties, LLC, Sinclair Radio of
Norfolk/Greensboro Licensee, L.P., Sinclair Radio of
Buffalo, Inc., Sinclair Radio of Buffalo Licensee,
LLC, WLFL, Inc., Sinclair Radio of Greenville
Licensee, Inc., Sinclair Radio of Wilkes-Barre, Inc.
and Sinclair Radio of Wilkes-Barre Licensee, LLC.
(See table of contents for list of omitted schedules
and exhibits, which the Registrant hereby agrees to
furnish supplementally to the Securities and Exchange
Commission upon request) (5)
10.10 Asset Purchase Agreement, dated as of August 20,
1999, among the Registrant, Sinclair Communications,
Inc., Sinclair Media III, Inc. and Sinclair Radio of
Kansas City Licensee, LLC. (See table of contents for
list of omitted schedules and exhibits, which the
Registrant hereby agrees to furnish supplementally to
the Securities and Exchange Commission upon request
(5)
10.11 Asset Purchase Agreement, dated as of August 13,
1998, among the Registrant, CBS Radio, Inc. and CBS
Radio License, Inc. (2)
10.12 Time Brokerage Agreement, dated as of August 13,
1998, among the Registrant, CBS Radio, Inc. and CBS
Radio License, Inc. (2)
10.13 Asset Purchase Agreement, dated as of August 13,
1998, among CBS Radio, Inc., CBS Radio License, Inc.,
ARS Acquisition II. And the Registrant (2)
10.14 Time Brokerage Agreement, dated as of August 13,
1998, among CBS Radio, Inc., CBS Radio License, Inc.,
ARS Acquisition II, Inc. and the Registrant (2)
11.01 Reconciliation of Earnings Per Share (1)
21.01 Information Regarding Subsidiaries of the Registrant
(7)
27.01 Financial Data Schedule (1)
</TABLE>
(1) Filed herewith.
(2) Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 333-61381).
(3) Incorporated by reference to the Company's Quarterly Report on Form
10Q. (File No. 001-14461)
(4) Incorporated by reference to the Company's Registration Statement on
Form S-1. (File No. 333-86843)
(5) Incorporated by reference to the Company's Registration Statement on
Form S-1. (File No. 333-86397)
(6) Incorporated by reference to the Company's Current Report on Form 8-K.
(File No. 001-14461).
(7) Incorporated by reference to the Company's identically numbered exhibit
to the Annual Report on Form 10-K for the fiscal year ended December
31, 1999. (File No. 001-14461)
18
<PAGE> 19
(b) The Company did not file any reports on Form 8-K during the three
months ended March 31, 2000.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENTERCOM COMMUNICATIONS CORP.
(Registrant)
Date: May 15, 2000 /s/ Joseph M. Field
-----------------------------------------------
Name: Joseph M. Field
Title: Chief Executive Officer
Date: May 15, 2000 /s/ David J. Field
-----------------------------------------------
Name: David J. Field
Title: President and Chief Operating Officer
Date: May 15, 2000 /s/ Stephen F. Fisher
-----------------------------------------------
Name: Stephen F. Fisher
Title: Senior Vice President and Chief Financial
Officer
20
<PAGE> 1
Exhibit 10.7
ASSET PURCHASE AGREEMENT
DATED MAY 11, 2000
AMONG
ENTERCOM COMMUNICATIONS CORP.
ENTERCOM KANSAS CITY, LLC
ENTERCOM KANSAS CITY LICENSE, LLC
AS SELLERS,
AND
SUSQUEHANNA RADIO CORP.
AS BUYER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1. CERTAIN DEFINITIONS.............................................................................2
1.1 Terms Defined in this Section...................................................................2
1.2 Terms Defined Elsewhere in this Agreement.......................................................8
SECTION 2. EXCHANGE AND TRANSFER OF ASSETS; ASSET VALUE....................................................9
2.1 Agreement to Exchange and Transfer..............................................................9
2.2 Excluded Assets................................................................................10
2.3 Purchase Price.................................................................................11
2.4 Initial Purchase Price.........................................................................12
2.5 Payment of Purchase............................................................................14
2.6 Assumption of Liabilities and Obligations......................................................14
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLERS......................................................15
3.1 Organization and Authority of Sellers..........................................................15
3.2 Authorization and Binding Obligation...........................................................15
3.3 Absence of Conflicting Agreements; Consents....................................................15
3.4 Governmental Licenses..........................................................................16
3.5 Real Property..................................................................................17
3.6 Tangible Personal Property.....................................................................18
3.7 Contracts......................................................................................18
3.8 Intangibles....................................................................................19
3.9 Title to Properties............................................................................19
3.10 Financial Statements...........................................................................19
3.11 Taxes..........................................................................................20
3.12 Insurance......................................................................................20
3.13 Reports........................................................................................20
3.14 Personnel and Employee Benefits................................................................20
3.15 Claims and Legal Actions.......................................................................22
3.16 Environmental Compliance.......................................................................22
3.17 Compliance with Laws...........................................................................23
3.18 Conduct of Business in Ordinary Course.........................................................23
3.19 Transactions with Affiliates...................................................................24
3.20 Broker.........................................................................................24
3.21 Insolvency Proceedings.........................................................................24
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER........................................................24
4.1 Organization, Standing and Authority...........................................................24
4.2 Authorization and Binding Obligation...........................................................24
4.3 Absence of Conflicting Agreements and Required Consents........................................25
4.4 Brokers........................................................................................25
4.5 Availability of Funds..........................................................................25
4.6 Qualifications of Buyer........................................................................25
4.7 WARN Act.......................................................................................26
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
4.8 Buyer's Defined Contribution Plan..............................................................26
SECTION 5. OPERATION OF THE STATIONS PRIOR TO CLOSING.....................................................26
5.1 Contracts......................................................................................26
5.2 Compensation...................................................................................27
5.3 Encumbrances...................................................................................27
5.4 Dispositions...................................................................................27
5.5 Access to Information..........................................................................27
5.6 Insurance......................................................................................27
5.7 Licenses.......................................................................................27
5.8 Obligations....................................................................................28
5.9 No Inconsistent Action.........................................................................28
5.10 Maintenance of Assets..........................................................................28
5.11 Consents.......................................................................................28
5.12 Books and Records..............................................................................29
5.13 Notification...................................................................................29
5.14 Financial Information..........................................................................29
5.15 Compliance with Laws...........................................................................29
5.16 Programming....................................................................................29
5.17 Preservation of Business.......................................................................29
5.18 Normal Operations..............................................................................30
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS...............................................................30
6.1 FCC Consent....................................................................................30
6.2 Hart-Scott-Rodino..............................................................................30
6.3 Risk of Loss...................................................................................30
6.4 Confidentiality................................................................................31
6.5 Cooperation....................................................................................31
6.6 Control of the Stations........................................................................31
6.7 Accounts Receivable............................................................................31
6.8 Allocation of Purchase Price...................................................................32
6.9 Access to Books and Records....................................................................32
6.10 Employee Matters...............................................................................33
6.11 Lease Agreement and Shared Property Agreement..................................................35
6.12 Public Announcements...........................................................................35
6.13 Disclosure Schedules...........................................................................35
6.14 Bulk Sales Law.................................................................................35
6.15 Environmental Site Assessment..................................................................35
6.16 Reserved.......................................................................................36
6.17 Adverse Developments...........................................................................36
6.18 Title Insurance................................................................................36
6.19 Surveys........................................................................................36
6.20 Reserved.......................................................................................36
6.21 Reserved.......................................................................................36
6.22 Cooperation on Tax Matters.....................................................................37
6.23 Nonsolicitation................................................................................37
6.24 Collective Bargaining Duty.....................................................................37
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
6.25 Shared Use of KCFX Studio......................................................................37
SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER..................................................37
7.1 Conditions to Obligations of Buyer.............................................................37
7.2 Conditions to Obligations of Sellers...........................................................38
SECTION 8. CLOSING AND CLOSING DELIVERIES.................................................................39
8.1 Closing........................................................................................39
8.2 Deliveries by Sellers..........................................................................40
8.3 Deliveries by Buyer............................................................................41
SECTION 9. TERMINATION....................................................................................42
9.1 Termination by Mutual Consent..................................................................42
9.2 Termination by Seller..........................................................................42
9.3 Termination by Buyer...........................................................................43
9.4 Rights on Termination..........................................................................43
9.5 Liquidated Damages Not a Penalty...............................................................44
9.6 Specific Performance...........................................................................44
9.7 Attorneys' Fees................................................................................44
9.8 Survival.......................................................................................44
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; CERTAIN REMEDIES..................44
10.1 Survival of Representations....................................................................44
10.2 Indemnification by Seller......................................................................45
10.3 Indemnification by Buyer.......................................................................45
10.4 Procedure for Indemnification..................................................................46
10.5 Certain Limitations............................................................................47
SECTION 11. MISCELLANEOUS..................................................................................47
11.1 Fees and Expenses..............................................................................47
11.2 Notices........................................................................................48
11.3 Benefit and Binding Effect.....................................................................48
11.4 Further Assurances.............................................................................49
11.5 GOVERNING LAW..................................................................................49
11.6 Entire Agreement...............................................................................49
11.7 Waiver of Compliance; Consents.................................................................49
11.8 Headings.......................................................................................49
11.9 Counterparts...................................................................................50
</TABLE>
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<PAGE> 5
LIST OF SCHEDULES
<TABLE>
<CAPTION>
<S> <C>
2.2 Excluded Real Property, Excluded Real Property Interests,
Excluded Tangible Personal Property
3.1 Good Standing, Joint Ventures
3.3 Consents
3.4 FCC Licenses
3.5 Real Property
3.6 Tangible Personal Property Exceptions to Title and Encumbrances
3.7 Contracts and Leases
3.8 Infringements on Intangibles
3.11 Taxes
3.12 Insurance
3.14 Personnel and Employee Benefits
3.14(g) Labor
3.15 Litigation
3.16 Environmental Compliance
3.18 Conduct of Business
3.19 Affiliate Transactions
3.20 Brokers
5.3 Encumbrances
6.10 Retention Agreements
6.23 Nonsolicitation
LIST OF EXHIBITS
Exhibit 1 Lease
Exhibit 2 Shared Property Agreement
</TABLE>
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered
into on May 11, 2000 by and among Entercom Communications Corp., a Pennsylvania
corporation ("ENTERCOM"), Entercom Kansas City, LLC, a Delaware limited
liability company ("ENTERCOM KANSAS CITY") and Entercom Kansas City License,
LLC, a Delaware limited liability company ("KANSAS CITY LICENSE"), (each a
"SELLER" and collectively, "SELLERS"), and Susquehanna Radio Corp., a
Pennsylvania corporation ("BUYER").
R E C I T A L S:
WHEREAS, Entercom Kansas City operates radio broadcast
stations KCMO-AM and KCMO-FM, Kansas City, Missouri, and Entercom has entered
into that certain Asset Purchase Agreement by and among Sinclair Communications,
Inc., Sinclair Media III, Inc., Sinclair Radio of Kansas City Licensee, LLC (the
"SINCLAIR SELLERS"), and Entercom, dated as of August 18, 1999 (the
"ENTERCOM/SINCLAIR CONTRACT") pursuant to which Entercom has the right to
acquire KCFX-FM, Harrisonville, Missouri (KCMO-AM, KCMO-FM and KCFX-FM,
collectively, the "STATIONS");
WHEREAS, Kansas City License is the licensee of KCMO-AM and
KCMO-FM, pursuant to certain authorizations issued to it by the FCC, and
Entercom has the right to acquire the FCC licenses of KCFX-FM pursuant to the
Entercom/Sinclair Contract; and
WHEREAS, the parties hereto desire to enter into this
Agreement to provide for the sale, assignment and transfer by Sellers to Buyer
of certain of the assets owned, leased or used by Sellers, in connection with
the business and operations of KCMO-AM and KCMO-FM, and the Sinclair Sellers, in
connection with the business and operations of KCFX-FM.
A G R E E M E N T S:
In consideration of the above recitals and of the mutual
agreements and covenants contained in this Agreement, the parties to this
Agreement, intending to be bound legally, agree as follows:
SECTION 1.
CERTAIN DEFINITIONS
1.1 Terms Defined in this Section. The following terms, as used in this
Agreement, have the meanings set forth in this Section:
"ACCOUNTS RECEIVABLE" means the rights of Sellers with respect
to accounts receivable of KCMO-AM and KCMO-FM, and the rights of the Sinclair
Sellers with respect to the accounts receivable of KCFX-FM, as of the Closing
Date, to payment in cash for the sale of advertising time and other goods and
services by the Stations prior to the Closing Date.
"AFFILIATE" means, with respect to any Person, (a) any other
Person that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with such Person, or (b)
an officer or director of such Person or of an Affiliate of such
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<PAGE> 7
Person within the meaning of clause (a) of this definition. For purposes of
clause (a) of this definition, (i) a Person shall be deemed to control another
Person if such Person (A) has sufficient power to enable such Person to elect a
majority of the board of directors or other governing body of such Person, or
(B) owns a majority of the beneficial interests in income and capital of such
Person; and (ii) a Person shall be deemed to control any partnership of which
such Person is a general partner.
"ASSETS" means the assets to be transferred or otherwise
conveyed by Sellers and the Sinclair Sellers to Buyer under this Agreement, as
such assets are specified in Section 2.1.
"ASSUMED CONTRACTS" means (a) all Contracts set forth on
Schedule 3.7, (b) Contracts entered into prior to the date of this Agreement
with advertisers for the sale of advertising time or production services for
cash at rates consistent with past practices, (c) Contracts entered into by any
Seller or any Sinclair Seller prior to the date of this Agreement which are not
required to be included on Schedule 3.7 hereto, (d) any Contracts entered into
by any of Sellers (in the case of KCMO-AM and KCMO-FM) and any of the Sinclair
Sellers (in the case of KCFX-FM) between the date of this Agreement and the
Closing Date that Buyer agrees in writing to assume, and (e) other contracts
entered into by any of Sellers (in the case of KCMO-AM and KCMO-FM) and any of
the Sinclair Sellers (in the case of KCFX-FM) between the date of this Agreement
and the Closing Date in compliance with Section 5.1.
"CLOSING" means the consummation of the exchange and
acquisition of the Assets pursuant to this Agreement on the Closing Date in
accordance with the provisions of Section 8.1.
"CLOSING DATE" means the date on which the Closing occurs, as
determined pursuant to Section 8.1.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as
amended.
"CONSENTS" means the consents, permits, or approvals of
government authorities and other third parties necessary to transfer the Assets
to Buyer or otherwise to consummate the transactions contemplated by this
Agreement.
"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 the
term "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" means all contracts, consulting agreements,
leases, non-governmental licenses and other agreements (including leases for
personal or real property and employment agreements), written or oral (including
any amendments and other modifications thereto) to which any Seller (in the case
of KCMO-AM and KCMO-FM) and any Sinclair Seller (in the case of KCFX-FM) is a
party or that are binding upon any Seller or Sinclair Seller, as the
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<PAGE> 8
case may be, that relate to or affect the Assets or the business or operations
of the Stations, and that either (a) are in effect on the date of this
Agreement, including those listed on Schedule 3.7 hereto, or (b) are entered
into by any Seller or Sinclair Seller, as the case may be, between the date of
this Agreement and the Closing Date in compliance with Section 5.1 hereof.
"EFFECTIVE TIME" means 12:01 a.m., Eastern time, on the
Closing Date.
"ENVIRONMENTAL LAWS" shall mean and include, but not be
limited to, any applicable federal, state or local law, statute, charter,
ordinance, rule or regulation or any governmental agency interpretation, policy
or guidance, 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, and the Toxic Substance Control 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 if such could materially affect the 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.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW DEPOSIT" means the sum of Six Million Three Hundred
Thousand Dollars ($6,300,000.00) in the form of a letter of credit in favor of
Sellers to be deposited by Buyer with Star Media Group, Inc. (the "ESCROW
AGENT") on the date hereof to secure the obligations of Buyer to close under
this Agreement, with (i) such deposit being held by the Escrow Agent in
accordance with the Escrow Agreement executed among Buyer, Sellers and Escrow
Agent and (ii) the Escrow Deposit, and all earnings thereon, being returned to
Buyer upon the consummation of this Agreement.
"EXCESS AMOUNT" shall have the meaning set forth in Section
10.5.
"EXCLUDED REAL PROPERTY" means the Real Property listed on
Schedule 2.2.
"EXCLUDED REAL PROPERTY INTERESTS" means all interests in Real
Property listed on Schedule 2.2 hereto.
"EXCLUDED TANGIBLE PERSONAL PROPERTY" means (i) any assets
used primarily in the operation of any television broadcast station owned or
operated or programmed by the Sinclair Sellers or any Affiliate of the Sinclair
Sellers, (ii) any assets used primarily in the operation of any radio broadcast
stations owned, operated or programmed by Seller or Sinclair Sellers but not
included as a "Station" hereunder, other than the assets located at 5800
Foxridge Drive, Kansas City, Missouri which shall be included as Tangible
Personal Property; provided
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<PAGE> 9
however, that the assets listed on the first attachment ("Attachment 1") to
Schedule 2.2 and located at 5800 Foxridge Drive shall be Excluded Tangible
Personal Property and shall be retained by Sellers; (iii) any assets located at
the Excluded Real Property, other than those assets listed on the second
attachment ("Attachment 2") to Schedule 2.2 which shall be included as Tangible
Personal Property and (iv) with respect to the Sinclair Sellers, any tangible
personal property located at Suite 220, Meadow Mill at Woodberry, 3600 Clipper
Mill Road, Baltimore, Maryland 21211.
"FCC" means the Federal Communications Commission.
"FCC CONSENT" means action by the FCC granting its consent to
the transfer of the FCC Licenses by Kansas City License (in the case of the KCMO
FCC Licenses) and by Kansas City Licensee, LLC (in the case of the KCFX FCC
Licenses) to Buyer as contemplated by this Agreement.
"FCC LICENSES" means those licenses, permits and
authorizations issued by the FCC to Sellers and the Sinclair Sellers in
connection with the business and operations of the Stations.
"FINAL ORDER" shall mean an action by the Commission upon any
application for FCC Consent filed by the parties hereto for FCC 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.
"HART-SCOTT-RODINO" means the Hart-Scott-Rodino Antitrust
Improvements Acts of 1976, as amended, and all Laws promulgated pursuant thereto
or in connection therewith.
"INTANGIBLES" means all copyrights, trademarks, trade names,
service marks, service names, licenses, patents, permits, jingles, proprietary
information, technical information and data, machinery and equipment warranties,
and other similar intangible property rights and interests (and any goodwill
associated with any of the foregoing) applied for, issued to, or owned by any of
Sellers (in the case of intangible property used in connection with the
operations of KCMO-AM and KCMO-FM) and any of the Sinclair Sellers (in the case
of intangible property rights used in connection with the operations of KCFX-FM)
or under which such sellers are licensed or franchised and that are used in the
business and operations of the Stations, together with any additions thereto
between the date of this Agreement and the Closing Date.
"KCFX FCC LICENSES" means those licenses, permits and
authorizations issued by the FCC to Sinclair Radio of Kansas City Licensee, LLC
in connection with the business and operations of KCFX-FM and which are to be
assigned to Sellers under the Entercom/Sinclair Contract.
"KCMO FCC LICENSES" means those licenses, permits and
authorizations issued by the FCC to Kansas City License in connection with the
business and operations of KCMO-AM and KCMO-FM.
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<PAGE> 10
"KCFX LICENSES" means the KCFX FCC Licenses and all licenses,
permits, construction permits and other authorizations issued by the Federal
Aviation Administration, or any other federal, state, or local governmental
authorities to any of the Sinclair Sellers, currently in effect and used in
connection with the conduct of the business or operations of KCFX-FM, together
with any additions thereto between the date of this Agreement and the Closing
Date.
"KCMO LICENSES" means the KCMO FCC Licenses and all licenses,
permits, construction permits and other authorizations issued by the Federal
Aviation Administration, or any other federal, state, or local governmental
authorities to any of Sellers, currently in effect and used in connection with
the conduct of the business or operations of KCMO-AM and KCMO-FM, together with
any additions thereto between the date of this Agreement and the Closing Date.
"KNOWLEDGE" or any derivative thereof with respect to the
Sellers means, exclusively, the actual Knowledge of the President and Chief
Executive Officer or the Chief Financial Officer of Entercom, the general
managers of the Stations, and any other employee of Entercom designated as a
"vice president" or any officer of any of the Sellers.
"LEASED REAL PROPERTY" means all real property and all
buildings and other improvements thereon and appurtenant thereto leased or held
by any of the Sellers (in connection with the operations of KCMO-AM and
KCMO-FM), other than the Excluded Real Property, and any of the Sinclair Sellers
(in connection with the operations of KCFX-FM) and used in the business or
operations of the Stations.
"LICENSES" means the KCFX Licenses and the KCMO Licenses.
"MATERIAL ADVERSE EFFECT" means 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.
"MATERIAL CONTRACT" means those Assumed Contracts that are
designated on Schedules 3.5 and 3.7 as "Material Contracts."
"OWNED REAL PROPERTY" means that certain parcel of real
property and all buildings and other improvements thereon and appurtenant
thereto owned by Entercom and used as a transmitter site for KCMO-AM.
"PERMITTED ENCUMBRANCES" means (a) encumbrances of a landlord,
or other statutory lien not yet due and payable, or a landlord's liens arising
in the ordinary course of business, (b) encumbrances arising in connection with
equipment or maintenance financing or leasing under the terms of the Contracts
set forth on the Schedules, which Contracts have been made available to Buyer,
(c) encumbrances for Taxes not yet delinquent or which are being contested in
good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on Sellers' books (in the case of KCMO-AM and KCMO-FM) or
the Sinclair Sellers' Books (in the case of KCFX-FM) in accordance with
generally accepted accounting
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principles, or (d) encumbrances that do not materially detract from the value of
any of the Assets or materially interfere with the use thereof.
"PERSON" means an individual, corporation, association,
partnership, joint venture, trust, estate, limited liability company, limited
liability partnership, or other entity or organization.
"REAL PROPERTY" means all real property and all buildings and
other improvements thereon and appurtenant thereto, whether or not owned, leased
or held by any of Sellers (in connection with the operations of KCMO-AM and
KCMO-FM) and leased by any of the Sinclair Sellers (in connection with the
operations of KCFX-FM) and used in the business or operations of the Stations,
but excluding the Excluded Real Property.
"REAL PROPERTY INTERESTS" means all interests in Owned Real
Property and Leased Real Property, including fee estates, leaseholds and
subleaseholds, purchase options, easements, licenses, rights to access, and
rights of way, and all buildings and other improvements thereon and appurtenant
thereto, owned or held by any of Sellers (in connection with the operations of
KCMO-AM and KCMO-FM) or held by any of the Sinclair Sellers (in connection with
the operations of KCFX-FM) and that are used in the business or operations of
the Stations, together with any additions, substitutions and replacements
thereof and thereto between the date of this Agreement and the Closing Date, but
excluding the Excluded Real Property Interests.
"TANGIBLE PERSONAL PROPERTY" means all machinery, equipment,
tools, vehicles, furniture, leasehold improvements, office equipment, plant,
inventory, spare parts and other tangible personal property owned or held by any
of Sellers (in connection with the operations of KCMO-AM and KCMO-FM and listed
on Attachment 2 to Schedule 2.2 hereof ) and any of the Sinclair Sellers (in
connection with the operations of KCFX-FM and the other stations currently
operated at the KCFX Studio) and that is used or useful in the conduct of the
business or operations of the Stations, together with any additions,
substitutions and replacements thereof and thereto between the date of this
Agreement and the Closing Date, but excluding the Excluded Tangible Personal
Property.
"TAX" means any federal, state, local, or foreign income,
gross receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, capital, transfer, employment, withholding, or other
tax or similar governmental assessment, together with any interest, additions,
or penalties with respect thereto and any interest in respect of such additions
or penalties.
"TAX RETURN" means any tax return, declaration of estimated
tax, tax report or other tax statement, or any other similar filing required to
be submitted to any governmental authority with respect to any Tax.
"THRESHOLD AMOUNT" has the meaning set forth in Section 10.5.
"UNEXPENDED REMEDIATION AMOUNT" shall mean Three Hundred Fifty
Thousand Dollars ($350,000) minus any amounts previously expended by Sellers to
remediate any of the Real Property pursuant to Section 6.15.
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1.2 Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, the following terms have the meanings set forth in the sections
indicated:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Balance Sheet Date Section 3.10
Benefit Arrangement Section 3.14 (a)(v)
Benefit Plans Section Section 3.14(a)(ii)
Buyer Preamble
Buyer's Plan Section 4.8
Claimant Section 10.4
Collection Period Section 6.7(a)
Confidentiality Agreement Section 6.4
Deferred Contract Section 5.11(b)
Designee Section 11.3(b)
Election Section 6.22
Employees Section 3.14(a)
Entercom Recitals
Entercom Kansas City Recitals
Entercom Kansas City License Recitals
Entercom/Sinclair Contract Recitals
Environmental Assessments Section 6.15
Environmental Laws Section 3.16
Environmental Threshold Amount Section 6.15
Estimated Purchase Price Section 2.4(a)
Excluded Real Property Interests Section 1.1
Excluded Tangible Personal Property Section 1.1
FCC Objection Section 7.1(c)
FTC Section 4.6
Financial Statements Section 3.10
Hart-Scott-Rodino Filing Section 6.2
Indemnity Cap Section 10.5
Indemnifying Party Section 10.4
Initial Employee Cap Section 6.10(g)
Initial Purchase Price Section 2.3
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
KCFX Balance Sheet Date Section 3.10
KCFX Financial Statements Section 3.10
KCFX Accounts Receivable Section 6.7
KCMO Balance Sheet Date Section 3.10
KCMO Financial Statements Section 3.10
KCMO Studio Section 6.25
Lease Section 6.11
Multiemployer Plan Section 3.14(a)(ii)
Operational Equipment Section 3.22
Pension Plan Section 3.14(a)(iii)
Purchase Price Section 2.3
Scheduled Retention Agreements Section 6.10(g)
Section 6.9 Amount Section 6.9
Seller Preamble
Seller Entities Section 6.10(i)
Sellers' Employees Section 6.10(i)
Shared Property Agreement Section 6.11
Sinclair Sellers Recitals
Stations Recitals
Title Commitment Section 6.18
Transferred Employees Section 6.10
Transition Period Section 6.25
Welfare Plan Section 3.14(a)(i)
</TABLE>
SECTION 2.
EXCHANGE AND TRANSFER OF ASSETS; ASSET VALUE
2.1 Agreement to Exchange and Transfer. Subject to the terms and
conditions set forth in this Agreement with respect to the Stations, Sellers
hereby agree to transfer, convey, assign and deliver to Buyer on the Closing
Date and to cause the Sinclair Sellers to transfer, convey, assign and deliver
to Buyer on the Closing Date, and Buyer agrees to acquire, all of Sellers' and
the Sinclair Sellers' right, title and interest in the tangible and intangible
assets used in connection with the conduct of the business or operations of the
Stations, together with any additions thereto between the date of this Agreement
and the Closing Date, but excluding the assets described in Section 2.2, free
and clear of any claims, liabilities, security interests, mortgages, liens,
pledges, charges, or encumbrances of any nature whatsoever (except for Permitted
Encumbrances), including the following:
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(a) The Tangible Personal Property;
(b) The Real Property Interests;
(c) The Licenses;
(d) The Assumed Contracts;
(e) The Intangibles, including the goodwill of the Stations,
if any;
(f) Reserved.
(g) All of Sellers' and the Sinclair Sellers' proprietary
information, technical information and data, machinery and equipment warranties,
maps, computer discs and tapes, plans, diagrams, blueprints and schematics,
including filings with the FCC, in each case to the extent relating to the
business and operation of the Stations;
(h) All choses in action of any of Sellers and any of the
Sinclair Sellers' relating to the Stations to the extent they relate to the
period after the Effective Time; and
(i) All books and records relating to the business or
operations of the Stations, including executed copies of the Assumed Contracts,
and all records required by the FCC to be kept by the Stations.
2.2 Excluded Assets. The Assets shall exclude the following (other than
those Assets listed on Attachment 2 to Schedule 2.2):
(a) All of each of Sellers' and the Sinclair Sellers' cash,
cash equivalents and deposits, all interest payable in connection with any such
items and rights in and to bank accounts, marketable and other securities and
similar investments of Sellers and the Sinclair Sellers;
(b) Any insurance policies, promissory notes, amounts due to
any of Sellers and the Sinclair Sellers from employees, bonds, letters of
credit, certificates of deposit, or other similar items, and any cash surrender
value in regard thereto; provided, that in the event Sellers are obligated to
assign to Buyer the proceeds of any such insurance policy or to cause the
assignment of such proceeds at the time a Closing occurs under Section 6.3, such
proceeds shall be included in the Assets;
(c) Any pension, profit-sharing, or employee benefit plans,
including all of Sellers' and the Sinclair Sellers' interests in any Welfare
Plan, Pension Plan or Benefit Arrangement (each as defined in Section 3.14(a));
(d) All Tangible Personal Property disposed of or consumed in
the ordinary course of business as permitted by this Agreement;
(e) All Tax Returns and supporting materials, all original
financial statements and supporting materials, all books and records that
Sellers and the Sinclair Sellers are required by law to retain, all of Sellers'
and the Sinclair Sellers' organizational documents, corporate books and records
(including minute books and stock ledgers) and originals of account books of
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<PAGE> 15
original entry, all records of Sellers and the Sinclair Sellers relating to the
sale of the Assets and all records and documents related to any assets excluded
pursuant to this Section 2.2;
(f) Any interest in and to any refunds of federal, state, or
local franchise, income, or other taxes for periods (or portions thereof) ending
on or prior to the Closing Date;
(g) All Accounts Receivable;
(h) All rights and claims of Sellers and the Sinclair Sellers
whether mature, contingent or otherwise, against third parties relating to the
Assets of the Stations, whether in tort, contract or otherwise, other than
rights and claims against third parties relating to the Assets which have as
their basis loss, damage or impairment of or to any of the Assets and which
loss, damage or impairment has not been restored or repaired prior to the
Closing in which any of the Assets which has been so damaged or impaired is
being acquired by Buyer (or in the case of a lost asset, that would have been
acquired but for such loss);
(i) Any Contracts which are not Assumed Contracts;
(j) All of each of Sellers' and the Sinclair Sellers' deposits
and prepaid expenses; provided, any deposits and prepaid expenses shall be
included in the Assets to the extent that Sellers or the Sinclair Sellers
receive a credit therefor in the proration of the Purchase Price pursuant to
Section 2.3(b);
(k) All rights of Sellers under or pursuant to this Agreement
(or any other agreements contemplated hereby);
(l) All rights to the names "Entercom" "Entercom
Communications," "Sinclair Communications," "Sinclair Broadcast Group,"
"Sinclair," and any logo or variation thereof and goodwill associated therewith;
(m) The Excluded Real Property;
(n) The Excluded Real Property Interests;
(o) The Excluded Tangible Personal Property;
(p) All assets owned by the Sinclair Sellers and used in
connection with any television or radio broadcast stations owned and/or
programmed by any of the Sinclair Sellers or Sinclair Sellers have the right to
acquire other than the Stations, including (without limitation) all assets
related to Sellers' operation and ownership of the Interstate Road Network and
the Road Gang Coast to Coast Network; KPNT-FM, St. Genevieve, MO; WVRV-FM, East
St. Louis, IL; WIL-FM, St. Louis, MO; WRTH-AM, St. Louis, MO; KIHT-FM, St.
Louis, MO; KXOK-FM, St. Louis, MO; KUPN-AM, Mission, KS.
(q) All shares of capital stock, partnership interests,
interests in limited liability companies or other equity interest, including,
but not limited to, any options, warrants or voting trusts relating thereto
which are owned by Sellers or the Sinclair Sellers and not expressly specified
in Section 2.1.
2.3 Purchase Price.
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2.4 (a) Initial Purchase Price. The purchase price of the Assets shall
be One Hundred and Thirteen Million U.S. Dollars ($113,000,000) (the "INITIAL
PURCHASE PRICE"), adjusted as provided below (the "PURCHASE PRICE"). The
Purchase Price shall be paid at Closing.
(b) Prorations. The Purchase Price shall be increased or
decreased as required to effectuate the proration of revenues and expenses, as
set forth below. All revenues and all expenses arising from the operation of the
Stations, including tower rental, business and license fees, utility charges,
real property and personal property and other similar Taxes and assessments
levied against or with respect to the Assets, property and equipment rentals,
applicable copyright or other fees, sales and service charges, payments due
under film or programming license agreements, and employee compensation,
including wages (including bonuses which constitute wages), salaries, accrued
sick leave and related Taxes shall be prorated between Buyer and Sellers as to
the Stations at Closing in accordance with the principle that Sellers shall
receive all revenues and shall be responsible for all expenses, costs and
liabilities allocable to the operations of the Stations for the period prior to
the Effective Time of Closing, and Buyer shall receive all revenues and shall be
responsible for all expenses, costs and obligations allocable to the operations
of the Stations for the period after the Effective Time of Closing, subject to
the following:
(i) There shall be no adjustment for, and Sellers
shall remain solely liable with respect to, any Contracts not included
in the Assumed Contracts and any other obligation or liability not
being assumed by Buyer in accordance with Section 2.2. An adjustment
and proration shall be made in favor of Buyer to the extent that Buyer
assumes any liability under any Assumed Contract to refund (or to
credit against payments otherwise due) any security deposit or similar
prepayment paid to Sellers by any lessee or other third party. An
adjustment and proration shall be made in favor of Sellers to the
extent Buyer receives the right to receive a refund (or to a credit
against payments otherwise due) under any Assumed Contract to any
security deposit or similar pre-payment paid by or on behalf of
Sellers.
(ii) An adjustment and proration shall be made in
favor of Sellers for the amount, if any, by which the fair market value
of the goods or services to be received by the Stations under its trade
or barter agreements as of the Effective Time exceeds by more than
Fifty Thousand Dollars ($50,000) the fair market value of any
advertising time remaining to be run by the Stations as of the
Effective Time. An adjustment and proration shall be made in favor of
Buyer to the extent that the amount of any advertising time remaining
to be run by the Stations under its trade or barter agreements as of
the Effective Time exceeds by more than Fifty Thousand Dollars
($50,000) the fair market value of the goods or services to be received
by the Stations as of the Effective Time.
(iii) There shall be no proration for program barter.
(iv) Reserved.
(v) An adjustment and proration shall be made in
favor of Sellers for the amount, if any, of prepaid expense, the
benefit of which accrues to Buyer hereunder, and other current assets
acquired by Buyer hereunder which are paid by Sellers to the extent
such prepaid expenses and other current assets relate to the period
after the Effective Time.
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(vi) There shall be no proration for any payment(s)
made by Interep to any of the Sellers in connection with obtaining the
right to serve as the national sales representative of any of the
Stations.
(c) Manner of Determining Adjustments. The Purchase Price, taking
into account the adjustments and prorations pursuant to Section 2.3(b), will be
determined in accordance with the following procedures:
(i) Sellers shall prepare and deliver to Buyer not
later than five (5) days before the Closing Date a preliminary
settlement statement which shall set forth Sellers' good faith estimate
of the adjustments to the Purchase Price under Section 2.3(b). The
preliminary settlement statement shall (A) contain all information
reasonably necessary to determine the adjustments to the Purchase Price
under Section 2.3(b) as to the Stations, to the extent such adjustments
can be determined or estimated as of the date of the preliminary
settlement statement, and such other information as may be reasonably
requested by Buyer, and (B) be certified by Sellers to be true and
complete to Sellers' Knowledge as of the date thereof.
(ii) Not later than ninety (90) days after the
Closing Date, Buyer will deliver to Sellers a statement setting forth
Buyer's determination of the Purchase Price and the calculation thereof
pursuant to Section 2.3(b) as to the Stations. Buyer's statement (A)
shall contain all information reasonably necessary to determine the
adjustments to the Purchase Price under Section 2.3(b), and such other
information as may be reasonably requested by Sellers, and (B) shall be
certified by Buyer to be true and complete to Buyer's knowledge as of
the date thereof. If Sellers dispute the amount of such Purchase Price
determined by Buyer, they shall deliver to Buyer within thirty (30)
days after receipt of Buyer's statement a statement setting forth their
determination of the amount of such Purchase Price. If Sellers notify
Buyer of its acceptance of Buyer's statement, or if Sellers fail to
deliver their statement within the thirty (30)-day period specified in
the preceding sentence, Buyer's determination of the Purchase Price
shall be conclusive and binding on the parties as of the last day of
the thirty (30)-day period.
(iii) Buyer and Sellers shall use good faith efforts
to resolve any dispute involving the determination of the Purchase
Price paid by Buyer at the Closing. If the parties are unable to
resolve the dispute within forty-five (45) days following the delivery
of all of Buyer's statements to be provided pursuant to Section
2.3(c)(ii) after the Closing, Buyer and Sellers shall jointly designate
an independent certified public accounting firm of national standing
which has not regularly provided services to either the Buyer or
Sellers in the last three (3) years, who shall be knowledgeable and
experienced in the operation of radio broadcasting stations, to resolve
the dispute. If the parties are unable to agree on the designation of
an independent certified public accounting firm, the selection of the
accounting firm to resolve the dispute shall be submitted to
arbitration to be held in Philadelphia, Pennsylvania, in accordance
with the commercial arbitration rules of the American Arbitration
Association. The accounting firm's resolution of the dispute shall be
final and binding on the parties, and a judgment may be entered thereon
in any court of competent jurisdiction. Any fees of this accounting
firm, and, if necessary, for arbitration to select such accountant,
shall be divided equally between the parties.
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(iv) Buyer acknowledges that prorations pursuant to
both clauses (i) and (ii) above with respect to revenues and expenses
in connection with the operations of KCFX-FM may, at the Sellers'
election, in whole or part, be made between Buyer and the Sinclair
Sellers, with an appropriate increase or decrease in the Purchase
Price; provided, however, that in the event of a dispute between Buyer
and the Sinclair Sellers concerning the adjustments to the Purchase
Price and the calculation thereof pursuant to Section 2.3(b), Buyer
shall settle any such dispute directly with Sellers in accordance with
Section 2.3 (c)(iii).
2.5 Payment of Purchase.
(a) Payment of Estimated Purchase Price At Closing. The
Initial Purchase Price, adjusted by the estimated adjustments pursuant to
Section 2.3(b) as set forth in Sellers' preliminary settlement statement
pursuant to Section 2.3(c)(i), is referred to as the "Estimated Purchase Price."
At the Closing, Buyer shall pay or cause to be paid to Sellers the Estimated
Purchase Price for the Stations, by federal wire transfer of same-day funds
pursuant to wire transfer instructions, which instructions shall be delivered to
Buyer by Sellers at least two (2) business days prior to the Closing Date.
(b) Return of Escrow Deposit at Closing. Buyer and Sellers
shall cause the Escrow Deposit to be returned to Buyer at Closing.
(c) Payments to Reflect Adjustments. The Purchase Price as
finally determined pursuant to Section 2.3(c) shall be paid as follows:
(i) If the Purchase Price as finally determined
pursuant to Section 2.3(c) exceeds the Estimated Purchase Price, Buyer
shall pay to Sellers, in immediately available funds within five (5)
business days after the date on which the Purchase Price is determined
pursuant to Section 2.3(c), the difference between the Purchase Price
and the Estimated Purchase Price.
(ii) If the Purchase Price as finally determined
pursuant to Section 2.3(c) is less than the Estimated Purchase Price,
Sellers shall pay to Buyer, in immediately available funds within five
(5) business days after the date on which the Purchase Price is
determined pursuant to Section 2.3(c), the difference between the
Purchase Price and the Estimated Purchase Price.
(d) Payment for KCFX-FM.
At Seller's election, which election shall be delivered in
writing to Buyer no later than three days prior to Closing, Buyer shall pay the
portion of the Estimated Purchase Price allocable to KCFX-FM to the Sinclair
Sellers at Closing by wire transfer to an account designated by Sellers in
accordance with Section 2.4(a), and pay to the Sinclair Sellers or receive from
the Sinclair Sellers, as the case may be, adjustments in accordance with Section
2.4(c) to the extent allocable to KCFX-FM.
2.6 Assumption of Liabilities and Obligations. As of the Closing Date,
Buyer shall assume and undertake to pay, discharge and perform all obligations
and liabilities of Sellers (with respect to obligations and liabilities arising
out of the business and operations of KCMO-
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<PAGE> 19
AM and KCMO-FM) and of the Sinclair Sellers (with respect to obligations and
liabilities arising out of the business and operations of KCFX-FM) under the
Licenses, the Assumed Contracts or as otherwise specifically provided for herein
to the extent that either (i) the obligations and liabilities relate to the time
after the Effective Time of the Closing, or (ii) the Purchase Price was reduced
pursuant to Section 2.3(b) as a result of the proration of such obligations and
liabilities. Buyer shall not assume any other obligations or liabilities of
Sellers or the Sinclair Sellers, including (1) any obligations or liabilities
under any Contract not included in the Assumed Contracts, (2) any obligations or
liabilities under the Assumed Contracts relating to the period prior to the
Effective Time of the Closing to which such Assumed Contracts relate, except
insofar as an adjustment therefor is made in favor of Buyer under Section
2.3(b), (3) any claims or pending litigation or proceedings relating to the
operation of the Stations prior to the Closing or (4) any obligations or
liabilities of Sellers or the Sinclair Sellers under any employee pension,
retirement, or other benefit plans.
SECTION 3.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller represents and warrants to Buyer as of the date
hereof and as of the Closing Date (except for representations and warranties
that speak as of a specific date or time, in which case, such representations
and warranties shall be true and complete as of such date or time) as follows:
3.1 Organization and Authority of Sellers. Each Seller is and at
Closing each Sinclair Seller will be a corporation, limited liability company or
limited partnership (as applicable), duly organized, validly existing and in
good standing under the laws of the State listed on Schedule 3.1 next to each
such Seller's or Sinclair Seller's name. Each Seller has and at Closing each
Sinclair Seller will have the requisite corporate power and authority (or other
appropriate power and authority based on the structure of such Seller or
Sinclair Seller) to own, lease and operate its properties, to carry on its
business in the places where such properties are now, or in the case of the
Sinclair Sellers at Closing will be, owned, leased, or operated and such
business is now, or in the case of the Sinclair Sellers at Closing will be,
conducted, and, in the case of the Sellers, to execute, deliver and perform this
Agreement and the documents contemplated hereby according to their respective
terms. Each Seller is and at Closing each Sinclair Seller will be duly qualified
and in good standing in each jurisdiction listed on Schedule 3.1 next to each
such Seller's or Sinclair Seller's name, which are all jurisdictions in which
such qualification is required. Except as set forth on Schedule 3.1, no Seller
is and no Sinclair Seller will be a participant in any joint venture or
partnership with any other Person with respect to any part of the operations of
the Stations or any of the Assets.
3.2 Authorization and Binding Obligation. The execution, delivery and
performance of this Agreement by each Seller have been duly authorized by all
necessary corporate or other required action on the part of each Seller. This
Agreement has been duly executed and delivered by each Seller and constitutes
its legal, valid and binding obligation, enforceable against it in accordance
with its terms except as the enforceability of this Agreement may be affected by
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by judicial discretion in the enforcement of equitable remedies.
3.3 Absence of Conflicting Agreements; Consents. Subject to obtaining
the FCC Consent provided for in Section 6.1, the filings required by
Hart-Scott-Rodino provided for in
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Section 6.2 and the other Consents described in Schedules 3.3 and 3.7, the
execution, delivery and performance by each Seller of this Agreement and the
documents contemplated hereby (with or without the giving of notice, the lapse
of time, or both): (a) do not require the consent of any third party; (b) will
not conflict with any provision of the Articles of Incorporation, Bylaws or
other organizational documents of Sellers; (c) will not conflict with, result in
a breach of, or constitute a default under any applicable law, judgment, order,
ordinance, injunction, decree, rule, regulation, or ruling of any court or
governmental instrumentality; (d) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of, any
material agreement, instrument, license, or permit to which any Seller is a
party or by which any Seller may be bound legally; and (e) will not create any
claim, liability, mortgage, lien, pledge, condition, charge, or encumbrance of
any nature whatsoever upon any of the Assets. Except for the FCC Consent
provided for in Section 6.1, the filings required by Hart-Scott-Rodino provided
for in Section 6.2 and the other Consents described in Schedules 3.3 and 3.7, no
consent, approval, permit, or authorization of, or declaration to, or filing
with any governmental or regulatory authority or any other third party is
required (a) to consummate this Agreement and the transactions contemplated
hereby, or (b) to permit Sellers to transfer and convey the Assets to Buyer.
3.4 Governmental Licenses. Schedule 3.4 includes a true and complete
list of the FCC Licenses. Sellers have made available to Buyer true and complete
copies of the main Licenses (including any amendments and other modifications
thereto). The Licenses have been validly issued, and Kansas City License is the
authorized legal holder of the KCMO FCC Licenses, a list of which is set forth
on Schedule 3.4 together with a list of the KCFX Licenses. The Licenses and the
FCC Licenses listed on Schedule 3.4 comprise all of the material licenses,
permits, and other authorizations required from any governmental or regulatory
authority for the lawful conduct in all material respects of the business and
operations of the Stations in the manner and to the full extent they are now
conducted, and, except as otherwise disclosed on Schedule 3.4, none of the
Licenses is subject to any unusual or special restriction or condition that
could reasonably be expected to limit materially the full operation of the
Stations as now operated. The FCC Licenses are in full force and effect, are
valid for the balance of the current license term applicable generally to radio
stations licensed to the same communities as the Stations, are unimpaired by any
acts or omissions of any Seller or any of its Affiliates, or the employees,
agents, officers, directors, or shareholder of any Seller or any of its
Affiliates (in the case of the KCMO FCC Licenses) and are unimpaired by any acts
or omission of any of the Sinclair Sellers or any of their Affiliates, or the
employees, agents, officers, directors or shareholders of any of the Sinclair
Sellers or any of their Affiliates (in the case of the KCFX Licenses), and are
free and clear of any restrictions which might limit the full operation of the
Stations in the manner and to the full extent as they are now operated (other
than restrictions under the terms of the licenses themselves or applicable to
the radio broadcast industry generally). Except as listed on Schedule 3.4
hereto, there are no applications, proceedings or complaints pending or, to the
Knowledge of any Seller, threatened which may have an adverse effect on the
business or operation of the Stations (other than rulemaking proceedings that
apply to the radio broadcasting industry generally). Except as disclosed on
Schedule 3.4 hereto, no Seller is aware of any reason why any of the FCC
Licenses might not be renewed in the ordinary course for a full term without
material qualifications or of any reason why any of the FCC Licenses might be
revoked. The Stations are in compliance with the Commission's policy on exposure
to radio frequency radiation. No renewal of any FCC License would constitute a
major
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environmental action under the rules of the Commission. To the Knowledge of
Sellers, there are no facts relating to Sellers which, under the Communications
Act of 1934, as amended, or the existing rules of the Commission, would (a)
disqualify any Seller from assigning any of its FCC Licenses to Buyer, (b) cause
the filing of any objection to the assignment of the FCC Licenses to Buyer, (c)
lead to a delay in the processing by the FCC of the applications of the FCC
Licenses to Buyer, (d) lead to a delay in the termination of the waiting period
required by Hart-Scott-Rodino, or (e) disqualify any Seller from consummating
the transactions contemplated herein within the times contemplated herein. An
appropriate public inspection file for each Station is maintained at the
Station's studio in accordance with Commission rules. Access to the Stations'
transmission facilities are restricted in accordance with the policies of the
Commission.
3.5 Real Property. Schedule 3.5 contains a complete description of all
Real Property Interests (including street address, owner, and use thereof) other
than the Excluded Real Property Interests. The Real Property Interests listed on
Schedule 3.5, together with the Real Property Interests which will be created by
the execution of the Lease (as defined herein) by Buyer and the appropriate
Sellers, comprises all interests in real property necessary to conduct the
business and operations of the Stations. Except as described on Schedule 3.5,
Sellers have good fee simple title to all fee estates included in the Real
Property Interests, and Sellers and the Sinclair Sellers collectively have good
title to all other Real Property Interests, in each case free and clear of all
liens, mortgages, pledges, covenants, easements, restrictions, encroachments,
leases, charges, and other claims and encumbrances, except for Permitted
Encumbrances. Each leasehold or subleasehold interest included as a Material
Contract on Schedule 3.5 is legal, valid, binding, enforceable and in full force
and effect. To Sellers' Knowledge, each leasehold or subleasehold designated in
the Real Property Interests, but not designated as Material Contracts on
Schedule 3.5 is legal, binding and enforceable and in full force and effect.
Neither the Seller party thereto (in the case of leases and subleases used in
the operations of KCMO-AM and KCMO-FM), nor the Sinclair Seller party thereto
(in the case of leases and subleases used in the operations of KCFX-FM), or to
Sellers' Knowledge any other party thereto, is in default, violation or breach
under any lease or sublease and no event has occurred and is continuing that
constitutes (with notice or passage of time or both) a default, violation or
breach thereunder. Sellers have not received any notice of a default, offset or
counterclaim under any lease or sublease used in the operation of KCMO-AM and
KCMO-FM. The Sinclair Sellers have not notified Sellers of any default, offset
or counterclaim under any lease or sublease with respect to the Real Property
Interests used in the operation of KCFX-FM. As of the date hereof and as of the
Closing Date, Sellers enjoy peaceful and undisturbed possession of the leased
Real Property Interests used in the operation of KCMO-AM and KCMO-FM. As of the
date hereof and as of the Closing Date, Sinclair Sellers enjoy peaceful and
undisturbed possession of the leased Real Property Interests used in the
operation of KCFX-FM. So long as Sellers and the Sinclair Sellers fulfill their
obligations under the leases for the leased Real Property Interests, those of
the Sellers and Sinclair Sellers which are the parties to such leases have
enforceable rights to nondisturbance and quiet enjoyment against its lessor or
sublessor, and, to the Knowledge of Sellers, except as set forth in Schedule
3.5, no third party holds any interest in the leased premises with the right to
foreclose upon Sellers' leasehold or subleasehold interest. Sellers have legal
and practical access to all of the Owned Real Property and Sellers and the
Sinclair Sellers collectively have legal and practical access to all of the
Leased Real Property, as applicable. Except as otherwise disclosed in Schedule
3.5, all towers, guy anchors, ground radials, and buildings and other
improvements included in the Assets are located entirely on the Owned Real
Property or the Leased Real Property, as applicable, listed in Schedule 3.5. All
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Owned Real Property and Leased Real Property (including the improvements
thereon) (a) is in good condition and repair consistent with its current use,
(b) is available for immediate use in the conduct of the business and operations
of the Stations, and (c) complies in all material respects with all applicable
building or zoning codes (in the case of Owned Real Property and Leased Real
Property used in the operations of KCMO-AM and KCMO-FM) or with all applicable
material building or zoning codes (in the case of Owned Real Property and Leased
Real Property used in the operations of KCFX-FM) and the regulations of any
governmental authority having jurisdiction, except to the extent that the
current use by any of Sellers or the Sinclair Sellers, as the case may be, while
permitted, constitutes or would constitute a "nonconforming use" under current
zoning or land use regulations. No eminent domain or condemnation proceedings
are pending or, to the Knowledge of Sellers, threatened with respect to any Real
Property Interests.
3.6 Tangible Personal Property. Except as described in Schedule 3.6,
Sellers own and have good title to each item of Tangible Personal Property used
in the operations of KCMO-AM and KCMO-FM and the Sinclair Sellers own and have
good title to each item of Tangible Personal Property used in the operations of
KCFX-FM, and none of the Tangible Personal Property owned by such sellers is
subject to any security interest, mortgage, pledge, conditional sales agreement,
or other lien or encumbrance, except for Permitted Encumbrances. With allowance
for normal repairs, maintenance, wear and obsolescence, each material item of
Tangible Personal Property is in good operation condition and repair and is
available for immediate use in the business and operations of the Stations. All
material items of transmitting and studio equipment included in the Tangible
Personal Property (a) have been maintained in a manner consistent with generally
accepted standards of good engineering practice, and (b) will permit the
Stations and any unit auxiliaries thereto to operate in accordance with the
terms of the FCC Licenses and the rules and regulations of the FCC and in all
material respects with all other applicable federal, state and local statutes,
ordinances, rules and regulations.
3.7 Contracts. Schedule 3.7 is a true and complete list of all
Contracts which either (a) have a remaining term (after taking into account any
cancellation rights of Sellers or the Sinclair Sellers) of more than one year
after the date hereof or (b) require expenditures in excess of Twenty Five
Thousand Dollars ($25,000) in any calendar year after the date hereof, except
contracts with advertisers for production or the sale of advertising time on the
Stations for cash that may be canceled by Sellers with respect to KCMO-AM and
KCMO-FM or the Sinclair Sellers with respect to KCFX-FM without penalty on not
more than ninety days' notice. Sellers have delivered or made available to Buyer
true and complete copies of all written Assumed Contracts, and true and complete
descriptions of all oral Assumed Contracts (including any amendments and other
modifications to such Contracts). Other than the Contracts listed on Schedule
3.7, Schedule 3.5, and the Lease, Sellers with respect to the business and
operations of KCMO-AM and KCMO-FM, and the Sinclair Sellers with respect to the
business and operations of KCFX-FM, require no material contract, lease, or
other agreement to enable them to carry on their business in all material
respects. All of the Contracts are in full force and effect and are valid,
binding and enforceable in accordance with their terms except as the
enforceability of such Contracts may be affected by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally and by judicial discretion in
the enforcement of equitable remedies. Neither the Seller party thereto in the
case of KCMO-AM and KCMO-FM nor the Sinclair Seller party thereto in the case of
KCFX-FM or, to the Knowledge of Sellers, any other party thereto, is in default,
violation or breach in any material respect under any Contract and no event has
occurred and is continuing that constitutes (with notice or passage of time or
both) a default, violation, or breach
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in any material respect thereunder. Except as disclosed on Schedule 3.7, other
than in the ordinary course of business, Sellers do not have Knowledge of any
intention by any party to any Contract (a) to terminate such Contract or amend
the terms thereof, (b) to refuse to renew the Contract upon expiration of its
term, or (c) to renew the Contract upon expiration only on terms and conditions
that are more onerous than those now existing. Except for the need to obtain the
Consents listed on Schedule 3.7, the exchange and transfer of the Assets in
accordance with this Agreement will not affect the validity, enforceability, or
continuation of any of the Contracts.
3.8 Intangibles. Sellers have provided or made available to Buyer
copies of all documents establishing or evidencing the Intangibles. Sellers own
or have a valid license to use all of the Intangibles, other than the
Intangibles used in the operation of KCFX-FM, as to which one or more of the
Sinclair Sellers own or have a valid license to use. Other than with respect to
matters generally affecting the radio broadcasting industry and not particular
to Sellers (in the case of KCMO-AM and KCMO-FM), or not particular to the
Sinclair Sellers (in the case of KCFX-FM), and except as set forth on Schedule
3.8, neither Sellers (in the case of KCMO-AM and KCMO-FM) nor the Sinclair
Sellers (in the case of KCFX-FM), have received any notice or demand alleging
that Sellers or the Sinclair Sellers are infringing upon or otherwise acting
adversely to any trademarks, trade names, service marks, service names,
copyrights, patents, patent applications, know-how, methods, or processes owned
by any other Person, and there is no claim or action pending, or to the
Knowledge of Sellers threatened, with respect thereto. To the Knowledge of
Sellers, except as set forth on Schedule 3.8, no other Person is infringing upon
Sellers' or the Sinclair Sellers' rights or ownership interest in the
Intangibles.
3.9 Title to Properties. Except as disclosed in Schedule 3.5 or 3.6,
Sellers, with respect to the assets used in the operations of KCMO-AM and
KCMO-FM, and the Sinclair Sellers, with respect to the assets used in the
operations of KCFX-FM, have good and marketable title to the Assets subject to
no mortgages, pledges, liens, security interests, encumbrances, or other charges
or rights of others of any kind or nature except for Permitted Encumbrances.
3.10 Financial Statements. Sellers have furnished Buyer with true and
complete copies of unaudited financial statements of KCMO-AM and KCMO-FM
containing a balance sheet and statement of income, as at and for the fiscal
year ended December 31, 1999, and an unaudited balance sheet and statement of
income as at and for the four months ended April 30, 2000 (the "KCMO BALANCE
SHEET DATE") (collectively, the "KCMO FINANCIAL STATEMENTS"). Sellers have
furnished Buyer with true and complete copies of unaudited financial statements
of KCFX-FM containing a balance sheet and statement of income, as at and for the
fiscal year ended December 31, 1998, and an unaudited balance sheet and
statement of income as at and for the seven (7) months ended July 31, 1999 (the
"KCFX BALANCE SHEET DATE") (collectively, the "KCFX FINANCIAL STATEMENTS") (the
KCMO Financial Statements and the KCFX Financial Statements, the "FINANCIAL
STATEMENTS"). To the extent the Financial Statements relate to the period of
time during which the Stations were owned by the Sellers (or any Affiliate
thereof) in the case of KCMO-AM and KCMO-FM or the Sinclair Sellers in the case
of KCFX-FM, and the Financial Statements have been prepared from the books and
records of such sellers and have been prepared in a manner consistent with the
audited Financial Statements of such sellers, except for the absence of
footnotes and certain year-end adjustments. The Financial Statements accurately
reflect the books, records and accounts of Sellers (in the case of KCMO-AM and
KCMO-FM), and the Sinclair Sellers (in the case of KCFX-FM), and present fairly
and
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accurately the financial condition of the Stations as at their respective dates
and the results of operations for the periods then ended and none of the
Financial Statements understates in any material respect the normal and
customary costs and expenses of conducting the business or operations of the
Stations in any material respect as currently conducted by Sellers or the
Sinclair Sellers, as the case may be, or otherwise materially inaccurately
reflects the operations of the Stations; provided, that the foregoing
representations are given only to the Sellers' Knowledge to the extent the
Financial Statements relate to a period of time during which the Stations were
not owned by Sellers (or an Affiliate thereof).
3.11 Taxes. Except as set forth in Schedule 3.11, Sellers and the
Sinclair Sellers have filed or caused to be filed all Tax Returns that are
required to be filed with respect to their ownership and operation of the
Stations, and have paid or caused to be paid all Taxes shown on those returns or
on any Tax assessment received by them to the extent that such Taxes have become
due, or have set aside on their books adequate reserves (segregated to the
extent required by generally accepted accounting principles) with respect
thereto. Except as set forth on Schedule 3.11, there are no legal,
administrative, or other Tax proceedings presently pending, and there are no
grounds existing pursuant to which Sellers or the Sinclair Sellers are or could
be made liable for any Taxes, the liability for which could extend to Buyer as
transferee of the business of the Stations.
3.12 Insurance. Schedule 3.12 is a true and complete list of all
insurance policies of or covering Sellers, in respect of the assets used in the
operations of KCMO-AM and KCMO-FM, and the Sinclair Sellers, in respect of the
assets used in the operations of KCFX-FM. All policies of insurance listed in
Schedule 3.12 are in full force and effect as of the date hereof. During the
past three years, no insurance policy of Sellers or the Sinclair Sellers
pertaining to the Stations has been canceled by the insurer and, except as set
forth on Schedule 3.12, no application of Sellers or the Sinclair Sellers for
insurance pertaining to the Stations has been rejected by any insurer.
3.13 Reports. All material returns, reports and statements that Sellers
or the Sinclair Sellers are currently required to file with the FCC or Federal
Aviation Administration pertaining to the Stations have been filed, and all
reporting requirements of the FCC and Federal Aviation Administration have been
complied with in all material respects. All of such returns, reports and
statements, as filed, satisfy all applicable legal requirements.
3.14 Personnel and Employee Benefits.
(a) Employees and Compensation. Schedule 3.14 contains a true
and complete list of all employees of Sellers and the Sinclair Sellers each of
whom Buyer is required to make an offer of employment pursuant to Section 6.10
if the employee remains employed with one of Sellers on the Closing Date. The
salary and bonus, if any, to which each such employee is currently entitled has
been provided to Buyer previously. As of the date of this Agreement, Sellers
have no Knowledge that any General Manager, Sales Manager, or Program Director
employed at the Stations currently plans to terminate employment, whether by
reason of the transactions contemplated by this Agreement or otherwise. Schedule
3.14 also contains a true and complete list of all employee benefit plans or
arrangements covering the employees employed at the Stations (THE "EMPLOYEES")
including, with respect to the Employees any:
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(i) "Employee welfare benefit plan," as defined in
Section 3(1) of ERISA, that is maintained or administered by any of
Sellers or any of the Sinclair Sellers or to which any of Sellers or
any of the Sinclair Sellers contribute or are required to contribute (a
"WELFARE PLAN");
(ii) "Multiemployer pension plan," as defined in
Section 3(37) of ERISA, that is maintained or administered by any of
Sellers or any of the Sinclair Sellers or to which any of Sellers or
any of the Sinclair Sellers contribute or are required to contribute (a
"MULTIEMPLOYER PLAN" and, together with the Welfare Plans, the "BENEFIT
PLANS");
(iii) "Employee pension benefit plan," as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan), to which any
of Sellers or any of the Sinclair Sellers contribute or are required to
contribute (a "PENSION PLAN");
(iv) Employee plan that is maintained in connection
with any trust described in Section 501(c)(9) of the Internal Revenue
Code of 1986, as amended; and
(v) Employment, severance, or other similar contract,
arrangement, or policy and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, or retirement benefits or
arrangement for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights, stock purchases, or other forms of
incentive compensation or post-retirement insurance, compensation, or
benefits that (A) is not a Welfare Plan, Pension Plan, or Multiemployer
Plan, and (B) is entered into, maintained, contributed to, or required
to be contributed to by any Seller or Sinclair Seller or under which
any Seller or Sinclair Seller has any liability relating to Employees,
(collectively, "BENEFIT ARRANGEMENTS").
(b) Pension Plans. None of Sellers and the Sinclair Sellers
sponsor, maintain, or contribute to any Pension Plan other than the Entercom
401(k) Savings and Retirement Plan in the case of Sellers, and the Sinclair
Broadcast Group 401(k) Profit Sharing Plan in the case of the Sinclair Sellers.
Each Pension Plan complies currently and has been maintained in substantial
compliance with its terms and, both as to form and in operation, with all
material requirements prescribed by any and all material statutes, orders, rules
and regulations that are applicable to such plans, including ERISA and the Code,
except where the failure to do so will not have a Material Adverse Effect.
(c) Welfare Plans. Each Welfare Plan complies currently and
has been maintained in substantial compliance with its terms and, both as to
form and in operation, with all material requirements prescribed by any and all
material statutes, orders, rules and regulations that are applicable to such
plans, including ERISA and the Code, except where the failure to do so will not
have a Material Adverse Effect. None of Sellers and the Sinclair Sellers
sponsor, maintain, or contribute to any Welfare Plan that provides health or
death benefits to former employees of the Stations other than as required by
Section 4980B of the Code or other applicable laws.
(d) Benefit Arrangements. Each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the material
requirements prescribed by all
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statutes, orders, rules and regulations that are applicable to such Benefit
Arrangement, except where the failure to do so will not have a Material Adverse
Effect. Except for those employment agreements listed on Schedule 3.7, none of
Sellers and the Sinclair Sellers have any written contract prohibiting the
termination of any Employee.
(e) Multiemployer Plans. Except as disclosed in Schedule 3.14,
none of Sellers and the Sinclair Sellers have at any time been a participant in
any Multiemployer Plan relating to or affecting any of the Employees.
(f) Delivery of Copies of Relevant Documents and Other
Information. Sellers have delivered or made available to Buyer true and complete
copies of each of the following documents:
(i) Each Welfare Plan and Pension Plan (and, if
applicable, related trust agreements) and all amendments thereto, and
written descriptions thereof that have been distributed to Employees,
all annuity contracts or other funding instruments; and
(ii) Each Benefit Arrangement and written
descriptions thereof that have been distributed to Employees and
complete descriptions of any Benefit Arrangement that is not in
writing.
(g) Labor Relations. Except as set forth in Schedule 3.14(g),
no Seller or any Sinclair Seller is a party to or subject to any collective
bargaining agreement or written or oral employment agreement with any Employee.
With respect to the Employees, Sellers and the Sinclair Sellers have complied in
all material respects with all laws, rules and regulations relating to the
employment of labor, including those related to wages, hours, collective
bargaining, occupational safety, discrimination, and the payment of social
security and other payroll related taxes, and have not received any notice
alleging that any Seller or any Sinclair Seller has failed to comply materially
with any such laws, rules, or regulations. Except as set forth on Schedule
3.14(g), no proceedings are pending or, to the Knowledge of Sellers, threatened,
between any Seller or any Sinclair seller and any Employee (singly or
collectively) that relate to the Stations. Except as set forth on Schedule
3.14(g), no labor union or other collective bargaining unit represents or claims
to represent any of the Employees. Except as set forth in Schedule 3.14, to the
Knowledge of Sellers, there is no union campaign being conducted to solicit
cards from any Employees to authorize a union to represent any Employee of any
Seller or any Sinclair Seller or to request a National Labor Relations Board
certification election with respect to any Employees.
3.15 Claims and Legal Actions. Except as disclosed on Schedule 3.15 and
except for any FCC rulemaking proceedings generally affecting the radio
broadcasting industry and not particular to any of Sellers (in the case of
KCMO-AM and KCMO-FM), and the Sinclair Sellers (in the case of KCFX-FM), there
is no claim, legal action, counterclaim, suit, arbitration, or other legal,
administrative, or tax proceeding, nor any order, decree, or judgment, in
progress or pending, or to the Knowledge of Sellers threatened, against or
relating to the Assets, or the business or operations of any of the Stations,
nor does any Seller know of any basis for the same.
3.16 Environmental Compliance.
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(a) Except as disclosed on Schedule 3.16, (x) none of the
Owned Real Property and none of the Tangible Personal Property and, to Sellers'
Knowledge (provided such knowledge qualifier shall not apply to the extent
caused by the Tangible Personal Property), none of the Leased Real Property
contains (i) any asbestos, polychlorinated biphenyls or any PCB contaminated
oil; (ii) any Contaminants; or (iii) any underground storage tanks; (y) no
underground storage tank disclosed on Schedule 3.16 used in the operation of
KCFX-FM has leaked and has not been remediated or in the case of any underground
storage tank used in connection with the operation of KCMO-AM and/or KCMO-FM has
not been remediated in substantial compliance with applicable Environmental
Laws, and no underground storage tank listed on Schedule 3.16 leaks and any such
tank is in substantial compliance with all applicable Environmental Laws; and
(z) all of the Owned Real Property and, to Sellers' Knowledge, all of the Leased
Real Property is in substantial compliance with all applicable Environmental
Laws.
(b) Sellers (with respect to property used in the operations
of KCMO-AM and KCMO-FM) and the Sinclair Sellers (with respect to property used
in the operations of KCFX-FM) have obtained all material permits, licenses and
other authorizations that are required under all Environmental Laws.
3.17 Compliance with Laws. Sellers have complied in all material
respects with the KCMO Licenses, and the Sinclair Sellers have complied in all
material respects with the KCFX Licenses, and the Sellers (with respect to the
business and operations of KCMO-AM and KCMO-FM) and the Sinclair Sellers (with
respect to the business and operations of KCFX-FM) have complied in all material
respects with all material federal, state and local laws, rules, regulations and
ordinances applicable or relating to the ownership and operation of the Assets
and Stations. Neither Sellers nor the Sinclair Sellers have received any notice
of any material violation of federal, state and local laws, regulations and
ordinances applicable or relating to the ownership or operation of the Assets
and the Stations nor, to Sellers' Knowledge, have Sellers or the Sinclair
Sellers received any notice of any immaterial violation of federal, state and
local laws, regulations, and ordinances applicable or relating to the ownership
or operation of the Assets or the Stations.
3.18 Conduct of Business in Ordinary Course. Since the December 31,
1999 balance sheet (in the case of KCMO-AM and KCMO-FM) and the July 31, 1999
balance sheet (in the case of KCFX-FM) and through the date hereof, the business
and operations of the Stations has been conducted in the ordinary course and,
except as disclosed in Schedule 3.18, there has not been:
(a) any material increase in compensation payable or to become
payable to any of its employees other than those in the normal and usual course
of business or in connection with any change in any Employee's responsibilities,
or any bonus payment made or promised to any of its Employees, or any material
change in personnel policies, employee benefits, or other compensation
arrangements affecting its employees;
(b) any sale, assignment, lease, or other transfer of assets
other than in the normal and usual course of business with suitable replacements
being obtained therefor;
(c) any canceled debts owed to or claims held by Sellers (with
respect to the business and operations of KCMO-AM and KCMO-FM), or by the
Sinclair Sellers (with respect to the business and operations of KCFX-FM),
except in the normal and usual course of business;
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(d) any changes in Sellers' accounting practices (with respect
to the business and operations of KCMO-AM and KCMO-FM) or any changes in
Sinclair Sellers' accounting practices (with respect to the business and
operations of KCFX-FM);
(e) any material write-down of the value of any Assets or any
material write-off as uncollectable of any Accounts Receivable; or
(f) transfer or grant of any right under, or any settlement
regarding the breach or infringement of, any license, patent, copyright,
trademark, trade name, franchise, or similar right, or modification of any
existing right, in each case used in the operation of the stations.
3.19 Transactions with Affiliates. Except as disclosed in Schedule 3.19
or with respect to the Excluded Real Property Interests and the Excluded
Tangible Personal Property, no Seller or Sinclair Seller has been involved in
any business arrangement or relationship with any Affiliate, and no Affiliate of
any Seller or any Sinclair Seller owns any property or right, tangible or
intangible, that is material to the operations of the business of the Stations.
3.20 Broker. Except as disclosed on Schedule 3.20, no Seller nor any
Person acting on their behalf has incurred any liability for any finders' or
brokers' fees or commissions in connection with the transactions contemplated by
this Agreement, and Buyer shall have no liability for any finders' or brokers'
fees or commissions in connection with the transactions contemplated by this
Agreement or for any broker listed on Schedule 3.20.
3.21 Insolvency Proceedings. None of the Sellers or the Sinclair
Sellers nor any of the Assets are the subject of any pending or threatened
insolvency proceedings of any character, including, without limitation,
bankruptcy, receivership, reorganization, composition or arrangement with
creditors, voluntary or involuntary. No Seller and no Sinclair Seller has made
an assignment for the benefit of creditors or taken any action in contemplation
of or which would constitute a valid basis for the institution of any such
insolvency proceedings. No Seller and no Sinclair Seller is insolvent nor will
it become insolvent as a result of entering into or performing this Agreement.
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as of the date hereof
and as of the Closing Date (except for representations and warranties that speak
as of a specific date or time, in which case, such representations and
warranties shall be true and complete as of such date and time) as follows:
4.1 Organization, Standing and Authority. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Pennsylvania
and has the requisite corporate power and authority to execute, deliver and
perform this Agreement and the documents contemplated hereby according to their
respective terms and to own the Assets. Prior to the Closing Date, Buyer will be
qualified to do business in each of the States in which any of the Stations are
located.
4.2 Authorization and Binding Obligation. The execution, delivery and
performance of this Agreement by Buyer have been duly authorized by all
necessary action on the part of
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Buyer. This Agreement has been duly executed and delivered by Buyer and
constitutes a legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms except as the enforceability of this
Agreement may be affected by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by judicial discretion in the enforcement of
equitable remedies.
4.3 Absence of Conflicting Agreements and Required Consents. Subject to
the receipt of the Consents, the execution, delivery and performance by Buyer of
this Agreement and the documents contemplated hereby (with or without the giving
of notice, the lapse of time, or both): (a) do not require the consent of any
third party; (b) will not conflict with the Articles of Incorporation or Bylaws
of Buyer; (c) will not conflict with, result in a breach of, or constitute a
default under, any applicable law, judgment, order, ordinance, injunction,
decree, rule, regulation, or ruling of any court or governmental
instrumentality; and (d) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of, any
agreement, instrument, license or permit to which Buyer is a party or by which
Buyer may be bound. Except for the FCC Consent provided for in Section 6.1. the
filings required by Hart-Scott-Rodino provided for in Section 6.2 and the other
Consents described in Schedule 4.3, no consent, approval, permit, or
authorization of, or declaration to, or filing with any governmental or
regulatory authority or any other third party is required (a) to consummate this
Agreement and the transactions contemplated hereby, or (b) to permit Buyer to
acquire the Assets from Sellers and the Sinclair Sellers or to assume certain
liabilities and obligations of Sellers and the Sinclair Sellers in accordance
with Section 2.5.
4.4 Brokers. Neither Buyer nor any person or entity acting on its
behalf has incurred any liability for any finders' or brokers' fees or
commissions in connection with the transactions contemplated by this Agreement.
4.5 Availability of Funds. Buyer will have available on the Closing
Date sufficient funds to enable it to consummate the transactions contemplated
hereby.
4.6 Qualifications of Buyer. Except as disclosed in Schedule 4.6, Buyer
is, and pending Closing will remain legally, financially and otherwise qualified
under the Communications Act, Hart-Scott-Rodino and all rules, regulations and
policies of the FCC, the Department of Justice, the Federal Trade Commission
(the "FTC") and any other governmental agency, to acquire and operate the
Stations. Except as disclosed in Schedule 4.6, there are no facts or proceedings
which would reasonably be expected to disqualify Buyer under the Communications
Act or Hart-Scott-Rodino or otherwise from acquiring or operating the Stations
or would cause the FCC not to approve the assignment of the FCC Licenses to
Buyer or the Department of Justice and the FTC not to allow the waiting period
under Hart-Scott-Rodino to terminate within 30 days of the filing provided for
in Section 6.2. Except as disclosed in Schedule 4.6, Buyer has no knowledge of
any fact or circumstance relating to Buyer or any of Buyer's Affiliates that
would reasonably be expected to (a) cause the filing of any objection to the
assignment of the FCC Licenses to Buyer, (b) lead to a delay in the processing
by the FCC of the applications for such assignment or (c) lead to a delay in the
termination of the waiting period required by Hart-Scott-Rodino. Except as
disclosed in Schedule 4.6, no waiver of any FCC rule or policy is necessary to
be obtained for the grant of the applications for the assignment of the FCC
Licenses to Buyer, nor will processing pursuant to any exception or rule of
general
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applicability be requested or required in connection with the consummation of
the transactions herein.
4.7 WARN Act. Buyer 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 Notification Act of 1988, as amended, or any similar
state law.
4.8 Buyer's Defined Contribution Plan. Schedule 4.8 completely and
accurately lists all Buyer's defined contribution plan or plans (the "BUYER'S
PLAN") intended to be qualified under Section 401(a) and 401(k) of the Code in
which the Transferred Employees will be eligible to participate. Buyer has a
currently applicable determination letter from the Internal Revenue Service with
respect to each of the Buyer's Plans other than Buyer's Employee Stock Ownership
Plan as to which Buyer will obtain an applicable determination letter from the
Internal Revenue Service as soon as reasonably possible.
SECTION 5.
OPERATION OF THE STATIONS PRIOR TO CLOSING
Sellers covenant and agree that between the date hereof and
the Closing Date, Sellers (with respect to the operations of KCMO-AM and
KCMO-FM), and the Sinclair Sellers (with respect to the operations of KCFX-FM),
will operate the Stations in the ordinary course in accordance with such
sellers' past practices (except where such conduct would conflict with the
following covenants or with other obligations of Sellers under this Agreement or
the Sinclair Sellers under the Entercom/Sinclair Contract, as the case may be),
and, except as contemplated by this Agreement or with the prior written consent
of Buyer (such consent not to be unreasonably withheld), Sellers (with respect
to KCMO-AM and KCMO-FM) and the Sinclair Sellers (with respect to KCFX-FM) will
act in accordance with the following insofar as such actions relate to the
Stations:
5.1 Contracts. Sellers (with respect to any Contract pertaining to the
business and operations of KCMO-AM and KCMO-FM) and the Sinclair Sellers (with
respect to any Contract pertaining to the business and operations of KCFX-FM)
will not renew, extend, amend or terminate, or waive any material right under,
any Material Contract, or enter into any contract or commitment or incur any
obligation (including obligations relating to the borrowing of money or the
guaranteeing of indebtedness and obligations arising from the amendment of any
existing Contract, regardless of whether such Contract is a Material Contract)
that will be assumed by or be otherwise binding on Buyer after Closing, except
for (a) cash time sales agreements and production agreements made in the
ordinary course of business consistent with such seller's past practices, (b)
the renewal or extension of any existing Contract (other than network
affiliation agreements) on its existing terms in the ordinary course of
business, and (c) other contracts (other than network affiliation agreements, or
time brokerage or local marketing arrangements) entered into in the ordinary
course of business consistent with such sellers' past practices that do not
involve consideration, in the aggregate, in excess of Fifty Thousand Dollars
($50,000) measured at Closing. Prior to the Closing Date, Sellers shall deliver
to Buyer a list of all material Contracts entered into between the date of this
Agreement and the Closing Date and shall make available to Buyer copies of such
Contracts.
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5.2 Compensation. Sellers (with respect to employees employed at
KCMO-AM and KCMO-FM), and the Sinclair Sellers (with respect to employees
employed at KCFX-FM), shall not materially increase the compensation, bonuses,
or other benefits payable or to be payable to any such person employed in
connection with the conduct of the business or operations of the respective
Stations, except in accordance with past practices, as required by an employment
agreement or consulting agreement or in connection and commensurate with the
change in responsibility of any such employee.
5.3 Encumbrances. Sellers (with respect to the assets used in the
operations of KCMO-AM and KCMO-FM), and the Sinclair Sellers (with respect to
the assets used in the operations of KCFX-FM), will not create, assume, or
permit to exist any mortgage, pledge, lien, or other charge or encumbrance
affecting any of the Assets, except for (a) liens disclosed in Schedule 5.3, (b)
liens that will be removed prior to the Closing Date, and (c) Permitted
Encumbrances.
5.4 Dispositions. Sellers (with respect to the assets used in the
operations of KCMO-AM and KCMO-FM) and the Sinclair Sellers (with respect to the
assets used in the operations of KCFX-FM) will not sell, assign, lease, or
otherwise transfer or dispose of any of the Assets except (a) Assets that are no
longer used in the operations of the Stations, (b) Assets that are replaced with
Assets of equivalent kind and value that are acquired after the date of this
Agreement, and (c) any intercompany accounts receivable.
5.5 Access to Information. Upon prior reasonable notice by Buyer,
Sellers will give, and will use their reasonable best efforts to cause the
Sinclair Sellers to give, to Buyer and its investors, lenders, counsel,
accountants, engineers and other authorized representatives, reasonable access
to the Stations and all books, records and documents of Sellers (in the case of
KCMO-AM and KCMO-FM) and the Sinclair Sellers (in the case of KCFX-FM) which are
material to the business and operation of the Stations and will furnish or cause
to be furnished to Buyer and its authorized representatives all information that
they reasonably request (including any financial reports and operations reports
produced with respect to the Stations).
5.6 Insurance. Sellers or their Affiliates shall maintain in full force
and effect policies of insurance of the same type, character and coverage as the
policies currently carried with respect to the business, operations and assets
of KCMO-AM and KCMO-FM. The Sinclair Sellers or their Affiliates shall maintain
in full force and effect policies of insurance of the same type, character and
coverage as the policies currently carried with respect to the business,
operations and assets of KCFX-FM.
5.7 Licenses. The Sellers (with regard to the KCMO Licenses listed on
Schedule 3.4) and the Sinclair Sellers (with regard to the KCFX Licenses listed
on Schedule 3.4) shall not cause or permit, by any act or failure to act, any
such licenses to expire or to be revoked, suspended or modified, or take any
action that could reasonably be expected to cause the FCC or any other
governmental authority to institute proceedings for the suspension, revocation
or material adverse modification of any of the Licenses. Sellers (with respect
to applications concerning KCMO-AM and KCMO-FM) and the Sinclair Sellers (with
respect to applications concerning of KCFX-FM) shall prosecute with due
diligence any applications to any governmental authority necessary for the
operation of the Stations.
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5.8 Obligations. Sellers (with respect to obligations arising out of
the business and operations of KCMO-AM and KCMO-FM) and the Sinclair Sellers
(with respect to obligations arising out of the business and operations of
KCFX-FM) shall pay all their obligations insofar as they relate to the Stations
as they become due, consistent with past practices.
5.9 No Inconsistent Action. Sellers shall not take any action that is
inconsistent with their obligations under this Agreement in any material respect
or that could reasonably be expected to hinder or delay the consummation of the
transactions contemplated by this Agreement. Neither Sellers nor any of their
respective representatives or agents shall, directly or indirectly, solicit,
initiate, or participate in any way in discussions or negotiations with, or
provide any confidential information to, any Person (other than Buyer or any
Affiliate or associate of Buyer, or the Sinclair Sellers or any affiliate or
associate of the Sinclair Sellers and their respective representatives and
agents) concerning any possible disposition of the Stations, the sale of any
material assets of the Stations, or any similar transaction.
5.10 Maintenance of Assets. Sellers (with respect to those of the
Assets used in the operations of KCMO-AM and KCMO-FM) and the Sinclair Sellers
(with respect to those of the Assets used in the operations of KCFX-FM) shall
maintain the Assets in good condition (ordinary wear, tear and casualty
excepted), consistent with their overall condition on the date of this
Agreement, and use, operate and maintain the Assets in a reasonable manner.
Sellers (with respect to KCMO-AM and KCMO-FM) and the Sinclair Sellers (with
respect to KCFX-FM) shall maintain inventories of spare parts and expendable
supplies at levels consistent with past practices. If any insured or indemnified
loss, damage, impairment, confiscation, or condemnation of or to any of the
Assets occurs, Sellers (with respect to the assets used in the operations of
KCMO-AM and KCMO-FM) and the Sinclair Sellers (with respect to the assets used
in the operations of KCFX-FM) shall repair, replace, or restore the Assets to
their prior condition as represented in this Agreement as soon thereafter as
possible, and Sellers (with respect to the assets used in the operations of
KCMO-AM and KCMO-FM) and the Sinclair Sellers (with respect to the assets used
in the operations of KCFX-FM) shall use the proceeds of any claim under any
property damage insurance policy or other recovery solely to repair, replace, or
restore any of the Assets that are lost, damaged, impaired, or destroyed.
5.11 Consents.
(a) Subject to Section 6.5 hereof, Sellers shall use their
reasonable efforts to obtain all Consents described in Section 3.3, without any
adverse change in the terms or conditions of any Assumed Contract or License.
Sellers shall promptly advise Buyer of any difficulties experienced in obtaining
any of the Consents and of any conditions proposed, considered or requested for
any of the Consents.
(b) Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign or
transfer any Contract or any claim, right or benefit arising thereunder or
resulting therefrom, if an attempted assignment or transfer thereof, without the
consent of a third party thereto would constitute a breach thereof or in any way
adversely affect the rights of the Buyer thereunder. If such consent (a
"DEFERRED CONSENT") is not obtained, or if an attempted assignment or transfer
thereof would be ineffective or would affect the rights thereunder so that the
Buyer would not receive all such rights, then (i) the Seller and the Buyer will
cooperate, in all reasonable respects, to obtain such Deferred Consents as soon
as practicable; provided that Sellers shall have no obligation (y) to expend
funds to obtain
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any Deferred Consent, other than ministerial processing fees, and Sellers'
out-of-pocket expenses to its attorney or other agents incurred in connection
with obtaining any Deferred Consent, or (z) to agree to any adverse change in
any License or Assumed Contract in order to obtain a Deferred Consent, and (ii)
until such Deferred Consent is obtained, the Seller and the Buyer will cooperate
in all reasonable respects, to provide to the Buyer the benefits under the
Contract, to which such Deferred Consent relates (with the Buyer responsible for
all the liabilities and obligations thereunder). In particular, in the event
that any such Deferred Consent is not obtained prior to Closing, then the Buyer
and the Seller shall enter into such arrangements (including subleasing or
subcontracting if permitted) to provide to the parties the economic and
operational equivalent of obtaining such Deferred Consent and assigning or
transferring such Contract, including enforcement for the benefit of the Buyer
of all claims or rights arising thereunder, and the performance by the Buyer of
the obligations thereunder on a prompt and punctual basis.
5.12 Books and Records. Sellers (with respect to the books and records
of KCMO-AM and KCMO-FM) and the Sinclair Sellers (with respect to the books and
records of KCFX-FM) shall maintain such books and records in accordance with
past practices.
5.13 Notification. Sellers shall promptly notify Buyer in writing of
any material developments with respect to the business or operations of the
Stations and of any material change in any of the information contained in the
representations and warranties contained in Section 3 of this Agreement.
5.14 Financial Information. Sellers shall furnish Buyer with sales
pacing reports for the Stations on a weekly basis and shall furnish to Buyer
within thirty (30) days after the end of each month ending between the date of
this Agreement and the Closing Date a statement of income and expense for the
month just ended and such other financial information (including information on
payables and receivables) as Buyer may reasonably request. All financial
information delivered by Sellers to Buyer pursuant to this Section 5.14 shall be
prepared from the books and records of Sellers (with respect to the business and
operations of KCMO-AM and KCMO-FM) or the Sinclair Sellers (with respect to the
business and operations of KCFX-FM) in accordance with generally accepted
accounting principles, consistently applied, shall accurately reflect the books,
records and accounts of the Stations, shall be complete and correct in all
material respects, and shall present fairly the financial condition of the
Stations as at their respective dates and the results of operations for the
periods then ended.
5.15 Compliance with Laws. Sellers (with respect to the business and
operations of KCMO-AM and KCMO-FM) shall comply in all material respects with
all laws, rules and regulations and the Sinclair Sellers (with respect to the
business and operations of KCFX-FM) shall comply in all material respects with
all material laws, rules and regulations.
5.16 Programming. Sellers (with respect to the programming of KCMO-AM
and KCMO-FM) and the Sinclair Sellers (with respect to the programming of
KCFX-FM) shall not make any material changes in the Stations' formats, except
such changes as in the good faith judgment of such sellers are required by the
public interest.
5.17 Preservation of Business. Sellers (with respect to KCMO-AM and
KCMO-FM) and the Sinclair Sellers (with respect to KCFX-FM) shall use
commercially reasonable efforts consistent with past practices to preserve the
business and organization of the Stations and to
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keep available to the Stations its present employees and to preserve the
audience of the Stations and the Stations' present relationships with suppliers,
advertisers, and others having business relations with it.
5.18 Normal Operations. Subject to the terms and conditions of this
Agreement (including, without limitation, Section 5.1), prior to the Closing,
Sellers (with respect to KCMO-AM and KCMO-FM) and the Sinclair Sellers (with
respect to KCFX-FM) shall carry on the business and activities of the Stations,
including, without limitation, promotional activities, the sale of advertising
time, entering into other contracts and agreements, purchasing and scheduling
programming, performing research, and operating in all material respects in
accordance with existing budgets and past practice and will not enter into trade
and barter obligations except in the ordinary course of business consistent with
past practice.
SECTION 6.
SPECIAL COVENANTS AND AGREEMENTS
6.1 FCC Consent.
(a) The exchange and transfer of the Assets as contemplated by
this Agreement is subject to the prior consent and approval of the FCC.
(b) Kansas City License and Buyer shall prepare and within
seven (7) business days after the date of this Agreement shall file with the FCC
an appropriate application for FCC Consent. The parties shall thereafter
prosecute the application with all reasonable diligence and otherwise use their
respective best efforts to obtain a grant of the application as expeditiously as
practicable. Each party agrees to comply with any condition imposed on it by the
FCC Consent, except that no party shall be required to comply with a condition
if (i) the condition was imposed on it as the result of a circumstance the
existence of which does not constitute a breach by that party of any of its
representations, warranties or covenants hereunder, and (ii) compliance with the
condition would have a material adverse effect upon it. Buyer and Kansas City
License shall oppose any petitions to deny or other objections filed with
respect to the application for the FCC Consent and any requests for
reconsideration or judicial review of the FCC Consent.
(c) If the Closing shall not have occurred for any reason
within the original effective period of the FCC Consent, and neither party shall
have terminated this Agreement under Section 9, the parties shall jointly
request an extension of the effective period of the FCC Consent, as the case may
be. No extension of the effective period of the FCC Consent shall limit the
exercise by either party of its right to terminate the Agreement under Section
9.
6.2 Hart-Scott-Rodino. As soon as reasonably possible, but in any event
no later than ten (10) business days following the execution of this Agreement,
Sellers and Buyer shall complete any filing that may be required pursuant to
Hart-Scott-Rodino (each an "HSR FILING"). Sellers and Buyer shall diligently
take, or fully cooperate in the taking of, all necessary and proper steps, and
provide any additional information reasonably requested in order to comply with,
the requirements of Hart-Scott-Rodino.
6.3 Risk of Loss. The risk of any loss, damage, impairment,
confiscation, or condemnation of any of the Assets of Sellers for any cause
whatsoever shall be borne by Sellers
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at all times prior to the Closing. In the event of loss or damage prior to the
Closing Date, Sellers shall use commercially reasonable efforts to fix, restore,
or replace such loss, damage, impairment, confiscation, or condemnation to its
former operational condition. If Sellers have adequate replacement cost
insurance, Buyer may elect to have Sellers assign such insurance proceeds to
Buyer, in which case, Buyer shall proceed with the Closing, and receive at the
Closing the insurance proceeds or an assignment of the right to receive such
insurance proceeds, as applicable, to which Sellers otherwise would be entitled,
whereupon Sellers shall have no further liability to Buyer for such loss or
damage.
6.4 Confidentiality. Except as necessary for the consummation of the
transaction contemplated by this Agreement, including Buyer's obtaining of
financing related hereto, and except as and to the extent required by law, each
party will keep confidential any information obtained from the other party in
connection with the transactions specifically contemplated by this Agreement. If
this Agreement is terminated, each party will return to the other party all
information obtained by the such party from the other party in connection with
the transactions contemplated by this Agreement.
6.5 Cooperation. Buyer and Sellers shall reasonably cooperate with each
other and their respective counsel and accountants in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and in connection with any litigation after the Closing Date which
relate to the Stations for periods prior to the applicable Effective Time, Buyer
and Sellers shall execute such other documents as may be reasonably necessary
and desirable to the implementation and consummation of this Agreement, and
otherwise use their commercially reasonable efforts to consummate the
transaction contemplated hereby and to fulfill their obligations under this
Agreement. Notwithstanding the foregoing, Sellers shall have no obligation (a)
to expend funds to obtain any of the Consents, other than ministerial processing
fees, and Sellers' out-of-pocket expenses to its attorney or other agents
incurred in connection with obtaining such consents, or (b) to agree to any
adverse change in any License or Assumed Contract in order to obtain a Consent
required with respect thereto.
6.6 Control of the Stations. Prior to the Closing, Buyer shall not,
directly or indirectly, control, supervise or direct, or attempt to control,
supervise or direct, the operations of the Stations; those operations, including
complete control and supervision of all of each Stations' programs, employees
and policies, shall be the sole responsibility of Seller.
6.7 Accounts Receivable.
(a) As soon as practicable after the Closing Date, Sellers
shall deliver or cause to be delivered to Buyer a complete and detailed list of
all the Accounts Receivable for KCFX-FM (the "KCFX-FM ACCOUNTS RECEIVABLE").
During the period beginning on the Closing Date and ending on the last day of
the sixth full calendar month beginning after the Closing Date (the "COLLECTION
PERIOD"), Buyer shall use commercially reasonable efforts, as Sellers' agent, to
collect the KCFX-FM Accounts Receivable in the usual and ordinary course of
business, using the KCFX-FM credit, sales and other appropriate personnel in
accordance with customary practices, which may include referral to a collection
agency. Notwithstanding the foregoing, Buyer shall not be required to institute
legal proceedings on Sellers' behalf to enforce the collection of any for
KCFX-FM Accounts Receivable. Buyer shall not adjust any for KCFX-FM Accounts
Receivable or grant credit without Sellers' written consent, and Buyer shall not
pledge, secure or otherwise encumber such for KCFX-FM Accounts Receivable or the
proceeds
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therefrom. On or before the twelfth business day after the end of each calendar
month during the Collection Period, Buyer shall remit to Sellers collections
received by Buyer with respect to the KCFX-FM Accounts Receivable, together with
a report of all amounts collected with respect to the for KCFX-FM Accounts
Receivable during, as the case may be, the period from the Closing or the
beginning of such month through the end of such month, less any sales
commissions or collection costs paid by Buyer during the respective periods with
respect to those for KCFX-FM Accounts Receivable.
(b) Any payments received by Buyer during the Collection
Period from any Person that is an account debtor with respect to any account
disclosed in the list of for KCFX-FM Accounts Receivable delivered by Sellers to
Buyer shall be applied first to the invoice designated by the account debtor
and, if none, such payment shall be applied to the oldest account which is not
disputed. Buyer shall incur no liability to Sellers for any uncollected account,
other than as a result of Buyer's breach of its obligations under this Section
6.7. Prior to the end of the third full calendar month after the Closing,
neither Sellers nor any agent of Sellers shall make any direct solicitation of
the account debtors for payment. After the end of the third full calendar month
after the Closing, Sellers shall have the right, at their expense, to assist and
participate with Buyer in the collection of unpaid for KCFX-FM Accounts
Receivable, provided, however, Seller's collection efforts shall be commercially
reasonable and consistent with its past practices.
(c) At the end of the Collection Period, Buyer shall return to
Sellers all files concerning the collection or attempts to collect the for
KCFX-FM Accounts Receivable, and Buyer's responsibility for the collection of
the for KCFX-FM Accounts Receivable shall cease.
(d) The parties also acknowledge that Sellers intend to
collect all of the Accounts Receivable for KCMO-AM and KCMO-FM after the Closing
Date; provided however, that if Accounts Receivables for KCMO-AM or KCMO-FM are
received by Buyer, Buyer shall promptly remit such Accounts Receivables to
Sellers no less often than every 30 days after the Closing Date.
6.8 Allocation of Purchase Price. Buyer and Sellers agree that the fair
market value of the Assets of the Stations will be appraised by the appraisal
firm of BIA, whose expenses will be borne one-half (1/2) by Buyer and one-half
(1/2) by Sellers. Buyer and Sellers agree that the fair market value of the
Assets of the Stations will be the value found in the appraisal of such Assets
by BIA. Buyer and Sellers shall collaborate in good faith in the preparation of
mutually satisfactory Form(s) 8594 (and Form 8824 to the extent applicable)
reflecting the Fair Market Value of the Assets as found by BIA and such other
information as is required by the form. Buyer and Sellers shall each file with
their respective federal income tax return for the tax year in which the Closing
occurs, IRS Form(s) 8594 (and Form 8824 to the extent applicable) containing the
information agreed upon by the parties pursuant to the immediately preceding
sentence. Buyer agrees to report the purchase of the Assets of the Stations, and
Sellers agree to report the sale of such assets for income tax purposes on their
respective income tax returns in a manner consistent with the information agreed
upon by the parties pursuant to this section and contained in the IRS Form(s)
8594 (and Form 8824 to the extent applicable).
6.9 Access to Books and Records. To the extent reasonably requested by
Buyer, Sellers shall provide Buyer access and the right to copy from and after
the Closing Date any books and records relating to the Assets within their
possession (or in the case of matters
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pertaining to KCFX-FM, available to them from the Sinclair Sellers) but not
included in the Assets. To the extent reasonably requested by Sellers, Buyer
shall provide Sellers access and the right to copy from and after the Closing
Date any books and records relating to the Assets that are included in the
Assets. Buyer and Sellers shall each retain any such books and records, for a
period of three years (or such longer period as may be required by law or good
business practice) following the Final Closing Date.
6.10 Employee Matters.
(a) Upon consummation of the Closing, Buyer shall offer
employment to each of the Employees of the Stations listed on Schedule 3.14
(including those on leave of absence, whether short-term, long-term, family,
maternity, paid, unpaid or other and those hired after the date hereof in the
ordinary course of business) at a comparable salary, position and place of
employment as held by each such Employee immediately prior to the Closing Date
(such Employees who are given such offers of employment are referred to herein
as the "TRANSFERRED EMPLOYEES")
(b) Except as provided otherwise in this Section 6.10, Sellers
(in the case of Employees of KCMO-AM and KCMO-FM) and the Sinclair Sellers (in
the case of Employees of KCFX-FM) shall pay, discharge and be responsible for
(a) all salary and wages arising out of or relating to the employment of the
Employees prior to the Closing Date and (b) any employee benefits arising under
the Benefit Plans or Benefit Arrangements of Sellers and their Affiliates and
the Sinclair Sellers and their Affiliates during the period prior to the Closing
Date. From and after the Closing Date, Buyer 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 Buyer on and after the Closing Date.
Buyer shall be responsible for all severance liabilities, and all COBRA
liabilities for any Transferred Employees of the Stations terminated on or after
the Closing Date, including, without limitation, any related to any deemed
termination by any of the Sellers or any of the Sinclair Sellers of the
Transferred Employees as a result of the consummation of the transaction
contemplated hereby and any required pursuant to those retention/severance
agreements listed on Schedule 6.10 hereto.
(c) Buyer shall cause all Transferred Employees as of the
Closing Date to be eligible to participate in its "employee welfare benefit
plans" and "employee pension benefit plans" (as defined in Section 3(1) and 3(2)
of ERISA, respectively) of Buyer in which similarly situated employees of Buyer
are generally eligible to participate; provided, however, that all Transferred
Employees and their spouses and dependents shall be eligible for coverage
immediately after the Closing Date (and shall not be excluded from coverage on
account of any pre-existing condition) to the extent provided under such plans
with respect to Transferred Employees.
(d) For purposes of any length of service requirements,
waiting period, vesting periods or different benefits based on length of service
in any such plan for which a Transferred Employee may be eligible after the
Closing, Buyer shall ensure that, to the extent permitted by law, service by
such Transferred Employee with any of Sellers or any of the Sinclair Sellers,
any Affiliate of any such sellers or any prior owner of the Stations shall be
deemed to have been service with the Buyer. In addition, Buyer shall ensure that
each Transferred Employee receives credit under any welfare benefit plan of
Buyer for any deductibles or co-payments paid by such Transferred Employee and
his or her dependents for the
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current plan year under a plan maintained by Sellers or the Sinclair Sellers or
any Affiliate of such sellers to the extent allowable under any such plan. Buyer
shall grant credit to each Transferred Employee for all sick leave in accordance
with the policies of Buyer applicable generally to its employees after giving
effect to service for Sellers and the Sinclair Sellers, any Affiliate of such
sellers or any prior owner of the Stations, as service for Buyer. To the extent
taken into account in determining prorations pursuant to Section 2.3 hereof,
Buyer shall assume and discharge Sellers' and the Sinclair Sellers' liabilities
for the payment of all unused vacation leave accrued by Transferred Employees as
of the Closing Date. To the extent any claim with respect to such accrued
vacation leave is lodged against any Sellers or any of Sinclair Sellers with
respect to any Transferred Employee for which Buyer has received a proration
credit, Buyer shall, to the extent of such credit, indemnify, defend and hold
harmless such sellers from and against any and all losses, directly or
indirectly, as a result of, or based upon or arising from the same.
(e) As soon as practicable following the Closing Date, Buyer
shall make available to the Transferred Employees Buyer's 401(k) Plan. To the
extent requested by a Transferred Employee, Sellers (with respect to any
Transferred Employees employed at KCMO-AM and KCMO-FM) shall cause to be
transferred to Buyer's 401(k) Plan, and to use its reasonable best efforts to
cause the Sinclair Sellers (with respect to any Transferred Employees employed
at KCFX-FM) to transfer to Buyer's 401(k) Plan in cash all of the individual
account balances of Transferred Employees under such sellers' Plans, including
any outstanding plan participant loan receivables allocated to such accounts.
(f) Buyer acknowledges and agrees that Buyer's obligations
pursuant to this Section 6.10 are in addition to, and not in limitation of,
Buyer's obligation to assume the employment contracts included in the Assumed
Contracts. Nothing in this Agreement shall be construed to provide employees of
Sellers and the Sinclair Sellers with any rights under this Agreement, and no
Person, other than the parties hereto, is or shall be entitled to bring any
action to enforce any provision of this Agreement against any of the parties
hereto, and the covenants and agreements set forth in this Agreement shall be
solely for the benefit of, and shall only be enforceable by, the parties hereto
and their respective successors and assigns as permitted hereunder.
(g) At Closing, Buyer shall assume the obligations of the
Sinclair Sellers under the Scheduled Retention Agreements set forth on Schedule
6.10 with respect to certain of the Transferred Employees of KCFX-FM.
(h) For eighteen (18) calendar months after the Closing Date
(a) none of Sellers or any of their Affiliates shall hire any of the Transferred
Employees; provided that the provisions of this Section 6.10(h)(a) shall not
apply to any Transferred Employee terminated by Buyer; and provided further that
this Section 6.10(h)(a) does not apply to any employees (other than the
Transferred Employees) hired by the Seller Entities (as defined below) after the
Closing Date, and (b) other than the Transferred Employees, Buyer shall not hire
any employees of Sellers or any Affiliate or parent of Sellers (the "SELLER
ENTITIES") who are employees, as of the Closing Date of any of the radio
broadcast stations owned, operated, or programmed by any of the Seller Entities
in the Kansas City market ("SELLERS' EMPLOYEES"); provided that the provisions
of this Section 6.10(h)(b) do not apply to Sellers' Employees whose employment
is terminated by the Seller Entities; and provided further that the provisions
of this Section
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6.10(i)(b) do not apply to any employees (other than Sellers' Employees) hired
by Buyer after the Closing Date.
6.11 Lease Agreement and Shared Property Agreement. At Closing, Buyer
and Entercom Kansas City shall enter into (i) the lease (the "LEASE") for the
antenna and certain other transmission equipment of KCFX-FM, in the form
attached hereto as Exhibit 1 and (ii) the shared property agreement (the "SHARED
PROPERTY AGREEMENT") for the use of certain transmitter equipment and assets of
KCFX-FM, in the form attached hereto as Exhibit 2.
6.12 Public Announcements. Sellers and Buyer shall consult with each
other before issuing any press releases or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
herein and shall not issue any such press release or make any such public
statement without the prior written consent of the other party, which shall not
be unreasonably withheld; provided, however, that a party may, without the prior
written consent of the other party, issue such press release or make such public
statement as may be required by Law or any listing agreement with a national
securities exchange to which Entercom or Buyer is a party if it has used all
reasonable efforts to consult with the other party and to obtain such party's
consent but has been unable to do so in a timely manner.
6.13 Disclosure Schedules. Sellers and Buyer acknowledge and agree that
Sellers shall not be liable for the failure of the Schedules to be accurate as a
result of (a) the operation of the Stations prior to the Closing in accordance
with Section 5 of this Agreement or (b) the failure of the Sinclair Sellers to
update the Schedules that they provided to Buyers as part of the
Entercom/Sinclair Contract. 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 if such relevance is readily apparent
from examination of such Schedules.
6.14 Bulk Sales Law. Buyer hereby waives compliance by Sellers and the
Sinclair Sellers, in connection with the transactions contemplated hereby, with
the provisions of any applicable bulk transfer laws.
6.15 Environmental Site Assessment.
6.15.1 Within thirty (30) days of the execution of this
Agreement, Buyer may obtain Phase I Environmental Assessments at Buyer's expense
for any or all of the parcels of the Owned or Leased Real Property (the
"ENVIRONMENTAL ASSESSMENTS"). In the event any Environmental Assessment
discloses any conditions contrary to any representations and warranties
(determined without regard to any knowledge qualifier therein) or any potential
that such conditions may exist, the Buyer may conduct or have conducted at its
expense additional testing to confirm or negate the existence of any such
conditions. If any such Environmental Assessment or additional testing reflects
the existence of any such conditions at any Owned Real Property or, to the
extent caused by any of the Assets, at any of the Leased Real Property, and if,
and only if, the estimated cost of remediation, exceeds Fifty Thousand Dollars
($50,000) (such amount, the Environmental Threshold Amount"), in the aggregate
for all parcels of the Real Property to be conveyed by Sellers hereunder Sellers
shall cause the conditions to be remedied as quickly as possible (and in all
events prior to Closing for which such property is used in the operation of the
Stations) such that no conditions contrary to the representations and warranties
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(determined with regard to any knowledge qualifier contained therein) of this
Agreement exist; provided, however, that Sellers shall not be obligated to
expend in the aggregate for the Stations in excess of Three Hundred Fifty
Thousand Dollars ($350,000) to effect such remediation for all Real Property to
be conveyed hereunder. In the event that such remedial action(s) is estimated to
cost in the aggregate in excess of Three Hundred Fifty Thousand Dollars
($350,000), Sellers may elect not to take such remedial action. In such event,
Buyer may require Sellers to proceed to the Closing of the Stations, and at the
Closing, the purchase price for any of the Stations acquired at the Closing
shall be reduced by the estimated cost of remediation for that portion of the
Owned Real Property to be acquired at the Closing, not to exceed in the
aggregate for the Closing the Unexpended Remediation Amount. Alternatively,
Buyer may terminate this Agreement, and Sellers shall have no liability to Buyer
as a result of such termination. Such Environmental Assessments shall not
relieve Sellers of any obligation with respect to any representation, warranty,
or covenant of Sellers in this Agreement or waive any condition to Buyer's
obligations under this Agreement. The cost of completing the Environmental
Assessments shall be paid by Buyer.
6.15.2 Nothing in this Section 6.15 shall be deemed to extend
the date on which the Closing would otherwise occur under this Agreement.
6.16 Reserved.
6.17 Adverse Developments. Sellers shall promptly notify Buyer of any
unusual or materially adverse developments that occur prior to the Closing with
respect to the assets used in the operations of KCMO-AM and KCMO-FM or the
operation of such stations and of any such developments prior to Closing
communicated to Sellers by the Sinclair Sellers with respect to the assets and
in the operation of KCFX-FM; provided, however, that Sellers' compliance with
the disclosure requirements of this Section 6.17 shall not relieve Sellers of
any obligation with respect to any representation, warranty or covenant of
Sellers in this Agreement or relieve Buyer of any obligation or duty hereunder,
waive any condition to Buyer's obligations under this Agreement, or expand or
enhance any right of Buyer hereunder.
6.18 Title Insurance. Within ten (10) days of the date of this
Agreement, each Seller shall deliver to Buyer its current title insurance
policies with respect to the Owned Real Property. Sellers shall cooperate with
Buyer in obtaining the commitment of a title insurance company reasonably
satisfactory to Buyer agreeing to issue to Buyer, at standard rates, ALTA 1992
Form extended coverage title insurance policies, insuring Buyer's interest in
the Owned Real Property (the "TITLE COMMITMENT"). The costs of the Title
Commitment and the policy to be issued pursuant to the Title Commitment shall be
paid by Buyer.
6.19 Surveys. Within forty-five (45) days of the date of this
Agreement, each Seller of Owned Real Property shall deliver to Buyer, at Buyer's
expense, surveys of the Owned Real Property performed by surveyors reasonably
acceptable to Buyer sufficient to remove any "survey exception" from the title
insurance policies to be issued pursuant to the Title Commitments.
6.20 Reserved.
6.21 Reserved.
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6.22 Cooperation on Tax Matters. The parties intend to allow for the
election by Sellers ("ELECTION") to have the sale of all or a portion of the
Assets contemplated by this Agreement become part of a "Tax Deferred Exchange"
in accordance with the provisions of the Code. Buyer covenants and agrees to
participate and fully cooperate with Sellers (and any qualified intermediary
involved in the Tax Deferred Exchange), in the event of an Election, so long as
such participation and cooperation does not have an adverse effect on Buyer. To
the extent that any provision in this Section 6.22 or in this Agreement shall be
found inconsistent with or in violation of any of the terms of Section 1031 of
the Code, such provision shall be null and void, all other provisions of this
Agreement shall remain in full force and effect, and the parties shall endeavor
to agree upon alternative provisions that affect a "Tax Deferred Exchange" of
property in such manner as will comply with Section 1031 of the Code. If no such
agreement is reached within a reasonable period, then this Agreement shall be
performed without an exchange of properties.
6.23 Nonsolicitation. During the period beginning on the date hereof
and ending eighteen months after the Closing Date, Sellers and their Affiliates,
and Buyer and its Affiliates, shall be prohibited from contracting for,
negotiating for, or soliciting any of the rights relating to certain programming
content or promotional materials, as set forth on Schedule 6.23. The rights
granted to Buyer under this Nonsolicitation section by Sellers shall terminate
upon the sale of the Station or Stations to which the rights relate.
6.24 Collective Bargaining Duty. To the extent required by law, Buyer
shall negotiate in good faith with the American Federation of Television and
Radio Artists with regard to the employees of KCMO-AM and KCMO-FM in accordance
with all applicable labor laws.
6.25 Shared Use of KCFX Studio. During the period beginning on the
Closing Date and ending 60 days thereafter (the "TRANSITION PERIOD"), Buyer and
Sellers shall have shared use of the KCFX Studio and the KCMO Studio and Office
Space, 4935 Berlinder Road, Westwood, Kansas (the "KCMO STUDIO"). During the
Transition Period, each of the parties agrees to cooperate in good faith for an
orderly transition of the equipment required to be relocated from the KCFX
Studio to the KCMO Studio and from the KCMO Studio to the KCFX Studio. Each of
the parties further agrees that any costs associated with transferring the
equipment used in connection with the operations of KQRC-FM, KCIY-FM or KXTR-FM
from the KCFX Studio to the KCMO Studio shall be borne by Sellers, and that any
costs associated with transferring the equipment currently used in connection
with KCMO-AM and KCMO-FM from the KCMO Studio to the KCFX Studio shall be borne
by Buyer.
SECTION 7.
CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER
7.1 Conditions to Obligations of Buyer. All obligations of Buyer at the
Closing hereunder with respect to the Stations are subject at Buyer's option to
the fulfillment prior to or at the Closing Date of each of the following
conditions:
(a) Representations and Warranties. All representations and
warranties of Sellers contained in this Agreement shall be true and complete at
and as of the Closing Date as though made at and as of that time, (except for
representations and warranties that speak as of a specific date or time which
need only be true and complete as of such date or time), except
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where the failure to be true and complete (determined without regard to any
materiality qualifications therein) does not have a Material Adverse Effect.
(b) Covenants and Conditions. Sellers shall have performed and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date, except where the failure to have performed and complied (determined
without regard to any materiality qualifications therein) does not have a
Material Adverse Effect.
(c) FCC Consent. The FCC Consent shall have been granted,
notwithstanding that it may not have yet become a Final Order, unless any filing
is made with the FCC that pertains to or becomes associated with any request for
consent to the assignment of any of the FCC Licenses (an "FCC OBJECTION"), in
which case, Buyer shall not be obligated to close until the FCC Consent shall
have become a Final Order, unless in the reasonable judgment of Buyer's counsel
such objection would not reasonably be expected to result in a denial of the FCC
Consent, or the designation for hearing for the applications for FCC Consent.
(d) Hart-Scott-Rodino. All applicable waiting periods under
Hart-Scott-Rodino shall have expired or terminated.
(e) Governmental Authorizations. Sellers shall be the holder
of all KCMO FCC Licenses, the Sinclair Sellers shall be the holder of all KCFX
FCC Licenses, and there shall not have been any modification, revocation, or
non-renewal of any License that has had a Material Adverse Effect. No proceeding
shall be pending the effect of which could be to revoke, cancel, fail to renew,
suspend, or modify materially and adversely any FCC License.
(f) Consents. All consents of third parties that are required
for the valid and binding assignment to Buyer of all Material Contracts marked
by an asterisk on Schedules 3.5 and 3.7 shall have been obtained (or available
upon consummation of the Closing).
(g) Deliveries. Sellers shall have made or stand willing to
make all the deliveries to Buyer described in Section 8.2.
(h) Satisfactory Environmental Assessment. To the extent that
any Environmental Assessment or additional testing conducting pursuant to
Section 6.15 hereof reflects the existence of conditions contrary to any
representation or warranty in this Agreement, either (i) Sellers shall have
completed the remediation of such conditions in accordance with Section 6.15
hereof, or (ii) Buyer shall have provided notice to Sellers of Buyer's election
to proceed to Closing with the proration to the Purchase Price specified in
Section 6.15 hereof.
(i) Entercom/Sinclair Contract. All conditions to closing set
forth in Section 7 of the Entercom/Sinclair Contract shall have been fulfilled
or waived, other than conditions which have not been fulfilled as a result of a
material breach by Entercom of the Entercom/Sinclair Contract.
7.2 Conditions to Obligations of Sellers. All obligations of Sellers at
the Closing hereunder are subject at Sellers' option to the fulfillment prior to
or at the Closing Date of each of the following conditions:
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(a) Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though made at and as of
that time.
(b) Covenants and Conditions. Buyer shall have performed and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date.
(c) FCC Consent. The FCC Consent shall have been granted.
(d) Hart-Scott-Rodino. All applicable waiting periods under
Hart-Scott-Rodino shall have expired or terminated.
(e) Deliveries. Buyer shall have made or stand willing to make
all the deliveries described in Section 8.3.
SECTION 8.
CLOSING AND CLOSING DELIVERIES
8.1 Closing.
(a) Closing Date.(i) Except as provided below in this Section
8.1 or as otherwise agreed to by Buyer and Sellers, the Closing
hereunder shall be held for all of the Stations on a date specified by
Sellers (it being understood that the parties intend that the Closing
occur simultaneously with the closing of the Entercom/Sinclair
Contract) on at least five (5) days written notice that is not earlier
than the first business day after or later than ten (10) business days
after the date on which all of the conditions to Closing have been
satisfied or waived;
(ii) If any event occurs that prevents signal
transmission by any of the Stations in the normal and usual manner and
Sellers cannot restore the normal and usual transmission before the
date on which the Closing would otherwise occur pursuant to this
Section 8.1(a), and this Agreement has not been terminated under
Section 9, Sellers shall diligently take such action as reasonably
necessary to restore such transmission (or, in the case of KCFX-FM, to
avail themselves of their rights under the Entercom/Sinclair Contract
to cause the restoration of such transmission by the Sinclair Sellers),
and the Closing shall be postponed until a date within the effective
period of the FCC Consent (as it may be extended pursuant to Section
6.1(c)) to allow Sellers to restore (or to avail themselves of their
rights under the Entercom/Sinclair Contract to cause the restoration
of) the normal and usual transmission for such Station. If the Closing
is postponed pursuant to this paragraph, the date of the Closing shall
be ten (10) days after notice by Sellers to Buyer that transmission has
been restored. Notwithstanding anything to the contrary in this
Agreement, Buyer shall not be obligated to close if the transmission of
any Station is not operating in the normal and usual manner, unless and
until the Sellers have restored (or caused the restoration of) the
transmission of such Station to its normal and usual level.
(iii) If there is in effect on the date on which the
Closing would otherwise occur pursuant to this Section 8.1(a) any
judgment, decree or order that would
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prevent or make unlawful the Closing on that date, the Closing shall be
postponed until a date within the effective period of the FCC Consent
(as it may be extended pursuant to Section 6.1(c)), to be set by
Sellers (it being understood that the parties intend that the Closing
occur simultaneously with the closing of the Entercom/Sinclair
Contract), when such judgment, decree, or order no longer prevents or
makes unlawful the Closing.
(b) Closing Place. The Closing hereunder shall be held at the
place of closing under the Entercom/Sinclair Contract, or any other place that
is mutually agreed upon by Buyer and Sellers.
8.2 Deliveries by Sellers. Prior to or on Closing Date, Sellers shall
deliver to Buyer (and in the case of documents specified in subsection (a)
hereof pertaining to KCFX-FM, Sellers shall avail themselves of their rights
under the Entercom/Sinclair Contract to cause the Sinclair Sellers to deliver to
Buyer) the following, in form and substance reasonably satisfactory to Buyer and
its counsel:
(a) Conveyancing Documents. Duly executed deeds in form and
quality equivalent to the deeds by which Sellers obtained title, bills of sale,
motor vehicle titles, assignments, and other transfer documents that are
sufficient to vest good and marketable title to the Assets being transferred at
the Closing in the name of Buyer, free and clear of all mortgages, liens,
restrictions, encumbrances, claims and obligations except for Permitted
Encumbrances;
(b) Officer's Certificate. A certificate, dated as of the
Closing Date, executed by an officer of Sellers, certifying: (i) that the
representations and warranties of Sellers contained in this Agreement are true
and complete as of the Closing Date as though made on and as of that date
(except for representations and warranties that speak as of a specific date or
time, which need only be true and complete as of such date or time), except to
the extent that the failure of such representations and warranties (in each case
determined without regard to any materiality qualifications contained therein)
shall not have had a Material Adverse Effect, and (ii) that Sellers have in all
respects performed and complied with all of its obligations, covenants and
agreements in this Agreement to be performed and complied with on or prior to
the Closing Date, except to the extent that the failure to perform such
covenants (in each case determined without regard to any materiality
qualifications contained therein) shall not have had a Material Adverse Effect.
(c) Secretary's Certificate. A certificate, dated as of the
Closing Date, executed by each of the Seller's Secretary, members, partners or
designees, as the case may be: (i) certifying that the resolutions, as attached
to such certificate, were duly adopted by such Seller's Board of Directors and
shareholders (if required) or by the members in the case of a limited liability
company), authorizing and approving the execution of this Agreement and the
consummation of the transaction contemplated hereby and that such resolutions
remain in full force and effect; and (ii) providing, as attachments thereto, the
Articles of Incorporation and Bylaws (or other organizational documents) of such
Seller;
(d) Consents. A manually executed copy of any instrument
evidencing receipt of any Consent which has been received by Sellers which
relate to the Stations or, the Assets of which are being transferred at the
Closing;
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(e) Good Standing Certificates. To the extent available from
the applicable jurisdictions, certificates as to the formation and/or good
standing of each Seller issued by the appropriate governmental authorities in
the states of organization and each jurisdiction in which such Sellers are
qualified to do business, each such certificate (if available) to be dated a
date not more than a reasonable number of days prior to the Closing Date;
(f) Opinions of Counsel. Opinions of Sellers' counsel and
communications counsel dated as of the Closing Date, in form and substance
reasonably satisfactory to Buyer; and
(g) Lease. An executed copy of the Lease.
(h) Shared Property Agreement. An executed copy of the Shared
Property Agreement.
(i) Other Documents. Such other documents reasonably requested
by Buyer or its counsel for complete implementation of this Agreement and
consummation of the transaction contemplated hereby.
8.3 Deliveries by Buyer. Prior to or on the Closing Date, Buyer shall
deliver to Sellers, and to the Sinclair Sellers in the case of documents
specified in subsection (d) hereof pertaining to KCFX-FM, the following, in form
and substance reasonably satisfactory to Sellers and their counsel:
(a) Closing Payment. The payment of the Estimated Purchase
Price described in Section 2.4(a);
(b) Officer's Certificate. A certificate, dated as of the
Closing Date, executed on behalf of an officer of the Buyer, certifying (i) that
the representations and warranties of Buyer contained in this Agreement are true
and complete in all material respects as of the Closing Date as though made on
and as of that date, and (ii) that Buyer has in all material respects performed
and complied with all of its obligations, covenants and agreements in this
Agreement to be performed and complied with on or prior to the Closing Date;
(c) Secretary's Certificate. A certificate, dated as of the
Closing Date, executed by Buyer's Secretary: (i) certifying that the
resolutions, as attached to such certificate, were duly adopted by Buyer's Board
of Directors, authorizing and approving the execution of this Agreement and the
consummation of the transaction contemplated hereby and that such resolutions
remain in full force and effect; and (ii) providing, as an attachment thereto,
Buyer's Certificate of Incorporation and Bylaws;
(d) Assumption Agreements. Appropriate assumption agreements
pursuant to which Buyer shall assume and undertake to perform (i) Sellers'
obligations and liabilities arising out of the business and operations of
KCMO-AM and KCMO-FM to the extent provided under this Agreement, including
(without limitation) under the KCMO-FM Licenses and the Assumed Contracts
pertaining to KCMO-AM and KCMO-FM; and (ii) the Sinclair Sellers' obligations
and liabilities arising out of the business and operations of KCFX-FM to the
extent such obligations and liabilities are to be assigned to Entercom under the
Entercom/Sinclair Contract,
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including (without limitation) under the KCFX Licenses and the Assumed Contracts
pertaining to KCFX-FM.
(e) Good Standing Certificates. To the extent available from
the applicable jurisdictions, certificates as to the formation and/or good
standing of Buyer issued by the appropriate governmental authorities in the
state of organization and each jurisdiction in which Buyer is qualified to do
business, each such certificate (if available) to be dated a date not more than
a reasonable number of days prior to the Closing Date;
(f) Opinion of Counsel. An opinion of Buyer's counsel dated as
of the Closing Date, in form and substance reasonably satisfactory to Seller;
(g) Sinclair Acknowledgement Certificate. A certificate to the
effect set forth in Section 11.3(b), subclause (h), of the Entercom/Sinclair
Contract; and
(h) Lease. An executed copy of the Lease.
(i) Shared Property Agreement. An executed copy of the Shared
Property Agreement.
(j) Other Documents. Such other documents reasonably requested
by Sellers or their counsel for complete implementation of this Agreement and
consummation of the transactions contemplated hereby.
SECTION 9.
TERMINATION
9.1 Termination by Mutual Consent. This Agreement may be terminated at
any time prior to Closing by the mutual consent of the parties.
9.2 Termination by Seller. This Agreement may be terminated by Sellers
and the sale and transfer of the Stations abandoned, if:
(a) Sellers are not then in material default hereunder, upon
written notice to Buyer if on the date that would otherwise be the Closing Date
any of the conditions precedent to the obligations of Sellers set forth in
Sections 7.2(a), 7.2(b) and 7.2(e) of this Agreement has not been satisfied or
waived in writing by Sellers (whether or not occurring as the result of Buyer's
material breach of any provision of this Agreement);
(b) Buyer shall default in the performance of its obligations
under this Agreement in any material respect and such default is not cured
within thirty (30) days after notice thereof;
(c) Sellers are not then in material default hereunder and
Closing has not occurred within one (1) calendar year from the date hereof and
failure of Closing to have occurred is due to the failure to receive any
regulatory approval required for Closing, including, but not limited to,
expiration or termination of the Hart-Scott-Rodino waiting period, any FCC
Consents (including, without limitation, such facts as are disclosed on Schedule
4.6 hereto), and
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the failure of such consent, expiration or termination to be granted is the
result of facts relating to Buyer or any Affiliate of Buyer;
(d) Sellers are not then in material default hereunder if the
Closing has not occurred within twenty four (24) months from the date hereof due
to the failure to receive any regulatory approval required for Closing,
including, but not limited to, the expiration or termination of the
Hart-Scott-Rodino waiting period of any FCC Consent, and the failure of such
consent, expiration, or termination to be granted is the result of facts
relating to Sellers;
(e) Closing has not occurred with respect to the Stations
within eighteen (18) months from the date hereof, if Sellers are not then in
material default hereunder, and Closing has not occurred for any reason other
than as provided in Section 9.2(d); or
(f) the Sinclair Sellers lawfully terminate the
Entercom/Sinclair Contract.
9.3 Termination by Buyer. This Agreement may be terminated by Buyer and
the exchange and transfer of the Stations abandoned, if:
(a) Buyer is not then in material default, upon written notice
to Sellers if on the date that would otherwise be the Closing Date any of the
conditions precedent to the obligations of Buyer set forth in Sections 7.1(a),
7.1(b), 7.1(e), 7.1(f), 7.1(h), and 7.1(i) of this Agreement (and only such
Sections) has not been satisfied or waived in writing by Buyer (whether or not
occurring as the result of Sellers' material breach of any provision of this
Agreement);
(b) Sellers shall have defaulted in the performance of
Sellers' obligations under this Agreement, and such default is not cured within
thirty (30) days after notice thereof and such default has had a Material
Adverse Effect; or
(c) Buyer is not then in material default hereunder and
Closing has not occurred within fifteen (15) months from the date hereof and
failure to close is due to the failure to receive any regulatory approval
required for Closing, including, but not limited to, expiration or termination
of the Hart-Scott-Rodino waiting period and any FCC Consents and the failure to
receive such consent is due to facts relating to Sellers or any Affiliate of
Sellers.
(d) Closing has not occurred with respect to the Stations
within eighteen (18) months from the date hereof, if the terminating party is
not then in material default hereunder and the Closing has not occurred for any
reason other than as provided in Section 9.2(c).
9.4 Rights on Termination. If this Agreement is terminated by Buyer
pursuant to Section 9.3 as a result of Sellers' material breach of any provision
of this Agreement or pursuant to Section 9.3(d), Buyer shall be entitled to the
immediate return of the amount of the Escrow Deposit, and Buyer shall have all
rights and remedies available at law or equity, including the remedy of specific
performance described in Section 9.6 below. If this Agreement is terminated by
Sellers pursuant to Section 9.2 (a), (b) or (c), Sellers, as their sole remedy,
shall be entitled to receive the amount of the Escrow Deposit, together with all
interest or other proceeds from the investment thereof, but less any
compensation due Escrow Agent, as liquidated damages in full and final
settlement of all claims of Sellers under this Agreement, and there shall be no
other or further obligations or remedies of Sellers hereunder.
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9.5 Liquidated Damages Not a Penalty. With respect to the liquidated
damages as described and provided for in Section 9.4 hereof, Sellers and Buyer
hereby acknowledge and agree that the damage that may be suffered by Sellers in
the event of a default by Buyer hereunder is not readily ascertainable and that
such liquidated damages as of the date hereof are a reasonable estimate of such
damages and are intended to compensate Sellers for any such damage and are not
to be construed as a penalty.
9.6 Specific Performance. The parties recognize that if Sellers breach
this Agreement and refuse to perform under the provisions of this Agreement,
monetary damages alone would not be adequate to compensate Buyer for its injury.
Buyer shall therefore be entitled, in addition to any other remedies that may be
available, to obtain specific performance of the terms of this Agreement. If any
action is brought by Buyer to enforce this Agreement, Sellers shall waive the
defense that there is an adequate remedy at law.
9.7 Attorneys' Fees. In the event of a default by either party that
results in a lawsuit or other proceeding for any remedy available under this
Agreement, the prevailing party shall be entitled to reimbursement from the
other party of its reasonable legal fees and expenses (whether incurred in
arbitration, at trial, or on appeal).
9.8 Survival. Notwithstanding the termination of this Agreement
pursuant to this Section 9, the obligations of Buyer and Sellers set forth in
Sections 6.2, 6.4, 9, 10, and 11 shall survive such termination and the parties
hereto shall have any and all rights and remedies to enforce such obligations
provided at law or in equity or otherwise (including without limitations,
specific performance).
SECTION 10.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; CERTAIN REMEDIES
10.1 Survival of Representations. All representations and warranties,
covenants and agreements of Sellers and Buyer contained in or made pursuant to
this Agreement or in any certificate furnished pursuant hereto shall survive the
Closing Date and shall remain in full force and effect to the following extent:
(a) representations and warranties (other than the representations and
warranties set forth in Section 3.16) shall survive for a period of twelve (12)
months after the Closing Date, (b) except as otherwise provided herein, the
covenants and agreements which, by their terms, survive the Closing shall
continue in full force and effect until fully discharged (but not beyond the
expiration of twelve (12) months after the Closing Date), and (c) any
representation, warranty, covenant or agreement that is the subject of a claim
which is asserted in a reasonably detailed writing prior to the expiration of
the survival period set forth in this Section 10.1 shall survive with respect to
such claim or dispute until the final resolution thereof; provided that
notwithstanding the foregoing, representations and warranties set forth in
Section 3.16 and the covenant in Section 6.15 shall survive for the lesser of
(i) eighteen (18) months after the Closing Date, and (ii) the expiration of the
applicable statute of limitations, but, in no event, shall the survival period
in this proviso be less than one (1) year after the Closing Date; provided
further that the covenants and agreements set forth in Section 6.4
Confidentiality, Section 6.5 Cooperation, Section 6.9 Books and Records, Section
11.1 Fees and Expenses, Section 11.2 Notices, and Section 11.3 Benefit and
Binding Effect shall survive the Closing for the period provided therein or, if
no period is specified, in perpetuity; and provided finally that anything to the
contrary in this Section 10.1 notwithstanding any claim for indemnification
under
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Section 10 hereof which is asserted in a reasonably detailed writing prior to
the expiration of the survival periods provided in this Section 10.1 shall
survive with respect to such claim or dispute until final resolution thereof.
10.2 Indemnification by Seller. After the Closing but subject to
Sections 10.1 and 10.5, Sellers hereby agree to indemnify and hold Buyer
harmless against and with respect to, and shall reimburse Buyer for:
(a) Any and all losses, liabilities, or damages arising out of
or resulting from any untrue representation, breach of warranty, or
nonfulfillment of any covenant by Sellers contained in this Agreement or in any
certificate, document, or instrument delivered to Buyer under this Agreement;
(b) Any and all obligations of Sellers not assumed by Buyer
pursuant to this Agreement, including any liabilities arising at any time under
any Contract not included in the Assumed Contracts;
(c) Any loss, liability, obligation, or cost arising out of or
resulting from the failure of Sellers and the Sinclair Sellers to comply with
the provisions of any bulk sales law applicable to the transfer of the Assets;
(d) Any and all obligations, losses, liabilities, or damages
arising out of or resulting from the operation or ownership of the Stations
prior to the Closing (except any losses, liabilities or damages for which Buyer
has received a proration in its favor or a reduction in Purchase Price under
Section 6.15), including any liabilities arising under the Licenses or the
Assumed Contracts to the extent that they relate to events occurring prior to
the Closing Date; and
(e) Any and all out-of-pocket costs and expenses, including
reasonable legal fees and expenses, incident to any action, suit, proceeding,
claim, demand, assessment, or judgment incident to the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
10.3 Indemnification by Buyer. Notwithstanding the Closing, but subject
to Section 10.5, Buyer hereby agrees to indemnify and hold Sellers harmless
against and with respect to, and shall reimburse Sellers for:
(a) Any and all losses, liabilities, or damages arising out of
or resulting from any untrue representation, breach of warranty, or
nonfulfillment of any covenant by Buyer contained in this Agreement or in any
certificate, document, or instrument delivered to Sellers under this Agreement;
(b) Any and all obligations of Sellers and the Sinclair
Sellers assumed by Buyer pursuant to this Agreement;
(c) Any and all obligations, losses, liabilities, or damages
arising out of or resulting from the operation or ownership of the Stations
after the Closing (including, without limitation, any obligations of Sellers or
any Affiliate thereof pursuant to any agreements by
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which the obligations of any of the Stations have been guaranteed), except any
losses, liabilities or damages for which Sellers have received a proration in
their favor; and
(d) Any and all out-of-pocket costs and expenses, including
reasonable legal fees and expenses, incident to any action, suit, proceeding,
claim, demand, assessment, or judgment incident to the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
10.4 Procedure for Indemnification. The procedure for indemnification
shall be as follows:
(a) The party claiming indemnification (the "CLAIMANT") shall
promptly give notice to the party from which indemnification is claimed (the
"INDEMNIFYING PARTY") of any claim, whether between the parties or brought by a
third party, specifying in reasonable detail the factual basis for the claim. If
the claim relates to an action, suit, or proceeding filed by a third party
against Claimant, such notice shall be given by Claimant within five business
days after written notice of such action, suit, or proceeding was given to
Claimant.
(b) With respect to claims solely between the parties,
following receipt of notice from the Claimant of a claim, the Indemnifying Party
shall have thirty days to make such investigation of the claim as the
Indemnifying Party deems necessary or desirable. For the purposes of such
investigation, the Claimant agrees to make available to the Indemnifying Party
and its authorized representatives the information relied upon by the Claimant
to substantiate the claim. If the Claimant and the Indemnifying Party agree at
or prior to the expiration of the thirty-day period (or any mutually agreed upon
extension thereof) to the validity and amount of such claim, the Indemnifying
Party shall immediately pay to the Claimant the full amount of the claim. If the
Claimant and the Indemnifying Party do not agree within the thirty-day period
(or any mutually agreed upon extension thereof), the Claimant may seek
appropriate remedy at law or equity.
(c) With respect to any claim by a third party as to which the
Claimant is entitled to indemnification under this Agreement, the Indemnifying
Party shall have the right at its own expense, to participate in or assume
control of the defense of such claim, and the Claimant shall cooperate fully
with the Indemnifying Party, subject to reimbursement for actual out-of-pocket
expenses incurred by the Claimant as the result of a request by the Indemnifying
Party, provided, however, that Indemnifier may not assume control of the defense
unless it affirms in writing its obligation to indemnify Claimant for any
damages incurred by Claimant with respect to such third-party claim. If the
Indemnifying Party elects to assume control of the defense of any third-party
claim, the Claimant shall have the right to participate in the defense of such
claim at its own expense. If the Indemnifying Party does not elect to assume
control or otherwise participate in the defense of any third-party claim, it
shall be bound by the results obtained in good faith by the Claimant with
respect to such claim.
(d) If a claim, whether between the parties or by a third
party, requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
(e) The indemnification rights provided in Section 10.2 and
Section 10.3 shall extend to the members, partners, shareholders, officers,
directors, employees, representatives and
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affiliated entities of any Claimant although for the purpose of the procedures
set forth in this Section 10.4, any indemnification claims by such parties shall
be made by and through the Claimant.
10.5 Certain Limitations.
(a) Notwithstanding anything in this Agreement to the
contrary, neither party shall indemnify or otherwise be liable to the other
party with respect to any claim for any breach of a representation or warranty,
or for the breach of any covenant contained in this Agreement, unless notice of
the claim is given within the relevant survival period specified in Section
10.1.
(b) Notwithstanding anything in this Agreement to the
contrary, but except as otherwise provided in this subsection (b): (i) Sellers
shall not be liable to Buyer in respect of any indemnification hereunder except
to the extent that (A) the aggregate amount of losses of Buyer, if any, exceeds
Five Hundred Thousand Dollars ($500,000) (the "THRESHOLD AMOUNT") and (B) the
aggregate amount of losses of Buyer, if any, is less than the excess of Ten
Million Dollars ($10,000,000) over any amounts expended by Sellers pursuant to
Section 6.15 or with respect to which Buyer receives a proration in its favor
under Section 6.15 (such excess being the "INDEMNITY CAP"); provided, the
foregoing shall not be applicable to any amounts owed in connection with the
Purchase Price or the proration adjustment thereof; and (ii) Buyer shall not be
liable to Sellers in respect of any indemnification hereunder except to the
extent that (A) the aggregate amount of losses of Sellers, if any, exceeds the
Threshold Amount and (B) the aggregate amount of losses of Sellers, if any, is
less than the Indemnity Cap. In determining whether Sellers shall be obligated
to indemnify Buyer, or Buyer shall be obligated to indemnify Sellers, in each
case, under this Section 10, once the Threshold Amount has been satisfied, each
representation and warranty and each covenant contained in this Agreement for
which indemnity may be sought hereunder shall be read solely for purposes of
determining whether a breach of such representation, warranty or covenant has
occurred without regard to materiality (including Material Adverse Effect)
qualifications that may be contained therein.
(c) Notwithstanding any other provision of this Agreement to
the contrary, in no event shall a party be entitled to indemnification for such
party's consequential or punitive damages, regardless of the theory of recovery.
Each party hereto agrees to use reasonable efforts to mitigate any losses which
form the basis for any claim for indemnification hereunder.
(d) After Closing, indemnification pursuant to Section 10
hereof shall be the sole and 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.
SECTION 11.
MISCELLANEOUS
11.1 Fees and Expenses.
(a) Buyer and Sellers shall each pay one-half of (i) any fees
charged by the FCC in connection with obtaining the FCC Consent, and (ii) any
filing fees incurred in connection with any Hart-Scott-Rodino Filings.
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(b) Buyer and Sellers shall each pay one-half (1/2) of any
filing fees, transfer taxes, document stamps, or other charges levied by any
governmental entity (other than income Taxes, which shall be the responsibility
of Sellers) on account of the transfer of the Assets from Sellers to Buyer.
(c) Except as otherwise provided in this Agreement, each party
shall pay its own expenses incurred in connection with the authorization,
preparation, execution and performance of this Agreement, including all fees and
expenses of counsel, accountants, agents and representatives, and each party
shall be responsible for all fees or commissions payable to any finder, broker,
advisor, or similar Person retained by or on behalf of such party.
11.2 Notices. All notices, demands and requests required or permitted
to be given under the provisions of this Agreement shall be (a) in writing, (b)
sent by telecopy (with receipt personally confirmed by telephone), delivered by
personal delivery, or sent by commercial delivery service or certified mail,
return receipt requested, (c) deemed to have been given on the date telecopied
with receipt confirmed, the date of personal delivery, or the date set forth in
the records of the delivery service or on the return receipt, and (d) addressed
as follows:
To Sellers:
Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
Attn: David J. Field
Telecopy: (610) 660-5620
Telephone: (610) 660-5610
with a copy Latham & Watkins
(which shall 1001 Pennsylvania Avenue, Suite 1300
not constitute Washington, D.C. 20004-2505
notice) to: Attn: Joseph D. Sullivan, Esquire
Telecopy: (202) 637-2201
Telephone: (202) 637-2200
To Buyers:
Susquehanna Radio Corp.
140 East Market Street
York, PA 17401
Attn: Craig W. Bremer, Esquire
Telecopy: (717) 771-1440
Telephone: (717) 852-2305
or to any other or additional persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 11.2.
11.3 Benefit and Binding Effect.
48
<PAGE> 53
(a) Buyer shall have the right to assign all or any portion of
its rights under this Agreement to (i) any entity under common control with
Buyer or any wholly-owned direct subsidiary of Buyer, (ii) a Qualified
Intermediary under Section 1031 of the Code, or (iii) any lender or any agent
for such lender(s) for collateral purposes only; provided, that no such
assignment shall relieve Buyer of its obligations hereunder. Sellers may assign,
combine, merge, or consolidate among themselves and any Affiliate of Sellers so
long as Sellers or their successors and assigns are bound by the terms and
conditions of this Agreement in all respects as if such successors and assigns
were original parties hereto, and such assignment, combination, merger, or
consolidation does not have an adverse affect on Buyer. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No Person, other than the parties hereto, is
or shall be entitled to bring any action to enforce any provision of this
Agreement against any of the parties hereto, and the covenants and agreements
set forth in this Agreement shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto or their respective successors and
assigns as permitted hereunder. Other than as expressly set forth in this
Section 11.3(a), no party may assign or transfer all or any portion of its
rights under this Agreement without the prior written consent of the parties
hereto.
11.4 Further Assurances. The parties shall take any actions and execute
any other documents that may be necessary or desirable to the implementation and
consummation of this Agreement.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND (WITHOUT REGARD TO
THE CHOICE OF LAW PROVISIONS THEREOF). IN ADDITION, EACH OF THE PARTIES HERETO
SUBMITS TO LOCAL JURISDICTION IN THE STATE OF MARYLAND AND AGREES THAT ANY
ACTION BY ANY PARTY HEREUNDER SHALL BE INSTITUTED IN THE STATE OF MARYLAND.
11.6 Entire Agreement. This Agreement, the Schedules hereto, and all
documents, certificates and other documents to be delivered by the parties
pursuant hereto, collectively, represent the entire understanding and agreement
between Buyer and Sellers with respect to the subject matter of this Agreement.
This Agreement supersedes all prior negotiations between the parties and cannot
be amended, supplemented, or changed except by an agreement in writing duly
executed by each of the parties hereto.
11.7 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement, or condition herein may be waived
by the party entitled to the benefits thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, representation, warranty, covenant,
agreement, or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 11.7.
11.8 Headings. The headings of the sections and subsections contained
in this Agreement are inserted for convenience only and do not form a part or
affect the meaning, construction or scope thereof.
49
<PAGE> 54
11.9 Counterparts. This Agreement may be signed in two or more
counterparts with the same effect as if the signature on each counterpart were
upon the same instrument.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
50
<PAGE> 55
IN WITNESS WHEREOF, this Agreement has been executed by the
duly authorized officers of Buyer and Sellers as of the date first written
above.
Buyer: Sellers:
SUSQUEHANNA RADIO CORP. ENTERCOM COMMUNICATIONS CORP.
By /s/ David. E. Kennedy By /s/ John C. Donlevie
-------------------------- -------------------------------------
Name: David E. Kennedy Name: John C. Donlevie
Title: President Title: Executive Vice President
ENTERCOM KANSAS CITY, LLC
By: /s/ John C. Donlevie
-------------------------------------
Name: John C. Donlevie
Title: Executive Vice President
ENTERCOM KANSAS CITY
LICENSE, LLC
By: /s/ John C. Donlevie
-------------------------------------
Name: John C. Donlevie
Title: Executive Vice President
51
<PAGE> 1
EXHIBIT 11.01
RECONCILIATION OF NET LOSS AND PRO FORMA EARNINGS PER COMMON SHARE
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 31,
--------- ---------
1999 2000
---- ----
<S> <C> <C>
EARNINGS (LOSS) PER SHARE
Basic loss per share:
NUMERATOR:
Basic net loss ($80,427) ($86)
============ ============
DENOMINATOR:
Basic weighted average shares outstanding 32,477,995 45,188,010
============ ============
Basic net loss per share ($2.48) ($0.00)
============ ============
Diluted earnings (loss) per share:
NUMERATOR:
Basic net loss ($80,427) ($86)
Dilutive effect of TIDES securities, net of taxes -- 1,172
------------ ------------
Diluted net income (loss) ($80,427) $1,086
============ ============
DENOMINATOR:
Weighted average shares outstanding 32,477,995 45,188,010
Dilutive effect of options 324,875 319,851
Dilutive effect of weighted average outstanding of
TIDES securities 2,841,000
------------ ------------
Dilutive weighted average shares outstanding 32,802,870 48,348,861
============ ============
Diluted earnings (loss) per share ($2.45) $0.00
============ ============
If anti-dilutive, use Basic Anti-dilutive Anti-dilutive
PRO FORMA DATA:
Basic pro forma income (loss) per share:
NUMERATOR:
Pro forma net income $207
============
DENOMINATOR:
Weighted average shares outstanding 32,477,995
============
Basic pro forma earnings per share $0.01
============
Diluted pro forma earnings per share:
NUMERATOR:
</TABLE>
21
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C>
Pro forma net income $207
============
DENOMINATOR:
Weighted average shares outstanding 32,477,995
Dilutive effect of options 324,875
------------
Dilutive weighted average shares outstanding 32,802,870
============
Diluted pro forma earnings per share $0.01
If anti-dilutive, use Basic
</TABLE>
22
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 10,446
<SECURITIES> 0
<RECEIVABLES> 55,827
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 79,539
<PP&E> 106,971
<DEPRECIATION> 19,170
<TOTAL-ASSETS> 1,403,325
<CURRENT-LIABILITIES> 24,011
<BONDS> 597,758
0
0
<COMMON> 452
<OTHER-SE> 685,255
<TOTAL-LIABILITY-AND-EQUITY> 1,403,325
<SALES> 0
<TOTAL-REVENUES> 70,877
<CGS> 56,681
<TOTAL-COSTS> 56,681
<OTHER-EXPENSES> 3,167
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,343
<INCOME-PRETAX> (208)
<INCOME-TAX> (122)
<INCOME-CONTINUING> (86)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (86)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
