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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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 0-15392
REGENT COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1492857
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 East RiverCenter Boulevard
Suite 180
Covington, Kentucky 41011
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (606) 292-0300
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class Name of each exchange on which registered
<S> <C>
Series C Convertible Preferred Stock None
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 31, 1999, the aggregate market value of registrant's common
equity beneficially held by non-affiliates of registrant is $0.
The number of common shares of registrant outstanding as of March 31,
1999 is 240,000.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive Proxy Statement to be filed during
April 1999 in connection with the 1999 Annual Meeting of Stockholders presently
scheduled to be held on April 29, 1999 are incorporated by reference into Part
III of this Form 10-K. Certain exhibits listed in Part IV of this Form 10-K are
incorporated by reference from prior filings made by the Registrant under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934.
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REGENT COMMUNICATIONS, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
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Page
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Part I
Item 1 Business 1
Item 2 Properties 10
Item 3 Legal Proceedings 11
Item 4 Submission of Matters to a Vote of Security Holders 11
Part II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters 11
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 7A Quantitative and Qualitative Disclosures about Market Risk 19
Item 8 Financial Statements and Supplementary Data 19
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 46
Part III
Item 10 Directors and Executive Officers of the Registrant 46
Item 11 Executive Compensation 46
Item 12 Security Ownership of Certain Beneficial Owners
and Management 46
Item 13 Certain Relationships and Related Transactions 46
Part IV
Item 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K 46
</TABLE>
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PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Regent Communications, Inc. ("Regent" or the "Company") is a holding
company engaged in the radio broadcasting business. Regent was incorporated in
Delaware in November 1996 by Terry S. Jacobs and William L. Stakelin with the
objective of acquiring radio properties, primarily in medium and smaller radio
markets, that have a history of growing revenues and broadcast cash flow, have
capable operating management and are in communities with good growth prospects
or have attractive competitive environments. Regent acquired its first radio
station in 1997, and with acquisitions of 32 additional stations in 1998, Regent
currently owns and operates 33 radio stations (21 FM and 12 AM) in ten markets
in California, Arizona, Michigan and Ohio. Regent has contracted to sell seven
of these stations which do not conform to Regent's strategic plans. Regent has
also agreed to purchase two FM radio stations and one AM station in the St.
Cloud, Minnesota market (the "St. Cloud Stations").
The following table sets forth certain information regarding radio
stations owned by Regent and which Regent has agreed to acquire:
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License
Power Expiration
Market Area Call Letters City of License Frequency (kw) Format Date
----------- ------------ --------------- --------- ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
San Diego, CA KCBQ(AM) San Diego, CA 1170 KHz 50.0/1.5 Talk/Information 12/01/05
Chico, CA KFMF(FM) Chico, CA 93.9 MHz 2.0 Album Oriented Rock 12/01/05
KALF(FM) Red Bluff, CA 95.7 MHz 7.0 Country Lite 12/01/05
KPPL(FM) Colusa, CA 107.5 MHz 28.0 Rock 12/01/05
Redding, CA KQMS(AM) Redding, CA 1400 KHz 1.0 News/Talk/Sports 12/01/05
KSHA(FM) Redding, CA 104.3 MHz 100.0 Soft Adult Contemporary 12/01/05
KNNN(FM) Central Valley, CA 99.3 MHz 4.2 Contemporary Hit Radio 12/01/05
KRDG(FM) Shingletown, CA 105.3 MHz 9.9 Oldies 12/01/05
KRRX(FM) Burney, CA 106.1 MHz 100.0 Album Oriented Rock 12/01/05
KNRO(AM) Redding, CA 600 KHz 1.0 Country 12/01/05
Palmdale, CA KAVC(AM) Mohave, CA 1340 KHz 1.0 Religion 12/01/05
KTPI(FM) Tehachapi, CA 103.1 MHz 6.0 Country 12/01/05
KOSS(FM) Rosamond, CA 105.5 MHz 2.9(6.0) Adult Contemporary 12/01/05
Victorville, CA KIXW(AM) Apple Valley, CA 960 KHz 5.0 Spanish 12/01/05
KZXY(FM) Apple Valley, CA 102.3 MHz 3.0 Adult Contemporary 12/01/05
KATJ(FM) George, CA 100.7 MHz 260w Country 12/01/05
KROY(AM) Victorville, CA 1590 KHz 500w Religion 12/01/05
KIXA(FM) Lucerne Valley, CA 106.5 MHz 550w Classic Rock 12/01/05
So. Lake Tahoe, CA KOWL(AM) So. Lake Tahoe, CA 1490 KHz 1.0 News/Talk/Sports 12/01/05
KRLT(FM) So. Lake Tahoe, CA 93.9 MHz 6.0 Lite Rock 12/01/05
Flagstaff, AZ * KZGL(FM) Cottonwood, AZ 95.9 MHz 9.0 Album Oriented Rock 10/01/05
KVNA(AM) Flagstaff, AZ 600 KHz 5.0 News/Talk/Sports 10/01/05
KVNA(FM) Flagstaff, AZ 97.5 MHz 100.0 Adult Contemporary 10/01/05
Kingman, AZ * KFLG(AM) Bullhead City, AZ 1000 KHz 5.0 American Standards 10/01/05
KFLG(FM) Bullhead City, AZ 102.7 MHz 53.0 Country 10/01/05
KAAA(AM) Kingman, AZ 1230 KHz 1.0 News/Talk 10/01/05
KZZZ(FM) Kingman, AZ 94.7 MHz 100.0 Adult Contemporary 10/01/05
Flint, MI WFNT(AM) Flint, MI 1470 KHz 5.0/1.0 News/Talk/Sports 10/01/04
WCRZ(FM) Flint, MI 107.9 MHz 50.0 Adult Contemporary 10/01/04
WWBN(FM) Tuscola, MI 101.5 MHz 6.0 Album Oriented Rock 10/01/04
Mansfield/Shelby, WMAN(AM) Mansfield, OH 1400 KHz 1.0 News/Talk/Sports 10/01/04
OH WYHT(FM) Mansfield, OH 105.3 MHz 50.0 Hot Adult Contemporary 10/01/04
WSWR(FM) Shelby, OH 100.1 MHz 3.0 Oldies 10/01/04
St. Cloud, MN ** WWJO(FM) St. Cloud, MN 98.1 MHz 101.0 Country 04/01/05
KMXK(FM) Cold Spring, MN 94.9 MHz 50.0 Oldies 04/01/05
WJON(AM) St. Cloud, MN 1240 KHz 1.0 News/Talk 04/01/05
</TABLE>
* Regent has entered into contracts to sell these stations.
** Regent has entered into a contract to acquire these stations.
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Acquisition Strategy. Given deregulation and subsequent consolidation
in the radio broadcast industry, Regent believes it is prudent in any
acquisition plan to acquire a sufficient number of stations in each market to
form competitive station clusters. Operating a number of stations in a single
market will allow Regent to reduce overhead and marketing expenses, to create a
strong identity among advertisers, to attract superior operating and on-air
talent, and to build a strong position with demographically attractive
listeners, thereby creating operating leverage that should give Regent the
opportunity to enhance revenue generation.
Initially, Regent has focused on the acquisition of properties
that have existing cash flow in order to provide a base for future growth.
Regent has not purchased, and does not foresee purchasing in the near
future, properties with negative cash flows, or so-called "underperforming"
or "turnaround" properties, unless they complement or can be combined with
the operations of positive cash flow properties in a market or regional
cluster. Regent's strategy is to operate in markets which have minimum
market advertising revenue of approximately $8,000,000 where the Regent
stations have the potential to generate at least $1,000,000 in annual
broadcast cash flow (net broadcasting revenues in excess of operating
expenses before depreciation, amortization and corporate expenses).
Management does not have a specific inflexible acquisition formula,
believing that what may be an attractive cash flow multiple in one situation may
be a very poor investment in other circumstances. Factors which may influence
pricing of station acquisitions include actual and potential revenue growth
rates, competitive factors, the potential to improve or add to existing
in-market operations, the quality of technical facilities, and hidden values
such as high overhead, poor sales conversion, or real estate or other assets
that can be sold.
Regent plans to utilize its management's experience in the industry and
relationships with both independent owners and larger corporate entities to
create opportunities for purchases that may not be available to others. Regent
expects to be flexible in structuring its acquisitions, offering certain sellers
the opportunity to receive stock of Regent in full or partial payment for their
stations. Regent believes the availability of preferred equity as a payment
medium may be useful to Regent in accommodating sellers' financial and tax
objectives.
Operating Strategy. Regent's strategies for operating broadcasting
properties and creating value have been developed from its management's years of
experience in the industry.
Critical elements of Regent's operating strategies include a continual
focus on improving ratings, revenues and operating effectiveness at each
station; an emphasis on developing superior local and corporate management; the
sharing of financial rewards with this management; operating multiple station
clusters for maximum efficiency; the development of strong ratings or format
positions within its markets; establishing the first, second or third revenue
position in each of its markets; improving the performance of developmental
stations; centralization of management information systems and controls; ongoing
programming research; and effective implementation of the results of this
research.
Regent management has experience building and operating profitable
in-market station clusters with strong ratings or format positions and believes
that the opportunities created by deregulation can only be realized by owning
well designed and executed clusters. Maximizing performance of an in-market
cluster requires musical formats that draw attractive demographics and create a
market position less vulnerable to competitive attack. An example of such a
cluster might include ownership of an Album Oriented Rock, Classic Rock and a
Sports/Talk station. Such a grouping would tend to attract an audience with
strength among male demographics. This audience would be of interest to
particular advertisers (e.g., brewers, certain automobile manufacturers or
retailers oriented toward a male clientele) and allow the broadcaster to create
attractive packages for these advertisers.
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Strong station clusters are also critical to establishing a competitive
revenue position. In most markets, holding a top three position generally
provides the ability to compete for advertisers seeking broad visibility in the
market. Moreover, clusters with larger revenue shares are in a position to
spread overhead and other costs over this larger base, thereby increasing
margins.
In running geographically diverse operations and rapidly changing
businesses that are typical of broadcasting companies, management has found that
effective management information systems and controls are an important element
of success. For Regent, in addition to regular oversight of daily operations by
senior management, these include detailed weekly sales and cash management
reports, monthly financial statements by department, station and market and,
where available, monthly tracking of Arbitron ratings by station and monthly
tracking, by market, of market and station revenue data.
Assembling talented and aggressive operating management is critical to
success for radio companies. Regent endeavors to create positive work
environments in order to attract and retain talented personnel. In addition,
Regent provides incentives to key employees by creating financial rewards,
including making equity available to certain key employees based on performance.
In summary, Regent's strategy is to attempt to create solid and growing
cash flows, profitable and well thought out local clusters, reasonable
geographic and formatic diversity and an experienced management team at both the
corporate and station levels. It is believed that the implementation of this
strategy will position Regent as a relatively attractive public or private
acquisition target or as a merger partner.
THE RADIO BROADCASTING INDUSTRY
At December 31, 1998, there were 4,793 commercial AM and 5,662
commercial FM stations authorized and operating in the United States. An
increasing number of persons listen to FM radio because of clearer sound
characteristics and stereo transmission. In the spring of 1998, FM listenership
represented about 78.5% of total radio audience.
Operations. Radio station revenue is derived predominantly from local
and regional advertising and, to a lesser extent, from national advertising.
Network compensation also provides some revenue. Local and regional sales
generally are made by a station's sales staff. National sales generally are made
by "national rep" firms specializing in radio advertising sales on the national
level. These firms are compensated on a commission-only basis. Local and
regional sales are made primarily to businesses in the market covered by a
station's broadcast signal and to some extent to businesses in contiguous or
nearby markets. Such businesses include auto dealers, soft drink, beer and wine
distributors, fast food outlets and financial institutions. National sales are
made to larger, nationwide advertisers, such as soft drink producers, automobile
manufacturers and airlines. Most advertising contracts are short-term, generally
running only for a few weeks. Advertising rates charged by a radio station are
based primarily on the station's ability to attract audiences in the demographic
groups which advertisers wish to reach and on the number of stations competing
in the market area. Rating service surveys quantify the number of listeners
tuned to the station at various times. Rates are generally highest during
morning and evening drive-time hours. Regent's stations' advertising sales are
made by their respective sales staffs under the direction of a general manager
or sales managers. Television, billboard, newspaper and direct mail advertising,
as well as special events and promotions, can be used to supplement direct
contact by the sales staff in developing advertising clients.
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The primary costs incurred in operating a radio station are salaries,
programming, promotion and advertising expenditures, occupancy costs of premises
for studios and offices, transmitting and other equipment expenses and music
license royalty fees.
Radio broadcasting revenues are spread over the calendar year. The
first quarter generally reflects the lowest and the second and third quarters
the highest revenues for the year, due in part to increases in demand from
retail advertising.
The radio industry is continually faced with technological changes and
innovations, the possible rise in popularity of competing entertainment and
communications media, changes in labor conditions, governmental restrictions and
actions of federal regulatory bodies, including the Federal Communications
Commission ("FCC"), any of which could have a material effect on Regent's
business. However, broadcasting stations have generally enjoyed growth in
listeners and value within the past several decades. Population increases and
greater availability of radios, particularly car and portable radios, have
contributed to this growth.
Competition. The radio broadcasting industry is a highly competitive
business. Regent's radio broadcasting stations compete for audience share and
revenue directly with the other AM and FM radio stations in their respective
market areas, as well as with other advertising media such as newspapers, cable
television, magazines, outdoor advertising, transit advertising and mail
marketing. Competition within the radio broadcasting industry occurs primarily
in the individual market areas so that a station in one market does not
generally compete with stations in other market areas. In addition to management
experience, factors which are material to competitive position include the
station's ratings in its market, rates charged for advertising time, broadcast
signal coverage, assigned frequency, audience characteristics, the ability to
create and execute promotional campaigns for clients and for the station, local
program acceptance and the number and characteristics of other stations in the
market area. Regent attempts to improve its competitive position by reviewing
programming and the programming of competitors, upgrading technical facilities
where appropriate, attempting to expand sales to existing advertising clients
and developing new client relationships, and by promotional campaigns aimed at
the demographic groups targeted by their respective stations.
The FCC recently has allocated spectrum to a new technology, digital
audio broadcasting ("DAB"), to deliver satellite-based audio programming to a
national or regional audience and has adopted regulations for a DAB service. DAB
may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats with compact disc quality sound to local
and national audiences. Another form of DAB, known as In-Band On Channel, could
provide DAB in the present FM radio band. It is not known at this time whether
this technology also may be used in the future by existing radio broadcast
stations either on existing or alternate broadcasting frequencies. In addition,
the FCC has recently authorized spectrum for the use of another new technology,
satellite digital audio radio services ("DARS"), to deliver audio programming.
The FCC has also authorized two companies to provide DARS service. DARS may
provide a medium for the delivery by satellite or terrestrial means of multiple
new audio programming formats to local and national audiences. It is not known
at this time whether this digital technology may also be used in the future by
existing radio broadcast stations either on existing or alternative broadcasting
frequencies.
The FCC has initiated a rule-making proceeding to consider the
licensing of low power radio stations. These low power stations would provide
licensees such as religious organizations or educational institutions the
opportunity to reach limited, local audiences. The rule-making has not
progressed sufficiently for the Company to be able to assess the competitive or
other impacts these low power stations could have in the Company's markets or on
the Company's stations.
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New technology allows radio broadcasters to make their programming
available to listeners over the Internet. Programming made available over the
Internet is exempt from certain government regulations applicable to broadcast
stations, including the multiple ownership limitations discussed below under
"Federal Regulation of Radio Broadcasting." The impact of radio broadcasting
over the Internet has not been fully evaluated and, thus, its effect on the
Company's stations is unknown.
FEDERAL REGULATION OF RADIO BROADCASTING
Introduction. The ownership, operation and sale of broadcast stations,
including those licensed to the Company, are subject to the jurisdiction of the
FCC, which acts under authority derived from the Federal Communications Act of
1934 (the "Communications Act"). The Communications Act was amended in 1996 by
the Telecommunications Act of 1996 (the "Telecom Act"). Among other things, the
FCC grants permits and licenses to construct and operate radio stations; assigns
frequency bands for broadcasting; determines whether to approve changes in
ownership or control of station licenses; regulates equipment used by stations
and the operating power and other technical parameters of stations; adopts and
implements regulations and policies that directly or indirectly affect the
ownership, operation and employment practices of stations; regulates the content
of some forms of radio broadcasting programming; and has the power to impose
penalties for violations of its rules under the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. Failure to
observe these or other rules and policies can result in the imposition of
various sanctions, including monetary forfeitures, the grant of "short-term"
(less than the maximum term) license renewal or, for particularly egregious
violations, the denial of a license renewal application, the revocation of a
license or the denial of FCC consent to acquire additional broadcast properties.
Reference should be made to the Communications Act, FCC rules and the public
notices and rulings of the FCC for further information concerning the nature and
extent of federal regulation of broadcast stations.
License Grant and Renewal. Radio broadcast licenses are granted and
renewed for maximum terms of eight years. Licenses may be renewed through an
application to the FCC. The Communications Act requires that the FCC grant the
renewal of a station's license if the FCC finds that, during the preceding term
of the license, the station has served the public interest, convenience and
necessity, that there have been no serious violations by the licensee of the
Communications Act or the rules and regulations of the FCC, and that there have
been no other violations by the licensee of the Communications Act or the rules
and regulations of the FCC that, when taken together, would constitute a pattern
of abuse.
Petitions to deny license renewal applications can be filed by
interested parties, including members of the public. Such petitions may raise
various issues before the FCC. The FCC is required to hold hearings on renewal
applications if the FCC is unable to determine that renewal of a license would
serve the public interest, convenience and necessity, or if a petition to deny
raises a "substantial and material question of fact" as to whether the grant of
the renewal application would be prima facie inconsistent with the public
interest, convenience and necessity. Also, during certain periods when a renewal
application is pending, the transferability of the applicant's license is
restricted. The Company is not currently aware of any facts that would prevent
the timely renewal of its licenses to operate its radio stations.
Regulatory Approvals. The Communications Act prohibits the assignment
of a broadcast license or the transfer of control of a broadcast license without
the prior approval of the FCC. In determining
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whether to assign, transfer, grant or renew a broadcast license, the FCC
considers a number of factors pertaining to the proposed transferee, including
compliance with various rules limiting common ownership of media properties,
financial qualifications of the proposed transferee, the "character" of the
proposed transferee and those persons holding "attributable" interests therein,
and compliance with the Communications Act's limitation on alien ownership, as
well as compliance with other FCC rules and policies.
Ownership Matters. Under the Communications Act, a broadcast license
may not be granted to or held by: (i) a corporation that has more than one-fifth
of its capital stock owned or voted by aliens or their representatives, by
foreign governments or their representatives, or by non-U.S. corporations; or
(ii) a corporation that is controlled, directly or indirectly, by any other
corporation more than one-fourth of whose capital stock is owned or voted by
aliens or their representatives, by foreign governments or their
representatives, or by non-U.S. corporations. These restrictions apply in
modified form to other forms of business organizations, including partnerships.
Under these restrictions no more than one-fourth of the Company's stock may be
owned or voted by aliens, foreign governments or non-U.S. corporations. The
Company is required to take appropriate steps to monitor the citizenship of its
shareholders, such as through representative samplings on a periodic basis, to
provide a reasonable basis for certifying compliance with the foreign ownership
restrictions of the Communications Act.
The Communications Act and FCC rules also generally restrict the common
ownership, operation or control of radio broadcast stations serving the same
local market, of a radio broadcast station and a television broadcast station
serving the same local market, and of a radio broadcast station and a daily
newspaper serving the same local market. Under these "cross-ownership" rules,
absent waivers, the Company would not be permitted to acquire any daily
newspaper or television broadcast station (other than low power television) in a
local market where it then owned any radio broadcast station. The FCC's rules
provide for the liberal grant of a waiver of the rule prohibiting common
ownership of radio and television stations in the same geographic market in the
top 25 television markets if certain conditions are satisfied. The Telecom Act
directed the FCC to extend this waiver policy to stations in the top 50
television markets, although the FCC has not yet implemented this change. For
purposes of these rules, a "market" is defined by reference to the signal
coverage(s) of the station(s) involved.
The Telecom Act and the FCC's broadcast multiple ownership rules
restrict the number of radio stations one person or entity may own, operate or
control on a local level. These limits are:
(i) in a market with 45 or more commercial radio signals, an entity may
own up to eight commercial radio stations, not more than five of which are in
the same service (FM or AM);
(ii) in a market with between 30 and 44 (inclusive) commercial radio
signals, an entity may own up to seven commercial radio stations, not more than
four of which are in the same service;
(iii) in a market with between 15 and 29 (inclusive) commercial radio
signals, an entity may own up to six commercial radio stations, not more than
four of which are in the same service; and
(iv) in a market with 14 or fewer commercial radio signals, an entity
may own up to five commercial radio stations, not more than three of which are
in the same service, except that an entity may not own more than 50% of the
stations in such market.
None of these multiple ownership rules requires any change in the
Company's current ownership of radio broadcast stations or precludes
consummation of its pending acquisition in the St. Cloud, Minnesota market;
however, these FCC rules and policies will limit the number of additional
stations which the Company may acquire in the future in certain of its markets.
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Because of these multiple and cross-ownership rules, a purchaser of
voting stock of the Company which acquires an "attributable" interest in the
Company may violate the FCC's rules if it also has an attributable or certain
non-attributable interests in other television or radio stations, or in daily
newspapers, depending on the number and location of those radio or television
stations or daily newspapers. Such a purchaser also may be restricted in the
companies in which it may invest, to the extent that these investments give rise
to an attributable interest. If an attributable shareholder of the Company
violates any of these ownership rules, the Company may be unable to obtain from
the FCC one or more authorizations needed to conduct its radio station business
and may be unable to obtain FCC consents for certain future acquisitions.
The FCC generally applies its television/radio/newspaper
cross-ownership rules and its broadcast multiple ownership rules by considering
the "attributable" or cognizable interests held by a person or entity. A person
or entity can have an interest in a radio station, television station or daily
newspaper by being an officer, director, partner or shareholder of a company
that owns that station or newspaper. Whether that interest is cognizable under
the FCC's ownership rules is determined by the FCC's attribution rules. If an
interest is attributable, the FCC treats the person or entity who holds that
interest as the "owner" of the radio station, television station or daily
newspaper in question, and therefore subject to the FCC's ownership rules.
With respect to a corporation, officers, directors and persons or
entities that directly or indirectly can vote 5% or more of the corporation's
stock (10% or more of such stock in the case of insurance companies, investment
companies, bank trust departments and certain other "passive investors" that
hold such stock for investment purposes only) generally are attributed with
ownership of the radio stations, television stations and daily newspapers the
corporation owns.
With respect to a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is "materially
involved" in the media-related activities or the management of the partnership.
Debt instruments, nonvoting stock, options and warrants for voting stock that
have not yet been exercised, limited partnership interests where the limited
partner is not "materially involved" in the media-related activities of the
partnership and where the limited partnership agreement expressly "insulates"
the limited partner from such material involvement, and minority (under 5%)
voting stock, generally do not subject their holders to attribution. However,
the FCC is currently reviewing its rules on attribution of broadcast interests,
and it may adopt stricter criteria. See "Proposed Changes," below.
In addition, the FCC has a "cross-interest" policy which, under certain
circumstances, could prohibit a person or entity with an attributable interest
in a broadcast station or daily newspaper from having a "meaningful"
nonattributable interest in another broadcast station or daily newspaper in the
same local market. Among other things, "meaningful" interests could include
significant equity interests (including non-voting stock, and otherwise
"insulated" limited partnership interests) and significant employment positions.
This policy may limit the permissible investments a purchaser of the Company's
voting stock may make or hold. It also may limit the Company's ability to
acquire stations in the same local market in which any of the Company's
non-attributable investors has an attributable media interest.
Programming and Operation. The Communications Act requires broadcasters
to serve the "public interest." Since 1981, the FCC gradually has relaxed or
eliminated many of the more formalized procedures it developed to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. However, licensees continue to be required to present
programming that is responsive to community problems, needs and interests and to
maintain certain records demonstrating such responsiveness. Complaints from
listeners concerning a station's programming will be
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considered by the FCC when it evaluates the licensee's renewal application, but
such complaints may be filed and considered at any time.
Stations also must follow various FCC rules that regulate, among other
things, political advertising, the broadcast of obscene or indecent programming,
sponsorship identification and technical operations (including limits on radio
frequency radiation).
In 1985, the FCC adopted rules regarding human exposures to levels of
radio frequency ("RF") radiation. These rules require applicants for new
broadcast stations, renewals of broadcast licenses or modifications of existing
licenses to inform the FCC at the time of filing such applications whether a new
or existing broadcast facility would expose people to RF radiation in excess of
certain guidelines. In August 1996, the FCC adopted more restrictive radiation
limits. These limits became effective on September 1, 1997 and govern
applications filed after that date. The Company anticipates that such
regulations will not have a material effect on its business.
Local Marketing Agreements. Over the past six years, a number of radio
stations, including certain of the Company's stations during 1997 and 1998,
entered into what commonly are referred to as "local marketing agreements"
("LMA") or "time brokerage agreements." In a typical LMA, the licensee of a
station makes available, for a fee, airtime on its station to a party who
supplies programming to be broadcast during that airtime and who collects
revenues from advertising aired during such programming. LMAs are subject to
compliance with the antitrust laws and the FCC's rules and policies, including
the requirement that the licensee of each station maintain independent control
over the programming and other operations of its own station. The FCC has held
that such agreements do not violate the Communications Act as long as the
licensee of the station that is being substantially programmed by another entity
maintains complete responsibility for, and control over, operations of its
broadcast stations and otherwise ensures compliance with applicable FCC rules
and policies.
A station that brokers substantial time on another station in its
market or engages in an LMA with a station in the same market will be considered
to have an attributable ownership interest in the brokered station for purposes
of the FCC's ownership rules, discussed above. As a result, a broadcast station
may not enter into an LMA that allows it to program more than 15% of the
broadcast time, on a weekly basis, of another local station that it could not
own under the FCC's local multiple ownership rules. FCC rules also prohibit a
station from simulcasting more than 25% of its programming on another station in
the same broadcast service (i.e., AM-AM or FM-FM) where the two stations serve
substantially the same geographic area, whether the licensee owns the stations
or owns one and programs the other through an LMA arrangement.
Proposed Changes. From time to time Congress and the FCC have taken
under consideration, and may in the future consider and adopt, new laws,
regulations and policies regarding a wide variety of matters that could,
directly or indirectly, affect the operation, ownership and profitability of the
Company's radio stations, result in the loss of audience share and advertising
revenues for the Company's radio stations, and affect the ability of the Company
to acquire additional radio stations or finance such acquisitions. Such matters
include: proposals to impose spectrum use or other fees on FCC licensees; the
FCC's regulations relating to political broadcasting; technical and frequency
allocation matters; proposals to restrict or prohibit the advertising of beer,
wine and other alcoholic beverages on radio; changes in the FCC's
cross-interest, multiple ownership and cross-ownership policies; changes to
broadcast technical requirements; proposals to allow telephone or cable
television companies to deliver audio and video programming to the home through
existing phone lines; proposals to limit the tax deductibility of advertising
expenses by certain types of advertisers; and proposals to auction the right to
use the radio broadcast spectrum to the highest bidder, instead of granting FCC
licenses and subsequent license renewals without such bidding.
-8-
<PAGE> 12
The Company cannot predict whether any of the foregoing proposed
changes will be adopted or what other matters might be considered in the future,
nor can it judge in advance what impact, if any, the implementation of any of
these proposals or changes might have on its business.
The foregoing is a brief summary of certain provisions of the
Communications Act, the Telecom Act and of specific FCC rules and policies. This
description does not purport to be comprehensive and reference should be made to
the Communications Act, the FCC's rules and the public notices and rulings of
the FCC for further information concerning the nature and extent of federal
regulation of radio broadcast stations.
Antitrust and Market Concentration Considerations. The Company is aware
that the United States Department of Justice (the "DOJ"), which evaluates
transactions to determine whether those transactions should be challenged under
the federal antitrust laws, has been active recently in its review of radio
station acquisitions, particularly where an operator proposes to acquire
additional stations in its existing markets or multiple stations in new markets.
On July 29, 1998, the DOJ issued a Civil Investigative Demand ("CID") to the
Company requesting information relating to the Company's acquisition on June 15,
1998 of six radio stations in and around Redding, California ("Redding
Stations"). In response to the CID, the Company has submitted certain
information requested by the DOJ so that it may evaluate whether the Company's
acquisition of the Redding Stations was in violation of applicable federal
antitrust laws. The Company believes that its acquisition of the Redding
Stations did not involve a violation of antitrust laws; however, it cannot
predict what the DOJ will conclude.
In addition, the FCC staff has stated publicly that it is currently
reevaluating its policies and procedures relating to local radio market
concentration, even where proposed acquisitions would comply with the station
ownership limits in the Telecom Act and the FCC's multiple-ownership rules, and
FCC approval of a number of pending radio station acquisitions by various
parties (including acquisitions by the Company in several markets) has been
delayed while this policy review is taking place. The FCC has issued a Notice of
Inquiry which, among other things, seeks public comment on these issues. There
can be no assurance that the DOJ, the Federal Trade Commission ("FTC") or the
FCC will not prohibit or require the restructuring of future acquisitions.
For an acquisition meeting certain size thresholds, the Hart Scott
Rodino Act ("HSR Act") and the rules promulgated thereunder require the parties
to file Notification and Report Forms with the FTC and the DOJ and to observe
specified waiting period requirements before consummating the transaction. If
the agencies determine that the transaction does not raise significant antitrust
issues, then they will either terminate the waiting period or allow it to expire
after the initial 30 days. On the other hand, if either of the agencies
determines that the transaction requires a more detailed investigation, then at
the conclusion of the initial 30 day period, it will issue a formal request for
additional information ("Second Request"). During the initial 30 day period
after the filing, the agencies decide which of them will investigate the
acquisition, which in the case of radio broadcasting has generally been the DOJ.
The issuance of a Second Request extends the waiting period until the twentieth
calendar day after the date of substantial compliance by all parties to the
acquisition. Thereafter, such waiting period may only be extended by court order
or with the consent of the parties. In practice, complying with a Second Request
can take a significant amount of time. In addition, if the investigating agency
raises substantive issues in connection with a proposed transaction, then the
parties frequently engage in lengthy discussions or negotiations with the
investigating agency concerning possible means of addressing those issues,
including but not limited to persuading the agency that the proposed acquisition
would not violate the antitrust laws, restructuring the proposed acquisition,
divestiture of other assets of one or more parties, or abandonment of the
transaction. Such discussions and negotiations can be time-consuming, and the
parties may agree to delay consummation of the acquisition during their
pendency.
-9-
<PAGE> 13
At any time before or after the consummation of a proposed acquisition,
the DOJ or the FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
acquisition or seeking divestiture of the business acquired or other assets of
the Company. Acquisitions that are not required to be reported under the HSR Act
also may be investigated by the DOJ or the FTC under the antitrust laws before
or after consummation. In addition, private parties may under certain
circumstances bring legal action to challenge an acquisition under the antitrust
laws.
As part of its increased scrutiny of radio station acquisitions, the
DOJ has stated publicly that it believes that commencement of operations under
LMAs and other similar agreements customarily entered into in connection with
radio station ownership transfers prior to the expiration of the waiting period
under the HSR Act could violate the HSR Act.
EMPLOYEES
At the corporate level, Regent employs 11 full-time employees and one
part-time employee. Each station has its own complement of employees, which may
include a general manager, a sales manager, a business manager, an operations
manager, advertising staff, on-air personalities and secretarial personnel. In
the aggregate, Regent's subsidiaries employ 233 persons on a full-time basis and
145 persons part-time.
Regent has never experienced a strike or work stoppage and believes
that its relations with its employees are good.
ITEM 2. PROPERTIES
The types of properties required to support each of Regent's radio
stations include offices, studios and tower, transmitter and antenna sites.
Regent typically leases its studio and office space with lease terms that expire
in five to ten years, although Regent does own certain of its facilities. A
station's studios are generally housed with its offices in downtown or business
districts. Regent generally considers its facilities to be suitable and of
adequate size for its current and intended purposes. Regent owns a majority of
its main tower, transmitter and antenna sites and leases the remainder of such
sites with lease terms that expire, including renewal options, in periods
ranging up to 20 years. The tower, transmitter and antenna site for each station
is generally located so as to provide maximum market coverage, consistent with
the station's FCC license. In general, Regent does not anticipate difficulties
in renewing facility or tower, transmitter and antenna site leases or in leasing
additional space or sites if required.
Regent owns substantially all of its other equipment, consisting
principally of towers, transmitters, antennae, studio equipment and general
office equipment. The towers, transmitters, antennae and other transmission
equipment used by Regent's stations are generally in good condition, although
opportunities to upgrade facilities are continuously reviewed. Substantially all
of the property owned by Regent secures Regent's borrowings under its bank
credit facility. See Notes 4 and 14 to the Company's 1998 Consolidated Financial
Statements for a description of encumbrances against Regent's properties and
Regent's rental obligations.
Regent leases approximately 4,700 square feet of office space in
Covington, Kentucky for its corporate offices under a lease which expires on
March 31, 2004. Regent has the option to renew that lease for two additional
five-year terms at market rates. Current annual rental is $69,943. Additional
corporate office space of approximately 780 square feet is leased at Old
Brookville, New York. The lease expires in February 2001. Annual rental is
currently $22,200.
-10-
<PAGE> 14
ITEM 3. LEGAL PROCEEDINGS.
The Company becomes involved from time to time in various claims and
lawsuits that are incidental to its business. In the opinion of the Company's
management, there are no legal proceedings pending against the Company or
any of its subsidiaries, or to which any of their properties are subject, that
would have a material adverse effect on the financial condition, results of
operations or cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There was no matter submitted to the security holders of the Company
during the fourth quarter of its fiscal year ended December 31, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
As of March 31, 1999, all of the Company's outstanding common stock
(240,000 shares) was held by two of the Company's executive officers and
directors. There is no public trading market for the Company's common stock.
The Company has never declared or paid cash dividends on its common
stock and does not intend to do so in the foreseeable future. The Company's
existing credit agreement with its lenders prohibits the payment of cash
dividends on its common stock.
As part of the additional purchase and sale of shares of the Company's
Series F Convertible Preferred Stock pursuant to the terms of the Company's
existing Stock Purchase Agreement dated June 15, 1998 with Waller-Sutton Media
Partners, L.P. and the other purchasers listed therein (collectively, the
"Series F Purchasers"), on November 30, 1998, the Company issued 400,000
additional shares of its Series F Convertible Preferred Stock to the Series F
Purchasers for an aggregate cash purchase price of $2,000,000 ($5.00 per share).
The Series F Convertible Preferred Stock is convertible at any time into shares
of the Company's common stock on a one-for-one basis at a conversion price of
$5.00 per share. The Company relied upon an exemption from the registration
requirements of the Securities Act of 1933, as amended, provided under Section
4(2) thereof and Rule 506 of Regulation D promulgated thereunder with respect to
the offer and sale of such Series F Convertible Preferred Stock.
ITEM 6. SELECTED FINANCIAL DATA.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998(1) 1997 1996 1995 1994
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating results:
Net broadcasting revenues $ 14,771,523 $ 5,993,291 $ 4,873,954 $ 5,113,582 $ 4,983,513
Income (loss) from operations (433,321) 1,015,144 1,222,829 1,511,481 1,470,355
Income (loss)
before extraordinary items (3,289,924) (362,537) 278,840 244,816 992,079
Extraordinary items, net (1,170,080) (4,333,310) -- -- 787,201
Net income (loss) (4,460,004) (4,695,847) 278,840 244,816 1,779,280
Basic net income (loss)
per common share:
Income (loss)
before extraordinary items $ (42.67) $ (1.51) $ 1.16 $ 1.02 $ 4.13
Extraordinary items (4.88) (18.06) -- -- 3.28
------------ ------------ ----------- ----------- -----------
Basic net income (loss)
per common share $ (47.55) $ (19.57) $ 1.16 $ 1.02 $ 7.41
Diluted net income (loss)
per common share:
Income (loss)
before extraordinary items $ (42.67) $ (1.51) $ 1.16 $ 1.02 $ 4.13
Extraordinary items (4.88) (18.06) -- -- 3.28
------------ ------------ ----------- ----------- -----------
Diluted net income (loss)
per common share $ (47.55) $ (19.57) $ 1.16 $ 1.02 $ 7.41
Balance sheet data at year end:
Current assets $ 11,618,745 $ 1,919,232 $ 1,305,585 $ 1,311,916 $ 1,246,104
Total assets 67,617,870 13,010,554 4,326,453 4,546,508 4,488,913
Current liabilities 13,027,306 859,631 1,068,021 1,037,239 1,150,537
Long-term debt 34,617,500 21,911,661 7,276,884 7,828,883 8,347,547
Redeemable preferred stock 26,876,058 -- -- -- --
Total shareholders' deficit (9,546,573) (10,181,788) (5,485,941) (5,764,781) (6,009,597)
</TABLE>
(1) See Notes 1 and 2 to the Company's Consolidated Financial Statements for a
discussion of comparability between years. The Company has not declared or paid
cash dividends on its Common Stock since its inception.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
1998 Compared to 1997.
On June 15, 1998, Regent consummated a number of mergers,
acquisitions, borrowings and issuances of additional equity (the "June 1998
Transactions"). See Notes 1, 2, 4 and 5 to the Company's Consolidated
Financial Statements included as part of this Form 10-K. The historical
financial statements of Faircom Inc. ("Faircom"), which was deemed the
"accounting acquirer" in the merger between Faircom and
-11-
<PAGE> 15
Regent completed June 15, 1998, became the historical financial statements
of the Company, and accordingly, the results of operations of Regent and of
the other entities which merged with or were acquired by Regent as part of
the June 1998 Transactions have been included in the Company's consolidated
financial statements only from June 15, 1998.
On the closing date of the June 1998 Transactions, the Company expanded
from a small broadcaster (represented, from an accounting standpoint, by
Faircom's six stations in two markets, of which only three stations in one
market were owned prior to June 30, 1997) to a group broadcaster operating 33
stations in ten different markets. This significant change in size of the
Company's operations led directly to substantial increases in revenue, operating
expenses, depreciation and amortization, corporate general and administrative
expenses, and interest expense in 1998 as compared to 1997. Because of the June
1998 Transactions, the results of the Company's operations in 1998 are not
comparable to those of 1997, nor are they necessarily indicative of results in
the future.
The key focus in 1998 was developing the platform from which the
Company could carry out its operating strategies as a much larger radio company.
Development of the platform required significant expenditures. These costs are
viewed by the Company as investment costs which will provide returns to the
Company in future years. Operationally, the Company replaced general managers in
eight of its markets and added or replaced general sales managers in six markets
in order to implement aggressive sales programs. The Company invested
significantly in the hiring and training of sales personnel and in increased
promotional spending in all markets. Finally, the Company developed a corporate
staff which it believes is capable of supporting a much larger operation. In
1997, the Faircom corporate office was a very small operation. While that
facility and expense have been maintained, the Company's primary administrative
offices are now located in Covington, Kentucky. The cost of additional executive
personnel and administrative expense amounted to approximately $940,000 from
June 16, 1998 through December 31, 1998 as a result of the merger. Additionally,
the issuance of stock options granted as of June 15, 1998 to two officers of
Faircom pursuant to the terms of the merger agreement between the Company and
Faircom resulted in the recognition, as of such date of grant, of approximately
$530,000 in additional compensation expense which is included in corporate
general and administrative expense for 1998. Consequently, 1998 operating loss
of $433,000 compared unfavorably with operating income of $1,015,000 in 1997.
Interest expense was $2,883,000 in 1998 as compared with $1,331,000 in
1997 principally due to debt incurred in connection with the June 1998
Transactions and to a lesser extent to debt incurred in connection with the
acquisition of the Mansfield Stations and the Shelby Station (defined below).
There were no federal, state or local income taxes in 1998 as a result
of a taxable loss.
In 1998, net loss declined to $4,460,000 from $4,696,000 in 1997 as a
result of the increase in operating losses and the increase in interest expense
offset by lower net extraordinary losses from debt extinguishment.
In addition to developing the infrastructure to support a large radio
group, the Company refined its definition of markets which it targets for
operation. The Company has decided to concentrate on markets which have a
minimum of approximately $8,000,000 in market advertising revenue and where the
Regent stations have the potential to generate at least $1,000,000 in annual
broadcast cash flow. The St. Cloud Stations, which are expected to be acquired
during the second quarter of 1999, meet these criteria. In addition, the Company
has entered into agreements for the sales of its Flagstaff and Kingman/Bullhead
City, Arizona radio stations (the "Arizona Stations"), which also do not meet
this strategic objective. Applications for FCC approval of these sales are
pending.
-12-
<PAGE> 16
1997 Compared to 1996.
The results of Faircom's operations for the year ended December 31,
1997 compared to the year ended December 31, 1996 are not comparable or
necessarily indicative of results in the future due to the significance of
acquisitions.
As of June 30, 1997, Faircom, through a wholly-owned subsidiary,
Faircom Mansfield Inc. ("Faircom Mansfield"), acquired the assets and
operations of two radio stations, WMAN-AM and WYHT-FM, both located in
Mansfield, Ohio (the "Mansfield Stations") for aggregate cash consideration of
$7,650,000. The acquisition has been accounted for as a purchase, and
accordingly the operating results of the Mansfield Stations have been included
in the Consolidated Statements of Operations from the acquisition date.
The increase in Faircom's net broadcasting revenues in 1997 as
compared with 1996 resulted principally from the ownership and operation of the
Mansfield Stations during 1997. Net broadcasting revenues increased to
$5,993,000 from $4,874,000, or 23.0%, in 1997 as compared with 1996.
Station operating expenses increased in 1997 as compared with 1996,
primarily as a result of the acquisition of the Mansfield Stations. Such
increase was to $3,860,000 from $2,993,000, or 29.0%, in 1997 as compared with
1996.
Depreciation and amortization and interest expense increased in 1997
as compared with 1996 as a result of the addition of assets and debt incurred
in connection with the acquisition of the Mansfield Stations.
Taxes on income for both 1997 and 1996 related principally to state
income taxes. There were no current federal income taxes in 1997, as a result
of a taxable loss. Current federal income taxes in 1996 were offset in full by
the utilization of net operating loss carryforwards. Faircom has provided
valuation allowances equal to its deferred tax assets because of uncertainty as
to their future utilization. The deferred tax assets relate principally to net
operating loss carryforwards. Although Faircom was marginally profitable in
1994 through 1996, the loss in 1997 along with substantial historical losses
caused management to conclude that it was still premature to reduce the
valuation allowance.
As a result principally of an extraordinary loss from debt
extinguishment of $4,703,000, offset in part by an extraordinary gain from debt
extinguishment of $370,000, net loss was $4,696,000 for 1997 compared to net
income of $279,000 in 1996.
Seasonality.
The financial results of the Company's business are seasonal.
Revenues are generally higher in the second, third and fourth calendar quarters
than in the first quarter.
LIQUIDITY AND CAPITAL RESOURCES
In 1998, net cash used in operating activities was $385,000 compared
with net cash provided by operating activities of $418,000 for 1997. In 1998,
proceeds from the issuance of long-term debt and preferred stock provided
substantially all of the funds used in operating activities, as well as funds
used for the acquisition of radio stations, capital expenditures, principal
payments on long-term debt and other investing and financing
-13-
<PAGE> 17
activity cash requirements. As a result, there was a net decrease in cash of
$57,000 in 1998 compared with a net increase of $412,000 in 1997.
The Company's borrowings are made under an agreement with a group of
lenders (as amended through the latest amendment dated February 24, 1999, the
"Credit Agreement") which provides for a senior reducing revolving credit
facility with a commitment of up to $55,000,000 expiring March 31, 2005 (the
"Revolver"). The Credit Agreement permits the borrowing of available credit for
working capital and acquisitions, including related acquisition expenses. In
addition, the Company may request from time to time that the lenders issue
letters of credit in accordance with the same provisions as the Revolver. At
December 31, 1998, the Company had borrowed $34,900,000 under the Credit
Agreement and had approximately $479,000 in cash balances. The remaining unused
portion of the Revolver of $20,100,000 was available to finance other
acquisitions, subject to restrictions contained in the Credit Agreement.
The Credit Agreement provides for the quarterly reduction of the
commitment under the Revolver for each of the four quarters during 1999 in the
amount of $687,500 per quarter, and by increasing quarterly amounts thereafter
to $2,750,000 during 2004, with a final payment of $6,875,000 due March 31,
2005, and, under certain circumstances, requires mandatory prepayments of any
outstanding loans and further commitment reductions. Mandatory prepayments and
commitment reductions are required to the extent that, from time to time,
outstanding loans exceed the commitment then in effect, and from certain asset
sales, surplus assets of any pension plans, sales of equity securities and
receipts of insurance proceeds. The indebtedness of the Company under the Credit
Agreement is collateralized by liens on substantially all of the assets of the
Company and its operating and license subsidiaries and by a pledge of the
operating and license subsidiaries' stock, and is guaranteed by those
subsidiaries. The Credit Agreement contains restrictions pertaining to the
maintenance of financial ratios, capital expenditures, payment of dividends or
distributions of capital stock and incurrence of additional indebtedness.
Beginning January 1, 1999, the Company is required to maintain an
interest rate coverage ratio (EBITDA, defined as earnings before interest,
taxes, depreciation and amortization, to annual interest rate cost); a fixed
charge coverage ratio (EBITDA to annual fixed charges); and a financial leverage
ratio (total debt to Adjusted EBITDA, as defined in the Credit Agreement).
Schedules of these covenants follow:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Minimum Interest Coverage Ratio
-----------------------------------------------------------------------------------------------------
Time Period Minimum Interest Coverage Ratio
-----------------------------------------------------------------------------------------------------
<S> <C>
January 1, 1999 - March 31, 1999 0.95:1.00
-----------------------------------------------------------------------------------------------------
April 1, 1999 - June 30, 1999 1.30:1.00
-----------------------------------------------------------------------------------------------------
July 1, 1999 - September 30, 1999 1.40:1.00
-----------------------------------------------------------------------------------------------------
October 1, 1999 - December 31, 1999 1.60:1.00
-----------------------------------------------------------------------------------------------------
January 1, 2000 - March 31, 2000 1.75:1.00
-----------------------------------------------------------------------------------------------------
April 1, 2000 - and thereafter 2.00:1.00
-----------------------------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE> 18
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
MINIMUM FIXED COVERAGE RATIO
-----------------------------------------------------------------------------------------------------
Time Period Minimum Fixed Coverage Ratio
-----------------------------------------------------------------------------------------------------
<S> <C>
January 1, 1999 - March 31, 1999 0.60:1.00
-----------------------------------------------------------------------------------------------------
April 1, 1999 - June 30, 1999 0.80:1.00
-----------------------------------------------------------------------------------------------------
July 1, 1999 - September 30, 1999 0.90:1.00
-----------------------------------------------------------------------------------------------------
October 1, 1999 - December 31, 1999 1.05:1.00
-----------------------------------------------------------------------------------------------------
January 1, 2000 - and thereafter 1.10:1.00
-----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
MAXIMUM LEVERAGE RATIO
-----------------------------------------------------------------------------------------------------
Time Period Maximum Leverage Ratio
-----------------------------------------------------------------------------------------------------
<S> <C>
January 1, 1999 - December 30, 1999 6.75:1.00
-----------------------------------------------------------------------------------------------------
December 31, 1999 - March 30, 2000 6.25:1.00
-----------------------------------------------------------------------------------------------------
March 31, 2000 - June 29, 2000 6.00:1.00
-----------------------------------------------------------------------------------------------------
June 30, 2000 - September 29, 2000 5.75:1.00
-----------------------------------------------------------------------------------------------------
September 30, 2000 - December 30, 2000 5.25:1.00
-----------------------------------------------------------------------------------------------------
December 31, 2000 - March 30, 2001 4.75:1.00
-----------------------------------------------------------------------------------------------------
March 31, 2001 - June 29, 2001 4.25:1.00
-----------------------------------------------------------------------------------------------------
June 30, 2001 - September 29, 2001 3.75:1.00
-----------------------------------------------------------------------------------------------------
September 30, 2001 - and thereafter 3:50:1.00
-----------------------------------------------------------------------------------------------------
</TABLE>
To maintain compliance with these covenants, the Company must
reduce its outstanding borrowings during the second and third quarters of
1999. It intends to do this through proceeds from the sales of the Arizona
Stations as well as the sale of the Company's operations in another
non-strategic market. Sales of the Arizona Stations are expected to close
during the second quarter of 1999, pending receipt of FCC consent. The
Company is currently seeking a buyer for such other non-strategic market
and expects to be able to consummate such sale during the third quarter of
1999. If these sales were to be delayed, the Company would request waivers
from its lenders to allow more time for the sales to close or to raise
additional equity to reduce its debt.
Interest under the Credit Agreement is payable, at the option of the
Company, at alternative rates equal to the LIBOR rate (established October 1,
1998 at 5.31% and effective at that same rate at December 31, 1998) plus 1.50%
to 3.50% or the base rate announced by the Bank of Montreal (7.75% at December
31, 1998) plus .25% to 2.25%. The spreads over the LIBOR rate and such base rate
vary from time to time, depending upon the Company's financial leverage. The
Company will pay quarterly commitment fees equal to 3/8% to 1/2% per annum,
depending upon the Company's financial leverage, on the unused portion of the
commitment under the Credit Agreement. The Company also is required to pay
certain other fees to the agent and the lenders for the administration and use
of the credit facility.
In connection with the 1997 acquisitions of KCBQ(AM) in San Diego,
California and an option to acquire WSSP(FM) in Charleston, South Carolina, the
Company issued notes in the maximum principal amounts of $6,000,000 and
$1,500,000, respectively. The San Diego note, which is collateralized by the
assets of the San Diego station, matures on the earlier of June 4, 2002 or the
sale of the San Diego station, and bears interest at 10% on any unpaid principal
after maturity. The Company is currently seeking a buyer for the San Diego
station. During 1998, the Company agreed to sell the Charleston station and
consummated the sale of that station in March 1999. At that time, the Charleston
note, which was collateralized by the assets of the Charleston station, was paid
in full. Based upon the Company's expectation that these stations would be sold
during 1999, $7,500,000, representing the principal amount of both notes, was
classified as a current liability at December 31, 1998 with an offsetting
current asset in that amount, designated as "assets held for sale."
-15-
<PAGE> 19
In the first quarter of 1999, the Company received approximately
$5,030,000 in gross proceeds from the issuance of shares of its Series F and G
Convertible Preferred Stock at $5.00 per share. In addition, the purchasers of
the Series F Convertible Preferred Stock have committed an additional $5,082,000
to the purchase of an additional 1,016,000 shares of the Company's Series F
Convertible Preferred Stock at $5.00 per share, to fund acquisitions by the
Company. The Company intends to draw on the balance of the committed funds to
help finance the pending acquisition of the St. Cloud Stations.
Based on current interest rates and accrued interest expense as of
December 31, 1998, the Company believes its interest payments for 1999 will be
approximately $3,240,000. Debt principal payments are expected to be $980,000
for 1999. Corporate general and administrative expense and capital expenditures
for 1999 are estimated to be approximately $2,065,000 and $1,070,000,
respectively. Of the $1,070,000 in capital expenditures, approximately $770,000
is required to be made in 1999 under the terms of the Credit Agreement. In
addition, during the first quarter of 1999, the Company paid approximately
$1,200,000 of deferred professional fees which were mostly incurred in
connection with the June 1998 Transactions. The Company intends to pay the
remaining balance of approximately $286,000 in deferred professional fees in
1999. For these payments, aggregating $8,841,000, the Company has used or will
utilize net cash provided by operations, current cash balances, and proceeds
from the issuance of Series F and G Convertible Preferred Stock received in the
first quarter of 1999.
The Company believes net cash from operations, cash balances, and the
proceeds from the sales of the Arizona Stations and the Company's other
non-strategic property will be sufficient to reduce borrowings under the Credit
Agreement to allow the Company to maintain compliance with all covenants and to
meet the Company's interest expense, and any required principal payments,
corporate expenses and capital expenditures in the foreseeable future, based on
its projected operations and indebtedness.
In addition to the Company's pending acquisition of the St. Cloud
Stations, which the Company intends to finance through borrowings against the
unused portion of its Credit Agreement and the $5,082,000 additional commitment
from the holders of its Series F Convertible Preferred Stock, the Company is
actively pursuing a number of acquisitions of radio stations in a number of
markets. Any such acquisitions would be financed from borrowings against the
unused portion of its Credit Agreement (less any utilization of such portion for
working capital needs) and through additional equity offerings, which the
Company intends to pursue in the second quarter of 1999. There can be no
assurance, however, that any of such acquisitions will be consummated or that
all or any portion of such financing will be available.
MARKET RISK
The Company is exposed to the impact of interest rate changes because
of borrowings under its Credit Agreement. It is the Company's policy to enter
into interest rate transactions only to the extent considered necessary to meet
its objectives and to comply with the requirements of its Credit Agreement. The
Company has not entered into interest rate transactions for trading purposes. At
December 31, 1998, the Company had $34,900,000 outstanding under its Credit
Agreement. The Company's future commitments under its Credit Agreement is
contingent upon the quarterly reduction requirements of the Credit Agreement
("Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources") and the outstanding borrowings
that the Company has at a particular time.
To satisfy the requirements of its Credit Agreement, the Company
entered into a two-year collar agreement with the Bank of Montreal effective
August 17, 1998 for a notional amount of $34,400,000 to mitigate the risk of
increasing interest rates created by the borrowing under its Credit Agreement.
This
-16-
<PAGE> 20
agreement is based on the three-month LIBOR or bank rate, has a Cap Rate, as
defined, of 6.50% and a Floor Rate, as defined, of 5.28%. These rates are
exclusive of additional spreads over the LIBOR or bank rate depending upon the
Company's financial leverage. Based on the $34,900,000 principal amount
outstanding under the Company's credit facility at December 31, 1998, the annual
interest expense would fluctuate by a maximum of $420,000 on $34,400,000,
exclusive of leverage spreads over the LIBOR or bank rate. Any fluctuation on
the remaining $500,000 would not have a material effect on the Company.
Each series of the Company's redeemable preferred stock is carried at
its fair market value, which, at December 31, 1998, equaled its liquidation
value. Holders of the redeemable preferred stock may require the Company,
subject to certain conditions, to repurchase their shares at any time after five
years from issuance.
YEAR 2000 COMPUTER SYSTEM COMPLIANCE
The "Year 2000" ("Y2K") issue results from the fact that many computer
programs were written with date-sensitive codes that utilize only the last two
digits (rather than all four digits) to refer to a particular year. As the year
2000 approaches, these computer programs may be unable to process accurately
certain date-based information, as the program may interpret the year 2000 as
1900.
The Company utilizes various information technology (IT) systems in the
operation of its business, including accounting and financial reporting systems
and local and wide area networking infrastructure. In addition to IT systems,
the Company is also reliant on several non-information technology (non-IT)
systems, which could potentially pose Y2K issues, including traffic scheduling
and billing systems and digital audio systems providing automated broadcasting.
Finally, in addition to the risks posed by Y2K issues involving its own IT and
non-IT systems, the Company could also be affected by any Y2K problems
experienced by its key business partners, which include local and national
advertisers, suppliers of communications services, financial institutions and
suppliers of utilities. The Company's plans to address the Y2K issue involve
four phases: (a) assessment of the existence, nature and risk of Y2K problems
affecting the Company's systems; (b) remediation of the Company's systems,
whether through repair, replacement or upgrade, based on the findings of the
assessment phase; (c) testing of the enhanced or upgraded systems; and (d)
contingency planning.
In the fourth quarter of 1998, the Company engaged the services of an
independent Y2K consultant in order to analyze the scope of the Company's Y2K
compliance issues and to initiate formal communications with its advertisers,
suppliers, lenders and other key business partners to determine their exposure
to the Y2K issue.
During the first quarter of 1999, the assessment phase was completed
with respect to the IT-systems and non-IT systems. Based on the findings of the
assessment phase, a detailed plan was developed for the remaining phases
(remediation, testing and contingency planning).
A summary of the status of the Company's Y2K plans in the IT and non-IT
areas follows.
IT Systems
During the assessment phase, the Company evaluated the level of Y2K
compliance of IT systems and hardware in its executive offices and all
markets. All financial and networking systems which have been
determined to be non-compliant will be upgraded in the second quarter
of 1999 and tested by the end of the third quarter of 1999. Costs
associated with the upgrades are expected to be immaterial. The Company
has assessed several of its personal computers ("PCs") to be
non-compliant. Several of the non-compliant PCs are either upgradable
at a minimal cost or are used for tasks where non-compliance will not
impact their functionality. There are PCs which will need to be
replaced in 1999 and the cost of replacement is included in the
Company's capital plan. All necessary upgrades will occur by the
-17-
<PAGE> 21
end of the third quarter of 1999. Most of the replacements will take
place by the end of the third quarter; however, a portion will occur in
the fourth quarter.
Non-IT Systems
The Company acquired all but one of its radio stations on or after June
15, 1998 from several independent operators. As part of the Company's
ongoing plan to provide its stations with a standardized digital audio
broadcast system and, thus, to realize certain of the efficiencies of
operating as a larger broadcast group, the Company has been
systematically upgrading the broadcast systems and other technical
equipment at its stations. Although this upgrading plan has had a
business purpose independent of the Y2K compliance issue, the Company
has required, as a matter of course, written assurance from its
suppliers that the new broadcast systems are Y2K compliant. With
respect to those properties which the Company expects to own on January
1, 2000, the upgrading project is 70% complete, with the installation
of new Y2K compliant broadcast systems having been completed for the
Company's stations in all of its markets except the Chico, California,
Mansfield, Ohio and Redding, California markets. The costs of the
upgrade project have been included in capital expenditures. Upgrades in
the Chico, California and the Mansfield, Ohio markets commenced during
the first quarter of 1999 and are expected to be completed by the end
of the second quarter of 1999. The upgrade in Redding will occur in the
third quarter in conjunction with an expansion of the Company's
facility in the market. The Company plans to conduct and complete its
own testing of the broadcast systems at all of its stations by the end
of the third quarter of 1999. The cost associated with this testing is
expected to be immaterial.
The traffic scheduling and billing systems currently utilized at the
Company's stations are provided by two suppliers on a Y2K compliant
basis, with the exception of the Company's stations located in the
Victorville, California market. To confirm Y2K compliance of its
traffic and billing systems, the Company intends to conduct and
complete tests of these systems during the second quarter of 1999. By
the third quarter of 1999, the Company intends to have replaced its
traffic and billing systems at the Victorville stations with a system
provided by suppliers utilized by the Company's other stations.
During the first quarter of 1999, the Company compiled a detailed
inventory of key business partners and prioritized the list based on potential
impact to the Company in the event that the business partners experienced severe
operational or financial hardship as a result of Y2K non-compliance. Each
business partner was contacted and asked to fill out a detailed questionnaire
regarding its own Y2K assessment. Follow-up on responses will occur in the
second quarter of 1999 and action steps will be developed based on the
responses.
The Company has budgeted $100,000 in 1999 for capital expenditures and
$50,000 for expenses involved in Y2K remediation. The Company does not expect
total expenditures to exceed the total budgeted amount.
Although the Company has not received any information to date that
would lead it to believe its internal Y2K compliance issues will not be able to
be resolved on a timely basis or that the related costs will have a material
adverse effect on the Company's operations, cash flows or financial condition,
the assessment phase of the Company's plans relative to its business partner
interfaces will continue through the second quarter of 1999. The remediation
phase is also not complete with respect to the broadcast systems at the
Company's Chico, Redding and Mansfield stations, and no actual testing of the
Company's enhanced or upgraded systems has been conducted. Accordingly,
unexpected costs associated with the remediation of the Company's systems or
with interruption of operation of the Company's stations could occur and, if
significant, could have a material adverse effect on the Company's operations,
cash flows
-18-
<PAGE> 22
and financial condition. The most reasonably likely worst-case scenarios include
loss of power and communications links. The impact of these uncertainties on the
Company's results of operations, liquidity and financial condition, is not
determinable. Based on the assessment of external and non-IT system risks and
the testing to be undertaken by the Company, contingency plans will be developed
for all critical systems by the end of the third quarter of 1999. Testing of
contingency plans will occur in the third and fourth quarters of 1999.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Form 10-K includes certain forward-looking statements with respect
to the Company that involve risks and uncertainties. Such statements are
influenced by the Company's financial position, business strategy, budgets,
projected costs, and plans and objectives of management for future operations,
and are expressed with words such as "anticipate," "believe," "plan,"
"estimate," "expect," "intend," "project" and other similar expressions.
Although the Company believes its expectations reflected in such forward-looking
statements are based on reasonable assumptions, readers are cautioned that no
assurance can be given that such expectations will prove correct and that actual
results and developments may differ materially from those conveyed in such
forward-looking statements. For these statements, the Company claims the
protections of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
Important factors that could cause actual results to differ materially
from the expectations reflected in the forward-looking statements herein include
changes in general economic, business and market conditions, as well as changes
in such conditions that may affect the radio broadcast industry or the markets
in which the Company operates, including, in particular, increased competition
for attractive radio properties and advertising dollars, fluctuations in the
cost of operating radio properties, and changes in the regulatory climate
affecting radio broadcast companies. Such forward-looking statements speak only
as of the date on which they are made, and the Company undertakes no obligation
to update any forward-looking statement to reflect events or circumstances after
the date of this Form 10-K. If the Company does update or correct one or more
forward-looking statements, readers should not conclude that the Company will
make additional updates or corrections with respect thereto or with respect to
other forward-looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this Item 7A is set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Market Risk" and is incorporated under this Item 7A by this
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Pages
Financial Statements:
Reports of Independent Accountants 19
Consolidated Statements of Operations for
the three years ended December 31, 1998, 1997 and 1996 20
Consolidated Balance Sheets for the years ended
December 31, 1998 and 1997 21
Consolidated Statements of Cash Flows for the
three years ended December 31, 1998, 1997 and 1996 22
Statement of Changes in Shareholders' Deficit 23
Notes to Consolidated Financial Statements 24
Financial Statement Schedule:
Report of Independent Accountants on Financial
Statement Schedule 45
II -- Valuation and Qualifying Accounts 45
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Regent Communications, Inc.
In our opinion, the accompanying consolidated balance sheet as of December
31, 1998 and the related consolidated statements of operations, of cash
flows, and of changes in shareholders' deficit present fairly, in all
material respects, the financial position of Regent Communications, Inc.
(the "Company") at December 31, 1998, and the results of its operations and
its cash flows for the year then ended, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for the opinion expressed above. The consolidated financial
statements of the Company, prior to the retroactive adjustments referred to
below, as of December 31, 1997 and for each of the two years in the period
then ended were audited by other independent accountants whose report dated
January 21, 1998 expressed an unqualified opinion on those statements.
We also audited the adjustments described in Note 1 to the consolidated
financial statements that were applied to retroactively adjust the 1997 and 1996
financial statements. In our opinion, such adjustments are appropriate and have
been properly applied.
PricewaterhouseCoopers LLP
Cincinnati, Ohio
March 30, 1999
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Faircom Inc.
We have audited the consolidated balance sheet of Faircom Inc. as of December
31, 1997 and the related consolidated statements of operations, shareholders'
deficit, and cash flows for the years ended December 31, 1997 and 1996 (see
Note 1). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Faircom Inc. at
December 31, 1997 and the consolidated results of its operations and its cash
flows for the years ended December 31, 1997 and 1996 in conformity with
generally accepted accounting principles.
BDO Seidman, LLP
Melville, New York
January 21, 1998
-19-
<PAGE> 23
REGENT COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Gross broadcast revenues $ 16,046,968 $ 6,696,564 $ 5,517,586
Less agency commissions (1,275,445) (703,273) (643,632)
------------ ----------- -----------
Net broadcast revenues 14,771,523 5,993,291 4,873,954
Station operating expenses 11,051,165 3,860,331 2,993,219
Depreciation and amortization 2,281,497 726,564 321,263
Corporate general and administrative expenses 1,872,182 391,252 336,643
------------ ----------- -----------
Operating income (loss) (433,321) 1,015,144 1,222,829
Interest expense 2,883,251 1,330,676 913,643
Other income, net 26,648 24,537 7,346
------------ ----------- -----------
Income (loss) before income taxes and
extraordinary items (3,289,924) (290,995) 316,532
Income tax expense -- 71,542 37,692
------------ ----------- -----------
Income (loss) before extraordinary items (3,289,924) (362,537) 278,840
Extraordinary gain from debt
extinguishment, net of taxes -- 370,060 --
Extraordinary loss from debt
extinguishment, net of taxes (1,170,080) (4,703,370) --
------------ ----------- -----------
Net income (loss) $ (4,460,004) $(4,695,847) $ 278,840
============ =========== ===========
Income (loss) applicable to common shares:
Net income (loss) $ (4,460,004) $(4,695,847) $ 278,840
Preferred stock dividend requirements (2,165,471) -- --
Preferred stock accretion (4,787,311) -- --
------------ ----------- -----------
Income (loss) applicable to common shares $(11,412,786) $(4,695,847) $ 278,840
============ =========== ===========
Basic net income (loss) per common share:
Before extraordinary items $ (42.67) $ (1.51) $ 1.16
Extraordinary items (4.88) (18.06) --
------------ ----------- -----------
Net income (loss) per common share $ (47.55) $ (19.57) $ 1.16
============ =========== ===========
Weighted average number of common shares
used in basic calculation 240,000 240,000 240,000
Diluted net income (loss) per common share:
Before extraordinary items $ (42.67) $ (1.51) $ 1.16
Extraordinary items (4.88) (18.06) --
------------ ----------- -----------
Net income (loss) per common share $ (47.55) $ (19.57) $ 1.16
============ =========== ===========
Weighted average number of common shares
used in diluted calculation 240,000 240,000 240,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 24
REGENT COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 478,545 $ 535,312
Accounts receivable, less allowance for doubtful accounts
of $268,000 in 1998 and $32,000 in 1997 3,439,372 1,358,002
Other current assets 200,828 25,918
Assets held for sale 7,500,000 --
------------ ------------
Total current assets 11,618,745 1,919,232
Property and equipment, net 9,303,975 2,156,244
Intangible assets, net 45,023,940 7,701,341
Other assets, net 1,671,210 1,233,737
------------ ------------
Total assets $ 67,617,870 $ 13,010,554
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 1,005,327 $ 87,280
Accrued expenses 2,772,612 233,955
Interest payable 769,367 108,391
Current portion of long-term debt 980,000 430,005
Notes payable 7,500,000 --
------------ ------------
Total current liabilities 13,027,306 859,631
------------ ------------
Long-term debt, less current portion 34,617,500 21,911,611
Warrants and other long-term liabilities 2,643,579 421,050
------------ ------------
Total liabilities 50,288,385 23,192,342
Commitments and contingencies
Redeemable preferred stock:
Series A convertible preferred stock, $5.00 stated value, 620,000 shares authorized;
620,000 shares issued and outstanding-liquidation value: $3,433,109 3,433,109 --
Series B senior convertible preferred stock, $5.00 stated value, 1,000,000 shares
authorized; 1,000,000 shares issued and outstanding-liquidation value: $5,372,054 5,372,054 --
Series D convertible preferred stock, $5.00 stated value, 1,000,000 shares authorized;
1,000,000 shares issued and outstanding-liquidation value: $5,231,441 5,231,441 --
Series F convertible preferred stock, $5.00 stated value, 4,100,000 shares authorized;
2,450,000 shares issued and outstanding-liquidation value: $12,839,454 12,839,454 --
------------ ------------
Total redeemable preferred stock 26,876,058 --
Shareholders' deficit:
Preferred stock:
Series C convertible preferred stock, $5.00 stated value, 4,000,000 shares authorized;
3,720,620 shares issued and outstanding-liquidation value: $19,311,291 1,584,820 --
Series E convertible preferred stock, $5.00 stated value, 5,000,000 shares authorized;
447,842 shares issued and outstanding-liquidation value: $2,324,453 2,239,210 --
Common stock, $.01 par value, 30,000,000 shares authorized;
240,000 shares issued and outstanding (Note 1) 2,400 2,400
Additional paid-in capital 3,948,384 2,677,195
Retained deficit (17,321,387) (12,861,383)
------------ ------------
Total shareholders' deficit (9,546,573) (10,181,788)
------------ ------------
Total liabilities and shareholders' deficit $ 67,617,870 $ 13,010,554
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 25
\REGENT COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (4,460,004) $ (4,695,847) $ 278,840
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 2,281,497 726,564 321,263
Amortization of deferred rental income (34,008) (34,008) (34,005)
Provision for doubtful accounts 174,051 46,308 25,660
Provision for appraisal rights -- -- 215,000
Noncash charge for debt extinguishments 804,580 4,333,310 --
Noncash charge for corporate option compensation 530,264 -- --
Amortization of deferred financing costs 234,897 -- --
Increase (decrease) in cash flows from changes in operating assets
and liabilities:
Accounts receivable (344,209) (234,538) (250,620)
Prepaid expenses 335,644 (13,326) (6,809)
Other assets -- -- (1,325)
Accounts payable (401,283) 10,427 17,907
Accrued expenses (167,344) (24,751) (19,581)
Interest payable 660,976 254,603 (167,714)
------------ ------------ -------
Net cash (used in) provided by operating activities (384,939) 418,244 378,616
Cash flows from investing activities:
Acquisitions of radio stations, net of cash acquired (31,440,795) (7,831,180) --
Capital expenditures (818,919) (131,701) (63,440)
------------ ------------ -------
Net cash used in investing activities (32,259,714) (7,962,881) (63,440)
Cash flows from financing activities:
Proceeds from issuance of Series A, B, D and F Convertible
Preferred Stock 20,150,000 -- --
Proceeds from long-term
debt 36,000,000 23,000,000 --
Principal payments on and purchase of long-term
debt (20,749,410) (13,194,135) (510,502)
Payments for deferred financing costs (1,292,042) (834,137) (44,985)
Payment of issuance costs (1,520,662) -- --
Payment of appraisal right liability -- (1,015,000) --
------------ ------------ -------
Net cash (used in) provided by financing activities 32,587,886 7,956,728 (555,487)
------------ ------------ -------
Net increase (decrease) in cash and cash equivalents (56,767) 412,091 (240,311)
Cash and cash equivalents at beginning of period 535,312 123,221 363,532
------------ ------------ -------
Cash and cash equivalents at end of period $ 478,545 $ 535,312 $ 123,221
============ ============ =========
Supplemental schedule of non-cash investing and financing activities:
Conversion of Faircom Inc.'s convertible subordinated
promissory notes to Faircom Inc. common stock $ 10,000,000
Liabilities assumed in acquisitions $ 11,680,322
Series E convertible preferred stock issued in conjunction with
the acquisition of Alta California Broadcasting, Inc. and Topaz
Broadcasting, Inc. $ 2,239,210
Series C convertible preferred stock issued in conjunction with
the merger between Faircom Inc. and the Company $ 1,618,681
Series A and B convertible preferred stock warrants $ 310,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 26
REGENT COMMUNICATIONS, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SERIES C SERIES E
CONVERTIBLE CONVERTIBLE ADDITIONAL TOTAL
PREFERRED PREFERRED COMMON PAID-IN RETAINED SHAREHOLDERS'
STOCK STOCK STOCK CAPITAL DEFICIT DEFICIT
----------- ------------- ------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995
(retroactively restated) $2,400 $ 2,677,195 $ (8,444,376) $ (5,764,781)
Net income 278,840 278,840
----------- ----------- ------ ----------- ------------ ------------
Balance, December 31, 1996 2,400 2,677,195 (8,165,536) (5,485,941)
Net loss (4,695,847) (4,695,847)
----------- ----------- ------ ----------- ------------ ------------
Balance, December 31, 1997 2,400 2,677,195 (12,861,383) (10,181,788)
Conversion of Faircom Inc.'s
Class A and Class B convertible
subordinated promissory notes 10,000,000 10,000,000
Issuance of 3,720,620 shares of
Series C convertible preferred
stock and retirement of 26,390,199
shares of Faircom Inc. common stock
and recordation of the effect of
recapitalization due to the reverse
merger with Faircom Inc. $ 1,584,820 (3,000,000) (1,415,180)
Issuance of Faircom Inc. employee
stock options immediately converted
into options to purchase 157,727
shares of Series C convertible preferred
stock in conjunction with the merger 530,264 530,264
Issuance of Series A redeemable
preferred stock warrants exercisable
for 80,000 shares of common stock 160,000 160,000
Issuance of 205,250 shares of Series E
convertible preferred stock in
connection with the acquisition of Alta
California Broadcasting, Inc. $ 1,026,250 1,026,250
Issuance of 242,592 shares of Series E
convertible preferred stock in
connection with the acquisition of Topaz
Broadcasting, Inc. 1,212,960 1,212,960
Dividends and accretion on Series A, B, D,
and F redeemable convertible preferred stock (6,419,075) (6,419,075)
Net loss (4,460,004) (4,460,004)
----------- ----------- ------ ----------- ------------ -----------
Balance, December 31, 1998 $ 1,584,820 $ 2,239,210 $2,400 $ 3,948,384 $(17,321,387) $(9,546,573)
=========== =========== ====== =========== ============ ===========
</TABLE>
23
<PAGE> 27
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
Regent Communications, Inc. (including its wholly-owned subsidiaries,
the "Company") was formed to acquire, own and operate radio stations in
small and medium-sized markets in the United States. The Company
acquired, pursuant to an agreement of merger, all of the outstanding
common stock of Faircom Inc. ("Faircom") for 3,720,620 shares of the
Company's Series C Convertible Preferred Stock. The acquisition has
been treated for accounting purposes as the acquisition of the Company
by Faircom under the purchase method of accounting, with Faircom as the
accounting acquirer. Consequently, the historical financial statements
prior to June 15, 1998, the date of merger, are those of Faircom.
Faircom operated radio stations through its wholly-owned subsidiaries
in Flint, Michigan and, effective June 30, 1997, in Mansfield, Ohio
(see Note 2). As a result of the Faircom merger, Faircom's historical
shareholder deficit and earnings per share information have been
retroactively restated to reflect the number of common shares
outstanding subsequent to the merger, with the difference between the
par value of the Company's and Faircom's common stock recorded as an
offset to additional paid-in capital.
2. CONSUMMATED ACQUISITIONS
On June 30, 1997, Faircom acquired the assets and operations of two
commercial radio stations located in Mansfield, Ohio (the "Mansfield
Stations"), pursuant to the terms of an asset purchase agreement dated
May 20, 1997 for $7,350,000 in cash. In addition, Faircom paid $300,000
in cash to one of the sellers in consideration of a five year
non-compete agreement. The acquisition was accounted for under the
purchase method of accounting and was financed with borrowings under
Faircom's senior secured term notes (see Note 4). Faircom allocated
approximately $1,089,000 of the purchase price to property and
equipment and approximately $6,261,000 to the related Federal
Communications Commission (FCC) licenses. The fair values of the
acquired assets were determined by an independent valuation. The excess
cost over the fair market value of the net assets acquired and the FCC
licenses related to this acquisition are being amortized over three
to 15-year periods.
On January 21, 1998, Faircom acquired substantially all of the assets
and operations of radio station WSWR-FM in Shelby, Ohio (the "Shelby
Station") for $1,125,000 in cash. The acquisition was accounted for
under the purchase method of accounting and was principally financed
through the borrowing of $1,100,000 represented by a subordinated
promissory note. The fair values of the acquired assets were determined
by an independent valuation. Faircom allocated substantially all of the
purchase price to the related FCC licenses. The excess cost over the
fair market value of net assets acquired and the FCC licenses related
to this acquisition are being amortized over a 15-year period.
On June 15, 1998, concurrent with the Faircom merger, the following
acquisitions (the "June 15 Acquisitions") were consummated. The
acquisitions were accounted for under the purchase method of accounting
and the fair value of the acquired assets were determined by
independent valuations.
24
<PAGE> 28
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The Company acquired all of the outstanding capital stock of The Park
Lane Group ("Park Lane") for approximately $24,038,000 in cash and
assumed liabilities. Park Lane owned 16 radio stations in California
and Arizona. At the time of the acquisition, the Company entered into a
one-year consulting and non-competition agreement with the President of
Park Lane, providing for the payment of a fee of $200,000.
The Company acquired the FCC licenses and related assets used in the
operation of radio stations KIXW (AM) and KZWY (FM) in Apple Valley,
California from Ruby Broadcasting, Inc. (the "Ruby Stations"), an
affiliate of Topaz Broadcasting, Inc. ("Topaz"), for $5,985,000 in
cash.
The Company acquired the FCC licenses and related assets used in the
operation of radio stations KFLG (AM) and KFLG (FM) in Bullhead City,
Arizona from Continental Radio Broadcasting, L.L.C. (the "Continental
Stations") for approximately $3,747,000 in cash. The Company separately
acquired the accounts receivables of these stations for an additional
purchase price of approximately $130,000.
The Company acquired all of the outstanding capital stock of Alta
California Broadcasting, Inc. ("Alta") for $2,635,000 in cash and
assumed liabilities and 205,250 shares of the Company's Series E
Convertible Preferred Stock. Alta owned four radio stations in
California.
The Company acquired all of the outstanding capital stock of Topaz for
242,592 shares of the Company's Series E Convertible Preferred Stock.
Immediately following the acquisition of Topaz, the Company acquired
the FCC licenses and operating assets of radio station KIXA (FM) in
Lucerne Valley, California for $215,000 in cash and assumed
liabilities, pursuant to an Asset Purchase Agreement between Topaz and
RASA Communications Corp.
The Company allocated the aggregate purchase price for the June 15
Acquisitions as follows:
<TABLE>
<S> <C>
Accounts receivable $ 143,000
Broadcasting equipment and
furniture and fixtures 6,503,000
FCC licenses 30,328,000
Goodwill 1,853,000
Other 360,000
------------
$ 39,187,000
============
</TABLE>
Goodwill and FCC licenses related to the June 15 Acquisitions are being
amortized over a 40-year period.
25
<PAGE> 29
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The sources for the cash portion of the consideration paid by the
Company for the June 15 Acquisitions and the Faircom merger,
aggregating approximately $52,900,000 (including approximately
$21,100,000 of debt assumed and refinanced with borrowings under the
Company's senior reducing revolving credit facility and $3,700,000 of
transaction costs) were $34,400,000 borrowed under the Company's senior
reducing revolving credit Facility (see Note 4), $18,150,000 in
additional equity from the sale of the Company's convertible preferred
stock (see Note 5) and approximately $350,000 of the Company's funds.
On November 30, 1998, the Company purchased substantially all of the
assets of radio station KOSS (FM) (formerly KAVC (FM)) located in
Lancaster, California from Oasis Radio, Inc. for $1,600,000 in cash.
The acquisition was financed through the issuance of additional shares
of Series F convertible preferred stock (see Note 5). The acquisition
was accounted for under the purchase method of accounting. The excess
cost over the fair market value of net assets acquired and FCC licenses
related to this acquisition are being amortized over a 40-year period.
The results of operations of the acquired businesses are included in
the Company's financial statements since the respective dates of
acquisition.
The following unaudited pro forma data summarizes the combined results
of operations of the Company, Faircom, the Mansfield Stations, the June
15 Acquisitions and KOSS (FM) as though the acquisitions had occurred
at the beginning of each year ended December 31:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Net broadcast revenues $ 20,018,379 $ 20,675,214
Loss before extraordinary items (8,026,665) (6,794,745)
Net loss (9,196,745) (11,128,055)
Net loss per common share before extraordinary items:
Basic and diluted $ (62.41) $ (28.31)
Net loss per common share:
Basic and diluted $ (67.29) $ (46.37)
</TABLE>
These unaudited pro forma amounts do not purport to be indicative of
the results that might have occurred if the foregoing transactions had
been consummated on the indicated dates. The acquisition of the Shelby
Station has not been included in the above pro forma information, due
to it not having a material effect on the operating results of the
Company.
26
<PAGE> 30
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
3. SUMMARY OF ACCOUNTING POLICIES
a. Consolidation:
The consolidated financial statements include the accounts of all of the
Company's wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation. Certain
prior year amounts and balances have been reclassified to conform to the
current classifications with no effect on financial results.
b. Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
c. Cash and Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all
highly liquid financial instruments purchased with an original maturity of
three months or less to be cash equivalents. The carrying amount reported
in the consolidated balance sheets for cash and cash equivalents
approximates its fair value.
d. Property and Equipment:
Property and equipment are stated at cost and depreciated on the
straight-line basis over the estimated useful life of the assets.
Buildings are depreciated over forty-years, broadcasting equipment over a
six-to-thirteen year life and furniture and fixtures generally over a
five-year life. Leasehold improvements are amortized over the shorter of
their useful lives or the terms of the related leases. For property and
equipment retired or sold, the gain or loss is recognized in other income.
e. Intangible Assets:
Intangible assets consist principally of the value of FCC licenses and the
excess of the purchase price (including related acquisition costs) over
the fair value of net assets of acquired radio stations. These assets are
amortized on a straight-line basis over lives ranging from 15- to
40-years. Intangible assets are evaluated periodically if events or
circumstances indicate a possible inability to recover their carrying
amount. Such evaluation is based on various analyses, including cash flows
and profitability projections. If future expected undiscounted cash flows
are insufficient to recover the carrying amounts of the asset, then an
impairment loss is recognized based upon the excess of the carrying value
of the asset over the anticipated cash flows on a discounted basis.
f. Deferred Financing Costs and Other Assets:
Deferred financing costs are amortized on a straight-line basis over the
term of the related debt. Non-compete agreements are amortized over the
terms of the related agreements.
27
<PAGE> 31
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
g. Barter Transactions:
Barter transactions (advertising provided in exchange for goods and
services) are reported at the estimated fair value of the products or
services received. Revenue from barter transactions is recognized when
advertisements are broadcast, and merchandise or services received are
charged to expense when received or used. If merchandise or services are
received prior to the broadcast of the advertising, a liability (deferred
barter revenue) is recorded. If advertising is broadcast before the
receipt of the goods or services, a receivable is recorded. For the year
ended December 31, 1998, barter revenue was approximately $731,000, and
barter expense was approximately $800,000.
h. Concentrations of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of accounts receivable.
The credit risk is limited due to the large number of customers comprising
the Company's customer base and their dispersion across several different
geographic areas of the Company.
i. Broadcast Revenue:
Broadcast revenue for commercial broadcasting advertisements is recognized
when the commercial is broadcast.
j. Fair Value of Financial Instruments:
Long-term debt
The fair value of the Company's long-term debt is estimated based on
the current rates offered to the Company for debt of the same
remaining maturities. Based on borrowing rates currently available,
the fair value of long-term debt approximates its carrying value at
December 31, 1998.
Redeemable preferred stock
The fair value of the Company's redeemable preferred stock is
estimated based on the market price of a similar financial
instrument that has a more readily determinable market value,
adjusted as appropriate for any differences in rights. Based
on transactions consummated recently, the fair value of the
redeemable preferred stock approximates its carrying value
at December 31, 1998.
4. LONG-TERM DEBT
Long-term debt consists of the following as of December 31:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Senior Secured Term Notes (a) $ -- $ 12,341,666
Convertible Subordinated Promissory Notes (b) -- 10,000,000
Senior Reducing Revolving Credit Facility (c) 34,900,000 --
Subordinated Promissory Note (d) 600,000 --
Non-compete Agreements (e) 97,500 --
------------ ------------
35,597,500 22,341,666
Less: Current Portion of Long-Term Debt (980,000) (430,005)
------------ ------------
$ 34,617,500 $ 21,911,661
============ ============
</TABLE>
28
<PAGE> 32
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Repayment of long-term debt required over each of the years following
December 31, 1998 consists of:
<TABLE>
<S> <C>
1999 $ 980,000
2000 62,500
2001 60,000
2002 6,545,000
2003 9,685,000
Thereafter 18,265,000
------------
$ 35,597,500
============
</TABLE>
a. Senior Secured Term Notes:
During 1997, Faircom borrowed $12,500,000 under an amended and restated
loan agreement (the "1997 Loan Agreement"). The term notes under the
1997 Loan Agreement would have matured on July 1, 2002. Interest on the
term notes was at the rate of 4.5% over 30 day commercial paper rates.
As of the date that Faircom entered into the 1997 Loan Agreement,
certain accrued interest was extinguished, resulting in an
extraordinary gain, net of income taxes, of $370,060. On June 15, 1998,
the Company terminated the 1997 Loan Agreement using funds obtained
from the Company's senior reducing revolving credit facility. As a
result of the extinguishment of debt, the Company recognized an
extraordinary loss of $1,170,080, net of income taxes, in 1998
consisting of a $366,000 prepayment penalty and the write-off of
$804,080 of related deferred financing costs. The effective tax rate
applied to the extraordinary gain and loss was zero due to the
Company's cumulative loss carryfoward position.
b. Convertible Subordinated Promissory Notes:
During 1997, Faircom completed the sale of $10,000,000 aggregate
principal amount of its convertible subordinated promissory notes due
July 1, 2002 (the "Faircom Notes"). The Faircom Notes consisted of
Class A and Class B convertible subordinated promissory notes, each in
the aggregate principal amount of $5,000,000, with interest payable at
the rate of 7% per annum, compounded quarterly. The proceeds from the
sale of the Faircom Notes were used to extinguish existing debt
obligations and to pay a portion of the purchase price for the
Mansfield Stations. The debt extinguishments resulted in an
extraordinary loss of $4,703,370, net of income taxes. The effective
tax rate applied to the extraordinary loss was zero due to the
Company's cumulative loss carryforward position. The Faircom Notes were
converted into a total of 19,012,000 shares of Faircom common stock
immediately preceding the merger between the Company and Faircom (see
Note 1).
29
<PAGE> 33
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
c. Senior Reducing Revolving Credit Facility:
The Company has an agreement with a group of lenders (as amended, the
"Credit Agreement") which provides for a senior reducing revolving
credit facility with a commitment of up to $55,000,000 expiring in
March 2005 (the "Revolver"). In addition, the Company may request from
time to time that the lenders issue letters of credit in accordance
with the same provisions as the Revolver. During 1998, in conjunction
with financing the June 15 Acquisitions, refinancing certain existing
debt and providing for additional working capital, the Company borrowed
$34,900,000 under the Credit Agreement.
The Credit Agreement provides for the reduction of the commitment under
the Revolver for each of the four quarters ending December 31, 1999 and
by increasing quarterly amounts thereafter, and, under certain
circumstances, requires mandatory prepayments of any outstanding loans
and further commitment reductions. The indebtedness of the Company
under the Credit Agreement is collateralized by liens on substantially
all of the assets of the Company and its operating and license
subsidiaries and by a pledge of the operating and license subsidiaries'
stock, and is guaranteed by these subsidiaries. The Credit Agreement
contains restrictions pertaining to the maintenance of financial
ratios, capital expenditures, payment of dividends or distributions of
capital stock and incurrence of additional indebtedness.
Interest under the Credit Agreement is payable, at the option of the
Company, at alternative rates equal to the LIBOR rate (established
October 1, 1998 at 5.31% and effective at that same rate at December
31, 1998) plus 1.25% to 2.75% or the base rate announced by the Bank of
Montreal (7.75% at December 31, 1998) plus 0% to 1.50%. The spreads
over the LIBOR rate and such base rate vary from time to time,
depending upon the Company's financial leverage. The Company must pay
quarterly commitment fees equal to 3/8% to 1/2% per annum, depending
upon the Company's financial leverage, on the unused portion of the
commitment under the Credit Agreement. The Company is also required to
pay certain other fees to the agent and the lenders for the
administration of the facilities and the use of the credit facility. At
December 31, 1998, the Company had paid non-refundable fees totaling
approximately $1,671,000 which are classified as other assets in the
accompanying Consolidated Balance Sheet and are being amortized over
the initial seven-year term of the Revolver.
As a condition of the Credit Agreement, the Company entered into a
two-year collar agreement (the "Collar Agreement") with the Bank of
Montreal on August 17, 1998 for a notional amount of $34,400,000. The
Collar Agreement is based on the three month LIBOR rate, provides for a
CAP Rate, as defined, of 6.5% and a Floor Rate, as defined of 5.28%
plus, in each case, the additional spread stipulated under the Credit
Agreement.
Effective January 1, 1999, the Company amended the Credit Agreement in
order to cure violations of certain restrictive covenants that existed
as of December 31, 1998. The amended Credit Agreement stipulates that
the Company must reduce the outstanding amount under the Credit
Agreement by $915,000 during the first quarter of 1999; consequently,
such amount has been classified as current portion of long-term debt at
December 31, 1998. The Company also must consummate the sale of its
properties
30
<PAGE> 34
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
located in Flagstaff and Kingman, Arizona within a specified period of
time (see Note 13), divest one other non-strategic market in 1999 and
make certain capital expenditures according to an agreed-upon
timetable. In addition, the amended Credit Agreement increases the
spread applied to the LIBOR rate from 1.25% to 2.75% to 1.50% to 3.50%
and the spread applied to the base rate announced by the Bank of
Montreal from 0% to 1.50% to .25% to 2.25%.
d. Subordinated Promissory Note:
In conjunction with the June 15 Acquisitions, the Company assumed a
subordinated promissory note (the "McNulty Note") to McNulty
Broadcasting, Inc. ("McNulty") for $600,000. The McNulty Note provides
for quarterly principal payments of $15,000 beginning on August 1,
2000. The remaining principal is due May 1, 2005. Interest on the
McNulty Note is payable quarterly at a rate of 8.0%
e. Non-Compete Agreements:
In conjunction with the June 15 Acquisitions, the Company assumed five
year non-compete agreements with McNulty and Island Broadcasting
Associates, L.P. in the amounts of $125,000 and $200,000, respectively
(the "Non-Compete Agreements"). The Non-Compete Agreements bear no
interest and require quarterly payments of $16,250 through May 2000.
5. CAPITAL STOCK AND REDEEMABLE PREFERRED STOCK
The Company's Amended and Restated Certificate of Incorporation
authorizes 30,000,000 shares of common stock and 20,000,000 shares of
preferred stock and designates 620,000 shares as Series A Convertible
Preferred Stock ("Series A"), 1,000,000 shares as Series B Senior
Convertible Preferred Stock ("Series B"), 4,000,000 shares as Series C
Convertible Preferred Stock ("Series C"), 1,000,000 shares as Series D
Convertible Preferred Stock ("Series D"), 5,000,000 shares as Series E
Convertible Preferred Stock ("Series E"), 4,100,000 shares as Series F
Convertible Preferred Stock ("Series F") and, effective January 11,
1999, 4,000,000 shares as Series G Convertible Preferred Stock ("Series
G"). The stated value of all series of preferred stock is $5.00 per
share.
Series A, Series C, Series E, Series F and Series G generally have the
same voting rights as common stock and each share may be converted at
the option of the holder into one share of common stock, subject to
adjustment. Series B has no voting power except for specific events and
ranks senior to all other series of preferred stock. Each Series B
share may be converted at the option of the holder into one-half share
of common stock, subject to adjustment. Series D has limited voting
power and, each share may be converted at the option of the holder into
one share of common stock, which would also have the same limited
voting power in certain circumstances. The Company's Board of Directors
also has the right to require conversion of all shares of Series A, B,
C, D, E, F and G upon the occurrence of certain events. Series A,
Series C, Series D, Series E, Series F and Series G have equal rights
for the payment of dividends and the distribution of assets and rights
upon liquidation, dissolution or winding up of the Company.
31
<PAGE> 35
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Upon liquidation of the Company, no distribution shall be made (a) to
holders of stock ranking junior to the Series B unless the holder of
the Series B has received the stated value per share, plus an amount
equal to all unpaid dividends or (b) to the holders of stock ranking on
a parity with the Series B, except distributions made rateably on the
Series B and all other such parity stock. Dividends accrue cumulatively
on all series of preferred stock, except Series F and Series G, at an
annual rate of $0.35 per share. Dividends accrue cumulatively on Series
F and Series G at an annual rate of $0.50 per share and, to the extent
not paid in cash, are compounded quarterly at a rate of 10% per annum.
The Company may redeem Series A, B and D at the stated value, plus an
amount equal to all unpaid dividends to the date of redemption, whether
or not declared. Undeclared dividends in arrears on all outstanding
series of preferred stock amounted to approximately $2,327,000 or $.54,
$.37, $.19, $.23, $.19 and $.24 per share of Series A, Series B, Series
C, Series D, Series E and Series F, respectively, at December 31, 1998.
In conjunction with the closing of the Faircom merger and the June 15
Acquisitions, BMO Financial, Inc., an existing shareholder of the
Company, purchased 780,000 shares of Series D for $3,900,000, General
Electric Capital Corporation ("GE Capital") paid $3,900,000 to complete
its purchase of 1,000,000 shares of Series B and the Chief Operating
Officer of the Company purchased 20,000 shares of Series A for
$100,000.
On June 15, 1998, pursuant to a stock purchase agreement with the
Company (the "Series F Stock Purchase Agreement"), Waller-Sutton Media
Partners, L.P. ("Waller-Sutton") purchased 1,000,000 shares of Series F
for $5,000,000. Also on that date, WPB Corporate Development Associates
V, L.L.C. and WPG Corporate Development Associates V (Overseas), L.P.,
purchased a total of 650,000 shares of Series F for $3,250,000; the
Chairman of Waller-Sutton Management Group, which manages
Waller-Sutton, purchased 50,000 shares of Series F for $250,000; GE
Capital purchased 250,000 shares of Series F for $1,250,000; and River
Cities Capital Fund Limited Partnership ("River Cities") purchased
100,000 shares of Series F for $500,000. In connection with these
purchases, the purchasers acquired 10-year warrants to purchase an
aggregate of 860,000 shares of the Company's common stock for $5.00 per
share. Such warrants can be "put" back to the Company after five years.
The 860,000 warrants issued in conjunction with the Series F have been
assigned a fair value of $2,459,000 and have been classified under
other long-term liability due to the associated "put" rights.
The Series F Stock Purchase Agreement provides that the terms of
the Series F include the right of the holders to require the
Company to repurchase the Series F at any time after five years at
a price equal to the greater of its fair market value, as defined,
or the sum of its stated value of $5.00 per share and all accrued
but unpaid dividends thereon, as well as any warrants held by such
holders at a price equal to the fair market value of the Company's
common stock less the exercise price of such warrants. Holders of
the Series A, Series B, Series D and Series G would have similar
"put" rights only if the holders of the Series F were to exercise
their "put" rights. As of December 31, 1998, Series A, Series B,
Series D and Series F (but not Series C and Series E) have been
reclassified and excluded from the equity to reflect such
anticipated "put" rights. Issuance costs of approximately
$2,070,000 for these reclassified shares have been netted against
the proceeds.
32
<PAGE> 36
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
In order to induce River Cities, as a holder of Series A, to approve
the merger with Faircom, the Company issued to River Cities, upon
consummation of the merger, five year warrants to purchase 80,000
shares of the Company's common stock at an exercise price of $5.00 per
share. R. Glen Mayfield, a member of the Company's Board of Directors,
serves as the general partner of River Cities Management Limited
Partnership, which is the general partner of River Cities. The warrants
issued to the holders of Series A have been assigned a value of
$160,000 and have been classified as additional paid-in capital.
In order to induce GE Capital, the holder of the Company's Series B, to
approve the addition of mandatory conversion rights to the terms of the
Series B in conjunction with the issuance of the Series F, the Company
issued to GE Capital, upon issuance of the Series F, five year warrants
to purchase 50,000 shares of the Company's common stock at an exercise
price of $5.00 per share. The warrants issued to the holder of Series B
has been assigned a fair value of $150,000 and has been classified as a
long-term liability due to associated "put" rights. These "put" rights
are subject to the prior exercise of the warrants and exercise of the
"put" rights associated with warrants issued to the Series F holders.
In November 1998, the Company issued 400,000 shares of Series F for
$5.00 per share to existing Series F holders on a pro rata basis. The
proceeds were used to complete the purchase of KOSS (FM) (see Note 2),
finance capital expenditures and meet initial working capital
requirements of KOSS (FM).
In January 1999, the Company issued 372,406 shares of Series G for
$5.00 per share to certain executive officers of the Company and Blue
Chip Capital Fund II Limited Partnership, an existing holder of Series
C. The proceeds were used to pay down existing debt under the Credit
Agreement and fund working capital needs of the Company.
In February 1999, the Company issued 633,652 shares of Series F for
$5.00 per share to existing Series F holders. The proceeds were used to
finance certain capital improvements, fund deferred transaction costs
related to the June 15 Acquisitions and the Faircom merger and fund
working capital needs of the Company. In addition, the holders of
Series F committed an additional $5,082,000 through the purchase of an
additional 1,016,000 shares of Series F at $5.00 to fund acquisitions
by the Company.
6. STOCK-BASED COMPENSATION PLAN
The Regent Communications, Inc. 1998 Management Stock Option Plan (the
"1998 Stock Option Plan") provides for the issuance of up to an
aggregate of 2,000,000 common shares in connection with the issuance of
incentive stock options ("ISO's") and non-qualified stock options
("NQSO's"). The Compensation Committee of the Company's Board of
Directors determines eligibility. The exercise price of the options is
to be not less than the fair market value of the underlying common
stock at the grant date, except in the case of ISO's granted to a 10%
owner (as defined), for which the option share price must be at least
110% of the fair market value of the underlying common stock at the
grant date. Under the terms of the 1998 Stock Option Plan, the options
expire no later than ten years from the date of grant in
33
<PAGE> 37
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
the case of ISO's (five years in the case of ISOs granted to a 10%
owner), no later than ten years and one day in the case of NQSOs, or
earlier in either case in the event a participant ceases to be an
employee of the Company.
Effective with the consummation of the Faircom merger, the Board of
Directors authorized a grant of incentive stock options to the Chief
Executive Officer and Chief Operating Officer of the Company, providing
each of the holders the right to acquire 608,244 shares of the
Company's common stock at an exercise price per share of $5.00. Of the
options granted, the maximum allowable will be treated as ISO's which
vest in equal 10% increments beginning on the grant date and on each of
the following nine anniversary dates of the grants.
The balance of the options will become exercisable in equal one-third
increments at the end of each of the first three years following the
grant. All options expire on June 15, 2008.
Upon consummation of the Faircom merger, the Board of Directors of the
Company adopted the Regent Communications, Inc. Faircom Conversion
Stock Option Plan ("Conversion Stock Option Plan") which applies to
those individuals previously participating in the Faircom Inc. Stock
Option Plan ("Faircom Plan"). In exchange for relinquishing their
options under the Faircom Plan, five former officers and members of
Faircom's Board of Directors were given, in total, the right to acquire
274,045 shares of the Company's Series C Convertible Preferred stock at
exercise prices ranging from $0.89 to $3.73 per share and expiring from
May 11, 1999 to July 1, 2002 (the "Converted Options"). Additional
expenses were incurred as a consequence of stock options being
granted as of June 15, 1998 to two officers of Faircom pursuant to the
terms of the merger agreement between the Company and Faircom,
resulting in the recognition, as of such date of grant, of
approximately $530,000 in additional compensation expense.
Subsequent to the consummation of the Faircom merger, the Company
issued 105,000 stock options under the 1998 Stock Option Plan to
certain key employees. Each of the options has an exercise price per
share of $5.00 and expires 10 years from the date of grant. The options
become exercisable in equal one-fifth increments over the first five
years following the grant. As of December 31, 1998, none of the options
issued under the 1998 Stock Option Plan or Conversion Stock Option
Plan had been exercised or forfeited.
The Company intends to apply the provisions of APB Opinion 25,
"Accounting for Stock Issued to Employees" ("APB No. 25"), in
accounting for the 1998 Stock Option Plan. Under APB No. 25, no
compensation expense is recognized for options granted to employees at
exercise prices that are equal to or greater than the fair market value
of the underlying common stock at the grant date. Statement of
Financial Accounting Standards No. 123,
34
<PAGE> 38
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
"Accounting for Stock-Based Compensation" ("SFAS No. 123") requires the
Company to provide, beginning with 1995 grants, pro forma information
regarding net income and net income per common share as if compensation
costs for the Company's stock option plans had been determined in
accordance with the fair value based method prescribed in SFAS No. 123.
Such pro forma information is as follows for the year ended December
31:
<TABLE>
<CAPTION>
Net income (loss): 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
As reported $ (4,460,004) $ (4,695,847) $ 278,840
Pro forma compensation expense, net of tax benefit (599,736) (169,841) (21,585)
------------- ------------- -----------
Pro forma $ (5,059,740) $ (4,865,688) $ 257,255
============= ============= ===========
Basic and diluted net income (loss) per common share:
As reported:
Basic $ (47.55) $ (19.57) $ 1.16
Diluted $ (47.55) $ (19.57) $ 1.16
Pro forma:
Basic $ (50.05) $ (20.27) $ 1.07
Diluted $ (50.05) $ (20.27) $ 1.07
</TABLE>
The weighted-average fair value per share for options granted under the
1998 Stock Option Plan was $2.88 for ISOs and $2.00 for NQSOs. The
weighted-average fair value for options granted under the Conversion
Stock Option Plan was approximately $230,000, and such amount was
recognized at the time of conversion since the Converted Options are
fully vested. The weighted average fair value per share for options
granted in 1997 and 1996 were $.08 and $.09, respectively. The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------- ------- -------
Converted
ISOs NQSOs Options
---- ----- -------
<S> <C> <C> <C> <C> <C>
Dividends None None None None None
Volatility 35.0% 35.0% 35.0% 46.5% 46.5%
Risk-free interest rate 5.55% 5.43% 5.38% 6.28% 6.28%
Expected term 10 years 5 years 2 years 5 years 5 years
</TABLE>
35
<PAGE> 39
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The following table summarizes the status of Company options
outstanding and exercisable at December 31, 1998, under the 1998 Stock
Option Plan and the Conversion Stock Option Plan:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------- ----------------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE CONTRACTUAL EXERCISE EXERCISE
PRICE SHARES(1) LIFE (YEARS) PRICE SHARES PRICE
----- --------- ------------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
$5.00 1,321,488 9.5 $5.00 40,000 $5.00
$0.89-$3.73 274,045 3.5 $2.73 274,045 $2.73
--------- -------
1,595,533 314,045
========= =======
</TABLE>
Of the options outstanding at December 31, 1998, it is anticipated that
no more than 1,195,533 will be treated as NQSOs and at least 400,000
will be treated as ISOs.
(1) As of December 31, 1998, the stock options granted under the 1998 Stock
Option Plan entitle the holders to purchase 1,321,488 shares of the
Company's common stock. Stock options granted under the Conversion
Stock Option Plan entitle the holders to purchase 274,045 shares of the
Company's Series C Convertible Preferred Stock.
36
<PAGE> 40
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
7. EARNINGS PER SHARE
The Company has adopted the provisions of SFAS 128, "Earnings Per
Share." SFAS 128 calls for the dual presentation of basic and diluted
earnings per share ("EPS"). Basic EPS is based upon the weighted
average common shares outstanding during the period. Diluted EPS
reflects the potential dilution that would occur if common stock
equivalents were exercised. Basic EPS and diluted EPS are the same for
all periods presented, since the effect of the Company's common stock
equivalents would be antidilutive.
Basic and diluted EPS for all periods presented have been calculated
using the 240,000 common shares that were outstanding subsequent to the
merger with Faircom (see Note 1).
8. INCOME TAXES
The Company's provision for income taxes consists of the following for
the year ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current federal $ -- $ -- $ --
Current state -- 71,542 37,692
------- ------- -------
Total $ -- $71,542 $37,692
======= ======= =======
</TABLE>
37
<PAGE> 41
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The components of the Company's deferred tax assets and liabilities are
as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 4,528,000 $ 2,448,000
Miscellaneous accruals and credits 79,000 35,000
Accounts receivable reserve 107,000 --
----------- -----------
Total deferred tax assets 4,714,000 2,483,000
Deferred tax liabilities:
Property and equipment (296,000) --
Intangible assets (170,000) --
----------- -----------
Total deferred tax liabilities $ (466,000) $ --
=========== ===========
Valuation allowance (4,248,000) (2,483,000)
----------- -----------
Net deferred tax assets $ -- $ --
=========== ===========
</TABLE>
The Company has cumulative federal and state tax loss carryforwards of
approximately $11,320,000 at December 31, 1998. These loss
carryforwards will expire in years 2011 through 2019. The utilization
of the aforementioned operating losses for federal income tax purposes
is limited pursuant to the annual utilization limitations provided
under the provisions of Internal Revenue Code Section 382.
38
<PAGE> 42
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The difference between the Company's effective tax rate on income
before taxes on income and the federal statutory tax rate arise from
the following:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal tax expense at statutory rate 34.0% 34.0% 34.0%
Loss from debt extinguishment - non-deductible -- (34.6) --
Amortization of intangibles and other
non-deductible expenses (12.0) (1.0) 31.9
Benefit of net operating losses -- -- (48.0)
Establishment of valuation allowance (28.0) 1.1 (13.9)
State tax, net of federal tax benefit 6.0 (1.0) 7.9
==== ==== ====
Effective tax rate 0% (1.5)% 11.9%
</TABLE>
9. SAVINGS PLANS
The Company sponsors defined contribution plans covering substantially
all employees. The Company did not make contributions to the defined
contribution plan during the years ended December 31, 1998 and 1997.
Faircom made a contribution in the amount of $6,800 during the year
ended December 31, 1996.
39
<PAGE> 43
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
10. NOTES PAYABLE
Notes payable at December 31, 1998 consist of the following:
<TABLE>
<S> <C>
Promissory note $6,000,000
Promissory note 1,500,000
----------
$7,500,000
</TABLE>
In connection with the acquisition of radio station KCBQ (AM), the
Company issued to the seller a promissory note for $6,000,000, which is
collateralized by the assets of the station. The terms of the
promissory note obligate the Company to pay the lesser of $6,000,000 or
the net proceeds from a commercially reasonable sale of the KCBQ (AM)
assets (with any such net sale proceeds in excess of $6,000,000 to be
split between the Company and the holder of the note in accordance with
the terms of the asset purchase agreement) on the earlier of June 4,
2002 or upon the sale of the KCBQ (AM) assets to an unrelated third
party. The note does not bear interest prior to the maturity date, as
defined. Interest on the unpaid principal of the note after maturity is
at the rate of 10% per annum. The Company is currently seeking a buyer
for this station and anticipates the sale of the station will occur
during 1999. As a result, the unpaid principal balance of $6,000,000
has been classified as a current liability at December 31, 1998 in the
accompanying Consolidated Balance Sheet.
In connection with the acquisition of an option to acquire radio
station WSSP (FM), the Company issued a five-year term promissory note
for $1,500,000 to a third party. The terms of the promissory note
obligate the Company to pay the lesser of $1,500,000 or the net
proceeds from a commercially reasonable sale of the option or the
station's assets (with any such net sale proceeds in excess of
$1,500,000 to be retained by the Company). The note is collateralized
by a security interest in the proceeds of a $1,500,000 note payable to
the Company by the owner of WSSP (FM) and matures on the earlier of
December 3, 2002 or upon the sale of the WSSP (FM) assets to an
unrelated third party. The note does not bear interest prior to the
maturity date, as defined. Interest on the unpaid principal of the note
after maturity is at the rate of 10% per annum. In March 1999, the
Company sold WSSP (FM) for $1,600,000 and repaid the promissory note.
Because the Company intended to sell this property during 1999, the
unpaid principal balance of $1,500,000 has been classified as a current
liability at December 31, 1998 in the accompanying Consolidated Balance
Sheet.
40
<PAGE> 44
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
11. OTHER FINANCIAL INFORMATION
Property and equipment consists of the following as of December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Equipment $ 11,926,277 $ 5,277,474
Furniture and fixtures 1,659,136 1,043,648
Building and improvements 1,442,799 958,583
Land 761,342 285,000
------------ -----------
15,789,554 7,564,705
Less accumulated depreciation (6,185,579) (5,408,461)
------------ -----------
Net property and equipment $ 9,303,975 $ 2,156,244
============ ===========
</TABLE>
Intangible assets consists of the following as of December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
FCC broadcast licenses $ 40,768,013 $6,672,749
Goodwill 6,545,097 1,813,383
------------ ----------
47,313,110 8,486,132
Less accumulated amortization (2,289,170) (784,791)
------------ ----------
Net intangible assets $ 45,023,940 $7,701,341
============ ==========
</TABLE>
Supplemental cash flow information for the year ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash paid for interest $2,974,000 $1,076,073 866,357
Income taxes paid, net of refunds -- 71,542 43,592
</TABLE>
41
<PAGE> 45
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
12. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standard Board issued SFAS 130,
"Reporting Comprehensive Income." SFAS 130 establishes standards of
disclosure and financial statement display for reporting total
comprehensive income and its individual components. SFAS 130 became
effective in 1998. Company management has determined that comprehensive
income equals the Company's net loss as of December 31, 1998.
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS
133 prescribes the accounting treatment for derivative instruments,
including certain derivative instruments embedded in other contracts,
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
Company may employ financial instruments to manage its exposure to
fluctuations in interest rates (see Note 4(c)). The Company does not
hold or issue such financial instruments for trading purposes. The
Company will adopt SFAS 133, as required in the year 2000, and does not
expect that the impact of adoption will have a material impact on the
Company's results of operations and statement of position.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which is
effective for fiscal years beginning after December 15, 1998. SOP 98-1
requires the capitalization of certain expenditures for software that
is purchased or internally developed for use in the business. The
Company elected to adopt SOP 98-1 in 1998. The impact of its adoption
was immaterial to the Company's results of operations and statement of
position.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." The SOP provides guidance on financial reporting
of costs of start-up activities. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998. The Company believes the
implementation of SOP 98-5 in 1999 will not have a material impact on
its financial reporting.
13. PENDING TRANSACTIONS
On January 6, 1999, the Company entered into an asset purchase
agreement to acquire the FCC licenses and related assets used in the
operations of radio stations WJON (AM), WWJO (FM) and KMXK (FM) in the
St. Cloud, Minnesota market from WJON Broadcasting Company, for
approximately $12,700,000 in cash. The transaction is subject to FCC
consent.
On March 5, 1999, the Company entered into an asset purchase agreement
to sell the FCC licenses and related assets used in the operations of
radio stations KAAA (AM), and KZZZ (FM) in Kingman, Arizona and KFLG
(AM) and KFLG (FM) in Bullhead, Arizona for approximately $5,400,000 in
cash to an unrelated third party. The transaction is subject to FCC
consent. In addition, the Company entered into a local programming and
marketing agreement with the purchaser effective April 1, 1999, which
will end upon consummation of the sale or termination of the asset
purchase agreement.
42
<PAGE> 46
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
On March 30, 1999, the Company entered into an asset purchase agreement
to sell the FCC licenses and related assets used in the operation of
radio stations KZGL (FM), KVNA (AM) and KVNA (FM) in Flagstaff, Arizona
for approximately $2,425,000 in cash to an unrelated third party. The
transaction is subject to FCC consent.
14. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is subject to various
regulatory proceedings, lawsuits, claims and other matters. Such
matters are subject to many uncertainties, and outcomes are not
predictable with assurance. However, the Company believes that the
resolution of such matters for amounts above those reflected in the
consolidated financial statements would not likely have a materially
adverse effect on the Company's results of operations or statement of
position.
Lease Commitments
The Company leases certain facilities and equipment used in its
operations. Total rental expenses were approximately $502,000, $56,000
and $46,000 in 1998, 1997 and 1996, respectively.
At December 31, 1998, the total minimum annual rental commitments under
noncancelable leases are as follows:
<TABLE>
<S> <C>
1999 $ 730,000
2000 596,000
2001 503,000
2002 334,000
2003 260,000
Thereafter 1,476,000
-----------
Total $ 3,899,000
===========
</TABLE>
43
<PAGE> 47
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
15. RELATED PARTY TRANSACTIONS:
The Company obtains all of its property and casualty insurance and
director and officer liability insurance coverages through an insurance
brokerage firm 90% owned by the Company's Chief Executive Officer and
members of his immediate family. In 1998, the Company paid
approximately $221,500 in insurance premiums.
44
<PAGE> 48
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Regent Communications, Inc.
Our report on the consolidated financial statements of Regent Communications,
Inc. which is contained in Item 8 of this Form 10-K also includes the audit of
the financial statement schedule on page 45 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information required to be
included therein.
PricewaterhouseCoopers LLP
Cincinnati, Ohio
March 30, 1999
<PAGE> 49
REGENT COMMUNICATIONS, INC.
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS
--------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER THE END
OF PERIOD EXPENSES ACCOUNTS(*) DEDUCTIONS (**) OF PERIOD
---------- -------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Years ended December 31,
1998 $ 32,000 174,051 173,960 112,011 $ 268,000
1997 $ 20,000 46,308 34,308 $ 32,000
1996 $ 20,000 42,449 42,449 $ 20,000
</TABLE>
* Recorded in conjunction with acquisitions consummated on June 15, 1998.
** Represents accounts written off to the reserve.
45
<PAGE> 50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item 10 is hereby incorporated by
reference from the Registrant's definitive Proxy Statement, and specifically
from the portions thereof captioned "Election of Directors" and "Executive
Officers," to be filed in April 1999 in connection with the 1999 Annual Meeting
of Stockholders presently scheduled to be held on April 29, 1999.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item 11 is hereby incorporated by
reference from the Registrant's definitive Proxy Statement, and specifically
from the portion thereof captioned "Executive Compensation," to be filed in
April 1999 in connection with the 1999 Annual Meeting of Stockholders presently
scheduled to be held on April 29, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item 12 is hereby incorporated by
reference from the Registrant's definitive Proxy Statement, and specifically
from the portion thereof captioned "Security Ownership of Certain Beneficial
Owners and Management," to be filed in April 1999 in connection with the 1999
Annual Meeting of Stockholders presently scheduled to be held on April 29, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item 13 is hereby incorporated by
reference from the Registrant's definitive Proxy Statement, and specifically
from the portion thereof captioned "Certain Relationships and Related
Transactions," to be filed in April 1999 in connection with the 1999 Annual
Meeting of Stockholders presently scheduled to be held on April 29, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. FINANCIAL STATEMENTS.
The consolidated financial statements of Regent
Communications, Inc. and subsidiaries filed as part of this Annual Report on
Form 10-K are set forth under Item 8.
2. FINANCIAL STATEMENT SCHEDULES.
The financial statement schedule filed as part of this Annual
Report on Form 10-K is set forth under Item 8.
46
<PAGE> 51
3. EXHIBITS.
A list of the exhibits filed or incorporated by reference as
part of this Annual Report on Form 10-K is set forth in the Index to Exhibits
which immediately precedes such exhibits and is incorporated herein by this
reference.
(b) REPORTS ON FORM 8-K.
The Registrant filed no reports on Form 8-K during the fourth
quarter of the fiscal year ended December 31, 1998.
47
<PAGE> 52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
REGENT COMMUNICATIONS, INC.
Date: March 31, 1999 By: /s/ Terry S. Jacobs
----------------------------------------------
Terry S. Jacobs, Chairman of the Board, Chief
Executive Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Terry S. Jacobs Chairman of the Board, Chief March 31, 1999
- ------------------------------------ Executive Officer, Treasurer and
Terry S. Jacobs Director (Principal Executive Officer)
/s/ William L. Stakelin President, Chief Operating Officer,
- ------------------------------------ Secretary and Director March 31, 1999
William L. Stakelin
/s/ Anthony A. Vasconcellos Vice President and Chief Financial March 31, 1999
- ------------------------------------ Officer (Principal Financial and
Anthony A. Vasconcellos Principal Accounting Officer)
/s/ Joel M. Fairman Vice-Chairman of the Board and March 31, 1999
- ------------------------------------ Director
Joel M. Fairman
Director March 31, 1999
- ------------------------------------
R. Glen Mayfield
/s/ John H. Wyant Director March 31, 1999
- -------------------------------------
John H. Wyant
Director March 31, 1999
- ------------------------------------
William H. Ingram
/s/ Richard H. Patterson Director March 31, 1999
- ------------------------------------
Richard H. Patterson
</TABLE>
S-1
<PAGE> 53
EXHIBIT INDEX
The following exhibits are filed, or incorporated by reference where
indicated, as part of Part IV of this Annual Report on Form 10-K:
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
2(a) Asset Purchase Agreement dated January 5, 1999 by and among
WJON Broadcasting Company, Regent Broadcasting of St. Cloud,
Inc., Regent Licensee of St. Cloud, Inc. and Regent
Communications, Inc.
The following exhibits and schedules to the foregoing Asset
Purchase Agreement are omitted as not material; however,
copies will be provided to the Securities and Exchange
Commission upon request:
Schedules:
1.2 Miscellaneous Excluded Assets
3.4 Allocation of Purchase Price
6.4 Third Party Consents
7.4 Stations Licenses, Etc.
7.7 Tangible Personal Property
7.8 Real Property
7.9 Contracts (including identification of Material
Contracts)
7.11 Environmental Matters
7.12 Intellectual Property
7.13 Financial Statements
7.14 Personnel Information
7.15 Litigation
7.16 Compliance With Laws
7.17 Employee Benefit Plans
Exhibits:
A Form of Indemnification Escrow Agreement
B Form of Deposit Escrow Agreement
C Form of Assignment and Assumption Agreement
D Form of Non-Competition Agreement
E Form of Lease Agreement
F Form of FCC Counsel Opinion
G Form of Buyers' Counsel Opinion
H Form of Seller's Counsel Opinion
2(b) Asset Purchase Agreement dated March 4, 1999 by and among Mag
Mile Media, L.L.C., Regent Broadcasting of Kingman, Inc. and
Regent Licensee of Kingman, Inc.
The following exhibits and schedules to the foregoing Asset
Purchase Agreement are omitted as not material; however,
copies will be provided to the Securities and Exchange
Commission upon request:
Schedules:
A Licenses
B Contracts
C Tangible Property
C-1 Leased Personal Property
D Copyrights, Logos, Jingles, Service Marks,
Trademarks and Other Intangible Rights
E Real Property
F Allocation of Purchase Price
G Evidence of Sources of Funds
H Excluded Employees
Exhibits:
A Form of Deposit Escrow Agreement
B Form of Time Brokerage Agreement
C Form of Assignment and Assumption Agreement
D Form of Opinion - Sellers' Counsel
E Form of Opinion - Sellers' Commission Counsel
F Form of Opinion - Buyer's Counsel
2(c) Asset Purchase Agreement dated March 30, 1999 by and among The
Guyann Corporation, Regent Broadcasting of Flagstaff, Inc. and
Regent Licensee of Flagstaff, Inc.
The following exhibits and schedules to the foregoing Asset
Purchase Agreement are omitted as not material; however,
copies will be provided to the Securities and Exchange
Commission upon request:
Schedules:
1.2.9 Miscellaneous Excluded Assets
6.3 Buyer Qualifications
7.4 Stations Licenses, Etc.
7.7 Tangible Personal Property
7.8 Leased Real Estate
7.9 Contracts (including identification of
Material Contracts)
7.11 Environmental Matters
7.12 Intellectual Property
7.13 Financial Statements
7.14 Employees
7.17 Employee Benefit Plans
Exhibits:
A Form of Indemnity Escrow Agreement
B Form of Deposit Escrow Agreement
C Form of Allocation of Purchase Price
D Form of Agreement Not to Compete
E Form of General Conveyance, Bill of Sale,
Assignment and Assumption Agreement
F Form of Seller's Counsel Opinion
G Form of Seller's FCC Counsel Opinion
H Form of Buyer's Counsel Opinion
3(a) Amended and Restated Certificate of Incorporation of Regent
Communications, Inc., as amended by a Certificate of
Designation, Number, Powers, Preferences and Relative,
Participating, Optional and Other Special Rights and the
Qualifications, Limitations, Restrictions, and Other
Distinguishing Characteristics of Series G Preferred Stock of
Regent Communications, Inc., filed January 21, 1999.
3(b)* Amended and Restated By-Laws of Regent Communications, Inc.
(previously filed as Exhibit 3(b) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998 and
incorporated herein by this reference).
4(a)* Second Amended and Restated Stockholders' Agreement dated as
of June 15, 1998 among Regent Communications, Inc., Terry S.
Jacobs, William L. Stakelin, Waller-Sutton Media Partners,
L.P., William H. Ingram, WGP Corporate Development Associates
V, L.L.C., WGP Corporate Development Associates (Overseas) V,
L.P., River Cities Capital Fund Limited Partnership, BMO
Financial, Inc., General Electric Capital Corporation, Joel M.
Fairman, Miami Valley Venture Fund II Limited Partnership, and
Blue Chip Capital Fund II Limited Partnership (excluding
exhibits not deemed material or filed separately in executed
form) (previously filed as Exhibit 4(c) to the Registrant's
Form 8-K filed June 30, 1998 and incorporated herein by this
reference).
4(b)* Stock Purchase Agreement dated June 15, 1998 among Regent
Communications, Inc., Waller-Sutton Media Partners, L.P., WPG
Corporate Development Associates V, L.C.C., WPG Corporate
Development Associates (Overseas) V, L.P., General Electric
Capital Corporation, River Cites Capital Fund Limited
Partnership and William H. Ingram (excluding exhibits not
deemed material or filed separately in executed form)
(previously filed as Exhibit 4(d) to the Registrant's Form 8-K
filed June 30, 1998 and incorporated herein by this
reference).
4(c)* Registration Rights Agreement dated June 15, 1998 among Regent
Communications, Inc., PNC Bank, N.A., Trustee, Waller-Sutton
Media Partners, L.P., WPG Corporate Development Associates V,
L.C.C., WPG Corporate Development Associates (Overseas) V,
L.P., BMO Financial, Inc., General Electric Capital
Corporation, River Cites Capital Fund Limited Partnership,
Terry S. Jacobs, William L. Stakelin, William H. Ingram, Blue
Chip Capital Fund II Limited Partnership, Miami Valley Venture
Fund L.P. and Thomas Gammon (excluding exhibits not deemed
material or filed separately in executed form) (previously
filed as Exhibit 4(e) to the Registrant's Form 8-K filed June
30, 1998 and incorporated herein by this reference).
E-1
<PAGE> 54
4(d)* Warrant for the Purchase of 650,000 Shares of Common Stock
issued by Regent Communications, Inc. to Waller-Sutton Media
Partners, L.P. dated June 15, 1998 (See Note 1 below)
(previously filed as Exhibit 4(f) to the Registrant's Form 8-K
filed June 30, 1998 and incorporated herein by this
reference).
4(e)* Warrant for the Purchase of 50,000 Shares of Common Stock
issued by Regent Communications, Inc. to General Electric
Capital Corporation dated June 15, 1998 (previously filed as
Exhibit 4(g) to the Registrant's Form 8-K filed June 30, 1998
and incorporated herein by this reference).
4(f)* Agreement to Issue Warrant dated as of June 15, 1998 between
Regent Communications, Inc. and General Electric Capital
Corporation (excluding exhibits not deemed material or filed
separately in executed form) (previously filed as Exhibit 4(h)
to the Registrant's Form 8-K filed June 30, 1998 and
incorporated herein by this reference).
4(g)* Warrant for the Purchase of 80,000 Shares of Common Stock
issued by Regent Communications, Inc. to River Cities Capital
Fund Limited Partnership dated June 15, 1998 (previously filed
as Exhibit 4(k) to the Form 10-Q for the Quarter Ended June
30, 1998, as amended, and incorporated herein by this
reference).
4(h)* Stock Purchase Agreement dated as of May 20, 1997 between
Terry S. Jacobs and Regent Communications, Inc. (previously
filed as Exhibit 4(b) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998 and
incorporated herein by this reference).
4(i)* Stock Purchase Agreement dated as of May 20, 1997 between
River Cities Capital Fund Limited Partnership and Regent
Communications, Inc. (previously filed as Exhibit 4(c) to the
Registrant's Form S-4 Registration Statement No. 333-46435
effective May 7, 1998 and incorporated herein by this
reference).
4(j)* Stock Purchase Agreement dated as of November 26, 1997 and
Terry S. Jacobs and Regent Communications, Inc. (previously
filed as Exhibit 4(d) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998 and
incorporated herein by this reference).
4(k)* Stock Purchase Agreement dated as of December 1, 1997 between
William L. Stakelin and Regent Communications, Inc.
(previously filed as Exhibit 4(e) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998 and
incorporated herein by this reference).
4(l)* Stock Purchase Agreement dated as of December 8, 1997 between
Regent Communications, Inc. and General Electric Capital
Corporation (previously filed
E-2
<PAGE> 55
as Exhibit 4(f) to the Registrant's Form S-4 Registration
Statement No. 333-46435 effective May 7, 1998 and incorporated
herein by this reference).
4(m)* Stock Purchase Agreement dated as of December 8, 1997 between
Regent Communications, Inc. and BMO Financial, Inc.
(previously filed as Exhibit 4(g) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998 and
incorporated herein by this reference).
4(n)* Credit Agreement dated as of November 14, 1997 among Regent
Communications, Inc., the lenders listed therein, as Lenders,
General Electric Capital Corporation, as Documentation Agent
and Bank of Montreal, Chicago Branch, as Agent (excluding
exhibits not deemed material or filed separately in executed
form) (previously filed as Exhibit 4(j) to the Registrant's
Form S-4 Registration Statement No. 333-46435 effective May 7,
1998 and incorporated herein by this reference).
4(o)* Revolving Note issued by Regent Communications, Inc. to Bank
of Montreal, Chicago Branch dated November 14, 1997 in the
principal amount of $20,000,000 (See Note 2 below) (previously
filed as Exhibit 4(k) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998 and
incorporated herein by this reference).
4(p)* Agreement to Issue Warrant dated as of March 25, 1998 between
Regent Communications, Inc. and River Cities Capital Fund
Limited Partnership (previously filed as Exhibit 4(1) to the
Registrant's Form S-4 Registration Statement No. 333-46435
effective May 7, 1998 and incorporated herein by this
reference).
4(q)* First Amendment to Credit Agreement dated as of February 16,
1998 among Regent Communications, Inc., the financial
institutions listed therein, as lenders, General Electric
Capital Corporation, as Documentation Agent, and Bank of
Montreal, Chicago Branch as Agent (previously filed as Exhibit
4(w) to the Registrant's Form 8-K/A (date of report June 15,
1998) filed September 3, 1998 and incorporated herein by
reference).
4(r)* Second Amendment and Limited Waiver to Credit Agreement dated
as of June 10, 1998 among Regent Communications, Inc., the
financial institutions listed therein, as lenders, General
Electric Capital corporation, as Documentation Agent, and Bank
of Montreal, Chicago Branch, as Agent (previously filed as
E-3
<PAGE> 56
Exhibit 4(x) to the Registrant's Form 8-K/A (date of report
June 15, 1998) filed September 3, 1998 and incorporated herein
by reference).
4(s)* Third Amendment to Credit Agreement dated as of August 14,
1998 among Regent Communications, Inc., the financial
institutions listed therein, as lenders, General Electric
Capital Corporation, as Documentation Agent, and Bank of
Montreal, Chicago Branch, as Agent (previously filed as
Exhibit 4(y) to the Registrant's Form 10-Q for the Quarter
Ended September 30, 1998, as amended, and incorporated herein
by this reference).
4(t) Amendment to Second Amended and Restated Stockholders'
Agreement, dated as of January 11, 1999, among Regent
Communications, Inc., Terry S. Jacobs, William L. Stakelin,
Waller-Sutton Media Partners, L.P., William H. Ingram, WGP
Corporate Development Associates V, L.L.C., WGP Corporate
Development Associates (Overseas) V, L.P., River Cities
Capital Fund Limited Partnership, BMO Financial, Inc., General
Electric Capital Corporation, Joel M. Fairman, Miami Valley
Venture Fund II Limited Partnership, and Blue Chip Capital
Fund II Limited Partnership (excluding exhibits not deemed
material or filed separately in executed form)
4(u) Stock Purchase Agreement dated January 11, 1999 between Regent
Communications, Inc. and Blue Chip Capital II Limited
Partnership relating to the purchase of 315,887 shares of
Regent Communications, Inc. Series G Convertible Preferred
Stock (excluding exhibits not deemed material or filed
separately in executed form)
4(v) Stock Purchase Agreement dated January 11, 1999 between
Regent Communications, Inc. and Terry S. Jacobs relating to
the purchase of 50,000 shares of Regent Communications, Inc.
Series G Convertible Preferred Stock (See Note 3) (excluding
exhibits not deemed material or filed separately in executed
form)
4(w) Fourth Amendment, Limited Consent and Limited Waiver to Credit
Agreement, First Amendment to Subsidiary Guaranty and First
Amendment to Pledge and Security Agreement, dated as of
October 16, 1998 among Regent Communications, Inc., the
financial institutions listed therein, as lenders, General
Electric Capital Corporation, as Documentation Agent, and Bank
of Montreal, Chicago Branch, as Agent.
4(x) Fifth Amendment to Credit Agreement, dated as of November 23,
1998, among Regent Communications, Inc., the financial
institutions listed therein, as lenders, General Electric
Capital Corporation, as Documentation Agent, and Bank of
Montreal, Chicago Branch, as Agent.
4(y) Sixth Amendment and Limited Consent to Credit Agreement, dated
as of February 24, 1999, among Regent Communications, Inc.,
the financial institutions listed therein, as lenders, General
Electric Capital Corporation, as Documentation Agent, and Bank
of Montreal, Chicago Branch, as Agent.
10(a) Time Brokerage Agreement dated as of March 4, 1999 among Mag
Mile Media, L.L.C., Regent Broadcasting of Kingman, Inc. and
Regent Licensee of Kingman, Inc. (excluding exhibits not
deemed material or filed separately in executed form)
21 Subsidiaries of the Registrant
27 Financial Data Schedule
- --------------------------------------------------------------------------------
* Incorporated by reference.
1. Six substantially identical Warrants for the purchase of shares of
Registrant's common stock were issued as follows:
<TABLE>
<S> <C>
Waller-Sutton Media Partners, L.P. 650,000
WPG Corporate Development Associates V, L.P. 112,580
WPG Corporate Development Associates (Overseas) V, L.P. 17,420
General Electric Capital Corporation 50,000
River Cities Capital Fund Limited Partnership 20,000
William H. Ingram 10,000
</TABLE>
2. Two substantially identical notes were issued to Bank of Montreal, Chicago
Branch, in the principal amounts of $15,000,000 and $20,000,000.
3. Two substantially identical Stock Purchase Agreements were entered into for
the purchase of Series G Convertible Preferred Stock as follows:
Joel M. Fairman 3,319 shares
William L. Stakelin 3,200 shares
E-4
<PAGE> 1
EXHIBIT 2(a)
ASSET PURCHASE AGREEMENT
BY AND AMONG
WJON BROADCASTING COMPANY,
REGENT BROADCASTING OF ST. CLOUD, INC.,
REGENT LICENSEE OF ST. CLOUD, INC.,
AND
REGENT COMMUNICATIONS, INC.
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE 1 PURCHASE OF ASSETS 1
1.1 Transfer of Assets 1
1.2 Excluded Assets 3
1.3 Collection of Accounts Receivable 4
1.4 Real Estate Matters 5
ARTICLE 2 ASSUMPTION OF OBLIGATIONS 8
2.1 Assumption of Obligations 8
2.2 Retained Liabilities 8
ARTICLE 3 CONSIDERATION 9
3.1 Delivery of Consideration 9
3.2 Escrow Deposit 9
3.3 Proration of Income and Expenses 10
3.4 Allocation of Purchase Price 11
3.5 Adjustment for Barter 11
ARTICLE 4 CLOSING 11
4.1 Closing 11
ARTICLE 5 GOVERNMENTAL CONSENTS 12
5.1 FCC Consent 12
5.2 FCC Application 12
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYERS 13
6.1 Organization and Standing 13
6.2 Authorization and Binding Obligations 13
6.3 Qualification As Assignee 13
6.4 Absence of Conflicting Agreements or Required Consents 13
6.5 Commissions or Finder's Fees 13
6.6 Litigation 14
6.7 Full Disclosure 14
6.8 Financial Qualification 14
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF SELLER 14
i
<PAGE> 3
7.1 Organization and Standing 14
7.2 Authorization and Binding Obligation 14
7.3 Absence of Conflicting Agreements or Required Consents 15
7.4 Government Authorizations 15
7.5 Compliance with FCC Regulations 16
7.6 Taxes 17
7.7 Personal Property 17
7.8 Real Property 17
7.9 Contracts 19
7.10 Status of Contracts, etc. 19
7.11 Environmental 19
7.12 Intellectual Property 20
7.13 Financial Statements 20
7.14 Personnel Information 21
7.15 Litigation 21
7.16 Compliance With Laws 21
7.17 Employee Benefit Plans 22
7.18 Commissions or Finder's Fees 22
7.19 Conduct of Business in Ordinary Course; Adverse Change 22
7.20 Instruments of Conveyance; Good Title 22
7.21 Undisclosed Liabilities 22
7.22 Full Disclosure 22
ARTICLE 8 COVENANTS OF BUYERS 23
8.1 Closing 23
8.2 Notification 23
8.3 No Inconsistent Action 23
8.4 Employees 23
8.5 Senior Lender Consents 23
ARTICLE 9 COVENANTS OF SELLER 24
9.1 Pre-Closing Covenants 24
9.2 Notification 25
9.3 No Inconsistent Action 26
9.4 Closing 26
9.5 Other Items 26
9.6 Exclusivity 26
ii
<PAGE> 4
ARTICLE 10 JOINT COVENANTS 27
10.1 Confidentiality 27
10.2 Cooperation 27
10.3 Control of Stations 27
10.4 Consents to Assignment 28
10.5 Filings 28
10.6 Employee Matters 28
10.7 Like-kind Exchanges 29
10.8 Transition Services Agreement 29
ARTICLE 11 CONDITIONS OF CLOSING BY BUYERS 29
11.1 Representations, Warranties and Covenants 29
11.2 Governmental Consents 29
11.3 Governmental Authorizations 30
11.4 Adverse Proceedings 30
11.5 Third-Party Consents 30
11.6 Closing Documents 30
11.7 Satisfactory Investigation of Station Facilities 30
11.8 Environmental Studies 31
11.9 No Adverse Change 31
11.10 Easement 31
11.11 Title Insurance 32
ARTICLE 12 CONDITIONS OF CLOSING BY SELLER 32
12.1 Representations, Warranties and Covenants 32
12.2 Governmental Consents 33
12.3 Adverse Proceedings 33
12.4 Third Party Consents 33
12.5 Matters Relating to Real Estate 33
12.6 Transition Services Agreement 33
12.7 Closing Documents 33
ARTICLE 13 TRANSFER TAXES; FEES AND EXPENSES 33
13.1 Expenses 33
13.2 Specific Charges 34
ARTICLE 14 DOCUMENTS TO BE DELIVERED AT CLOSING 34
14.1 Seller's Documents 34
14.2 Buyers' Documents 35
ARTICLE 15 SURVIVAL, INDEMNIFICATION, ETC. 36
iii
<PAGE> 5
15.1 Survival of Representations, Etc 36
15.2 Indemnification 37
15.3 Procedures: Third Party and Direct Indemnification Claims 38
ARTICLE 16 TERMINATION RIGHTS 39
16.1 Termination 39
16.2 Liability 41
16.3 Monetary Damages, Specific Performance and Other Remedies 41
16.4 Seller's Liquidated Damages 41
ARTICLE 17 MISCELLANEOUS PROVISIONS 41
17.1 Risk of Loss 41
17.2 Certain Interpretive Matters and Definitions 42
17.3 Further Assurances 42
17.4 Preservation of Records 43
17.5 Benefit and Assignment 43
17.6 Amendments 43
17.7 Headings 43
17.8 Governing Law 44
17.9 Notices 44
17.10 Counterparts 45
17.11 No Third Party Beneficiaries 45
17.12 Severability 45
17.13 Entire Agreement 45
iv
<PAGE> 6
LIST OF SCHEDULES AND EXHIBITS
Schedule 1.2 Miscellaneous Excluded Assets
3.4 Allocation of Purchase Price
6.4 Third Party Consents
7.4 Stations Licenses, Etc.
7.7 Tangible Personal Property
7.8 Real Property
7.9 Contracts (including identification of Material
Contracts)
7.11 Environmental Matters
7.12 Intellectual Property
7.13 Financial Statements
7.14 Personnel Information
7.15 Litigation
7.16 Compliance With Laws
7.17 Employee Benefit Plans
Exhibit A Indemnification Escrow Agreement
B Deposit Escrow Agreement
C Assignment and Assumption Agreement
D Non-Completion Agreement
E Lease Agreement
F FCC Counsel Opinion
G Buyers' Counsel Opinion
H Seller's Counsel Opinion
v
<PAGE> 7
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
this 5th day of January, 1999 by and between WJON BROADCASTING COMPANY, a
Minnesota limited partnership (hereinafter referred to as "Seller"), REGENT
BROADCASTING OF ST. CLOUD, INC., a Delaware corporation ("RBI"), REGENT LICENSEE
OF ST. CLOUD, INC., a Delaware corporation ("RLI") (RBI and RLI collectively
referred to as "Buyers"), and REGENT COMMUNICATIONS, INC., a Delaware
corporation ("Regent").
RECITALS
WHEREAS, Seller owns and operates radio stations WJON-AM and WWJO-FM
licensed to St. Cloud, Minnesota, and KMXK-FM, licensed to Cold Spring,
Minnesota (together the "Stations" and each individually, a "Station") pursuant
to licenses issued by the Federal Communications Commission ("FCC"), and
WHEREAS, Seller desires to sell, and Buyers desire to purchase, certain
assets and assume certain obligations associated with the ownership and
operation of the Stations, all on the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE 1
PURCHASE OF ASSETS
1.1 Transfer of Assets. On the terms and subject to the conditions
hereof and subject to Section 1.2, on the Closing Date (as hereinafter defined),
Seller shall sell, assign, transfer, convey and deliver to Buyers, Buyers shall
purchase for the Purchase Price determined pursuant to Section 3.1, and RBI
shall assume from Seller, all of the right, title and interest of Seller in and
to all of the assets, properties, interests and rights of Seller of whatsoever
kind and nature, real and personal, tangible and intangible, owned or leased (to
the extent of Seller's leasehold interest) by Seller as the case may be,
wherever situated, which are used or held for use in the operation of the
Stations (the "Stations Assets"), including but not limited to all of Seller's
right, title and interest in and to the assets, properties, interests and rights
described in this Section 1.1 (but specifically excluding the assets identified
as Excluded Assets in Section 1.2 hereof):
1.1.1 all transferable licenses, permits and other
authorizations issued to Seller by any governmental or regulatory authority
including without limitation those issued by the FCC (the licenses, permits and
authorizations issued by the FCC are hereafter referred to as the "Stations
Licenses") as the same are used or useful in connection with the operation of
the Stations, including but not limited to those described in Schedule 7.4,
along with renewals or
<PAGE> 8
modifications of such items, and all applications pertaining thereto, between
the date hereof and the Closing Date;
1.1.2 all equipment, electrical devices, antennae, cables,
tools, hardware, office furniture and fixtures, office materials and supplies,
inventory, motor vehicles, spare parts and all other tangible personal property
of every kind and description, and Seller's rights therein, owned, leased (to
the extent of Seller's leasehold interest) or held by Seller and used or useful
in connection with the operations of the Stations, including but not limited to
those items described or listed in Schedule 7.7, together with any replacements
thereof and additions thereto, made between the date hereof and the Closing
Date, and less any retirements or dispositions thereof made between the date
hereof and the Closing Date in the ordinary course of business and consistent
with past practices of Seller; provided, however, Seller agrees that the value
of all such assets retired or disposed of and not replaced with an asset of like
kind and quality shall not exceed $10,000 in the aggregate unless Seller has
obtained the prior written approval of RBI which shall not be unreasonably
withheld, delayed or conditioned;
1.1.3 all transferable contracts, agreements, leases and
legally binding contractual rights of any kind, written or oral, existing on the
date hereof and relating to the operation of the Stations including, but not
limited to, those which are listed in Schedule 7.8 and Schedule 7.9, together
with (a) all advertising contracts relating to the operation of the Stations
which are entered into or acquired by Seller in the ordinary course of business
and which are consistent with past practices of Seller; and (b) any other
contracts, agreements, leases and legal binding contractual rights relating to
the operation of the Stations which are entered into or acquired by Seller in
the ordinary course of business between the date hereof and the Closing Date
(collectively the "Contracts"); provided, however, Buyers shall be entitled to a
credit against the Purchase Price for the amount, if any, by which the aggregate
net value of the Stations' Barter Payable as of the Closing Date exceeds the
aggregate net value of the Stations' Barter Receivable as of the Closing Date by
more than $15,000.
1.1.4 all of Seller's transferable rights in and to the call
letters WJON, WWJO, and KMXK, and any variation thereof, as well as all of
Seller's transferable rights in and to all trademarks, trade names, service
marks, franchises, copyrights, including registrations and applications for
registration of any of them, computer software, programs and programming
material of whatever form or nature, jingles, slogans, the Stations' logos and
all other logos or licenses to use same and all other intangible property rights
of Seller, to the extent transferable, which are used or useful in connection
with the operation of the Stations, including but not limited to those listed in
Schedule 7.12 (collectively, the "Intellectual Property") together with any
associated goodwill and any additions thereto between the date hereof and the
Closing Date;
1.1.5 all transferable programming materials and elements of
whatever form or nature owned by Seller, whether recorded on tape or other
medium or intended for live performance, and all copyrights owned by or licensed
to Seller that are used or useful in connection with the operation of the
Stations, including all such programs, materials, elements and copyrights
acquired by Seller between the date hereof and the Closing Date;
2
<PAGE> 9
1.1.6 all of Seller's rights in and to all the files,
documents, records, and books of account relating to the operation of the
Stations or to the Stations Assets, including, without limitation, the Stations'
local public files, programming information and studies, blueprints, technical
information and engineering data, news and advertising studies or consulting
reports, marketing and demographic data, sales correspondence, lists of
advertisers, promotional materials, credit and sales reports and filings with
the FCC and all written Contracts to be assigned hereunder, logs, transferable
software programs and books and records (copies where originals have been
retained by Seller) relating to employees, financial, accounting and operation
matters, but excluding records relating solely to any Excluded Asset (as
hereinafter defined);
1.1.7 all of Seller's rights under manufacturers' and vendors'
warranties relating to items included in the Stations Assets and all similar
rights against third parties relating to items included in the Stations Assets,
to the extent assignable;
1.1.8 the real property and fixtures thereon described in
Section 7.8 (exclusive of the Excluded Real Estate, subject to the provisions of
Section 1.4 hereof); and
1.1.9 except for Excluded Assets, such other assets,
properties, interests and rights owned by Seller that are used or useful in
connection with the operation of the Stations to the extent assignable in the
case of intangible assets and to the extent of Seller's leasehold interest with
respect to leased property.
The Stations Assets shall be transferred to RBI (except for the
Stations' Licenses which shall be transferred to RLI) free and clear of all
debts, security interests, mortgages, trusts, claims, pledges or other liens,
liabilities (other than Assumed Liabilities), encumbrances or rights of third
parties whatsoever ("Encumbrances"), except for Permitted Encumbrances, if any,
as provided for in Section 7.8.2 and except as set forth in Schedule 7.7. and
Schedule 7.8. Notwithstanding the foregoing, RBI may, by providing written
notice to Seller not less than five (5) days prior to the Closing, decide, in
the exercise of its sole discretion, not to purchase any one or more of such
Stations Assets which is not a Contract (and, in such event, not to assume any
liability secured by, arising from the acquisition of, or otherwise relating to
any such Asset); provided, that in no event shall such decision reduce the
Purchase Price.
1.2 Excluded Assets. Notwithstanding anything to the contrary contained
herein, it is expressly understood and agreed that the Stations Assets shall not
include the following assets along with all rights, title and interest therein
(the "Excluded Assets"):
1.2.1 all cash and cash equivalents of Seller on hand and/or
in banks, including without limitation certificates of deposit, commercial
paper, treasury bills, marketable securities, asset or money market accounts and
all such similar accounts or investments;
1.2.2 all investment securities, accounts receivable (not to
include Barter Receivables which shall be Stations Assets) or notes receivable
for services performed by Seller
3
<PAGE> 10
prior to the Closing Date, and other claims of Seller to the payment of money
relating to the operation of the Stations by the Seller prior to the Closing;
1.2.3 all real property owned by Seller and described on
Schedule 7.8 as Excluded Real Estate (subject to the provisions of Section 1.4
hereof) by reason of not being used by Seller in connection with the operation
of the Stations and all tangible and intangible personal property of Seller not
located at the Stations' facilities identified on Schedule 7.8, and not used by
Seller in connection with the operation of the Stations or used by Seller in all
material respects solely in connection with the operation of radio station
KKJM-FM (those material items of excluded tangible and intangible personal
property being listed on Schedule 1.2);
1.2.4 subject to the limitation set forth in Section 1.1.2 of
this Agreement, all tangible and intangible personal property of Seller disposed
of or consumed in the ordinary course of business consistent with the past
practices of Seller between the date of this Agreement and the Closing Date;
1.2.5 all Contracts that have terminated or expired prior to
the Closing Date in the ordinary course of business consistent with the past
practices of Seller;
1.2.6 Seller's (i) minute books and records, ownership record
books and such other books and records as pertain to the organization, existence
or capitalization of Seller; (ii) originals of all personnel and other records
which Seller is required by law to retain in its possession, including those as
are required by Seller to file its tax returns and reports; and (iii) such other
records or materials relating to Seller generally and not involving or relating
to the Stations Assets or the operation or operations of the Stations;
1.2.7 contracts of insurance, and any insurance proceeds or
claims made by, Seller relating to property or equipment repaired, replaced or
restored by Seller prior to the Closing Date;
1.2.8 all pension, profit sharing or cash or deferred (Section
401 (k)) plans and trusts and the assets thereof and any other employee benefit
plan or arrangement and the assets thereof, if any, maintained by Seller; and
1.2.9 any other right, property or asset described in Schedule
1.2.
1.3 Collection of Accounts Receivable. Following the Closing, RBI shall
act as Seller's agent for the sole purpose of collecting the accounts receivable
due and owing to the Seller as of the Closing Date, which accounts receivable
are identified as Excluded Assets pursuant to Section 1.2.2 ("Seller's Accounts
Receivable"). RBI shall use its customary methods for collecting its own
accounts receivable in collecting Seller's Accounts Receivable, but RBI shall
not be obligated to initiate legal action for such purpose. All payments
received by RBI during the four (4) month period following the Closing Date, net
of commissions payable to
4
<PAGE> 11
RBI's employees who were formerly employees of Seller (provided such amount is
actually paid by RBI to said former employees in satisfaction of Seller's
obligation thereto), shall be applied, on an account debtor by account debtor
basis, first to Seller's Accounts Receivable and, only after full satisfaction
thereof, to RBI's account; provided, however, that if during the four-month
collection period any account debtor contests the validity of its obligation
with respect to any of Seller's Accounts Receivable or specifies in writing
(exclusive of any standard language in any RBI statement or invoice which
specifies the application of payment) that the payment is to be applied to its
account with RBI, RBI may apply the payment from such account debtor to its
existing account. RBI shall remit, on a monthly basis, all cash collections of
Seller's Accounts Receivable, net of commissions payable thereon to any of
Seller's former employees who are employees of RBI (provided such amount is
actually paid by RBI to said former employee), within ten (10) days following
the expiration of each calendar month and of the four-month collection period,
accompanied by a report in form and substance sufficient to enable the Seller to
identify the current collection status of Seller's Accounts Receivable. All
commissions payable on Seller's Accounts Receivable collected by RBI shall be
the obligation of Seller except to the extent such commissions are set off by
Buyers as provided for in this Section 1.3.
During the four-month collection period, the Seller will refrain from
taking any action in an attempt to collect any of the Seller's Accounts
Receivable without obtaining the prior written consent of RBI, except that the
Seller shall be entitled to pursue the collection of any amount claimed due by
Seller from an account debtor who disputes the balance or validity of its
obligation to make payment to the Seller or who otherwise directs that payment
be applied first to RBI's account in lieu of Seller's account without RBI's
written consent by use of any commercially-acceptable collection methods,
including submitting uncollected Seller's Accounts Receivable for collection, as
the Seller may deem appropriate in its sole discretion. RBI shall not have the
right to compromise, settle or adjust the amount of any of Seller's Accounts
Receivable without Seller's prior written consent. Upon expiration of the
four-month collection period, RBI shall have no further obligation to collect
any of Seller's Accounts Receivable, provided, however, that all funds
subsequently received by RBI (without time limitation) that can be specifically
identified as belonging to the Seller (including payments relating to any
Excluded Asset), whether by accompanying invoice, remittance advice or
otherwise, shall be promptly paid over or forwarded to the Seller. RBI shall
allow Seller and its representatives to review such books, records and documents
as may be reasonably necessary or helpful to establish and verify the accuracy
and status of RBI's collection of Seller's Accounts Receivable.
1.4 Real Estate Matters. The Real Estate that is included in the
Stations Assets includes the KMXK tower site, the WWJO tower site and a portion
of the WJON site known as the "Headquarters Property" on which the broadcasting
offices and studio of the Stations and WJON-AM tower and ground systems are
located (said parcels are collectively referred to herein as the "Included Real
Estate"). The excluded portion of the Headquarters Property is identified on
Schedule 7.8 as the Excluded Real Estate. The Included Real Estate and the
Excluded Real Estate constitute the Owned Real Estate. Seller shall have a
surveyor ("Surveyor") prepare legal descriptions for the Excluded Real Estate at
Seller's sole cost and expense, which legal descriptions shall conform, in all
material respects, with the sketch of the Excluded Real Estate
5
<PAGE> 12
identified as parcels 1, 2, 5, and 6 identified on Schedule 7.8 (the "Excluded
Real Estate Legal Descriptions"). The parties shall execute an agreement at
Closing accepting the Excluded Real Estate Legal Descriptions as prepared by the
Surveyor describing the Excluded Real Estate. For the purpose of consummating
the transactions contemplated by this Agreement, Seller will convey all of the
Owned Real Estate to RBI, subject to Seller's reservation of rights in, and
RBI's obligations with respect to the Excluded Real Estate, as the same are more
fully described in this Section 1.4. RBI, upon the written request of Seller
("Demand to Re-convey"), will re-convey the Excluded Real Estate (or selected
parcels thereof which may be designated by Seller from time to time in a Demand
to Re-convey), to Seller. Seller may waive in writing the obligation of RBI to
re-convey one or more of the parcels of Excluded Real Estate, in its sole
discretion, at any time, provided, however, that RBI shall retain ownership of
any parcel(s) of Excluded Real Estate which are not subject to a Demand to
Re-convey submitted by the Seller on or prior to the Re-conveyance Deadline.
The parties acknowledge that there are certain title problems affecting
the Headquarters Property that need to be remedied by Seller by a quiet title
action through a judicial proceeding ("Quiet Title Proceeding"). These title
problems include (i) a guy wire anchor in the southeast corner of the Included
Real Estate is presently located in an ingress and egress easement; (ii) the
existence of an appurtenant easement for a guy wire is required as contemplated
by Section 11.10 of the Purchase Agreement; (iii) the existence of possible
legal description inaccuracies; and (iv) such other title objections made by the
Buyers in accordance with the provisions of Section 11.11 which are not
Permitted Real Property Encumbrances as described therein. Buyers agree to
reasonably cooperate with Seller to quiet the title to such real estate. The
cooperation shall include, but not be limited to (i) the joining by RBI in an
action by Seller in any Court of competent jurisdiction to quiet the title to
the Headquarters Property, (ii) the joining by RBI in any plats or subdivisions
of the Headquarters Property necessary to more accurately describe the
Headquarters Property and the Excluded Real Estate, and (iii) complying with all
reasonable requirements imposed by any applicable governmental authority in the
subdivision of the Owned Real Estate to show and describe the Excluded Real
Estate as described in this Section 1.4. Notwithstanding anything to the
contrary, Buyers' cooperation shall in no way limit, infringe upon, disrupt or
otherwise affect their operation of the Headquarters Property as a broadcasting
station. Seller acknowledges that Buyers' senior lenders must (i) provide their
prior written consent to the Quiet Title Proceeding and (ii) agree in writing to
release the Excluded Real Estate from the lien of their mortgage upon
re-conveyance of Excluded Real Estate to Seller without any consideration
(collectively the "Senior Lender Consents"). Buyers shall exercise commercially
reasonable efforts in obtaining the Senior Lender Consents prior to the Closing
in such form as may be reasonably acceptable to counsel for the Seller. Seller
hereby agrees to indemnify and hold Buyers and Buyers' lenders harmless from any
and all costs, expenses, liabilities, loss or damage (including reasonable
attorney's fees and disbursements) as a result of the Quiet Title Proceeding.
RBI's re-conveyance of the Excluded Real Estate to Seller shall be by a
limited warranty deed. RBI will also cause the necessary partial releases for
any Encumbrances created or suffered to exist by or as a result of RBI's
ownership of the Excluded Real Property at the time
6
<PAGE> 13
of any re-conveyance ("RBI Encumbrances"). RBI shall indemnify and hold the
Seller harmless from any and all costs, expenses, liabilities, loss or damage
(including reasonable attorney's fees and disbursements) incurred by the Seller
in enforcing its rights of re-conveyance set forth herein or in obtaining the
release or discharge of the RBI Encumbrances. All costs associated with said
re-conveyance (exclusive of the RBI Encumbrances and RBI's indemnity obligation
related thereto) shall be borne by Seller. RBI shall not encumber the
Headquarters Property or the Excluded Real Estate except for liens to secure
financing used to acquire the Headquarters Property from the Seller in
accordance with the provisions of this Agreement.
It is anticipated that the Quiet Title Proceeding, platting of the
Headquarters Property and re-conveyance of the Excluded Real Estate shall be
completed by March 1, 2000; provided, however, Seller shall have until thirty
(30) days after the later of (i) the Quiet Title Proceeding has been finally
determined; or (ii) the approval of the last governmental authority to the
platting of the Headquarters Property and the Excluded Real Estate to request
the conveyance from RBI of the Excluded Real Estate ("Re-conveyance Deadline").
Upon re-conveyance of the Excluded Real Estate to Seller by RBI, Seller
shall reimburse RBI for all real estate taxes paid by RBI on the Excluded Real
Estate re-conveyed to Seller. The amount of the real estate taxes on the
Excluded Real Estate re-conveyed shall be mutually agreed upon at the time of
re-conveyance, provided, however, if RBI and Seller cannot mutually agree upon
the amount of the real estate taxes, the local assessor or appropriate
governmental department of the City of St. Cloud shall allocate the amount of
the real estate taxes for the Excluded Real Estate being re-conveyed to Seller
by RBI and their allocation shall be final and binding upon the Seller and RBI.
It is the intent of the provisions of this Section 1.4 that upon
resolution of the Quiet Title Proceeding, the platting of the Headquarters
Property and the re-conveyance to Seller of such Excluded Real Estate as Seller
shall request, the parties shall be placed in such economic position with
respect to such Excluded Real Estate and the balance of the Owned Real Estate as
they would be had such Excluded Real Property re-conveyed to Seller never been
conveyed to RBI.
In the event the Quiet Title Proceeding is unsuccessful in remedying,
in all material respects, title problems that affect the Headquarters Property,
Seller, diligently and in good faith, shall take such steps to eliminate
reasonably foreseeable potential adverse effects of such unresolved title
problems that could reasonably interfere in any material respect with the
existing use of the Headquarters Property, without cost to Buyers. In the event
less expensive remedies have been exhausted, resolution may include, without
limitation, a replacement of the WJON-AM tower with a tower of equivalent height
with a reconfigured guy wire system. All such remedial steps shall be completed
with reasonable promptness in a manner reasonably acceptable to Buyers and their
engineer in accordance with good engineering practice and without adversely
affecting to any noticeable degree the quality of the broadcast signals
transmitted by or to the Station (WJON-AM) over its area of population coverage,
the objective being to place Buyers in a position equivalent to the position
they would have been in upon Closing of this transaction had such material title
problems not existed. Because of stability
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concerns, a shortening or relocation of the existing guy wires to the existing
tower will not be a suitable remedial solution. In the event the Quiet Title
Proceeding is unsuccessful in remedying the title problems and alternative
corrective measures do not exist, then as a remedy of last resort Buyers shall
be entitled to compensation in the form of an equitable reduction of the
Purchase Price, and a refund of the excess paid with interest at Regent's bank
borrowing rate in effect from time to time since the Closing Date, to reflect
the diminution in value to Buyers of the transaction, taking into account the
unanticipated problems existing by virtue of the title problems. In the event
the parties are unable to agree upon the amount of the equitable reduction, the
matter shall be submitted to arbitration in Chicago, Illinois in accordance with
the commercial rules of the American Arbitration Association then in effect, and
the decision shall be binding and enforceable upon the parties. In the event the
title problems have not been remedied or alternative corrective measures
completed by the time the escrow funds being held under the Indemnification
Escrow Agreement are to be released to Seller, then $150,000 of such funds shall
continue to be held in escrow under said agreement until such title problems
have been remedied, the alternative corrective measures completed, or Buyers
have been compensated according to the terms hereof. The Seller and RBI shall
enter into a memorandum or short form of this provision which shall be in
recordable form ("Memorandum of Re-conveyance").
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
2.1 Assumption of Obligations. Subject to the provisions of this
Section 2.1, Section 2.2 and Section 3.3, on the Closing Date, RBI shall assume
the obligations of Seller arising or to be performed on and after the Closing
Date (except to the extent such obligations represent liabilities for
activities, events or transactions occurring, or conditions existing, prior to
the Closing Date) under: (a) the Contracts (including Barter Payables); (b) all
property taxes and other governmental charges on the Stations Assets; and (c)
all federal, state, county, municipal, and foreign sales tax liabilities,
including any penalties and interest thereon, relating to the operation of the
Stations. All of the foregoing liabilities and obligations shall be referred to
herein collectively as the "Assumed Liabilities. "
2.2 Retained Liabilities. Except as specifically set forth in Section
2.1 above for Assumed Liabilities, Buyers expressly do not, and shall not,
assume or agree to pay, satisfy, discharge or perform and will not be deemed by
virtue of the execution and delivery of this Agreement or any agreement,
instrument or document delivered pursuant to or in connection with this
Agreement or otherwise by reason of or in connection with the consummation of
the transactions contemplated hereby or thereby, to have assumed or to have
agreed to pay, satisfy, discharge or perform, any liabilities, obligations or
commitments of Seller of any nature whatsoever whether accrued, absolute,
contingent or otherwise and whether or not disclosed to Buyer. Seller will
retain and pay, satisfy, discharge and perform in accordance with the terms
thereof, all liabilities and obligations of the Seller, other than the Assumed
Liabilities, including but not limited to, the obligation to assume, perform,
satisfy or pay any liability, obligation, agreement, debt, charge, claim,
judgment or expense incurred by or asserted against Seller related to taxes,
environmental matters, pension or retirement plans or trusts, profit-sharing
plans,
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employment contracts, employee benefits, severance of employees, product
liability or warranty, negligence, contract breach or default, or other
obligations, claims or judgments asserted against Buyers as successor in
interest to Seller. All of such liabilities, obligations and commitments of
Seller described in this Section 2.2 shall be referred to herein collectively as
the "Retained Liabilities."
ARTICLE 3
CONSIDERATION
3.1 Delivery of Consideration. In consideration for the sale of the
Stations Assets to Buyers, Buyers shall, at the Closing (as hereinafter
defined), pay to Seller prior to 11:00 a.m., Central Time, on the Closing Date
in cash by wire transfer to an account or accounts designated by Seller the
amount of Twelve Million Seven Hundred Thousand and no/100 Dollars
($12,700,000.00), subject to the provisions of Section 1.1.3 above and Sections
3.2, 3.3, and 11.9 below (the "Purchase Price"). Notwithstanding the foregoing,
the parties agree that at the Closing, Buyers, Seller and National City Bank, as
Escrow Agent (the "Indemnification Escrow Agent"), shall enter into an
Indemnification Escrow Agreement in the form of Exhibit A hereto (the
"Indemnification Escrow Agreement") pursuant to which Seller shall deposit with
the Indemnification Escrow Agent Seven Hundred Fifty Thousand Dollars
($750,000), which funds shall be held in escrow for a period of at least one
year from the Closing Date and until the earlier of (a) the date which is thirty
(30) days after Buyers' receipt from their auditors of audited financial
statements for the Stations for the 12-month period ended December 31, 1999 or
(b) June 30, 2000, except as otherwise provided in Section 1.4. Such funds shall
be used to satisfy indemnification claims of Buyers pursuant to Sections 15.2.1
and 15.3 hereof, and otherwise be administered and released as specifically
provided for in the Indemnification Escrow Agreement.
3.2 Escrow Deposit.
(a) Concurrently with the execution and delivery of this
Agreement, Buyers, Seller and National City Bank, as
Escrow Agent (the "Deposit Escrow Agent"), shall
enter into a Deposit Escrow Agreement in the form of
Exhibit B hereto (the "Deposit Escrow Agreement")
pursuant to which Buyers shall deposit within two (2)
business days thereafter the amount described below
as a deposit on the amount of the Purchase Price.
Such amount held in escrow shall be applied as set
forth herein and in the Deposit Escrow Agreement.
(b) Pursuant to the terms of the Deposit Escrow
Agreement, Buyers shall wire transfer Five Hundred
Thousand Dollars ($500,000), or alternatively,
deliver an irrevocable, stand-by letter of credit for
such amount in form and substance acceptable to
Seller, to an escrow account established pursuant to
the Deposit Escrow Agreement (the "Escrow Deposit").
At the Closing, the Escrow Deposit if, in the form of
cash, shall be applied to the Purchase Price to be
paid to Seller and the interest accrued thereon
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shall be paid to Buyers, or if in the form of a
letter of credit, shall be returned to Buyers. In the
event (i) this Agreement is terminated pursuant to
Section 16.1.3 because of Buyers' material breach of
this Agreement which was not cured within any
applicable cure period and all other conditions to
Closing are at such time satisfied or waived (other
than such conditions (1) as could not be satisfied
because of Buyers' material breach of this Agreement
or (2) except for those conditions referred to in
(1), as can reasonably be expected to be satisfied by
the Closing), the Escrow Deposit shall be paid to or
delivered for draw thereon to Seller as liquidated
damages as provided in Section 16.4 hereto for
Buyers' material breach of this Agreement (the
payment of such sum to Seller shall discharge any
liability Buyers may have to Seller), and the
interest accrued on the Escrow Deposit shall be paid
to Buyers; and (ii) this Agreement is terminated
under any circumstances other than those set forth in
the immediately preceding clause (i), the Escrow
Deposit and the interest accrued thereon shall be
paid or returned to Buyers; provided, however, the
rights and remedies which either party has pursuant
to any confidentiality agreement, whether set forth
herein or in a separate agreement shall not be merged
with this provision and shall survive termination of
this Agreement.
3.3 Proration of Income and Expenses.
3.3.1 Except as otherwise provided herein, all revenues,
expenses and all deposits, reserves and prepaid and deferred income and expenses
relating to the Stations Assets or the Assumed Liabilities and arising from the
conduct of the business and operations of the Stations shall be prorated between
RBI and Seller in accordance with generally accepted accounting principles as of
11:59 p.m. Central time, on the date immediately preceding the Closing Date
(such that Seller shall be responsible for amounts allocable to the period prior
to the Closing Date and RBI shall be responsible for amounts allocable to the
period on or after the Closing Date). Such prorations shall include, without
limitation, all ad valorem, real estate, property taxes and other governmental
charges on the Stations Assets (but excluding taxes arising by reason of the
transfer of the Stations Assets as contemplated hereby which shall be paid as
set forth in Section 13.2), business and license fees, frequency discounts,
music and other license fees (including any retroactive adjustments thereof,
which retroactive adjustments shall not be subject to the sixty-day limitation
set forth in Section 3.3.2), utility expenses, vacation and sick leave, amounts
due or to become due under Contracts, rents and similar prepaid and deferred
items.
3.3.2 Except as otherwise provided herein, the prorations and
adjustments contemplated by this Section 3.3, to the extent practicable, shall
be made on the Closing Date. As to those prorations and adjustments not capable
of being ascertained on the Closing Date, an estimate shall be made as of the
Closing Date with the actual amount of the adjustment and proration to be made
within sixty (60) calendar days after the Closing Date.
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3.3.3 In the event of any disputes between the parties as to
such adjustments, the amounts not in dispute shall nonetheless be paid at the
time provided in Section 3.3.2 and such disputes shall be determined by an
independent certified public accountant with no prior relationship to the
parties or their Affiliates which is mutually acceptable to the parties, and the
fees and expenses of such accountant shall be paid one-half by Seller and
one-half by Buyers. The determination of such accountant shall be binding on the
parties hereto.
3.4 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Stations Assets in accordance with the allocation set forth on
Schedule 3.4. Seller and Buyer hereby agree to use the allocation set forth on
Schedule 3.4 for all tax purposes, including, without limitation, those matters
subject to Section 1060 of the Internal Revenue Code of 1986, as amended.
3.5 Adjustment for Barter. As of the Closing Date, Buyers shall be
entitled to a credit against the Purchase Price for the amount, if any, by which
the aggregate net value of the Stations' Barter Payable (as defined below) as of
the Closing Date exceeds the aggregate net value of the Stations' Barter
Receivable (as defined below) as of the Closing Date by more than $15,000 with
respect to Contracts for the sale of advertising in exchange, in whole or in
part, for merchandise or services ("Trade Agreements"). For purposes of this
Agreement, any Contract which provides for the payment of fees for programming
services through advertising barter (i.e., barter programming) shall be excluded
from the definition of Trade Agreements.
"Barter Payable" means the aggregate value of time owed pursuant to
each of the Trade Agreements. "Barter Receivable" means the aggregate value of
goods and services to be received pursuant to each of the Trade Agreements.
Notwithstanding the foregoing, the net Barter Payable, if any, relating solely
to the Value Connection shall be calculated by multiplying the net Barter
Payable for the Value Connection by a fraction, the numerator of which is
seventy (70) and the denominator of which is eighty-five (85). The resultant
shall be the net Barter Payable attributable to the Value Connection, which
amount shall be aggregated with the net Barter Payable or Receivable from all
other Trade Agreements to arrive at the net Barter Payable or Barter Receivable.
ARTICLE 4
CLOSING
4.1 Closing. Except as otherwise mutually agreed upon by Buyers and
Seller, the consummation of the transactions contemplated herein (the "Closing")
shall occur within five (5) business days after the later to occur of (a) the
satisfaction or waiver of each condition to closing contained herein, other than
such conditions as are reasonably anticipated to be satisfied at Closing
(provided that each party hereto shall use its commercially reasonable efforts
to cause each condition to closing to be satisfied so that the Closing may occur
at the earliest possible date), (b) the issuance of the Final Order (as defined
below) or (c) January 1, 1999; or such other date as may be mutually agreed upon
by the parties hereto (the "Closing Date"); provided,
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however, that Buyers and Seller may waive the requirement that a Final Order be
issued and elect (subject to clause (a) and (c) above, to close at any time (not
less than five (5) business days following such agreement) after the release of
the initial FCC approval on public notice that the FCC has consented to the
transaction contemplated hereby (the "Initial Approval"). For purposes of this
Agreement, "Final Order" (and "Final") means an order or grant by the FCC which
is no longer subject to reconsideration or review by the FCC or a court of
competent jurisdiction and pursuant to which the FCC consents, as the case may
be, to the assignments of the FCC Licenses contemplated by this Agreement or to
the renewal of the FCC Licenses, each such order or grant being without the
imposition of any conditions adverse to Buyers or any Affiliate (as hereinafter
defined) of Buyers with respect to the assignment of the FCC Licenses to RLI or
the continued operation by Buyers of the Stations or the Stations Assets in the
manner presently operated by Seller. In the event the parties close before the
Initial Approval has become a Final Order, the parties shall enter into a
mutually acceptable unwind agreement. The Closing shall be held in the offices
of Moss & Barnett, Minneapolis, Minnesota, or at such place and in such manner
as the parties hereto may agree. The Closing shall be effective as of the
beginning of business on the Closing Date.
ARTICLE 5
GOVERNMENTAL CONSENTS
5.1 FCC Consent. It is specifically understood and agreed by Buyers and
Seller that the Closing and the assignment of the Stations Licenses and the
transfer of the Stations Assets are expressly conditioned on and are subject to
the prior consent and approval of the FCC without the imposition of any
conditions materially adverse to Buyers or Regent, on the one hand, or the
Seller, on the other hand (the "FCC Consent").
5.2 FCC Application. Within five (5) business days after the execution
of this Agreement, Buyers and Seller shall file an application with the FCC for
the FCC Consent (the "FCC Application"). Buyers and Seller shall prosecute the
FCC Application with all reasonable diligence and otherwise use their
commercially reasonable efforts to obtain the FCC Consent as expeditiously as
practicable (but neither Buyers nor Seller shall have any obligation to satisfy
complainants or the FCC by taking any steps which would have a material adverse
effect upon Buyers or Seller or upon any of their respective Affiliates). If the
FCC Consent imposes any condition on Buyers or Seller or any of their respective
Affiliates, such party shall use its commercially reasonable efforts to comply
with such condition; provided, however, that neither Buyers nor Seller shall be
required hereunder to comply with any condition that would have a material
adverse effect upon it or any of its Affiliates. If reconsideration or judicial
review is sought with respect to the FCC Consent, the party affected shall
vigorously oppose such efforts for reconsideration or judicial review; provided,
however, that nothing herein shall be construed to limit either party's right to
terminate this Agreement pursuant to Article 16 hereof.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYERS (AND REGENT)
Buyers (and Regent where stated) hereby make the following
representations and warranties to Seller, each of which is true and correct on
the date hereof, shall survive the Closing for the periods provided for in
Section 15.1 and, subject to the provisions of Section 15.3.5, shall be
unaffected by any investigation heretofore or hereafter made by Seller:
6.1 Organization and Standing. Buyers and Regent are corporations duly
organized validly existing and in good standing under the laws of the State of
Delaware, and by the Closing Date Buyers will be duly qualified to conduct
business within the State of Minnesota.
6.2 Authorization and Binding Obligations. Buyers have all necessary
corporate power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and to own or lease the Stations Assets and to
carry on the business of the Stations upon the consummation of the transactions
contemplated by this Agreement. Buyers' and Regent's execution, delivery and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary action on their part and, assuming
the due authorization, execution and delivery of this Agreement by Seller, this
Agreement will constitute the legal, valid and binding obligation of Buyers and
Regent, enforceable against them in accordance with its terms, except as limited
by laws affecting creditors' rights or equitable principles generally.
6.3 Qualification As Assignee. To the best of Buyers' knowledge, there
are no facts which, under the Communications Act of 1934, as amended, or the
existing rules and regulations of the FCC, would disqualify RLI as an assignee
of the Stations Licenses.
6.4 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article 5 hereof with respect to governmental consents or on
Schedule 6.4, the execution, delivery and performance of this Agreement by
Buyers and Regent: (a) will not conflict with, result in a breach of, or
constitute a violation of, or a default under, the provisions of the articles of
incorporation or by-laws (or other charter or organizational documents) of
Buyers or Regent; (b) do not require the consent of any third party; (c) will
not violate any applicable law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority to which either Buyer or
Regent or any of their respective assets are now subject; and (d) will not,
either alone or with the giving of notice or the passage of time, or both,
conflict with, constitute grounds for termination of or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
agreement, instrument, license or permit to which either Buyer or Regent is now
subject.
6.5 Commissions or Finder's Fees. Neither Buyers, Regent, nor any person
or entity acting on behalf of Buyers or Regent has agreed to pay a commission,
finder's fee or similar payment in connection with this Agreement or any matter
related hereto to any person or entity, with the sole exception of Media Venture
Partners.
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6.6 Litigation. Buyers and Regent are not subject to any judgment, award,
order, writ, injunction, arbitration decision or decree prohibiting the
consummation of the transactions contemplated by this Agreement, and there are
no suits, legal proceedings or investigations of any nature pending, or to the
best knowledge of Buyers or Regent, threatened against or affecting Buyers or
Regent that would affect Buyers' ability to carry out the transactions
contemplated by this Agreement.
6.7 Full Disclosure. No representation or warranty made by Buyers or
Regent contained in this Agreement or any certificate, document or other
instrument furnished or to be furnished by Buyers pursuant hereto contains or
will contain any untrue statement of a material fact, or omits or shall omit to
state any material fact required to make any statement contained herein or
therein not misleading. To the best of Buyers' knowledge, as of the date hereof,
there is no pending or contemplated event or occurrence that would cause any of
the representations of the Buyers or Regent in this Agreement not to be true and
complete on the date of such event or occurrence as if made on that date.
6.8 Financial Qualification. Buyers and Regent have funds available to
them subject to terms of an existing Credit Agreement and Stock Purchase
Agreement which are sufficient to enable them to acquire the Stations Assets and
to consummate the transactions contemplated by this Agreement.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the following representations and warranties to Buyers,
each of which is true and correct on the date hereof, shall survive the Closing
for the periods of time provided for in Section 15.1 and, except as provided in
Section 15.3.5, shall be unaffected by any investigation heretofore or hereafter
made by Buyers:
7.1 Organization and Standing. Seller is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Minnesota, is authorized to conduct business within the State of Minnesota, and
has the requisite power and authority to own, lease and operate the Stations
Assets owned or leased by it and to carry on the business of the Stations as now
being conducted by it.
7.2 Authorization and Binding Obligation. Seller has all necessary power
and authority of a limited partnership to enter into and perform this Agreement
and the transactions contemplated hereby. Seller's execution, delivery and
performance of this Agreement and the transactions contemplated hereby have been
duly authorized, executed and delivered by Seller and, assuming the due
authorization, execution and delivery of this Agreement by Buyers and Regent,
this Agreement will constitute the legal, valid and binding obligation of Seller
enforceable against it in accordance with its terms, except as limited by laws
affecting the enforcement of creditors' rights or equitable principles
generally.
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7.3 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article 5 with respect to governmental consents, in Schedule 7.8
with respect to consents required in connection with the assignment of leases
relating to the Leased Real Estate, and in Schedule 7.9 with respect to consents
required in connection with the assignment of certain other Contracts, the
execution, delivery and performance of this Agreement by Seller: (a) do not
require the consent of any third party (including, without limitation, the
consent of any governmental, regulatory, administrative or similar authority);
(b) will not conflict with, result in a breach of, or constitute a violation of
or default under, the provisions of Seller's charter or organizational
documents, or any applicable law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority to which Seller is a party or
by which Seller or any of the Stations Assets are bound; (c) will not either
alone or with the giving of notice or the passage of time, or both, conflict
with, constitute grounds for termination of or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any Material
Contract, agreement, instrument, license or permit to which Seller or any of the
Stations Assets is now subject; and (d) will not result in the creation of any
lien, charge or encumbrance on any of the Stations Assets, excluding in each
case violations which, or breaches and approvals the absence of which,
individually or in the aggregate could not reasonably have a material adverse
effect on the Seller or the Stations Assets.
7.4 Government Authorizations.
7.4.1 Schedule 7.4 hereto contains a true and complete list of
the Stations Licenses and other material licenses, permits or other
authorizations from governmental and regulatory authorities which are required
for the lawful conduct of the business and operations of the Stations in the
manner and to the extent they are presently conducted (including, without
limitation, auxiliary licenses associated with each Station). Seller has
delivered to Buyers true and complete copies of the Stations Licenses and the
other material licenses, permits and authorizations listed in Schedule 7.4,
including any and all amendments and other modifications thereto.
7.4.2 Seller is the authorized legal holder of the Stations
Licenses and other licenses, permits and authorizations listed in Schedule 7.4.
Except as set forth Schedule 7.4, none of the Stations Licenses and other
licenses, permits and authorizations listed in Schedule 7.4 is subject to any
restrictions or conditions which would limit in any material respect the full
operation of the Stations as now operated.
7.4.3 Except for the governmental consents contemplated by
Article 5 or as set forth in Schedule 7.4, and except for matters affecting the
radio broadcast industry generally, there are no applications, complaints,
petitions or proceedings pending or, to the best of Seller's knowledge,
threatened as of the date hereof before the FCC or any other governmental or
regulatory authority relating to the business or operations of the Stations.
Except as set forth in Schedule 7.4, the Stations Licenses and the other
licenses, permits and authorizations listed in Schedule 7.4 are in full force
and effect and are not materially impaired as a result of any act or
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omission of Seller or its members, managers, officers, or employees. The
operations of the Stations are now and have been during the current renewal term
in all material respects in accordance with the Stations Licenses and the
underlying construction permits and the other licenses, permits and
authorizations listed in Schedule 7.4. No proceedings are pending or, to the
best of Seller's knowledge, threatened, and to the best of Seller's knowledge
there has not been any act or omission of Seller or any of its members,
managers, officers, or employees, which could reasonably be expected to result
in the revocation, modification, non-renewal or suspension of any of the
Stations Licenses or the other licenses, permits and authorizations listed in
Schedule 7.4, the denial of any pending applications, the issuance of any cease
and desist order, the imposition of any administrative actions by the FCC or any
other governmental or regulatory authority with respect to the Stations Licenses
or the other licenses, permits and authorizations listed in Schedule 7.4 or
which could reasonably be expected to have a material adverse effect on Buyers'
ability to continue to operate the Stations as they are currently operated.
7.4.4 Each Station is operating with the maximum facilities
specified in the respective Station License.
7.4.5 To the best of Seller's knowledge: (i) none of the
Stations is causing objectionable interference to the transmissions of any other
broadcast station or communications facility nor has any of the Stations
received any complaints with respect thereto; and (ii) no other broadcast
station or communications facility is causing objectionable interference to the
respective transmissions of any Station or the public's reception of such
transmissions which exceeds the interference which the Stations are required to
accept pursuant to the provisions of the applicable Stations License.
7.4.6 Seller has no reason to believe that the Stations
Licenses and the other licenses, permits, or authorizations listed in Schedule
7.4 will not be renewed in their ordinary course.
7.4.7 All reports, forms, and statements required to be filed
by Seller with the FCC with respect to the Stations since the grant of the last
renewal of the Stations Licenses which the failure to file would materially
adversely affect the Stations Licenses have been filed and are complete and
accurate in all material respects.
7.4.8 The operation of the Stations and all of the Stations
Assets are in compliance in all material respects with ANSI Radiation Standards
C95.1-1992.
7.5 Compliance with FCC Regulations. Except as specified in Schedule 7.4,
the operation of the Stations and all of the Stations Assets are in compliance
in all material respects with: (a) all applicable engineering standards required
to be met under applicable FCC rules; and (b) all other applicable federal,
state and local rules, regulations, requirements and policies, including, but
not limited to, equal employment opportunity policies of the FCC, and all
applicable painting and lighting requirements of the FCC and the Federal
Aviation
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Administration to the extent required to be met under applicable FCC rules and
regulations, and to the best of Seller's knowledge, there are no filed claims to
the contrary.
7.6 Taxes. Seller has filed all federal, state, local and foreign
income, franchise, sales, use, property, excise, payroll and other tax returns
required by law to have been filed by it and has paid in full all taxes,
estimated taxes, interest, assessments, and penalties shown as due and payable
by it on such returns. All returns and forms which have been filed have been
true and correct in all material respects and, to the knowledge of Seller, no
tax or other payment in an amount other than as shown on such returns and forms
that is required to be paid by Seller with respect to the periods covered by
such returns has not been paid by Seller. There are no present disputes as to
taxes of any nature payable by Seller which in any event could adversely affect
any of the Stations Assets or the operation of the Stations by Buyers. To the
best of Seller's knowledge, none of its tax returns, federal, state, local or
foreign, are currently being audited. Seller does not and will not in the future
have any liability, fixed or contingent, for any unpaid federal, state or local
taxes or other governmental or regulatory charges whatsoever (including without
limitation withholding and payroll taxes but excluding tax liabilities prorated
under Section 3.3.1) which will result in a lien on the Stations Assets after
conveyance thereof to Buyers or in any other form of transferee liability to
Buyers.
7.7 Personal Property. Schedule 7.7 hereto contains a list of all
material items of tangible personal property owned by Seller and used or useful
in the conduct of the business and operations of the Stations. Schedule 7.7 also
separately lists any material tangible personal property leased by Seller
pursuant to leases included within the Contracts. Except as disclosed in
Schedule 7.7, Seller has, and following the Closing, RBI will have, good and
marketable title to all of the items of tangible personal property which are
included in the Stations Assets (other than those subject to lease) and none of
such Stations Assets at the Closing will be subject to any Encumbrances except
for liens for taxes not yet due and payable, and except for the Assumed
Liabilities. The properties listed in Schedule 7.7, along with those properties
subject to lease and included among the Contracts, constitute all material
tangible personal property necessary to operate the Stations as the same are now
being operated. Except as set forth in Schedule 7.7, all items of tangible
personal property listed or described on Schedule 7.7 are in good and
technically sound operating condition and repair (ordinary wear and tear
excepted), are free from all material defect and damage, are suitable for the
purposes for which they are now being used, and have been maintained in a manner
consistent in all material respects with generally accepted standards of good
engineering practice.
7.8 Real Property.
7.8.1 Schedule 7.8 hereto contains a complete and accurate
list of all real property (including without limitation, real property relating
to the towers, transmitters, studio sites and offices of the Stations) used by
Seller in connection with the operations of the Stations, identifying thereon
the real property that is owned by Seller or its Affiliates (the "Owned Real
Estate") or leased by Seller (the "Leased Real Estate") (collectively, the "Real
Estate").
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7.8.2 Seller will have on or before the Closing Date good and
marketable title in fee simple to all of the Owned Real Estate, free and clear
of all Encumbrances, except for (i) liens for taxes and other governmental
charges which are not yet due and payable, (ii) restrictions, covenants, and
easements of record which do not materially detract from the existing use of the
property affected or affect the marketability of the same, and (iii) zoning laws
and other land use restrictions that do not impair the full use of the Owned
Real Estate in the same or substantially similar manner as such is currently
used (collectively, the "Permitted Encumbrances") and except for such
Encumbrances described in Schedule 7.8 as will be released and discharged on or
prior to the Closing Date.
7.8.3 Seller is currently in possession of all Real Estate. To
the best knowledge of Seller, there are no present disputes or claims with
respect to offsets or defenses by any party against the other under any of the
Contracts relating to the Leased Real Estate. Seller has delivered to Buyers
true and complete copies of all Contracts relating to the Real Estate. Except as
set forth in Schedule 7.9 hereto, the assignment of the Contracts relating to
the Leased Real Estate to RBI will not permit the other party to accelerate the
rent, cause the terms thereof to be renegotiated or constitute a default
thereunder, and will not require the consent of any such party to the assignment
thereof to RBI.
7.8.4 Seller has legal access to all of the Real Estate, and
except as described in Section 1.4, Section 11.10 or as further described on
Schedule 7.8, all easements, rights of way, and real property licenses relating
to Seller's use thereof, if any, have been properly recorded in the appropriate
public recording offices. Subject to (i) the provisions of Section 1.4 relating
to the Quiet Title Proceeding; and (ii) the requirement of obtaining the
Easement described in Section 11.10, the Real Estate will include, on or before
the Closing Date, all the real property, easements, rights of way, and other
real property interests necessary to conduct the business and operations of the
Stations as they are now conducted. Except as described in Section 1.4, Section
11.10 or in Schedule 7.8, none of the buildings, structures, improvements or
fixtures constructed on any Real Estate, in connection with the operation of the
Stations, including, but not limited to, all towers, guy wires and guy anchors
and ground radials, encroach upon adjoining real property, and all such
buildings, structures, improvements and fixtures are constructed and are
operated and used in conformance in all material respects with all "set back"
lines, easements, covenants, restrictions and all applicable building, fire,
zoning, health and safety laws and codes. No utility lines serving such Real
Estate pass over the lands of a third party except where appropriate easements
have been obtained. Except as described in Schedule 7.8, all buildings,
structures, towers, antennae, improvements and fixtures situated on the Real
Estate are in good and technically sound operating condition, ordinary wear and
tear excepted, to the best knowledge of Seller have no latent structural
mechanical or other defects of material significance, are reasonably suitable
for the purposes for which they are being used, and each has (i) adequate rights
of ingress and egress, and (ii) to the extent applicable utility service for
water and sewer, telephone, electric and/or gas, and sanitary service for the
conduct of the business and operations of the Stations as presently conducted.
Except for the Quiet Title Proceeding contemplated by Section 1.4, there is no
pending or, to the best knowledge of Seller, threatened condemnation or other
legal proceeding or action of any kind relating to the Real Estate.
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7.9 Contracts. Schedule 7.9 lists all Contracts to which Seller is a
party, or which are binding on Seller and that relate to the Stations or to the
Stations Assets as of the date of this Agreement except for those which: (i)
were entered into in the ordinary course of business and which do not require
aggregate payments by any party thereto in excess of $5,000; (ii) are terminable
without further consideration on no more than 90 days' prior notice; or (iii)
constitute an advertising contract of the Seller which has been entered into in
the ordinary course of business consistent with past practices. Those Material
Contracts (as hereinafter defined) listed on Schedule 7.9, if any, requiring the
consent of a third party to assignment are identified by an asterisk "*" in the
left margin of Schedule 7.9. Those Contracts, if any, that Seller and Buyers
have agreed are material to the operation of the Stations Assets and the valid
assignment of which and receipt by Buyers of consents thereto (along with
appropriate estoppel certificates for the leases related to the Leased Real
Estate) is a condition to the consummation of the transactions contemplated
hereby (the "Material Contracts") are identified by an "M" in the left margin of
Schedule 7.9.
7.10 Status of Contracts, etc. Seller has delivered to Buyers true and
complete copies of all written Contracts listed on Schedule 7.9 and true and
complete memoranda of all oral Contracts, including any and all amendments and
other modifications thereto. Except as disclosed on Schedule 7.9, all of the
Material Contracts are in full force and effect and are valid, binding and
enforceable in accordance with their respective terms, except as limited by laws
affecting creditors' rights or equitable principles generally. Seller has
complied in all material respects with all Contracts and is not in default in
any material respect beyond any applicable grace periods under any thereof and,
to the best of Seller's knowledge, no other contracting party is in default
under any thereof. Except as disclosed on Schedule 7.9, none of the Contracts
for the sale or provision of radio time or advertising to be fulfilled in whole
or in part after the Closing Date (i) shall be for rates materially below the
Stations' generally prevailing rates for such time or advertising as of the date
such contracts were executed, or (ii) shall be commissionable to any employee
after he/she has left the employ of the Stations.
7.11 Environmental. Except as set forth in Schedule 7.11, Seller has
complied in all material respects with all federal, state and local
environmental laws, rules and regulations as in effect on the date hereof
applicable to each of the Stations and its operations, including but not limited
to the FCC's guidelines regarding RF radiation. No hazardous or toxic waste,
substance, material or pollutant (as those or similar terms are defined under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. SectionSection 9601 et seq., Toxic Substances
Control Act. 15 U. S. C. Section Section 2601 et seq., the Resource Conservation
and Recovery Act of 1976, 42 U.S.C. SectionSection 6901 et seq. or any other
applicable federal, state and local environmental law, statute, ordinance,
order, judgment rule or regulation relating to the environment or the protection
of human health ("Environmental Laws")), including but not limited to, any
asbestos or asbestos-related products, oils, or petroleum-derived compounds,
CFCs, PCBs, or underground storage tanks (collectively Hazardous Materials"),
have been released, emitted or discharged by Seller in violation of applicable
laws or regulations or are currently located in quantities in violation of
applicable laws and regulations in, on, or
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under or about the Real Estate or contained in the tangible personal property
included in the Stations Assets. The Stations Assets and Seller's use thereof
are not in violation in any material respect of any Environmental Laws or any
occupational, safety and health or other applicable law now in effect. As
between Buyer and Regent, on the one hand, and Seller on the other hand, Seller
shall be as of the Closing Date and thereafter solely responsible for all
environmental liabilities, of whatsoever kind and nature, arising out of or
attributable to the operation or ownership of the Stations Assets prior to the
Closing Date.
7.12 Intellectual Property. Schedule 7.12 hereto is a true and complete
list of all material Intellectual Property applied for, registered or issued to,
and owned by Seller or under which Seller is a licensee and which is used in the
conduct of Seller's business and operations with regard to the Stations. Except
as set forth on Schedule 7.12, to the best of Seller's knowledge: (a) Seller's
right, title and interest in the Intellectual Property as owner or licensee, as
applicable, is free and clear of all Encumbrances in favor of any third party
except for sublicensees, if any, and for the rights of third parties in and to
any Intellectual Property which is licensed to the Seller on a non-exclusive
basis, and, to the extent any of the Intellectual Property is licensed to
Seller, such interest is valid and uncontested by the licensor thereof; (b) all
computer software located at the Stations' facilities or used in the Stations'
business or operations which is material to the operation of the Stations as
presently conducted is (i) properly licensed to Seller, and all of Seller's uses
of such computer software are authorized under such licenses, and (ii) is, to
the best of Seller's knowledge, "Year 2000 compliant"; (c) all of Seller's
right, title and interest in and to the Intellectual Property identified by an
"M" in the left margin of Schedule 7.12 as being material shall be assignable to
RBI at Closing, and upon such assignment, RBI shall receive valid and
enforceable right, title, and interest in and to all tangible and intangible
property rights of Seller existing in such material Intellectual Property; (d)
and there are no infringements or unlawful use of such material Intellectual
Property by Seller in connection with Seller's business or operations.
7.13 Financial Statements. Set forth in Schedule 7.13 are complete
copies of the reviewed financial statements of Seller relating to the Stations
for the years ended December 31, 1997, 1996 and 1995, together with internally
prepared interim statements of operations for the Stations for the ten-month
period ending October 31, 1998 (collectively, the "Financial Statements"). The
Financial Statements are prepared in accordance with the books and records of
Seller and in accordance with generally accepted accounting principles
consistently applied and maintained throughout the periods indicated except (i)
that the interim Financial Statements lack footnotes and other presentation
items, (ii) that the interim Financial Statements are subject to year-end
adjustments, and (iii) as has been disclosed in Schedule 7.13 or in the notes to
the reviewed financial statements. The Financial Statements, including the notes
attached or accompanying said Financial Statements, present fairly the financial
condition, results of operations and cash flow of the Stations for the periods
indicated. None of the Financial Statements understates in any material respects
the actual costs and expenses of conducting the business and operations of the
Stations, fails to disclose any material liability, or inflates (or will
inflate) the revenues of the Stations for any reason.
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7.14 Personnel Information.
7.14.1 Schedule 7.14 contains a true and complete list of all
persons employed at the Stations, including date of hire, a description of
material compensation arrangements (other than employee benefit plans set forth
in Schedule 7.17) and a list of other material agreements affecting such persons
and their employment by Seller. To the best of Seller's knowledge, no individual
employee intends to terminate his or her employment relationship with the
Stations for reason of the transactions contemplated hereby.
7.14.2 Seller, with respect to the Stations, is not a party to
any contract or agreement with any labor organization, nor has Seller agreed to
recognize any union or other collective bargaining unit, nor has any union or
other collective bargaining unit been certified as representing any employees of
Seller at the Stations. Seller has no knowledge of any organization effort
currently being made or threatened by or on behalf of any labor union with
respect to employees of Seller at the Stations.
7.14.3 Except as disclosed in Schedule 7.14, Seller, with
respect to the Stations, has complied in all material respects with all laws
relating to the employment of labor, including, without limitation, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and those laws
relating to wages, hours, collective bargaining, unemployment insurance,
workers' compensation, equal employment opportunity and payment and withholding
of taxes.
7.15 Litigation. Except as set forth in Schedule 7.15, Seller is not
subject to any judgment, award, order, writ, injunction, arbitration decision or
decree relating to the conduct of the business or the operation of the Stations
or any of the Stations Assets, and there is no litigation, administrative
action, arbitration, proceeding or investigation pending or, to the best
knowledge of Seller, threatened against Seller with respect to, related to or in
connection with the operation of the Stations in any federal, state or local
court, or before any administrative agency or arbitrator (including, without
limitation, any proceeding which seeks the forfeiture of, or opposes the renewal
of, any of the Stations Licenses), or before any other tribunal duly authorized
to resolve disputes.
7.16 Compliance With Laws. Except as set forth in Schedule 7.16: (i)
Seller is not in material violation of, nor has Seller received any notice or
communication in writing asserting any non-compliance by it in connection with
the operation of the Stations or use or ownership of any of the Stations Assets
with, any applicable statute, rule or regulation, whether federal, state or
local; (ii) Seller is not in default with respect to any judgment, order,
injunction or decree of any court administrative agency or other governmental
authority or any other tribunal duly authorized to resolve disputes which
relates to the transactions contemplated hereby; and (iii) Seller is in all
material respects in compliance with all laws, regulations and governmental
orders applicable to the conduct of the business and operations of the Stations,
and to the best of Seller's knowledge its present use of the Stations Assets
does not violate any of such laws, regulations or orders in any material
respect.
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7.17 Employee Benefit Plans. Schedule 7.17 contains a true and complete
list as of the date of this Agreement of all employee benefit plans applicable
to the employees of Seller employed at the Stations. Seller does not maintain
any other employee benefit plan as the term is defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended, applicable to the
employees of Seller employed at the Stations.
7.18 Commissions or Finder's Fees. Neither Seller nor any person or
entity acting on behalf of Seller has agreed to pay a commission, finder's fee
or similar payment in connection with this Agreement or any matter related
hereto to any person or entity, with the exception of Media Venture Partners.
7.19 Conduct of Business in Ordinary Course; Adverse Changes. Since
December 31, 1997: (a) Seller has conducted the business of the Stations in all
material respects only in the ordinary course consistent with Seller's past
practices; (b) there has not been any material adverse change in the business,
assets, properties, prospects or condition (financial or otherwise) of the
Stations, or any damage, destruction, or loss which has had a material adverse
effect on the Stations Assets; and (c) except as identified on Schedules 7.7,
7.8 or 7.9 or incurred in the ordinary course of business, Seller has not
created, assumed, or suffered any mortgage, pledge, lien or encumbrance on any
of the Stations Assets.
7.20 Instruments of Conveyance: Good Title. The instruments to be
executed by Seller and delivered to Buyers at the Closing, conveying the
Stations Assets to Buyers, will transfer good and marketable title to the
Stations Assets free and clear of all Encumbrances, except for the Assumed
Liabilities and Permitted Encumbrances and except as set forth in Schedule 7.7
and Schedule 7.8 hereto.
7.21 Undisclosed Liabilities. Excepting only for the Assumed
Liabilities, no liability or obligation of any nature, whether accrued,
absolute, contingent or otherwise, relating to Seller, the Stations or the
Stations Assets exists which, after the Closing, will result in any form of
transferee liability against Buyers or subject the Stations Assets to any
Encumbrance or otherwise affect the full, free and unencumbered use of the
Stations Assets by Buyers in the manner currently used by Seller.
7.22 Full Disclosure. No representation or warranty made by Seller
contained in this Agreement or any certificate, document or other instrument
furnished or to be furnished by Seller pursuant hereto contains or will contain
any untrue statement of a material fact, or omits or shall omit to state any
material fact required to make any statement contained herein or therein not
misleading. To the best of Seller's knowledge as of the date hereof, there is no
pending or contemplated event or occurrence that would cause any of the
foregoing representations not to be true and complete on the date of such event
or occurrence as if made on that date.
Whenever in this Agreement a warranty or representation is qualified by
a word or phrase referring to Seller's knowledge (or similar terms), it shall
mean to the actual knowledge of
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Andrew W. Hilger, Steve Stewart, or Deb Huschle, after having made due inquiry
of the employees, representatives and agents of Seller who would be expected to
have knowledge of the matter, and with respect to the condition of any Stations
Assets, records or other object, after having inspected it.
ARTICLE 8
COVENANTS OF BUYERS (AND REGENT)
8.1 Closing. Subject to Article 11 hereof, on the Closing Date, Buyers
shall purchase the Stations Assets from Seller as provided in Article 1 hereof
and RBI shall assume the Assumed Liabilities of Seller as provided in Article 2
hereof.
8.2 Notification. Buyers will provide Seller prompt written notice of
any change in any of the information contained in the representations and
warranties made in Article 6. Buyers shall also notify Seller of any litigation,
arbitration or administrative proceeding pending or, to its knowledge,
threatened against Buyers or Regent which challenges the transactions
contemplated hereby. Subject to the provisions of Sections 5.2 and 16.1, should
any fact relating to Buyers or Regent which would cause the FCC to deny its
consent to the transactions contemplated by this Agreement come to Buyers' or
Regent's attention, Buyers will promptly notify Seller thereof and will use
their commercially reasonable efforts to take such steps as may be necessary to
remove any such impediment to the FCC's Consent to the transactions contemplated
by this Agreement.
8.3 No Inconsistent Action. Buyers and Regent shall not take any action
which is materially inconsistent with its obligations under this Agreement or
take any action which would cause any representation or warranty of Buyers or
Regent contained herein to be or become false or invalid or which could hinder
or delay the consummation of the transactions contemplated by this Agreement.
8.4 Employees. RBI shall offer a position of employment to each of
Seller's employees who are employed at the Stations except those who have an
equity interest in Seller or its Affiliates. Such offer shall be made within a
reasonable period of time prior to Closing and shall be on terms of employment
which are not materially different from those applicable to such employee
described in Schedules 7.14 and 7.17 hereto. Failure of RBI to make such offers
shall be deemed a material breach by RBI of this Agreement. RBI shall not be in
default hereunder to the extent any employee fails to accept such offer or for
the failure to make an offer to any employee who elects to terminate his/her
employment, or such employment is terminated by Seller, prior to the Closing
Date.
8.5 Senior Lender Consents. The Buyers and Regent shall exercise
commercially reasonable efforts in obtaining the Senior Lender Consents
contemplated by Section 1.4 hereof.
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ARTICLE 9
COVENANTS OF SELLER
9.1 Pre-Closing Covenants. Seller covenants and agrees with respect to
the Stations that, between the date hereof and the Closing Date or the earlier
termination of this Agreement in accordance with its terms, except as expressly
permitted by this Agreement or with the prior written consent of Buyers (which
shall not be unreasonably withheld, delayed, or conditioned), Seller shall act
in accordance with the following:
9.1.1 Seller shall use its commercially reasonable efforts to
conduct the business and operations of the Stations in the ordinary and prudent
course of business consistent with past practice and with the intent of
preserving the Stations Assets and ongoing operations of the Stations, including
but not limited to maintaining the independent identity of the Stations,
retaining the current format and programming (including the content thereof) of
the Stations, continuing at historical levels and frequencies spending for
promotions, advertising, and survey testing, and using its commercially
reasonable efforts to retain at the Stations the services of all active
employees, consultants and agents of the Stations.
9.1.2 Seller shall use its commercially reasonable efforts to:
(i) preserve the operation of the Stations intact; (ii) preserve the business of
the Stations' advertisers, customers, suppliers and others having business
relations with the Stations; and (iii) continue to conduct financial operations
of the Stations, including without limitation, their credit and collection and
pricing policies and practices, all in the ordinary course of business
consistent with past practices. Seller shall not change, alter or modify, in any
material respect, its business practices relating to the generation of
advertising revenue including, but not limited to increasing costs and expenses
incurred by the Seller for the short-term purpose of generating revenue to meet
the thresholds set forth in Section 11.9. This restriction shall not prevent the
Seller from making such changes in its procedures which are done in the ordinary
course of business, consistent with past practice, which activities may include,
but shall not be limited to, the practice of selling "surplus advertising
inventory" in accordance with Seller's historical practices.
9.1.3 Seller shall operate the Stations in all material
respects in accordance with FCC rules and regulations and the Stations Licenses
and with all other laws, regulations, rules and orders, and shall not (i) cause
or permit by any act, or failure to act, any of the Stations Licenses or other
licenses, permits or authorizations listed in Schedule 7.4 to expire, be
surrendered, adversely modified, or otherwise terminated, (ii) cause the FCC to
institute any proceedings for the suspension, revocation or adverse modification
of any of the Stations Licenses, or (iii) fail to prosecute with due diligence
any pending applications to the FCC.
9.1.4 Subject to the provisions of Sections 5.2 and 16.1,
should any fact relating to Seller which would cause the FCC to deny its consent
to the transactions contemplated by this Agreement come to Seller's attention,
Seller will promptly notify Buyers thereof and will use its commercially
reasonable efforts to take such steps as may be necessary to remove any such
impediment to the FCC's Consent.
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9.1.5 Except for changes or actions in the ordinary course of
business consistent with past practices, Seller shall not: (i) sell broadcast
time on a prepaid basis (other than in the course of existing credit practices);
(ii) except as required by the applicable law or written agreements currently in
effect, grant or agree to grant any general increases in the rates of salaries
or compensation payable to employees of the Stations; (iii) except as required
by written agreements currently in effect, grant or agree to grant any specific
bonus or increase in compensation to any executive management employee of the
Stations; (iv) provide for any new pension, retirement or other employment
benefits for employees of the Stations or any increases in any existing
benefits, (v) except as contemplated by Section 10.8 or as disclosed on Schedule
1.2 hereof relating to the bifurcation of KKJM contracts, modify, change or
terminate any Contract; or (vi) change the advertising rates in effect as of the
date hereof; provided, however that subparts (ii) and (iii) of this Section
9.1.5 shall not apply to any equity owner of Seller or any of its Affiliates who
is not intended to become an employee of RBI as a result of this transaction.
9.1.6 Seller shall give or cause the Stations to give Buyers
and Buyers' counsel, accountants, engineers and other representatives, at
Buyers' reasonable request and upon reasonable notice, full and reasonable
access during normal business hours to all of Seller's personnel, properties,
books, Contracts, reports and records (including, without limitation, financial
information and tax returns relating to the Stations, and environmental audits
in existence with respect to the Stations Assets), real estate, buildings and
equipment relating to the Stations and to the Stations' employees, and to
furnish Buyers with information and copies of all documents and agreements
relating to the Stations and the operation thereof (including but not limited to
financial and operating data and other information concerning the financial
condition, results of operations and business of the Stations) that Buyers may
reasonably request. The rights of Buyers under this Section 9.1.6 shall not be
exercised in such a manner as to interfere unreasonably with the business of the
Stations.
9.1.7 Seller shall use its commercially reasonable efforts to
obtain the Easement described in Section 11.10 and any third party consents
necessary for the assignment of any Contract (which shall not require any
payment to any such third party except for such amounts contemplated by the
Contract to be assigned, and any amount then owing by Seller to such third
party).
9.2 Notification. Seller will provide Buyers prompt written notice of
any change in any of the information contained in the representations and
warranties made in Article 7 or any Schedule. Seller agrees to notify Buyers of
any litigation, arbitration or administrative proceeding pending or, to the best
of its knowledge, threatened, which challenges the transactions contemplated
hereby. Seller shall promptly notify Buyers if any of the normal broadcast
transmissions of any Station are interrupted, interfered with or in any way
impaired, by reason other than normal maintenance activities and shall provide
Buyers with prompt written notice of the problem and the measures being taken to
correct such problem. If such Station is not restored so that operation is
resumed to full licensed power and antenna height within five (5)
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days of such event, or if more than five (5) such events occur within any thirty
(30) day period, or if any of the Stations shall be off the air for more than
seventy-two (72) consecutive hours, then Buyers shall have the right to
terminate this Agreement by giving written notice not more than thirty (30) days
after the expiration of the applicable period, but in no event later than the
Closing Date.
9.3 No Inconsistent Action. Seller shall not take any action which is
materially inconsistent with its obligations under this Agreement nor take any
action which would cause any representation or warranty of Seller contained
herein to be or become false or invalid or which could reasonably be expected to
hinder or delay the consummation of the transactions contemplated by this
Agreement.
9.4 Closing. Subject to Article 12 hereof, on the Closing Date, Seller
shall transfer, convey, assign and deliver to Buyers the Stations Assets and the
Assumed Liabilities subject to and as provided in Articles 1 and 2 and Section
7.20 of this Agreement.
9.5 Other Items. Until the Closing Date or the earlier termination of
this Agreement in accordance with the terms hereof, Seller shall not: (a) waive
or release any material right relating to the business or operations of the
Stations, except for adjustments or settlements made in the ordinary course of
business consistent with its past practices; (b) transfer or grant any rights
under any of the Stations Licenses; (c) enter into any commitment for capital
expenditures in an aggregate amount in excess of $25,000 for which Buyers would
become liable after the Closing Date; (d) introduce any material changes in the
broadcast hours or in the format of the Stations or any other material change in
the Stations' programming policies; (e) change the call letters of any Station;
and (f) enter into any transaction or make or enter into any contract or
commitment with respect to any of the Stations or the Stations Assets which by
reason of its size or otherwise is not in the ordinary course of business
consistent with past practices.
9.6 Exclusivity. Seller agrees that, commencing on the date hereof
through the Closing or earlier termination of this Agreement, Buyers shall have
the exclusive right to consummate the transactions contemplated herein, and
during such exclusive period, Seller agrees that neither Seller, nor any
partner, officer, employee or other representative of Seller: (a) will initiate,
solicit or encourage, directly or indirectly, any inquiries, or the making or
implementation of any proposal or offer with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of, all or any
portion of the Stations Assets other than Exchanges contemplated in Section 10.7
of this Agreement (any such inquiry, proposal or offer being hereinafter
referred to as an "Acquisition Proposal" and any such transaction being
hereinafter referred to as an "Acquisition"); (b) will engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; or (c) will continue any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal or Acquisition and will take the necessary steps to inform
the individuals or entities referred to above of the obligations undertaken by
them in this Section 9.6. Notwithstanding the foregoing, in the event
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that Buyers default in any material respect in the observance or in the due and
timely performance of any of its covenant or agreements herein contained and
such default shall not be cured within ten (10) business days of notice of
default served by Seller, Seller's obligations under this Section 9.6 shall be
null and void.
ARTICLE 10
JOINT COVENANTS
Buyers and Seller each covenant and agree that between the date hereof
and the Closing Date, they shall act in accordance with the following:
10.1 Confidentiality. Subject to the requirements of applicable law,
Buyers and Seller shall each keep confidential all information obtained by it
with respect to the other parties hereto and their respective businesses in
connection with this Agreement and the negotiations preceding this Agreement,
and will use such information solely in connection with the transactions
contemplated by this Agreement, and if the transactions contemplated hereby are
not consummated for any reason, each shall return to each other party hereto,
without retaining a copy thereof, any schedules, documents or other written
information obtained from such other party in connection with this Agreement and
the transactions contemplated hereby, together with any summaries thereof.
Notwithstanding the foregoing, no party shall be required to keep confidential
or return any information which: (a) is known or available through other lawful
sources, not bound by a confidentiality agreement with the disclosing party; (b)
is or becomes publicly known through no fault of the receiving party or its
agents; (c) is required to be disclosed pursuant to an order or request of a
judicial or governmental authority (provided the disclosing party is given
reasonable prior notice of the order or request and the purpose of the
disclosure); or (d) is developed by the receiving party independently of the
disclosure by the disclosing party. Notwithstanding anything to the contrary
herein, either party may in accordance with its legal obligations, including but
not limited to filings permitted or required by the Securities Act of 1933 and
the Securities and Exchange Act of 1934, make such press releases and other
public statements and announcements as it deems necessary and appropriate in
connection with this Agreement and the transactions contemplated hereby;
provided, however, that prior to making any such unilateral press release or
announcement, such party shall first communicate the same in writing to the
other and afford the other with a reasonable opportunity under the circumstances
to review and make reasonable modifications thereto.
10.2 Cooperation. Subject to express limitations contained elsewhere
herein, Buyers and Seller agree to cooperate fully with one another in taking
any reasonable actions (including without limitation, reasonable actions to
obtain the required consent of any governmental instrumentality or any third
party) necessary or helpful to accomplish the transactions contemplated by this
Agreement, including but not limited to the satisfaction of any condition to
closing set forth herein.
10.3 Control of Stations. Buyers shall not, directly or indirectly,
control, supervise or direct the operations of the Stations prior to the
Closing. Such operations, including complete
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control and supervision of all Station programs, employees and policies, shall
be the sole responsibility of Seller.
10.4 Consents to Assignment. To the extent that any non-Material
Contract identified in the Schedules is not capable of being sold, assigned,
transferred, delivered or subleased without the waiver or consent of any third
person (including a government or governmental unit), or if such sale,
assignment, transfer, delivery or sublease or attempted sale, assignment,
transfer, delivery or sublease would constitute a breach thereof or a violation
of any law or regulation, this Agreement and any assignment executed pursuant
hereto shall not constitute a sale, assignment, transfer, delivery or sublease
or an attempted sale, assignment, offer, delivery or sublease thereof. Subject
to the provisions of Section 11.5, in those cases where consents, assignments,
releases and/or waivers have not been obtained at or prior to the Closing
relating to the assignment to RBI of the Contracts, this Agreement and any
assignment executed pursuant hereto, to the extent permitted by law, shall
constitute an equitable assignment by Seller to RBI of all of Seller's otherwise
transferable rights, benefits, title and interest in and to the Contracts, and
where necessary or appropriate, RBI shall be deemed to be Seller's agent for the
purpose of completing, fulfilling and discharging all of Seller's rights and
liabilities arising after the Closing Date under such Contracts. Seller shall
use its commercially reasonable efforts to provide RBI with the financial and
business benefits of such Contracts (including, without limitation, permitting
RBI to enforce any rights of Seller arising under such Contracts), and RBI
shall, to the extent RBI is provided with the benefits of such Contracts,
assume, perform and in due course pay and discharge all debts, obligations and
liabilities of Seller under such Contracts to the extent that RBI was to assume
those obligations pursuant to the terms hereof.
10.5 Filings. In addition to the covenants of the parties set forth in
Article 5 hereto, as promptly as practicable after the execution of this
Agreement, Buyers and Seller shall use their commercially reasonable efforts to
obtain, and to cooperate with each other in obtaining, all authorizations,
consents, orders and approvals of any governmental authority that may be or
become necessary in connection with the consummation of the transactions
contemplated by this Agreement, and to take all reasonable actions to avoid the
entry of any order or decree by any governmental authority prohibiting the
consummation of the transactions contemplated hereby, including without
limitation, any reports or notifications that may be required to be filed with
the FCC, and each shall furnish to one another all such information in its
possession as may be necessary for the completion of the reports or
notifications to be filed by the other.
10.6 Employee Matters. Except as provided in Section 3.3, regarding
proration, Seller shall be responsible for the payment of all compensation and
accrued employee benefits payable to all employees up to the Closing Date.
Seller acknowledges and agrees that it, and not Buyers, is and shall be solely
responsible for any and all severance, insurance, supplemental pension, deferred
compensation, retirement and any other benefits, and related costs, premiums and
claims, due, to become due, committed or otherwise promised to any person who,
as of the Closing Date, is a retiree, former employee, or current employee of
Seller, relating to the period up to the Closing Date. Buyers, as purchaser of
the Stations Assets, shall assume no employee benefit plans, programs or
practices, whether or not set forth in writing, maintained by Seller at
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any time except for vacation and sick leave for which there have been prorations
pursuant to Section 3.3.1.
10.7 Like-kind Exchanges. Buyers acknowledge and agree that they shall
cooperate fully with the Seller and shall take any reasonable action requested
by the Seller at the cost of Seller in order to effect a like-kind exchange of
specific Real Estate and/or to effect a like-kind exchange of the Stations
Assets, including the Stations Licenses consisting of the WJON-AM business
segment ("Exchanges"); provided, however, that the Exchanges shall not result in
any material delay or increase in the cost or expense to the Buyers contemplated
by this Agreement.
10.8 Transition Services Agreement. RBI and Seller shall have entered
into a Transition Services Agreement with respect to the issues and matters
identified in Schedule 10.8, which Transition Services Agreement shall be
reasonably acceptable to counsel for RBI and the Seller.
ARTICLE 11
CONDITIONS OF CLOSING BY BUYERS
The obligations of Buyers hereunder are, at their option, subject to
satisfaction or waiver, at or prior to the Closing Date, of each of the
following conditions:
11.1 Representations, Warranties and Covenants.
11.1.1 All representations and warranties of Seller made in
this Agreement or in any Exhibit, Schedule or document delivered pursuant
hereto, shall be true and complete if limited by materiality, in accordance with
the terms thereof in all respects and if not so limited by materiality, in all
material respects, as of the date hereof and on and as of the Closing Date as if
made on and as of that date, except for changes (a) expressly permitted or
contemplated by the terms of this Agreement; or (b) in the ordinary course of
business which are not, either individually or in the aggregate, material and
adverse.
11.1.2 All of the terms, covenants and conditions to be
complied with and performed by Seller on or prior to the Closing Date shall have
been complied with or performed in all material respects.
11.1.3 Buyers shall have received a certificate, dated as of
the Closing Date, from Seller, executed by the President of Seller to the effect
that: (a) the representations and warranties of Seller contained in this
Agreement are true and complete in all material respects on and as of the
Closing Date as if made on and as of that date; and (b) Seller has complied with
or performed in all material respects all terms, covenants and conditions to be
complied with or performed by it on or prior to the Closing Date.
11.2 Governmental Consents. Subject to the provisions of Section 4.1,
the FCC Consent shall have been obtained and shall have become a Final Order.
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11.3 Governmental Authorizations. Seller shall be the holder of the
Stations Licenses and all other licenses, permits and other authorizations
listed in Schedule 7.4, and there shall not have been any modification of any of
such licenses, permits and other authorizations which has a material adverse
effect on any of the Stations or the operations thereof. No application shall be
pending for the renewal of any of the Stations Licenses. No proceeding shall be
pending which seeks, or the effect of which reasonably could be, to revoke,
cancel, fail to renew, suspend or adversely modify any of the Stations Licenses
or any other licenses, permits or other authorizations listed in Schedule 7.4.
11.4 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending or threatened against, and no order, decree or
judgment of any court, agency or other governmental authority shall have been
rendered (and remain in effect) against, any party hereto which: (a) would
render it unlawful, as of the Closing Date, to effect the transactions
contemplated by this Agreement in accordance with its terms; (b) questions the
validity or legality of any transaction contemplated hereby; (c) seeks to enjoin
any transaction contemplated hereby; (d) seeks material damages on account of
the consummation of any transaction contemplated hereby; or (e) is a petition of
bankruptcy by or against Seller, an assignment by Seller for the benefit of its
creditors, or other similar proceeding.
11.5 Third-Party Consents. The consents identified on Schedule 6.4
shall have been obtained, all Material Contracts shall be in full force and
effect on the Closing Date, and Seller shall have obtained and shall have
delivered to RBI all appropriate third-party consents in form and substance
reasonably acceptable to RBI (including estoppel certificates for the leases
related to the Leased Real Estate) in connection with the assignment of the
Material Contracts to RBI.
11.6 Closing Documents. Seller shall have delivered or caused to be
delivered to Buyers, on the Closing Date, all bills of sale, general warranty
deeds, endorsements, assignments and other instruments of conveyance reasonably
satisfactory in form and substance to Buyers, effecting the sale, transfer,
assignment and conveyance of the Stations Assets to Buyers, including, without
limitation, each of the documents required to be delivered by it pursuant to
Article 14.
11.7 Satisfactory Investigation of Station Facilities. Buyers shall
have conducted such examination and investigation of the Real Estate and title
thereto, studios, transmitter facilities, and other Stations Assets and
personnel on matters covered by or generally within the scope of Seller's
warranties and representations as Buyers deem advisable or appropriate and shall
have determined that the findings and results of such examination and
investigation are satisfactory in its sole discretion. Said investigation shall
be conducted, in substantial part, through the use of independent third parties
who shall provide detailed reports summarizing his/her/their findings with
respect to the Stations Assets and other matters within the scope of review as
set forth in this Section 11.7 (the "Inspection Reports"). If Buyers do not
advise Seller in writing within thirty (30) days after the date of this
Agreement of any unsatisfactory findings or results, this condition shall be
deemed waived. If Buyers do advise Seller of any unsatisfactory findings or
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results, and such results relate to the discovery of a breach of a
representation or warranty by the Seller which is disclosed in any of the
Inspection Reports and which is/are capable of being cured by Seller to Buyers'
reasonable satisfaction, Seller shall have the obligation (if the cost is
reasonably expected to be $200,000 or less) or option (if the cost is reasonably
expected to be more than $200,000) to cause the same to be cured to Buyers'
reasonable satisfaction prior to Closing Date, provided, that Buyers provide to
Seller a copy of the applicable Inspection Report which substantiates the basis
for the alleged breach of warranty or representation. Notwithstanding the
foregoing to the contrary, the Seller's obligation to cure and/or remediate
pursuant to Section 11.7 and 11.8 shall not exceed $200,000 in the aggregate.
11.8 Environmental Studies. Buyers shall have obtained at their cost
and expense within thirty (30) days following the date of this Agreement (which
may be extended up to an additional fifteen (15) days in the event that the
failure to obtain such report is attributable to matters beyond the control of
the Buyers), Phase I environmental assessment reports on the Real Estate
confirming the representations and warranties of Seller on environmental matters
("Phase I Report"). The Seller shall be listed among the parties who are to
receive a reliance letter upon the Phase I Report. If the Phase I Report
discloses any condition which is inconsistent with the representations and
warranties of Seller, and such is capable of being cured by Seller to Buyers'
reasonable satisfaction, Seller shall have the obligation (if the cost is
reasonably expected to be $200,000 or less) or option (if the cost is reasonably
expected to be more than $200,000) to cause the same to be cured to Buyers'
reasonable satisfaction prior to Closing Date. Notwithstanding the foregoing to
the contrary, the Seller's obligation to cure and/or remediate pursuant to
Section 11.7 and 11.8 shall not exceed $200,000 in the aggregate.
11.9 No Adverse Change. No material adverse change in condition or
status of the Stations or the Stations Assets, which change is caused by or
arises out of any breach by Seller of any of its representations, warranties,
covenants or agreements hereunder, shall have occurred since December 31, 1997,
be threatened or be reasonably likely to occur, and no material adverse change
in the business, financial condition or results of operations shall be deemed to
have occurred. For purposes of this Agreement, a material adverse change in the
business, financial results or result of operations shall be deemed to have
occurred if, and only if, the combined gross revenue generated by the Stations
and KKJM-FM ("Combined Gross Revenue") for the "Calculation Period" (which shall
be the 12 consecutive calendar months ending with the month immediately
preceding the month prior to the month in which the Closing occurs) is less than
$3,372,500. In the event that Combined Gross Revenue generated during the
Calculation Period is less than $3,372,500, then there shall be reduction of the
Purchase Price by $3.50 for every $1.00 by which Combined Gross Revenue is less
than $3,372,500; provided, however, in the event Combined Gross Revenue during
the Calculation Period is less than $3,195,000, in lieu of a reduction of the
Purchase Price, Buyers may terminate this Agreement.
11.10 Easement. Seller shall have obtained a perpetual easement for the
radio tower guy wire currently located on real property adjacent to the north
east corner of the Headquarters Property in form reasonably satisfactory to the
Buyers ("Easement").
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11.11 Title Insurance Buyers shall have obtained a title insurance
commitment ("Commitment") issued on the Owned Real Estate by a title company
("Title Company") within the thirty-day period identified in Section 11.7.
Buyers shall also cause the Title Company to deliver to the Buyers with the
Commitment copies of all title exceptions shown on the Commitment, except those
exceptions that will be released on the Closing Date. The title to the Owned
Real Estate shall be subject only to such permitted encumbrances acceptable to
the Buyers ("Permitted Real Property Encumbrances"). Permitted Real Property
Encumbrances shall include the 75' ingress and egress easement in Book 90 of
Deeds, page 340, subject to the provisions of Section 1.4 of this Agreement,
except that, as to parcel number 9 of the Headquarters Property, said easement
shall be deemed to be a Permitted Real Property Encumbrance. Within the
thirty-day period described in Section 11.7, Buyers shall make any objections to
the title of the Owned Real Estate. Buyer's objections shall be made in writing
or shall be deemed to have been waived. Buyers shall send said objections to
Seller. For purposes of this Agreement, Permitted Real Property Encumbrances
shall not be deemed to be objections to title if said Permitted Real Property
Encumbrances do not prohibit, restrict, materially detract from or impair the
full use of the Owned Real Estate for the operation of the Stations as presently
conducted by the Seller or affect the marketability of same. Objections to title
which are not Permitted Real Property Encumbrances shall be resolved in
accordance with the provisions of Section 1.4 of this Agreement.
ARTICLE 12
CONDITIONS OF CLOSING BY SELLER
The obligations of Seller hereunder are, at its option, subject to
satisfaction or waiver, at or prior to the Closing Date, of each of the
following conditions:
12.1 Representations, Warranties and Covenants.
12.1.1 All representations and warranties of Buyers and Regent
made in this Agreement or in any Exhibit, Schedule or document delivered
pursuant hereto, shall be true and complete in all material respects as of the
date hereof and on and as of the Closing Date as if made on and as of that date,
except for changes expressly permitted or contemplated by the terms of this
Agreement.
12.1.2 All the terms, covenants and conditions to be complied
with and performed by Buyers or Regent on or prior to the Closing Date shall
have been complied with or performed in all material respects.
12.1.3 Seller shall have received a certificate, dated as of
the Closing Date, executed by the President of each of Buyers and Regent, to the
effect that: (a) the representations and warranties of Buyers and Regent
contained in this Agreement are true and complete in all material respects on
and as of the Closing Date as if made on and as of that date; and (b) Buyers
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and Regent have complied with or performed in all material respects all terms,
covenants and conditions to be complied with or performed by them on or prior to
the Closing Date.
12.2 Governmental Consents. The FCC Consent shall have been obtained
and, subject to the provisions of Section 4.1 hereof, shall have become a Final
Order.
12.3 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending or threatened against, and no other decree or
judgment of any court, agency or other governmental authority shall have been
rendered (and remain in effect) against, any party hereto which: (a) would
render it unlawful, as of the Closing Date, to effect the transactions
contemplated by this Agreement in accordance with its terms; (b) questions the
validity or legality of any transaction contemplated hereby; (c) seeks to enjoin
any transaction contemplated hereby; (d) seeks material damages on account of
the consummation of any transaction contemplated hereby; (e) is a petition in
bankruptcy by or against any of Buyers or Regent, an assignment for the benefit
of creditors, or other similar proceeding.
12.4 Third Party Consents. Seller shall have received all appropriate
third party consents in form and substance reasonably acceptable to Seller for
the assumption by RBI of the Assumed Liabilities under the Material Contracts
and to obtain the Easement described in Section 11.10.
12.5 Matters Relating to Real Estate.
12.5.1 The parties shall have accepted the Excluded Real
Estate Legal Description prepared by the Surveyor as describing the Real Estate;
and are prepared to execute an agreement to that effect.
12.5.2 Seller shall have received the Senior Lender Consents
in form reasonably acceptable to counsel for the Seller;
12.5.3 RBI shall have joined with the Seller in the Quiet
Title Proceeding;
12.6 Transition Services Agreement. The Seller shall have received the
Transition Services Agreement in the form contemplated by Section 10.8.
12.7 Closing Documents. Buyers shall have delivered or caused to be
delivered to Seller, on the Closing Date, the Purchase Price and each of the
documents required to be delivered by them pursuant to Article 14.
ARTICLE 13
TRANSFER TAXES: FEES AND EXPENSES
13.1 Expenses. Except as set forth in Section 13.2 hereof or otherwise
expressly set forth in this Agreement, each party hereto shall be solely
responsible for all costs and expenses
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incurred by it in connection with the negotiation, preparation and performance
of and compliance with the terms of this Agreement including, but not limited
to, the costs and expenses incurred pursuant to Article 5 hereof and the fees
and disbursements of counsel and other advisors.
13.2 Specific Charges. All costs of transferring the Stations Assets in
accordance with this Agreement, including recordation, transfer and documentary
taxes and fees, and any excise, sales or use taxes, shall be paid one-half by
Seller and one-half by Buyers. Any filing or grant fees imposed upon it by any
governmental authority the consent of which or the filing with which is required
for the consummation of the transactions contemplated hereby shall be paid
one-half by Seller and one-half by Buyers. Any fees or commission due Media
Venture Partners as a result of this transaction shall be paid by Seller,
provided Seller shall be reimbursed at the time of Closing by Buyers for the
amount paid by Seller to the extent of $100,000.
ARTICLE 14
DOCUMENTS TO BE DELIVERED AT CLOSING
14.1 Seller's Documents. At the Closing, Seller shall deliver or cause
to be delivered to Buyers the following:
14.1.1 Certified resolutions of all requisite action of Seller
approving the execution and delivery of this Agreement and authorizing the
consummation of the transactions contemplated hereby;
14.1.2 A certificate of Seller, dated the Closing Date, in the
form described in Section 11.1.3;
14.1.3 Governmental certificates showing that Seller is duly
organized and in good standing in the State of Minnesota;
14.1.4 Such certificates, bills of sale, general warranty
deeds, assignments, documents of title and other instruments of conveyance,
assignment and transfer (including without limitation any necessary consents to
conveyance, assignment or transfer required to be delivered hereunder), and lien
releases, all in form satisfactory to the parties and their counsel, as shall be
effective to vest in Buyers good and marketable title in and to the Stations
Assets in accordance with the terms of this Agreement, free, clear and
unencumbered except for the Assumed Liabilities and Permitted Encumbrances, if
any, as set forth on Schedule 7.7 and Schedule 7.8.
14.1.5 An Assignment and Assumption Agreement in the form of
Exhibit C effectuating the assignment and assumption of the Assumed Liabilities
(the "Assignment and Assumption Agreement");
14.1.6 The Indemnification Escrow Agreement;
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14.1.7 At the time and place of Closing, originals and all
copies of all program, operations, transmission or maintenance logs and all
other records required to be maintained by the FCC with respect to the Stations,
including the public files of the Stations, shall be left at the Stations and
thereby delivered to Buyers;
14.1.8 A written opinion of Seller's corporate counsel, on
which Buyers' lenders shall be entitled to rely, in substantially the form set
forth in Exhibit H;
14.1.9 A written opinion of Seller's FCC counsel, on which
Buyers' lenders shall be entitled to rely, confirming to Buyers' reasonable
satisfaction the matters listed on Exhibit F;
14.1.10 A Non-Competition Agreement in the form of Exhibit D
(the "Non-Competition Agreement") executed by Seller and Andrew W. Hilger;
14.1.11 A Lease Agreement substantially in the form of Exhibit
E (the "Lease Agreement") whereby RBI shall lease to Seller for use as a studio
for radio station KKJM-FM for a term of up to one (1) year at no cost to Seller
a portion of Seller's building being acquired by RBI in this transaction;
14.1.12 The Easement described in Section 11.10;
14.1.13 The Memorandum of Re-conveyance;
14.1.14 The agreement acknowledging of the Excluded Real
Estate Legal Descriptions;
14.1.15 The Transition Services Agreement;
14.1.16 The Nominee Agreement transferring title to the
Headquarters Property to the Seller as contemplated by Section 1.4 hereof for
the purpose of completing the Quiet Title Proceeding, platting of the
Headquarters Property, placing Seller in a position of being able to transfer to
RBI all Owned Real Estate and effecting the re-conveyance of the Excluded Real
Property (the "Nominee Agreement"); and
14.1.17 Such additional information, materials, agreements,
documents and instruments as Buyers and their counsel may reasonably request in
order to consummate the Closing.
14.2 Buyers' and Regents Documents. At the Closing, Buyers shall
deliver or cause to be delivered to Seller the following:
14.2.1 Certified resolutions of the Board of Directors of each
of Buyers and Regent approving the execution and delivery of this Agreement and
authorizing the consummation of the transactions contemplated hereby;
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14.2.2 A certificate of Buyers and Regent, dated the Closing
Date, in the form described in Section 12.1.3;
14.2.3 Governmental certificates showing that RBI is
qualified to conduct business in the State of Minnesota and that each of Buyers
is duly organized and in good standing in the State of Delaware;
14.2.4 The Assignment and Assumption Agreement;
14.2.5 The Indemnification Escrow Agreement;
14.2.6 A written opinion of Buyers' and Regent's counsel in
substantially the form set forth on Exhibit G;
14.2.7 The Purchase Price in accordance with Section 3.1
hereof;
14.2.8 The Non-Competition Agreement;
14.2.9 The Lease Agreement;
14.2.10 The Transition Services Agreement;
14.2.11 Senior Lender Consents;
14.2.12 The agreement acknowledging the Excluded Real Estate
Legal Descriptions;
14.2.13 The Memorandum of Re-conveyance; and
14.2.14 Such additional information, materials, agreement,
documents and instruments as Seller and its counsel may reasonably request in
order to consummate the Closing.
ARTICLE 15
SURVIVAL, INDEMNIFICATION, ETC.
15.1 Survival of Representations, Etc. It is the express intention and
agreement of the parties to this Agreement that all covenants and agreements
(together, "Agreements") and all representations and warranties (together,
"Warranties") made by Buyers, Regent and Seller in this Agreement shall survive
the Closing (subject to the provisions of Section 15.3.5, regardless of any
knowledge, investigation, audit or inspection at any time made by or on behalf
of Buyers, Regent or Seller) as follows:
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15.1.1 The Agreements shall survive the Closing for a period
from the Closing Date equal to the statute of limitations for written contracts
in Minnesota.
15.1.2 The Warranties in Sections 6.2, 6.5, 7.2, the third
sentence of 7.7, 7.18 and 7.20 shall survive the Closing without limitation.
15.1.3 The Warranties in Section 7.11 relating to
environmental matters and in Section 7.6 or otherwise relating to the federal,
state, local or foreign tax obligations of Seller shall survive the Closing for
the period of the applicable statute of limitations plus any extensions or
waivers granted or imposed with respect thereto.
15.1.4 All other Warranties shall survive for a period of one
(1) year from the Closing Date and until the earlier of (i) the date which is
thirty (30) days after Buyers' receipt from their auditors of audited financial
statements for the Stations for the 12-month period ended December 31, 1999 or
(ii) June 30, 2000.
15.1.5 The right of any party to recover Damages (as defined
in Section 15.2.1) pursuant to Section 15.2 shall not be affected by the
expiration of any Warranties as set forth herein, provided that notice of the
existence of any potential Damages in such reasonable detail from which the
basis of a Claim subject to the provisions of Section 15.3 can be determined
(but not necessarily the fixed amount of any such Damages) has been given by the
indemnified party to the indemnifying party prior to such expiration.
15.1.6 Notwithstanding any provision hereof to the contrary,
there shall be no contractual time limit in which Buyers, Regent or Seller may
bring any action for actual fraud (a "Fraud Action"), regardless of whether such
actual fraud also included a breach of any Agreement or Warranty; provided,
however, that any Fraud Action must be brought within the period of the
applicable statute of limitations plus any extensions or waivers granted or
imposed with respect thereto.
15.2 Indemnification.
15.2.1 Seller shall defend, indemnify and hold harmless Buyers
and Regent from and against any and all losses, costs, damages, liabilities and
expenses, including reasonable attorneys' fees and expenses ("Damages") incurred
by Buyers or Regent arising out of or related to: (a) any breach of the
Warranties given or made by Seller in this Agreement; (b) any material breach of
the Agreements made by Seller in the Agreement; (c) the Retained Liabilities;
(d) any failure of the parties to comply with any "bulk sales" laws applicable
to the transactions contemplated hereby; and (e) the conduct of the business and
operations of the Stations or any portion thereof or the use or ownership of any
of the Stations Assets prior to the Closing Date.
15.2.2 Buyers and Regent jointly and severally shall defend,
indemnify and hold harmless Seller from and against any and all Damages incurred
by Seller arising out of or related to: (a) any breach of the Agreements and
Warranties given or made by either of Buyers or Regent
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in this Agreement; (b) the Assumed Liabilities, and (c) the conduct of the
business and operations of the Stations or any portion thereof or the use or
ownership of any of the Stations Assets on or after the Closing Date.
15.3 Procedures: Third Party and Direct Indemnification Claims. The
indemnified party agrees to give written notice within a reasonable time to the
indemnifying party of any demand, suit, claim or assertion of liability by third
parties or other circumstances that could give rise to an indemnification
obligation hereunder against the indemnifying party (hereinafter collectively
"Claims," and individually a "Claim"), it being understood that the failure to
give such notice shall not affect the indemnified party's right to
indemnification and the indemnifying party's obligation to indemnify as set
forth in this Agreement, unless the indemnifying party's ability to contest,
defend or settle with respect to such Claim is thereby demonstrably and
materially prejudiced. The parties also agree that any Claim for Damages arising
directly between the parties relating to this Agreement may be brought at any
time within the applicable survival period specified in Section 15.1, provided
that the notice required with respect thereto as specified in Section 15.1.5 has
been given within the applicable survival period.
The obligations and liabilities of the parties hereto with respect to
their respective indemnities pursuant to Section 15.2 resulting from any Claim
shall be subject to the following additional terms and conditions:
15.3.1 The indemnifying party shall have the right to
undertake, by counsel or other representatives of its own choosing, the defense
or opposition to such Claim.
15.3.2 In the event that the indemnifying party shall elect
not to undertake such defense or opposition within (10) days after notice of any
such Claim from the indemnified party or shall otherwise fail to defend or
oppose following such election, the indemnified party (upon further written
notice to the indemnifying party) shall have the right to undertake the defense,
opposition, compromise or settlement of such Claim, by counsel or other
representatives of its own choosing, on behalf of and for the account and risk
of the indemnifying party (subject to the right of the indemnifying party to
assume defense of or opposition to such Claim at any time prior to settlement,
compromise or final determination thereof).
15.3.3 Anything this Section 15.3 to the contrary
notwithstanding: (a) the indemnified party shall have the right, at its own cost
and expense, to participate in the defense, opposition, compromise or settlement
of the Claim; (b) the indemnifying party shall not, without the indemnified
party's written consent (not to be unreasonably withheld, delayed or
conditioned), settle or compromise any Claim or consent to entry of any judgment
which does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the indemnified party of a release from all
liability in respect of such Claim, and (c) in the event that the indemnifying
party undertakes defense of or opposition to any Claim the indemnified party, by
counsel or other representative of its own choosing and at its sole cost and
expense, shall have the right to consult with the indemnifying party and its
counsel or other representatives concerning such Claim and the indemnifying
party and the indemnified party, and their
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respective counsel or other representatives, shall cooperate in good faith with
respect to such Claim.
15.3.4 No undertaking of defense or opposition to a Claim
shall be construed as an acknowledgment by such party that it is liable to the
party claiming indemnification with respect to the Claim at issue or other
similar Claims.
15.3.5 Notwithstanding the provisions in Section 15.2, neither
Seller, Buyers nor Regent shall have the obligation to defend, indemnify and
hold harmless under Section 15.2.1(a) and 15.2.2(a) until and only to the extent
the aggregate Damages on account thereof exceed $75,000 and then, only to the
maximum amount of $2,000,000 in the aggregate, excluding therefrom however,
Damages for Claims related to matters of title, taxes, environment, or Licenses,
which shall be limited in maximum amount to the Purchase Price. Further, the
obligation to indemnify and hold harmless under Section 15.2.1(a) and Section
15.2.2(a) shall be reduced by the amount of any insurance proceeds received by
the indemnified party and shall be calculated after taking into account the
value of any tax benefits actually realized by the indemnified party as a result
of such Damages and the receipt of the indemnification payment to the end result
that the indemnified party shall be made whole from such Damages.
Notwithstanding any provision of this Agreement to the contrary,
Damages for which any indemnifying party may be liable for under Sections 15.2.1
or 15.2.2, whichever is applicable, shall exclude Damages for the breach or
falsity of any Warranty if (a) the indemnified party had conscious awareness of
facts or law which establish the existence of such breach or falsity (i) prior
to the execution of this Agreement; or (ii) with respect to Buyers and Regent,
subsequent to the execution of this Agreement but only to the extent such facts
are contained in the Phase I Report or any of the Inspection Reports, and (b)
such indemnified party failed to inform the indemnifying party of such breach of
Warranty prior to the Closing of the transaction contemplated by this Agreement,
provided, however, in the event that the Buyers elect to waive the requirements
that the conditions of Closing by Buyers described in Sections 11.7 and/or 11.8
be satisfied at the time of Closing, the Seller's aggregate obligation to
indemnify the Buyers and Regent, as the same relates to the existence of
breaches of Warranties described in Sections 11.7 and/or 11.8, shall, in no
event exceed $200,000 in the aggregate.
ARTICLE 16
TERMINATION RIGHTS
16.1 Termination. This Agreement may be terminated at any time prior to
Closing as follows:
16.1.1 Upon the mutual written consent of Buyers and Seller,
this Agreement may be terminated on such terms and conditions as so agreed; or
16.1.2 By written notice of Buyers to Seller if Seller
breaches in any material respect any of its representations or warranties or
defaults in any material respect in the
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observance or in the due and timely performance of any of its covenants or
agreements herein contained and such breach or default shall not be cured within
thirty (30) days of the date of notice of breach or default served by Buyers; or
16.1.3 By written notice of Seller to Buyers if either Buyer
or Regent breaches in any material respect any of its representations or
warranties or defaults in any material respect in the observance or in the due
and timely performance of any of its/their covenants or agreements herein
contained and such breach or default shall not be cured within thirty (30) days
of the date of notice of breach or default served by Seller; or
16.1.4 By written notice of Buyers to Seller or by Seller to
Buyers if the FCC denies the FCC Application under circumstances in which Seller
is not entitled to the Escrow Deposit;
16.1.5 By written notice of Buyers to Seller, or by Seller to
Buyers, if any court of competent jurisdiction shall have issued an order,
decree or ruling (which then remains in effect) or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, or by Buyers, if any court, legislative body or governmental or
regulatory authority has taken, or is reasonably expected to take, action that
reasonably would have a material adverse effect on the ability of Buyers to
operate the stations as contemplated by Buyers; or
16.1.6 By written notice of Buyers to Seller, or by Seller to
Buyers, if the Closing shall not have been consummated on or before June 30,
1999.
16.1.7 By written notice of Buyers to Seller if it shall
become apparent in both Seller's and Buyers' judgment reasonably exercised that
any condition to Buyers' obligation to close as set forth in Article 11 hereof
will not be satisfied on or before June 30, 1999.
16.1.8 By written notice of Seller to Buyers if it shall
become apparent in both Seller's and Buyers' judgment reasonably exercised that
any condition to Seller's obligation to close as set forth in Article 12 hereof
will not be satisfied on or before June 30, 1999.
16.1.9 By written notice of Buyers to Seller under the
conditions set forth in Section 9.2 hereof.
16.1.10 By written notice of Seller to Buyers if the consents
listed on Schedule 6.4 have not been obtained by Buyers within thirty (30) days
of submitting the FCC Application (and the notice is given thereafter before
such consents have been obtained), provided, with respect to the consent of
Waller-Sutton, as described on Schedule 6.4, Buyers and Regent shall not have
caused Waller-Sutton to deliver its written consent to the transactions
contemplated hereby, without any conditions or limitations not expressly set
forth in this Agreement, not later than ten (10) days following the expiration
of the diligence period described in Section 11.7 of this Agreement.
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Notwithstanding the foregoing, no party hereto may effect a termination
hereof if such party is in material default or breach of this Agreement.
16.2 Liability. Except as set forth in Section 16.4 below, the
termination of this Agreement under Section 16.1 shall not relieve any party of
any liability for breach of this Agreement prior to the date of termination.
16.3 Monetary Damages, Specific Performance and Other Remedies. The
parties recognize that if Seller refuses to perform under the provisions of this
Agreement in breach of this Agreement, monetary damages alone will not be
adequate to compensate Buyers for their injury. Buyers shall therefore be
entitled to obtain specific performance of the terms of this Agreement in
addition to any other remedies, including but not limited to monetary damages,
that may be available to it. If any action is brought by Buyers to enforce this
Agreement, Seller shall waive the defense that there is an adequate remedy at
law. In the event of a material default by either party, which results in the
filing of a lawsuit for damages, specific performance, or other remedy by the
other party, the prevailing party shall be entitled to reimbursement by the
non-prevailing party of reasonable legal fees and expenses incurred by the
prevailing party.
16.4 Seller's Liquidated Damages. As more fully described in the
Deposit Escrow Agreement, in the event this Agreement is terminated because of
Buyers' material breach of this Agreement, and all other conditions to Closing
are at such time satisfied or waived (other than such conditions as can
reasonably be satisfied by Closing), then the Escrow Deposit shall be delivered
to Seller, and the proceeds thereof shall constitute liquidated damages. It is
understood and agreed that such liquidated damages amount represents Buyers' and
Seller's reasonable estimate of actual damages and does not constitute a
penalty. Recovery of liquidated damages shall be the sole and exclusive remedy
of Seller against Buyers for failing to consummate this Agreement as a result of
Buyers' material breach hereof, and shall be applicable regardless of the actual
amount of damages sustained and all other remedies are deemed waived by Seller.
The receipt of such amount, however, shall not affect the right of Seller to
enforce specific provisions of this Agreement relating to confidentiality in
equity and to recover, to the extent allowed, costs and expenses incurred in
such enforcement Notwithstanding the foregoing, Seller shall be entitled to
recover its reasonable attorneys fees and costs of collection and enforcement of
the Deposit Escrow Agreement from the Buyers in addition to the Escrow Deposit.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 Risk of Loss. The risk of loss or damage to any of the Stations
Assets prior to the Closing Date shall be upon Seller. If, prior to the Closing
Date, any material Stations Asset(s) shall have suffered, sustained or incurred
any material loss, damage or destruction, including, without limitation, any
environmental contamination or pollution, and Seller shall not have elected at
its sole option and expense to wholly repair or replace the Stations Asset(s)
which suffered, sustained or incurred the material loss, damage or destruction
with assets which are
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equivalent in value, form and function, Buyers shall have the right in their
sole discretion and election, to either (i) terminate this Agreement in which
event Buyers shall be entitled to receive a full refund of the Escrow Deposit,
or (ii) complete the purchase contemplated by this Agreement, in which event:
(a) Seller shall assign and transfer to RBI and RBI shall
be entitled to receive all insurance proceeds and
other compensation collected by reason of such loss,
damage or destruction, together with any rights to
receive any uncollected insurance proceeds or other
compensation relating to such loss, damage or
destruction in an amount equal to the sum of the
aggregate amount of any applicable deductibles under
any insurance policies covering the lost, damage or
destroyed Stations Asset(s); or
(b) Buyers shall be entitled to reduce the Purchase Price
of the Stations Assets by an amount equal to the
reasonable cost of repair, or if destroyed or damaged
beyond repair, or if expropriated, seized, lost or
stolen, by an amount equal to the replacement cost;
or
(c) Buyers shall be entitled to use alternatives (a) and
(b) concurrently, but not both with respect to any
single Stations Asset(s).
If Buyers elect to complete the purchase contemplated hereby
notwithstanding any such loss, damage or destruction, and if Seller assigns such
insurance proceeds and other compensation and any other rights thereto to RBI,
then Seller shall be released from any and all liability or responsibility with
respect to such loss, damage or destruction, but shall cooperate with RBI, at no
cost or expense to Seller, in collecting all insurance proceeds and other
compensation with respect to thereto. The Purchase Price hereunder in such event
shall be reduced by the amount of any deductible amounts under such insurance
which is not paid by Seller to RBI.
17.2 Certain Interpretive Matters and Definitions. Unless the context
otherwise requires: (a) all references to Sections, Articles, Schedules or
Exhibits are to Sections, Articles, Schedules or Exhibits of or to this
Agreement; (b) each term defined in this Agreement has the meaning assigned to
it; (c) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect on the date hereof, (d) "or" is disjunctive but not
necessarily exclusive; (e) words in the singular include the plural and vice
versa; (f) the term "Affiliate" has the meaning given it in Rule 12b-2 of
Regulation 12B under the Securities Exchange Act of 1934, as amended; and (g)
all references to "$" or dollar amounts will be to lawful currency of the United
States of America.
17.3 Further Assurances. After the Closing, the parties shall from time
to time, at the request of and without further cost or expense to the other
parties, execute and deliver such other instruments of conveyance and transfer
and take such other actions as may reasonably be requested in order more
effectively to consummate the transactions contemplated hereby,
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including but not limited to, vesting in Buyers good and marketable title to the
Stations Assets being transferred hereunder in accordance with the terms hereof,
and the Buyers or Regent, as applicable, shall from time to time, at the request
of and without further cost or expense to Seller, execute and deliver such other
instruments and take such other actions as may reasonably be requested in order
more effectively to consummate the transaction contemplated hereby.
17.4 Preservation of Records. Subject to Section 10.1 hereof, RBI
hereby agrees that it will preserve and make available to Seller and its
attorneys and accountants (including the right to inspect and copy at Seller's
cost), during normal business hours and upon reasonable advance notice, for six
(6) years after the Closing Date, such of the books, records, files,
correspondence, memoranda and other documents referred pursuant to this
Agreement as Seller may reasonably require for the preparation of tax reports
and returns, the preparation of financial statements, or the preparation of a
response to any claim by a third party against Seller; provided, however, RBI
may destroy any part or parts of such records upon obtaining Seller's prior
written consent, which consent shall not be unreasonably withheld.
17.5 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Seller may not voluntarily or involuntarily assign its
interest under this Agreement without the prior written consent of Buyers.
Buyers shall have the right to assign and/or delegate all or any portion of its
rights and obligations under this Agreement, including without limitation,
assignments as collateral, provided that any assignment by Buyers which will
likely cause a delay of more than seven (7) days in the issuance of FCC Consent
on the FCC Application shall require the prior written consent of Seller, and
provided further, that no such assignment and/or delegation shall relieve Buyers
or Regent of their respective obligations hereunder in the event that its
assignee fails to perform the obligations delegated. All covenants, agreements,
statements, representations, warranties and indemnities in this Agreement by and
on behalf of any of the parties hereto shall bind and inure to the benefit of
their respective successors and permitted assigns of the parties hereto. In the
event Buyers find it necessary or are required to provide to a third party a
collateral assignment of the Buyers' interest in this Agreement and/or any
related documents, Seller shall cooperate with the Buyers and any third party
requesting such assignment including but not limited to signing a consent and
acknowledgment of such assignment.
17.6 Amendments. No amendment, waiver of compliance with any provision
or condition hereof or consent pursuant to this Agreement shall be effective
unless evidenced by an instrument in writing signed by the party against whom
enforcement of any waiver, amendment, change, extension or discharge is sought.
17.7 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
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17.8 Governing Law. The construction and performance of this Agreement
shall be governed by the laws of the State of Minnesota, without giving effect
to the choice of law provisions thereof.
17.9 Notices. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing, including by
facsimile, and shall be deemed to have been duly delivered and received on the
date of personal delivery, on the third (3rd) day after deposit in the U.S. mail
if mailed by registered or certified mail, postage prepaid and return receipt
requested, on the business day after delivery to a nationally recognized
overnight courier service if sent by an overnight delivery service for next
morning delivery or when dispatched by facsimile transmission (with the
facsimile transmission confirmation being deemed conclusive evidence of such
dispatch) and shall be addressed to the following addresses, or to such other
address as any party may request, in the case of Seller, by notifying Buyers,
and in the case of Buyers, by notifying Seller:
To Seller: WJON Broadcasting Company
640 S.E. Lincoln, Avenue
St. Cloud, MN 56304
Fax: (320) 251-1855
Attn: Mr. Andrew W. Hilger
Copy to: MOSS & BARNETT, a Professional Association
4800 Norwest Center
Minneapolis, MN 55402-4129
Fax: (612) 339-6686
Attn: Dave F. Senger, Esq.
To Buyers: Regent Broadcasting of St. Cloud, Inc.
c/o Regent Communications, Inc.
50 East RiverCenter Blvd.
Suite 180
Covington, KY 41011
Fax: (606) 292-0352
Attn: Mr. Terry S. Jacobs
Copy to: STRAUSS & TROY
2100 PNC Center
201 East Fifth Street
Cincinnati, OH 45202
Fax: (513) 241-8289
Attn: Alan C. Rosser, Esq.
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17.10 Counterparts. This Agreement may be executed in one or more
counterparts and by facsimile, each of which will be deemed an original and all
of which together will constitute one and the same instrument.
17.11 No Third Party Beneficiaries. Nothing herein expressed or implied
is intended or shall be construed to confer upon or give to any person or entity
other than the parties hereto and their successors or permitted assigns any
rights or remedies under or by reason of this Agreement.
17.12 Severability. The parties agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable law, this Agreement shall be
construed with the invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected or impaired thereby.
17.13 Entire Agreement. This Agreement and the schedules and exhibits
hereto embody the entire agreement and understanding of the parties hereto and
supersede any and all prior agreements, arrangements and understandings relating
to the matters provided for herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
WJON BROADCASTING COMPANY, A REGENT BROADCASTING OF
MINNESOTA LIMITED PARTNERSHIP ST. CLOUD, INC.
By WJON BROADCASTING COMPANY
A MINNESOTA CORPORATION
By: /s/ Andrew W. Hilger By: /s/ Terry S. Jacobs
-------------------------- -----------------------------
Name: Andrew W. Hilger Name: Terry S. Jacobs
Title: President Title: Chairman and CEO
Its: General Partner
REGENT LICENSEE OF ST. CLOUD, INC.
By: /s/ Terry S. Jacobs
-----------------------------
Name: Terry S. Jacobs
Title: Chairman and CEO
REGENT COMMUNICATIONS, INC.
By: /s/ Terry S. Jacobs
-----------------------------
Name: Terry S. Jacobs
Title: Chairman and CEO
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<PAGE> 1
EXHIBIT 2(b)
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 4th day of March,
1999, by and among REGENT BROADCASTING OF KINGMAN, INC., a Delaware corporation
("RBK"), and REGENT LICENSEE OF KINGMAN, INC., a Delaware corporation ("RLK")
(RBK and RLK being collectively referred to as "Sellers"), and MAG MILE MEDIA,
L.L.C., a Delaware limited liability company ("Buyer").
WHEREAS, RBK is the owner and operator, and RLK is the licensee, of
Radio Stations KAAA (AM) and KZZZ (FM), which are licensed to Kingman, Arizona,
and Radio Stations KFLG (AM) and KFLG (FM), which are licensed to Bullhead City,
Arizona, (hereinafter referred to collectively as the "Stations" and each a
"Station"); and
WHEREAS, Buyer desires to purchase, and Sellers desire to sell, all of
the fixed, tangible, and intangible assets of Sellers used or held for use in
the operation of the Stations, defined herein as the "Broadcast Assets", and to
obtain assignments of the licenses issued by the Federal Communications
Commission (the "Commission") for the operation of the Stations, and of other
licenses, permits or authorizations issued by any governmental entity in
connection therewith; and
WHEREAS, the licenses issued by the Commission for the operation of the
Stations may not be assigned by RLK to Buyer without the prior written consent
of the Commission; and
WHEREAS, Buyer and Sellers have negotiated a price (hereinafter called
the "Purchase Price") for the sale and purchase of the Broadcast Assets
(hereinafter defined) of the Stations.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained, and subject to the conditions hereinafter set forth, the
parties hereto agree as follows:
DEFINITION OF TERMS
1. Recitals. The foregoing recitals are hereby incorporated herein and
made a part hereof.
2. Definition of Terms. As used herein, the following terms shall have
the following meanings:
(a) "Commission" means the Federal Communications Commission.
(b) "Commission's Order" means the action of the Commission
consenting to the assignment to Buyer of the Licenses.
(c) "Final Order" means the Commission's Order as to which the
time for filing a request for all administrative or judicial review or for
motion by the Commission
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ordering review shall have expired without any such motion or filing having been
made, or in the event of such motion or filing, the Commission's Order shall
have been reaffirmed or upheld and the time for seeking further administrative
or judicial review with respect thereto shall have expired without any request
for such further review having been filed.
(d) "Licenses" means the licenses, permits, approvals,
consents and authorizations issued by the Commission for the Stations and all
associated auxiliary broadcast stations, all as listed on Schedule A attached
hereto.
(e) "Closing Date" means the date, time and place designated
by not less than seven (7) days' written notice from Buyer to Sellers, which
date shall not be less than seven (7) days after the Commission's Order and not
more than fifteen (15) days after the Final Order, or such other date within the
effective period (including any extension thereof) of the Commission's Order as
shall be mutually agreed upon by Sellers and Buyer. The parties will seek to
obtain any extension of the effective period of the Commission's Order as may be
necessary under this provision. The parties agree that the Closing Date may, by
mutual agreement, be prior to the date on which the Commission's Order becomes a
Final Order; provided, however, in such event the Closing will take place
subject to the terms of an agreement to unwind the transaction and return the
parties to their original positions should the Commission's Order thereafter be
reversed. "Closing" means the transfer of the Broadcast Assets and the
consideration therefor, together with the other documents and consideration
provided herein.
(f) "Broadcast Assets" means:
(i) The Licenses listed on Schedule A and the Public
Inspection Files maintained in connection therewith.
(ii) The leases, contracts and agreements relating to
the operation of the Stations which are described in Schedule B (as may be
supplemented by Sellers with Buyer's consent) and which are in effect on the
Closing Date, plus such other leases, contracts, and agreements not described in
subsections (f)(iii) and (f)(iv) below that are entered into in the ordinary
course of business and relate to the operation of the Stations after the date
hereof.
(iii) All contracts for the sale for cash of
broadcast time or advertising on the Stations on or after the Closing Date which
are valid and enforceable as of the Closing Date and which are to be assumed or
conveyed under Sections 3(a) and 3(b).
(iv) All contracts for the sale of broadcast time or
advertising on the Stations in exchange for merchandise or services (or a
combination of merchandise or services and cash) on or after the Closing Date
which are valid and enforceable as of the Closing Date up to $15,000 in
liability in the aggregate and which are to be assumed or conveyed under
Sections 3(a) and 3(b) hereof.
(v) All the tangible property, assets, furniture,
fixtures, supplies, materials, goods, receivers, tapes, programming, music
libraries, transmitters, switches,
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equipment and all other personal property used or held for use in the operation
of the Stations, including, without limitation, that listed on Schedule C, and
including replacements thereof or additions thereto made between the date hereof
and the Closing Date, less any retirements made in the ordinary and usual course
of business, which are not currently used in the operation of the Stations or
are otherwise replaced and excluding any tangible personal property leased by
Sellers (as listed in Schedule C-1).
(vi) The spare parts and inventory of RBK relating to the
items set forth in Schedule C.
(vii) Goodwill, privileges, permits, copyrights, logos,
jingles, brand names, service marks, trademarks and trade names (including
rights in applications in connection therewith), and other intangible rights,
including rights to the call letters of the Stations owned by Sellers and used
in the operation of the Stations or in connection with the Broadcast Assets, as
described on Schedule D.
(viii) Such of the correspondence, files, records, books of
account, programming studies, advertising reports, software (to the extent
transferable), operating and marketing plans, logs, advertising lists, customer
and vendor lists, copy and other files, books, writings and records of the
Sellers that relate to the business and operations of the Stations (but all of
the foregoing shall thereafter for a period of seven (7) years following the
Closing Date be available for reasonable inspection and duplication by Sellers
at their expense, upon reasonable request during normal business hours).
(ix) The real property including fixtures, buildings and
improvements thereon and all appurtenant rights owned by Sellers described on
Schedule E attached hereto (the "Owned Real Property").
(x) The leases of Real Property with respect to Real Property
leased by Sellers described on Schedule F attached hereto (the "Leased Real
Property").
The Broadcast Assets do not include at Closing (1) cash or cash equivalents on
hand or in banks, (2) accounts receivable, (3) property employed solely in the
general corporate operations of Sellers, (4) property not located at the
Stations' facilities and used or useful in the operations of any other stations
owned or operated by any affiliate of Sellers (provided that such property is
not currently used in the operation of the Stations), (5) books and records of
the Sellers other than those specified in subsection 1(f)(viii) above and those
Buyer is required to maintain by reason of the Commission rules or by law, (6)
all pension, profit sharing or cash or deferred (Section 401(k)) plans and
trusts and the assets thereof and any other employee benefit plan or
arrangement, if any, maintained by Sellers, and (7) Sellers' rights, claims, and
causes of action against third parties (including, without limitation, any
rights under insurance policies and any rights to tax refunds). Sellers shall
maintain copies of and make available to Buyer for a period of seven (7) years
those items in number (5) above for reasonable inspection and duplication by
Buyer at its expense, upon reasonable request during normal business hours.
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<PAGE> 4
In addition to the conveyance of the Broadcast Assets, prepaid
expenses, deposits and deferred charges of the Stations as of the Closing Date,
determined in accordance with generally accepted accounting principles, shall be
prorated pursuant to Section 17 hereof.
(g) "Financials" means the financial statements of Sellers
relating to the Stations furnished by Sellers to Buyer and consisting of
unaudited statements of operations and cash flows for the twelve-month period
ended December 31, 1998, identified on Schedule H.
(h) "Permitted Encumbrances" is defined in Section 14(k).
(i) "Time Brokerage Agreement" is defined in Section 26.
ASSETS TO BE SOLD
3. Assets to be Conveyed. On the Closing Date, subject to the terms and
conditions of this Agreement, Sellers will assign, transfer and deliver or cause
to be delivered to Buyer all of the Broadcast Assets free and clear of all
debts, liens, security interests, claims, encumbrances and other liabilities of
any nature whatsoever, except for Permitted Encumbrances and as otherwise
provided in Section 4 of this Agreement, and will execute and deliver to Buyer
all such assignments, bills of sale, deeds, leases, and other documents and
instruments as may be required by this Agreement or as Buyer or Buyer's counsel
may reasonably request (in a form acceptable to Buyer's counsel) in order to
sufficiently effectuate the transfer and sale of the Broadcast Assets to Buyer
as of the Closing Date.
4. Assumption of Certain Liabilities.
(a) On the Closing Date, Buyer will assume, and indemnify,
defend and hold Sellers harmless from, the liabilities of Sellers under the
contracts, agreements and leases included in the Broadcast Assets as described
in subsections 2(f)(ii), 2(f)(iii), and 2(f)(iv), which are applicable to the
period after the Closing Date, and Buyer shall execute and deliver to Sellers
all documents and instruments as may be required by this Agreement and as
Sellers may reasonably request (in a form acceptable to Seller's counsel) in
order to sufficiently effectuate such assumption of obligations.
(b) The foregoing notwithstanding, Buyer shall not be
obligated to assume Sellers' obligations under any "trade out" agreements to the
extent there exists a net negative barter balance (the amount by which the value
of the service yet to be rendered under all such agreements collectively by the
Stations exceeds the consideration yet to be received by the Stations therefor),
based upon the Stations' then prevailing rates, in excess of $15,000.00 except
to the extent that any such excess is treated as prepaid time sales for cash and
adjusted for as a proration in Buyer's favor at Closing under Section 17. All
consideration received or to be received by Sellers from such "trade out"
accounts not consumed by the Sellers in the ordinary course of business shall be
a Broadcast Asset.
(c) In no event shall Buyer assume or be responsible for any
obligations or liabilities of Sellers except to the extent provided in
subsections 4(a) and 4(b). Without limiting
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the generality of the foregoing, except to the extent provided in subsections
4(a) and 4(b), Buyer shall in no event assume or be responsible for: (i) any
liability with respect to any action, suit, proceeding, arbitration,
investigation, claim or inquiry against Sellers, whether civil, criminal or
administrative ("Litigation"), whether or not described in a schedule; (ii) all
liabilities incurred by either Seller in connection with this Agreement and the
transactions contemplated herein, including, without limitation, tax
liabilities: (iii) any liability of either Seller for federal income taxes and
any state or local income, profit, franchise, property or other taxes of any
nature, and any penalties or interest due on account thereof; (iv) liabilities
of either Seller for any breach or failure to perform any of such Seller's
covenants and agreements contained in, or made pursuant to, this Agreement, or,
prior to the Closing, any other contract, whether or not assumed hereunder,
including any breach arising from assignment of contracts hereunder without
consent of third parties; (v) liabilities of either Seller for any violation of
or failure to comply with any statute, law, ordinance, rule or regulation
(collectively, "Laws") or any order, writ, injunction, judgment, plan or decree
(collectively, "Orders") of any court, arbitrator, department, commission,
board, bureau, agency, authority, instrumentality or other body, whether
federal, state, municipal, foreign or other (collectively, "Government
Entities"): (vi) liabilities of either Seller to its present or former
Affiliates; and (vii) liabilities for all pension, profit sharing, retirement,
bonus, medical, dental, life, accident insurance, disability, executive or
deferred compensation, and other similar fringe or employee benefit plans.
"Affiliate" shall have the meaning given such term in Rule 13e-3 under the
Securities Exchange Act of 1934, as amended, and shall include all shareholders,
directors and officers of each Seller.
PURCHASE PRICE
5. Purchase Price and Payment Thereof.
(a) The Purchase Price for the Broadcast Assets, to be
allocated among the Broadcast Assets according to Schedule G, shall be Five
Million Four Hundred Thousand Dollars ($5,400,000.00) and shall be payable,
including the cash portion of the Escrow Deposit and less or plus prorations and
adjustments made pursuant to Section 18 of this Agreement, in cash at the
Closing by wire transfer of immediately available funds to such account as is
specified by Sellers.
(b) On or before the date of this Agreement, Buyer has
deposited in escrow with Star Media Group, Inc., as Escrow Agent ("SMG"),
pursuant to the provisions of a Deposit Escrow Agreement in the form of Exhibit
A hereto among Sellers, Buyer and SMG (the "Deposit Escrow Agreement"), cash
and/or an irrevocable, stand-by letter of credit (in form and substance
acceptable to Sellers) in the aggregate amount of $270,000,00 (the "Escrow
Deposit"), to be held in escrow and applied as set forth herein and in the
Deposit Escrow Agreement; provided, however, the Escrow Deposit shall consist of
at least $50,000.00 in cash. At the Closing, the cash portion of the Escrow
Deposit shall be applied to the Purchase Price to be paid to Sellers, the
interest accrued thereon shall be paid to Buyer, and the letter of credit shall
be returned to Buyer. As more fully described in the Deposit Escrow Agreement:
(i) in the event this Agreement is terminated because of Buyer's breach of
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this Agreement and all other conditions to Closing are at such time satisfied or
waived (other than such conditions as can reasonably be expected to be satisfied
by the Closing), the Escrow Deposit shall be distributed to Sellers and the cash
proceeds therefrom shall constitute liquidated damages as provided in Section 26
(a) hereto for Buyer's breach of this Agreement (the receipt of such amount by
Sellers shall be Seller's sole remedy and shall discharge any liability Buyer
may have to Sellers), and the interest accrued on the Escrow Deposit shall be
paid to Buyer; (ii) in the event this Agreement is terminated because of
Sellers' breach of this Agreement and all other conditions to Closing are at
such time satisfied or waived (other than such conditions as can reasonably be
expected to be satisfied by the Closing), the Escrow Deposit and the interest
thereon shall be distributed to Buyer; and (iii) in the event this Agreement is
terminated under any circumstances other than those set forth in the immediately
preceding clauses (i) and (ii), the Escrow Deposit, including all accrued
interest thereon, shall be distributed to Buyer.
COMMISSION MATTERS
6. Commission Consent to Assignment of Licenses. Notwithstanding
anything herein to the contrary, the terms and conditions of this Agreement are
subject prior to Closing to the Commission's Order (and, except as hereafter
otherwise mutually agreed, to a Final Order) granting consent to the assignment
of the Licenses by RLK to Buyer.
7. Application for Consent-Cooperation of the Parties. Buyer and
Sellers shall join in an application or applications to be filed with the
Commission requesting consent to the assignment of the Licenses. They shall file
with the Commission within five (5) business days of the date of this Agreement
the necessary application and expeditiously prosecute all necessary amendments
to such application, briefs, pleadings, documents and supporting data, and take
all such actions and give all such notices as may be required or requested by
the Commission or as may be appropriate in an effort to expedite the approval of
the Commission of the assignment of the Licenses to Buyer.
8. Costs and Expenses. Buyer and Sellers each shall bear its own legal
and accounting fees and other costs and expenses with respect to this
transaction, including preparation and prosecution of Commission applications.
The cost of filing fees and grant fees, if any, imposed by the Commission shall
be borne equally by Buyer and RLK. Sellers shall pay all sales, transfer and
documentary taxes, and Buyer shall pay all recording fees.
9. Operation of the Stations Before Closing. Between the date of this
Agreement and the Closing Date, Sellers (i) will continue to operate the
Stations under the terms of the Licenses in the public interest, convenience and
necessity and (ii) will file with the Commission all documents required to be
filed in connection with the operation of the Stations. Between the date hereof
and the Closing Date, Sellers and Buyer shall provide the other with copies of
all correspondence received from or filed with the Commission with respect to
the Stations, the above application or any of the same.
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10. Control and Access. Prior to Closing, Buyer and its agents shall
not directly or indirectly (i) control, supervise or direct, or (ii) attempt to
control, supervise or direct, the operations of the Stations. Such operations
shall be the sole responsibility of and in the complete discretion of Sellers.
In addition to rights granted to Buyer under the Time Brokerage Agreement
(hereinafter defined), Buyer shall be permitted reasonable observation and
access and inspection of the records and property of the Stations during regular
business hours in such a manner as to not interfere unreasonably with the normal
operations of the Stations.
11. Conditions on Assignment Consent. In the event the Commission's
Order consenting to assignment of the Licenses to Buyer contains a condition,
arising other than in connection with any action or omission of Buyer and Buyer
reasonably determines in good faith that the condition is materially adverse to
Buyer and prevents Buyer from operating the Stations in substantially the same
manner as owned and operated by Sellers, then the parties will cooperate in
seeking the removal or mitigation of such condition until the earlier to occur
of (1) the reconsideration by the Commission on terms reasonably acceptable to
Buyer in accordance with the standards set forth above or (ii) the expiration of
90 days from the effective date of the Commission's Order (the "Reconsideration
Period"). Notwithstanding the foregoing, no party shall be obligated to
participate in an evidentiary hearing before the Commission. If the Commission
has not taken the action specified in (i) above by the termination of the
Reconsideration Period, Buyer shall have the right to terminate this Agreement
upon written notice to Sellers within 10 days after the expiration of the
Reconsideration Period. If Sellers do not agree with Buyer's determination that
a condition is materially adverse to Buyer, the matter shall be submitted to
arbitration in Phoenix, Arizona in accordance with the rules of the American
Arbitration Association, and the results thereof shall be binding upon the
parties.
12. Time for Commission Consent-Termination. If no Final Order
consenting to the assignment of all the Licenses to Buyer is secured on or
before the expiration of six (6) months from the filing of the 314 application,
this Agreement may be terminated at the option of either Sellers or Buyer
provided that the action or inaction of the terminating party is not the reason
the Final Order has not been granted, upon the giving of ten (10) days' written
notice to the other and, in the absence of material breach by either of the
parties, Buyer and Sellers shall thereupon be released and discharged of all
obligations hereunder, and the Escrow Deposit shall be distributed in accordance
with the provisions of Section 4(b)(iii) hereof.
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ACCOUNTS RECEIVABLE
13. Collection. The accounts receivable of Sellers are not included
among the Broadcast Assets. Nevertheless, at Closing, RBK shall supply Buyer
with a list of RBK's accounts receivable as of the Closing Date (the
"Accounts"), and Buyer shall use such efforts as are reasonable and in the
ordinary course of business to collect the Accounts on RBK's behalf for a period
of sixty (60) days from the Closing Date (the "Collection Period"). This
obligation, however, shall not extend to the institution of litigation,
employment of counsel, or any other extraordinary means of collection. During
the Collection Period, Sellers shall not solicit any monies from an account
debtor who, after Closing, continues to do business with the Stations, provided
that during such period RBK may act to preserve its rights against a bankrupt
debtor or commence suit or otherwise take action against any debtor that
disputes the amount of, or liability for, an Account. If RBK receives a payment
from an account debtor during the Collection Period, it shall so notify Buyer.
Buyer may endorse and deposit in its own name and collect any and all checks and
other instruments for the payment of money that Buyer may receive in payment of
Accounts. Buyer shall receive no remuneration for its services and shall not be
liable for non-collection, or failure of any such collection, except due to its
own gross negligence or intentional misconduct. Upon termination of its duties
hereunder, Buyer shall deliver to RBK all of its correspondence and files
concerning the collection of the Accounts and all reports of attempts to collect
the same. Except as otherwise provided herein, amounts collected by Buyer on
account of RBK's Accounts shall be remitted in full to RBK on a monthly basis,
by the fifteenth (15) day of the month following the month for which remittance
is due. Buyer shall deliver to RBK an accounting showing the amount it received
during each period on each account. If both RBK and Buyer are entitled to
accounts receivable from the same account debtor, all payments received during
the Collection Period shall be first applied to RBK's Accounts from such account
debtor until the same are paid in full, unless such account debtor has disputed
such account receivable in writing to RBK, in which event Buyer shall be
entitled to apply the payment made by the account debtor to Buyer's account
receivable. At the conclusion of the Collection Period and after remittance of
all amounts collected, Buyer will thereafter have no further responsibility with
respect to the collection of the Accounts, and Buyer may apply all collections
received by Buyer from any Account party who continues business with Buyer to
obligations owing to Buyer, except for any payment received by Buyer which such
Account party specifies is for amounts owed to RBK, in which event such
specified amounts shall be paid over to RBK. Buyer shall not have the right to
compromise, settle or adjust the amounts of any one of the Accounts without
RBK's prior written consent. RBK shall promptly pay all sales commissions
relating to all of its accounts receivable whenever RBK receives payment
thereon.
COVENANTS, REPRESENTATIONS
AND WARRANTIES OF SELLERS
14. Covenants, Representations and Warranties of Sellers. Sellers make
the following covenants, representations and warranties:
(a) Corporate Standing and Authority.
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(i) Each Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and each
is duly licensed or qualified to do business as a foreign corporation, and is in
good standing, in all such other states where its business requires such
qualification, and each Seller has all corporate power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby.
(ii) This Agreement, all other documents referred to
herein to be signed by Sellers, and the transactions contemplated hereby have
been duly authorized and approved by the Board of Directors of each Seller and
its sole shareholder, and copies of all corporate proceedings of said
corporations relating to such authorization and approval, certified by its
Secretary, will be delivered to Buyer at Closing. This Agreement constitutes a
valid and binding obligation of Sellers, enforceable in accordance with its
terms, subject to bankruptcy laws, other federal and state laws affecting
creditors' rights generally and the availability of equitable remedies.
(b) Title to Broadcast Assets. RLK, as to the Licenses, and
RBK, as to the other Broadcast Assets, have good and marketable title to the
Broadcast Assets, free and clear of all liens, mortgages, pledges, conditional
sales agreements, security interests, charges and encumbrances, except for such
liens as will be released and discharged on or prior to the Closing Date and
except, as to any real property included in the Broadcast Assets, for Permitted
Encumbrances.
(c) Financials. Included as part of Schedule H is a true and
complete copy of the Financials relating to the operation of the Stations for
the twelve-month period ended December 31, 1998. For the period of ownership of
the Stations by Sellers, such Financials are true, complete and accurate, have
been prepared in accordance with generally accepted accounting principles
(except for the absence of footnote disclosure) applied on a consistent basis,
have been prepared in accordance with the books and records of Sellers, and
fairly present, in accordance with generally accepted accounting principles,
results of operations and cash flows of RBK as of the date and for the periods
indicated. Sellers have also provided to Buyer copies of financial statements
received at the time of Sellers purchase of the Stations in June of 1998, as
included in Schedule H (the "Prior Financials"); provided, however, that no
representation or warranty is made by Sellers with respect to the Prior
Financials.
(d) Accounts Receivable. All accounts receivable of Sellers
relating to the operation of the Stations are listed on Schedule I as of the
date indicated and represent arm's length sales actually made in the ordinary
course of business, are to the best of each Sellers knowledge, collectible (net
of reasonable reserves for doubtful accounts) in the ordinary course of business
without the necessity of commencing legal proceedings, are subject to no
counterclaim or setoff, and are not in dispute. Schedule I contains an aged
schedule of all such accounts receivable.
(e) Contracts. Schedule B is a complete list or description of
all material written and oral contracts relative to the Stations in existence at
the date of this Agreement which are enforceable against RBK (other than
contracts for the sale of radio time or
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advertising). All contracts for the sale of broadcast time or advertising on the
Stations in exchange for merchandise or services on or after the date hereof to
which RBK is a party or by which it is bound are preemptible for cash sales.
True and complete copies of all contracts, leases and agreements listed in
Schedule B have been made available to Buyer. RBK has and on the Closing Date
will have paid all of its obligations and otherwise will not be in material
default under any of the contracts, leases and agreements listed on Schedule B
or otherwise to be assumed by Buyer hereunder; and each shall be in full force
and effect and unimpaired by any acts or omissions of RBK, its agents or
employees on the Closing Date, except for those that shall previously have
expired by passage of time in accordance with their respective terms.
(f) Licenses. Schedule A is a complete list of all Licenses
currently held by RLK for the Stations. The Licenses constitute all licenses,
permits, approvals, authorizations and consents of the Commission required for
the operation of the Stations. The Licenses are currently in effect and are
subject to no restrictions of such a nature as would materially limit the full
operation of the Stations as presently authorized and conducted. The Licenses
have been renewed in the normal course at their last renewal date with the
normal expiration date. The operation of the Stations is in all material
respects in accordance with the Licenses. Sellers have no knowledge of any
matter that might result in the suspension or revocation of the Licenses. There
are no Commission citations outstanding with respect to the Stations or their
operations. There are no petitions to deny, material complaints or proceedings
known by Sellers to be pending before the Commission against the Stations or the
Sellers (other than rulemakings of general applicability to the broadcast
industry or a substantial segment thereof) and relating to the business and
operation of the Stations.
(g) Tangible Broadcast Assets. Without material omission, all
of the Broadcast Assets, including, without limitation, tangible property and
assets of RBK used or held for use in the operation of the Stations as of the
date hereof are listed on Schedule C. All equipment actually used in connection
with, and necessary for, the operation of the Stations including, without
limitation, antennas, transmitters, and other studio and transmitting equipment
is in good operating condition (ordinary wear and tear excepted) consistent with
the terms of the Stations' licenses, all underlying construction permits, and
the Commission's rules and regulations and building, zoning and other laws; and
on the date of this Agreement there are no orders or citations outstanding
requiring any repairs, improvements or modifications with respect thereto.
(h) Laws and Regulations. On the date hereof and at Closing,
the Stations will be in compliance in all material respects with all applicable
federal, state and local laws, ordinances and regulations, including to the best
of Sellers' knowledge, applicable Environmental Laws (as defined below). Sellers
agree that prior to the Closing Date, if they become aware of any violations of
the Communications Act of 1934, or of the Rules and Regulations of the
Commission, they will use their best efforts to remove all such violations and,
unless the violation has been caused by Buyer from acts under the Time Brokerage
Agreement, be responsible for the costs of removing such, including the payment
of any fines that may be assessed before or after Closing for any such
violations. Sellers are not in default
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with respect to any judgment, order, injunction or decree of any court,
administrative agency, or other governmental authority in any respect material
to this transaction.
(i) Compliance. Except as set forth in Schedule J, the
Stations (including each and all of their operations and practices) and the
Broadcast Assets are in compliance in all material respects with all applicable
Laws and Orders, including, without limitation, those applicable to trade
practices, competition and pricing, zoning, building and sanitation, product
advertising and the Environmental Laws, as hereinafter defined. Except as set
forth in Schedule J, neither Seller has received notice of any violation or
alleged violation pertaining to the operation of the Stations, and is subject to
no liability for, past or continuing violation pertaining to the operation of
the Stations, of any Laws or Orders. All reports and returns pertaining to the
Stations required to be filed by Sellers with any government entity have been
filed and were accurate and complete when filed. The operation of the Stations
as it is now conducted does not, nor does any condition existing at any of
either Seller's or the Stations' facilities, in any manner constitute a nuisance
or other tortuous interference with the rights of any person or persons in such
a manner as to give rise to or constitute the grounds for a meritorious suit,
action, claim or demand by any such person or persons seeking compensation or
damages or seeking to restrain, enjoin or otherwise prohibit any aspect of the
conduct of such business or the manner in which it is now conducted.
(j) Environmental Matters. The applicable laws relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, generation, storage, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic, hazardous or petroleum
or petroleum-based substances or wastes ("Waste") into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Waste including, without limitation, the Clean Water Act, the Clean
Air Act, the Resource Conservation and Recovery Act, the Toxic Substances
Control Act and the Comprehensive Environmental Response Compensation Liability
Act ("CERCLA"), as amended, and their state and local counterparts are herein
collectively referred to as the "Environmental Laws". Without limiting the
generality of the foregoing provisions of this Section 14, each Seller is in
full compliance in all material respects with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or contained in any regulations,
code, plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder. There is no litigation nor any
demand, claim, hearing or notice of violation pending or, to the best of each
Seller's knowledge, threatened against either Seller relating in any way to the
Environmental Laws or any order issued, entered, promulgated or approved
thereunder. Except as set forth in Schedule K, there are no past, present, or,
to the best of each Seller's knowledge, anticipated events, conditions,
circumstances, activities, practices, incidents, actions, omissions or plans
which may materially interfere with or prevent compliance or continued
compliance with the Environmental Laws or with any order issued, entered,
promulgated or approved thereunder, or which may give rise to any liability,
including, without limitation, liability under CERCLA or similar state or local
laws, or otherwise form the basis of any litigation, hearing, notice of
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violation, study or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into the
environment, of any Waste.
(k) Marketable Title. On the Closing Date, other than Liens
that will be satisfied at Closing, Sellers shall have and convey good and
marketable title to all the Broadcast Assets, free and clear of all mortgages,
liens (statutory or otherwise), security interests, claims, pledges, licenses,
equities, options, conditional sales contracts, assessments, levies, easements,
covenants, reservations, restrictions, rights-of-way, exceptions, limitations,
charges or encumbrances of any nature whatsoever (collectively, "Liens"); other
than in the case of real property, Liens for taxes and assessments not yet due
or which are being contested in good faith by appropriate proceedings (and which
have been sufficiently accrued or reserved against in the Recent Balance Sheet);
municipal, building and zoning ordinances; easements, restrictions and
agreements described on Schedule E; and easements for public utilities which do
not materially interfere with the use of the Broadcast Assets as currently
utilized or materially and adversely affect the marketability of the Broadcast
Assets ("Permitted Encumbrances"). Except as set forth on Schedule L, none of
the Broadcast Assets is subject to any restrictions with respect to the
transferability thereof, and Sellers have complete and unrestricted power and
right to sell, assign, convey and deliver the Broadcast Assets to Buyer as
contemplated hereby. At Closing, Buyer will receive good and marketable title to
all the Broadcast Assets, free and clear of all Liens of any nature whatsoever
except Permitted Encumbrances.
(l) Condition. All buildings, towers and other structures
owned or otherwise utilized by Sellers are in good condition and repair (normal
wear and tear excepted) and have no structural defects or material defects
affecting the plumbing, electrical, sewerage, or heating, ventilating or air
conditioning systems.
(m) Real Property. Schedule E sets forth all real property
owned, used or occupied by Sellers, including a description of all land, and all
encumbrances, existing leases, easements or rights of way of record (or, if not
of record, of which either Seller has notice or knowledge) granted on or
appurtenant to or otherwise affecting the Owned Real Property, and all towers,
buildings or other structures located thereon. Schedule F sets forth, with
respect to each parcel of Leased Real Property the material terms of such lease.
Except for provisions contained in leases or licenses referred to on Schedule F,
no fact or condition exists which would prohibit or adversely affect the
ordinary rights of access to and from the Owned or Leased Real Property from and
to the existing highways and roads and there is no pending or, to the best of
Seller's knowledge, threatened restriction or denial, governmental or otherwise,
upon such ingress and egress. There is not (i) any claim of adverse possession
or prescriptive rights involving any of the Owned Real Property or, to the best
of Sellers' knowledge, the Leased Real Property, (ii) any structure located on
any Owned Real Property or, to the best of Sellers' knowledge, the Leased Real
Property which encroaches on or over the boundaries of neighboring or adjacent
properties or (iii) any structure of any other party which encroaches on or over
the boundaries of any of such Owned Real Property or, to the best of Sellers'
knowledge, the Leased Real Property. None of the Owned Real Property or, to the
best of
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Sellers' knowledge, the Leased Real Property is located in a flood plain, flood
hazard area, wetland or lakeshore erosion area within the meaning of any Law. No
public improvements have been commenced and to each Seller's knowledge none are
planned which in either case may result in special assessments against or
otherwise materially adversely affect any Owned or Leased Real Property. To the
best of Seller's knowledge, no portion of any of the Owned or Leased Real
Property has been used as a landfill or for storage or landfill of hazardous or
toxic materials. Neither Seller has notice or knowledge of any (i) planned or
proposed increase in assessed valuations of any Owned or Leased Real Property,
(ii) order requiring repair, alteration, or correction of any existing condition
affecting any Owned or Leased Real Property or the systems or improvements
thereat, (iii) condition or defect which could give rise to an order of the sort
referred to in clause (ii) above, or (iv) underground storage tanks, or any
structural, mechanical, or other defects of material significance affecting any
Owned or Leased Real Property or the systems or improvements thereat (including,
but not limited to, inadequacy for normal use of mechanical systems or disposal
or water systems at or serving the Owned or Leased Real Property).
(n) No Condemnation or Expropriation. Neither the whole nor
any portion of the Broadcast Assets is subject to any Order to be sold or is
being condemned, expropriated or otherwise taken by any Government Entity with
or without payment of compensation therefor, nor to the best of either Seller's
knowledge has any such condemnation, expropriation or taking been proposed.
(o) No Certified Survey Map Required. To the best knowledge of
Sellers, no certified survey map or other state, municipal, or other
governmental approval regarding the division, platting, or mapping of real
estate is required as a prerequisite to the conveyance by RBK to Buyer (or as a
prerequisite to the recording of any conveyance document) of any Owned Real
Property pursuant to the terms hereof.
(p) Insurance. Set forth in Schedule M is a complete and
accurate list and description of all policies of fire, liability and other forms
of insurance presently in effect with respect to the Stations and properties of
Sellers used or held for use in the operation of the Stations, true and correct
copies of which have been delivered to Buyer. All of the Broadcast Assets which
are of an insurable character are insured for fair market value, less reasonable
deductibles, by financially sound and reputable insurance companies against loss
or damage by fire and other risks to the extent and in the manner customary for
such Broadcast Assets. RBK will maintain or cause to be maintained such
insurance until the Closing Date. RBK has not received any notice from any of
its insurance carriers covering the Stations that any insurance coverage will
not be available in the future on substantially the same terms as now in effect.
No notice of cancellation or termination has been received with respect to the
policies.
(q) Disposition of Assets. Between the date hereof and the
Closing Date, Sellers will not transfer, convey or assign to any other person
any of the Broadcast Assets unless such disposition is in the ordinary course of
business or otherwise agreed to in writing by Buyer.
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(r) Trade-Out Agreements. Subject to the terms of the Time
Brokerage Agreement, RBK will encourage advertisers to use prior to the Closing
Date the broadcast time available to them under all existing arrangements for
the exchange of advertising time for considerations other than cash ("trade-out
agreements"). RBK covenants and agrees that at the Closing Date there will be no
trade-out agreements to which RBK is a party which shall require the broadcast
of advertising following the Closing Date (i) unless approved in writing by
Buyer or (ii) unless such were entered into in the ordinary course of business
and are preemptible for cash sales. At the Closing, RBK will deliver to Buyer a
schedule of all trade-out agreement payables and receivables, together with all
contracts pertaining thereto not previously delivered.
(s) Transmitter Site. To the best of Sellers' knowledge, the
Stations' transmitter sites are not the subject of any official complaint or
notice of violation of any applicable zoning ordinance or building code and no
such violation is known to exist. To the best of Sellers' knowledge, there is no
zoning ordinance or building code or use or occupancy restriction or
condemnation proceeding pending or threatened, which would preclude or
materially impair the use of such real estate or the improvements thereon by
Buyer in the manner and for the purpose for which it is presently used.
(t) Litigation. There is no litigation, action, suit,
investigation or proceeding pending, or to the best of Sellers' knowledge,
threatened, against Sellers which may give rise to any claim against any of the
assets to be conveyed or upon Sellers' ability to perform in accordance with the
terms of this Agreement, or which might result in a material monetary forfeiture
or in any material adverse effect upon the business or assets of Sellers or the
Stations.
(u) No Conflict. The execution, delivery and performance by
Sellers of this Agreement and the consummation of the transactions contemplated
hereby by Sellers will not (i) violate, conflict with or result in the breach of
any provision of the Certificate of Incorporation or By-Laws of Sellers; (ii)
violate any order, writ, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against, or binding upon, Sellers
or upon the assets of Sellers which violation could give rise to a valid claim
for injunction or other equitable relief or for damages; and (iii) subject to
obtaining the approvals, consents and permits or making the filings referred to
in this Agreement, (A) violate any statute, law or regulation of any
jurisdiction as such statute, law or regulation relates to the Stations or to
the assets of Sellers, which violation could have a material adverse effect on
the ability of Sellers to perform their obligations hereunder, (B) violate or
result in the revocation or suspension of any license or permit, the loss of
which could have a material adverse effect on the assets, results of operations
or financial condition of the Stations, or (C) require the consent of any third
party other than the required consent of Waller-Sutton Media Partners, L.P.
(which Sellers covenant to exercise all diligent and reasonable efforts to
obtain).
(v) Consents. Except for the approvals required by the
Commission, there are no authorizations, consents or approvals of, or filings
with, any governmental regulatory
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authority required by Sellers in connection with the execution of this Agreement
or the consummation of the transactions contemplated hereby.
(w) Qualifications for Assignment. RLK is presently a licensee
in good standing with the Commission and RLK knows of no reason why the
Commission would not approve the assignment of licenses contemplated by this
Agreement or the renewal of the Stations' licenses set forth in Schedule A.
(x) Absence of Certain Changes. Between December 31, 1998, and
the date of this Agreement, there has not been:
(i) Any damage, destruction or loss (whether or not
covered by insurance) adversely affecting the Broadcast Assets in a material
manner;
(ii) Any sale, assignment, lease or other transfer or
disposition of any of the properties or assets used or intended for use in the
operation of the Stations except in the ordinary course of business, or in
connection with the acquisition of similar property or assets in the normal and
usual course of business;
(iii) Any contract, obligation, or commitment entered
into in connection with the operation of the Stations except in the normal and
usual course of business; and
(iv) Any material change in the accounting methods or
practices of the Stations, or the depreciation or amortization policies or rates
with respect to the Stations.
(y) Labor Relations. Sellers are not parties to or subject to
any collective bargaining or similar agreement with any labor union with respect
to the employees of Sellers. As of the date of this Agreement, there are no
actions or proceedings pending or, to the best of Sellers' knowledge, threatened
between Sellers and any of their employees or any labor union, nor is there, to
the best of Sellers' knowledge, any attempt by any labor union to gain
recognition as the bargaining representative of any of the employees of Sellers.
Schedule N contains a true and correct list of all employees to whom either
Seller is paying compensation, including bonuses and incentives, at an annual
rate in excess of EIGHT THOUSAND DOLLARS ($8,000) for services rendered or
otherwise; and in the case of salaried employees such list identifies the
current annual rate of compensation for each employee and in the case of hourly
or commission employees identifies certain reasonable ranges of rates and the
number of employees falling within each such range.
(z) Tax Matters. The Financials contain adequate provisions
for all material federal income, accumulated earnings, payroll, F.l.C.A.,
unemployment, withholding and other federal taxes and all state and local
income, franchise, real property, personal property, sales, payroll, disability,
unemployment, withholding and other taxes imposed on Sellers or their properties
or rights or otherwise payable by them, including interest and penalties, if
any, in respect thereof, for the period ended on said date and all fiscal
periods prior thereto. No deficiency in payment of any taxes for any period has
been asserted or proposed by any taxing
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body at the date hereof, and all reports or returns required to be filed by
Sellers with any federal body or authority (and, to the best of Sellers'
knowledge, with any state or local governmental body or authority) with respect
to the Stations have been properly completed and filed in a timely manner, and
any and all amounts shown on such returns and reports to be due and payable have
been paid in full except to the extent, if any, that the failure to so file or
so pay could not lead to the imposition of any liability upon Buyer or lien or
encumbrance upon any of the Broadcast Assets.
(aa) Negative Covenants. Between the date hereof and the
Closing Date, Sellers, with respect to the Stations, will not without the prior
written consent of Buyer, not to be unreasonably withheld:
(i) Enter into any contract or commitment or engage
in any transaction relating to the Stations except in the normal and usual
course of business;
(ii) Create any mortgage, pledge, lien or encumbrance
affecting any of the Broadcast Assets except for such liens as will be released
and discharged on or prior to the Closing Date and for Permitted Encumbrances;
(iii) Sell, assign, lease or otherwise transfer or
dispose of any of the Broadcast Assets, except in the normal and usual course of
business or as permitted in Section 14(q) above; or
(iv) Cancel, modify, amend, or in any way impair any
of the contracts or other agreements which are to be assumed by Buyer except in
the normal and usual course of business.
(bb) Additional Agreements. Subject to the terms and
conditions herein provided, Sellers agree to use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement. In case at any time after the Closing any
further action is reasonably necessary to carry out the purposes of this
Agreement, Sellers shall take such action so long as such will not involve
additional costs (except as may be required under the indemnification provisions
of this Agreement).
(cc) Join in Execution of Documents. Sellers will join with
Buyer, at such time as all conditions precedent to the transactions contemplated
by this Agreement have been fulfilled, in executing and delivering all documents
which may be necessary or appropriate to effect the transactions contemplated by
this Agreement.
(dd) Full Disclosure. No representation or warranty made by
Sellers contained in this Agreement nor any certificate, document or other
instrument furnished or to be furnished by Sellers pursuant hereto contains or
will contain any untrue statement of a material fact, or omits or shall omit to
state any material fact required to make any statement contained herein or
therein not misleading. Sellers are not aware of any impending or
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contemplated event or occurrence that would cause any of the foregoing
representations not to be true and complete on the date of such event or
occurrence as if made on that date.
For purposes of this Agreement, "Seller's knowledge" means the
knowledge of William Stakelin (President of Sellers) or Dave Remund (the chief
engineer for Sellers) after due inquiry of the employees, representatives and
agents of Sellers who would have or be expected to have knowledge of the matter,
and with respect to the condition of the Stations, Broadcast Assets, records or
other object, after they have inspected it.
COVENANTS, REPRESENTATIONS
AND WARRANTIES OF BUYER
15. Covenants, Representations and Warranties of Buyer. Buyer makes the
following representations, warranties, and covenants:
(a) Corporate Standing and Authority.
(i) Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware; on the Closing Date will be qualified to do business in the State of
Arizona; and has all power and authority to enter into this Agreement, and to
carry out the transactions contemplated hereby.
(ii) This Agreement, all other documents referred to
herein to be signed by Buyer, and the transactions contemplated hereby have been
duly authorized and approved by the members of Buyer, and copies of all
proceedings of Buyer relating to such authorization and approval, certified by
its managers (or directors) have been delivered to Sellers.
(iii) This Agreement constitutes a valid and binding
obligation of Buyer, enforceable in accordance with the terms, subject to
bankruptcy laws, other federal and state laws affecting creditors' rights
generally and availability of equitable remedies.
(b) Litigation. There is no litigation, action, suit,
investigation or proceeding pending, or to the best of Buyer's knowledge,
threatened, against Buyer which may give rise to any claim against any of the
assets to be conveyed or upon Buyer's ability to perform in accordance with the
terms of this Agreement, or which might result in a material monetary forfeiture
or in any material adverse effect upon the business or assets of Buyer or the
Stations.
(c) No Conflict. The execution, delivery and performance by
the Buyer of this Agreement and the consummation of the transactions
contemplated hereby by the Buyer will not (i) violate, conflict with or result
in the breach of any provision of the Operating Agreement of Buyer; (ii) violate
any order, writ, judgment, injunction, award or decree of any court, arbitrator
or governmental or regulatory body against, or binding upon, Buyer or upon the
assets of Buyer which violation could give rise to a valid claim for injunction
or other equitable relief or for damages; and (iii) subject to obtaining the
approvals, consents and
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permits or making the filings referred to in this Agreement, (A) violate any
statute, law or regulation of any jurisdiction as such statute, law or
regulation relates to the Stations or to the assets of Buyer, which violation
could have a material adverse effect on the ability of Buyer to perform its
obligations hereunder, or (B) require the consent of any third party.
(d) Additional Agreements. Subject to the terms and conditions
herein provided, Buyer agrees to use all reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement. In case at any time after the Closing any
further action is reasonably necessary to carry out the purposes of this
Agreement, Buyer shall take such action so long as such will not involve
additional costs (except as may be required under the indemnification provisions
of this Agreement).
(e) Join in Execution of Documents. Buyer will join with
Sellers, at such time as all conditions precedent to the transactions
contemplated by this Agreement have been fulfilled, in executing and delivering
all documents which may be necessary or appropriate to effect the transactions
contemplated by this Agreement.
(f) Consents. Except for the approvals required of the
Commission, there are no material authorizations, consents or approvals of, or
filings with, governmental regulatory authorities required by Buyer in
connection with the execution or delivery of this Agreement or the consummation
of the transactions contemplated hereby.
(g) Qualifications. To the best knowledge of Buyer, there are
no facts which would, under present law (including the Communications Act of
1934, and present rules, regulations and policies of the Commission), disqualify
Buyer from acquiring the Licenses or from owning and operating the Stations.
Buyer will not take, or fail to take, any action which action Buyer knows or
reasonably expects would cause such disqualification. Buyer has, and will
continue to have to the Closing, funds committed and readily available to it
sufficient to pay the Purchase Price at the Closing, as evidenced by the
documentation set forth in Schedule O.
(h) Full Disclosure. No representation or warranty made by
Buyer contained in this Agreement nor any certificate, document or other
instrument furnished or to be furnished by Buyer pursuant hereto contains or
will contain any untrue statement of a material fact, or omits or shall omit to
state any material fact required to make any statement contained herein or
therein not misleading. Buyer is not aware of any impending or contemplated
event or occurrence that would cause any of the foregoing representations not to
be true and complete on the date of such event or occurrence as if made on that
date.
OTHER
16. (a) Title Insurance.
Not less than five (5) days prior to the Closing, Sellers, at their
expense, shall provide to Buyer a title insurance commitment, issued by a title
insurance company reasonably
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satisfactory to Buyer, agreeing to issue to Buyer a standard form owner's policy
of title insurance with respect to all Owned Real Property, together with a copy
of each document to which reference is made in such commitment. Such policy
shall be in the form of an ALTA Owner's Policy (10-17-92 or more current
version) with standard coverage and in the full amount of that portion of the
Purchase Price allocated to the Owned Real Property insuring good and marketable
title thereto expressly including all easements and other appurtenances. Such
policy shall insure title in full accordance with the representations and
warranties set forth herein and shall be subject only to such conditions and
exceptions as shall be contained in ALTA Loan Policy No. 45032281-M referred to
in Schedule E, and shall contain such endorsements as Buyer shall reasonably
request (including, but not limited to, an endorsement over rights of creditors,
if requested by Buyer or Buyer's lender).
(b) Surveys.
Not less than five (5) days prior to the Closing, Sellers, at their
expense, shall provide to Buyer a survey of the Owned Real Property, and, if
obtainable without undue difficulty or expense, a survey of the KFLG-AM/FM
leased studio property referenced in Schedule F, prepared in accordance with
ALTA/ASCM standards, each dated no more than ninety (90) days prior to the
Closing and each detailing the legal description, the perimeter boundaries, all
improvements located thereon, all easements and encroachments affecting each
such parcel of Owned or Leased Real Property and such other matters as may be
reasonably requested by Buyer or the title insurance companies, each containing
a surveyor certificate reasonably acceptable to Buyer and the title insurance
companies, and each prepared by a registered land surveyor satisfactory to
Buyer.
(c) Environmental Audits.
Buyer, at its expense, will promptly retain a firm engaged in the
regular business of environmental engineering to conduct such environmental
audits of Sellers' operations and the real estate occupied by Sellers as Buyer
in its discretion shall consider necessary or appropriate.
(d) Bulk Sales Law.
The parties do not believe that any bulk sales or fraudulent conveyance
statute applies to the transactions contemplated by this Agreement. Buyer
therefore waives compliance by Sellers with the requirements of any such
statutes, and Sellers agree to indemnify and hold Buyer harmless against any
claim made against Buyer by any creditor of either Seller as a result of a
failure to comply with any such statute.
(e) Use of Call Letters and Company Name.
Following the Closing, neither Seller nor any Affiliate of Sellers,
without the prior written consent of Buyer, will make any use of the call
letters "KAAA (AM)", "KZZZ (FM)", "KFLG (AM)" or "KFLG (FM)" (or any name
confusingly similar thereto), except as
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may be necessary for Sellers to pay its liabilities, prepare tax returns and
other reports, and to otherwise wind up and conclude its business pertaining to
the Stations.
INDEMNIFICATION
17. Indemnification by Buyer and Sellers.
(a) Buyer does not assume and shall not be obligated to pay
any liabilities of Sellers under the terms of this Agreement or otherwise and
shall not be obligated to perform any obligations of Sellers of any kind or
manner except for contracts expressly assigned to and assumed by Buyer hereunder
and, with respect to such contracts, only such obligations which arise
subsequent to the Closing hereunder or as is herein provided.
(b) Sellers and their shareholder hereby agree to jointly and
severely indemnify and hold Buyer, its affiliates, successors and assigns,
harmless from and against:
(i) Any and all claims, liabilities and obligations
of any kind or nature, contingent or otherwise, arising from or related to the
ownership or operation of the Stations prior to the Closing Date hereunder
including, but not limited to, any and all claims, liabilities and obligations
arising or required to be performed prior to the Closing hereunder under any
lease, contract or agreement assumed by Buyer hereunder, except as otherwise
provided herein;
(ii) Any and all damages or deficiency resulting from
any misrepresentation, breach of warranty, or nonfulfillment of any covenant of
Sellers under this Agreement, or from any misrepresentation in or omission from
any certificate or other instrument furnished to Buyer pursuant to this
Agreement, subject, however, to a maximum liability for all such claims in the
aggregate of $5,400,000; and
(iii) Any and all actions, suits, proceedings,
damages, assessments, judgments, costs and expenses, including reasonable
attorneys' fees incurred by Buyer or its Affiliates as a result of Sellers'
failure or refusal to defend or satisfy any claim incident to the foregoing
provisions, or failure otherwise to comply with the foregoing provisions.
(c) Sellers and their shareholder shall jointly and severally
indemnify Buyer, its Affiliates, successors and assigns, against any claims by
creditors of Sellers (including any taxing authority) under the provisions of
any applicable Bulk Sales Law.
(d) Sellers and their shareholder shall jointly and severally
indemnify Buyer, its Affiliates, successors and assigns, against any claims by
employees of the Stations for commissions earned prior to the Closing Date.
(e) If any claim of liability shall be asserted against Buyer,
its Affiliates, successors and/or assigns, which would give rise to a claim by
Buyer, its Affiliates, successors and/or assigns, against Sellers or their
shareholder for indemnification under the provisions of
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this Section 16, Buyer shall promptly notify Sellers in writing of the same and
Sellers shall be entitled at their own expense to compromise or defend any such
claim.
(f) Buyer hereby agrees to indemnify and hold Sellers and
their Affiliates, successors and assigns harmless from and against:
(i) Any and all claims, liabilities and obligations
of any kind or nature, contingent or otherwise, arising from or relating to the
ownership or operation of the Stations on and after the Closing Date hereunder
including, but not limited to, any and all claims, liabilities and obligations
assumed or required to be assumed by Buyer under this Agreement or arising or
required to be performed subsequent to the Closing hereunder;
(ii) Any and all damages or deficiency resulting from
any misrepresentation, breach of warranty, or nonfulfillment of any covenant of
Buyer under this Agreement, or from any misrepresentation in or omission from
any certificate or other instrument furnished to Sellers pursuant to this
Agreement; and
(iii) Any and all claims, actions, suits,
proceedings, damages, assessments, judgments, costs and expenses, including
reasonable attorneys' fees, incurred by Sellers or their Affiliates as the
result of Buyer's failure or refusal to defend or satisfy any claim incident to
any of the foregoing provisions, or failure otherwise to comply with the
foregoing provisions.
(g) If any claim or liability shall be asserted against
Sellers or their Affiliates which would give rise to a claim by Sellers or their
Affiliates against Buyer for indemnification under the provisions of this
Section 16, Sellers shall promptly notify Buyer of the same, and Buyer shall be
entitled at its own expense to compromise or defend any such claim.
(h) The indemnification provided for in subsections (b)(ii)
and (f)(ii) above shall apply only in the event the claim for indemnification
arises and notice of the claim is given within eighteen (18) months from the
Closing Date, except for matters of title or taxes for which there shall be no
limitation except such as is provided by law. No indemnified party shall be
entitled to assert a claim for indemnification under subsections (b)(ii)and
(f)(ii) unless and to the extent that the aggregate damages for all such claims
exceeds $75,000.00; provided, however, that in such event, the Indemnified Party
shall then be entitled to indemnification in full. Each party's exclusive
monetary remedy for breach of representation, warranty or covenant shall be its
rights to seek indemnification hereunder.
PRORATION
18. Proration. Except as previously prorated pursuant to the Time
Brokerage Agreement, all income and expenses arising from the operation of the
Stations including, but not limited to, state and local taxes (excluding income
taxes), upon the Broadcast Assets, real estate taxes and assessments, license
fees, frequency discounts, contractual and other obligations, rents, deposits,
prepaid items such as prepaid rent and insurance and prepayments for advertising
and broadcast time, utility charges, transferable license, permit and
registration
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fees (including, without limitation, ASCAP, BMI and SESAC), the Commission's
Annual License Fee, if any, amounts of any barter balances as provided in
Section 3(b) (to the extent such Section is applicable) and all other items
normally adjusted in connection with similar transactions shall be prorated and
accounted for and paid insofar as practicable as between Sellers and Buyer at
the Closing, in accordance with generally-accepted accounting principles as of
11:59 PM on the date immediately preceding the Closing Date. Within sixty (60)
days following the Closing Date, Sellers shall furnish to Buyer their good faith
computation of any proration items not determinable as of the Closing Date.
Within 5 days thereafter, a final adjustment payment shall be made by Buyer or
Sellers to the other, as the case may be.
RISK OF LOSS
19. Risk of Loss. The risk of loss, damage or destruction from any
cause to the Broadcast Assets shall be borne by RBK at all times between the
date of this Agreement and the Closing Date. In the event of any material loss,
damage or destruction to the Broadcast Assets between the date of this Agreement
and the Closing Date, RBK at its option may, but it shall be under no obligation
to, repair, replace or restore any such Broadcast Asset prior to the Closing
Date to substantially the same condition existing prior to such damage or
destruction. In the event of substantial damage to any of the Broadcast Assets
or in the event of the occurrence of any damage or event which prevents
broadcast transmission of the Stations in the normal and usual manner and in
accordance with the Licenses, Sellers shall promptly notify Buyer of the same in
writing, specifying with particularity the loss or damage incurred, the cause
thereof if known or reasonably ascertainable, and the extent to which
restoration, replacement and repair of the property lost or destroyed will be
reimbursed under the insurance coverage. In the event the loss, damage or
destruction has not been restored, replaced or repaired by the Closing Date, the
Closing Date shall be postponed to the extent necessary to allow RBK at least
ninety (90) days from the date of loss, damage or destruction to complete the
repair, replacement or restoration. In the event the repair, replacement or
restoration has not been completed after allowing for such minimum period for
such to be accomplished, then Buyer shall have the option to:
(a) Terminate this Agreement without any further obligation
hereunder; or
(b) Elect to consummate the Closing and accept the property in
its then condition, in which event RBK shall assign to Buyer all proceeds of
insurance theretofore received and due and owing covering the property involved
to the extent not previously applied to restore such property.
In the event the Closing Date is postponed, Sellers and Buyer will
cooperate to extend the time during which this Agreement must be closed as
specified in the Commission's Order.
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CONDITIONS PRECEDENT TO BUYER'S
OBLIGATION TO CLOSE
20. Conditions Precedent to Buyer's Obligations. If at the Closing Date
the following conditions are satisfied or waived, Buyer, subject to the
provisions of Section 19 hereof, shall be obligated to purchase the Broadcast
Assets in accordance with the terms and conditions of this Agreement:
(a) Representations, Warranties and Covenants. The
representations and warranties of Sellers contained herein or in any Schedule or
in any list, certificate or document delivered pursuant to the provisions hereof
shall be true in all material respects as of the date of this Agreement and as
of and at the Closing Date as though made on such Closing Date except for (i)
changes to schedules resulting from the modification thereof by Sellers to
reflect changes from the date hereof to the Closing Date for items that do not
result from any breach by Sellers hereunder, (ii) breaches which could not
reasonably be expected to have a material adverse effect on the Stations or the
Broadcast Assets, and (iii) changes caused by Buyer's time brokering of the
Stations under the Time Brokerage Agreement. Sellers shall have performed and
complied with all obligations and covenants required by this Agreement and the
Time Brokerage Agreement to be duly performed or complied with by Sellers on or
prior to the Closing Date (except for such failures to comply which could not
reasonably be expected to have a material adverse effect on the Stations or the
Broadcast Assets). Sellers shall have delivered to Buyer certificates dated the
Closing Date and signed by an officer of Sellers attesting to the above.
(b) Delivery of Closing Documents. Sellers shall have
delivered to Buyer the Closing Documents described hereinafter in Section 22 of
this Agreement.
(c) Licenses. RLK shall be the holder of the Licenses and such
Licenses shall be free and clear of material adverse conditions not set forth on
the Licenses on the date of this Agreement, competing applications, petitions to
deny, material complaints, appeals or any restrictions as might limit the
operation of the Stations as presently authorized.
(d) Consents. On the Closing Date, each person, association,
corporation or other entity, the consent or approval of which to the purchase
and acquisition of the Broadcast Assets or any material part thereof from
Sellers as herein provided is then required shall have duly consented or
approved such acquisition of Broadcast Assets; provided, that in connection with
the contract consents listed on Schedule B, only those consents marked with an
asterisk need be obtained as a condition to Buyer's obligation to purchase the
Broadcast Assets.
(e) Final Order. The Commission's Order shall have been issued
with no conditions materially adverse to Buyer and shall have become a Final
Order.
(f) No Adverse Conditions. From the date of this Agreement
through the Closing, there shall have been no material loss or damage (excluding
such as was caused by the acts of Buyer) to the tangible properties or assets
forming a part of the Broadcast Assets (whether or not covered by insurance)
which materially and adversely affects or impairs the
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ability of the Stations to conduct their business as it is being conducted on
the date hereof and which have not been either (i) repaired, replaced or
restored by the Sellers, or (ii) with respect to which the Buyer has not taken
the action described in Section 19(b).
(g) Adverse Proceedings. As of the Closing Date, no suit,
action, claim or governmental proceeding or investigation shall be pending or
shall have been instituted, taken, presented or threatened against Sellers which
results or reasonably may result in a material adverse effect upon, or
substantial disruption of the operations of the Stations, or make unlawful the
carrying out of this Agreement, cause it to be rescinded or impose a lien on, or
require Buyer to divest itself of, any of the assets to be acquired by it
hereunder.
(h) Time Brokerage Agreement Compliance. From the date hereof
through the Closing Date, the Time Brokerage Agreement shall not have been
terminated by Buyer as permitted by the Time Brokerage Agreement as a result of
RBK's material noncompliance with its obligations under the Time Brokerage
Agreement.
CONDITIONS PRECEDENT TO SELLERS'
OBLIGATION TO CLOSE
21. Conditions Precedent to Sellers' Obligations. If at the Closing
Date the following conditions are satisfied or waived, Sellers shall be
obligated to sell the Broadcast Assets in accordance with the terms and
conditions of this Agreement:
(a) Representations, Warranties and Covenants. The
representations and warranties of Buyer contained herein or in any list,
certificate or document delivered pursuant to the provisions hereof shall be
true in all material respects as of and at the Closing Date as though made on
such date except for changes permitted by this Agreement. Buyer shall have
performed and complied with in all material respects all obligations and
covenants required by this Agreement to be performed or complied with by Buyer
on or prior to the Closing Date. Buyer shall have delivered to Sellers a
certificate dated the Closing Date and signed by an officer of Buyer attesting
to the above.
(b) Purchase Price. Payment of the Purchase Price on the
Closing Date shall have been paid in accordance with the terms of this
Agreement.
(c) Delivery of Closing Documents. Buyer shall have delivered
to Sellers the Closing Documents described hereafter in Section 23 of this
Agreement.
(d) Commission's Order. The Commission's Order shall have been
issued with no conditions materially adverse to Sellers.
(e) Adverse Proceedings. As of the Closing Date, no suit,
action, claim or governmental proceeding or investigation shall be pending or
shall have been instituted, taken, presented or threatened against Buyer which
reasonably would make unlawful the carrying out of this Agreement, cause it to
be enjoined or rescinded, or impose damages against Sellers if the relief sought
were granted.
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(f) Consents. On the Closing Date, each person, association,
corporation or other entity, the consent or approval of which to the sale of the
Broadcast Assets or any material part thereof by Sellers as herein provided is
then required shall have duly consented or approved such sale of Broadcast
Assets; provided, that in connection with the contract consents listed on
Schedule B, only those consents marked with an asterisk need be obtained as a
condition to Sellers' obligation to sell the Broadcast Assets.
CLOSING DOCUMENTS
22. Closing Documents to be Delivered by Sellers. On the Closing Date,
Sellers shall deliver to Buyer:
(a) A Deed, Bills of Sale and other instruments of conveyance
in form satisfactory to Buyer, dated the Closing Date, executed by RBK, in such
form and reasonable detail as Buyer may request, conveying to Buyer good title
to the assets set forth in Schedule C and to the real property described on
Schedule E in accordance with the terms of this Agreement.
(b) Assignment instruments in form satisfactory to Buyer,
dated the Closing Date, appropriately executed by RLK, assigning the Licenses.
(c) Certificates signed by an officer of Sellers to the effect
set forth in Section 20(a) hereof.
(d) Certified resolutions of the shareholder and Board of
Directors of Sellers approving the execution and delivery of this Agreement and
authorizing the consummation of the transactions contemplated hereby.
(e) Such other assignments, documents and instruments as
counsel for Buyer may reasonably require to evidence ownership of all property
rights hereunder sold, wherever located.
(f) Possession of all Broadcast Assets.
(g) All consents required of any other party to any contract
marked by an asterisk on Schedule B or whose consent is required pursuant to
subsection 14(m) hereof.
(h) A Good Standing Certificate dated within fifteen (15) days
of the Closing Date issued by the Secretaries of State of the States of Delaware
and Arizona.
(i) An Assignment and Assumption Agreement executed by RBK in
the form of Exhibit C effectuating the assignment and assumption of the
liabilities to be assumed by Buyer hereunder (the "Assignment and Assumption
Agreement").
(j) A written opinion of Sellers' counsel in the form of
Exhibit D, dated as of the Closing Date.
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(k) A written opinion of Sellers' Commission counsel in the
form of Exhibit E, dated as of the Closing Date.
(l) Surveys and Title Insurance as required pursuant to
Section 16.
23. Closing Documents to be Delivered by Buyer. On the Closing Date,
Buyer shall deliver to Sellers:
(a) Electronic funds transfers of good funds totaling the
Purchase Price, including the Escrow Deposit and less or plus any adjustments
thereto by virtue of Section 18.
(b) A certificate signed by an officer of Buyer to the effect
set forth in Section 21 hereof.
(c) A certified copy of the resolution of Buyer's members
authorizing the execution, delivery and performance of this Agreement and all
instruments referred to herein to which Buyer is a party.
(d) Good Standing Certificates dated within fifteen (15) days
of the Closing issued by the Secretaries of State of the States of Delaware and
Arizona.
(e) The Assignment and Assumption Agreement executed by Buyer.
(f) A written opinion of Buyer's counsel in the form of
Exhibit F, dated as of the Closing Date.
MISCELLANEOUS PROVISIONS
24. Confidentiality. Subject to the requirements of applicable law,
Buyer and Sellers shall keep confidential all information obtained by them with
respect to the other parties hereto in connection with this Agreement and the
negotiations preceding this Agreement, and will use such information solely in
connection with the transactions contemplated by this Agreement, and if the
transactions contemplated hereby are not consummated for any reason, each shall
return to the other party hereto, without retaining a copy thereof, any
schedules, documents or other written information obtained from such other party
in connection with this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, no party shall be required to keep confidential
or return any information which: (a) is known or available through other lawful
sources, not bound by a confidentiality agreement with the disclosing party; (b)
is or becomes publicly known through no fault of the receiving party or its
agents; (c) is required to be disclosed pursuant to an order or request of a
judicial or governmental authority (provided the disclosing party is given
reasonable prior notice of the order or request and the purpose of the
disclosure); or (d) is developed by the receiving party independently of the
disclosure by the disclosing party. Notwithstanding anything to the contrary
herein, any party may in accordance with its legal obligations, including but
not limited to filings permitted or required by the Securities Act of 1933 and
the Securities and Exchange Act of 1934, the NASDAQ National Market and other
similar regulatory bodies,
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make such press releases and other public statements and announcements as it
deems necessary and appropriate in connection with this Agreement and the
transactions contemplated hereby; provided, however, that prior to making any
such unilateral press release or announcement, such party shall first
communicate the same in writing to the other.
25. Consents to Assignment. To the extent that any contract identified
in the Schedules is not capable of being sold, assigned, transferred, delivered
or subleased without the waiver or consent of any third person (including a
government or governmental unit), or if such sale, assignment, transfer,
delivery or sublease or attempted sale, assignment, transfer, delivery or
sublease would constitute a breach thereof or a violation of any law or
regulation, this Agreement and any assignment executed pursuant hereto shall not
constitute a sale, assignment, transfer, delivery or sublease or an attempted
sale, assignment, offer, delivery or sublease thereof. Subject to the provisions
of Section 20(d), in those cases where consents, assignments, releases and/or
waivers have not been obtained at or prior to the Closing relating to the
assignment to Buyer of the contracts, this Agreement and any assignment executed
pursuant hereto, to the extent permitted by law, shall constitute an equitable
assignment by RBK to Buyer of all of RBK's rights, benefits, title and interest
in and to the contracts, and where necessary or appropriate, Buyer shall be
deemed to be RBK's agent for the purpose of completing, fulfilling and
discharging all of RBK's rights and liabilities arising after the Closing Date
under such contracts. RBK shall use its reasonable best efforts to provide Buyer
with the financial and business benefits of such contracts (including, without
limitation, permitting Buyer to enforce any rights of RBK arising under such
contracts), and Buyer shall, to the extent Buyer is provided with the benefits
of such contracts, assume, perform and in due course pay and discharge all
debts, obligations and liabilities of RBK under such contracts to the extent
that Buyer was to assume those obligations pursuant to the terms hereof.
26. Time Brokerage Agreement. Simultaneously with the execution hereof,
Buyer and RBK are entering into a Time Brokerage Agreement, in the form of
Exhibit B hereto (the "Time Brokerage Agreement"), pursuant to which RBK has
agreed to make available to Buyer the broadcasting transmission facilities of
the Stations and/or cause to be broadcast on the Stations Buyer's programming
from the Commencement Date (as defined in the Time Brokerage Agreement) and
during the term thereof. An Event of Default by either party under the Time
Brokerage Agreement shall constitute a material default under this Agreement and
insofar as the cure period specified in the Time Brokerage Agreement has expired
with respect to the default, no further cure period shall be afforded under the
provisions hereof.
27. Employee Matters. Buyer shall be under no obligation to offer
employment to any of Sellers' employees. RBK or any of its Affiliates, may
terminate or retain any of RBK's employees. RBK shall be responsible for the
payment of all compensation and accrued employee benefits payable to all of its
employees. RBK acknowledges and agrees that it, and not Buyer, is and shall be
solely responsible for any and all insurance, supplemental pension, deferred
compensation, retirement and any other benefits, and related costs, premiums and
claims, due, to become due, committed or otherwise promised to any person who is
a retiree, former employee, or current employee of RBK, relating to the period
of employment by RBK.
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28. Remedies on Default.
(a) In the event of a material breach by Buyer prior to
Closing of any term or condition of this Agreement or of any warranty or
representation contained herein, Sellers, provided they are not otherwise in
default hereunder, may terminate this Agreement and receive as their sole remedy
and as liquidated damages the Escrow Deposit. The rights conferred by the above
sentence may not be exercised unless Sellers have given Buyer thirty (30) days
written notice of the specific nature of the breach and Buyer has failed to
correct it within that period; provided, however, that Sellers shall not be
required to give Buyer said notice if Sellers are exercising their rights as a
result of Buyer's failure to close the transaction contemplated hereby.
(b) In the event of a material breach by Sellers prior to
Closing of any term or condition of this Agreement or of any warranty or
representation contained herein, Buyer, provided that it is not otherwise in
default hereunder, may, at its option, terminate this Agreement and recover
damages from Sellers and/or pursue the right to specific performance of this
Agreement, which Sellers acknowledge is an appropriate remedy because damages
recoverable hereunder may be inadequate. The rights conferred by the above
sentence may not be exercised unless Buyer has given Sellers thirty (30) days'
written notice of the specific nature of the breach and Sellers have failed to
correct it within that period; provided, however, that Buyer shall not be
required to give Sellers said notice if Buyer is exercising its rights as a
result of Sellers' failure to close the transaction contemplated hereby.
29. Brokerage. The parties agree that there is no brokerage commission
or finder's fee payable in connection herewith, with the exception of a
commission payable to SMG, which commission shall be paid by Sellers.
30. Survival of Representations and Warranties. The representations,
warranties, covenants, and agreements herein contained shall be deemed and
construed to be continuing representations, warranties, covenants, and
agreements which shall survive the consummation of this transaction and any
investigation at any time made by or on behalf of Buyer for the period provided
in Section 17(h); and neither the acceptance of payments due nor the acceptance
of delivery of property hereunder shall constitute a waiver of any covenant,
representation, or warranty herein contained. Buyer and Sellers shall remain
liable to each other in accordance with the terms and provisions of this
Agreement for any damage resulting from any breach, failure, nonperformance or
non-fulfillment of any of their respective covenants, representations or
warranties herein notwithstanding that the injured party may elect to close this
transaction with such breach outstanding. No waiver or forbearance by either
party in any instance shall constitute or be deemed a waiver or forbearance in
any other instance. Any party hereto may waive the conditions to its performance
hereunder other than those pertaining to regulatory approval.
31. Entire Agreement. This Agreement (including the Schedules and
Exhibits) and the collateral agreements executed in connection with consummation
of the transactions contemplated hereby contain the entire agreement between the
parties hereto with respect to the
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purchase and sale of the Broadcast Assets, and supersedes all prior agreements,
written or oral, with respect thereto.
32. Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and delivered in person or sent by fax
or certified mail, postage prepaid and properly addressed as follows:
To Sellers: To Buyer:
c/o Regent Communications, Inc. Mag Mile Media, L.L.C
50 East River Center Boulevard 980 North Michigan Avenue
Suite 180 Suite 1880
Covington, Kentucky 41011-1683 Chicago, Illinois 60611
Attn: Mr. Terry S. Jacobs Attn: Bruce Buzil
Facsimile: (606) 292-0352 Facsimile: (312) 587-9520
Copy to: Copy to:
(which copies shall not constitute notice hereunder)
Alan C. Rosser, Esq. Robert E. Neiman, Esq.
Struass & Troy Foley & Lardner
2100 PNC Center 330 North Wabash Avenue
201 East Fifth Street Chicago, Illinois 60611
Cincinnati, Ohio 45202 Facsimile (312) 755-1900
Facsimile: (513) 241-8289
All notices and other communication required or permitted under this Agreement
which are addressed as provided in this paragraph, if delivered personally,
shall be effective upon delivery; if delivered by fax, shall be effective upon
receipt; and if delivered by mail, shall be effective upon deposit in the United
States mail, postage prepaid. Either party may from time to time change its
address for the purpose of notice by a similar notice specifying a new address,
but no such change shall be deemed to have been given until it is actually
received by the party sought to be charged with the contents.
33. Waivers and Amendments; Non-Contractual Remedies; Preservation of
Remedies. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by the Buyer and the Sellers or, in the case of a waiver, by the party
waiving compliance. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right, power or privilege, nor any
single or partial exercise of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other such right, power or
privilege. The rights and
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remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity.
34. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Arizona without regard to the conflict
of law provisions thereof.
35. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors. This
Agreement may be assigned by Buyer without the prior consent of Sellers;
provided, however, no such assignment shall relieve Buyer of its obligations
hereunder.
36. Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto.
37. Exhibits and Schedules. The Exhibits and Schedules are a part of
this Agreement as if fully set forth herein. All references herein to
paragraphs, sections, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
38. Headings. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.
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<PAGE> 31
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
BUYER: SELLERS:
MAG MILE MEDIA, L.L.C. REGENT BROADCASTING OF KINGMAN, INC.
By: /s/ By: /s/
Title: /s/ Title: /s/
REGENT LICENSEE OF KINGMAN, INC.
By: /s/
Title: /s/
SHAREHOLDER:
REGENT COMMUNICATIONS, INC., solely for
purposes of being bound by the provisions of
Section 17 regarding indemnification
By: /s/
Title: /s/
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<PAGE> 32
(i) LIST OF SCHEDULES
Schedule A Licenses
Schedule B Contracts
Schedule C Tangible Property
Schedule C-1 Leased Personal Property
Schedule D Copyrights, Logos, Jingles, Service Marks,
Trademarks and Other Intangible Rights
Schedule E Owned Real Property
Schedule F Leased Real Property
Schedule G Allocation of Purchase Price
Schedule H Financials
Schedule I Accounts Receivable
Schedule J Non-Compliance with Laws
Schedule K Environmental Matters
Schedule L Restrictions on Transferability
Schedule M Insurance
Schedule N Employees
Schedule O Sources of Funds
(ii) LIST OF EXHIBITS
Exhibit A Deposit Escrow Agreement
Exhibit B Time Brokerage Agreement
Exhibit C Assignment and Assumption Agreement
Exhibit D Form of Opinion-Sellers' Counsel
<PAGE> 33
Exhibit E Form of Opinion-Sellers' Commission Counsel
Exhibit F Form of Opinion-Buyer's Counsel
<PAGE> 1
Exhibit 2(c)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
this 30th day of March, 1999 by and between THE GUYANN CORPORATION, an Arizona
corporation, or its assignee (hereinafter referred to as "Buyer") and REGENT
LICENSEE OF FLAGSTAFF, INC., a Delaware corporation ("RLF") and REGENT
BROADCASTING OF FLAGSTAFF, INC. ("RBF," and with RLF collectively referred to as
"Seller").
RECITALS
WHEREAS, Seller owns and operates radio stations KZGL-FM licensed to
Cottonwood, Arizona, and KVNA-AM and FM licensed to Flagstaff, Arizona (together
the "Stations" and each individually, a "Station") pursuant to licenses issued
by the Federal Communications Commission ("FCC"), and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, certain
assets and assume certain obligations associated with the ownership and
operation of the Stations, all on the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE OF ASSETS
1.1 Transfer of Assets. On the terms and subject to the conditions
hereof and subject to Section 1.2, on the Closing Date (as hereinafter defined),
Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer
shall purchase and assume from Seller, all of the right, title and interest of
Seller in and to all of the assets, properties, interests and rights of Seller
of whatsoever kind and nature, real and personal, tangible and intangible, owned
or leased (to the extent of Seller's leasehold interest) by Seller as the case
may be, wherever situated, which are used or held for use in the operation of
the Stations (the "Stations Assets"), including but not limited to all of
Seller's right, title and interest in and to the assets, properties, interests
and rights described in this Section 1.1:
1.1.1 all licenses, permits and other authorizations issued to
Seller by any governmental or regulatory authority including without limitation
those issued by the FCC (the licenses, permits and authorizations issued by the
FCC are hereafter referred to as the "Stations Licenses") used or useful in
connection with the operation of the Stations, including but not limited to
those described in Schedule 7.4, along with renewals or modifications of such
items between the date hereof and the Closing Date;
1.1.2 all equipment, electrical devices, antennae, cables,
tools, hardware, office furniture and fixtures, office materials and supplies,
inventory, motor vehicles, spare parts and all
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other tangible personal property of every kind and description, and Seller's
rights therein, owned, leased (to the extent of Seller's leasehold interest) or
held by Seller and used or useful in connection with the operations of the
Stations, including but not limited to those items described or listed in
Schedule 7.7, together with any replacements thereof and additions thereto, made
between the date hereof and the Closing Date, and less any retirements or
dispositions thereof made between the date hereof and the Closing Date in the
ordinary course of business and consistent with past practices of Seller;
provided, however, Seller agrees that the value of all such assets retired or
disposed of and not replaced with an asset of like kind and quality shall not
exceed $5,000 in the aggregate unless Seller has obtained the prior written
approval of Buyer which shall not be unreasonably withheld.
1.1.3 all time sales agreements which are in effect on the
Closing Date, all Trade Agreements (time sales agreements for consideration
other than cash) which are in effect as of the date of this Agreement or which
(i) are entered into between the date hereof and the Closing Date and (ii) have
a term expiring on or before June 30, 1999, and (a) all other contracts,
agreements, leases and legally binding contractual rights of any kind, written
or oral, relating to the operation of the Stations and which are listed in
Schedule 7.8 and Schedule 7.9, together with (b) all contracts, agreements,
leases and legal binding contractual rights entered into or acquired by Seller
between the date hereof and the Closing Date which (i) are terminable on no more
than thirty (30) days notice for either no or nominal consideration or (ii) the
Buyer specifically agrees at Closing to assume (collectively (a) and (b) above
are referred to herein as the "Contracts").
1.1.4 all of Seller's rights in and to the call letters
KZGL-FM and KVNA-AM and FM, as well as all of Seller's rights in and to all
trademarks, trade names, service marks, franchises, copyrights, including
registrations and applications for registration of any of them, computer
software programs and programming material of whatever form or nature (to the
extent transferable), jingles, slogans, the Stations' logos and all other logos
or licenses to use same and all other intangible property rights of Seller,
which are used or useful in connection with the operation of the Stations,
including but not limited to those listed in Schedule 7.12 (collectively, the
"Intellectual Property") together with any associated goodwill and any additions
thereto between the date hereof and the Closing Date;
1.1.5 all programming materials and elements of whatever form
or nature owned by Seller, whether recorded on tape or other medium or intended
for live performance, and all copyrights owned by or licensed to Seller that are
used or useful in connection with the operation of the Stations, including all
such programs, materials, elements and copyrights acquired by Seller between the
date hereof and the Closing Date;
1.1.6 all of Seller's rights in and to all the files,
documents, records, and books of account relating to the operation of the
Stations or to the Stations Assets, including, without limitation, the Stations'
local public files, programming information and studies, blueprints, technical
information and engineering data, news and advertising studies or consulting
reports, marketing and demographic data, sales correspondence and account files,
lists of advertisers, promotional materials, credit and sales reports and
filings with the FCC and all written contracts, whether current or expired,
including without limitation, the Contracts to be assigned hereunder,
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logs, books and records relating to employees, financial, accounting and
operation matters, but excluding records relating solely to any Excluded Asset
(as hereinafter defined);
1.1.7 all of Seller's rights under manufacturers' and vendors'
warranties relating to items included in the Stations Assets and all similar
rights against third parties relating to items included in the Stations Assets;
1.1.8 the leasehold interests in the real property and
fixtures thereon described in Section 7.8; and
1.1.9 except for Excluded Assets, such other assets,
properties, interests and rights owned by Seller that are located at the
Station's facilities and used or useful in connection with the operation of the
Stations.
The Stations Assets shall be transferred to Buyer free and clear of all
debts, security interests, mortgages, trusts, claims, pledges or other liens,
liabilities, encumbrances or rights of third parties whatsoever
("Encumbrances"), except for Permitted Encumbrances (as defined in Section 7.7)
and except as set forth in Schedule 7.4, Schedule 7.7 and Schedule 7.8.
1.2 Excluded Assets. Notwithstanding anything to the contrary contained
herein, it is expressly understood and agreed that the Stations Assets shall not
include the following assets along with all rights, title and interest therein
(the "Excluded Assets"):
1.2.1 all cash and cash equivalents of Seller on hand and/or
in banks, including without limitation investment securities, certificates of
deposit, commercial paper, treasury bills, marketable securities, asset or money
market accounts and all such similar accounts or investments;
1.2.2 all investment securities and accounts receivable or
notes receivable existing on the Closing Date arising from services performed by
Seller in connection with the operation of the Stations prior to the Closing
Date;
1.2.3 all property owned by Seller or any affiliate of Seller
not located at the Stations' facilities and not used by Seller in connection
with the operation of the Stations;
1.2.4 subject to the limitation set forth in Section 1.1.2 of
this Agreement, all tangible and intangible personal property of Seller disposed
of or consumed in the ordinary course of business consistent with the past
practices of Seller between the date of this Agreement and the Closing Date;
1.2.5 all Contracts that have terminated or expired prior to
the Closing Date in the ordinary course of business consistent with the past
practices of Seller;
1.2.6 Seller's corporate minute books and records, corporate
stock record books and such other books and records as pertain to the
organization, existence or share capitalization
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<PAGE> 4
of Seller and duplicate copies of such records as are necessary to enable Seller
to file its tax returns and reports, as well as any other records or materials
relating to Seller generally and not involving or relating to the Stations
Assets or the operation or operations of the Stations;
1.2.7 contracts of insurance, and any insurance proceeds or
claims made by, Seller relating to property or equipment repaired, replaced or
restored by Seller prior to the Closing Date;
1.2.8 all pension, profit sharing or cash or deferred (Section
401 (k)) plans and trusts and the assets thereof and any other employee benefit
plan or arrangement and the assets thereof, if any, maintained by Seller; and
1.2.9 any right, property or asset described in Schedule
1.2.9.
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
2.1 Assumption of Obligations. Subject to the provisions of this
Section 2. 1, Section 2.2 and Section 3.3, on the Closing Date, Buyer shall
assume the obligations of Seller arising or to be performed on and after the
Closing Date (except to the extent such obligations represent liabilities for
activities, events or transactions occurring, or conditions existing, on or
prior to the Closing Date) under: (a) the Contracts; (b) all property taxes and
other governmental charges on the Stations Assets; and (c) all time sales
agreements and Trade Agreements. All of the foregoing liabilities and
obligations shall be referred to herein collectively as the "Assumed
Liabilities."
2.2 Retained Liabilities Notwithstanding anything contained in this
Agreement to the contrary, Buyer expressly does not, and shall not, assume or
agree to pay, satisfy, discharge or perform and will not be deemed by virtue of
the execution and delivery of this Agreement or any agreement, instrument or
document delivered pursuant to or in connection with this Agreement or otherwise
by reason of or in connection with the consummation of the transactions
contemplated hereby or thereby, to have assumed or to have agreed to pay,
satisfy, discharge or perform, any liabilities, obligations or commitments of
Seller of any nature whatsoever whether accrued, absolute, contingent or
otherwise and whether or not disclosed to Buyer, other than the Assumed
Liabilities. Seller will retain and pay, satisfy, discharge and perform in
accordance with the terms thereof, all liabilities and obligations of the
Seller, other than the Assumed Liabilities, including but not limited to, the
obligation to assume, perform, satisfy or pay any liability, obligation,
agreement, debt, charge, claim, judgment or expense incurred by or asserted
against Seller related to taxes, environmental matters, stock option, pension or
retirement plans or trusts, profit-sharing plans, employment contracts, employee
benefits, severance of employees, product liability or warranty, negligence,
contract breach or default, or other obligations, claims or judgments asserted
against Buyer as successor in interest to Seller. All of such liabilities,
obligations and commitments of Seller described in this Section 2.2 shall be
referred to herein collectively as the "Retained Liabilities."
ARTICLE 3
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<PAGE> 5
CONSIDERATION; ACCOUNTS RECEIVABLE
3.1 Delivery of Consideration. In consideration of the Agreement Not to
Compete and the sale of the Stations Assets to Buyer, in addition to the
assumption of certain obligations of Seller pursuant to Section 2.1 above, Buyer
shall, at the Closing (as hereinafter defined), deliver to Seller Two Million
Four Hundred Twenty Five Thousand Dollars ($2,425,000.00) by wire transfer of
immediately available funds, subject to adjustment pursuant to the provisions of
Sections 3.2 and 3.3 below (the "Purchase Price"). Notwithstanding the
foregoing, the parties agree that at the Closing, Buyer, Seller and William R.
Preston, Jr., Esq., as Escrow Agent (the "Indemnification Escrow Agent"), shall
enter into an Indemnification Escrow Agreement in the form of Exhibit A hereto
(the "Indemnification Escrow Agreement") pursuant to which Seller shall deposit
with the Indemnification Escrow Agent One Hundred Thousand Dollars ($100,000),
which funds shall be held in escrow for a period of at least twelve (12) months
from the Closing Date and will be used to satisfy indemnification claims of
Buyer pursuant to Section 15.2.1 hereof, and which funds shall otherwise be
administered and released as specifically provided for in the Indemnification
Escrow Agreement.
3.2 Escrow Deposit. (a) Upon the execution and delivery of this
Agreement, Buyer, Seller and William R. Preston, Jr., Esq., as Escrow Agent (the
"Deposit Escrow Agent"), shall enter into a Deposit Escrow Agreement in the form
of Exhibit B hereto (the "Deposit Escrow Agreement") pursuant to which Buyer
shall deposit the amount described below as a deposit on the amount of the
Purchase Price. Such amounts held in escrow shall be applied as set forth herein
and in the Deposit Escrow Agreement.
(b) Pursuant to the terms of the Deposit Escrow Agreement,
Buyer shall wire transfer One Hundred Thousand Dollars ($100,000) to an escrow
account established pursuant to the Deposit Escrow Agreement (the "Escrow
Deposit"). At the Closing, the Escrow Deposit shall be applied to the Purchase
Price to be paid to Seller and the interest accrued thereon shall be paid to
Buyer. As more fully described in the Deposit Escrow Agreement: (a) in the event
this Agreement is terminated because of Buyer's material breach of this
Agreement and all other conditions to Closing are at such time satisfied or
waived (other than such conditions as can reasonably be expected to be satisfied
by the Closing), the Escrow Deposit shall be paid to Seller as liquidated
damages as provided in Section 16.4 hereto for Buyer's material breach of this
Agreement (the payment of such sum to Seller shall discharge any liability Buyer
may have to Seller), and the interest accrued on the Escrow Deposit shall be
paid to Buyer; and (b) in the event this Agreement is terminated under any
circumstances other than those set forth in the immediately preceding clause
(a), the Escrow Deposit and the interest accrued thereon shall be paid or
returned to Buyer.
3.3 Proration of Income and Expenses.
3.3.1. Except as otherwise provided herein, all deposits,
reserves and prepaid and deferred income and expenses relating to the Stations
Assets or the Assumed Liabilities and arising from the conduct of the business
and operations of the Stations shall be prorated between Buyer and Seller in
accordance with generally accepted accounting principles as of 11:59 p.m.
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<PAGE> 6
local Arizona time, on the date immediately preceding the Closing Date. Such
prorations shall include, without limitation, all ad valorem, real estate,
property taxes and other governmental charges on the Stations Assets (but
excluding taxes arising by reason of the transfer of the Stations Assets as
contemplated hereby which shall be paid as set forth in Section 13.2), business
and license fees, frequency discounts, music and other license fees (including
any retroactive adjustments thereof, which retroactive adjustments shall not be
subject to the sixty-day limitation set forth in Section 3.3.2), utility
expenses, vacation pay, amounts due or to become due under Contracts, rents and
similar prepaid and deferred items.
3.3.2 Except as otherwise provided herein, the prorations and
adjustments contemplated by this Section 3.3, to the extent practicable, shall
be made on the Closing Date. As to those prorations and adjustments not capable
of being ascertained on the Closing Date, an adjustment and proration shall be
made within sixty (60) calendar days after the Closing Date.
3.3.3 In the event of any disputes between the parties as to
such adjustments, the amounts not in dispute shall nonetheless be paid at the
time provided in Section 3.3.2 and such disputes shall be determined by an
independent certified public accountant mutually acceptable to the parties, and
the fees and expenses of such accountant shall be paid one-half by Seller and
one-half by Buyer.
3.4 Allocation of Purchase Price. The parties have agreed upon an
allocation of the Purchase Price among the Stations Assets, and the Agreement
Not to Compete, as attached to this Agreement as Exhibit C. Seller and Buyer
agree to use the agreed upon allocation, if any, for all tax purposes, including
without limitation, those matters subject to Section 1060 of the Internal
Revenue Code of 1986, as amended.
3.5 Adjustment for Barter. As of the Closing Date, Buyer shall be
entitled to a credit against the Purchase Price, for the amount, if any, by
which the aggregate net value of the Stations' Barter Payable (as defined below)
as of the Closing Date exceeds by more than $10,000 the aggregate net value of
the Stations' Barter Receivable (as defined below) as of the Closing Date.
"Barter Payable" means the aggregate value of time owed pursuant to
each of the Trade Agreements. "Barter Receivable" means the aggregate value of
goods and services to be received pursuant to each of the Trade Agreements.
3.6 Agreement Not to Compete. At the Closing, Buyer and Seller shall
enter into an Agreement Not to Compete, substantially in the form attached
hereto as Exhibit D (the "Agreement Not to Compete"). The Agreement Not to
Compete shall provide that Seller shall not compete with Buyer in the radio
business in the Cottonwood, Prescott and Flagstaff, Arizona markets for a period
of three (3) years after the Closing; provided, however, Seller shall not be
restricted by the Agreement Not to Compete from being involved in the radio
business in the Phoenix, Arizona market.
3.7 Accounts Receivable. Buyer acknowledges that all accounts
receivable arising
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prior to the Closing Date in connection with the operation of the Stations,
including but not limited to accounts receivable for advertising revenues for
programs and announcements performed prior to the Closing Date, shall remain the
property of RBF ("Seller Accounts Receivable") and that Buyer shall not acquire
any beneficial right or interest therein or responsibility therefor under this
Agreement. For a period of one hundred twenty (120) days following the Closing
Date (the "Collection Period"), Buyer shall for no remuneration use
substantially the same efforts to collect the Seller Accounts Receivable as
Buyer uses to collect Buyer's own accounts receivable in the normal and ordinary
course of business, and Buyer will apply all such amounts collected in
connection with the Seller Accounts Receivable collected in connection with the
Seller Accounts Receivable to the debtor's oldest account receivable first,
except that any such accounts collected by Buyer who are also indebted to Buyer
for programs and announcements broadcast on any of the Stations may be applied
to Buyer's account if so directed by the debtor or under circumstances in which
there is a bona fide dispute between RBF and such account debtor with respect to
such account. Buyer's obligation and authority shall not extend to the
institution of litigation, employment of counsel or a collection agency or any
other extraordinary means of collection. Buyer agrees to reasonably cooperate
with RBF, at RBF's expense, as to any litigation or other collection efforts
instituted by RBF to collect any delinquent Seller Accounts Receivable. During
the Collection Period, neither Seller nor its agents shall make any direct
solicitation of any account debtor for collection purposes or institute
litigation for the collection of amounts due. Any amounts relating to the Seller
Accounts Receivable that are paid directly to Seller shall be retained by
Seller, but Seller shall provide Buyer with prompt notice of any such payment.
Except as otherwise provided herein, amounts collected by Buyer on account of
Seller Accounts Receivable shall be remitted in full to RBF on a monthly basis,
by the fifteenth (15) day of the month following the month for which remittance
is due. Buyer shall deliver to RBF an accounting showing the amount it received
during each period on each account. At the conclusion of the Collection Period
and after remittance of all amounts collected, Buyer will thereafter have no
further responsibility with respect to the collection of the Seller Accounts
Receivable, and Buyer may apply all collections received by Buyer from any party
who continues business with Buyer to obligations owing to Buyer, except for any
payment received by Buyer which such party specifies is for amounts owed to RBF,
in which event such specified amounts shall be paid over to RBF. Buyer shall not
have the right to compromise, settle or adjust the amounts of any one of the
Seller Accounts Receivable without RBF's prior written consent. RBF shall
promptly pay all sales commissions relating to all of its accounts receivable
whenever RBF receives payment thereon.
ARTICLE 4
CLOSING
4.1 Closing. Except as otherwise mutually agreed upon by Buyer and
Seller, the consummation of the transactions contemplated herein (the "Closing")
shall occur within ten (10) business days after the later to occur of (a) the
satisfaction or waiver of each condition to closing contained herein, other than
such conditions as are reasonably anticipated to be satisfied at Closing
(provided that each party hereto shall use its reasonable best efforts to cause
each condition to closing to be satisfied so that the Closing may occur at the
earliest possible date); and (b) the issuance of the Final Order (as defined
below), or such other date as may be mutually
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agreed by the parties hereto (the "Closing Date"); provided, however, that
unless Seller's senior lenders object Buyer may in its sole discretion waive the
requirement that a Final Order be issued and elect (subject to clause (a) above)
to close at any time (upon not less than ten (10) business days' notice to
Seller) after the release of initial FCC approval on public notice that it has
consented to the transaction contemplated hereby (the "Initial Approval"). For
purposes of this Agreement, "Final Order" (and "Final") means an order or grant
by the FCC which is no longer subject to reconsideration or review by the FCC or
a court of competent jurisdiction and pursuant to which the FCC consents, as the
case may be, to the assignments of the FCC Licenses contemplated by this
Agreement or to the renewal of the FCC Licenses, each such order or grant being
without the imposition of any conditions adverse to Buyer or any Affiliate (as
hereinafter defined) of Buyer with respect to the assignment of the FCC Licenses
to Buyer or the continued operation by Buyer of the Stations or the Stations
Assets. In the event that the parties close before the Initial Approval has
become a Final Order, the parties shall enter into an Unwind Agreement mutually
acceptable to the parties and their respective senior lenders. The Closing shall
be held in the offices of Buyer's counsel in Flagstaff, Arizona, or at such
place and in such manner as the parties hereto may agree.
ARTICLE 5
GOVERNMENTAL CONSENTS
5.1 FCC Consent. It is specifically understood and agreed by Buyer and
Seller that the Closing and the assignment of the Stations Licenses and the
transfer of the Stations Assets are expressly conditioned on and are subject to
the prior consent and approval of the FCC without the imposition of any
conditions adverse to Buyer or any Affiliate of Buyer (the "FCC Consent").
5.2 FCC Application. Within five (5) business days after the execution
of this Agreement, Buyer and RLF shall file an application with the FCC for the
FCC Consent (the "FCC Application"). Buyer and RLF shall prosecute the FCC
Application with all reasonable diligence and otherwise use their best efforts
to obtain the FCC Consent as expeditiously as practicable (but neither Buyer nor
RLF shall have any obligation to satisfy complainants or the FCC by taking any
steps which would have a material adverse effect upon Buyer or RLF or upon any
of their respective Affiliates). If the FCC Consent imposes any condition on
Buyer or RLF or any of their respective Affiliates, such party shall use its
best efforts to comply with such condition; provided, however, that neither
Buyer nor RLF shall be required hereunder to comply with any condition that
would have a material adverse effect upon it or any of its Affiliates. If
reconsideration or judicial review is sought with respect to the FCC Consent,
the party affected shall vigorously oppose such efforts for reconsideration or
judicial review; provided, however, that nothing herein shall be construed to
limit either party's right to terminate this Agreement pursuant to Article 16
hereof.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to
Seller, each of which
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<PAGE> 9
is true and correct on the date hereof, shall survive the Closing and shall be
unaffected by any investigation heretofore or hereafter made by Seller:
6.1 Organization and Standing. Buyer is a corporation duly organized
and validly existing under the laws of the State of Arizona.
6.2 Authorization and Binding Obligations. Buyer has all necessary
legal power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and to own or lease the Stations Assets and to
carry on the business of the Stations upon the consummation of the transactions
contemplated by this Agreement. Buyer's execution, delivery and performance of
this Agreement and the transactions contemplated hereby have been duly and
validly authorized by all necessary action on its part and, assuming the due
authorization, execution and delivery of this Agreement by Seller, this
Agreement will constitute the legal, valid and binding obligation of Buyer,
enforceable against it in accordance with its terms, except as limited by laws
affecting creditors' rights or equitable principles generally.
6.3 Qualification As Assignee. To the best of Buyer's knowledge, there
are no facts which, under the Communications Act of 1934, as amended, or the
existing rules and regulations of the FCC, would disqualify Buyer as an assignee
of the Stations Licenses. Buyer has, and will continue to have to the Closing,
funds committed and readily available to it sufficient to pay all amounts due at
the Closing, as evidenced by the documentation set forth in Schedule 6.3.
6.4 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article 5 hereof with respect to governmental consents, the
execution, delivery and performance of this Agreement by Buyer: (a) do not
conflict with the provisions of the articles of organization or operating
agreement of Buyer; (b) do not require the consent of any third party; (c) will
not violate any applicable law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority to which Buyer or any of its
affiliates is a party; and (d) will not, either alone or with the giving of
notice or the passage of time, or both, conflict with, constitute grounds for
termination of or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any agreement, instrument, license or permit to
which Buyer is now subject.
6.5 Commissions or Finder's Fees. Neither Buyer nor any person or
entity acting on behalf of Buyer has agreed to pay a commission, finder's fee or
similar payment in connection with this Agreement or any matter related hereto
to any person or entity.
6.6 Litigation. Buyer is not subject to any judgment, award, order,
writ, injunction, arbitration decision or decree prohibiting the consummation of
the transactions contemplated by this Agreement, and there are no suits, legal
proceedings or investigations of any nature pending, or to the best knowledge of
Buyer, threatened against or affecting Buyer that would affect Buyer's ability
to carry out the transactions contemplated by this Agreement.
6.7 Full Disclosure. No representation or warranty made by Buyer
contained in this Agreement nor any certificate, document or other instrument
furnished or to be furnished by
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<PAGE> 10
Buyer pursuant hereto contains or will contain any untrue statement of a
material fact, or omits or shall omit to state any material fact required to
make any statement contained herein or therein not misleading. To the best of
Buyer's knowledge, there is no impending or contemplated event or occurrence
that would cause any of the foregoing representations not to be true and
complete on the date of such event or occurrence as if made on that date.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the following representations and warranties to Buyer,
each of which is true and correct on the date hereof, shall survive the Closing
and shall be unaffected by any investigation heretofore or hereafter made by
Buyer:
7.1 Organization and Standing. Each of RBF and RLF is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, RBF is authorized to conduct business within the State of
Arizona, and each of RBF and RLF has the requisite power and authority to own,
lease and operate the Stations Assets owned or leased by it and to carry on the
business of the Stations as now being conducted by it and as proposed to be
conducted by it between the date hereof and the Closing Date.
7.2 Authorization and Binding Obligation. Seller has the power and
authority, and has taken all necessary and proper action to enter into and
perform this Agreement and to consummate the actions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by Seller and,
assuming the due authorization, execution and delivery of this Agreement by
Buyer, constitutes the legal, valid and binding obligation of Seller enforceable
against it in accordance with its terms, except as limited by laws affecting the
enforcement of creditors' rights or equitable principles generally.
7.3 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article 5 with respect to governmental consents and in Schedule 7.9
with respect to required consents, the execution, delivery and performance of
this Agreement by Seller: (a) do not require the consent of any third party
(including, without limitation, the consent of any governmental, regulatory,
administrative or similar authority); (b) will not conflict with, result in a
breach of, or constitute a violation of or default under, the provisions of
Seller's certificate of organization or bylaws, or any applicable law, judgment,
order, injunction, decree, rule, regulation or ruling of any governmental
authority to which Seller is a party or by which Seller or any of the Stations
Assets are bound; (c) will not either alone or with the giving of notice or the
passage of time, or both, conflict with, constitute grounds for termination of
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, any Contract, agreement, instrument, license or permit to which
Seller or any of the Stations Assets is now subject; and (d) will not result in
the creation of any lien, charge or encumbrance on any of the Stations Assets.
7.4 Government Authorizations.
7.4.1 Schedule 7.4 hereto contains a true and complete list of
the Stations
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<PAGE> 11
Licenses which are required for the lawful conduct of the business and
operations of the Stations in the manner and to the full extent they are
presently conducted (including, without limitation, auxiliary licenses
associated with each Station and all tower registrations), except for such
licenses, permits and authorizations the failure of which to obtain would not
have a material adverse effect on Buyer or the Stations. Seller has delivered to
Buyer true and complete copies of the Stations Licenses listed in Schedule 7.4,
including any and all amendments and other modifications thereto.
7.4.2 RLF is the authorized legal holder of the Stations
Licenses. Except as set forth Schedule 7.4, none of the Stations Licenses is
subject to any restrictions or conditions which would materially limit the full
operation of the Stations as now operated.
7.4.3 Except as set forth in Schedule 7.4, and except for
matters affecting the radio broadcast industry generally, there are no
complaints, petitions or proceedings pending or, to the best of Seller's
knowledge, threatened as of the date hereof before the FCC or any other
governmental or regulatory authority relating to the business or operations of
the Stations. Except as set forth on Schedule 7.4, there are no applications
pending by RLF before the FCC. Except as set forth in Schedule 7.4, the Stations
Licenses are in good standing, are in full force and effect and are unimpaired
by any act or omission of Seller or its directors, officers, or employees, and
the operations of the Stations are in accordance with the Stations Licenses.
Except as set forth on Schedule 7.4, no proceedings are pending or, to the best
of Seller's knowledge, threatened, and to the best of Seller's knowledge there
has not been any act or omission of Seller or any of its directors, officers, or
employees, which may result in the revocation, modification, non-renewal or
suspension of any of the Stations Licenses, the denial of any pending
applications, the issuance of any cease and desist order, the imposition of any
administrative actions by the FCC or any other governmental or regulatory
authority with respect to the Stations Licenses or which may affect Buyer's
ability to continue to operate the Stations as they are currently operated.
7.4.4 Except as set forth on Schedule 7.4, each Station is
operating with the maximum facilities specified in the respective Station
License.
7.4.5 To the best of Seller's knowledge: (i) none of the
Stations is causing objectionable interference to the transmissions of any other
broadcast station or communications facility nor has any of the Stations
received any complaints with respect thereto; and (ii) no other broadcast
station or communications facility is causing objectionable interference to
respective transmissions of either Station.
7.4.6 Seller has no reason to believe that the Stations
Licenses will not be renewed in their ordinary course.
7.4.7 All reports, forms, and statements required to be filed
by RLF with the FCC with respect to the Stations since the grant of the last
renewal of the Stations Licenses have been filed and are substantially complete
and accurate.
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<PAGE> 12
7.4.8 To the best knowledge of Seller, there are no facts
which, under the Communications Act of 1934, as amended, or the existing rules
and regulations of the FCC, would disqualify RLF as assignor of the Stations
Licenses or cause the Stations Licenses not to be renewed in their ordinary
course.
7.4.9 As if the Closing Date, the operation of the Stations
and all of the Stations Assets will be in compliance in all respects with ANSI
Radiation Standards C95.1-1992.
7.5 Compliance with FCC Regulations. Except as specified in Schedule
7.4, the operation of the Stations and all of the Stations Assets are in
compliance in all material respects with: (a) all applicable engineering
standards required to be met under applicable FCC rules; and (b) all other
applicable federal, state and local rules, regulations, requirements and
policies, including, but not limited to, equal employment opportunity policies
of the FCC, and all applicable painting and lighting requirements of the FCC and
the Federal Aviation Administration to the extent required to be met under
applicable FCC rules and regulations, and to the best of Seller's knowledge,
there are no filed claims to the contrary.
7.6 Taxes. Seller has filed all federal, state, local and foreign
income, franchise, sales, use, property, excise, payroll and other tax returns
required by law to be filed by it and has paid in full all taxes, estimated
taxes, interest, assessments, and penalties due and payable by it. All returns
and forms which have been filed have been true and correct in all material
respects and no tax or other payment in an amount other than as shown on such
returns and forms is required to be paid by Seller and has not been paid by
Seller. There are no present disputes as to taxes of any nature payable by
Seller which in any event could adversely affect any of the Stations Assets or
the operation of the Stations by Buyer. Seller has not been advised that any of
its tax returns, federal, state, local or foreign, have been or are being
audited. Seller does not and will not in the future have any liability, fixed or
contingent, for any unpaid federal, state or local taxes or other governmental
or regulatory charges whatsoever (including without limitation withholding and
payroll taxes) which could result in a lien on the Stations Assets after
conveyance thereof to Buyer or in any other form of transferee liability to
Buyer.
7.7 Personal Property. Schedule 7.7 hereto contains a list of all
material items of tangible personal property owned by RBF and used in the
conduct of the business and operations of the Stations. Schedule 7.7, also
separately lists any material tangible personal property leased by RBF pursuant
to leases included within the Contracts. Except as disclosed in Schedule 7.7 RBF
has, and following the Closing, Buyer will have, good and marketable title to
all of the items of tangible personal property which are included in the
Stations Assets (other than those subject to lease) and, except as set forth in
Schedule 7.7, all of which will be paid at or prior to Closing, none of such
Stations Assets is, or at the Closing will be, subject to any security interest,
mortgage, pledge, lease, license, lien, encumbrance, title defect or other
charge, except for liens for taxes not yet due and payable, and except for the
Assumed Liabilities ("Permitted Encumbrances"). The properties listed in
Schedule 7.7, along with those properties subject to lease and included among
the Contracts, constitute all material tangible personal property necessary to
operate the Stations as the same are now being operated. Except as set forth in
Schedule 7.7, all items of tangible personal property included in the Stations'
Assets are in good
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operating condition and repair (ordinary wear and tear excepted), are free from
all material defect and damage, are suitable for the purposes for which they are
now being used, and have been properly maintained by Seller in a manner
consistent with generally accepted standards of good engineering practice.
7.8 Real Property.
7.8.1 Seller owns no real property. Schedule 7.8 hereto
contains a complete and accurate list and description of all real property
(including without limitation, real property relating to the towers,
transmitters, studio sites and offices of the Stations) leased by RBF and used
by RBF in connection with the operations of the Stations (the "Leased Real
Estate"). The KZGL office lease in Prescott, AZ with Adolph Bulleri, et al. is
on a month-to-month basis.
7.8.2 RBF enjoys quiet possession of all Leased Real Estate.
There are no present disputes or claims with respect to offsets or defenses by
any party against the other under any of the Contracts relating to the Leased
Real Estate. Seller has delivered to Buyer true and complete copies of all
Contracts relating to the Leased Real Estate. Except as set forth in Schedule
7.9 hereto, the assignment of the Contracts relating to the Leased Real Estate
to Buyer will not permit the other party to accelerate the rent, cause the terms
thereof to be renegotiated or constitute a default thereunder, and will not
require the consent of any such party to the assignment thereof to Buyer.
7.8.3 Except as described in Schedule 7.8, to the best of
Seller's knowledge none of the buildings, structures, improvements or fixtures
constructed on any Leased Real Estate, in connection with the operation of the
Stations, including, but not limited to, all towers, guy wires and guy anchors
and ground radials, encroach upon adjoining real property, and all such
buildings, structures, improvements and fixtures are constructed and are
operated and used in conformance with all "set back" lines, easements,
covenants, restrictions and all applicable building, fire, zoning, health and
safety laws and codes. To the best of Seller's knowledge, no utility lines
serving such Leased Real Estate pass over the lands of a third party except
where appropriate easements have been obtained. To the best of Seller's
knowledge, except as described in Schedule 7.8, all buildings, structures,
towers, antennae, improvements and fixtures situated on the Leased Real Estate
are in good and technically sound operating condition, ordinary wear and tear
excepted, have no latent structural mechanical or other defects of material
significance, are reasonably suitable for the purposes for which they are being
used and each has adequate rights of ingress and egress, utility service for
water and sewer, telephone, electric and/or gas, and sanitary service for the
conduct of the business and operations of the Stations as presently conducted.
There is no pending or, to the best knowledge of Seller, threatened condemnation
or other legal proceeding or action of any kind relating to such real property
and/or title thereto.
7.9 Contracts. Schedule 7.9 lists all Contracts to which Seller is a
party, or which are binding on Seller, as of the date of this Agreement, except
for contracts which are not to be assumed by or assigned to Buyer. Those
Contracts listed on Schedule 7.9, if any, requiring the consent of a third party
to assignment are identified by an asterisk in the left margin of Schedule 7.9.
Those Contracts, if any, that Seller and Buyer have agreed are material to the
operation of
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the Stations Assets and the valid assignment of which and receipt by Buyer of
consents thereto (along with appropriate estoppel certificates for the leases
related to the Leased Real Estate) is a condition to the consummation of the
transactions contemplated hereby (the "Fundamental Contracts") are identified by
an "F" in the left margin of Schedule 7.9.
7.10 Status of Contracts, etc. Seller has delivered to Buyer true and
complete copies of all material written Contracts and true and complete
memoranda of all material oral Contracts, including any and all amendments and
other modifications thereto. All of such material Contracts are in full force
and effect and are valid, binding and enforceable in accordance with their
respective terms, except as limited by laws affecting creditors' rights or
equitable principles generally. Seller has complied in all respects with all
material Contracts and is not in default beyond any applicable grace periods
under any thereof and, to the best of Seller's knowledge, no other contracting
party is in default under any thereof.
7.11 Environmental. To the best of Seller's knowledge, except as set
forth in Schedule 7.11, Seller has complied with all federal, state and local
environmental laws, rules and regulations as in effect on the date hereof
applicable to each of the Stations and its operations, including but not limited
to the FCC's guidelines regarding RF radiation. To the best of Seller's
knowledge, no hazardous or toxic waste, substance, material or pollutant (as
those or similar terms are defined under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
SectionSection 9601 et seq., Toxic Substances Control Act. 15 U. S. C.
SectionSection 2601 et seq., the Resource Conservation and Recovery Act of 1976,
42 U.S.C. SectionSection 6901 et seq. or any other applicable federal, state and
local environmental law, statute, ordinance, order, judgment rule or regulation
relating to the environment or the protection of human health ("Environmental
Laws")), including but not limited to, any asbestos or asbestos-related
products, oils, or petroleum-derived compounds, CFCs, PCBs, or underground
storage tanks (collectively Hazardous Materials"), have been released, emitted
or discharged by Seller or any predecessor of Seller in violation of applicable
laws or regulations, or are currently located in quantities in violation of
applicable laws and regulations in, on, or under or about the real property on
which the Stations Assets are situated, including without limitation the
transmitter sites, or contained in the tangible personal property included in
the Stations Assets which were placed there by Seller or any predecessor of
Seller. To the best of Seller's knowledge, the Stations Assets and RBF's use
thereof are not in violation of any Environmental Laws or any occupational,
safety and health or other applicable law now in effect. With respect to Buyer,
Seller shall be as of the Closing Date and thereafter solely responsible for all
environmental liabilities, of whatsoever kind and nature, arising out of or
attributable to the operation or ownership of the Stations Assets prior to the
Closing Date.
7.12 Intellectual Property. Schedule 7.12 hereto is a true and complete
list of all material Intellectual Property applied for, registered or issued to,
and owned by RBF or under which RBF is a licensee and which is used in the
conduct of Seller's business and operations, except for computer software
licensed for use by the Stations. Except as set forth on Schedule 7.12, to the
best of Seller's knowledge: (a) RBF's right, title and interest in the
Intellectual Property as owner or licensee, as applicable, is free and clear of
all liens, claims, encumbrances, rights, or equities whatsoever of any third
party and, to the extent any of the Intellectual Property
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<PAGE> 15
is licensed to RBF, such interest is valid and uncontested by the licensor
thereof or any third party; (b) all computer software located at the Stations'
facilities or used in the Stations' business or operations is properly licensed
to RBF, and all of RBF's uses of such computer software are authorized under
such licenses; (c) all of RBF's right, title and interest in and to the
Intellectual Property and computer software shall be assignable to Buyer at
Closing, and upon such assignment, Buyer shall receive complete and exclusive
right, title, and interest in and to all tangible and intangible property rights
existing in the Intellectual Property; and (d) there are no infringements or
unlawful use of such Intellectual Property by RBF in connection with RBF's
business or operations.
7.13 Financial Statements. Set forth in Schedule 7.13 are complete
copies of the income statements of RBF relating to the Stations for the
twelve-month period ended December 31, 1998, together with monthly income
statement for the Stations for the month of January 1999 (collectively, the
"Financial Statements"). The Financial Statements were prepared in accordance
with the books and records of RBF and in accordance with generally accepted
accounting principles consistently applied and maintained throughout the periods
indicated except for the absence of footnotes and customary year-end adjustments
and as has been disclosed in Schedule 7.13. The Financial Statements present
fairly the results of operations of the Stations for the periods indicated. None
of the Financial Statements understates the true costs and expenses of
conducting the business and operations of the Stations, fails to disclose any
material liability, or inflates (or will inflate) the revenues of the Stations
for any reason.
7.14 Personnel Information.
7.14.1 Schedule 7.14 contains a true and complete list of all
persons employed at the Stations, including date of hire, a description of
material compensation arrangements (other than employee benefit plans set forth
in Schedule 7.17) and a list of other material terms of any and all agreements
affecting such persons and their employment by RBF. Seller has received no
notice that, and Seller is not aware of, any individual employee who shall or is
likely to terminate his or her employment relationship with the Stations upon
the execution of this Agreement or after the Closing.
7.14.2 Seller, with respect to the Stations, is not a party to
any contract or agreement with any labor organization, nor has Seller agreed to
recognize any union or other collective bargaining unit, nor has any union or
other collective bargaining unit been certified as representing any employees of
RBF at the Stations. Seller has no knowledge of any organization effort
currently being made or threatened by or on behalf of any labor union with
respect to employees of RBF at the Stations.
7.14.3 To the best of Seller's knowledge, except as disclosed
in Schedule 7.14, Seller, with respect to the Stations, has complied in all
material respects with all laws relating to the employment of labor, including,
without limitation, the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and those laws relating to wages, hours, collective
bargaining, unemployment insurance, workers' compensation, equal employment
opportunity and payment and withholding of taxes.
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7.15 Litigation. Seller is not subject to any judgment, award, order,
writ, injunction, arbitration decision or decree relating to the conduct of the
business or the operation of the Stations or any of the Stations Assets, and
there is no litigation, administrative action, arbitration, proceeding or
investigation pending or, to the best knowledge of Seller, threatened against
Seller with respect to, related to or in connection with the operation of the
Stations in any federal, state or local court, or before any administrative
agency or arbitrator (including, without limitation, any proceeding which seeks
the forfeiture of, or opposes the renewal of, any of the Stations Licenses), or
before any other tribunal duly authorized to resolve disputes. In particular,
but without limiting the generality of the foregoing, to the best knowledge of
Seller, there are no applications, complaints or proceedings pending or
threatened before the FCC or any other governmental organization with respect to
the business or operations of the Stations.
7.16 Compliance With Laws. To the best of Seller's knowledge, (i)
Seller is not in material violation of, nor has Seller received any notice
asserting any non-compliance by it in connection with the operation of the
Stations or use or ownership of any of the Stations Assets with, any applicable
statute, rule or regulation, whether federal, state or local; (ii) Seller is not
in default with respect to any judgment, order, injunction or decree of any
court administrative agency or other governmental authority or any other
tribunal duly authorized to resolve disputes which relates to the transactions
contemplated hereby; and (iii) Seller is in material compliance with all laws,
regulations and governmental orders applicable to the conduct of the business
and operations of the Stations.
7.17 Employee Benefit Plans. Schedule 7.17 contains a true and complete
list as of the date of this Agreement of all employee benefit plans applicable
to the employees of RBF employed at the Stations, and a brief description
thereof. Seller does not maintain any other employee benefit plan as the term is
defined in Section 3 of the Employee Retirement Income Security Act of 1974, as
amended, applicable to the employees of RBF employed at the Stations.
7.18 Commissions or Finder's Fees. Neither Seller nor any person or
entity acting on behalf of Seller has agreed to pay a commission, finder's fee
or similar payment in connection with this Agreement or any matter related
hereto to any person or entity.
7.19 Conduct of Business in Ordinary Course: Adverse Changes. Since the
date Seller acquired the Stations, (a) Seller has conducted the business of the
Stations only in the ordinary course consistent with Seller's past practices;
(b) there has not been any material adverse change in the physical condition of
the tangible assets of the Stations, nor any damage, destruction, or physical
loss affecting any of the Stations Assets; and (c) Seller has not created,
assumed, or suffered any mortgage, pledge, lien or encumbrance on any of the
Stations Assets.
7.20 Instruments of Conveyance: Good Title. The instruments to be
executed by Seller and delivered to Buyer at the Closing, conveying the Stations
Assets to Buyer, will transfer good and marketable title to the Assets free and
clear of all liabilities (absolute or contingent), security interests,
mortgages, pledges, liens, obligations and encumbrances, except for Permitted
Encumbrances and except as set forth in Schedule 7.4, Schedule 7.7 and Schedule
7.8 hereto and
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those obligations referred to in the first sentence of Section 2.1 hereof.
7.21 Undisclosed Liabilities. Excepting only for the Assumed
Liabilities, no liability or obligation of any nature, whether accrued,
absolute, contingent or otherwise, relating to Seller, the Stations or the
Stations Assets exists which could, after discharging any indebtedness therefor
at or prior to the Closing, result in any form of transferee liability against
Buyer or subject the Stations Assets to any lien, encumbrance, claim, charge,
security interest or imposition whatsoever or otherwise affect the full, free
and unencumbered use of the Stations Assets by Buyer.
7.22 Full Disclosure. No representation or warranty made by Seller
contained in this Agreement nor any certificate, document or other instrument
furnished or to be furnished by Seller pursuant hereto contains or will contain
any untrue statement of a material fact, or omits or shall omit to state any
material fact required to make any statement contained herein or therein not
misleading. To the best of Seller's knowledge, there is no impending or
contemplated event or occurrence that would cause any of the foregoing
representations not to be true and complete on the date of such event or
occurrence as if made on that date.
Whenever in this Article 7 a warranty or representation is qualified by
a word or phrase referring to the best of Seller's knowledge (or similar terms),
it shall mean to the actual knowledge of Terry S. Jacobs, William L. Stakelin,
David Remund (Seller's engineer), and Jay Mlazgar (Seller's General Manager),
after having made due inquiry of the employees, representatives and agents of
Seller who would be expected to have knowledge of the matter, and with respect
to the condition of any Stations Assets, records or other object, after having
inspected it.
ARTICLE 8
COVENANTS OF BUYER
8.1 Closing. Subject to Article 11 hereof, on the Closing Date, Buyer
shall purchase the Stations Assets from Seller as provided in Article I hereof
and shall assume the Assumed Liabilities of Seller as provided in Article 2
hereof.
8.2 Notification. Buyer will provide Seller prompt written notice of
any change in any of the information contained in the representations and
warranties made in Article 6. Buyer shall also notify Seller of any litigation,
arbitration or administrative proceeding pending or, to its knowledge,
threatened against Buyer which challenges the transactions contemplated hereby.
8.3 No Inconsistent Action. Buyer shall not take any action which is
materially inconsistent with its obligations under this Agreement or take any
action which would cause any representation or warranty of Buyer contained
herein to be or become false or invalid or which could hinder or delay the
consummation of the transactions contemplated by this Agreement.
8.4 Removal of Impediments. Should any fact relating to Buyer which
would cause the FCC to deny its consent to the transactions contemplated by this
Agreement come to Buyer's
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attention, Buyer will promptly notify Seller thereof and will use its reasonable
efforts to take such steps as may be necessary to remove any such impediment to
the FCC's consent to the transactions contemplated by this Agreement.
ARTICLE 9
COVENANTS OF SELLER
9.1 Pre-Closing Covenants. Seller covenants and agrees with respect to
the Stations that, between the date hereof and the Closing Date or the earlier
termination of this Agreement in accordance with its terms, except as expressly
permitted by this Agreement or with the prior written consent of Buyer, Seller
shall act in accordance with the following:
9.1.1 Seller shall conduct the business and operations of the
Stations in the ordinary and prudent course of business consistent with past
practice and with the intent of preserving the ongoing operations and assets of
the Stations, including but not limited to maintaining the independent identity
of the Stations.
9.1.2 Seller shall use its reasonable best efforts to: (i)
preserve the operation of the Stations intact; (ii) preserve the business of the
Stations' advertisers, customers, suppliers and others having business relations
with the Stations; and (iii) continue to conduct financial operations of the
Stations, including without limitation, their credit and collection and pricing
policies and practices, all in the ordinary course of business consistent with
past practices, and, without limiting the generality of the foregoing, Seller
shall not discount its accounts receivable, accelerate its efforts to collect
accounts receivable or take any other action or use any other collection method
not regularly taken or used by it in the ordinary course of business prior to
the date of this Agreement.
9.1.3 Except for conditions described in Schedule 7.4, Seller
shall operate the Stations in all respects in accordance with FCC rules and
regulations and the Stations Licenses and with all other laws, regulations,
rules and orders, and shall not cause or permit by any act, or failure to act,
any of the Stations Licenses to expire, be surrendered, adversely modified, or
otherwise terminated, or the FCC to institute any proceedings for the
suspension, revocation or adverse modification of any of the Stations Licenses,
or fail to prosecute with due diligence any pending applications to the FCC.
9.1.4 Should any fact relating to Seller which would cause the
FCC to deny its consent to the transactions contemplated by this Agreement come
to Seller's attention, Seller will promptly notify Buyer thereof and will use
its reasonable best efforts to take such steps as may be necessary to remove any
such impediment to the FCC's consent to the transactions contemplated by this
Agreement.
9.1.5 Except for changes or actions in the ordinary course of
business consistent with past practices, Seller shall not: (a) sell broadcast
time on a prepaid basis (other than in the course of existing credit practices);
(b) except as set forth on Schedule 7.14, or as required by applicable law or
written agreements currently in effect, grant or agree to grant any general
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increases in the rates of salaries or compensation payable to employees of the
Stations (provided that no such increase to any employee shall exceed the amount
budgeted therefor in RBF's 1999 budgets) unless such increase is as a result of
increased commissions payable to employees on account of increased advertising
sales; (c) except as required by written agreements currently in effect, grant
or agree to grant any specific bonus or increase in compensation to any
executive management employee of the Stations (provided that no such increase to
any employee shall exceed the amount budgeted therefor in RBF's 1999 budgets)
unless such bonus or increase is as a result of increased commissions payable to
employees on account of increased advertising sales or is used as an incentive
for employees to remain with the Stations up to the Closing; (d) provide for any
new pension, retirement or other employment benefits for employees of the
Stations or any increases in any existing benefits, (e) modify, change or
terminate any Contract other than in the ordinary course of business; or (f)
change the advertising rates in effect as of the date hereof other than in the
ordinary course of business.
9.1.6 Seller shall give or cause the Stations to give Buyer
and Buyer's counsel, accountants, engineers and other representatives, at
Buyer's reasonable request and upon reasonable notice, full and reasonable
access during normal business hours to all of Seller's personnel, properties,
books, Contracts, reports and records (including, without limitation, financial
information and tax returns relating to the Stations, and environmental audits
in existence with respect to the Stations Assets), real estate, buildings and
equipment relating to the Stations and to the Stations' employees, and to
furnish Buyer with information and copies of all documents and agreements
relating to the Stations and the operation thereof (including but not limited to
financial and operating data and other information concerning the financial
condition, results of operations and business of the Stations, and any
engineering materials in Seller's possession regarding the operations of the
Stations and the ability, if any, of the Stations' signals to be upgraded) that
Buyer may reasonably request. The rights of Buyer under this Section 9.1.6 shall
not be exercised in such a manner as to interfere unreasonably with the business
of the Stations.
9.1.7 Seller shall use its reasonable best efforts to obtain
any third party consents necessary for the assignment of any Contract (which
shall not require any payment to any such third party except for such amounts
contemplated by the Contract to be assigned, and any amount then owing by Seller
to such third party).
9.2 Notification. Seller will provide Buyer prompt written notice of
any change in any of the information contained in the representations and
warranties made in Article 7 or any Schedule. Seller agrees to notify Buyer of
any litigation, arbitration or administrative proceeding pending or, to the best
of its knowledge, threatened, which challenges the transactions contemplated
hereby. Seller shall promptly notify Buyer if any of the normal broadcast
transmissions of any Station are interrupted, interfered with or in any way
impaired, and shall provide Buyer with prompt written notice of the problem and
the measures being taken to correct such problem.
9.3 No Inconsistent Action. Seller shall not take any action which is
materially inconsistent with its obligations under this Agreement nor take any
action which would cause
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any representation or warranty of Seller contained herein to be or become false
or invalid or which could hinder or delay the consummation of the transactions
contemplated by this Agreement.
9.4 Closing. Subject to Article 12 hereof, on the Closing Date, Seller
shall transfer, convey, assign and deliver to Buyer the Stations Assets and the
Assumed Liabilities as provided in Articles 1 and 2 and Section 7.20 of this
Agreement.
9.5 Other Items. Until the Closing Date or the earlier termination of
this Agreement in accordance with the terms hereof, except with Buyer's prior
written consent, Seller shall not: (a) waive or release any right relating to
the business or operations of the Stations, except for adjustments or
settlements made in the ordinary course of business consistent with its past
practices; (b) transfer or grant any rights under any of the Stations Licenses;
(c) enter into any commitment for capital expenditures for which Buyer would
become liable after the Closing Date; (d) introduce any material changes in the
broadcast hours or in the format of the Stations or any other material change in
the Station's programming policies; (e) change the call letters of any of the
Stations; and (f) enter into any transaction or make or enter into any contract
or commitment with respect to any of the Stations or the Stations Assets which
by reason of its size or otherwise is not in the ordinary course of business
consistent with past practices.
9.6 Exclusivity. Seller agrees that, commencing on the date hereof
through the Closing or earlier termination of this Agreement, Buyer shall have
the exclusive right to consummate the transactions contemplated herein, and
during such exclusive period, Seller agrees that neither Seller, nor any
director, officer, employee or other representative of Seller: (a) will
initiate, solicit or encourage, directly or indirectly, any inquiries, or the
making or implementation of any proposal or offer with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase of,
all or any portion of the Stations Assets (any such inquiry, proposal or offer
being hereinafter referred to as an "Acquisition Proposal" and any such
transaction being hereinafter referred to as an "Acquisition"); (b) will engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; or (c) will continue any existing activities, discussions
or negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal or Acquisition and will take the necessary steps to inform
the individuals or entities referred to above of the obligations undertaken by
them in this Section 9.6. Notwithstanding the foregoing, in the event that Buyer
defaults in any material respect in the observance or in the due and timely
performance of any of its covenant or agreements herein contained and such
default shall not be cured within ten (10) business days of notice of default
served by Seller, Seller's obligations under this Section 9.6 shall be null and
void.
ARTICLE 10
JOINT COVENANTS
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Buyer and Seller each covenant and agree that between the date hereof
and the Closing Date, they shall act in accordance with the following:
10.1 Confidentiality. Subject to the requirements of applicable law,
Buyer and Seller shall each keep confidential all information obtained by it
with respect to the other parties hereto in connection with this Agreement and
the negotiations preceding this Agreement, and will use such information solely
in connection with the transactions contemplated by this Agreement, and if the
transactions contemplated hereby are not consummated for any reason, each shall
return to each other party hereto, without retaining a copy thereof, any
schedules, documents or other written information obtained from such other party
in connection with this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, no party shall be required to keep confidential
or return any information which: (a) is known or available through other lawful
sources, not bound by a confidentiality agreement with the disclosing party; (b)
is or becomes publicly known through no fault of the receiving party or its
agents; (c) is required to be disclosed pursuant to an order or request of a
judicial or governmental authority (provided the disclosing party is given
reasonable prior notice of the order or request and the purpose of the
disclosure); or (d) is developed by the receiving party independently of the
disclosure by the disclosing party. Notwithstanding anything to the contrary
herein, either party may in accordance with its legal obligations, including but
not limited to filings permitted or required by the Securities Act of 1933 and
the Securities and Exchange Act of 1934, make such press releases and other
public statements and announcements as it deems necessary and appropriate in
connection with this Agreement and the transactions contemplated hereby;
provided, however, that prior to making any such unilateral press release or
announcement, such party shall first communicate the same in writing to the
other.
10.2 Cooperation. Subject to express limitations contained elsewhere
herein, Buyer and Seller agree to cooperate fully with one another in taking any
reasonable actions (including without limitation, reasonable actions to obtain
the required consent of any governmental instrumentality or any third party and
to permit Buyer to take such steps as it may desire to take prior to the Closing
Date to remedy those conditions described in Schedule 7.4 as exceptions to
Seller's warranties and representations) necessary or helpful to accomplish the
transactions contemplated by this Agreement, including but not limited to the
satisfaction of any condition to closing set forth herein.
10.3 Control of Stations. Buyer shall not, directly or indirectly,
control, supervise or direct the operations of the Stations prior to the
Closing. Such operations, including complete control and supervision of all
Station programs, employees and policies, shall be the sole responsibility of
Seller.
10.4 Consents to Assignment. To the extent that any Contract identified
in the Schedules is not capable of being sold, assigned, transferred, delivered
or subleased without the waiver or consent of any third person (including a
government or governmental unit), or if such sale, assignment,
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transfer, delivery or sublease or attempted sale, assignment, transfer, delivery
or sublease would constitute a breach thereof or a violation of any law or
regulation, this Agreement and any assignment executed pursuant hereto shall not
constitute a sale, assignment, transfer, delivery or sublease or an attempted
sale, assignment, offer, delivery or sublease thereof. Subject to the provisions
of Section 11.5, in those cases where consents, assignments, releases and/or
waivers have not been obtained at or prior to the Closing relating to the
assignment to Buyer of the Contracts, this Agreement and any assignment executed
pursuant hereto, to the extent permitted by law, shall constitute an equitable
assignment by Seller to Buyer of all of Seller's rights, benefits, title and
interest in and to the Contracts, and where necessary or appropriate, Buyer
shall be deemed to be Seller's agent for the purpose of completing, fulfilling
and discharging all of Seller's rights and liabilities arising after the Closing
Date under such Contracts. Seller shall use its reasonable best efforts to
provide Buyer with the financial and business benefits of such Contracts
(including, without limitation, permitting Buyer to enforce any rights of Seller
arising under such Contracts), and Buyer shall, to the extent Buyer is provided
with the benefits of such Contracts, assume, perform and in due course pay and
discharge all debts, obligations and liabilities of Seller under such Contracts
to the extent that Buyer was to assume those obligations pursuant to the terms
hereof.
10.5 Filings. In addition to the covenants of the parties set forth in
Article 5 hereto, as promptly as practicable after the execution of this
Agreement, Buyer and Seller shall use their reasonable best efforts to obtain,
and to cooperate with each other in obtaining, all authorizations, consents,
orders and approvals of any governmental authority that may be or become
necessary in connection with the consummation of the transactions contemplated
by this Agreement, and to take all reasonable actions to avoid the entry of any
order or decree by any governmental authority prohibiting the consummation of
the transactions contemplated hereby, including without limitation, any reports
or notifications that may be required to be filed with the FCC, and each shall
furnish to one another all such information in its possession as may be
necessary for the completion of the reports or notifications to be filed by the
other.
10.6 Bulk Sales Laws. Buyer hereby waives compliance by Seller with the
provisions of the "bulk sales" or similar laws of any state. Seller agrees to
indemnify Buyer and hold it harmless from any and all loss, cost, damage and
expense (including but not limited to, reasonable attorney's fees) sustained by
Buyer as a result of any failure of Seller to comply with any "bulk sales" or
similar laws.
10.7 Employee Matters. RBF shall be responsible for the payment of all
compensation and accrued employee benefits payable to all employees up to the
Closing Date. RBF acknowledges and agrees that it, and not Buyer, is and shall
be solely responsible for any and all insurance, supplemental pension, deferred
compensation, retirement and any other benefits, and related costs, premiums and
claims, due, to become due, committed or otherwise promised to any person who,
as of the Closing Date is a retiree, former employee, or current employee of
RBF, relating to the period up to the Closing Date. Buyer, as a purchaser of the
Stations Assets, shall assume no employee benefit plans, programs or practices,
whether or not set forth in writing, maintained by Seller at any time.
ARTICLE 11
CONDITIONS OF CLOSING BY BUYER
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The obligations of Buyer hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
11.1 Representations, Warranties and Covenants.
11.1.1 All representations and warranties of Seller made in
this Agreement or in any Exhibit, Schedule or document delivered pursuant
hereto, shall be true and complete in all material respects as of the date
hereof and on and as of the Closing Date as if made on and as of that date,
except for changes (a) expressly permitted or contemplated by the terms of this
Agreement or (b) in the ordinary course of business which are not, either
individually or in the aggregate, material and adverse.
11.1.2 All of the terms, covenants and conditions set forth in
this Agreement to be complied with and performed by Seller on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
11.1.3 Buyer shall have received a certificate, dated as of
the Closing Date, from Seller, executed by an officer of Seller to the effect
that: (a) the representations and warranties of Seller contained in this
Agreement are true and complete in all material respects on and as of the
Closing Date as if made on and as of that date, except for changes (i) expressly
permitted or contemplated by the terms of this Agreement, or (ii) in the
ordinary course of business which are not, either individually or in the
aggregate, material and adverse; and (b) Seller has complied with or performed
in all material respects all terms, covenants and conditions set forth in this
Agreement to be complied with or performed by it on or prior to the Closing
Date.
11.2 Governmental Consents. The FCC Final Approval shall have been
obtained.
11.3 Governmental Authorizations. RLF shall be the holder of the
Stations Licenses and there shall not have been any modification of any of such
Licenses which has a material adverse effect on any of the Stations or the
operations thereof. No application shall be pending for the renewal of any of
the Stations Licenses. No proceeding shall be pending which seeks, or the effect
of which reasonably could be, to revoke, cancel, fail to renew, suspend or
adversely modify any of the Stations Licenses.
11.4 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending or threatened in writing against, and no order,
decree or judgment of any court, agency or other governmental authority shall
have been rendered (and remain in effect) against, any party hereto which: (a)
would render it unlawful, as of the Closing Date, to effect the transactions
contemplated by this Agreement in accordance with its terms; (b) questions the
validity or legality of any transaction contemplated hereby; (c) seeks to enjoin
any transaction contemplated hereby; (d) seeks material damages on account of
the consummation of any transaction contemplated hereby; or (e) is a petition of
bankruptcy by or against Seller, an assignment by Seller for the benefit of its
creditors, or other similar proceeding.
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11.5 Third-Party Consents. All Material Contracts shall be in full
force and effect on the Closing Date, and Seller shall have obtained and shall
have delivered to Buyer all appropriate third-party consents in form and
substance acceptable to Buyer (including estoppel certificates for the leases
related to the Leased Real Estate) in connection with the assignment of the
Material Contracts to Buyer.
11.6 Closing Documents. Seller shall have delivered or caused to be
delivered to Buyer, on the Closing Date, all bills of sale, general warranty
deeds, endorsements, assignments and other instruments of conveyance reasonably
satisfactory in form and substance to Buyer, effecting the sale, transfer,
assignment and conveyance of the Stations Assets to Buyer, including, without
limitation, each of the documents required to be delivered by it pursuant to
Article 14.
11.7 No Adverse Change in Physical Condition of Tangible Assets. No
material adverse change in physical condition of any of the tangible assets
included in the Station Assets, which change is caused by or arises out of any
breach by Seller of any of its representations, warranties, covenants or
agreements hereunder shall have occurred or be reasonably likely to occur.
11.8 Phase One Environmental Audit. Buyer shall have received the Phase
I environmental site assessments received by Seller related to the Stations
during calendar year 1998 (copies of which are included in Schedule 7.11), which
assessments, if Buyer requests within thirty (30) days after the date of this
Agreement, shall be recertified to Buyer in all material respects by the
environmental consultants who prepared the assessments, the cost for such
recertification to be paid by Buyer.
ARTICLE 12
CONDITIONS OF CLOSING BY SELLER
The obligations of Seller hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
12.1 Representations, Warranties and Covenants.
12.1.1 All representations and warranties of Buyer made in
this Agreement or in any Exhibit, Schedule or document delivered pursuant
hereto, shall be true and complete in all material respects as of the date
hereof and on and as of the Closing Date as if made on and as of that date,
except for changes expressly permitted or contemplated by the terms of this
Agreement.
12.1.2 All the terms, covenants and conditions set forth in
this Agreement to be complied with and performed by Buyer on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
12.1.3 Seller shall have received a certificate, dated as of
the Closing Date,
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executed by an officer of Buyer, to the effect that: (a) the representations and
warranties of Buyer contained in this Agreement are true and complete in all
material respects on and as of the Closing Date as if made on and as of that
date; and (b) Buyer has complied with or performed in all material respects all
terms, covenants and conditions to be complied with or performed by it on or
prior to the Closing Date.
12.2 Governmental Consents. The FCC Initial Approval shall have been
obtained.
12.3 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending or threatened in writing against, and no other
decree or judgment of any court, agency or other governmental authority shall
have been rendered (and remain in effect) against, any party hereto which: (a)
would render it unlawful, as of the Closing Date, to effect the transactions
contemplated by this Agreement in accordance with its terms; (b) questions the
validity or legality of any transaction contemplated hereby; (c) seeks to enjoin
any transaction contemplated hereby; or (d) seeks material damages on account of
the consummation of any transaction contemplated hereby.
12.4 Closing Documents. Buyer shall have delivered or caused to be
delivered to Seller, on the Closing Date, the Purchase Price and each of the
documents required to be delivered by it pursuant to Article 14.
ARTICLE 13
TRANSFER TAXES: FEES AND EXPENSES
13.1 Expenses. Except as set forth in Section 13.2 hereof or otherwise
expressly set forth in this Agreement, each party hereto shall be solely
responsible for all costs and expenses incurred by it in connection with the
negotiation, preparation and performance of and compliance with the terms of
this Agreement including, but not limited to, the costs and expenses incurred
pursuant to Article 5 hereof and the fees and disbursements of counsel and other
advisors.
13.2 Specific Charges. All costs of transferring the Stations Assets in
accordance with this Agreement, including recordation, transfer and documentary
taxes and fees, and any excise, sales or use taxes, shall be shall be paid by
Seller. Each party shall pay any filing or grant fees imposed upon it by any
governmental authority the consent of which or the filing with which is required
for the consummation of the transactions contemplated hereby, with the exception
of filing fees of the FCC which shall be shared equally by Buyer and Seller.
ARTICLE 14
DOCUMENTS TO BE DELIVERED AT CLOSING
14.1 Seller's Documents. At the Closing, Seller shall deliver or cause
to be delivered to Buyer the following:
14.1.1 Certified resolutions of the directors and sole
shareholder of Seller approving the execution and delivery of this Agreement and
authorizing the consummation of the
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transactions contemplated hereby;
14.1.2 A certificate of Seller, dated the Closing Date, in the
form described in Section 11.1.3;
14.1.3 Governmental certificates showing that (a) each of RBF
and RLF is duly organized, validly existing and in good standing in the State of
Delaware, (b) RBF is qualified to transact business and in good standing in the
State of Arizona; and (c) each of RBF and RLF has filed all returns, paid all
taxes due' thereon and is currently subject to no assessment, each certified as
of a date not more than thirty (30) days before the Closing Date;
14.1.4 Such certificates, bills of sale, general warranty
deeds, assignments, documents of title and other instruments of conveyance,
assignment and transfer (including without limitation any necessary consents to
conveyance, assignment or transfer required to be delivered hereunder), and lien
releases, all in form satisfactory to Buyer and Buyer's counsel, as shall be
effective to vest in Buyer good and marketable title in and to the Stations
Assets, free, clear and unencumbered except for Permitted Encumbrances, if any,
as set forth on Schedule 7.7 and Schedule 7.8.
14.1.5 An Assignment and Assumption Agreement in the form of
Exhibit E effectuating the assignment and assumption of the Assumed Liabilities
(the "Assignment and Assumption Agreement");
14.1.6 The Indemnification Escrow Agreement;
14.1.7 At the time and place of Closing, originals and all
copies of all program, operations, transmission or maintenance logs and all
other records required to be maintained by the FCC with respect to the Stations,
including the public files of the Stations, shall be left at the Stations and
thereby delivered to Buyer;
14.1.8 A written opinion of Seller's corporate counsel
substantially in the form attached as Exhibit F, dated as of the Closing Date
(provided, as to matters of Arizona law, such counsel may rely on or deliver a
separate opinion of Arizona counsel);
14.1.9 A written opinion of Seller's FCC counsel confirming
the matters set forth in Exhibit G, dated as of the Closing Date;
14.1.10 The Agreement Not to Compete; and
14.1.11 Such additional information, materials, agreements,
documents and instruments as Buyer and its counsel may reasonably request in
order to consummate the Closing.
14.2 Buyer's Documents. At the Closing, Buyer shall deliver or cause to
be delivered to Seller the following:
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14.2.1 Certified resolutions of the directors of Buyer
approving the execution and delivery of this Agreement and authorizing the
consummation of the transactions contemplated hereby;
14.2.2 A certificate of Buyer, dated the Closing Date, in the
form described in Section 12.1.3;
14.2.3 The Assignment and Assumption Agreement;
14.2.4 The Indemnification Escrow Agreement;
14.2.5 A written opinion of Buyer's counsel in the form
attached as Exhibit H, dated as of the Closing Date;
14.2.6 The Purchase Price in accordance with Section 3. 1
hereof;
14.2.7 The Agreement Not to Compete; and
14.2.8 Such additional information, materials, agreement,
documents and instruments as Seller and its counsel may reasonably request in
order to consummate the Closing.
ARTICLE 15
SURVIVAL, INDEMNIFICATION. ETC.
15.1 Survival of Representations, Etc. It is the express intention and
agreement of the parties to this Agreement that all covenants and agreements
(together, "Agreements") and all representations and warranties (together,
"Warranties") made by Buyer and Seller in this Agreement shall survive the
Closing (regardless of any knowledge, investigation, audit or inspection at any
time made by or on behalf of Buyer or Seller) as follows:
15.1.1 The Agreements shall survive the Closing for a period
from the Closing Date equal to the statute of limitations for written contracts
in Arizona.
15.1.2 The Warranties in Sections 6.2, 6.5, 7.2, the third
sentence of 7.7, 7.18 and 7.20 shall survive the Closing without limitation.
15.1.3 The Warranties in Section 7.6 or otherwise relating to
the federal, state, local or foreign tax obligations of Seller shall survive the
Closing for the period of the applicable statute of limitations plus any
extensions or waivers granted or imposed with respect thereto.
15.1.4 All other Warranties shall survive for a period of
twelve (12) months from the Closing Date.
15.1.5 The right of any party to recover Damages (as defined
in Section 15.2. 1)
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pursuant to Section 15.2 shall not be affected by the expiration of any
Warranties as set forth herein, provided that notice of the existence of any
Damages (but not necessarily the fixed amount of any such Damages) has been
given by the indemnified party to the indemnifying party prior to such
expiration.
15.1.6 Notwithstanding any provision hereof to the contrary,
there shall be no contractual time limit in which Buyer or Seller may bring any
action for actual fraud (a "Fraud Action"), regardless of whether such actual
fraud also included a breach of any Agreement or Warranty; provided, however,
that any Fraud Action must be brought within the period of the applicable
statute of limitations plus any extensions or waivers granted or imposed with
respect thereto.
15.2 Indemnification.
15.2.1 Seller shall defend, indemnify and hold harmless Buyer
from and against any and all losses, costs, damages, liabilities and expenses,
including reasonable attorneys' fees and expenses ("Damages") incurred by Buyer
arising out of or related to: (a) any breach of the Warranties given or made by
Seller in this Agreement; (b) any breach of the Agreements made by Seller in
this Agreement; (c) the Retained Liabilities; and (d) any failure of the parties
to comply with any "bulk sales" laws applicable to the transactions contemplated
hereby.
15.2.2 Buyer shall defend, indemnify and hold harmless Seller
from and against any and all Damages incurred by Seller arising out of or
related to: (a) any breach of the Warranties given or made by Buyer in this
Agreement; (b) any breach of the Agreements made by Buyer in this Agreement, and
(c) the Assumed Liabilities.
15.3 Procedures: Third Party and Direct Indemnification Claims. The
indemnified party agrees to give written notice, within thirty (30) days
following its discovery thereof, to the indemnifying party of any demand, suit,
claim or assertion of liability by third parties or other circumstances that
could give rise to an indemnification obligation hereunder against the
indemnifying party (hereinafter collectively "Claims," and individually a
"Claim"), it being understood that the failure to give such notice shall not
affect the indemnified party's right to indemnification and the indemnifying
party's obligation to indemnify as set forth in this Agreement, unless the
indemnifying party's ability to contest, defend or settle with respect to such
Claim is thereby demonstrably and materially prejudiced. The parties also agree
that any claim for Damages arising directly between the parties relating to this
Agreement may be brought at any time within the applicable survival period
specified in Section 15. 1, and that the only notice required with respect
thereto shall be as specified in Section 15.1.5.
The obligations and liabilities of the parties hereto with respect to
their respective indemnities pursuant to Section 15.2 resulting from any Claim
shall be subject to the following additional terms and conditions:
15.3.1 The indemnifying party shall have the right to
undertake, by counsel or other representatives of its own choosing, the defense
or opposition to such Claim.
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15.3.2 In the event that the indemnifying party shall elect
not to undertake such defense or opposition, or within (10) days after notice of
any such Claim from the indemnified party shall fail to defend or oppose, the
indemnified party (upon further written notice to the indemnifying party) shall
have the right to undertake the defense, opposition, compromise or settlement of
such Claim, by counsel or other representatives of its own choosing, on behalf
of and for the account and risk of the indemnifying party (subject to the right
of the indemnifying party to assume defense of or opposition to such Claim at
any time prior to settlement, compromise or final determination thereof).
15.3.3 Anything in this Section 15.3 to the contrary
notwithstanding: (a) the indemnified party shall have the right, at its own cost
and expense, to participate in the defense, opposition, compromise or settlement
of the Claim; (b) the indemnifying party shall not, without the indemnified
party's written consent, settle or compromise any Claim or consent to entry of
any judgment which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the indemnified party of a release from all
liability in respect of such Claim, and (c) in the event that the indemnifying
party undertakes defense of or opposition to any Claim the indemnified party, by
counsel or other representative of its own choosing and at its sole cost and
expense, shall have the right to consult with the indemnifying party and its
counsel or other representatives concerning such Claim and the indemnifying
party and the indemnified party, and their respective counsel or other
representatives, shall cooperate in good faith with respect to such Claim.
15.3.4 No undertaking of defense or opposition to a Claim
shall be construed as an acknowledgment by such party that it is liable to the
party claiming indemnification with respect to the Claim at issue or other
similar Claims.
15.3.5 No indemnified party shall be entitled to assert a
claim for indemnification under Section 15.2.1(a) or Section 15.2.2(a) unless
and then only to the extent that the aggregate damages for all such claims
exceed $25,000, and the maximum liability of either party for indemnification
under such Subsections shall be $1,000,000, except with respect to claims
relating to title, taxes, License revocation, and environmental matters (which
shall not be so limited) or as otherwise set forth in Sections 16.2, 16.3 and
16.4 hereof.
ARTICLE 16
TERMINATION RIGHTS
16.1 Termination. This Agreement may be terminated at any time prior to
Closing as follows:
16.1.1 Upon the mutual written consent of Buyer and Seller,
this Agreement may be terminated on such terms and conditions as so agreed; or
16.1.2 By written notice of Buyer to Seller if Seller breaches
in any material respect any of its representations or warranties or defaults in
any material respect in the
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observance or in the due and timely performance of any of its covenants or
agreements herein contained and such breach or default shall not be cured within
thirty (30) days of the date of notice of breach or default served by Buyer; or
16.1.3 By written notice of Seller to Buyer if Buyer breaches
in any material respect any of its representations or warranties or defaults in
any material respect in the observance or in the due and timely performance of
any of its covenants or agreements herein contained and such breach or default
shall not be cured within thirty (30) days of the date of notice of breach or
default served by Seller; or
16.1.4 By written notice of Buyer to Seller or by Seller to
Buyer if the FCC denies the FCC Application under circumstances in which Seller
is not entitled to the Escrow Deposit;
16.1.5 By written notice of Buyer to Seller, or by Seller to
Buyer, if any court of competent jurisdiction shall have issued an order, decree
or ruling (which then remains in effect) or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, or by Buyer, if any court, legislative body or governmental or
regulatory authority has taken, or is reasonably expected to take, action that
would make the consummation of the transactions contemplated hereby inadvisable
or undesirable as determined by Buyer in its sole discretion reasonably
exercised;
16.1.6 By written notice of Buyer to Seller, or by Seller to
Buyer, if the Closing shall not have been consummated on or before September 15,
1999.
16.1.7 By written notice of Buyer to Seller if it shall become
apparent in both Seller's and Buyer's judgment reasonably exercised that any
condition to Buyer's obligation to close as set forth in Article 11 hereof will
not be satisfied on or before September 15, 1999.
16.1.8 By written notice of Buyer to Seller under the
conditions set forth in Section 9.2 hereof.
Notwithstanding the foregoing, no party hereto may effect a termination
hereof if such party is in material default or breach of this Agreement.
16.2 Liability. Except as set forth in Section 16.4 below, the
termination of this Agreement under Section 16.1 shall not relieve any party of
any liability for breach of this Agreement prior to the date of termination.
16.3 Monetary Damages. Specific Performance and Other Remedies. The
parties recognize that if Seller refuses to perform under the provisions of this
Agreement, monetary damages alone will not be adequate to compensate Buyer for
its injury. Buyer shall therefore be entitled to obtain specific performance of
the terms of this Agreement in addition to any other remedies, including but not
limited to monetary damages, that may be available to it. if any action is
brought by Buyer to enforce this Agreement, Seller shall waive the defense that
there is
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an adequate remedy at law. In the event of a default by Seller, which results in
the filing of a lawsuit for damages, specific performance, or other remedy,
Buyer shall be entitled to reimbursement by Seller of reasonable legal fees and
expenses incurred by Buyer.
16.4 Seller's Liquidated Damages. As more fully described in the
Deposit Escrow Agreement, in the event this Agreement is terminated because of
Buyer's material breach of this Agreement, and all other conditions to Closing
are at such time satisfied or waived (other than such conditions as can
reasonably be satisfied by Closing), then the Escrow Deposit shall be delivered
to Seller, and the proceeds thereof shall constitute liquidated damages. It is
understood and agreed that such liquidated damages amount represents Buyer's and
Seller's reasonable estimate of actual damages and does not constitute a
penalty. Recovery of liquidated damages shall be the sole and exclusive remedy
of Seller against Buyer for failing to consummate this Agreement as a result of
Buyer's material breach hereof, and shall be applicable regardless of the actual
amount of damages sustained and all other remedies are deemed waived by Seller.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 Risk of Loss. The risk of loss or damage to any of the Stations
Assets prior to the Closing Date, shall be upon Seller. Seller shall repair,
replace and restore any such damaged or lost Stations Asset to its prior
condition as soon as possible and in no event later than forty-five (45) days
following the loss or damage; provided, however, that in the event any such loss
or damage of the Stations Assets exists on the Closing Date, then
notwithstanding any other provision hereto, Buyer at its option may extend the
Closing Date for a period of up to sixty (60) days until such time as Seller
shall have repaired, replaced and restored any such damaged or lost Stations
Asset to its prior condition or deduct from the Purchase Price that amount which
Buyer and Seller reasonably determine to be sufficient to cover any such loss or
damage and close the transaction on the Closing Date.
17.2 Certain Interpretive Matters and Definitions. Unless the context
otherwise requires: (a) all references to Sections, Articles, Schedules or
Exhibits are to Sections, Articles, Schedules or Exhibits of or to this
Agreement; (b) each term defined in this Agreement has the meaning assigned to
it; (c) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect on the date hereof, (d) "or" is disjunctive but not
necessarily exclusive; (e) words in the singular include the plural and vice
versa; (f) the term "Affiliate" has the meaning given it in Rule l2b-2 of
Regulation 12B under the Securities Exchange Act of 1934, as amended; and (g)
all references to '$' or dollar amounts will be to lawful currency of the United
States of America.
17.3 Further Assurances. After the Closing, Seller shall from time to
time, at the request of and without further cost or expense to Buyer, execute
and deliver such other instruments of conveyance and transfer and take such
other actions as may reasonably be requested in order more effectively to
consummate the transactions contemplated hereby to vest in Buyer good and
marketable title to the Stations Assets being transferred hereunder in
accordance with the terms hereof, and Buyer shall from time to time, at the
request of and
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without further cost or expense to Seller, execute and deliver such other
instruments and take such other actions as may reasonably be requested in order
more effectively to relieve Seller of any obligations being assumed by Buyer
hereunder.
17.4 Preservation of Records. Subject to Section 10. 1 hereof, Buyer
hereby agrees that it will preserve and make available to Seller and its
attorneys and accountants (including the right to inspect and copy at Seller's
cost), during normal business hours and upon reasonable advance notice, for
three (3) years after the Closing Date, such of the books, records, files,
correspondence, memoranda and other documents referred pursuant to this
Agreement as Seller may reasonably require for the preparation of tax reports
and returns, the preparation of financial statements, or the preparation of a
response to any claim by a third party against Seller.
17.5 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Neither Buyer nor Seller may voluntarily or involuntarily
assign its interest under this Agreement without the prior written consent of
the other; provided, however, that no such permitted assignment shall relieve
Buyer of its obligations hereunder in the event that its assignee fails to
perform the obligations delegated. All covenants, agreements, statements,
representations, warranties and indemnities in this Agreement by and on behalf
of any of the parties hereto shall bind and inure to the benefit of their
respective successors and permitted assigns of the parties hereto. In the event
Buyer finds it necessary or is required to provide to a third party a collateral
assignment of the Buyer's interest in this Agreement and/or any related
documents, Seller shall cooperate with the Buyer and any third party requesting
such assignment including but not limited to signing a consent and
acknowledgment of such assignment.
17.6 Amendments. No amendment, waiver of compliance with any provision
or condition hereof or consent pursuant to this Agreement shall be effective
unless evidenced by an instrument in writing signed by the party against whom
enforcement of any waiver, amendment, change, extension or discharge is sought.
17.7 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
17.8 Governing Law. The construction and performance of this Agreement
shall be governed by the laws of the State of Arizona, without giving effect to
the choice of law provisions thereof.
17.9 Notices. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing, including by
facsimile, and shall be deemed to have been duly delivered and received on the
date of personal delivery, on the third day after deposit in the U.S. mail if
mailed by registered or certified mail, postage prepaid and return receipt
requested, on the day after delivery to a nationally recognized overnight
courier service if sent by an overnight delivery service for next morning
delivery or when dispatched by facsimile transmission (with the facsimile
transmission confirmation being deemed conclusive evidence of such dispatch) and
shall be addressed to the following addresses, or to such other address as any
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party may request, in the case of Seller, by notifying Buyer, and in the case of
Buyer, by notifying Seller:
To Buyer: Guy Christian
The Guyann Corporation
1117 West Highway 66
Flagstaff, AZ 86001
Fax: (520) 779-2988
Copy to: HALEY BADER & POTTS
4350 N. Fairfax Drive, Suite 900
Arlington, VA 22203
Attn: Theodore D. Kramer, Esq.
Fax: (703) 841-2345
To Seller: Terry S. Jacobs, Chairman
Regent Broadcasting of
Flagstaff, Inc.
50 East RiverCenter Blvd.
Suite 180
Covington, KY 41011
Fax: (606) 292-0352
Copy to: STRAUSS & TROY
2100 PNC Center
201 East Fifth Street
Cincinnati, OH 45202
Attn: Alan C. Rosser, Esq.
Fax: (513) 241-8389
17.10 First Right of Negotiation.
17.10.1 Effective upon the Closing and continuing thereafter
for a period of five (5) years, Seller and its Affiliate, Regent Communications,
Inc. ("Regent") shall have a first right to negotiate an acquisition of the
Stations and radio stations KAFF(FM), KMGN(FM) and KAFF(AM). Should Buyer or its
shareholders desire to sell substantially all of its/their interest in any of
the Stations and/or radio stations KAFF(FM), KMGN(FM) and KAFF(AM), it/they
shall notify Regent of such desire and shall provide to Regent, in writing, the
requested sale price and other material terms of such sale which are acceptable
to Buyer or its shareholders. For purposes of this Section 17.10 a sale shall
include a transfer, assignment or other disposition of substantially all of the
assets used or useful in the operation of any of the Stations and/or radio
stations KAFF(FM), KMGN(FM) and KAFF(AM) and a transfer, assignment or other
disposition, by purchase, merger or otherwise, of two-thirds (2/3rds) or more of
the outstanding voting stock of Buyer, in one transaction or in a series of
related transactions; provided, however, any pledge as collateral; gift or any
such transfer among or between the shareholders of Buyer as
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of the date of this Agreement, to or from family members of the shareholders of
Buyer as of the date of this Agreement or to charitable organizations; or in
connection with legitimate estate planning purposes shall not constitute a
transfer, assignment or other disposition. Regent shall have a period of twenty
(20) business days from its receipt of such notice in which to negotiate
exclusively with Buyer or its shareholders and to send written notice to Buyer
or the shareholders that Regent elects to acquire the assets or stock (or that
part thereof which is the subject of the proposed sale), on the terms as
negotiated or offered to Regent, in which event the parties shall then proceed
to the execution of definitive agreements with representations, warranties,
terms and conditions customary for transactions of such nature (including
conditions for physical, environmental and engineering inspections), the
satisfaction of applicable conditions, and closing pursuant to the terms offered
or negotiated. Should Regent fail to elect to acquire the assets or stock on the
terms offered or negotiated, Buyer or the shareholders shall be free to proceed
to sell to a third party in accordance with the terms offered to Regent,
provided, however, in the event the actual sale price negotiated with a third
party purchaser is less than ninety percent (90%) of the lowest price offered to
Regent, the provisions of Section 17.10.2 below shall apply.
17.10.2 In the event the sale price negotiated with a third
party purchaser is less than ninety percent (90%) of the price offered to Regent
in accordance with Section 17.10.1 above, Buyer or its shareholders, as the case
may be, shall provide written notice to Regent of such proposed sale, setting
forth all material terms and provisions of the proposed sale. Regent shall have
a period of five (5) business days after receipt of such notice to agree in
writing to purchase the assets at the same price and on the same terms and
provisions as contained in the notice and to deliver a written notice to that
effect to Buyer or its shareholders, as the case may be. If Regent does not
timely elect to exercise sale right of first refusal, Buyer or the shareholders
may consummate such sale with the third party purchaser in accordance with the
terms and provisions set forth in the notice.
17.11 Counterparts. This Agreement may be executed in one or more
counterparts and by facsimile, each of which will be deemed an original and all
of which together will constitute one and the same instrument.
17.12 No Third Party Beneficiaries. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person
or entity other than the parties hereto and their successors or permitted
assigns any rights or remedies under or by reason of this Agreement.
17.13 Severability. The parties agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable law, this Agreement shall be
construed with the invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected or impaired thereby.
17.14 Entire Agreement. This Agreement and the schedules and exhibits
hereto embody the entire agreement and understanding of the parties hereto and
supersede any and all prior agreements, arrangements and understandings relating
to the matters provided for herein.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
REGENT LICENSEE OF FLAGSTAFF, INC.
By: /s/
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
REGENT BROADCASTING OF FLAGSTAFF, INC.
By: /s/
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
THE GUYANN CORPORATION
By: /s/
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
268185_2.DOC
The following shareholders, representing in excess of sixty-six percent
(66%) of the outstanding voting stock of Buyer, hereby agree to be bound by the
provisions of Section 17.10 above.
/s/
------------------------------------------
/s/
------------------------------------------
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------------------------------------------
<PAGE> 1
EXHIBIT 3(a)
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
REGENT COMMUNICATIONS, INC.
Regent Communications, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies that the
Corporation was originally incorporated under the name "JS Communications, Inc."
on November 4, 1996, and that its original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on the same date. The
Corporation further certifies that the Corporation changed its named from JS
Communications, Inc. to Regent Communications, Inc. upon the filing with the
Secretary of State of Delaware of a Certificate of Amendment on May 16, 1997.
The Corporation further certifies that this Amended and Restated Certificate of
Incorporation amends and restates the provisions previously filed with the
Secretary of State of the State of Delaware.
FIRST: Name. The name of the Corporation is Regent Communications, Inc.
SECOND: Registered Office and Registered Agent. The registered office
of the Corporation in the State of Delaware is 1209 Orange Street, New Castle
County, Wilmington, Delaware 19801. The Registered Agent at the same address is
The Corporation Trust Company.
THIRD: Purposes. The purposes of the Corporation are to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: Capital Stock.
A. Authorized Capital Stock. The total number of shares of all classes
of stock which the Corporation shall have authority to issue is Fifty Million
(50,000,000) shares, consisting of a class of Thirty Million (30,000,000) shares
of Common Stock, par value of $.01 per share, and a class of Twenty Million
(20,000,000) shares of Preferred Stock, par value of $.01 per share.
B. Common Stock. The Common Stock shall have full voting rights and
other characteristics of common stock recognized under the General Corporation
Law of the State of Delaware subject to the rights and preferences of Preferred
Stock; provided, however, in the event the Corporation holds (directly or
indirectly) a license or franchise from the Federal Communications Commission to
conduct its business and such license or franchise is conditioned upon some or
all of the holders of its capital stock possessing prescribed qualifications,
such Common Stock and the Preferred Stock shall be subject to redemption by the
Corporation, to the extent necessary to prevent the loss of such license or
franchise or to reinstate it, for cash, property or rights, including other
securities of the Corporation, at such time or times as the Board of Directors
determines upon notice and following the same procedures as are applicable to
redemption of Preferred Stock at a redemption price equal to the greater of the
amount of its liquidation preference or its fair market value; and provided
further, that the
<PAGE> 2
Board of Directors is authorized, subject to limitations prescribed by law and
the provisions of this Article FOURTH, to provide for the issuance of a series
of Common Stock designated Series B Common Stock consisting of such number of
shares constituting said series as the Board of Directors shall determine from
time to time, each share to be convertible at any time at the option of the
holder in the same manner and subject to the same conditions as were applicable
to a voluntary conversion of the Series D Convertible Preferred Stock set forth
in Section 7 of Subpart G of this Article FOURTH into one share of Common Stock
(subject to equitable adjustment for stock splits, reverse stock splits, common
stock dividends and the like), and such Series B Common Stock, having the
restricted voting rights applicable to the Series D Convertible Preferred Stock
set forth in Section 3 of Subpart G of this Article FOURTH and constituting the
series of Common Stock issuable upon a mandatory conversion of the Series D
Convertible Preferred Stock pursuant to Section 7[c][i] of Subpart G of this
Article FOURTH, and by filing a certificate pursuant to the applicable law of
the State of Delaware to fix the number of shares to be included in such Series
B Common Stock and to set forth the restricted voting and conversion rights
thereof.
C. Preferred Stock. The Board of Directors is authorized, subject to
the limitations prescribed by law and the provisions of this Article FOURTH, to
provide for the issuance of the shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designations, powers, preferences and rights of the
shares of each such series and the qualifications, limitations or restrictions
thereof.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
[1] The number of shares constituting that series and the
distinctive designation of that series;
[2] The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends on
shares of that series;
[3] Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such
voting rights;
[4] Whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including provision
for adjustment of the conversion rate in such events as the Board of
Directors shall determine;
[5] Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
[6] Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
2
<PAGE> 3
[7] The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment of
shares of that series;
[8] Any other relative rights, preferences and limitations of
that series.
D. Designation of Series A Convertible Preferred Stock. A series of the
Preferred Stock of the Corporation is hereby created and authorized, and the
designations, amount and stated value of such series of Preferred Stock and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereon, are as follows:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as "Series A Convertible
Preferred Stock" (the "Series A Preferred") and the number of shares
constituting such series shall be 620,000 shares. The stated value of the Series
A Preferred shall be $5 per share, the original per share issue price (the
"Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series A Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing commencing with the date of issue of such shares, on shares of
the Series A Preferred at the rate of $.35 per share per annum. No interest
shall be paid on accrued but unpaid dividends.
SECTION 3. VOTING RIGHTS.
In addition to voting rights required by law or by this Amended
Certificate of Incorporation, as amended or restated from time to time (the
"Certificate of Incorporation"), subject to restrictions contained in this
Certificate of Incorporation the holders of Series A Preferred shall be entitled
to vote on all matters submitted to a vote of the Corporation's stockholders.
Except as otherwise required by law or provided by this Certificate of
Incorporation or by the Board of Directors pursuant to Subpart C of this Article
FOURTH, the holders of the Series A Preferred, shall vote together with the
holders of all other series of the Corporation's voting preferred stock and the
holders of the Corporation's Common Stock as one class with one vote per share
(in the case of Preferred Stock, subject to adjustments as provided in Section 7
below and if convertible into Common Stock, one vote per share of Common Stock
into which such convertible Preferred Stock is then convertible) on all matters
submitted to a vote of the Corporation's stockholders.
SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series A Preferred as provided in
Section 2 are in arrears, thereafter and until dividends, including all accrued
dividends, on shares of the Series A Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any stock ranking junior (either as to
dividends or upon liquidation, dissolution or
3
<PAGE> 4
winding up) to the Series A Preferred, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such junior stock in
exchange for shares of any such junior stock, (B) pay dividends on or make any
other distributions on any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred, except
dividends paid ratably on the Series A Preferred and all such parity stock on
which dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled, (C) redeem or purchase
or otherwise acquire for consideration any stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior to the Series A Preferred or in
satisfaction of contractual obligations to do so entered into with the written
consent of the holders of a majority of outstanding shares of Series A Preferred
(including, without limitation, in satisfaction of the provisions contained in
the Stockholders' Agreement), or (D) purchase or otherwise acquire for
consideration any shares of the Series A Preferred, or any shares of stock
ranking on a parity with the Series A Preferred except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series of classes, or except pursuant to the provisions of the
Stockholders' Agreement. As used in this Amended and Restated Certificate of
Incorporation, the term "Stockholders' Agreement" shall mean that certain Second
Amended and Restated Stockholders' Agreement, dated in June, 1998, among the
Corporation and certain of its stockholders, as the same may be further amended,
restated or modified from time to time. All references to the Stockholders'
Agreement shall be applicable as long as the Stockholders' Agreement remains in
effect.
SECTION 5. REACQUIRED SHARES.
Any shares of the Series A Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, or otherwise in accordance with Delaware General
Corporation Law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of the Series A Preferred unless,
prior thereto, the holders of the Series B Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (B) to the holders of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Preferred
unless, prior thereto, the holders of Series A Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (C) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred, except distributions made ratably on the Series A Preferred and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
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SECTION 7. CONVERSION.
[a] Optional Conversion. Subject to the provisions for
adjustment hereinafter set forth, each share of the Series A Preferred
shall be convertible at any time at the option of the holder thereof,
in the manner hereinafter set forth, into one (1) fully paid and
nonassessable share of Common Stock of the Corporation.
[b] Mandatory Conversion. Subject to the provisions for
adjustment set forth in this Section 7, each share of the Series A
Preferred shall be convertible at the option of the Board of Directors,
under the conditions hereinafter set forth, into one (1) fully paid and
nonassessable share of Common Stock of the Corporation. The Board of
Directors of the Corporation may require conversion of all shares of
the Series A Preferred into shares of Common Stock in preparation for
or upon any of the following:
[i] A public offering of equity securities of the
Corporation of at least $10,000,000 in gross proceeds;
[ii] A private placement of equity securities of the
Corporation of at least $25,000,000 in gross proceeds;
[iii] A private placement of equity securities of the
Corporation of at least $10,000,000 in gross proceeds under
circumstances where the investor(s) reasonably believe the
conversion of the Series A Preferred is necessary to achieve
its (their) investment objectives;
[iv] A merger of the Corporation with another
corporation or other entity, whether or not the Corporation is
a survivor of such transaction whereby as a result the
stockholders of the Corporation hold less than 50% of the
outstanding capital stock of the surviving entity; or
[v] An acquisition of equity securities of the
Corporation in one transaction or in a series of related
transactions which results in a transfer of majority voting
control of the Corporation.
[c] The number of shares of Common Stock into which each share
of the Series A Preferred is convertible shall be adjusted from time to
time as follows:
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series A
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise),
then, and in each such case, the number of shares of Common
Stock into which each share of the Series A Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the
occurrence of such event by (b) a fraction, the numerator of
which is the sum of (I) the number of shares of Common Stock
into which such share was convertible immediately prior to the
occurrence of such event plus (II) the number
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of shares of Common Stock which such holder would have been
entitled to receive in connection with the occurrence of such
event had such share been converted immediately prior thereto,
and the denominator of which is the number of shares of Common
Stock determined in accordance with clause (I) above. An
adjustment made pursuant to this subparagraph [c][i] shall
become effective (a) in the case of any such dividend,
immediately after the close of business on the record date for
the determination of holders of Common Stock entitled to
receive such dividend, or (b) in the case of any such
subdivision, at the close of business on the day immediately
prior to the day upon which such corporate action becomes
effective.
[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series A Preferred
shall combine or consolidate the outstanding shares of its
Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of
the Series A Preferred is convertible shall be adjusted so
that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of
Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such share was convertible
immediately prior to the occurrence of such event by (b) a
fraction, the numerator of which is the number of shares which
the holder would have owned after giving effect to such event
had such share been converted immediately prior to the
occurrence of such event and the denominator of which is the
number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event.
An adjustment made pursuant to this subparagraph b(ii] shall
become effective at the close of business on the date
immediately prior to the day upon which such corporate action
becomes effective.
[iii] In case the Corporation after the issuance of
such share of Series A Preferred shall: (A) issue any options,
warrants, or other rights (excluding those issued in exchange
for options to purchase common stock in Faircom Inc. pursuant
to the terms of a merger, and excluding options to purchase
Common Stock issued to management of the Corporation
exercisable for up to the lesser of 2,000,000 shares of Common
Stock (subject to adjustment pursuant to provisions applicable
to the options in the case of stock splits, reverse stock
splits and the like) or that number of shares of Common Stock
equal to fifteen percent (15%) of the aggregate number of
outstanding shares of Common Stock and other equity securities
of the Corporation exercisable for the purchase of, or
convertible into, Common Stock computed on a fully-diluted
basis) entitling the holder thereof to subscribe for, or
purchase, Common Stock at a price per share which, when added
to the amount of consideration received or receivable by the
Corporation for such options, warrants, or other rights, is
less than the then fair market value per share of the Common
Stock at the date of such issuance; (B) issue or sell
securities of the Corporation convertible into, or
exchangeable for, Common Stock at a price per share which,
when added to the amount of consideration received or
receivable, from the Corporation for such exchangeable or
convertible securities, is less than the then fair market
value of a share of Common Stock at the date of such issuance;
or (C) issue or sell additional shares of Common Stock for
consideration representing less than the then fair market
value of the Common Stock at the date of such issuance; then
the number of shares of Common Stock into which each share of
the Series A Preferred is convertible shall be adjusted so
that, thereafter, until further
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adjusted, the holder of each share thereof shall be entitled
to receive, upon the conversion thereof, the number of shares
of Common Stock determined by multiplying (w) the number of
shares of Common Stock into which such shares are convertible
immediately prior to the occurrence of such event by (x) a
fraction, the numerator of which shall be the number of shares
of Common Stock outstanding prior to such issuance plus the
number of additional shares of Common Stock issuable upon
exercise of such options, warrants, or rights, or exchangeable
or convertible securities, or the additional number of shares
of Common Stock issued at such time, and the denominator of
which shall be the number of shares of Common Stock
outstanding prior to such issuance plus the number of shares
of Common Stock that either (y) the sum of the aggregate
exercise price of the total number of shares of Common Stock
issuable upon exercise of such options, warrants, or rights,
or upon conversion or exchange of such convertible securities,
and the aggregate amount of consideration, if any, received or
receivable by the Corporation for such options, warrants, or
rights, or convertible or exchangeable securities, or (z) the
aggregate consideration received in connection with the sale
of shares of its Common Stock for less than the then fair
market value, as the case may be, would purchase at the then
fair market value.
[iv] In the event that, at any time, or from
time to time, after the issuance such share of the Series A
Preferred, the Common Stock issuable upon conversion of the
Series A Preferred Stock is changed into the same or a
different number of shares of any class or classes of stock,
whether by recapitalization, reclassification, or otherwise
(other than a subdivision or combination of shares or stock
dividend, or a reorganization, merger, consolidation or sale
of assets, provided for elsewhere in this Section 7), then,
and in any such event, each holder of Series A Preferred shall
have the right thereafter to convert such stock into the kind
and amount of stock and other securities and property
receivable upon such recapitalization, reclassification, or
other change, by holders of the number of shares of Common
Stock into which such shares of Series A Preferred could have
been converted immediately prior to such recapitalization,
reclassification, or change, all subject to further adjustment
as provided herein.
[v] If at any time, or from time to time
after the issuance such share of the Series A Preferred there
is a capital reorganization of the Common Stock other than a
recapitalization, subdivision, combination, reclassification,
or exchange of shares provided for elsewhere in this Section
7) or a merger or consolidation of the Corporation with or
into another corporation, or the sale of all, or substantially
all, of the Corporations' properties and assets to any other
person, then, as a part of such reorganization, merger,
consolidation, or sale, provision shall be made so that the
holders of the Series A Preferred shall thereafter be entitled
to receive upon conversion of the Series A Preferred the
number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation, or sale. In any
such case, appropriate adjustment shall be made in the
application of the provisions of this Section 7 with respect
to the rights of the holders of Series A Preferred after the
reorganization, merger, consolidation, or sale to the end that
the provisions of this Section 7 shall be applicable after
that event and be as nearly equivalent as may be practicable.
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[vi] Upon the expiration of any rights,
options, warrants or conversion or exchange privileges which
caused an adjustment pursuant to this Section 7 to be made, if
any thereof shall not have been exercised, the number of
shares of Common Stock into which each share of the Series A
Preferred is convertible shall, upon such expiration, be
readjusted and shall thereafter be such as it would have been
had it been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (a)
the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion or
exchange privileges and (b) such shares of Common Stock, if
any, were issued or sold for the consideration actually
received by the Corporation upon such exercise plus the
aggregate consideration, if any, actually received by the
Corporation for the issuance, sale or grant of all such
rights, options, warrants or conversion or exchange
privileges, whether or not exercised.
[d] If any adjustment in the number of shares of Common Stock
into which each share of the Series A Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of the Series A Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series A Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series A Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [d] shall be made to the
nearest one-hundredth of a share.
[e] Subject to the limitation in Section 7[h] below, the
holder of any shares of the Series A Preferred may convert such shares
into shares of Common Stock pursuant to paragraph [a] of this Section 7
by surrendering for such purpose to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation
for that purpose, a certificate or certificates representing the shares
of Series A Preferred to be converted (or if such certificate or
certificates cannot be found, an affidavit of lost securities in form
and substance acceptable to the Corporation) accompanied by a written
notice stating that such holder elects to convert all or a specified
number of such shares in accordance with the provisions of this Section
7 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name
or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates and the receipt
of such notice relating thereto and, if applicable, payment of all
transfer taxes, the Corporation shall deliver or cause to be delivered
(i) certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock of the Corporation to which
the holder of the Series A Preferred so converted shall be entitled and
(ii) if less than the full number of shares of the Series A Preferred
evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or
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certificates less the number of shares converted. Such conversions
shall be deemed to have been made at the close of business on the date
of giving of such notice and of such surrender of the certificate or
certificates representing the shares of the Series A Preferred to be
converted so that the rights of the holder thereof shall cease except
for the right to receive Common Stock of the corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [g] below,, and the converting holder shall be treated for
all purposes as having become the record holder of such Common Stock of
the Corporation at such time.
[f] The Series A Preferred shall convert to Common Stock of
the Corporation pursuant to paragraph [b] of this Section 7
automatically upon notice in writing to the stockholders, including all
holders of the Series A Preferred, setting forth the date of such
conversion and the material terms of the triggering event. As promptly
as practicable after such notice, and in any event within five business
days after the surrender of certificates for the Series A Preferred (if
required by the Board of Directors), the Corporation shall deliver or
cause to be delivered to each holder of Series A Preferred certificates
representing the number of validly issued, fully paid and nonassessable
shares of Common Stock of the Corporation to which such holder of the
Series A Preferred so converted shall be entitled. Such conversion
shall be deemed to have been made at the close of business on the date
set forth in such notice of mandatory conversion so that the rights of
the holder thereof shall cease with or without surrender of
certificates for the Series A Preferred, except for the right to
receive Common Stock of the Corporation in accordance herewith and any
accumulated, accrued or unpaid dividends pursuant to paragraph [g]
below,, and the converting holder shall be treated for all purposes as
having become the record holder of such Common Stock of the Corporation
at such time.
[g] Upon conversion of any shares of the Series A Preferred
pursuant to paragraphs [a] or [b] of this Section 7, the holder thereof
shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted, including any
dividends on such shares of the Series A Preferred declared prior to
such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series A Preferred
entitled to receive payment of such dividend.
[h] Shares of the Series A Preferred may not be converted
after the close of business on the third business day preceding the
Redemption Date pursuant to Section 8.
[i] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series A Preferred.
[j] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
[k] The provisions in paragraph [c][ii] above shall not apply
to, and no adjustment shall be made as a result of, a reverse stock
split of Common Stock made by the Corporation on December 1, 1997.
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SECTION 8. REDEMPTION.
[a] The Corporation may, at the election of its Board of
Directors, at any time or from time to time, redeem the whole or part
of the Series A Preferred, at the Stated Value, plus an amount equal to
all unpaid dividends thereon, including accrued dividends, whether or
not declared, to the date of redemption. In case the Corporation shall
elect to redeem less than all the Series A Preferred, the Corporation
shall select pro rata the shares so to be redeemed, except that if the
Board of Directors determines in its reasonable business judgment that
to do so by lot would be in the best interests of the Corporation, then
the shares so to be redeemed shall be selected by lot in such manner as
shall be prescribed by the Board of Directors.
[b] Notice of every such redemption shall be mailed, first
class postage prepaid, not less than thirty (30) nor more than sixty
(60) days prior to the date fixed for redemption ("Redemption Date"),
to each holder of record of the shares to be redeemed, at his or her
address as the same appears on the record of stockholders; but neither
failure to mail any such notice to one or more such holders nor any
defect in any such notice shall affect the sufficiency of the
proceedings for redemptions as to other holders. Each such notice shall
state the Redemption Date; the number of shares of Series A Preferred
to be redeemed, and, if less than all the shares of Series A Preferred
held by such holder are to be redeemed, the manner of selecting by lot
the shares to be redeemed; the place or places where such shares are to
be surrendered for payment; that dividends on the shares to be redeemed
will cease on such Redemption Date; and the effect of such redemption
on the right of conversion.
[c] Notice having been mailed as aforesaid, from and after the
Redemption Date, all dividends on the shares so called for redemption
shall cease to accrue, said shares shall no longer be deemed to be
outstanding, all rights of the holders thereof as stockholders of the
Corporation (except the right to receive payment for the shares, the
right to receive declared dividends pursuant to Section 7[g] above, and
the right to convert such shares into shares of Common Stock of the
Corporation until the close of business on the third business day
preceding the Redemption Date, as provided in Section 7) shall cease,
and, upon surrender in accordance with said notice of the certificates
for any such shares (properly endorsed or assigned for transfer, if the
Board of Directors shall so require), such shares shall be redeemed by
the Corporation in accordance with this Section 8. In connection with
the determination of the amount of dividends accruing with respect to
any conversion in the period between a notice of redemption and the
Redemption Date, on a date which is not a Quarterly Dividend Payment
Date, the amount of any such dividends shall be prorated based upon the
number of days which have elapsed since the immediately preceding
Quarterly Dividend Payment Date (excluding such Quarterly Dividend
Payment Date itself).
SECTION 9. REPORTS AS TO ADJUSTMENTS.
Whenever the number of shares of Common Stock into which the shares of
the Series A Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series A Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series A Preferred is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and when such adjustment will become
effective and (B) promptly mail to the holders of record of the
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outstanding shares of the Series A Preferred a notice stating that the number of
shares into which the shares of Series A Preferred are convertible has been
adjusted and setting forth the new number of shares into which each share of the
Series A Preferred is convertible as a result of such adjustment and when such
adjustment will become effective. Notwithstanding the foregoing, the Corporation
shall incur no liability for its failure to take any action set forth in this
Section 9, nor shall such failure affect the validity, rights or preferences of
any shares of the Series A Preferred.
SECTION 10. RANKING.
The Series A Preferred shall rank senior to the Common Stock and any
other series of Preferred Stock of the Corporation hereafter created (except for
the Series B Preferred, which shall rank senior to the Series A Preferred, and
except for the Series C Preferred, the Series D Preferred, the Series E
Preferred, the Series F Preferred, and any other series of Preferred Stock which
the Board of Directors shall establish and designate to rank equal therewith
pursuant to Subpart C of this Article FOURTH, with which it shall rank equal),
as to the payment of dividends and the distribution of assets and rights upon
liquidation, dissolution or winding up of the Corporation.
SECTION 11. DIRECTORSHIP.
The holders of the Series A Preferred, as a class, shall be entitled to
be represented on the Board of Directors by one Director (the "Series A
Director") who, upon nomination by such holders, as a class, will stand for
election by voting by the holders of the Preferred Stock (subject to limitations
in this Article FOURTH or established by the Board of Directors pursuant to
Section C of this Article FOURTH) and holders of Common Stock together, except
under circumstances where the number of individuals nominated for election
exceeds the number of Directors to be elected. In the event the number of
individuals nominated for election exceeds the number of Directors to be elected
then the holders of the Series A Preferred shall have the sole right to vote
for, elect and remove the individual nominated by them, as a class, to serve as
the Series A Director, and in such event the further right to vote for, elect or
remove any of the other Directors who are not to be elected solely by the
holders of another class or series of Preferred Stock. The Series A Director,
upon being elected, will serve for the same term and have the same voting powers
as other Directors. In addition, the Series A Director shall serve as a member
of the Compensation, Audit, and Nominating Committees of the Board of Directors
(or any other committee of the Board performing such functions), which
Committees will be composed of at least one Director, in addition to the Series
A Director, who is not an employee of the Corporation.
E. Designation of Series B Senior Convertible Preferred Stock. A series
of the Preferred Stock of the corporation is hereby created and authorized, and
the designations, amount and stated value of such series of Preferred Stock and
the voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereon, are as follows:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as Series B Senior
Convertible Preferred (the "Series B Preferred") and the number of shares
constituting such series shall be 1,000,000 shares. The stated value of the
Series B Preferred shall be $5 per share, the original per share issue price
(the "Stated Value").
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SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series B Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing commencing with the date of issue of such shares, on shares of
the Series B Preferred at the rate of $.35 per share per annum; provided,
however, such rate shall be increased to $.45 per share per annum immediately
upon but only for the period during which the ratio of (a) the sum of (i) the
Corporation's Consolidated Total Debt plus (ii) the aggregate Stated Value of
the then outstanding shares of Series B Preferred to (b) the Corporation's
Adjusted Consolidated Operating Cash Flow for any four fiscal quarter period
ending as of the last day of any fiscal quarter of the Corporation exceeds, as a
result of the incurrence by the Corporation of additional debt, 7.75 to 1.00. No
interest shall be paid on accrued but unpaid dividends. For purposes of this
Section, the terms "Consolidated Total Debt" and "Adjusted Consolidated
Operating Cash Flow" shall have the meanings given those terms in that certain
Credit Agreement, dated as of November 14, 1997, as amended through June 11,
1998, among the Corporation, the Lenders listed therein, General Electric
Capital Corporation (as Documentation Agent), and Bank of Montreal, Chicago
Branch (as Agent) (not taking into account any modification or amendment of such
definitions at any time after June 11, 1998 not consented to in writing by
holders of the Series B Preferred and irrespective of the termination of such
Credit Agreement).
SECTION 3. VOTING RIGHTS.
Except as provided herein or otherwise required by law, the voting
power of the Corporation shall be vested in the holders of shares of Common
Stock, Series A Preferred, Series C Preferred, Series E Preferred, Series F
Preferred, and such other series of voting preferred stock as are from time to
time designated, and the holders of shares of Series B Preferred and the Series
D Preferred shall have no voting power except that with respect to the events
described below, the holders of the Series A Preferred, the Series B Preferred,
the Series C Preferred, the Series D Preferred, the Series E Preferred, Series
F. Preferred, and all other series of voting preferred stock as are from time to
time designated to have such voting rights, and the holders of the Corporation's
Common Stock shall vote together as one class with one vote per share (in the
case of Preferred Stock, subject to adjustments as provided in Section 7 below
and if convertible into Common Stock, one vote per share of Common Stock into
which such convertible Preferred Stock is then convertible), to the extent such
of the following events are otherwise subject to the vote of any holders of
capital stock of the Corporation pursuant to the requirements of the Delaware
General Corporation Law:
[a] any amendment of this Amended and Restated Certificate of
Incorporation;
[b] a sale of all or substantially all of the assets of the
Corporation;
[c] the dissolution, liquidation or termination of the
Corporation;
[d] any acquisition of, or merger of the Corporation with,
another corporation or other entity, whether or not the Corporation is
a survivor of such transaction;
[e] any change in the fundamental nature of the business of
the Corporation;
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[f] any transaction with affiliates, except upon fair and
reasonable terms comparable to an arms-length transaction; and
[g] any change in the Corporation's capital structure in a
manner that dilutes the ownership interest of the holders of Series B
Preferred.
SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series B Preferred as provided in
Section 2 are in arrears, thereafter and until dividends, including all accrued
dividends, on shares of the Series B Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series B
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
such junior stock, (B) pay dividends on or make any other distributions on any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series B Preferred, except dividends paid
ratably on the Series B Preferred and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled, (C) redeem or purchase or
otherwise acquire for consideration any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series B
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior to the Series B Preferred or in
satisfaction of contractual obligations to do so entered into with the written
consent of the holders of a majority of outstanding shares of Series B
Preferred, or (D) purchase or otherwise acquire for consideration any shares of
the Series B Preferred, or any shares of stock ranking on a parity with the
Series B Preferred except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series of classes.
SECTION 5. REACQUIRED SHARES.
Any shares of the Series B Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, or otherwise in accordance with Delaware General
Corporation Law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series B
Preferred unless, prior thereto, the holders of Series B Preferred shall have
received the Stated Value per share, plus an amount equal to unpaid dividends
thereon, including accrued dividends, whether or not declared, to the date of
such payment or (B) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series
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B Preferred, except distributions made ratably on the Series B Preferred and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 7. CONVERSION.
[a] Optional Conversion. Subject to the provisions for
adjustment hereinafter set forth, each share of the Series B Preferred
shall be convertible at any time at the option of the holder thereof,
in the manner hereinafter set forth, into one-half (1/2) fully paid and
nonassessable share of Common Stock of the Corporation.
[b] Mandatory Conversion. Subject to the provisions for
adjustment set forth in this Section 7, each share of the Series B
Preferred shall be convertible at the option of the Board of Directors
into one-half (1/2) fully paid and nonassessable share of Common Stock
of the Corporation in the event of, and concurrently with the closing
of, a public offering of Common Stock of the Corporation at a per share
price of at least $12.00 (subject to adjustment for stock splits, stock
dividends, reverse stock splits and the like) with gross proceeds to
the Corporation of at least $25,000,000 (excluding the effect of any
over-allotment option).
[c] The number of shares of Common Stock into which each share
of the Series B Preferred is convertible shall be adjusted from time to
time as follows:
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series B
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise),
then, and in each such case, the number of shares of Common
Stock into which each share of the Series B Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the
occurrence of such event by (b) a fraction, the numerator of
which is the sum of (I) the number of shares of Common Stock
into which such share was convertible immediately prior to the
occurrence of such event plus (II) the number of shares of
Common Stock which such holder would have been entitled to
receive in connection with the occurrence of such event had
such share been converted immediately prior thereto, and the
denominator of which is the number of shares of Common Stock
determined in accordance with clause (I) above. An adjustment
made pursuant to this subparagraph [c][i] shall become
effective (a) in the case of any such dividend, immediately
after the close of business on the record date for the
determination of holders of Common Stock entitled to receive
such dividend, or (b) in the case of any such subdivision, at
the close of business on the day immediately prior to the day
upon which such corporate action becomes effective.
[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series B Preferred
shall combine or consolidate the outstanding shares of its
Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of
the Series B Preferred is convertible shall be
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<PAGE> 15
adjusted so that the holder of each share thereof shall be
entitled to receive, upon the conversion thereof, the number
of shares of Common Stock determined by multiplying (a) the
number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event
by (b) a fraction, the numerator of which is the number of
shares which the holder would have owned after giving effect
to such event had such share been converted immediately prior
to the occurrence of such event and the denominator of which
is the number of shares of Common Stock into which such share
was convertible immediately prior to the occurrence of such
event. An adjustment made pursuant to this subparagraph b[ii]
shall become effective at the close of business on the date
immediately prior to the day upon which such corporate action
becomes effective.
[iii] In case the Corporation after the
issuance of such share of Series B Preferred shall: (A) issue
any options, warrants, or other rights entitling the holder
thereof to subscribe for, or purchase, Common Stock at a price
per share which, when added to the amount of consideration
received or receivable by the Corporation for such options,
warrants, or other rights, is less than the then fair market
value per share of the Common Stock at the date of such
issuance (other than stock options issued in exchange for
options to purchase common stock in Faircom Inc. pursuant to
the terms of a merger and options to purchase Common Stock
issued to management of the Corporation exercisable for up to
the lesser of 2,000,000 shares of Common Stock (subject to
adjustment pursuant to provisions applicable to the options in
the case of stock splits, reverse stock splits and the like)
or that number of shares of Common Stock equal to fifteen
percent (15%) of the aggregate number of outstanding shares of
Common Stock and other equity securities of the Corporation
exercisable for the purchase of, or convertible into, Common
Stock computed on a fully-diluted basis); (B) issue or sell
securities of the Corporation convertible into, or
exchangeable for, Common Stock at a price per share which,
when added to the amount of consideration received or
receivable, from the Corporation for such exchangeable or
convertible securities, is less than the then fair market
value of a share of Common Stock at the date of such issuance;
or (C) issue or sell additional shares of Common Stock for
consideration representing less than the then fair market
value of the Common Stock at the date of such issuance; then
the number of shares of Common Stock into which each share of
the Series B Preferred is convertible shall be adjusted so
that, thereafter, until further adjusted, the holder of each
share thereof shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock
determined by multiplying (w) the number of shares of Common
Stock into which such shares are convertible immediately prior
to the occurrence of such event by (x) a fraction, the
numerator of which shall be the number of shares of Common
Stock outstanding prior to such issuance plus the number of
additional shares of Common Stock issuable upon exercise of
such options, warrants, or rights, or exchangeable or
convertible securities, or the additional number of shares of
Common Stock issued at such time, and the denominator of which
shall be the number of shares of Common Stock outstanding
prior to such issuance plus the number of shares of Common
Stock that either (y) the sum of the aggregate exercise price
of the total number of shares of Common Stock issuable upon
exercise of such options, warrants, or rights, or upon
conversion or exchange of such convertible securities, and the
aggregate amount of consideration, if any, received or
receivable by the Corporation for such options, warrants, or
rights, or convertible or
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<PAGE> 16
exchangeable securities, or (z) the aggregate consideration
received in connection with the sale of shares of its Common
Stock for less than the then fair market value, as the case
may be, would purchase at the then fair market value.
[iv] In the event that, at any time, or from
time to time, after the issuance of such share of the Series B
Preferred, the Common Stock issuable upon conversion of the
Series B Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend, or a
reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 7), then, and in any
such event, each holder of Series B Preferred shall have the
right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable
upon such recapitalization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such shares of Series B Preferred could have been converted
immediately prior to such recapitalization, reclassification,
or change, all subject to further adjustment as provided
herein.
[v] If at any time, or from time to time
after the issuance of such share of the Series B Preferred
there is a capital reorganization of the Common Stock (other
than a recapitalization, subdivision, combination,
reclassification, or exchange of shares provided for elsewhere
in this Section 7) or a merger or consolidation of the
Corporation with or into another corporation, or the sale of
all, or substantially all, of the Corporation's properties and
assets to any other person, then, as a part of such
reorganization, merger, consolidation, or sale, provision
shall be made so that the holders of the Series B Preferred
shall thereafter be entitled to receive upon conversion of the
Series B Preferred the number of shares of stock or other
securities or property to which a holder of the number of
shares of Common Stock deliverable upon conversion would have
been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions
of this Section 7 with respect to the rights of the holders of
Series B Preferred after the reorganization, merger,
consolidation, or sale to the end that the provisions of this
Section 7 shall be applicable after that event and be as
nearly equivalent as may be practicable.
[vi] Upon the expiration of any rights,
options, warrants or conversion or exchange privileges which
caused an adjustment pursuant to this Section 7 to be made, if
any thereof shall not have been exercised, the number of
shares of Common Stock into which each share of the Series B
Preferred is convertible shall, upon such expiration, be
readjusted and shall thereafter be such as it would have been
had it been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (a)
the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion or
exchange privileges and (b) such shares of Common Stock, if
any, were issued or sold for the consideration actually
received by the Corporation upon such exercise plus the
aggregate consideration, if any, actually received by the
Corporation for the issuance, sale or grant of all such
rights, options, warrants or conversion or exchange
privileges, whether or not exercised.
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<PAGE> 17
[d] If any adjustment in the number of shares of Common Stock
into which each share of the Series B Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of the Series B Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series B Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series B Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [d] shall be made to the
nearest one-hundredth of a share.
[e] Subject to the limitation in Section 7[h] below, the
holder of any shares of the Series B Preferred may convert such shares
into shares of Common Stock pursuant to paragraph [a] of this Section 7
by surrendering for such purpose to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation
for that purpose, a certificate or certificates representing the shares
of Series B Preferred to be converted (or if such certificate or
certificates cannot be found, an affidavit of lost securities in form
and substance acceptable to the Corporation) accompanied by a written
notice stating that such holder elects to convert all or a specified
number of such shares in accordance with the provisions of this Section
7 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name
or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates and the receipt
of such notice relating thereto and, if applicable, payment of all
transfer taxes, the Corporation shall deliver or cause to be delivered
(I) certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock of the Corporation to which
the holder of the Series B Preferred so converted shall be entitled and
(ii) if less than the full number of shares of the Series B Preferred
evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted. Such conversions
shall be deemed to have been made at the close of business on the date
of giving of such notice and of such surrender of the certificate or
certificates representing the shares of the Series B Preferred to be
converted so that the rights of the holder thereof shall cease except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [g] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[f] The Series B Preferred shall convert to Common Stock of
the Corporation pursuant to paragraph [b] of this Section 7
automatically upon notice in writing to the stockholders, including all
holders of the Series B Preferred, setting forth the date of such
conversion and the material terms of the triggering public offering. As
promptly as practicable after such notice, and in any event within five
business days after the surrender of certificates for the Series B
Preferred (if required by the Board of Directors), the Corporation
shall deliver or
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<PAGE> 18
cause to be delivered to each holder of Series B Preferred certificates
representing the number of validly issued, fully paid and nonassessable
shares of Common Stock of the Corporation to which such holder of the
Series B Preferred so converted shall be entitled. Such conversion
shall be deemed to have been made at the close of business on the date
set forth in such notice of mandatory conversion so that the rights of
the holder thereof shall cease with or without surrender of
certificates for the Series B Preferred, except for the right to
receive Common Stock of the Corporation in accordance herewith and any
accumulated, accrued or unpaid dividends pursuant to paragraph [g]
below, and the converting holder shall be treated for all purposes as
having become the record holder of such Common Stock of the Corporation
at such time.
[g] Upon conversion of any shares of the Series B Preferred
pursuant to paragraphs [a] or [b] of this Section 7, the holder thereof
shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted, including any
dividends on such shares of the Series B Preferred declared prior to
such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series B Preferred
entitled to receive payment of such dividend.
[h] Shares of the Series B Preferred may not be converted
after the close of business on the third business day preceding the
Redemption Date pursuant to Section 8.
[i] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series B Preferred.
[j] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser, who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
SECTION 8. REDEMPTION.
[a] The Corporation may, at the election of its Board of
Directors, at any time or from time to time, redeem the whole or part
of the Series B Preferred, at the Stated Value, plus an amount equal to
all unpaid dividends thereon, including accrued dividends, whether or
not declared, to the date of redemption. In case the Corporation shall
elect to redeem less than all the Series B Preferred, the Corporation
shall select pro rata the shares so to be redeemed, except that if the
Board of Directors determines in its reasonable business judgment that
to do so by lot would be in the best interests of the Corporation, then
the shares so to be redeemed shall be selected by lot in such manner as
shall be prescribed by the Board of Directors.
[b] Notice of every such redemption shall be mailed, first
class postage prepaid, not less than thirty (30) nor more than sixty
(60) days prior to the date fixed for redemption ("Redemption Date"),
to each holder of record of the shares to be redeemed, at his or her
address as the same appears on the record of stockholders; but neither
failure to mail any such notice to one or more such holders nor any
defect in any such notice shall affect the sufficiency of the
proceedings for redemptions as to other holders. Each such notice shall
state the Redemption
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<PAGE> 19
Date; the number of shares of Series B Preferred to be redeemed, and,
if less than all the shares of Series B Preferred held by such holder
are to be redeemed, the manner of selecting by lot the shares to be
redeemed; the place or places where such shares are to be surrendered
for payment; that dividends on the shares to be redeemed will cease on
such Redemption Date; and the effect of such redemption on the right of
conversion.
[c] Notice having been mailed as aforesaid, from and after the
Redemption Date, all dividends on the shares so called for redemption
shall cease to accrue, said shares shall no longer be deemed to be
outstanding, all rights of the holders thereof as stockholders of the
Corporation (except the right to receive payment for the shares, and
the right to convert such shares into shares of Common Stock of the
Corporation until the close of business on the third business day
preceding the Redemption Date, as provided in Section 7) shall cease,
and, upon surrender in accordance with said notice of the certificates
for any such shares (properly endorsed or assigned for transfer, if the
Board of Directors shall so require), such shares shall be redeemed by
the Corporation in accordance with this Section 8. In connection with
the determination of the amount of dividends accruing with respect to
any conversion in the period between a notice of redemption and the
Redemption Date, on a date which is not a Quarterly Dividend Payment
Date, the amount of any such dividends shall be prorated based upon the
number of days which have elapsed since the immediately preceding
Quarterly Dividend Payment Date (excluding such Quarterly Dividend
Payment Date itself)
SECTION 9. REPORTS AS TO ADJUSTMENTS.
Whenever the number of shares of Common Stock into which the shares of
the Series B Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series B Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series B Preferred is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and when such adjustment will become
effective and (B) promptly mail to the holders of record of the outstanding
shares of the Series B Preferred a notice stating that the number of shares into
which the shares of Series B Preferred are convertible has been adjusted and
setting forth the new number of shares into which each share of the Series B
Preferred is convertible as a result of such adjustment and when such adjustment
will become effective. Notwithstanding the foregoing, the Corporation shall
incur no liability for its failure to take any action set forth in this Section
9, nor shall such failure affect the validity, rights or preferences of any
shares of the Series B Preferred.
SECTION 10. RANKING.
The Series B Preferred shall rank senior to the Common Stock, the
Series A Preferred, the Series C Preferred, the Series D Preferred, the Series E
Preferred, the Series F Preferred, and any other series of Preferred Stock of
the Corporation hereafter created, as to the payment of dividends and the
distribution of assets and rights upon liquidation, dissolution or winding up of
the Corporation.
F. Designation of Series C Convertible Preferred Stock. A series of the
Preferred Stock of the corporation is hereby created and authorized, and the
designations, amount and stated value of such series of Preferred Stock and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereon, are as follows:
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<PAGE> 20
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as Series C Convertible
Preferred (the "Series C Preferred") and the number of shares constituting such
series shall be 4,000,000 shares. The stated value of the Series C Preferred
shall be $5 per share, the original per share issue price (the "Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series C Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing commencing with the date of issue of such shares, on shares of
the Series C Preferred at the rate of $.35 per share per annum. No interest
shall be paid on accrued but unpaid dividends.
SECTION 3. VOTING RIGHTS.
In addition to voting rights required by law or by the Certificate of
Incorporation, subject to restrictions contained in this Certificate of
Incorporation the holders of Series C Preferred shall be entitled to vote on all
matters submitted to a vote of the Corporation's stockholders. Except as
otherwise required by law or provided by this Certificate of Incorporation or by
the Board of Directors pursuant to Subpart C of this Article FOURTH, the holders
of the Series C Preferred shall vote together with the holders of all other
series of the Corporation's voting preferred stock and the holders of the
Corporation's Common Stock as one class with one vote per share (in the case of
Preferred Stock, subject to adjustments as provided in Section 7 below and if
convertible into Common Stock, one vote per share of Common Stock into which
such convertible Preferred Stock is then convertible) on all matters submitted
to a vote of the Corporation's stockholders.
SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series C Preferred as provided in
section 2 are in arrears, thereafter and until dividends, including all accrued
dividends, on shares of the Series C Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series C
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
such junior stock, (B) pay dividends on or make any other distributions on any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series C Preferred, except dividends paid
ratably on the Series C Preferred and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled, (C) redeem or purchase or
otherwise acquire for consideration any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series C
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior to the Series C Preferred or in
satisfaction of contractual obligations to do so entered into with the written
consent of the holders of a majority of outstanding shares of Series C Preferred
(including, without limitation, in satisfaction of the provisions contained in
the Stockholders' Agreement), or (D) purchase or otherwise acquire for
consideration any
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<PAGE> 21
shares of the Series C Preferred, or any shares of stock ranking on a parity
with the Series C Preferred except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series of
classes, or except pursuant to the provisions of the Stockholders' Agreement.
SECTION 5. REACQUIRED SHARES.
Any shares of the Series C Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, or otherwise in accordance with Delaware General
Corporation Law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of the Series C Preferred unless,
prior thereto, the holders of the Series B Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (B) to the holders of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series C Preferred
unless, prior thereto, the holders of Series C Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (C) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series C
Preferred, except distributions made ratably on the Series C Preferred and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 7. OPTIONAL CONVERSION.
Each share of the Series C Preferred may be converted at any time, at
the option of the holder thereof, into shares of Common Stock of the
Corporation, on the terms and conditions set forth below in this Section 7:
[a] Subject to the provisions for adjustment hereinafter set
forth, each share of the Series C Preferred shall be convertible at the
option of the holder thereof, in the manner hereinafter set forth, into
one (1) fully paid and nonassessable share of Common Stock of the
Corporation.
[b] The number of shares of Common Stock into which each share
of the Series C Preferred is convertible shall be adjusted from time to
time as follows:
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series C
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of
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<PAGE> 22
its Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise), then, and in each
such case, the number of shares of Common Stock into which
each share of the Series C Preferred is convertible shall be
adjusted so that the holder of each share thereof shall be
entitled to receive, upon the conversion thereof, the number
of shares of Common Stock determined by multiplying (a) the
number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event
by (b) a fraction, the numerator of which is the sum of (I)
the number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event
plus (II) the number of shares of Common Stock which such
holder would have been entitled to receive in connection with
the occurrence of such event had such share been converted
immediately prior thereto, and the denominator of which is the
number of shares of Common Stock determined in accordance with
clause (I) above. An adjustment made pursuant to this
subparagraph b[i] shall become effective (a) in the case of
any such dividend, immediately after the close of business on
the record date for the determination of holders of Common
Stock entitled to receive such dividend, or (b) in the case of
any such subdivision, at the close of business on the day
immediately prior to the day upon which such corporate action
becomes effective.
[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series C Preferred
shall combine or consolidate the outstanding shares of its
Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of
the Series C Preferred is convertible shall be adjusted so
that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of
Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such share was convertible
immediately prior to the occurrence of such event by (b) a
fraction, the numerator of which is the number of shares which
the holder would have owned after giving effect to such event
had such share been converted immediately prior to the
occurrence of such event and the denominator of which is the
number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event.
An adjustment made pursuant to this subparagraph b[ii] shall
become effective at the close of business on the date
immediately prior to the day upon which such corporate action
becomes effective.
[iii] In case the Corporation after the issuance of
such share of Series C Preferred shall: (A) issue any options,
warrants, or other rights (excluding options to purchase
Common Stock issued to management of the Corporation
exercisable for up to the lesser of 2,000,000 shares of Common
Stock (subject to adjustment pursuant to provisions applicable
to the options in the case of stock splits, reverse stock
splits and the like) or that number of shares of Common Stock
equal to fifteen percent (15%) of the aggregate number of
outstanding shares of Common Stock and other equity securities
of the Corporation exercisable for the purchase of, or
convertible into, Common Stock computed on a fully-diluted
basis) entitling the holder thereof to subscribe for, or
purchase, Common Stock at a price per share which, when added
to the amount of consideration received or receivable by the
Corporation for such options, warrants, or other rights, is
less than the then fair market value per share of the Common
Stock at the date of such issuance: (B) issue or sell
securities of the
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<PAGE> 23
Corporation convertible into, or exchangeable for, Common
Stock at a price per share which, when added to the amount of
consideration received or receivable, from the Corporation for
such exchangeable or convertible securities, is less than the
then fair market value of a share of Common Stock at the date
of such issuance; or (C) issue or sell additional shares of
Common Stock for consideration representing less than the then
fair market value of the Common Stock at the date of such
issuance; then the number of shares of Common Stock into which
each share of the Series C Preferred is convertible shall be
adjusted so that, thereafter, until further adjusted, the
holder of each share thereof shall be entitled to receive,
upon the conversion thereof, the number of shares of Common
Stock determined by multiplying (w) the number of shares of
Common Stock into which such shares are convertible
immediately prior to the occurrence of such event by (x) a
fraction, the numerator of which shall be the number of shares
of Common Stock outstanding prior to such issuance plus the
number of additional shares of Common Stock issuable upon
exercise of such options, warrants, or rights, or exchangeable
or convertible securities, or the additional number of shares
of Common Stock issued at such time, and the denominator of
which shall be the number of shares of Common Stock
outstanding prior to such issuance plus the number of shares
of Common Stock that either (y) the sum of the aggregate
exercise price of the total number of shares of Common Stock
issuable upon exercise of such options, warrants, or rights,
or upon conversion or exchange of such convertible securities,
and the aggregate amount of consideration, if any, received or
receivable by the Corporation for such options, warrants, or
rights, or convertible or exchangeable securities, or (z) the
aggregate consideration received in connection with the sale
of shares of its Common Stock for less than the then fair
market value, as the case may be, would purchase at the then
fair market value.
[iv] In the event that, at any time, or from
time to time, after the issuance of such share of the Series C
Preferred, the Common Stock issuable upon conversion of the
Series C Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend, or a
reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 7), then, and in any
such event, each holder of Series C Preferred shall have the
right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable
upon such recapitalization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such shares of Series C Preferred could have been converted
immediately prior to such recapitalization, reclassification,
or change, all subject to further adjustment as provided
herein.
[v] If at any time, or from time to time
after the issuance of such share of the Series C Preferred
there is a capital reorganization of the Common Stock other
than a recapitalization, subdivision, combination,
reclassification, or exchange of shares provided for elsewhere
in this Section 7) or a merger or consolidation of the
Corporation with or into another corporation, or the sale of
all, or substantially all, of the Corporations' properties and
assets to any other person, then, as a part of such
reorganization, merger, consolidation, or sale, provision
shall be made so that the holders of the Series C Preferred
shall thereafter be entitled to receive upon conversion of the
Series C Preferred the number of shares of stock or other
securities
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<PAGE> 24
or property to which a holder of the number of shares of
Common Stock deliverable upon conversion would have been
entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions
of this Section 7 with respect to the rights of the holders of
Series C Preferred after the reorganization, merger,
consolidation, or sale to the end that the provisions of this
Section 7 shall be applicable after that event and be as
nearly equivalent as may be practicable.
[vi] Upon the expiration of any rights,
options, warrants or conversion or exchange privileges which
caused an adjustment pursuant to this Section 7 to be made, if
any thereof shall not have been exercised, the number of
shares of Common Stock into which each share of the Series C
Preferred is convertible shall, upon such expiration, be
readjusted and shall thereafter be such as it would have been
had it been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (a)
the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion or
exchange privileges and (b) such shares of Common Stock, if
any, were issued or sold for the consideration actually
received by the Corporation upon such exercise plus the
aggregate consideration, if any, actually received by the
Corporation for the issuance, sale or grant of all such
rights, options, warrants or conversion or exchange
privileges, whether or not exercised.
[c] If any adjustment in the number of shares of Common Stock
into which each share of the Series C Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of the Series C Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series C Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series C Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [c] shall be made to the
nearest one-hundredth of a share.
[d] The holder of any shares of the Series C Preferred may
convert such shares into shares of Common Stock by surrendering for
such purpose to the Corporation, at its principal office or at such
other office or agency maintained by the Corporation for that purpose,
a certificate or certificates representing the shares of Series C
Preferred to be converted (or if such certificate or certificates
cannot be found, an affidavit of lost securities in form and substance
acceptable to the Corporation) accompanied by a written notice stating
that such holder elects to convert all or a specified number of such
shares in accordance with the provisions of this Section 7 and
specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name
or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates
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<PAGE> 25
and the receipt of such notice relating thereto and, if applicable,
payment of all transfer taxes, the Corporation shall deliver or cause
to be delivered (i) certificates representing the number of validly
issued, fully paid and nonassessable shares of Common Stock of the
Corporation to which the holder of the Series C Preferred so converted
shall be entitled and (ii) if less than the full number of shares of
the Series C Preferred evidenced by the surrendered certificate or
certificates are being converted, a new certificate or certificates, of
like tenor, for the number of shares evidenced by such surrendered
certificate or certificates less the number of shares converted. Such
conversions shall be deemed to have been made at the close of business
on the date of giving of such notice and of such surrender of the
certificate or certificates representing the shares of the Series C
Preferred to be converted so that the rights of the holder thereof
shall cease except for the right to receive Common Stock of the
Corporation in accordance herewith and any accumulated, accrued or
unpaid dividends pursuant to paragraph [e] below, and the converting
holder shall be treated for all purposes as having become the record
holder of such Common Stock of the Corporation at such time.
[e] Upon conversion of any shares of the Series C Preferred,
the holder thereof shall be entitled to receive any accumulated,
accrued or unpaid dividends in respect of the shares so converted,
including any dividends on such shares of the Series C Preferred
declared prior to such conversion if such holder held such shares on
the record date fixed for the determination of holders of the Series C
Preferred entitled to receive payment of such dividend.
[f] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series C Preferred.
[g] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
SECTION 8. MANDATORY CONVERSION.
Each share of the Series C Preferred shall be converted, at the option
of the Board of Directors, into shares of Common Stock of the Corporation, on
the terms and conditions set forth below in this Section 8:
[a] Subject to the provisions for adjustment set forth in
Section 7, which shall also apply to conversions pursuant to this
Section 8, each share of the Series C Preferred shall be convertible at
the option of the Board of Directors, under the conditions hereinafter
set forth, into one (1) fully paid and nonassessable share of Common
Stock of the Corporation.
[b] The Board of Directors of the Corporation may require
conversion of all shares of the Series C Preferred into shares of
Common Stock upon any of the following events if, and only if, all
other outstanding shares of Preferred Stock of the Corporation, other
than those which rank senior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series C Preferred, are
concurrently either redeemed or converted:
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<PAGE> 26
[i] A public offering of equity securities of the
Corporation of at least $10,000,000 in gross proceeds;
[ii] A private placement of equity securities of the
Corporation of at least $25,000,000 in gross proceeds;
[iii] A private placement of equity securities of the
Corporation of at least $10,000,000 in gross proceeds under
circumstances where the investor(s) reasonably believe the
conversion of the Series C Preferred is necessary to achieve
its (their) investment objectives;
[iv] A merger of the Corporation with another
corporation or other entity, whether or not the Corporation is
a survivor of such transaction whereby as a result the
stockholders of the Corporation hold less than 50% of the
outstanding capital stock of the surviving entity; or
[v] An acquisition of equity securities of the
Corporation in one transaction or in a series of related
transactions which results in a transfer of majority voting
control of the Corporation.
[c] The Series C Preferred shall convert to Common Stock of
the Corporation automatically upon notice in writing to the
stockholders, including all holders of the Series C Preferred, setting
forth the date of such conversion and the material terms of the
triggering event. As promptly as practicable after such notice, and in
any event within five business days after the surrender of certificates
for the Series C Preferred (if required by the Board of Directors), the
Corporation shall deliver or cause to be delivered to each holder of
Series C Preferred certificates representing the number of validly
issued, fully paid and nonassessable shares of Common Stock of the
Corporation to which such holder of the Series C Preferred so converted
shall be entitled. Such conversion shall be deemed to have been made at
the close of business on the date set forth in such notice of mandatory
conversion so that the rights of the holder thereof shall cease with or
without surrender of certificates for the Series C Preferred, except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [d] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[d] Upon conversion of the Series C Preferred, the holder
thereof shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted, including any
dividends on such shares of the Series C Preferred declared prior to
such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series C Preferred
entitled to receive payment of such dividend.
[e] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series C Preferred.
SECTION 9. REPORTS AS TO ADJUSTMENTS.
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<PAGE> 27
Whenever the number of shares of Common Stock into which the shares of
the Series C Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series C Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series C Preferred is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and when such adjustment will become
effective and (B) promptly mail to the holders of record of the outstanding
shares of the Series C Preferred a notice stating that the number of shares into
which the shares of Series C Preferred are convertible has been adjusted and
setting forth the new number of shares into which each share of the Series C
Preferred is convertible as a result of such adjustment and when such adjustment
will become effective. Notwithstanding the foregoing, the Corporation shall
incur no liability for its failure to take any action set forth in this Section
9, nor shall such failure affect the validity, rights or preferences of any
shares of the Series C Preferred.
SECTION 10. RANKING.
The Series C Preferred shall rank senior to the Common Stock and any
other series of Preferred Stock of the Corporation hereafter created (except for
the Series B Preferred, which shall rank senior to the Series C Preferred, and
except for the Series A Preferred, the Series D Preferred, the Series E
Preferred, the Series F Preferred, and any other series of Preferred Stock which
the Board of Directors shall establish and designate to rank equal therewith
pursuant to Subpart C of this Article FOURTH, with which it shall rank equal),
as to the payment of dividends and the distribution of assets and rights upon
liquidation, dissolution or winding up of the Corporation.
SECTION 11. DIRECTORSHIP.
The holders of the Series C Preferred, as a class, shall be entitled to
be represented on the Board of Directors by one Director (the "Series C
Director") who, upon nomination by such holders, as a class, will stand for
election by voting by the holders of the Preferred Stock entitled to vote for
the election of directors (subject to limitations in this Article FOURTH or
established by the Board of Directors pursuant to Section C of this Article
FOURTH) and holders of Common Stock together, except under circumstances where
the number of individuals nominated for election exceeds the number of Directors
to be elected. In the event the number of individuals nominated for election
exceeds the number of Directors to be elected, then the holders of the Series C
Preferred shall have the sole right to vote for, elect and remove the individual
nominated by them, as a class, to serve as the Series C Director, and in such
event the further right to vote for, elect or remove any of the other Directors
who are not to be elected solely by the holders of another class or series of
Preferred Stock.. The Series C Director, upon being elected, will serve for the
same term and have the same voting powers as other Directors. The right to elect
the Series C Director pursuant to the terms hereof shall be exercisable by the
holders of a majority of the Series C Preferred at their option upon at least 60
days notice to the Corporation; provided, however, if the Corporation is subject
to the reporting requirements of the Securities Exchange Act of 1934, such
notice must be provided on or before the date established by the Corporation for
the submission of proposals pursuant to the proxy rules promulgated under the
Securities Exchange Act of 1934. The Series C Director, if not an employee of
the Corporation, shall serve as a member of the Compensation, Audit, and
Nominating Committees of the Board of Directors (or any other Committee of the
Board performing such functions), which Committees will be composed of at least
one Director, in addition to the Series C Director, who is not an employee of
the Corporation.
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<PAGE> 28
G. Designation of Series D Convertible Preferred Stock. A series of the
Preferred Stock of the corporation is hereby created and authorized, and the
designations, amount and stated value of such series of Preferred Stock and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereon, are as follows:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as Series D Convertible
Preferred (the "Series D Preferred") and the number of shares constituting such
series shall be 1,000,000 shares. The stated value of the Series D Preferred
shall be $5 per share, the original per share issue price (the "Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series D Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing commencing with the date of issue of such shares, on shares of
the Series D Preferred at the rate of $.35 per share per annum. No interest
shall be paid on accrued but unpaid dividends.
SECTION 3. VOTING RIGHTS.
Except as provided herein or otherwise required by law, the voting
power of the Corporation shall be vested in the holders of shares of Common
Stock, Series A Preferred, Series C Preferred, Series E Preferred, Series F
Preferred, and such other series of voting preferred stock as are from time to
time designated, and the holders of shares of Series B Preferred and the Series
D Preferred shall have no voting power, except that with respect to the events
described below, the holders of the Series A Preferred, the Series B Preferred,
the Series C Preferred, the Series D Preferred, the Series E Preferred, the
Series F Preferred, and all other series of voting preferred stock as are from
time to time designated to have such voting rights, and the holders of the
Corporation's Common Stock shall vote together as one class with one vote per
share (in the case of Preferred Stock, subject to adjustments as provided in
Section 7 below and if convertible into Common Stock, one vote per share of
Common Stock into which such convertible Preferred Stock is then convertible),
to the extent such of the following events are otherwise subject to the vote of
any holders of capital stock of the Corporation:
[a] any amendment of this Amended and Restated Certificate of
Incorporation, including the same as it may hereafter be amended or
restated, which (i) authorizes, or modifies the rights, preferences or
terms of, any security that is or would be senior in any respect to the
Series D Preferred, (ii) modifies any of the rights, preferences or
terms of the Series D Preferred, or (iii) would otherwise significantly
and adversely affect the Series D Preferred.
[b] a sale of all or substantially all of the assets of the
Corporation;
[c] the dissolution, liquidation or termination of the
Corporation;
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<PAGE> 29
[d] any merger of the Corporation with another corporation or
entity, whether or not the Corporation is the survivor;
[e] any material change in the fundamental nature of the
business of the Corporation;
[f] any transaction with affiliates, except upon fair and
reasonable terms comparable to an arms-length transaction; and
[g] any change in the Corporation's capital structure in a
manner that dilutes the economic interest of the holders of Series D
Preferred.
At such time as the holders of the Series D Preferred shall have
obtained the consent (which does not need to have become final) of the Federal
Communications Commission to the exercise by the holders of the Series D
Preferred of the voting rights set forth below or at such time as the consent of
the Federal Communications Commission is not necessary under applicable law,
rule or regulation (in the opinion of counsel acceptable to the Board of
Directors), then on the election of a majority of the holders of the Series D
Preferred, in addition to voting rights required by law, the holders of Series D
Preferred shall be entitled to vote on all matters submitted to a vote of the
Corporation's stockholders in accordance with the next sentence. Except as
otherwise required by law or this Certificate of Incorporation, the holders of
the Series D Preferred and the holders of the Corporation's Common Stock shall
vote together as part of the same class and each of the outstanding shares of
the Series D Preferred shall have a number of votes per share on a matter equal
to the quotient of (a) the lesser of (1) the number of shares of Common Stock
into which the outstanding shares of Series D Preferred are then convertible,
and (2) the difference between (A) the product of (i) the fraction equal to
0.049 divided by 0.951, multiplied by (ii) the sum of the number of votes
entitled to be a cast by the Corporation's Common Stock and any Series of
Preferred (other than the Series D Preferred) which votes as a class with the
Corporation's Common Stock on such matter minus (B) the number of shares of the
Corporation's Common Stock issued pursuant to Section 7[a][i] of this Subarticle
G of Article 4 (fully adjusted to reflect the events described in Section
7[c][i] and [ii], divided by (b) the number of outstanding shares of Series D
Preferred. It is the intention of this provision that it should be construed
consistently with the limitations to which bank holding companies and foreign
banks treated as bank holding companies are subject with respect to the
ownership or control of voting securities under the Bank Holding Company Act of
1956, as amended.
SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series D Preferred as provided in
section 2 are in arrears,, thereafter and until dividends, including all accrued
dividends, on shares of the Series D Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series D
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
such junior stock, (B) pay dividends on or make any other distributions on any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series D Preferred, except dividends paid
ratably on the Series D Preferred and all such parity stock on which dividends
are payable or in arrears
29
<PAGE> 30
in proportion to the total amounts to which the holders of all such shares are
then entitled, (C) redeem or purchase or otherwise acquire for consideration any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series D Preferred, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for shares of any stock of the Corporation ranking
junior to the Series D Preferred or in satisfaction of contractual obligations
to do so entered into with the written consent of the holders of a majority of
outstanding shares of Series D Preferred (including, without limitation, in
satisfaction of the provisions contained in the Stockholders' Agreement), or (D)
purchase or otherwise acquire for consideration any shares of the Series D
Preferred, or any shares of stock ranking on a parity with the Series D
Preferred except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series of classes or except
pursuant to the provisions of the Stockholders' Agreement.
SECTION 5. REACQUIRED SHARES.
Any shares of the Series D Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, or otherwise in accordance with Delaware General
Corporation Law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of the Series D Preferred unless,
prior thereto, the holders of the Series B Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (B) to the holders of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series D Preferred
unless, prior thereto, the holders of Series D Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (C) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series D
Preferred, except distributions made ratably on the Series D Preferred and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 7. CONVERSION.
[a] Optional Conversion. Subject to Section 7[c] and to the
provisions for adjustment hereinafter set forth, each share of the
Series D Preferred shall be convertible at the option of the holder
thereof, in the manner hereinafter set forth, into one (1) fully paid
and nonassessable share of Common Stock of the Corporation.
[b] Mandatory Conversion. Subject to the provisions for
adjustment set forth in this Section 7, each share of the Series D
Preferred shall be convertible at the option of the Board of
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<PAGE> 31
Directors, under the conditions hereinafter set forth, into one (1)
fully paid and nonassessable share of Common Stock of the Corporation
in the event of, and concurrently with the closing of, a public
offering of Common Stock (or Series B Common Stock if required pursuant
to clause [c][i] below) of the Corporation at a per share price of at
least $12.00 (subject to adjustment for stock splits, stock dividends,
reverse stock splits and the like) with gross proceeds to the
Corporation of at least $25,000,000 (excluding the effect of any
over-allotment option).
[c] Shares of Series D Preferred may be converted by a holder
pursuant to Section 7[a] or at the option of the Board of Directors
pursuant to Section 7[b]only:
[i] To acquire shares of Common Stock; provided,
however, that to the extent necessary to prevent the holders
of Series D Preferred Stock from being in violation of any
applicable law or regulation, all shares issuable to such
holder on conversion of Series D Preferred, together with all
of the shares of Common Stock previously acquired on
conversion of Series D Preferred under this provision (fully
adjusted to reflect the events described in Section 7[c]),
shall, at the time and as a condition of such conversion, be
designated Series B Common Stock, which will have all of the
characteristics of the Common Stock with the sole exception
that the voting rights of such Series B Common Stock shall be
subject to the same voting rights limitations as are
applicable to the Series D Preferred pursuant to Section 3
above and will be convertible at any time into Common Stock at
the option of the holder in the same manner and subject to the
same conditions as were applicable to a voluntary conversion
of the Series D Preferred set forth in this Section 7; or
[ii] In a widely dispersed public distribution of the
resulting Common Stock; or
[iii] In connection with a private placement in which
no one party directly or indirectly acquires the right to
purchase in excess of 2% of the Common Stock; or
[iv] In an assignment to one or more financial
intermediaries (e.g., broker-dealer or investment banker) for
the purpose of conducting a widely dispersed distribution of
the resulting Common Stock on behalf of the holder; or
[v] On effectiveness of an amendment to or repeal of
the Bank Holding Company Act of 1956, as amended (including
any replacement law, "BHCA"), or the International Banking Act
of 1978, as amended ("IBA"), as a result of which a bank
holding company (as defined in the BHCA) and a foreign bank
with a U.S. branch or agency may acquire the resulting shares
of Common Stock without limitation; or
[vi] On receipt and finality of an order approving
the transaction from the Board of Governors of the Federal
Reserve System (including any successor agency responsible for
supervision and enforcement under the BHCA or IBA, "FRB")
under the BHCA or the IBA.
[d] The number of shares of Common Stock into which each share
of the Series D Preferred is convertible shall be adjusted from time to
time as follows:
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<PAGE> 32
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series D
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise),
then, and in each such case, the number of shares of Common
Stock into which each share of the Series D Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the
occurrence of such event by (b) a fraction, the numerator of
which is the sum of (I) the number of shares of Common Stock
into which such share was convertible immediately prior to the
occurrence of such event plus (II) the number of shares of
Common Stock which such holder would have been entitled to
receive in connection with the occurrence of such event had
such share been converted immediately prior thereto, and the
denominator of which is the number of shares of Common Stock
determined in accordance with clause (I) above. An adjustment
made pursuant to this subparagraph [d][i] shall become
effective (a) in the case of any such dividend, immediately
after the close of business on the record date for the
determination of holders of Common Stock entitled to receive
such dividend, or (b) in the case of any such subdivision, at
the close of business on the day immediately prior to the day
upon which such corporate action becomes effective.
[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series D Preferred
shall combine or consolidate the outstanding shares of its
Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of
the Series D Preferred is convertible shall be adjusted so
that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of
Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such share was convertible
immediately prior to the occurrence of such event by (b) a
fraction, the numerator of which is the number of shares which
the holder would have owned after giving effect to such event
had such share been converted immediately prior to the
occurrence of such event and the denominator of which is the
number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event.
An adjustment made pursuant to this subparagraph d[ii] shall
become effective at the close of business on the date
immediately prior to the day upon which such corporate action
becomes effective.
[iii] In case the Corporation after the
issuance of such share of Series D Preferred shall: (A) issue
any options, warrants, or other rights (excluding those issued
in exchange for options to purchase common stock in Faircom
Inc. pursuant to the terms of a merger, and excluding options
to purchase Common Stock issued to management of the
Corporation exercisable for up to the lesser of 2,000,000
shares of Common Stock (subject to adjustment pursuant to
provisions applicable to the options in the case of stock
splits, reverse stock splits and the like) or that number of
shares of Common Stock equal to fifteen percent (15%) of the
aggregate number of outstanding shares of Common Stock and
other equity securities of the Corporation exercisable for the
purchase of, or convertible into, Common Stock computed on a
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fully-diluted basis) entitling the holder thereof to subscribe
for, or purchase, Common Stock at a price per share which,
when added to the amount of consideration received or
receivable by the Corporation for such options, warrants, or
other rights, is less than the then fair market value per
share of the Common Stock at the date of such issuance; (B)
issue or sell securities of the Corporation convertible into,
or exchangeable for, Common Stock at a price per share which,
when added to the amount of consideration received or
receivable, from the Corporation for such exchangeable or
convertible securities, is less than the then fair market
value of a share of Common Stock at the date of such issuance;
or (C) issue or sell additional shares of Common Stock for
consideration representing less than the then fair market
value of the Common Stock at the date of such issuance; then
the number of shares of Common Stock into which each share of
the Series D Preferred is convertible shall be adjusted so
that, thereafter, until further adjusted, the holder of each
share thereof shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock
determined by multiplying (w) the number of shares of Common
Stock into which such shares are convertible immediately prior
to the occurrence of such event by (x) a fraction, the
numerator of which shall be the number of shares of Common
Stock outstanding prior to such issuance plus the number of
additional shares of Common Stock issuable upon exercise of
such options, warrants, or rights, or exchangeable or
convertible securities, or the additional number of shares of
Common Stock issued at such time, and the denominator of which
shall be the number of shares of Common Stock outstanding
prior to such issuance plus the number of shares of Common
Stock that either (y) the sum of the aggregate exercise price
of the total number of shares of Common Stock issuable upon
exercise of such options, warrants, or rights, or upon
conversion or exchange of such convertible securities, and the
aggregate amount of consideration, if any, received or
receivable by the Corporation for such options, warrants, or
rights, or convertible or exchangeable securities, or (z) the
aggregate consideration received in connection with the sale
of shares of its Common Stock for less than the then fair
market value, as the case may be, would purchase at the then
fair market value.
[iv] In the event that, at any time, or from
time to time, after the issuance of such share of the Series D
Preferred, the Common Stock issuable upon conversion of the
Series D Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend, or a
reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 7), then, and in any
such event, each holder of Series D Preferred shall have the
right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable
upon such recapitalization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such shares of Series D Preferred could have been converted
immediately prior to such recapitalization, reclassification,
or change, all subject to further adjustment as provided
herein.
[v] If at any time, or from time to time
after the issuance of such share of the Series D Preferred,
there is a capital reorganization of the Common Stock other
than a recapitalization, subdivision, combination,
reclassification, or exchange of shares provided for elsewhere
in this Section 7) or a merger or consolidation of the
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<PAGE> 34
Corporation with or into another corporation, or the sale of
all, or substantially all, of the Corporations' properties and
assets to any other person, then, as a part of such
reorganization, merger, consolidation, or sale, provision
shall be made so that the holders of the Series D Preferred
shall thereafter be entitled to receive upon conversion of the
Series D Preferred the number of shares of stock or other
securities or property to which a holder of the number of
shares of Common Stock deliverable upon conversion would have
been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions
of this Section 7 with respect to the rights of the holders of
Series D Preferred after the reorganization, merger,
consolidation, or sale to the end that the provisions of this
Section 7 shall be applicable after that event and be as
nearly equivalent as may be practicable.
[vi] Upon the expiration of any rights,
options, warrants or conversion or exchange privileges which
caused an adjustment pursuant to this Section 7 to be made, if
any thereof shall not have been exercised, the number of
shares of Common Stock into which each share of the Series D
Preferred is convertible shall, upon such expiration, be
readjusted and shall thereafter be such as it would have been
had it been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (a)
the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion or
exchange privileges and (b) such shares of Common Stock, if
any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for
the issuance, sale or grant of all such rights, options,
warrants or conversion or exchange privileges, whether or not
exercised.
[e] If any adjustment in the number of shares of Common Stock
into which each share of the Series D Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of the Series D Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series D Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series D Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [e] shall be made to the
nearest one-hundredth of a share.
[f] Subject to the limitation in Section 7[i] below, the
holder of any shares of the Series D Preferred may convert such shares
into shares of Common Stock pursuant to paragraph [a] of this Section 7
by surrendering for such purpose to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation
for that purpose, a certificate or certificates representing the shares
of Series D Preferred to be converted (or if such certificate or
certificates cannot be found, an affidavit of lost securities in form
and substance acceptable to the Corporation) accompanied by a written
notice stating that such holder elects to convert all or
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<PAGE> 35
a specified number of such shares in accordance with the provisions of
this Section 7 and specifying the name or names in which such holder
wishes the certificate or certificates for shares of Common Stock to be
issued. In case such notice shall specify a name or names other than
that of such holder, such notice shall be accompanied by payment of all
transfer taxes payable upon the issuance of shares of Common Stock in
such name or names. As promptly as practicable, and in any event within
five business days after the surrender of such certificates and the
receipt of such notice relating thereto and, if applicable, payment of
all transfer taxes, the Corporation shall deliver or cause to be
delivered (i) certificates representing the number of validly issued,
fully paid and nonassessable shares of Common Stock of the Corporation
to which the holder of the Series D Preferred so converted shall be
entitled and (ii) if less than the full number of shares of the Series
D Preferred evidenced by the surrendered certificate or certificates
are being converted, a new certificate or certificates, of like tenor,
for the number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted. Such conversions
shall be deemed to have been made at the close of business on the date
of giving of such notice and of such surrender of the certificate or
certificates representing the shares of the Series D Preferred to be
converted so that the rights of the holder thereof shall cease except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [h] below,, and the converting holder shall be treated for
all purposes as having become the record holder of such Common Stock of
the Corporation at such time.
[g] The Series D Preferred shall convert to Common Stock of
the Corporation pursuant to paragraph [b] of this Section 7
automatically upon notice in writing to the stockholders, including all
holders of the Series D Preferred, setting forth the date of such
conversion and the material terms of the triggering public offering. As
promptly as practicable after such notice, and in any event within five
business days after the surrender of certificates for the Series D
Preferred (if required by the Board of Directors), the Corporation
shall deliver or cause to be delivered to each holder of Series D
Preferred certificates representing the number of validly issued, fully
paid and nonassessable shares of Common Stock of the Corporation to
which such holder of the Series D Preferred so converted shall be
entitled. Such conversion shall be deemed to have been made at the
close of business on the date set forth in such notice of mandatory
conversion so that the rights of the holder thereof shall cease with or
without surrender of certificates for the Series D Preferred, except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [h] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[h] Upon conversion of any shares of the Series D Preferred
pursuant to paragraph [a] or [b] of this Section 7, the holder thereof
shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted, including any
dividends on such shares of the Series D Preferred declared prior to
such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series D Preferred
entitled to receive payment of such dividend.
[i] Shares of the Series D Preferred may not be converted
after the close of business on the third business day preceding the
Redemption Date pursuant to Section 8.
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<PAGE> 36
[j] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series D Preferred.
[k] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser, who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
SECTION 8. REDEMPTION.
[a] The Corporation may, at the election of its Board of
Directors, at any time or from time to time, redeem the whole or part
of the Series D Preferred, at the Stated Value, plus an amount equal to
all unpaid dividends thereon, including accrued dividends, whether or
not declared, to the date of redemption. In case the Corporation shall
elect to redeem less than all the Series D Preferred, the Corporation
shall select pro rata the shares so to be redeemed, except that if the
Board of Directors determines in its reasonable business judgment that
to do so by lot would be in the best interests of the Corporation, then
the shares so to be redeemed shall be selected by lot in such manner as
shall be prescribed by the Board of Directors.
[b] Notice of every such redemption shall be mailed, first
class postage prepaid, not less than thirty (30) nor more than sixty
(60) days prior to the date fixed for redemption ("Redemption Date"),
to each holder of record of the shares to be redeemed, at his or her
address as the same appears on the record of stockholders; but neither
failure to mail any such notice to one or more such holders nor any
defect in any such notice shall affect the sufficiency of the
proceedings for redemptions as to other holders. Each such notice shall
state the Redemption Date; the number of shares of Series D Preferred
to be redeemed, and, if less than all the shares of Series D Preferred
held by such holder are to be redeemed, the manner of selecting by lot
the shares to be redeemed; the place or places where such shares are to
be surrendered for payment; that dividends on the shares to be redeemed
will cease on such Redemption Date; and the effect of such redemption
on the right of conversion.
[c] Notice having been mailed as aforesaid, from and after the
Redemption Date, all dividends on the shares so called for redemption
shall cease to accrue, said shares shall no longer be deemed to be
outstanding, all rights of the holders thereof as stockholders of the
Corporation (except the right to receive payment for the shares, the
right to receive declared dividends pursuant to Section 7[g] above, and
the right to convert such shares into shares of Common Stock of the
Corporation until the close of business on the third business day
preceding the Redemption Date, as provided in Section 7) shall cease,
and, upon surrender in accordance with said notice of the certificates
for any such shares (properly endorsed or assigned for transfer, if the
Board of Directors shall so require), such shares shall be redeemed by
the Corporation in accordance with this Section 8. In connection with
the determination of the amount of dividends accruing with respect to
any conversion in the period between a notice of redemption and the
Redemption Date, on a date which is not a Quarterly Dividend Payment
Date, the amount of any such dividends shall be prorated based upon the
number of days which have elapsed since the
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<PAGE> 37
immediately preceding Quarterly Dividend Payment Date (excluding such
Quarterly Dividend Payment Date itself).
SECTION 9. REPORTS AS TO ADJUSTMENTS.
Whenever the number of shares of Common Stock into which the shares of
the Series D Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series D Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series D Preferred is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and when such adjustment will become
effective and (B) promptly mail to the holders of record of the outstanding
shares of the Series D Preferred a notice stating that the number of shares into
which the shares of Series D Preferred are convertible has been adjusted and
setting forth the new number of shares into which each share of the Series D
Preferred is convertible as a result of such adjustment and when such adjustment
will become effective. Notwithstanding the foregoing, the Corporation shall
incur no liability for its failure to take any action set forth in this Section
9, nor shall such failure affect the validity, rights or preferences of any
shares of the Series D Preferred.
SECTION 10. RANKING.
The Series D Preferred shall rank senior to the Common Stock and any
other series of Preferred Stock of the Corporation hereafter created (except for
the Series B Preferred, which shall rank senior to the Series D Preferred, and
except for the Series A Preferred, the Series C Preferred, the Series E
Preferred, the Series F Preferred, and any other series of Preferred Stock which
the Board of Directors shall establish and designate to rank equal therewith
pursuant to Subpart C of this Article FOURTH, with which it shall rank equal),
as to the payment of dividends and the distribution of assets and rights upon
liquidation, dissolution or winding up of the Corporation.
H. Designation of Series E Convertible Preferred Stock. A series of the
Preferred Stock of the Corporation is hereby created and authorized, and the
designations, amount and stated value of such series of Preferred Stock and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereon, are as follows:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as "Series E Convertible
Preferred Stock" (the "Series E Preferred") and the number of shares
constituting such series shall be 5,000,000 shares. The stated value of the
Series E Preferred shall be $5 per share, the original per share issue price
(the "Stated Value") .
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series E Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing
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commencing with the date of issue of such shares, on shares of the Series E
Preferred at the rate of $.35 per share per annum. No interest shall be paid on
accrued but unpaid dividends.
SECTION 3. VOTING RIGHTS.
In addition to voting rights required by law or by this Amended
Certificate of Incorporation, as amended or restated from time to time (the
"Certificate of Incorporation"), subject to restrictions contained in this
Certificate of Incorporation the holders of Series E Preferred shall be entitled
to vote on all matters submitted to a vote of the Corporation's stockholders.
Except as otherwise required by law or provided by this Certificate of
Incorporation or by the Board of Directors pursuant to Subpart C of this Article
FOURTH, the holders of the Series E Preferred shall vote together with the
holders of all other series of the Corporation's voting preferred stock and the
holders of the Corporation's Common Stock as one class with one vote per share
(in the case of Preferred Stock, subject to adjustments as provided in Section 7
below and if convertible into Common Stock, one vote per share of Common Stock
into which such convertible Preferred Stock is then convertible) on all matters
submitted to a vote of the Corporation's stockholders.
SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series E Preferred as provided in
Section 2 are in arrears, thereafter and until dividends, including all accrued
dividends, on shares of the Series E Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series E
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
such junior stock, (B) pay dividends on or make any other distributions on any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series E Preferred, except dividends paid
ratably on the Series E Preferred and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled, (C) redeem or purchase or
otherwise acquire for consideration any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series E
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior to the Series E Preferred or in
satisfaction of contractual obligations to do so entered into with the written
consent of the holders of a majority of aggregate outstanding shares of Series A
Preferred and Series E Preferred outstanding as of the date of the creation of
such contractual obligations (including, without limitation, in satisfaction of
the provisions contained in the Stockholders' Agreement), or (D) purchase or
otherwise acquire for consideration any shares of the Series E Preferred or any
shares of stock ranking on a parity with the Series E Preferred except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series of classes or except pursuant to
the provisions of the Stockholders' Agreement.
SECTION 5. REACQUIRED SHARES.
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Any shares of the Series E Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, or otherwise in accordance with Delaware General
Corporation Law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of the Series E Preferred unless,
prior thereto, the holders of the Series B Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (B) to the holders of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series E Preferred
unless, prior thereto, the holders of Series E Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (C) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series E
Preferred, except distributions made ratably on the Series E Preferred and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 7. OPTIONAL CONVERSION.
Each share of the Series E Preferred may be converted at any time, at
the option of the holder thereof, into shares of Common Stock of the
Corporation, on the terms and conditions set forth below in this Section 7:
[a] Subject to the provisions for adjustment hereinafter set
forth, each share of the Series E Preferred shall be convertible at the
option of the holder thereof, in the manner hereinafter set forth, into
one (1) fully paid and nonassessable share of Common Stock of the
Corporation.
[b] The number of shares of Common Stock into which each share
of the Series E Preferred is convertible shall be adjusted from time to
time as follows:
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series E
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise),
then, and in each such case, the number of shares of Common
Stock into which each share of the Series E Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the
occurrence of such event by (b) a fraction, the numerator of
which is the sum of (I) the number of shares of Common Stock
into which such share was convertible immediately prior to the
occurrence of such event plus (II) the number of shares of
Common Stock which such holder would have been entitled to
receive in
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connection with the occurrence of such event had such share
been converted immediately prior thereto, and the denominator
of which is the number of shares of Common Stock determined in
accordance with clause (I) above. An adjustment made pursuant
to this subparagraph [b][i] shall become effective (a) in the
case of any such dividend, immediately after the close of
business on the record date for the determination of holders
of Common Stock entitled to receive such dividend, or (b) in
the case of any such subdivision, at the close of business on
the day immediately prior to the day upon which such corporate
action becomes effective.
[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series E Preferred
shall combine or consolidate the outstanding shares of its
Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of
the Series E Preferred is convertible shall be adjusted so
that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of
Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such share was convertible
immediately prior to the occurrence of such event by (b) a
fraction, the numerator of which is the number of shares which
the holder would have owned after giving effect to such event
had such share been converted immediately prior to the
occurrence of such event and the denominator of which is the
number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event.
An adjustment made pursuant to this subparagraph b(ii] shall
become effective at the close of business on the date
immediately prior to the day upon which such corporate action
becomes effective.
[iii] In case the Corporation after the issuance of
such share of Series E Preferred shall: (A) issue any options,
warrants, or other rights (excluding those issued in exchange
for options to purchase common stock in Faircom Inc. pursuant
to the terms of a merger, and excluding options to purchase
Common Stock issued to management of the Corporation
exercisable for up to the lesser of 2,000,000 shares of Common
Stock (subject to adjustment pursuant to provisions applicable
to the options in the case of stock splits, reverse stock
splits and the like) or that number of shares of Common Stock
equal to fifteen percent (15%) of the equity aggregate number
of outstanding shares of Common Stock and other securities of
the Corporation exercisable for the purchase of, or
convertible into, Common Stock, computed on a fully-diluted
basis) entitling the holder thereof to subscribe for, or
purchase, Common Stock at a price per share which, when added
to the amount of consideration received or receivable by the
Corporation for such options, warrants, or other rights, is
less than the then fair market value per share of the Common
Stock at the date of such issuance; (B) issue or sell
securities of the Corporation convertible into, or
exchangeable for, Common Stock at a price per share which,
when added to the amount of consideration received or
receivable, from the Corporation for such exchangeable or
convertible securities, is less than the then fair market
value of a share of Common Stock at the date of such issuance;
or (C) issue or sell additional shares of Common Stock for
consideration representing less than the then fair market
value of the Common Stock at the date of such issuance; then
the number of shares of Common Stock into which each share of
the Series E Preferred is convertible shall be adjusted so
that, thereafter, until further adjusted, the holder of each
share thereof shall be entitled to receive, upon the
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<PAGE> 41
conversion thereof, the number of shares of Common Stock
determined by multiplying (w) the number of shares of Common
Stock into which such shares are convertible immediately prior
to the occurrence of such event by (x) a fraction, the
numerator of which shall be the number of shares of Common
Stock outstanding prior to such issuance plus the number of
additional shares of Common Stock issuable upon exercise of
such options, warrants, or rights, or exchangeable or
convertible securities, or the additional number of shares of
Common Stock issued at such time, and the denominator of which
shall be the number of shares of Common Stock outstanding
prior to such issuance plus the number of shares of Common
Stock that either (y) the sum of the aggregate exercise price
of the total number of shares of Common Stock issuable upon
exercise of such options, warrants, or rights, or upon
conversion or exchange of such convertible securities, and the
aggregate amount of consideration, if any, received or
receivable by the Corporation for such options, warrants, or
rights, or convertible or exchangeable securities, or (z) the
aggregate consideration received in connection with the sale
of shares of its Common Stock for less than the then fair
market value, as the case may be, would purchase at the then
fair market value.
[iv] In the event that, at any time, or from
time to time, after the issuance of such share of the Series E
Preferred, the Common Stock issuable upon conversion of the
Series E Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend, or a
reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 7), then, and in any
such event, each holder of Series E Preferred shall have the
right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable
upon such recapitalization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such shares of Series E Preferred could have been converted
immediately prior to such recapitalization, reclassification,
or change, all subject to further adjustment as provided
herein.
[v] If at any time, or from time to time
after the issuance of such share of the Series E Preferred
there is a capital reorganization of the Common Stock other
than a recapitalization, subdivision, combination,
reclassification, or exchange of shares provided for elsewhere
in this Section 7) or a merger or consolidation of the
Corporation with or into another corporation, or the sale of
all, or substantially all, of the Corporations' properties and
assets to any other person, then, as a part of such
reorganization, merger, consolidation, or sale, provision
shall be made so that the holders of the Series E Preferred
shall thereafter be entitled to receive upon conversion of the
Series E Preferred the number of shares of stock or other
securities or property to which a holder of the number of
shares of Common Stock deliverable upon conversion would have
been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions
of this Section 7 with respect to the rights of the holders of
Series E Preferred after the reorganization, merger,
consolidation, or sale to the end that the provisions of this
Section 7 shall be applicable after that event and be as
nearly equivalent as may be practicable.
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[vi] Upon the expiration of any rights,
options, warrants or conversion or exchange privileges which
caused an adjustment pursuant to this Section 7 to be made, if
any thereof shall not have been exercised, the number of
shares of Common Stock into which each share of the Series E
Preferred is convertible shall, upon such expiration, be
readjusted and shall thereafter be such as it would have been
had it been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (a)
the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion or
exchange privileges and (b) such shares of Common Stock, if
any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for
the issuance, sale or grant of all such rights, options,
warrants or conversion or exchange privileges, whether or not
exercised.
[c] If any adjustment in the number of shares of Common Stock
into which each share of the Series E Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of the Series E Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series E Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series B Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [c] shall be made to the
nearest one-hundredth of a share.
[d] The holder of any shares of the Series E Preferred may
convert such shares into shares of Common Stock by surrendering for
such purpose to the Corporation, at its principal office or at such
other office or agency maintained by the Corporation for that purpose,
a certificate or certificates representing the shares of Series E
Preferred to be converted (or if such certificate or certificates
cannot be found, an affidavit of lost securities in form and substance
acceptable to the Corporation) accompanied by a written notice stating
that such holder elects to convert all or a specified number of such
shares in accordance with the provisions of this Section 7 and
specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name
or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates and the receipt
of such notice relating thereto and, if applicable, payment of all
transfer taxes, the Corporation shall deliver or cause to be delivered
(i) certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock of the Corporation to which
the holder of the Series E Preferred so converted shall be entitled and
(ii) if less than the full number of shares of the Series E Preferred
evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted. Such conversions
shall be deemed to have
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been made at the close of business on the date of giving of such notice
and of such surrender of the certificate or certificates representing
the shares of the Series E Preferred to be converted so that the rights
of the holder thereof shall cease except for the right to receive
Common Stock of the corporation in accordance herewith and any
accumulated, accrued or unpaid dividends pursuant to paragraph [e]
below, and the converting holder shall be treated for all purposes as
having become the record holder of such Common Stock of the Corporation
at such time.
[e] Upon conversion of any shares of the Series E Preferred,
the holder thereof shall be entitled to receive any accumulated,
accrued or unpaid dividends in respect of the shares so converted,
including any dividends on such shares of the Series E Preferred
declared prior to such conversion if such holder held such shares on
the record date fixed for the determination of holders of the Series E
Preferred entitled to receive payment of such dividend.
[f] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series E Preferred.
[g] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser, who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
SECTION 8. MANDATORY CONVERSION.
Each share of the Series E Preferred shall be converted, at the option
of the Board of Directors, into shares of Common Stock of the Corporation, on
the terms and conditions set forth below in this Section 8:
[a] Subject to the provisions for adjustment set forth in
Section 7, which shall also apply to conversions pursuant to this
Section 8, each share of the Series E Preferred shall be convertible at
the option of the Board of Directors, under the conditions hereinafter
set forth, into one (1) fully paid and nonassessable share of Common
Stock of the Corporation.
[b] The Board of Directors of the Corporation may require
conversion of all shares of the Series E Preferred into shares of
Common Stock in preparation for or upon any of the following:
[i] A public offering of equity securities of the
Corporation of at least $10,000,000 in gross proceeds;
[ii] A private placement of equity securities of the
Corporation of at least $25,000,000 in gross proceeds;
[iii] A private placement of equity securities of the
Corporation of at least $10,000,000 in gross proceeds under
circumstances where the investor(s) reasonably
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<PAGE> 44
believe the conversion of the Series E Preferred is necessary
to achieve its (their) investment objectives;
[iv] A merger of the Corporation with another
corporation or other entity, whether or not the Corporation is
a survivor of such transaction whereby as a result the
stockholders of the Corporation hold less than 50% of the
outstanding capital stock of the surviving entity; or
[v] An acquisition of equity securities of the
Corporation in one transaction or in a series of related
transactions which results in a transfer of majority voting
control of the Corporation.
[c] The Series E Preferred shall convert to Common Stock of
the Corporation automatically upon notice in writing to the
stockholders, including all holders of the Series E Preferred, setting
forth the date of such conversion and the material terms of the
triggering event. As promptly as practicable after such notice, and in
any event within five business days after the surrender of certificates
for the Series E Preferred (if required by the Board of Directors), the
Corporation shall deliver or cause to be delivered to each holder of
Series E Preferred certificates representing the number of validly
issued, fully paid and nonassessable shares of Common Stock of the
Corporation to which such holder of the Series E Preferred so converted
shall be entitled. Such conversion shall be deemed to have been made at
the close of business on the date set forth in such notice of mandatory
conversion so that the rights of the holder thereof shall cease with or
without surrender of certificates for the Series E Preferred, except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [d] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[d] Upon conversion of the Series E Preferred, the holder
thereof shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted, including any
dividends on such shares of the Series E Preferred declared prior to
such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series E Preferred
entitled to receive payment of such dividend.
[e] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series E Preferred.
SECTION 9. REPORTS AS TO ADJUSTMENTS.
Whenever the number of shares of Common Stock into which the shares of
the Series E Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series E Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series E Preferred is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and when such adjustment will become
effective and (B) promptly mail to the holders of record of the outstanding
shares of the Series E Preferred a notice stating that the number of shares into
which the shares of Series E Preferred are convertible has been adjusted and
setting forth the new number of
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<PAGE> 45
shares into which each share of the Series E Preferred is convertible as a
result of such adjustment and when such adjustment will become effective.
Notwithstanding the foregoing, the Corporation shall incur no liability for its
failure to take any action set forth in this Section 9, nor shall such failure
affect the validity, rights or preferences of any shares of the Series E
Preferred.
SECTION 10. RANKING.
The Series E Preferred shall rank senior to the Common Stock and any
other series of Preferred Stock of the Corporation hereafter created (except for
the Series B Preferred, which shall rank senior to the Series E Preferred, and
except for the Series A Preferred, the Series C Preferred, the Series D
Preferred, the Series F Preferred, and any other series of Preferred Stock which
the Board of Directors shall establish and designate to rank equal therewith
pursuant to Subpart C of this Article FOURTH, with which it shall rank equal),
as to the payment of dividends and the distribution of assets and rights upon
liquidation, dissolution or winding up of the Corporation.
I. Designation of Series F Convertible Preferred Stock. A series of the
Preferred Stock of the Corporation is hereby created and authorized, and the
designations, amount and stated value of such series of Preferred Stock and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereon, are as follows:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as Series F Convertible
Preferred (the "Series F Preferred") and the number of shares constituting such
series shall be 4,100,000 shares. The stated value of the Series F Preferred
shall be $5 per share, the original per share issue price (the "Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series F Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing commencing with the date of issue of such shares, on shares of
the Series F Preferred at the rate of $.50 per share per annum; provided,
however, that if and to the extent that the holder of a share of the Series F
Preferred does not receive a cash dividend on any given Quarterly Dividend
Payment Date in full payment of the accrued and unpaid dividend on such share of
the Series F Preferred or any previously cumulated dividend on such share for
the period ending on such Quarterly Dividend Payment Date and beginning on the
immediately preceding Quarterly Dividend Payment Date (or, if such share was
first issued during such period, beginning on the date of such issuance), such
unpaid portion of such dividend shall be cumulative and shall itself accrue,
whether or not declared and whether or not the Corporation has at the time funds
legally available for such purpose, from and after such date, until the date so
paid in full, dividends on a daily basis at a rate of 10% per annum, compounded
quarterly. No interest shall be paid on accrued but unpaid dividends.
SECTION 3. VOTING RIGHTS.
In addition to voting rights required by law or by this Amended
Certificate of Incorporation, as amended or restated from time to time (the
"Certificate of Incorporation"), subject to restrictions
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<PAGE> 46
contained in this Certificate of Incorporation the holders of Series F Preferred
shall be entitled to vote on all matters submitted to a vote of the
Corporation's stockholders. Except as otherwise required by law or provided by
this Certificate of Incorporation or by the Board of Directors pursuant to
Subpart C of this Article FOURTH, the holders of the Series F Preferred, shall
vote together with the holders of all other series of the Corporation's voting
preferred stock and the holders of the Corporation's Common Stock as one class
with one vote per share (in the case of Preferred Stock, subject to adjustments
as provided in Section 7 below and if convertible into Common Stock, one vote
per share of Common Stock into which such convertible Preferred Stock is then
convertible) on all matters submitted to a vote of the Corporation's
stockholders. Further, this Certificate of Incorporation may not be amended to
change the liquidation preference, conversion rate, dividend rate or voting, put
or redemption rights of any series of the Corporation's Preferred Stock without
the approval of the holders of a majority of the outstanding shares of the
Series F Preferred, voting as a separate class.
SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series F Preferred as provided in
Section 2 are in arrears, thereafter and until dividends, including all accrued
dividends, on shares of the Series F Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series F
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
such junior stock, (B) pay dividends on or make any other distributions on any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series F Preferred, except dividends paid
ratably on the Series F Preferred and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled, (C) redeem or purchase or
otherwise acquire for consideration any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series F
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior to the Series F Preferred or in
satisfaction of contractual obligations to do so entered into with the written
consent of the holders of a majority of outstanding shares of Series F Preferred
(including, without limitation, in satisfaction of the provisions contained in
the Stockholders' Agreement), or (D) purchase or otherwise acquire for
consideration any shares of the Series F Preferred, or any shares of stock
ranking on a parity with the Series F Preferred except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors (including the Series F Directors voting as part of the majority),
after consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall unanimously
determine in good faith will result in fair and equitable treatment among the
respective series of classes or except pursuant to the provisions of the
Stockholders' Agreement.
SECTION 5. REACQUIRED SHARES.
Any shares of the Series F Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, or otherwise in accordance with Delaware General
Corporation Law.
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SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of the Series F Preferred unless,
prior thereto, the holders of the Series B Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (B) to the holders of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series F Preferred
unless, prior thereto, the holders of Series F Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (C) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series F
Preferred, except distributions made ratably on the Series F Preferred and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 7. CONVERSION.
[a] Optional Conversion. Subject to the provisions for
adjustment hereinafter set forth, each share of the Series F Preferred
shall be convertible at any time at the option of the holder thereof,
in the manner hereinafter set forth, into one (1) fully paid and
nonassessable share of Common Stock of the Corporation.
[b] Mandatory Conversion. Subject to the provisions for
adjustment set forth in this Section 7, each share of the Series F
Preferred shall be convertible at the option of the Board of Directors
into one (1) fully paid and nonassessable share of Common Stock of the
Corporation in the event of, and concurrently with the closing of, a
public offering of Common Stock of the Corporation at a per share price
of at least $12.00 (subject to adjustment for stock splits, stock
dividends, reverse stock splits and the like) with gross proceeds to
the Corporation of at least $25,000,000 (excluding the effect of any
over-allotment option).
[c] The number of shares of Common Stock into which each share
of the Series F Preferred is convertible shall be adjusted from time to
time as follows:
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series F
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise),
then, and in each such case, the number of shares of Common
Stock into which each share of the Series F Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the
occurrence of such event by (b) a fraction, the numerator of
which is the sum of (I) the number of shares of Common Stock
into which such share was convertible immediately prior to the
occurrence of such event plus (II) the number of shares of
Common Stock which such holder would have been entitled to
receive in connection with the occurrence of such event had
such share been converted immediately prior thereto, and the
denominator of which is the number of shares of Common Stock
determined in
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<PAGE> 48
accordance with clause (I) above. An adjustment made pursuant
to this subparagraph [c][i] shall become effective (a) in the
case of any such dividend, immediately after the close of
business on the record date for the determination of holders
of Common Stock entitled to receive such dividend, or (b) in
the case of any such subdivision, at the close of business on
the day immediately prior to the day upon which such corporate
action becomes effective.
[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series F Preferred
shall combine or consolidate the outstanding shares of its
Common Stock into a lesser number of shares of Common Stock,
by reclassification or otherwise, then, and in each such case,
the number of shares of Common Stock into which each share of
the Series F Preferred is convertible shall be adjusted so
that the holder of each share thereof shall be entitled to
receive, upon the conversion thereof, the number of shares of
Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such share was convertible
immediately prior to the occurrence of such event by (b) a
fraction, the numerator of which is the number of shares which
the holder would have owned after giving effect to such event
had such share been converted immediately prior to the
occurrence of such event and the denominator of which is the
number of shares of Common Stock into which such share was
convertible immediately prior to the occurrence of such event.
An adjustment made pursuant to this subparagraph b[ii] shall
become effective at the close of business on the date
immediately prior to the day upon which such corporate action
becomes effective.
[iii] In case the Corporation after the
issuance of such share of Series F Preferred shall: (A) issue
any options, warrants, or other rights (excluding those issued
in exchange for options to purchase common stock in Faircom
Inc. pursuant to the terms of a merger, and excluding options
to purchase Common Stock issued to management of the
Corporation exercisable for up to the lesser of 2,000,000
shares of Common Stock (subject to adjustment pursuant to
provisions applicable to the options in the case of stock
splits, reverse stock splits and the like) or that number of
shares of Common Stock equal to fifteen percent (15%) of the
aggregate number of outstanding shares of Common Stock and
other equity securities of the Corporation exercisable for the
purchase of, or convertible into, Common Stock, computed on a
fully-diluted basis) entitling the holder thereof to subscribe
for, or purchase, Common Stock at a price per share which,
when added to the amount of consideration received or
receivable by the Corporation for such options, warrants, or
other rights, is less than the then fair market value per
share of the Common Stock at the date of such issuance; (B)
issue or sell securities of the Corporation convertible into,
or exchangeable for, Common Stock at a price per share which,
when added to the amount of consideration received or
receivable, from the Corporation for such exchangeable or
convertible securities, is less than the then fair market
value of a share of Common Stock at the date of such issuance;
or (C) issue or sell additional shares of Common Stock for
consideration representing less than the then fair market
value of the Common Stock at the date of such issuance; then
the number of shares of Common Stock into which each share of
the Series F Preferred is convertible shall be adjusted so
that, thereafter, until further adjusted, the holder of each
share thereof shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock
determined by multiplying (w) the number of shares of Common
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Stock into which such shares are convertible immediately prior
to the occurrence of such event by (x) a fraction, the
numerator of which shall be the number of shares of Common
Stock outstanding prior to such issuance plus the number of
additional shares of Common Stock issuable upon exercise of
such options, warrants, or rights, or exchangeable or
convertible securities, or the additional number of shares of
Common Stock issued at such time, and the denominator of which
shall be the number of shares of Common Stock outstanding
prior to such issuance plus the number of shares of Common
Stock that either (y) the sum of the aggregate exercise price
of the total number of shares of Common Stock issuable upon
exercise of such options, warrants, or rights, or upon
conversion or exchange of such convertible securities, and the
aggregate amount of consideration, if any, received or
receivable by the Corporation for such options, warrants, or
rights, or convertible or exchangeable securities, or (z) the
aggregate consideration received in connection with the sale
of shares of its Common Stock for less than the then fair
market value, as the case may be, would purchase at the then
fair market value.
[iv] In the event that, at any time, or from
time to time, after the issuance of such share of the Series F
Preferred, the Common Stock issuable upon conversion of the
Series F Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend, or a
reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 7), then, and in any
such event, each holder of Series F Preferred shall have the
right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable
upon such recapitalization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such shares of Series F Preferred could have been converted
immediately prior to such recapitalization, reclassification,
or change, all subject to further adjustment as provided
herein.
[v] If at any time, or from time to time
after the issuance of such share of the Series F Preferred,
there is a capital reorganization of the Common Stock other
than a recapitalization, subdivision, combination,
reclassification, or exchange of shares provided for elsewhere
in this Section 7) or a merger or consolidation of the
Corporation with or into another corporation, or the sale of
all, or substantially all, of the Corporations' properties and
assets to any other person, then, as a part of such
reorganization, merger, consolidation, or sale, provision
shall be made so that the holders of the Series F Preferred
shall thereafter be entitled to receive upon conversion of the
Series F Preferred the number of shares of stock or other
securities or property to which a holder of the number of
shares of Common Stock deliverable upon conversion would have
been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions
of this Section 7 with respect to the rights of the holders of
Series F Preferred after the reorganization, merger,
consolidation, or sale to the end that the provisions of this
Section 7 shall be applicable after that event and be as
nearly equivalent as may be practicable.
[vi] Upon the expiration of any rights,
options, warrants or conversion or exchange privileges which
caused an adjustment pursuant to this
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<PAGE> 50
Section 7 to be made, if any thereof shall not have been
exercised, the number of shares of Common Stock into which
each share of the Series F Preferred is convertible shall,
upon such expiration, be readjusted and shall thereafter be
such as it would have been had it been originally adjusted (or
had the original adjustment not been required, as the case may
be) as if (a) the only shares of Common Stock so issued were
the shares of Common Stock, if any, actually issued or sold
upon the exercise of such rights, options, warrants or
conversion or exchange privileges and (b) such shares of
Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all
such rights, options, warrants or conversion or exchange
privileges, whether or not exercised.
[d] If any adjustment in the number of shares of Common Stock
into which each share of the Series F Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of the Series F Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series F Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series F Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [d] shall be made to the
nearest one-hundredth of a share.
[e] Subject to the limitation in Section 7[h] below, the
holder of any shares of the Series F Preferred may convert such shares
into shares of Common Stock pursuant to paragraph [a] of this Section 7
by surrendering for such purpose to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation
for that purpose, a certificate or certificates representing the shares
of Series F Preferred to be converted (or if such certificate or
certificates cannot be found, an affidavit of lost securities in form
and substance acceptable to the Corporation) accompanied by a written
notice stating that such holder elects to convert all or a specified
number of such shares in accordance with the provisions of this Section
7 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name
or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates and the receipt
of such notice relating thereto and, if applicable, payment of all
transfer taxes, the Corporation shall deliver or cause to be delivered
(i) certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock of the Corporation to which
the holder of the Series F Preferred so converted shall be entitled and
(ii) if less than the full number of shares of the Series F Preferred
evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted. Such conversions
shall be deemed to have been made at the close of business on the date
of giving of such notice and of such surrender of the certificate or
certificates representing
50
<PAGE> 51
the shares of the Series F Preferred to be converted so that the rights
of the holder thereof shall cease except for the right to receive
Common Stock of the Corporation in accordance herewith and any
accumulated, accrued or unpaid dividends pursuant to paragraph [g]
below, and the converting holder shall be treated for all purposes as
having become the record holder of such Common Stock of the Corporation
at such time.
[f] The Series F Preferred shall convert to Common Stock of
the Corporation pursuant to paragraph [b] of this Section 7
automatically upon notice in writing to the stockholders, including all
holders of the Series F Preferred, setting forth the date of such
conversion and the material terms of the triggering public offering. As
promptly as practicable after such notice, and in any event within five
business days after the surrender of certificates for the Series F
Preferred (if required by the Board of Directors), the Corporation
shall deliver or cause to be delivered to each holder of Series F
Preferred certificates representing the number of validly issued, fully
paid and nonassessable shares of Common Stock of the Corporation to
which such holder of the Series F Preferred so converted shall be
entitled. Such conversion shall be deemed to have been made at the
close of business on the date set forth in such notice of mandatory
conversion so that the rights of the holder thereof shall cease with or
without surrender of certificates for the Series F Preferred, except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [g] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[g] Upon conversion of any shares of the Series F Preferred
pursuant to paragraph [a] or [b] of this Section 7, the holder thereof
shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted (whether or not
declared or otherwise payable as of such date of conversion), including
any dividends on such shares of the Series F Preferred declared prior
to such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series F Preferred
entitled to receive payment of such dividend.
[h] Shares of the Series F Preferred may not be converted
after the close of business on the third business day preceding the
Redemption Date pursuant to Section 8.
[i] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series F Preferred.
[j] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser, who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
SECTION 8. REPORTS AS TO ADJUSTMENTS.
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<PAGE> 52
Whenever the number of shares of Common Stock into which the shares of
the Series F Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series F Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series F Preferred is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and when such adjustment will become
effective and (B) promptly mail to the holders of record of the outstanding
shares of the Series F Preferred a notice stating that the number of shares into
which the shares of Series F Preferred are convertible has been adjusted and
setting forth the new number of shares into which each share of the Series F
Preferred is convertible as a result of such adjustment and when such adjustment
will become effective. Notwithstanding the foregoing, the Corporation shall
incur no liability for its failure to take any action set forth in this Section
8, nor shall such failure affect the validity, rights or preferences of any
shares of the Series F Preferred.
SECTION 9. RANKING.
The Series F Preferred shall rank senior to the Common Stock and any
other series of Preferred Stock of the Corporation hereafter created (except for
the Series B Preferred, which shall rank senior to the Series F Preferred, and
except for the Series A Preferred, the Series C Preferred, the Series D
Preferred, the Series E Preferred, and any other series of Preferred Stock which
the Board of Directors shall establish and designate to rank equal therewith
pursuant to Subpart C of this Article FOURTH, with which it shall rank equal),
as to the payment of dividends and the distribution of assets and rights upon
liquidation, dissolution or winding up of the Corporation.
SECTION 10. DIRECTORSHIPS.
The holders of the Series F Preferred, as a class, shall be
entitled to be represented on the Board of Directors by two Directors (the
"Series F Directors") who, upon nomination by such holders, as a class, will
stand for election by voting by the holders of the Preferred Stock (subject to
limitations in this Article FOURTH or established by the Board of Directors
pursuant to Section C of this Article FOURTH) and holders of Common Stock
together, except under circumstances where the number of individuals nominated
for election exceeds the number of Directors to be elected. In the event the
number of individuals nominated for election exceeds the number of Directors to
be elected, then the holders of the Series F Preferred shall have the sole right
to vote for, elect and remove the individuals nominated by them, as a class, to
serve as the Series F Directors, and in such event the further right to vote
for, elect or remove any of the other Directors who are not to be elected solely
by the holders of another class or series of Preferred Stock. The Series F
Directors, upon being elected, will serve for the same term and have the same
voting powers as other Directors. The right to elect the Series F Directors
pursuant to the terms hereof shall be exercisable by the holders of a majority
of the Series F Preferred at their option upon at least 60 days notice to the
Corporation; provided, however, if the Corporation is subject to the reporting
requirements of the Securities Exchange Act of 1934, such notice must be
provided on or before the date established by the Corporation for the submission
of proposals pursuant to the proxy rules promulgated under the Securities Act of
1934. One of the Series F Directors shall serve as a member of the Compensation
Committee and the other shall serve as a member of the Audit and Nominating
Committees of the Board of Directors (or such other Committees of the Board
performing such functions), which Committees will be composed of at least one
Director, in addition to the Series F Director, who is not an employee of the
Corporation.
52
<PAGE> 53
FIFTH: Incorporator. The name and mailing address of the incorporator
is Terry Jacobs, 50 East RiverCenter Boulevard, Covington, Kentucky 41011, whose
powers as incorporator have ceased by virtue of the election of the Board of
Directors.
SIXTH: Elimination of Director Liability. A director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended after the filing of the Certificate of
Incorporation of which this Article is a part to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
SEVENTH: Right to Indemnification.
A. Indemnification. The Corporation shall indemnify and hold harmless,
to the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party, or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding"), by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another Corporation or of a partnership, joint venture, trust, enterprise or
non-profit entity, including service with respect to employee benefit plans,
against all liability and loss suffered and expenses reasonably incurred by such
person. The Corporation shall be required to indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
B. Prepayment of Expenses. The Corporation shall pay the expenses of
directors and executive officers of the Corporation, and may pay the expenses of
all other officers, employees or agents of the Corporation, incurred in
defending any proceeding, in advance of its final disposition, provided,
however, that the payment of expenses incurred by a director, officer, employee
or agent in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the director, officer, employee or agent
to repay all amounts advanced if it should be ultimately determined that the
director, officer, employee or agent is not entitled to be indemnified under
this Article SEVENTH or otherwise.
C. Claims. If a claim for indemnification or payment of expenses under
this Article is not paid in full within sixty days after a written claim
therefor has been received by the Corporation, the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under
applicable law.
53
<PAGE> 54
D. Non-Exclusivity of Rights. The rights conferred on any person by
this Article SEVENTH shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
certificate of incorporation, bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
E. Other Indemnification. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another Corporation, partnership, joint venture,
trust, enterprise or nonprofit entity, shall be reduced by any amount such
person may collect as indemnification from such other Corporation, partnership,
joint venture, trust, enterprise or non-profit enterprise.
F. Amendment or Repeal. Any repeal or modification of the foregoing
provisions of this Article SEVENTH shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
EIGHTH: Bylaws. In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized to make, alter or repeal bylaws of the Corporation.
*******
The Corporation further certifies:
II. That at a meeting of the Board of Directors of Regent
Communications, Inc. resolutions were duly adopted setting forth the foregoing
Amended and Restated Certificate of Incorporation, declaring adoption of the
same to be advisable and submitting it to the shareholders of said corporation
for approval.
III. That thereafter, pursuant to resolution of its Board of Directors,
consents of the stockholders of the corporation were executed, in accordance
with Section 228 of the General Corporation Law of the State of Delaware, by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Pursuant to Section
228 of the General Corporation Law of the State of Delaware, written notice has
been given to stockholders who have not consented in writing.
IV. That said amendment was duly adopted in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware.
54
<PAGE> 55
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by Terry S. Jacobs, its Chairman, and William L. Stakelin, its Secretary,
this 11th day of June, 1998.
By: /s/ Terry S. Jacobs
-------------------------
Terry S. Jacobs, Chairman
ATTEST:
/s/ William L. Stakelin
------------------------------
William L. Stakelin, Secretary
55
<PAGE> 56
CERTIFICATE OF DESIGNATION, NUMBER, POWERS PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL, AND OTHER SPECIAL RIGHTS AND THE QUALIFICATIONS,
LIMITATIONS, RESTRICTIONS, AND OTHER DISTINGUISHING CHARACTERISTICS OF
SERIES G PREFERRED STOCK OF REGENT COMMUNICATIONS, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation")
is
REGENT COMMUNICATIONS, INC.
2. The certificate of incorporation (as amended) of the corporation
authorizes the issuance of 20,000,000 shares of Preferred Stock (of a par value
of $.01 each) and expressly vests in the Board of Directors of the corporation
the authority provided therein to issue any or all of said shares in one or more
series and by resolution or resolutions, the designation, number, full or
limited voting powers, or the denial of voting powers, preferences and relative,
participating, optional, and other special rights and the qualifications,
limitations, restrictions, and other distinguishing characteristics of each
series to be issued.
3. The Board of Directors of the corporation, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
designating a new series of Preferred Stock as Series G Preferred Stock:
"RESOLVED, that the Board of Directors hereby designates a new
series of Preferred Stock to be known as "Series G Convertible
Preferred Stock", the number, amount, stated value, voting
powers, preferences and relative, participating, optional and
other special rights of which, and the qualifications,
limitations or restrictions thereon, are set forth on Exhibit
A attached hereto;
RESOLVED FURTHER, that the statements contained in the
foregoing resolution designating the said Series G Preferred
Stock shall, upon the effective date of said series, be deemed
to be included in and be a part of the certificate of
incorporation of the corporation pursuant to the provisions of
Sections 104 and 151 of the General Corporation Law of the
State of Delaware;
RESOLVED FURTHER, that the officers of the corporation and
each of them individually hereby are authorized to execute and
deliver, for and on behalf of the corporation a Certificate of
Designation to be filed with the Delaware Secretary of State
and any other documents or filings required by applicable law
required to amend the corporation's Certificate and to
otherwise effectuate the intent of the foregoing resolutions."
<PAGE> 57
The effective time and date of the series herein certified shall be the filing
of this certificate.
IN WITNESS WHEREOF, the undersigned officer has executed this document
the 11th day of January, 1999.
/s/ Terry S. Jacobs
---------------------------------
Terry S. Jacobs, Chairman and CEO
COMMONWEALTH OF KENTUCKY )
) SS:
COUNTY OF KENTON )
BE IT REMEMBERED, that on this 11th day of January, 1999, before me,
the subscriber, a Notary Public in and for said county, personally came Terry S.
Jacobs, the Chairman and CEO of Regent Communications, Inc., and acknowledged
that he signed the foregoing instrument on behalf of said corporation and that
the signing thereof is his voluntary act and deed and the voluntary act and deed
of said corporation.
IN TESTIMONY THEREOF, I have hereunto subscribed my name and affixed my
seal on this day and year aforesaid.
/s/ Christina Tenhundfeld
------------------------------
Notary Public
<PAGE> 58
EXHIBIT A
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as Series G Convertible
Preferred (the "Series G Preferred") and the number of shares constituting such
series shall be 4,000,000 shares. The stated value of the Series G Preferred
shall be $5 per share, the original per share issue price (the "Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
The holders of shares of the Series G Preferred shall be entitled to
receive, when, as and if declared by the Board of Directors of the Corporation
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), accruing commencing with the date of issue of such shares, on shares of
the Series G Preferred at the rate of $.50 per share per annum; provided,
however, that if and to the extent that the holder of a share of the Series G
Preferred does not receive a cash dividend on any given Quarterly Dividend
Payment Date in full payment of the accrued and unpaid dividend on such share of
the Series G Preferred or any previously cumulated dividend on such share for
the period ending on such Quarterly Dividend Payment Date and beginning on the
immediately preceding Quarterly Dividend Payment Date (or, if such share was
first issued during such period, beginning on the date of such issuance), such
unpaid portion of such dividend shall be cumulative and shall itself accrue,
whether or not declared and whether or not the Corporation has at the time funds
legally available for such purpose, from and after such date, until the date so
paid in full, dividends on a daily basis at a rate of 10% per annum, compounded
quarterly. No interest shall be paid on accrued but unpaid dividends.
SECTION 3. VOTING RIGHTS.
In addition to voting rights required by law or by the Company's
Amended and Restated Certificate of Incorporation, as amended or restated from
time to time (the "Certificate of Incorporation"), subject to restrictions
contained in the Certificate of Incorporation the holders of Series G Preferred
shall be entitled to vote on all matters submitted to a vote of the
Corporation's stockholders. Except as otherwise required by law or provided by
the Certificate of Incorporation or by the Board of Directors pursuant to
Subpart C of Article Fourth of the Certificate of Incorporation, the holders of
the Series G Preferred shall vote together with the holders of all other series
of the Corporation's voting preferred stock and the holders of the Corporation's
Common Stock as one class with one vote per share (in the case of Preferred
Stock, subject to adjustments as provided in Section 7 below and if convertible
into Common Stock, one vote per share of Common Stock into which such
convertible Preferred Stock is then convertible) on all matters submitted to a
vote of the Corporation's stockholders.
<PAGE> 59
SECTION 4. CERTAIN RESTRICTIONS.
Whenever dividends payable on the Series G Preferred as provided in
Section 2 are in arrears, thereafter and until dividends, including all accrued
dividends, on shares of the Series G Preferred outstanding shall have been paid
in full or declared and set apart for payment, the Corporation shall not (A) pay
dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series G
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
such junior stock, (B) pay dividends on or make any other distributions on any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series G Preferred, except dividends paid
ratably on the Series G Preferred and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled, (C) redeem or purchase or
otherwise acquire for consideration any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series G
Preferred, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior to the Series G Preferred or in
satisfaction of contractual obligations to do so entered into with the written
consent of the holders of a majority of outstanding shares of Series F Preferred
and Series G Preferred voting together as one class on the matter (including,
without limitation, in satisfaction of the provisions contained in the
Stockholders' Agreement), or (D) purchase or otherwise acquire for consideration
any shares of the Series G Preferred, or any shares of stock ranking on a parity
with the Series G Preferred except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall unanimously
determine in good faith will result in fair and equitable treatment among the
respective series of classes or except pursuant to the provisions of the
Stockholders' Agreement.
SECTION 5. REACQUIRED SHARES.
Any shares of the Series G Preferred which have been converted to
Common Stock or have been purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, or otherwise in accordance with Delaware General
Corporation Law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (A) to the holders of the Series G Preferred unless,
prior thereto, the holders of the Series B Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (B) to the holders of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series G Preferred
unless, prior thereto, the holders of Series G Preferred shall have received the
Stated Value per share, plus an amount equal to unpaid dividends thereon,
including accrued dividends, whether or not declared, to the date of such
payment, or (C) to the holders of stock ranking on a parity
<PAGE> 60
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series G Preferred, except distributions made ratably on the Series G Preferred
and all other such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up.
SECTION 7. CONVERSION.
[a] Optional Conversion. Subject to the provisions for
adjustment hereinafter set forth, each share of the Series G Preferred
shall be convertible at any time at the option of the holder thereof,
in the manner hereinafter set forth, into one (1) fully paid and
nonassessable share of Common Stock of the Corporation.
[b] Mandatory Conversion. Subject to the provisions for
adjustment set forth in this Section 7, each share of the Series G
Preferred shall be convertible at the option of the Board of Directors
into one (1) fully paid and nonassessable share of Common Stock of the
Corporation in the event of, and concurrently with the closing of, a
public offering of Common Stock of the Corporation at a per share price
of at least $12.00 (subject to adjustment for stock splits, stock
dividends, reverse stock splits and the like) with gross proceeds to
the Corporation of at least $25,000,000 (excluding the effect of any
over-allotment option).
[c] The number of shares of Common Stock into which each share
of the Series G Preferred is convertible shall be adjusted from time to
time as follows:
[i] In case the Corporation shall at any time or from
time to time after the issuance of such share of Series G
Preferred declare or pay any dividend on its Common Stock
payable in its Common Stock or effect a subdivision of the
outstanding shares of its Common Stock into a greater number
of shares of Common Stock (by reclassification or otherwise),
then, and in each such case, the number of shares of Common
Stock into which each share of the Series G Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the
occurrence of such event by (b) a fraction, the numerator of
which is the sum of (I) the number of shares of Common Stock
into which such share was convertible immediately prior to the
occurrence of such event plus (II) the number of shares of
Common Stock which such holder would have been entitled to
receive in connection with the occurrence of such event had
such share been converted immediately prior thereto, and the
denominator of which is the number of shares of Common Stock
determined in accordance with clause (I) above. An adjustment
made pursuant to this subparagraph [c][i] shall become
effective (a) in the case of any such dividend, immediately
after the close of business on the record date for the
determination of holders of Common Stock entitled to receive
such dividend, or (b) in the case of any such subdivision, at
the close of business on the day immediately prior to the day
upon which such corporate action becomes effective.
[ii] In case the Corporation at any time or from time
to time after the issuance of such share of Series G Preferred
shall combine or consolidate the
<PAGE> 61
outstanding shares of its Common Stock into a lesser number of
shares of Common Stock, by reclassification or otherwise,
then, and in each such case, the number of shares of Common
Stock into which each share of the Series G Preferred is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the
occurrence of such event by (b) a fraction, the numerator of
which is the number of shares which the holder would have
owned after giving effect to such event had such share been
converted immediately prior to the occurrence of such event
and the denominator of which is the number of shares of Common
Stock into which such share was convertible immediately prior
to the occurrence of such event. An adjustment made pursuant
to this subparagraph b[ii] shall become effective at the close
of business on the date immediately prior to the day upon
which such corporate action becomes effective.
[iii] In case the Corporation after the issuance of such share
of Series G Preferred shall: (A) issue any options, warrants,
or other rights (excluding options to purchase Common Stock
issued to management of the Corporation exercisable for up to
the lesser of 2,000,000 shares of Common Stock (subject to
adjustment pursuant to provisions applicable to the options in
the case of stock splits, reverse stock splits and the like)
or that number of shares of Common Stock equal to fifteen
percent (15%) of the aggregate number of outstanding shares of
Common Stock and other equity securities of the Corporation
exercisable for the purchase of, or convertible into, Common
Stock, computed on a fully-diluted basis) entitling the holder
thereof to subscribe for, or purchase, Common Stock at a price
per share which, when added to the amount of consideration
received or receivable by the Corporation for such options,
warrants, or other rights, is less than the then fair market
value per share of the Common Stock at the date of such
issuance; (B) issue or sell securities of the Corporation
convertible into, or exchangeable for, Common Stock at a price
per share which, when added to the amount of consideration
received or receivable, from the Corporation for such
exchangeable or convertible securities, is less than the then
fair market value of a share of Common Stock at the date of
such issuance; or (C) issue or sell additional shares of
Common Stock for consideration representing less than the then
fair market value of the Common Stock at the date of such
issuance; then the number of shares of Common Stock into which
each share of the Series G Preferred is convertible shall be
adjusted so that, thereafter, until further adjusted, the
holder of each share thereof shall be entitled to receive,
upon the conversion thereof, the number of shares of Common
Stock determined by multiplying (w) the number of shares of
Common Stock into which such shares are convertible
immediately prior to the occurrence of such event by (x) a
fraction, the numerator of which shall be the number of shares
of Common Stock outstanding prior to such issuance plus the
number of additional shares of Common Stock issuable upon
exercise of such options, warrants, or rights, or exchangeable
or convertible securities, or the additional number of shares
of Common Stock issued at such time, and the denominator of
which shall be the number of shares of Common Stock
outstanding prior to such issuance plus the number of shares
of Common Stock that either (y) the sum of the aggregate
exercise price of the total number of shares of Common Stock
issuable upon exercise of such options,
<PAGE> 62
warrants, or rights, or upon conversion or exchange of such
convertible securities, and the aggregate amount of
consideration, if any, received or receivable by the
Corporation for such options, warrants, or rights, or
convertible or exchangeable securities, or (z) the aggregate
consideration received in connection with the sale of shares
of its Common Stock for less than the then fair market value,
as the case may be, would purchase at the then fair market
value.
[iv] In the event that, at any time, or from
time to time, after the issuance of such share of the Series G
Preferred, the Common Stock issuable upon conversion of the
Series G Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by
recapitalization, reclassification, or otherwise (other than a
subdivision or combination of shares or stock dividend, or a
reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 7), then, and in any
such event, each holder of Series G Preferred shall have the
right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable
upon such recapitalization, reclassification, or other change,
by holders of the number of shares of Common Stock into which
such shares of Series G Preferred could have been converted
immediately prior to such recapitalization, reclassification,
or change, all subject to further adjustment as provided
herein.
[v] If at any time, or from time to time
after the issuance of such share of the Series G Preferred,
there is a capital reorganization of the Common Stock other
than a recapitalization, subdivision, combination,
reclassification, or exchange of shares provided for elsewhere
in this Section 7) or a merger or consolidation of the
Corporation with or into another corporation, or the sale of
all, or substantially all, of the Corporation's properties and
assets to any other person, then, as a part of such
reorganization, merger, consolidation, or sale, provision
shall be made so that the holders of the Series G Preferred
shall thereafter be entitled to receive upon conversion of the
Series G Preferred the number of shares of stock or other
securities or property to which a holder of the number of
shares of Common Stock deliverable upon conversion would have
been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions
of this Section 7 with respect to the rights of the holders of
Series G Preferred after the reorganization, merger,
consolidation, or sale to the end that the provisions of this
Section 7 shall be applicable after that event and be as
nearly equivalent as may be practicable.
[vi] Upon the expiration of any rights,
options, warrants or conversion or exchange privileges which
caused an adjustment pursuant to this Section 7 to be made, if
any thereof shall not have been exercised, the number of
shares of Common Stock into which each share of the Series G
Preferred is convertible shall, upon such expiration, be
readjusted and shall thereafter be such as it would have been
had it been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (a)
the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion or
exchange privileges and (b) such shares of Common Stock, if
<PAGE> 63
any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for
the issuance, sale or grant of all such rights, options,
warrants or conversion or exchange privileges, whether or not
exercised.
[d] If any adjustment in the number of shares of Common Stock
into which each share of the Series G Preferred may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of the Series G Preferred is then convertible, the
amount of any such adjustment shall be carried forward and adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
the number of shares of Common Stock into which each share of the
Series G Preferred is then convertible; provided that any such
adjustments carried forward shall be made immediately following receipt
of notice from a holder of the intent to convert all or a portion of
the Series G Preferred such that upon conversion the holder shall
receive such number of shares of Common Stock as such holder is
entitled, taking into account all adjustments required by this Section
7. All calculations under this paragraph [d] shall be made to the
nearest one-hundredth of a share.
[e] Subject to the limitation in Section 7[h] below, the
holder of any shares of the Series G Preferred may convert such shares
into shares of Common Stock pursuant to paragraph [a] of this Section 7
by surrendering for such purpose to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation
for that purpose, a certificate or certificates representing the shares
of Series G Preferred to be converted (or if such certificate or
certificates cannot be found, an affidavit of lost securities in form
and substance acceptable to the Corporation) accompanied by a written
notice stating that such holder elects to convert all or a specified
number of such shares in accordance with the provisions of this Section
7 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name
or names. As promptly as practicable, and in any event within five
business days after the surrender of such certificates and the receipt
of such notice relating thereto and, if applicable, payment of all
transfer taxes, the Corporation shall deliver or cause to be delivered
(i) certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock of the Corporation to which
the holder of the Series G Preferred so converted shall be entitled and
(ii) if less than the full number of shares of the Series G Preferred
evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted. Such conversions
shall be deemed to have been made at the close of business on the date
of giving of such notice and of such surrender of the certificate or
certificates representing the shares of the Series G Preferred to be
converted so that the rights of the holder thereof shall cease except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [g] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
<PAGE> 64
[f] The Series G Preferred shall convert to Common Stock of
the Corporation pursuant to paragraph [b] of this Section 7
automatically upon notice in writing to the stockholders, including all
holders of the Series G Preferred, setting forth the date of such
conversion and the material terms of the triggering public offering. As
promptly as practicable after such notice, and in any event within five
business days after the surrender of certificates for the Series G
Preferred (if required by the Board of Directors), the Corporation
shall deliver or cause to be delivered to each holder of Series G
Preferred certificates representing the number of validly issued, fully
paid and nonassessable shares of Common Stock of the Corporation to
which such holder of the Series G Preferred so converted shall be
entitled. Such conversion shall be deemed to have been made at the
close of business on the date set forth in such notice of mandatory
conversion so that the rights of the holder thereof shall cease with or
without surrender of certificates for the Series G Preferred, except
for the right to receive Common Stock of the Corporation in accordance
herewith and any accumulated, accrued or unpaid dividends pursuant to
paragraph [g] below, and the converting holder shall be treated for all
purposes as having become the record holder of such Common Stock of the
Corporation at such time.
[g] Upon conversion of any shares of the Series G Preferred
pursuant to paragraph [a] or [b] of this Section 7, the holder thereof
shall be entitled to receive any accumulated, accrued or unpaid
dividends in respect of the shares so converted (whether or not
declared or otherwise payable as of such date of conversion), including
any dividends on such shares of the Series G Preferred declared prior
to such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series G Preferred
entitled to receive payment of such dividend.
[h] Shares of the Series G Preferred may not be converted
after the close of business on the third business day preceding the
Redemption Date pursuant to Section 8.
[i] The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares
of Common Stock of the Corporation issuable upon the conversion of all
outstanding shares of the Series G Preferred.
[j] For purposes of this Section, "fair market value" shall be
as determined by the Board of Directors in such manner as they shall
deem appropriate in their discretion, unless the holder(s) of more than
twenty-five percent (25%) of the outstanding shares of Preferred Stock
of the Corporation demand in good faith and in writing that "fair
market value" be determined by an appraiser, who shall be mutually
acceptable to the Board of Directors and such holders, whose
determination shall be binding and whose fees and expenses shall be
paid by the Corporation.
SECTION 8. REPORTS AS TO ADJUSTMENTS.
Whenever the number of shares of Common Stock into which the shares of
the Series G Preferred are convertible is adjusted as provided in Section 7, the
Corporation will (A) promptly compute such adjustment and furnish to each
transfer agent for the Series G Preferred a certificate, signed by a principal
financial officer of the Corporation, setting forth the number of shares of
Common Stock into which each share of the Series G Preferred is convertible as a
result of such adjustment, a
<PAGE> 65
brief statement of the facts requiring such adjustment and the computation
thereof and when such adjustment will become effective and (B) promptly mail to
the holders of record of the outstanding shares of the Series G Preferred a
notice stating that the number of shares into which the shares of Series G
Preferred are convertible has been adjusted and setting forth the new number of
shares into which each share of the Series G Preferred is convertible as a
result of such adjustment and when such adjustment will become effective.
Notwithstanding the foregoing, the Corporation shall incur no liability for its
failure to take any action set forth in this Section 8, nor shall such failure
affect the validity, rights or preferences of any shares of the Series G
Preferred.
SECTION 9. RANKING.
The Series G Preferred shall rank senior to the Common Stock and any
other series of Preferred Stock of the Corporation hereafter created (except for
the Series B Preferred, which shall rank senior to the Series G Preferred, and
except for the Series A Preferred, the Series C Preferred, the Series D
Preferred, the Series E Preferred, the Series F Preferred, and any other series
of Preferred Stock which the Board of Directors shall establish and designate to
rank equal therewith pursuant to Subpart C of Article Fourth of the Company's
Certificate of Incorporation, with which it shall rank equal), as to the payment
of dividends and the distribution of assets and rights upon liquidation,
dissolution or winding up of the Corporation.
<PAGE> 1
EXHIBIT 4(t)
AMENDMENT TO
SECOND AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
THIS AMENDMENT is made and entered into as of January 11, 1999 and
amends that certain Second Amended and Restated Stockholders' Agreement among
Regent Communications, Inc. and certain of its shareholders (the "Stockholders'
Agreement"). Capitalized terms used herein without definition shall have the
same meanings as set forth in the Stockholders' Agreement.
WITNESSETH:
WHEREAS, the Company intends to designate and issue shares of a new
series of convertible preferred stock entitled Series G Convertible Preferred
Stock (the "Series G Preferred Stock"), which is to have substantially the same
terms as the Series F Preferred Stock; and
WHEREAS, in conjunction with the issuance of the Series G Preferred
Stock, certain amendments to the Stockholders' Agreement are desired; and
WHEREAS, the Stockholders signing this Amendment hold more than fifty
percent (50%) of the Common Stock Beneficially Owned by all Stockholders,
thereby permitting the Company and Stockholders signing below to amend the
Stockholders' Agreement pursuant to Section 16 thereof;
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein, it is hereby agreed as follows:
1. AMENDMENTS. The Stockholders' Agreement is amended as follows:
(a) The definition of "Eligible Put Shares" is expanded to
include the Series G Preferred Stock, and accordingly, subpart (v) of the
definition is changed to state "(v) any series of preferred stock first created
by the Board of Directors after the date hereof other than the Company's 10%
Series G Convertible Preferred Stock, $ .01 par value". . . .
(b) The definition of "Preferred Stock" is amended to state in
its entirety as follows:
"'Preferred Stock' means any or all of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series F Preferred Stock, or Series
G Preferred Stock."
(c) Section 12 is amended to add to the exclusions from the
applicability of the purchase right contained therein the issuance of Series F
Preferred Stock pursuant to the
<PAGE> 2
Series F Preferred Stock Purchase Agreement by adding in the second
parenthetical phrase in the first sentence the following "or (v) pursuant to the
Series F Preferred Stock Purchase Agreement". . . .
(d) There is added to the Stockholders' Agreement a Section 30
to state in its entirety as follows:
"30. Automatic Amendment to Series G Preferred Stock.
In the event any of the terms of the Series F Preferred Stock
(other than amendments which provide the holders of the Series
F Preferred Stock with increased or additional voting or
consent rights or board representation), as set forth in the
Amended and Restated Charter, are amended, the corresponding
terms of the Series G Preferred Stock shall be similarly
amended automatically and without the necessity of a vote of
the holders of the Series G Preferred Stock so as to keep the
terms of the two Series consistent, purchase and acceptance of
delivery of the Series G Preferred Stock being deemed consent
to any such automatic amendment."
2. REMAINDER OF AGREEMENT. Except as specifically amended hereby, the
terms, conditions and provisions of Stockholders' Agreement remain in full force
and effect.
3. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the signatories below have caused this Amendment to
be executed and delivered as of the date first above written.
REGENT COMMUNICATIONS, INC. WALLER-SUTTON MEDIA PARTNERS,
L.P.
By: /s/ By: Waller-Sutton Media, L.L.C.,
its General Partner
Name: /s/
Title: /s/ By: /s/
Member
<PAGE> 3
/s/
TERRY S. JACOBS BLUE CHIP CAPITAL FUND II
LIMITED PARTNERSHIP
/s/ By: Blue Chip Venture Company, Ltd.,
WILLIAM L. STAKELIN its General Partner
By: /s/
/s/ Name: /s/
JOEL M. FAIRMAN Title: /s/
MIAMI VALLEY VENTURE FUND, L.P.
By: Blue Chip Venture Company of
Dayton, Ltd., its Special
Limited Partner
By: /s/
John H. Wyant
Manager
<PAGE> 1
EXHIBIT 4(u)
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") dated as of the 11th
day of January, 1999 between REGENT COMMUNICATIONS, INC., a Delaware corporation
(the "Company") and BLUE CHIP CAPITAL FUND II LIMITED PARTNERSHIP, an Ohio
limited partnership (the "Buyer").
1. Authorization. The Company will authorize the sale and issuance
under this Agreement of 315,887 shares (the "Shares") of its Series G
Convertible Preferred Stock (the "Series G Preferred Stock"), having the rights,
privileges and preferences as set forth in the Certificate of Designation (the
"Certificate") in the form attached to this Agreement as Exhibit A. The shares
of Common Stock into which the Shares will be convertible are referred to herein
as the "Conversion Stock."
2. Sale and Purchase of the Series G Preferred Stock. On and subject to
the terms and conditions set forth herein, the Company will sell, issue and
deliver to Buyer, and Buyer will purchase from the Company, 315,887 shares of
the Series G Convertible Preferred Stock.
3. Closing Date. The closing of the purchase and sale of the Series G
Preferred Stock hereunder shall be on January 11, 1999 (the "Closing") or at
such other time upon which the Company and Buyer shall agree (the date of the
Closing is hereinafter referred to as the "Closing Date").
4. Purchase Price. The purchase price for the Series G Preferred Stock
is One Million Five Hundred Seventy-Nine Thousand Four Hundred Thirty-Five
Dollars ($1,579,435.00) ($5.00 per share) (the "Purchase Price"), which sum
Buyer will pay to the Company by wire transfer of immediately available funds on
the Closing Date.
5. Deliveries by the Company. At the Closing, the Company will deliver
to Buyer the following:
(a) a stock certificate or certificates representing the
Series G Preferred Stock duly issued in the name of Buyer and bearing the
legends set forth in Section 7(j) hereof; and
(b) an opinion of Strauss & Troy, as counsel to the Company,
in the form attached as Exhibit B.
6. Representations and Warranties of the Company. The Company
represents and warrants to Buyer as follows:
(a) Organization and Qualification. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of the
State of Delaware and is in good standing under such laws. The Company has
requisite power and authority to own and operate its properties and assets, and
to carry on its business as presently conducted. The Company is authorized to
transact business as a foreign corporation in good standing in those
jurisdictions in which the nature of its activities or the property owned by it
make such qualification necessary.
(b) Authorization. All corporate action on the part of the
Company necessary for the authorization, execution, delivery and performance of
this Agreement by the Company, the authorization, sale, issuance and delivery of
(i) the Shares and (ii) the Conversion Stock and the
<PAGE> 2
performance of all of the Company's obligations hereunder has been taken or will
be taken prior to the Closing. This Agreement, when executed and delivered by
the Company, shall constitute the valid and binding obligation of the Company,
enforceable in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement is subject
to general principles of equity regardless of whether enforcement is considered
in a proceeding at law or in equity. The Shares, when issued in compliance with
the provisions of this Agreement, will be validly issued, fully paid and
nonassessable. The Conversion Stock has been duly and validly reserved and, when
issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable. The Shares and the Conversion Stock will
be free of any liens or encumbrances, other than any liens or encumbrances
created by or imposed upon the holders thereof through no action of the Company;
provided, however, that the Shares and the Conversion Stock will be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein and under certain other restrictions as set forth in that certain Second
Amended and Restated Stockholders' Agreement dated as of June 15, 1998 among the
Company, Waller-Sutton Media Partners, L.P. et al. The issuance of the Shares
will not violate any preemptive rights available to the holders of any of the
Company's securities. The Series G Preferred Stock shall have the rights,
preferences, privileges and restrictions set forth in the Certificate.
(c) Compliance with Laws. The Company is not in violation of
(i) any applicable order, judgment, injunction, award or decree, or (ii) any
federal, state, local or foreign law, statute, rule, ordinance or regulation or
any other requirement of any governmental or regulatory body, court or
arbitrator applicable to the business of the Company except for violations which
reasonably could not have a material adverse effect on the business or
properties of the Company. The Company has obtained all licenses, permits,
orders and approvals of any federal, state, local or foreign governmental
regulatory body (collectively, "Permits") that are material to or necessary for
the conduct of the business of the Company. All of such Permits are in full
force and effect, no violations are or have been recorded in respect of any
Permit and no proceeding is pending or, to the best of the Company's knowledge,
threatened to revoke or limit any such Permit.
(d) Compliance with Other Instruments, None Burdensome, etc.
Except as set forth on Schedule 1 hereto, the Company is not in violation of any
term of its Amended and Restated Certificate of Incorporation or By-Laws, or, of
any term or provision of any material mortgage, indebtedness, indenture,
contract, agreement, instrument, judgment or decree. The execution, delivery and
performance of and compliance with this Agreement and the issuance of the Series
G Preferred Stock and the Conversion Stock have not resulted and will not result
in any violation of, or conflict with, or constitute a default under, the
Company's existing Amended and Restated Certificate of Incorporation or By-Laws
or any of its agreements or result in the creation of, any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company.
(e) Litigation. Except as set forth on Schedule 1 hereto,
there are no actions, suits, proceedings or investigations pending against the
Company or its properties before any court or governmental agency (nor, to the
best of the Company's knowledge, is there any reasonable basis therefor or
threat thereof).
(f) Governmental Consent, etc. No consent, approval or
authorization of (or designation, declaration of filing with) any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or
<PAGE> 3
issuance of the Series G Preferred Stock and the Conversion Stock, or the
consummation of any other transaction contemplated hereby, except (i) filing of
the Certificate in the office of the Secretary of State of the State of
Delaware, and (ii) qualification (or taking such action as may be necessary to
secure an exemption from qualification, if available) of the offer and sale of
the Series G Preferred Stock and the Conversion Stock under applicable state
securities laws, which filings and qualifications, if required, will be
accomplished in a timely manner.
(g) Offering. Subject to the accuracy of the Buyer's
representations in Section 7 hereof, the offer, sale and issuance of the Series
G Preferred Stock to be issued in conformity with the terms of this Agreement,
and the issuance of the Conversion Stock upon conversion of the Series G
Preferred Stock, constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act").
(h) Brokers or Finders. The Company has not incurred, and will
not incur, directly or indirectly, as a result of any action taken by the
Company, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement.
(i) Disclosure. No representations or warranty by the Company
in this Agreement, nor any statement, document, or certificate, furnished or to
be furnished, to the Buyer in connection herewith, or pursuant hereto, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material fact necessary to make any statement herein or therein not
misleading.
(j) No Material Adverse Change. Except as set forth on
Schedule 1 hereto and except for the utilization of available working capital in
the fourth quarter, between the date of the financial statements filed as part
of the Company's third quarter 10-Q and the Closing Date, there has not been any
change in the assets, liabilities, financial condition or operations of the
Company from that reflected in the financial statements, except changes in the
ordinary course of business which have not been, either in any case or in the
aggregate, materially adverse.
7. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to the Company with respect to the purchase of the Shares as follows:
(a) Non-Registration. Buyer understands that the offering and
sale of the Series G Preferred Stock is intended to be exempt from registration
under the Securities Act of 1933, as amended (the "1933 Act"), by virtue of
Section 4(2) of the Act and the provisions of Regulation D promulgated
thereunder, that the Series G Preferred Stock has not been registered under the
1933 Act or under the securities laws of any state, and that the Company will be
under no obligation to effect any such registration.
(b) Investment Intent. Buyer is purchasing the Series G
Preferred Stock and the Conversion Stock for its own account, for investment and
not with a view to resale, distribution, or other disposition, and Buyer has no
present plans to enter into any contract, undertaking, agreement or arrangement
for any such resale, distribution or other disposition. It understands that the
Shares and the Conversion Stock have not been, and will not be, registered under
the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
such Buyer's representations as expressed herein. Buyer will not sell or
otherwise transfer the Series G
<PAGE> 4
Preferred Stock without registration under the 1933 Act and applicable state
securities laws, or pursuant to an exemption from the registration requirements
thereof which, in the opinion of counsel reasonably acceptable to the Company,
is available for the transaction.
(c) Rule 144. Buyer acknowledges that the Shares and the
Conversion Stock must be held indefinitely unless subsequently registered under
the Securities Act or unless an exemption from such registration is available.
It is aware of the provisions of Rule 144 promulgated under the Securities Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being effected through a "broker's transaction" or in transactions directly with
a "market maker" and the number of shares being sold during any three-month
period not exceeding specified limitations.
(d) No Public Market. Buyer understands that no public market
now exists for the Shares and that the Company has made no assurances that a
public market will ever exist for the Shares.
(e) Status of Buyer. Buyer: (i) is an "accredited investor,"
as that term is defined in Rule 501(a) of Regulation D promulgated under the
1933 Act, inasmuch as Buyer meets the requirements of subparagraph (a)(3) of
Rule 501; (ii) was not formed for the primary purpose of evading federal or
state securities laws, and (iii) is a "Qualified Institutional Buyer" as defined
in 17 CFR .144A(a).
(f) Opportunity to Review Books and Records. Buyer has had a
reasonable opportunity to inspect all documents, books and records pertaining to
the Company and the Series G Preferred Stock and confirms that the Series G
Preferred Stock is being purchased without Buyer's receipt of any offering
literature.
(g) Opportunity for Questions. Buyer has had a reasonable
opportunity to ask questions of and receive answers from a person or persons
acting on behalf of the Company concerning the Company, its business and
operations, the terms of the Series G Preferred Stock and all other aspects of
investment in the Company, and all such questions have been answered to the full
satisfaction of Buyer.
(h) Manner of Purchase. Buyer is not subscribing for the
Series G Preferred Stock as a result of or pursuant to any advertisement,
article, notice or other communication published in any newspaper, magazine, or
similar media or broadcast over television or radio, or presented at any seminar
or meeting, or any solicitation of a subscription by a person other than a
representative of the Company.
(i) Brokers or Finders. Buyer has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
(j) Legends. Buyer understands that the certificate(s)
representing the Series G Preferred Stock shall bear legends in substantially
the following forms, and Buyer shall not transfer any
<PAGE> 5
of the shares of Series G Preferred Stock, or any shares of common stock that
may be issued on conversion thereof, or any interest therein, except in
accordance with the terms of such legends:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any state (the "Securities Laws"). These securities
may not be offered, sold, transferred, pledged or hypothecated in the
absence of registration under applicable Securities Laws, or the
availability of an exemption therefrom. This certificate will not be
transferred on the books of the Corporation or any transfer agent
acting on behalf of the Corporation except upon the receipt of an
opinion of counsel, satisfactory to the Corporation, that the proposed
transfer is exempt from the registration requirements of all applicable
Securities Laws, or the receipt of evidence, satisfactory to the
Corporation, that the proposed transfer is the subject of an effective
registration statement under all applicable Securities Laws."
"The issuer is subject to restrictions contained in the Federal
Communications Act, as amended. The securities evidenced by this
certificate may not be sold, transferred, assigned or hypothecated if,
as a result thereof, the issuer would be in violation of that act."
"The securities represented by this certificate are subject to the
terms and entitled to the benefits of that certain Registration Rights
Agreement dated as of June 15, 1998 among the Company and certain of
its stockholders, as the same may be amended from time to time, and
that certain Second Amended and Restated Stockholders' Agreement dated
as of June 15, 1998 among the Company and certain of its stockholders,
as the same may be amended from time to time."
(k) Authority of Buyer. This Agreement, when executed and
delivered by the Buyer will constitute the legal, valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting enforcement of creditors' rights generally and except
as enforcement is subject to general principles of equity regardless of whether
enforcement is considered in a proceeding at law or in equity.
(l) No Conflicts. The execution, delivery and performance of
this Agreement by Buyer will not violate in any material respect any provision
of law or any rule or regulation of any federal, state or local governmental
authority to which Buyer is subject, nor result in a breach or violation by
Buyer of any of the terms or provisions of, or constitute an event of default
under, any material indenture, mortgage, trust (constructive or otherwise), loan
agreement, lease or other agreement or instrument to which Buyer is a party or
by which Buyer or its assets are bound. Buyer is not a party to, or subject to,
or bound by, any judgment, award, injunction, order or decree of any court or
governmental authority, or any arbitration award which may restrict or interfere
with the performance by Buyer of this Agreement or such other documents as may
be delivered by Buyer in connection herewith.
(m) Legal Proceedings. There is no action, suit, proceeding or
investigation pending (or, to the knowledge of Buyer, threatened) against Buyer
in, before or by any court, administrative
<PAGE> 6
agency or arbitrator affecting the ability of Buyer to carry out the provisions
of this Agreement and the transactions contemplated hereby.
8. Buyer's Conditions to Closing. The Buyer's obligation to purchase
the Shares at the Closing is subject to the fulfillment of the following
conditions:
(a) Representations and Warranties Correct. The
representations and warranties made by the Company in Section 6 hereof shall be
true and correct, if limited by materiality, in accordance with the terms
thereof in all respects, and if not so limited by materiality, in all material
respects, as of the Closing Date.
(b) Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
Closing Date shall have been performed or complied with in all material
respects.
(c) Compliance with State Securities Laws. The Company shall
have obtained all permits and qualifications required by any state for the offer
and sale of the Shares and the Conversion Stock, or shall have the availability
of exemptions therefrom.
(d) Legal Matters. All material matters of a legal nature
which pertain to this Agreement and the transactions contemplated hereby shall
have been reasonably approved by counsel to Buyer.
9. Company's Conditions to Closing. The Company's obligation to sell
and issue the Shares at the Closing Date is, at the option of the Company,
subject to the fulfillment as of the Closing Date of the following conditions:
(a) Representations and Warranties Correct. The
representations and warranties made by Buyer in Section 7 hereof shall be true
and correct when made, and shall be true and correct on the Closing Date.
(b) Compliance with State Securities Laws. The Company shall
have obtained all permits and qualifications required by any state for the offer
and sale of the Shares and the Conversion Stock, or shall have the availability
of exemptions therefrom.
(c) Legal Matters. All material matters of a legal nature
which pertain to this Agreement, and the transactions contemplated hereby, shall
have been reasonably approved by counsel to the Company.
10. Reimbursement of Legal Fees. The Company hereby agrees to reimburse
Buyer for its legal fees incurred in connection with the negotiation, execution
and performance of this Agreement.
<PAGE> 7
11. Miscellaneous.
(a) Notices. Any notice, request or other document to be given
hereunder to any party shall be effective upon receipt (or refusal of receipt)
and shall be in writing and delivered personally or sent by telecopy or
certified or registered mail, postage prepaid:
(i) if to the Company, addressed to:
Regent Communications, Inc.
50 East RiverCenter Boulevard, Suite 180
Covington, KY 41011
Attn: Terry S. Jacobs, Chairman of the Board
Facsimile: (606) 292-0352
with a copy to:
Strauss & Troy
2100 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
Attn: Alan C. Rosser, Esq.
Facsimile: (513) 241-8289
(ii) if to Buyer, addressed to:
Blue Chip Capital Fund II Limited Partnership
250 East Fifth Street, Suite 1100
Cincinnati, Ohio 45202
Attn: John H. Wyant
Facsimile: (404) 723-2306
<PAGE> 8
with copies to:
Taft, Stettinius & Hollister LLP
1800 Star Bank Center
425 Walnut Street
Cincinnati, Ohio 45202
Attn: Gerald S. Greenberg, Esq.
Facsimile: (513) 381-0205
or to such other address or telecopy number as any party shall have specified by
notice given to the other parties in the manner specified above.
(b) Entire Agreement; Amendment. This Agreement, including the
Exhibits and Schedules hereto, and the other agreements expressly contemplated
by this Agreement, contain the entire agreement between the parties with respect
to the subject matter hereof and supersede all prior oral and written
agreements, memoranda, term sheets, understandings and undertakings among the
parties hereto relating to the subject matter hereof. This Agreement may be
modified or amended only by a written instrument executed by or on behalf of the
parties hereto.
(c) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Ohio without
regard to the application of its conflicts of laws principles. The parties
hereby waive all right to trial by jury in any action, suit or proceeding
brought to enforce or defend any rights or remedies under this Agreement or the
transactions contemplated hereby.
(d) Severability. In case any provision in this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
(e) Construction. The section and subsection headings used
herein are for convenience of reference only, are not a part of this Agreement
and are not to affect the construction of, or be taken into consideration in
interpreting, any provision of this Agreement. As used in this Agreement, the
masculine, feminine and neuter gender each includes the other, unless the
context otherwise dictates. Any and all schedules and exhibits referred to in
this Agreement and attached hereto are and shall be deemed to be incorporated in
this Agreement as if fully set forth herein.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(g) Specific Performance. The parties hereto acknowledge that
damages may be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder may be
specifically enforceable, and no party will take any action to impede the other
from seeking to enforce such right of specific performance after any such
breach.
(h) Successors and Assigns: Assignability. Except as otherwise
provided herein, this Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto
<PAGE> 9
and their respective successors and permitted assigns; provided, however, that
the right of the Buyer to purchase the Series G Preferred Stock shall not be
assignable without the consent of the Company. This Agreement (i) shall not
confer upon any person other than the parties hereto and their respective
successors and permitted assigns any rights or remedies hereunder; and (ii)
shall not be assignable by either party without the prior written consent of the
other.
(i) Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
(j) Survival. The representations and warranties of the
parties contained herein shall survive execution and delivery of this Agreement
and issuance and delivery of the Series G Preferred Stock hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered, as of the day and year first above written.
COMPANY:
REGENT COMMUNICATIONS, INC.
By: /s/
Its: /s/
BUYER:
BLUE CHIP CAPITAL FUND II LIMITED PARTNERSHIP
By: Blue Chip Venture Company, Ltd., its general partner
By: /s/
Its: /s/
<PAGE> 1
EXHIBIT 4(v)
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") dated as of the 11th
day of January, 1999 between TERRY S. JACOBS (the "Buyer"), and REGENT
COMMUNICATIONS, INC., a Delaware corporation (the "Company").
1. Sale and Purchase of the Series G Preferred Stock. On and subject to
the terms and conditions set forth herein, the Company hereby sells, issues and
delivers to Buyer, and Buyer hereby purchases from the Company, 50,000 shares of
the Series G Convertible Preferred Stock of the Company (the "Series G Preferred
Stock").
2. Purchase Price. The purchase price for the Series G Preferred Stock
is Two Hundred Fifty Thousand Dollars ($250,000.00) ($5.00 per share) (the
"Purchase Price"), which sum has been paid by Buyer to the Company prior to the
execution of this Agreement, receipt of which is hereby acknowledged.
3. Deliveries by the Company. Upon the execution of this Agreement, the
Company has delivered to Buyer, and Buyer hereby acknowledges receipt thereof, a
stock certificate representing the Series G Preferred Stock duly issued in the
name of Buyer and bearing the legends set forth in Section 5(j) hereof.
4. Representations and Warranties of the Company. The Company
represents and warrants to Buyer, as of the date hereof, as follows:
(a) Organization and Qualification. The Company is validly
existing as a Delaware corporation in good standing and is authorized to
transact business as a foreign corporation in good standing in those
jurisdictions in which the nature of its activities or the property owned by it
make such qualification necessary.
(b) Authority of the Company. This Agreement has been duly
authorized, executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity).
(c) No Conflicts. The execution, delivery and performance of
this Agreement by the Company does not and will not violate any provision of law
or any rule or regulation of any federal, state or local governmental authority
to which the Company is subject, nor result in a breach or violation by the
Company of any of the terms or provisions of, or constitute an event of default
under the Company's Certificate of Incorporation or By-Laws, as currently in
effect, or any indenture, mortgage, trust (constructive or otherwise), loan
agreement, lease or other agreement or instrument to which the Company is a
party or by which the Company or its assets are bound. The Company is not a
party to, or subject to, or bound by, any judgment, award, injunction, order or
<PAGE> 2
decree of any court or governmental authority, or any arbitration award which
may restrict or interfere with the performance by the Company of this Agreement.
(d) Required Consents. No consent, approval, joinder, waiver,
authorization, or declaration, filing or registration with any governmental or
regulatory authority, or any consent of any third party, is required to be
obtained by the Company in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, other than the waiver attached hereto.
5. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to the Company, as of the date hereof, as follows:
(a) Non-Registration. Buyer understands that the offering and
sale of the Series G Preferred Stock is intended to be exempt from registration
under the Securities Act of 1933, as amended (the "1933 Act"), by virtue of
Section 4(2) of the Act and the provisions of Regulation D promulgated
thereunder, that the Series G Preferred Stock has not been registered under the
1933 Act or under the securities laws of any state, and that the Company will be
under no obligation to effect any such registration.
(b) Investment Intent. Buyer is purchasing the Series G
Preferred Stock for his own account, for investment and not with a view to
resale, distribution, or other disposition, and Buyer has no present plans to
enter into any contract, undertaking, agreement or arrangement for any such
resale, distribution or other disposition. Buyer will not sell or otherwise
transfer the Series G Preferred Stock without registration under the 1933 Act
and applicable state securities laws, or pursuant to an exemption from the
registration requirements thereof which, in the opinion of counsel acceptable to
the Company, is available for the transaction.
(c) Status of Buyer. Buyer is an "accredited investor," as
that term is defined in Rule 501(a) of Regulation D promulgated under the 1933
Act.
(d) Opportunity to Review Books and Records. Buyer has had a
reasonable opportunity to inspect all documents, books and records pertaining to
the Company and the Series G Preferred Stock and confirms that the Series G
Preferred Stock is being purchased without Buyer's receipt of any offering
literature. Buyer is not relying on the Company or any agent of the Company with
respect to the economic or other considerations of an investment in the Company;
provided, however, that the representations of Buyer contained in this
subsection (d) and in subsection (e) below of this Section 5 shall not operate
to limit or modify the representations and warranties made by the Company in
Section 4 of this Agreement or the right of Buyer to rely thereon.
(e) Opportunity for Questions. Buyer has had a reasonable
opportunity to ask questions of and receive answers from a person or persons
acting on behalf of the Company concerning the Company, its business and
proposed operations, the terms of the Series G Preferred Stock and all other
aspects of investment in the Company, and all such questions have been answered
to the full satisfaction of Buyer.
<PAGE> 3
(f) Manner of Purchase. Buyer is not subscribing for the
Series G Preferred Stock as a result of or pursuant to any advertisement,
article, notice or other communication published in any newspaper, magazine, or
similar media or broadcast over television or radio, or presented at any seminar
or meeting, or any solicitation of a subscription by a person other than a
representative of the Company.
(g) Absence of Certain Convictions, Orders. Neither Buyer nor
any affiliate (as defined in the 1933 Act) of Buyer: (i) has filed a
registration statement which is the subject of a currently effective stop order
entered pursuant to any state's law within five years prior to the date hereof;
(ii) has been convicted within five years prior to the date hereof of any felony
or misdemeanor in connection with the purchase or sale of any security or any
felony involving fraud or deceit including, but not limited to, forgery,
embezzlement, obtaining money under false pretenses, larceny or conspiracy to
defraud; (iii) is currently subject to any state's administrative order or
judgment entered by that state's securities administrator within five years
prior to the date hereof and is not subject to any state's administrative order
or judgment in which fraud or deceit was found and the order or judgment was
entered within five years of the date hereof; (iv) is currently subject to any
state's administrative order or judgment which prohibits the use of any
exemption from registration in connection with the purchase or sale of
securities; (v) is subject to any order, judgment or decree of any court of
competent jurisdiction temporarily or preliminarily restraining or enjoining, or
is subject to any order, judgment or decree of any court of competent
jurisdiction, entered within five years prior to the date hereof, permanently
restraining or enjoining the any such person from engaging in or continuing any
conduct or practice in connection with the purchase or sale of any security or
involving the making of any false filing with any state.
(h) No Conflict. The execution, delivery and performance of
this Agreement by Buyer (i) will not constitute a default under or conflict with
any agreement or instrument to which Buyer is a party or by which Buyer or his
assets are bound, (ii) will not conflict with or violate any order, judgment,
decree, statute, ordinance or regulation applicable to Buyer and (iii) do not
require the consent of any person or entity.
(i) No Broker or Finder. Buyer has not retained, or otherwise
entered into any agreement or understanding with, any broker or finder in
connection with his purchase of the Series G Preferred Stock hereunder, and the
Company will not incur any liability for any fee, commission or other
compensation on account of any such retention, agreement or understanding by
Buyer.
(j) Legends. Buyer understands that the certificate
representing the Series G Preferred Stock shall bear legends in substantially
the following forms, and Buyer shall not transfer any of the shares of Series G
Preferred Stock, or any shares of common stock that may be issued on conversion
thereof, or any interest therein, except in accordance with the terms of such
legends:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any state (the "Securities Laws"). These securities
may not be offered, sold, transferred, pledged or hypothecated in the
absence of registration under applicable Securities Laws, or the
availability of an exemption therefrom. This certificate will not be
transferred on the books of the Corporation or any transfer agent
acting on behalf of the Corporation
<PAGE> 4
except upon the receipt of an opinion of counsel, satisfactory to the
Corporation, that the proposed transfer is exempt from the registration
requirements of all applicable Securities Laws, or the receipt of
evidence, satisfactory to the Corporation, that the proposed transfer
is the subject of an effective registration statement under all
applicable Securities Laws."
"The issuer is subject to restrictions contained in the Federal
Communications Act, as amended. The securities evidenced by this
certificate may not be sold, transferred, assigned or hypothecated if,
as a result thereof, the issuer would be in violation of that act."
"The securities represented by this certificate are subject to the
terms of that certain Second Amended and Restated Stockholders'
Agreement dated as of June 15, 1998, among Regent Communications, Inc.
and certain of its stockholders, as the same may be amended from time
to time."
6. Audited Financials. The Company shall furnish to the holder(s) of
the Series G Preferred Stock issued pursuant to this Agreement, within 120 days
after the close of each fiscal year of the Company, audited financial statements
of the Company for such fiscal year, prepared and presented in accordance with
generally accepted accounting principles, together with the report of
independent certified public accountants, unqualified as to scope.
7. Miscellaneous
(a) Notices. Any notice, request or other document to be given
hereunder to any party shall be effective upon receipt (or refusal of receipt)
and shall be in writing and delivered personally or sent by telecopy or
certified or registered mail, postage prepaid:
(i) if to the Company, addressed to:
Regent Communications, Inc.
50 East RiverCenter Boulevard, Suite 180
Covington, KY 41011
Attn: William L. Stakelin, President
Facsimile (606) 292-0352
<PAGE> 5
(ii) if to Buyer, addressed to:
Mr. Terry S. Jacobs
c/o Regent Communications, Inc.
50 East RiverCenter Boulevard, Suite 180
Covington, KY 41011
Facsimile (606) 292-0352
or to such other address or telecopy number as any party shall have specified by
notice given to the other parties in the manner specified above.
(b) Entire Agreement; Amendment. This Agreement, and the other
agreements expressly contemplated by this Agreement, contain the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior oral and written agreements, memoranda, term sheets,
understandings and undertakings among the parties hereto relating to the subject
matter hereof. This Agreement may be modified or amended only by a written
instrument executed by or on behalf of the parties hereto.
(c) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Ohio without regard to
the application of its conflicts of laws principles.
(d) Severability. In case any provision in this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
(e) Construction. The section and subsection headings used
herein are for convenience of reference only, are not a part of this Agreement
and are not to affect the construction of, or be taken into consideration in
interpreting, any provision of this Agreement. As used in this Agreement, the
masculine, feminine and neuter gender each includes the other, unless the
context otherwise dictates. Any and all schedules and exhibits referred to in
this Agreement and attached hereto are and shall be incorporated in this
Agreement as if fully set forth herein.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(g) Specific Performance. The parties hereto acknowledge that
damages may be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder may be
specifically enforceable, and no party will take any action to impede the other
from seeking to enforce such right of specific performance after any such
breach.
(h) Successors and Assigns: Assignability. Except as otherwise
provided herein, this Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective successors and
permitted assigns. This Agreement (i) shall not confer upon any person other
than the parties hereto and their respective successors and permitted assigns
<PAGE> 6
any rights or remedies hereunder; and (ii) shall not be assignable by either
party without the prior written consent of the other.
(i) Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
(j) Survival. The representations and warranties of the
parties contained herein shall survive execution and delivery of this Agreement
and issuance and delivery of the Series G Preferred Stock hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered, as of the day and year first above written.
COMPANY:
REGENT COMMUNICATIONS, INC.
By: /s/
Its: /s/
BUYER:
/s/
Terry S. Jacobs
<PAGE> 1
EXHIBIT 4(w)
REGENT COMMUNICATIONS, INC.
FOURTH AMENDMENT, LIMITED CONSENT AND LIMITED WAIVER TO CREDIT
AGREEMENT, FIRST AMENDMENT TO SUBSIDIARY GUARANTY AND FIRST
AMENDMENT TO PLEDGE AND SECURITY AGREEMENT
This FOURTH AMENDMENT, LIMITED CONSENT AND LIMITED WAIVER TO
CREDIT AGREEMENT, FIRST AMENDMENT TO SUBSIDIARY GUARANTY AND FIRST AMENDMENT TO
PLEDGE AND SECURITY AGREEMENT (this "Amendment") is dated as of October 16, 1998
and entered into by and among Regent Communications, Inc., a Delaware
corporation ("COMPANY"), the financial institutions listed on the signature
pages hereof ("LENDERS"), General Electric Capital Corporation, as documentation
agent ("DOCUMENTATION AGENT") and Bank of Montreal, Chicago Branch, as agent for
Lenders ("AGENT"), and the Subsidiaries listed on the signature pages hereof,
and is made with reference to that certain Credit Agreement dated as of November
14, 1997, as amended by that certain First Amendment to Credit Agreement dated
as of February 16, 1998, that certain Second Amendment and Limited Waiver to
Credit Agreement dated as of June 10, 1998 and that certain Third Amendment to
Credit Agreement dated as of August 14, 1998 (as so amended, the "CREDIT
AGREEMENT"), by and among Company, Lenders and Agent, that certain Subsidiary
Guaranty dated as of November 14, 1997 by and among each Subsidiary of Company
(the "SUBSIDIARY GUARANTY") and that certain Pledge and Security Agreement dated
as of November 14, 1997 by and among Company and each Subsidiary of Company (the
"PLEDGE AND SECURITY AGREEMENT"). Capitalized terms used herein without
definition shall have the same meanings herein as set forth in the Credit
Agreement.
RECITALS
WHEREAS, Company and Lenders desire to waive compliance with
the provisions of subsection 6.1(ii) of the Credit Agreement in the manner and
to the limited extent described herein;
WHEREAS, Company has requested that Lenders consent to the
changes in the corporate structure of and the stock/asset transfers among
certain of Company's Subsidiaries as set forth in Schedule A annexed hereto
(collectively the "REGROUPING TRANSACTIONS");
1
<PAGE> 2
WHEREAS, in connection with the Regrouping Transactions,
Company and Lenders desire to amend the Credit Agreement to make certain
amendments as set forth below;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION 1. LIMITED CONSENT TO THE CREDIT AGREEMENT
Anything in the Credit Agreement to the contrary
notwithstanding, Lenders hereby consent to the Regrouping Transactions,
substantially as set forth in Schedule A annexed hereto.
SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS
A. SUBSIDIARY NAME CHANGES: As a result of the Regrouping
Transactions, the following Credit Parties shall change their names as follows
and all references in the Credit Agreement and the other Loan Documents to such
Credit Parties shall thereafter be deemed to be references to their new names:
1. "The Park Lane Group" shall be changed to "Regent
Broadcasting West Coast, Inc.";
2. "Regent Merger Corp." shall be changed to " Regent
Broadcasting Midwest, Inc.";
3. "Faircom Flint Inc." shall be changed to "Regent
Broadcasting of Flint, Inc."; and
4. "Faircom Mansfield Inc." shall be changed to "Regent
Broadcasting of Mansfield, Inc.".
B. SUBSIDIARY MERGERS: As a result of the Regrouping
Transactions, the following mergers among Credit Parties shall take place:
1. Park Lane Regency Radio, Inc. into Regent Broadcasting West
Coast, Inc., with Regent Broadcasting West Coast, Inc. as the surviving
corporation;
2. Park Lane High Desert, Inc. into Regent Broadcasting West
Coast, Inc., with Regent Broadcasting West Coast, Inc. as the surviving
corporation;
2
<PAGE> 3
3. Regent Acquisition Corp., Inc. into Regent Broadcasting of
Redding, Inc., with Regent Broadcasting of Redding as the surviving
corporation;
4. Park Lane Redding Radio, Inc. into Regent Broadcasting of
Redding, Inc., with Regent Broadcasting of Redding, Inc. as the
surviving corporation;
5. Park Lane Chico, Inc. into Regent Broadcasting of Chico,
Inc., with Regent Broadcasting of Chico, Inc. as the surviving
corporation; and
6. Park Lane Northern Arizona, Inc. into Regent Broadcasting
of Flagstaff, Inc., with Regent Broadcasting of Flagstaff, Inc. as the
surviving corporation.
C. NEW CREDIT PARTIES. In connection with the Regrouping
Transactions, the following new corporations have been formed and will become
new Credit Parties ("NEW CREDIT PARTIES"), and all references to "Credit Party"
or "Credit Parties" in the Credit Agreement and the other Loan Documents shall
thereafter include the following:
1. Regent Licensee of Lake Tahoe, Inc., a Delaware
corporation;
2. Regent Licensee of Palmdale, Inc., a Delaware
corporation;
3. Regent Licensee of Redding, Inc., a Delaware
corporation;
4. Regent Licensee of Chico, Inc., a Delaware corporation;
5. Regent Licensee of Flagstaff, Inc., a Delaware
corporation;
6. Regent Licensee of Flint, Inc., a Delaware corporation;
and
7. Regent Licensee of Mansfield, Inc., a Delaware
corporation.
D. GUARANTIES AND SECURITY INTERESTS.
Each New Credit Party created pursuant to the Regrouping
Transactions hereby agrees to guaranty and secure the Obligations pursuant to
the Subsidiary Guaranty and the Pledge and Security Agreement; furthermore, all
Credit Parties hereby agree to take all such action as Agent may reasonably
request pursuant to the Credit Agreement and the other Loan Documents to effect
the foregoing changes and to insure that all Loans and Obligations continue to
be guaranteed and secured by all Credit Parties, including, without limitation,
the delivery of executed Counterparts to the
3
<PAGE> 4
Subsidiary Guaranty and the Pledge and Security Agreement making each New Credit
Party a party thereto, the delivery of certificates representing the shares of
capital stock pledged pursuant to the Security Documents, the filing of Uniform
Commercial Code financing statements as to the Collateral for all jurisdictions
necessary or desirable to perfect Agent's security interest in the Collateral
and delivery of all other evidence reasonably satisfactory to Agent that all
other filings, recordings and other actions Agent deems necessary or advisable
to establish, preserve and perfect the First Priority Liens granted to Agent on
behalf and for the ratable benefit of Lenders shall have been made.
Without limiting the foregoing, each Credit Party hereby
agrees to deliver the certificates set forth on Schedule B annexed hereto
evidencing the pledged stock of each New Credit Party.
E. AMENDMENTS TO SCHEDULES. Each Credit Party hereby agrees to
update each of the Schedules to the Credit Agreement and the Pledge and Security
Agreement to the extent necessary to reflect changes resulting from the
consummation of the Regrouping Transactions (the "AMENDED AND RESTATED
SCHEDULES") effective and dated as of the date upon which the Regrouping
Transactions are completed. Each Credit Party shall have delivered to Agent an
Officers' Certificate to which such Amended and Restated Schedules shall be
attached certifying that such Amended and Restated Schedules are true, correct
and accurate as of the date of the consummation of the Regrouping Transactions.
SECTION 3. LIMITED WAIVER TO THE CREDIT AGREEMENT
Lenders hereby waive compliance with the provisions of
subsection 6.1(ii) of the Credit Agreement requiring Company to deliver to Agent
on the date which is 45 days after the end of the Fiscal Quarter period ended
June 30, 1998 the financial information and related items set forth in such
subsection; provided such financial information and related items are delivered
no later than September 29, 1998.
SECTION 4. LIMITATION OF AMENDMENTS, WAIVERS AND CONSENTS
Without limiting the generality of the provisions of
subsection 10.6 of the Credit Agreement, the amendments, waivers and consents
set forth above shall be limited precisely as written and relate solely to the
matters expressly set forth in Sections 1, 2 and 3 hereof, in the manner and to
the extent described above, and nothing in this Amendment shall be deemed to:
(a) constitute a waiver of compliance by Company with
respect to the Credit Agreement in any other instance or any
other term, provision or condition
4
<PAGE> 5
of the Credit Agreement or any other instrument or agreement
referred to therein; or
(b) prejudice any right or remedy that Agent or any
Lender may now have (except to the extent such right or remedy
was based upon existing defaults that will not exist after
giving effect to this Amendment) or may have in the future
under or in connection with the Credit Agreement or any other
instrument or agreement referred to therein.
Except as expressly set forth herein, the terms, provisions
and conditions of the Credit Agreement and the other Loan Documents shall remain
in full force and effect and in all other respects are hereby ratified and
confirmed.
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment,
Company hereby represents and warrants that after giving effect to this
Amendment:
(a) there exists no Event of Default or Potential
Event of Default under the Credit Agreement;
(b) all representations and warranties contained in
the Credit Agreement and the other Loan Documents are true,
correct and complete in all material respects on and as of the
date hereof except to the extent such representations and
warranties specifically relate to an earlier date, in which
case they were true, correct and complete in all material
respects on and as of such earlier date; and
(c) Company has performed all agreements to be
performed on its part as set forth in the Credit Agreement.
SECTION 6. ACKNOWLEDGEMENT AND CONSENT
Each of the Company and the Subsidiaries (each individually a
"Credit Support Party" and collectively, the "CREDIT SUPPORT PARTIES") hereby
acknowledges that it has reviewed the terms and provisions of the Credit
Agreement and this Amendment and consents to the amendments of the Credit
Agreement effected pursuant to this Amendment. The Pledge and Security
Agreement, the Collateral Account Agreement and the Subsidiary Guaranty are
collectively referred to herein as the "CREDIT SUPPORT DOCUMENTS". Each Credit
Support Party hereby confirms that each Credit Support Document to which it is a
party or otherwise bound and all Collateral encumbered
5
<PAGE> 6
thereby will continue to guaranty or secure, as the case may be, to the fullest
extent possible the payment and performance of all "Guarantied Obligations" and
"Secured Obligations", as the case may be (in each case as such terms are
defined in the applicable Credit Support Document), including without limitation
the payment and performance of all such "Guarantied Obligations" and "Secured
Obligations", as the case may be, in respect of the Obligations of Company now
or hereafter existing under or in respect of the Credit Agreement and the Notes.
SECTION 7. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
(i) On and after the effectiveness of this Amendment,
each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import
referring to the Credit Agreement, and each reference in the
other Loan Documents to the "Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Amended
Agreement.
(ii) Except as specifically amended by this
Amendment, the Credit Agreement and the other Loan Documents
shall remain in full force and effect and are hereby ratified
and confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein,
constitute a waiver of any provision of, or operate as a
waiver of any right, power or remedy of Agent or any Lender
under, the Credit Agreement or any of the other Loan
Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs,
fees and expenses as described in subsection 10.2 of the Credit Agreement
incurred by Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
C. HEADINGS. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE
6
<PAGE> 7
STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS; EFFECTIVE DATE OF AMENDMENT.
This Amendment may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document. This Amendment
shall become effective upon the execution of a counterpart hereof by Company,
Lenders and each of the Credit Support Parties and receipt by Company and Agent
of written or telephonic notification of such execution and authorization of
delivery thereof.
[Remainder of page intentionally left blank]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
REGENT COMMUNICATIONS, INC.
By: /s/ Terry S. Jacobs
-----------------------------
Name: Terry S. Jacobs
Title: Chairman and CEO
S-1
<PAGE> 9
EXISTING CREDIT PARTIES
REGENT BROADCASTING OF LEXINGTON, INC.,
REGENT BROADCASTING OF SAN DIEGO,INC.,
REGENT BROADCASTING OF DAYTON, INC.,
REGENT BROADCASTING OF CHICO, INC.,
REGENT BROADCASTING OF FLAGSTAFF, INC.,
REGENT BROADCASTING OF KINGMAN, INC.,
REGENT BROADCASTING OF LAKE TAHOE, INC.,
REGENT BROADCASTING OF PALMDALE, INC.,
REGENT BROADCASTING OF REDDING, INC.,
REGENT BROADCASTING OF VICTORVILLE, INC.,
REGENT ACQUISITION CORP.,
REGENT MERGER CORP.,
FAIRCOM FLINT INC.,
FAIRCOM MANSFIELD INC.,
each a Delaware corporation
By: /s/ Terry S. Jacobs
------------------------
Name: Terry S. Jacobs
Title: Chairman and CEO
of each of the forgoing
THE PARK LANE GROUP,
PARK LANE CHICO, INC.,
PARK LANE HIGH DESERT, INC.,
PARK LANE NORTHERN ARIZONA, INC.,
PARK LANE REGENCY RADIO, INC.,
PARK LANE REDDING RADIO, INC.,
each a California corporation
By: /s/ Terry S. Jacobs
------------------------
Name: Terry S. Jacobs
Title: Chairman and CEO
of each of the forgoing
S-2
<PAGE> 10
REGENT LICENSEE OF SAN DIEGO, INC.,
REGENT LICENSEE OF DAYTON, INC.,
REGENT LICENSEE OF KINGMAN, INC,
REGENT LICENSEE OF VICTORVILLE, INC.,
REGENT LICENSEE OF LEXINGTON, INC.,
each a Delaware corporation
By: /s/ Terry S. Jacobs
------------------------
Name: Terry S. Jacobs
Title: Chairman and CEO
of each of the foregoing
NEW CREDIT PARTIES
REGENT LICENSEE OF LAKE TAHOE, INC.,
REGENT LICENSEE OF PALMDALE, INC.,
REGENT LICENSEE OF REDDING, INC.,
REGENT LICENSEE OF CHICO, INC.,
REGENT LICENSEE OF FLAGSTAFF, INC.,
REGENT LICENSEE OF FLINT, INC.,
REGENT LICENSEE OF MANSFIELD, INC.,
each a Delaware corporation
By: /s/ Terry S. Jacobs
------------------------
Name: Terry S. Jacobs
Title: Chairman and CEO
of each of the foregoing
S-3
<PAGE> 11
BANK OF MONTREAL, CHICAGO BRANCH,
individually and as Agent
By: /s/ Karen Klapper
-----------------------------
Name: Karen Klapper
Title: Director
S-4
<PAGE> 12
GENERAL ELECTRIC CAPITAL CORPORATION,
individually and as Documentation Agent
By: /s/ Thomas P. Waters
-----------------------------
Name: Thomas P. Waters
Title: Senior Vice President
S-5
<PAGE> 13
BANK ONE, INDIANAPOLIS, NA,
By: /s/ John W. Eyler
------------------------------
Name: John W. Eyler
Title: Senior Vice President
S-6
<PAGE> 14
SCHEDULE A
DESCRIPTION OF REGROUPING TRANSACTIONS
[SEE ATTACHED]
Sch.A-1
<PAGE> 15
Schedule A
REGENT COMMUNICATIONS, INC.
PROPOSAL FOR REGROUPING STATIONS
BY MARKET
1. NAME CHANGES
(a) The Park Lane Group will change its name to Regent
Broadcasting West Coast, Inc.
(b) Regent Merger Corp. will change its name to Regent
Broadcasting Midwest, Inc.
(c) Faircom Flint Inc. will change its name to Regent
Broadcasting of Flint, Inc.
(d) Faircom Mansfield Inc. will change its name to Regent
Broadcasting of Mansfield, Inc.
2. KINGMAN MARKET
(a) Regent Communications, Inc. will drop the stock of Regent
Broadcasting of Kingman, Inc. down into Regent Broadcasting West Coast, Inc.
(fka The Park Lane Group), and Regent Broadcasting West Coast, Inc. (fka The
Park Lane Group) will drop the stock of Regent Broadcasting of Kingman, Inc.
down into Park Lane Regency Radio, Inc.
(b) The assets of KAAA and KZZZ (presently held in Park Lane
Regency Radio, Inc.) will be dropped down into Regent Broadcasting of Kingman,
Inc., and the FCC licenses will be dropped from there into Regent Licensee of
Kingman, Inc.
3. SOUTH LAKE TAHOE MARKET
(a) A new Delaware corporation (Regent Licensee of Lake Tahoe,
Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of Lake
Tahoe, Inc.
(b) Regent Communications, Inc. will drop the stock of Regent
Broadcasting of Lake Tahoe, Inc. down into Regent Broadcasting West Coast, Inc.
(fka The Park Lane Group), and Regent Broadcasting West Coast, Inc. (fka The
Park Lane Group) will drop the stock of Regent Broadcasting of Lake Tahoe, Inc.
down into Park Lane Regency Radio, Inc.
(c) The assets of the Tahoe stations (presently held by Park
Lane Regency Radio, Inc. and which are the subject of a pending sale) will be
dropped down into Regent Broadcasting of Lake Tahoe, Inc., and the FCC licenses
will be dropped down another level into Regent Licensee of Lake Tahoe, Inc.
pending the sale.
(d) Park Lane Regency Radio, Inc. will then merge with and
into Regent Broadcasting West Coast, Inc. (fka The Park Lane Group), with Regent
Broadcasting West Coast, Inc. (fka The Park Lane Group) to survive.
<PAGE> 16
4. VICTORVILLE MARKET
(a) Regent Communications, Inc. will drop the stock of Regent
Broadcasting of Victorville, Inc. down into Regent Broadcasting West Coast, Inc.
(fka The Park Lane Group), and Regent Broadcasting West Coast, Inc. (fka The
Park Lane Group) will drop the stock of Regent Broadcasting of Victorville, Inc.
down into Park Lane High Desert, Inc.
(b) The assets of KATJ and KROY (the Victorville stations
presently held in Park Lane High Desert, Inc.) will be dropped down into Regent
Broadcasting of Victorville, Inc., and the FCC licenses of KATJ and KROY will be
dropped from there into Regent Licensee of Victorville, Inc.
5. PALMDALE MARKET
(a) A new Delaware corporation (Regent Licensee of Palmdale,
Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of
Palmdale, Inc.
(b) Regent Communications, Inc. will drop the stock of Regent
Broadcasting of Palmdale, Inc. down into Regent Broadcasting West Coast, Inc.
(fka The Park Lane Group), and Regent Broadcasting West Coast, Inc. (fka The
Park Lane Group) will drop the stock of Regent Broadcasting of Palmdale, Inc.
down into Park Lane High Desert, Inc.
(c) The assets of the Palmdale stations (presently held by
Park Lane High Desert, Inc.) will be dropped down into Regent Broadcasting of
Palmdale, Inc., and the FCC licenses will be dropped down another level into
Regent Licensee of Palmdale, Inc.
(d) Park Lane High Desert, Inc. will then merge with and into
Regent Broadcasting West Coast, Inc. (fka The Park Lane Group), with Regent
Broadcasting West Coast, Inc. (fka The Park Lane Group) to survive.
6. REDDING MARKET
(a) A new Delaware corporation (Regent Licensee of Redding,
Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of
Redding, Inc.
(b) Regent Communications, Inc. will drop the stock of Regent
Broadcasting of Redding, Inc. down into Regent Broadcasting West Coast, Inc.
(fka The Park Lane Group)
(c) Regent Communications, Inc. will drop the stock of Regent
Acquisition Corp. down into Regent Broadcasting West Coast, Inc. (fka The Park
Lane Group).
(d) Regent Acquisition Corp. will be merged with and into
Regent Broadcasting of Redding, Inc., with Regent Broadcasting of Redding to
survive.
(e) Park Lane Redding Radio, Inc. will be merged with and into
Regent Broadcasting of Redding, Inc., with Regent Broadcasting of Redding, Inc.
to survive.
(f) The licenses of all six of the Redding stations will be
dropped down Regent Licensee of Redding, Inc. (the new subsidiary of Regent
Broadcasting of Redding, Inc.).
-2-
<PAGE> 17
7. CHICO MARKET
(a) A new Delaware corporation (Regent Licensee of Chico,
Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of
Chico, Inc.
(b) Regent Communications, Inc. will drop the stock of Regent
Broadcasting of Chico, Inc. down into Regent Broadcasting West Coast, Inc. (fka
The Park Lane Group)
(c) Park Lane Chico, Inc. will be merged with and into Regent
Broadcasting of Chico, Inc., with Regent Broadcasting of Chico, Inc. surviving.
(d) The FCC licenses of the Chico stations will be dropped
down into Regent Licensee of Chico, Inc.
8. FLAGSTAFF MARKET
(a) A new Delaware corporation (Regent Licensee of Flagstaff,
Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of
Flagstaff, Inc.
(b) Regent Communications, Inc. will drop the stock of Regent
Broadcasting of Flagstaff, Inc. down into Regent Broadcasting West Coast, Inc.
(fka The Park Lane Group).
(c) Park Lane Northern Arizona, Inc. will be merged with and
into Regent Broadcasting of Flagstaff, Inc., with Regent Broadcasting of
Flagstaff, Inc. surviving.
(d) The FCC licenses of the Flagstaff stations will be dropped
down into Regent Licensee of Flagstaff, Inc.
9. FLINT MARKET
(a) A new Delaware corporation (Regent Licensee of Flint,
Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of
Flint, Inc. (fka Faircom Flint Inc.)
10. MANSFIELD/SHELBY MARKET
(a) A new Delaware corporation (Regent Licensee of Mansfield,
Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of
Mansfield, Inc. (fka Faircom Mansfield Inc.)
-3-
<PAGE> 18
[Flow Chart Not Shown]
<PAGE> 19
[Flow Chart Not Shown]
<PAGE> 20
SCHEDULE B
Description of Pledged Stock of New Credit Parties
<TABLE>
<CAPTION>
Stock Issuer Holder Class No. Par Value # of Shares
- ------------ ------ ----- --- --------- -----------
<S> <C> <C> <C> <C> <C>
Regent Licensee Regent Broadcasting Common 1 $1.00 100
of Lake Tahoe, Inc. of Lake Tahoe, Inc.
Regent Licensee Regent Broadcasting of Common 1 $1.00 100
of Palmdale, Inc. Palmdale, Inc.
Regent Licensee Regent Broadcasting of Common 1 $1.00 100
of Redding, Inc. Redding, Inc.
Regent Licensee Regent Broadcasting of Common 1 $1.00 100
of Chico, Inc. Chico, Inc.
Regent Licensee Regent Broadcasting of Common 1 $1.00 100
of Flagstaff, Inc. Flagstaff, Inc.
Regent Licensee Regent Broadcasting of Common 1 $1.00 100
of Flint, Inc. Flint, Inc.
Regent Licensee Regent Broadcasting of Common 1 $1.00 100
of Mansfield, Inc. Mansfield, Inc.
</TABLE>
Sch.B-1
<PAGE> 1
EXHIBIT 4(x)
REGENT COMMUNICATIONS, INC.
FIFTH AMENDMENT TO CREDIT AGREEMENT
This FIFTH AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is
dated as of November 23, 1998 and entered into by and among Regent
Communications, Inc., a Delaware corporation ("COMPANY"), the financial
institutions listed on the signature pages hereof ("LENDERS"), General Electric
Capital Corporation, as documentation agent ("DOCUMENTATION AGENT") and Bank of
Montreal, Chicago Branch, as agent for Lenders ("AGENT"), and, for purposes of
Section 4 hereof, the Credit Support Parties (as defined in Section 4 hereof)
listed on the signature pages hereof, and is made with reference to that certain
Credit Agreement dated as of November 14, 1997, as amended by that certain First
Amendment to Credit Agreement dated as of February 16, 1998, that certain Second
Amendment and Limited Waiver to Credit Agreement dated as of June 10, 1998, that
certain Third Amendment to Credit Agreement dated as of August 14, 1998 and that
certain Fourth Amendment, Limited Consent and Limited Waiver to Credit
Agreement, First Amendment to Subsidiary Guaranty and First Amendment to Pledge
and Security Agreement dated as of October 16, 1998 (as so amended, the "CREDIT
AGREEMENT"), by and among Company, Lenders and Agent. Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit
Agreement to make certain amendments as set forth below;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
A. AMENDMENTS TO SECTION 4.3: CONDITIONS TO PERMITTED ACQUISITIONS.
Subsection 4.3H of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"H. ACQUISITION FCC CONSENT. The Acquisition FCC
Consent with respect to the Acquired Stations shall have been
obtained and (i) shall not have been reversed, stayed,
enjoined, annulled or suspended; (ii) the time for filing a
request for administrative or judicial relief shall have
expired without any such
<PAGE> 2
filing having been made, and without the FCC having instituted
administrative review thereof sua sponte; and (iii) no threat
of administrative review thereof sua sponte shall be pending."
B. AMENDMENTS TO SECTION 6.1: FINANCIAL STATEMENTS AND OTHER REPORTS.
Subsection 6.1(i) of the Credit Agreement is hereby amended
and restated in its entirety as follows:
"(i) Monthly Financials: as soon as available and in any event
within 30 days after the end of each month (other than those months
which are Fiscal Quarter or Fiscal Year ends) commencing with the month
ending October 31, 1998, copies of the monthly sales reports and cash
flows for such month for each designated market area in which Company
maintains Stations as furnished to Company by such Stations."
SECTION 2. LIMITATION OF AMENDMENTS
Without limiting the generality of the provisions of
subsection 10.6 of the Credit Agreement, the amendments set forth above shall be
limited precisely as written and relate solely to the matters expressly set
forth in Section 1 hereof, in the manner and to the extent described above, and
nothing in this Amendment shall be deemed to:
(a) constitute a waiver of compliance by Company with respect
to the Credit Agreement in any other instance or any other term,
provision or condition of the Credit Agreement or any other instrument
or agreement referred to therein; or
(b) prejudice any right or remedy that Agent or any Lender may
now have (except to the extent such right or remedy was based upon
existing defaults that will not exist after giving effect to this
Amendment) or may have in the future under or in connection with the
Credit Agreement or any other instrument or agreement referred to
therein.
Except as expressly set forth herein, the terms, provisions
and conditions of the Credit Agreement and the other Loan Documents shall remain
in full force and effect and in all other respects are hereby ratified and
confirmed.
SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment,
Company hereby represents and warrants that after giving effect to this
Amendment:
(a) there exists no Event of Default or Potential Event of
Default under the Credit Agreement;
2
<PAGE> 3
(b) all representations and warranties contained in the Credit
Agreement and the other Loan Documents are true, correct and complete
in all material respects on and as of the date hereof except to the
extent such representations and warranties specifically relate to an
earlier date, in which case they were true, correct and complete in all
material respects on and as of such earlier date; and
(c) Company has performed all agreements to be performed on
its part as set forth in the Credit Agreement.
SECTION 4. ACKNOWLEDGEMENT AND CONSENT
Each of the Company and the Subsidiaries (each individually a
"Credit Support Party" and collectively, the "CREDIT SUPPORT PARTIES") hereby
acknowledges that it has reviewed the terms and provisions of the Credit
Agreement and this Amendment and consents to the amendments of the Credit
Agreement effected pursuant to this Amendment. The Pledge and Security
Agreement, the Collateral Account Agreement and the Subsidiary Guaranty are
collectively referred to herein as the "CREDIT SUPPORT DOCUMENTS". Each Credit
Support Party hereby confirms that each Credit Support Document to which it is a
party or otherwise bound and all Collateral encumbered thereby will continue to
guaranty or secure, as the case may be, to the fullest extent possible the
payment and performance of all "Guaranteed Obligations" and "Secured
Obligations", as the case may be (in each case as such terms are defined in the
applicable Credit Support Document), including without limitation the payment
and performance of all such "Guaranteed Obligations" and "Secured Obligations",
as the case may be, in respect of the Obligations of Company now or hereafter
existing under or in respect of the Credit Agreement and the Notes.
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(i) On and after the effectiveness of this Amendment, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the
"Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement shall mean and be a reference to the
Amended Agreement.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
3
<PAGE> 4
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of any right, power
or remedy of Agent or any Lender under, the Credit Agreement or any of
the other Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs,
fees and expenses as described in subsection 10.2 of the Credit Agreement
incurred by Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
C. HEADINGS. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS; EFFECTIVE DATE OF AMENDMENT.
This Amendment may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document. This Amendment
shall become effective upon the execution of a counterpart hereof by Company,
Requisite Lenders and each of the Credit Support Parties and receipt by Company
and Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
REGENT COMMUNICATIONS, INC.
By: /s/ Anthony A. Vasconcellos
---------------------------
Name: Anthony A. Vasconcellos
Title: Vice President and CFO
S-1
<PAGE> 6
CREDIT SUPPORT PARTIES
(for the purposes of Section 4 only)
REGENT BROADCASTING OF LEXINGTON, INC.,
REGENT BROADCASTING OF SAN DIEGO, INC.,
REGENT BROADCASTING OF DAYTON, INC., REGENT
BROADCASTING OF CHICO, INC., REGENT
BROADCASTING OF FLAGSTAFF, INC., REGENT
BROADCASTING OF KINGMAN, INC., REGENT
BROADCASTING OF LAKE TAHOE, INC., REGENT
BROADCASTING OF PALMDALE, INC., REGENT
BROADCASTING OF REDDING, INC., REGENT
BROADCASTING OF VICTORVILLE, INC., REGENT
BROADCASTING OF SOUTH CAROLINA, INC.,
REGENT BROADCASTING MIDWEST, INC.
(formerly known as Regent Merger Corp.),
REGENT BROADCASTING OF FLINT, INC.
(formerly known as Faircom Flint Inc.),
REGENT BROADCASTING OF MANSFIELD, INC.
(formerly known as Faircom Mansfield Inc.),
each a Delaware corporation
By: /s/ Anthony A. Vasconcellos
---------------------------
Name: Anthony A. Vasconcellos
Title: Vice President and CFO
of each of the forgoing
REGENT BROADCASTING WEST COAST, INC.
(formerly known as The Park Lane Group),
PARK LANE CHICO, INC.,
PARK LANE HIGH DESERT, INC.,
PARK LANE NORTHERN ARIZONA, INC.,
PARK LANE REGENCY RADIO, INC.,
PARK LANE REDDING RADIO, INC.,
each a California corporation
By: /s/ Anthony A. Vasconcellos
---------------------------
Name: Anthony A. Vasconcellos
Title: Vice President and CFO
of each of the forgoing
S-2
<PAGE> 7
REGENT LICENSEE OF SAN DIEGO, INC.,
REGENT LICENSEE OF DAYTON, INC.,
REGENT LICENSEE OF KINGMAN, INC,
REGENT LICENSEE OF VICTORVILLE, INC.,
REGENT LICENSEE OF LEXINGTON, INC.,
REGENT LICENSEE OF LAKE TAHOE, INC.,
REGENT LICENSEE OF PALMDALE, INC.,
REGENT LICENSEE OF REDDING, INC.,
REGENT LICENSEE OF CHICO, INC.,
REGENT LICENSEE OF FLAGSTAFF, INC.,
REGENT LICENSEE OF FLINT, INC.,
REGENT LICENSEE OF MANSFIELD, INC.,
REGENT LICENSEE OF SOUTH CAROLINA, INC.,
each a Delaware corporation
By: /s/ Anthony A. Vasconcellos
---------------------------
Name: Anthony A. Vasconcellos
Title: Vice President and CFO
of each of the foregoing
S-3
<PAGE> 8
BANK OF MONTREAL, CHICAGO BRANCH,
individually and as Agent
By: /s/ Ola Anderssen
------------------------
Name: Ola Anderssen
Title: Director
S-4
<PAGE> 9
GENERAL ELECTRIC CAPITAL CORPORATION,
individually and as Documentation Agent
By: /s/ Thomas P. Waters
----------------------------
Name: Thomas P. Waters
Title: Senior Vice President
S-5
<PAGE> 10
BANK ONE, INDIANAPOLIS, NA,
By: /s/ John W. Eyler
---------------------------
Name: John W. Eyler
Title: Senior Vice President
S-6
<PAGE> 1
EXHIBIT 4(y)
REGENT COMMUNICATIONS, INC.
SIXTH AMENDMENT AND LIMITED CONSENT TO CREDIT AGREEMENT
This SIXTH AMENDMENT AND LIMITED CONSENT TO CREDIT AGREEMENT
(this "AMENDMENT") is dated as of February 24, 1999 and entered into by and
among Regent Communications, Inc., a Delaware corporation ("COMPANY"), the
financial institutions listed on the signature pages hereof ("LENDERS"), General
Electric Capital Corporation, as documentation agent ("DOCUMENTATION AGENT") and
Bank of Montreal, Chicago Branch, as agent for Lenders ("AGENT"), and the Credit
Support Parties (as defined in Section 5 hereof) listed on the signature pages
hereof, and is made with reference to that certain Credit Agreement dated as of
November 14, 1997, as amended by that certain First Amendment to Credit
Agreement dated as of February 16, 1998, that certain Second Amendment and
Limited Waiver to Credit Agreement dated as of June 10, 1998, that certain Third
Amendment to Credit Agreement dated as of August 14, 1998, that certain Fourth
Amendment, Limited Consent and Limited Waiver to Credit Agreement, First
Amendment to Subsidiary Guaranty and First Amendment to Pledge and Security
Agreement dated as of October 16, 1998 and that certain Fifth Amendment to
Credit Agreement dated as of November 23, 1998 (as so amended, the "CREDIT
AGREEMENT"), by and among Company, Lenders and Agent. Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit
Agreement to make certain amendments as set forth below;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1: DEFINITIONS
A. NEW DEFINITIONS. Subsection 1.1 of the Credit Agreement is hereby
amended by adding the following definitions thereto, which shall be inserted in
proper alphabetical order:
"AUTOMATION DATE" means no later than (i) May 1, 1999 for the
Palmdale Stations, (ii) June 1, 1999 for the Mansfield Stations, (iii)
June 30, 1999 for the Chico Stations and (iv) September 1, 1999 for the
Redding Stations or any other Stations.
"ST. CLOUD ACQUISITION" means, the acquisition by Company and
its subsidiaries of all of the assets of radio stations WJON-AM and
WWJO-FM, each licensed to St. Cloud, Minnesota, and radio station
KMXK-FM, licensed to Cold Spring, Minnesota pursuant to that certain
Purchase Agreement dated January 5, 1999."
<PAGE> 2
B. AMENDED DEFINITIONS.
(i) The definition of Acquisition Proceeds contained in
subsection 1.1 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
"`ACQUISITION PROCEEDS' means the proceeds (net of the cost of
issuance thereof) of any additional Company Common Stock,
Company Preferred Stock or any other equity securities issued
by Company in accordance with this Agreement which are issued
to be used to consummate Permitted Acquisitions and pay fees
and expenses related thereto and at least a portion of which
are actually used within 90 days of such issuance to
consummate a Permitted Acquisition and pay fees and expenses
related thereto and the balance of which are committed to be
used to consummate Permitted Acquisitions ("SPECIFIED
ACQUISITIONS") and pay fees and expenses related thereto with
respect to which the appropriate filings for transfer have
been made with the FCC within 180 days of such issuance;
provided that if any Specified Acquisition is terminated or
does not close for any reason, then immediately upon such
termination or non-closure, the Acquisition Proceeds committed
to such Specified Acquisition shall cease to be Acquisition
Proceeds and shall be applied to the repayment of the Loans
and the reduction of the Commitment as set forth in subsection
2.4B(iii)(c)."
(ii) The definition of Consolidated Operating Cash Flow
contained in subsection 1.1 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"`CONSOLIDATED OPERATING CASH FLOW' means, for any period, (x)
the sum, without duplication, of the amounts for such period
of (i) Consolidated Net Income, (ii) Consolidated Interest
Expense, (iii) income taxes paid in Cash, (iv) total
depreciation expense, (v) total amortization expense, (vi)
other non-Cash items reducing Consolidated Net Income
including, without limitation, accrued but unpaid income
taxes, but excluding accrued and unpaid Overhead, and (vii)
extraordinary losses less (y) other non-Cash items increasing
Consolidated Net Income, less (z) extraordinary gains, all of
the foregoing as determined on a consolidated basis for
Company and its Subsidiaries in conformity with GAAP; provided
that for any period in which any Credit Party has acquired, or
disposed of, a Station, Consolidated Operating Cash Flow shall
be calculated on a pro forma basis satisfactory to Agent as if
such acquisition or disposition had occurred on the first date
of such period."
(iii) The definition of Consolidated Total Debt contained in
subsection 1.1 of the Credit Agreement is hereby amended by amending and
restating clause (i) of the proviso thereto as follows:
"(i) December 31, 1999,"
(iv) The definition of Consolidated Total Debt Ratio contained
in subsection 1.1 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
2
<PAGE> 3
"`CONSOLIDATED TOTAL DEBT RATIO' means, as of any date of
determination, the ratio of (i) Consolidated Total Debt as of such date
of determination to (ii) Consolidated Operating Cash Flow for the four
consecutive Fiscal Quarter period ending as of the last day of the most
recent Fiscal Quarter for which a Compliance Certificate has been
delivered hereunder, as calculated in accordance with subsection 7.6C."
(v) The definition of Overhead contained in subsection 1.1 of
the Credit Agreement is hereby amended by adding the phrase ",deferred,
deferrable" immediately after the phrase "paid, payable" in the first line
thereof.
(vi) The definition of Regent of Charleston contained in
subsection 1.1 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
"`REGENT OF CHARLESTON' means, prior to July 15, 1998, Regent
Broadcasting of Charleston, Inc., a Delaware corporation and
wholly-owned Subsidiary of Company and, on and after July 15, 1998,
Regent Broadcasting of South Carolina, Inc., a Delaware corporation and
wholly-owned Subsidiary of Company."
(vii) The definition of Charleston License Sub contained in
subsection 1.1 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
"`CHARLESTON LICENSE SUB' means, prior to July 15, 1998,
Regent Licensee of Charleston, Inc., a Delaware corporation and
wholly-owned Subsidiary of Regent of Charleston and, on and after July
15, 1998, Regent Licensee of South Carolina, Inc., a Delaware
corporation and wholly-owned Subsidiary of Company."
C. DELETED DEFINITIONS. The definition of Adjusted Consolidated
Operating Cash Flow contained in subsection 1.1 of the Credit Agreement is
hereby deleted in its entirety and each reference to "Adjusted Consolidated
Operating Cash Flow" in the Credit Agreement and the other Loan Documents is
hereby amended to be a reference to "Consolidated Operating Cash Flow."
1.2 AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
A. RATE OF INTEREST: Subsection 2.2A of the Credit Agreement is hereby
amended by deleting the table set forth therein in its entirety and substituting
the following therefor:
3
<PAGE> 4
<TABLE>
<CAPTION>
APPLICABLE MARGIN
----------------------------
CONSOLIDATED BASE LIBOR
TOTAL DEBT RATIO RATE LOAN RATE LOAN
- ---------------- --------- ---------
<S> <C> <C>
Greater than or equal to 6.50:1.00 2.250% 3.500%
Greater than 6.25:1.00 but less than 6.50:1.00 2.000% 3.250%
Greater than 6.00:1.00 but less than 6.25:1.00 1.750% 3.000%
Greater than or equal to 5.50:1.00 but less than 1.500% 2.750%
6.00:1.00
Greater than or equal to 5.00:1.00 but less than 1.250% 2.500%
5.50:1.00:
Greater than or equal to 4.50:1.00 but less than 1.000% 2.250%
5.00:1.00
Greater than or equal to 4.00:1.00 but less than 0.750% 2.000%
4.50:1.00
Greater than or equal to 3.50:1.00 but less than 0.500% 1.750%
4.00:1.00
Less than 3.50:1.00: 0.250% 1.500%
</TABLE>
B. PREPAYMENT OF LOANS. Subsection 2.4B(iii)(c) is hereby amended by
(i) deleting the reference to "Acquisition Proceeds" contained in the first
sentence thereof and (ii) adding the following proviso to the end of the first
sentence thereof:
" ; provided that as long as no Event of Default or Potential
Event of Default has occurred and is continuing (or would
result therefrom) and the Consolidated Total Debt Ratio is
equal to or less than 5.50:1.00 at the time of any such equity
issuance, then the foregoing prepayments to reduce the
Consolidated Total Debt Ratio to 4.50:1.00 shall only be
required with the net proceeds of an equity issuance (or
related series of equity issuances) for gross proceeds of
$20,000,000 or more, which are not Acquisition Proceeds."
1.3. AMENDMENTS TO SECTION 6: AFFIRMATIVE COVENANTS
A. MORTGAGES FOR CERTAIN STATIONS Subsection 6.12 of the Credit
Agreement is hereby amended by deleting each reference to "the one year
anniversary of the Closing Date" set forth therein and substituting a reference
to "December 31, 1999" in each case therefor.
4
<PAGE> 5
B. SALE OF STATIONS. A new subsection 6.13 is hereby added to the
Credit Agreement as follows:
"6.13 SALE OF CERTAIN STATIONS.
On or before March 30, 1999 (or June 30, 1999 with respect to
the Lake Tahoe Stations only), Company and its Subsidiaries
shall have entered into definitive sale agreements and made
the appropriate filings with the FCC for the sale, for fair
market value Cash consideration, of the Flagstaff Stations,
the Kingman Stations, the Lake Tahoe Stations or any other
Station or combination of Stations the sale of which is
reasonably expected to result in aggregate Net Cash Proceeds
sufficient (after application of such proceeds in accordance
with this Agreement) to achieve a Leverage Ratio of no more
than 6.75:1.00 (calculated on a pro forma basis to give effect
to such sales). Such sales shall be consummated and the Net
Cash Proceeds in respect thereof shall be applied to repay the
Loans and reduce the Commitments no later than June 30, 1999
(or September 30, 1999 with respect to the Lake Tahoe Stations
only)."
1.4. AMENDMENTS TO SECTION 7: NEGATIVE COVENANTS
A. MINIMUM INTEREST COVERAGE RATIO. Subsection 7.6A of the Credit
Agreement is hereby amended and restated in its entirety as follows:
" A. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit
the ratio of (i) Consolidated Operating Cash Flow to (ii)
Consolidated Interest Expense for any four consecutive Fiscal
Quarter period ending as of the last day of any Fiscal Quarter
during any of the periods set forth below to be less than the
correlative ratio indicated:
<TABLE>
<CAPTION>
MINIMUM INTEREST COVERAGE
PERIOD RATIO
------ -----
<S> <C>
January 1, 1999 - March 31, 1999 0.95:1.00
April 1, 1999 - June 30, 1999 1.30:1.00
July 1, 1999 - September 30, 1999 1.40:1.00
October 1, 1999 - December 31, 1999 1.60:1.00
January 1, 2000 - March 31, 2000 1.75:1.00
April 1, 2000 and thereafter 2.00:1.00
</TABLE>
"
B. MINIMUM FIXED CHARGE COVERAGE RATIO. Subsection 7.6B of the Credit
Agreement is hereby amended and restated in its entirety as follows:
" B. MINIMUM FIXED CHARGE COVERAGE RATIO. Company shall not
permit the ratio of (i) Consolidated Operating Cash Flow to
(ii) Consolidated Fixed Charges Expense for any four
consecutive Fiscal Quarter period ending as
5
<PAGE> 6
of the last day of any Fiscal Quarter during any of the periods set forth below
to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
MINIMUM FIXED COVERAGE
PERIOD RATIO
------ -----
<S> <C>
January 1, 1999 - March 31, 1999 0.60:1.00
April 1, 1999 - June 30, 1999 0.80:1.00
July 1, 1999 - September 30, 1999 0.90:1.00
October 1, 1999 - December 31, 1999 1.05:1.00
January 1, 2000 and thereafter 1.10:1.00
</TABLE>
"
C. MAXIMUM CONSOLIDATED TOTAL DEBT RATIO. Subsection 7.6C of the Credit
Agreement is hereby amended and restated in its entirety as follows:
" C. MAXIMUM CONSOLIDATED TOTAL DEBT RATIO. Company shall not
permit the ratio of (i) Consolidated Total Debt as of any date
during any of the periods set forth below to (ii) Consolidated
Operating Cash Flow for the four consecutive Fiscal Quarter
period ending as of the last day of the most recently
concluded Fiscal Quarter (including any Fiscal Quarter ending
as of such date of determination), to exceed the correlative
ratio indicated:
<TABLE>
<CAPTION>
MAXIMUM
PERIOD LEVERAGE RATIO
------ --------------
<S> <C>
January 1, 1999 - December 30, 1999 6.75:1.00
December 31, 1999 - March 30, 2000 6.25:1.00
March 31, 2000 - June 29, 2000 6.00:1.00
June 30, 2000 - September 29, 2000 5.75:1.00
September 30, 2000 - December 30, 2000 5.25:1.00
December 31, 2000 - March 30, 2001 4.75:1.00
March 31, 2001 - June 29, 2001 4.25:1.00
June 30, 2001 - September 29, 2001 3.75:1.00
September 30, 2001 and thereafter 3.50:1.00
</TABLE>
"
D. CERTAIN CALCULATIONS. Subsection 7.6 of the Credit Agreement is
hereby further amended by adding a new subsection 7.6D at the end thereof as
follows:
6
<PAGE> 7
" D. CERTAIN ADJUSTMENTS AND CALCULATIONS. For purposes of
determining compliance with the financial covenants set forth in this
subsection 7.6, the following special adjustments and calculations
shall be permitted (without duplication) as specified for certain
financial covenants at the times and for the periods indicated (all
such calculations and adjustments shall be in form and substance
satisfactory to Agent and Requisite Lenders and, without limiting the
foregoing, to the extent any such adjustment or calculation is made on
the basis of projections or expected results, such adjustment or
calculation shall be revised to actual amounts when determined):
(i) Automation. With respect to any Stations subject to
automation of operations as described in Part 1 of Schedule 7.6D
annexed hereto, Company shall be permitted to increase Consolidated
Operating Cash Flow by the aggregate amount of annual cost savings that
the Company in good faith reasonably expects to realize by automating
such Stations in the amounts and for and as of the periods and dates of
determination as set forth in Part 1 of Schedule 7.6D; provided that
such automation increases (a) shall not apply to any Station that (y)
is the subject of any pending or completed Asset Sale or (z) has not
completed automation as of its applicable Automation Date, (b) shall
not apply for purposes of the financial covenants set forth in
subsections 7.6A and 7.6B until such time as such automation is
actually completed and (c) in no event shall any automation increases
be permitted after March 31, 2000.
(ii) Consolidation Savings. With respect to any Stations
subject to consolidation of operations as described in Part 2 of
Schedule 7.6D annexed hereto during the period beginning the first
Fiscal Quarter following such consolidation and ending on March 31,
2000 for the Redding Stations and Palmdale Stations and on September
30, 1999 for all other Stations, Company shall be permitted to increase
Consolidated Operating Cash Flow by the aggregate amount of annual cost
savings that the Company in good faith reasonably expects to realize by
such consolidation savings in the amounts and for and as of the periods
and dates of determination as set forth in Part 2 of Schedule 7.6D;
provided that no consolidation increases shall be permitted with
respect to any Station which is subject to a pending or completed Asset
Sale (other than $20,094 of consolidation savings for the third Fiscal
Quarter of 1998 for the Kingman Stations to be added back to
Consolidated Operating Cash Flow on March 31, 1999).
(iii) Sale of Assets. For purposes of calculating the
Consolidated Total Debt Ratio only for any relevant period through June
30, 1999 (or through September 30, 1999 with respect to the Lake Tahoe
Stations only), with respect to Stations which are subject to pending
Asset Sales in accordance with subsection 6.13, Company and its
Subsidiaries may calculate Consolidated Total Debt and Consolidated
Operating Cash Flow on a pro forma basis as if such sales had been
consummated and the Net Cash Proceeds which Company in good faith
reasonably expects to result from the consummation of such Asset Sales
(as
7
<PAGE> 8
certified by Company to Lenders pursuant to an Officers' Certificate no
later than March 31, 1999 (or June 30, 1999 with respect to the Lake
Tahoe Stations only)) had been applied to repay Loans as required
hereunder, in each case as of the first date of such period.
(iv) Negative Cash Flow. For purposes of calculating the
Consolidated Total Debt Ratio only, (A) for any relevant period through
September 30, 1998, to the extent that the operating cash flow on a
trailing 12 month basis relating to the Flagstaff Stations (on a
combined basis in accordance with GAAP) included in the calculation of
Consolidated Operating Cash Flow for any such period is negative, such
negative combined operating cash flow for such period shall be deemed
to be zero for purposes of calculating Consolidated Operating Cash Flow
hereunder (provided, however, that no more than $300,000 in the
aggregate of negative combined operating cash flow for all such
Stations may be excluded in any such period) and (B) for any relevant
period during the first consecutive twelve months following the
pre-Closing Date programming format change for Station KIXA(FM),
licensed to Lucerne Valley, California, implemented on March 15, 1998,
and Station KNRO(AM), licensed to Redding, California, implemented on
December 1, 1997, to the extent the operating cash flow on a trailing
12-month basis for any such Station (on a stand-alone basis) included
in Consolidated Operating Cash Flow for any such period is negative,
such negative combined operating cash flow for such period shall be
deemed to be zero for purposes of calculating Consolidated Operating
Cash Flow hereunder (provided, however that the aggregate amount of
negative operating cash flow that may be so excluded pursuant to the
immediately preceding proviso shall not exceed $140,000 for KIXA(FM)
and $92,000 for KNRO(AM)); provided that the foregoing adjustments
shall not apply to any Station which is subject to a pending or
completed Asset Sale.
(v) Other Adjustments. For purposes of calculating the
Consolidated Total Debt Ratio only for any relevant period, Company may
exclude from the calculation of Consolidated Operating Cash Flow (i)
the annualized effect of the salary of Terry S. Jacobs and William
Stakelin which is to be deferred and not paid in accordance with
subsection 7.16 and (ii) through December 31, 1999, the salary of
terminated employees and severance costs set forth in Part 3 of
Schedule 7.6D annexed hereto in the amounts and for and as the periods
and dates of determination as set forth in such Schedule; provided that
no such adjustments shall be permitted with respect to any Station
which is subject to a pending or completed Asset Sale.
F. RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS.
(i) Subsection 7.7(ii) of the Credit Agreement is hereby amended by
adding the following proviso to the end thereof:
" ; provided still further that anything in this
Agreement to the contrary not withstanding, in no event shall
Company or its Subsidiaries
8
<PAGE> 9
consummate any Permitted Acquisition or enter into or continue
any LMA at any time that the Consolidated Total Debt Ratio is
greater than 5.50:1.00 without the prior written consent of
Requisite Lenders."
(ii) Subsection 7.7 of the Credit Agreement is hereby further amended
by adding a new subsection 7.7(vi) thereto as follows:
" (vi) Any Subsidiary of Company (including, without
limitation, Regent of Dayton, Inc.) may be merged with or into
Company or any wholly-owned Subsidiary of Company, or be
liquidated, wound up or dissolved, or all or any substantial
part of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to Company or any
wholly-owned Subsidiary of Company; provided that, in the case
of such a merger, Company or such wholly-owned Subsidiary
shall be the continuing or surviving corporation; and"
(iii) Subsection 7.7 of the Credit Agreement is hereby further amended
by adding a new subsection 7.7(vii) thereto as follows:
" (vii) Company and its Subsidiaries may consummate
the St. Cloud Acquisition; provided that (a) the aggregate
consideration therefor (net of transactions costs and
expenses) shall not exceed $12,750,000, (b) each of the
conditions set forth in subsection 4.3 have been satisfied,
(c) anything in this Agreement to the contrary
notwithstanding, the Consolidated Total Debt Ratio shall be
less than or equal to 6.75:1.00 calculated on a pro forma
basis to give effect to such Permitted Acquisition and the
Asset Sales required by subsection 6.13 and (d) Company and
its Subsidiaries shall have entered into definitive agreements
and made the appropriate filings with the FCC to sell Stations
as required by subsection 6.13."
G. CAPITAL EXPENDITURES. Subsection 7.8 of the Credit Agreement is hereby
amended and restated in its entirety as follows:
"7.8 CAPITAL EXPENDITURES.
The Credit Parties shall not, and shall not
permit any of their respective Subsidiaries to, make or incur
Consolidated Capital Expenditures in excess of (i) $1,750,000
in the aggregate for any twelve consecutive month period
ending as of the last day of any Fiscal Quarter during Fiscal
Year 1999 and (ii) $1,600,000 in the aggregate during any
Fiscal Year thereafter."
H. OVERHEAD. Subsection 7.16 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"7.16 OVERHEAD.
9
<PAGE> 10
Company shall not permit the aggregate amount of
Overhead during any twelve consecutive month period ending
during the periods or as of any date of determination set
forth below to exceed the correlative amount indicated:
<TABLE>
<CAPTION>
AGGREGATE
PERIOD ENDING OVERHEAD
------------- --------
<S> <C>
March 31, 1999 $1,700,000
April 1, 1999 - September 30, 1999 $1,900,000
October 1, 1999 - December 31, 1999 $2,000,000
January 1, 2000 - December 31, 2000 $2,100,000
January 1, 2001 - December 31, 2001 $2,205,000
January 1, 2002 - December 31, 2002 $2,315,250
January 1, 2003 - December 31, 2003 $2,431,000
January 1, 2004 - December 31, 2004 $2,552,550
</TABLE>
; provided that without limiting the foregoing, at
least $200,000 of the 1999 annual salary of Terry S. Jacobs and at
least $50,000 of the 1999 annual salary of William Stakelin shall be
deferred by Company and its Subsidiaries and shall only be payable
after such time as the Consolidated Total Debt Ratio is less than or
equal to 6.50:1.00 and Company delivers to Agent a Compliance
Certificate, demonstrating that the Company shall be in pro forma
compliance with the financial covenants set forth in subsection 7.6
after such payments are made and that no Event of Default or Potential
Event of Default has occurred and is continuing or would result from
such payments; provided further that for purposes of this Agreement,
such deferred amounts (i) shall not be considered Indebtedness, (ii)
shall apply against the aggregate Overhead limits set forth above for
the period when deferred and shall not apply to such limits for the
period when paid and (iii) shall be included in the calculation of
Consolidated Operating Cash Flow for any applicable period when paid."
I. EVENTS OF DEFAULT. Subsection 8.3 of the Credit Agreement is hereby
amended by adding a reference to subsection "6.13" immediately after the
reference to subsection "6.2" contained therein.
J. SCHEDULES. A new Schedule 7.6D is hereby added to the Credit
Agreement in the form of Schedule A annexed hereto.
SECTION 2. LIMITATION OF AMENDMENTS AND CONSENT
Without limiting the generality of the provisions of
subsection 10.6 of the Credit Agreement, the amendments and consent set forth
above shall be limited precisely as written and
10
<PAGE> 11
relate solely to the matters expressly set forth in Sections 1 and 2 hereof, in
the manner and to the extent described above, and nothing in this Amendment
shall be deemed to:
(a) constitute a waiver of compliance by Company with respect
to the Credit Agreement in any other instance or any other
term, provision or condition of the Credit Agreement or any
other instrument or agreement referred to therein; or
(b) prejudice any right or remedy that Agent or any Lender may
now have (except to the extent such right or remedy was based
upon existing defaults that will not exist after giving effect
to this Amendment) or may have in the future under or in
connection with the Credit Agreement or any other instrument
or agreement referred to therein.
Except as expressly set forth herein, the terms, provisions
and conditions of the Credit Agreement and the other Loan Documents shall remain
in full force and effect and in all other respects are hereby ratified and
confirmed.
SECTION 3. CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "SIXTH AMENDMENT
EFFECTIVE DATE"):
A. EXECUTION OF AMENDMENT. The execution of a counterpart hereof by
Company, each Credit Support Party and Requisite Lenders and receipt Agent of
written or telephonic notification of such execution and authorization of
delivery thereof.
B. AMENDMENT FEE. Agent shall have received for distribution to each
Lender in accordance with its Pro Rata Share, a non-refundable amendment fee
equal to $220,000.
C. ISSUANCE OF EQUITY. Company shall have issued at least $5,000,000 of
additional equity after January 1, 1999 on substantially the same terms and
conditions as the equity issued by Company on the Closing Date, at least
$915,000 of which shall have been applied to repay the Loans and reduce the
Commitments in accordance with the Credit Agreement and the remaining proceeds
of which shall be applied as set forth in Schedule B annexed hereto.
D. LEGAL FEES. O'Melveny & Myers LLP, counsel for Agent, shall have
received payment of all fees previously billed to Company.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, each Credit Party
represents and warrants to each Lender that the following statements are true,
correct and complete:
A. CORPORATE POWER AND AUTHORITY. Each Credit Party has all
requisite corporate power and authority to enter into this Amendment and to
carry out the transactions
11
<PAGE> 12
contemplated by, and perform its obligations under, the Credit Agreement as
amended by this Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of each Credit Party.
C. NO CONFLICT. The execution and delivery by each Credit
Party of this Amendment and the performance by each Credit Party of the Amended
Agreement (to the extent it is a party thereto) do not and will not (i) violate
any provision of any law or any governmental rule or regulation applicable to
Company or any of its Subsidiaries, the Certificate or Articles of Incorporation
or Bylaws or of Company or any of its Subsidiaries or any order, judgment or
decree of any court or other agency of government binding on Company or any of
its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any Contractual Obligation
of Company or any of its Subsidiaries, (iii) result in or require the creation
or imposition of any Lien upon any of the properties or assets of Company or any
of its Subsidiaries (other than Liens created under any of the Loan Documents in
favor of Agent on behalf of Lenders or otherwise permitted pursuant to the Loan
Documents), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Company or any of its
Subsidiaries which has not been obtained.
D. GOVERNMENTAL CONSENTS. The execution and delivery by each
Credit Party of this Amendment and the performance by each Credit Party of the
Amended Agreement (to the extent it is a party thereto) do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or other governmental authority or
regulatory body.
E. BINDING OBLIGATION. This Amendment and the Amended
Agreement have been duly executed and delivered by each Credit Party to the
extent it is a party thereto and are the legally valid and binding obligations
of each such Credit Party, enforceable against each such Credit Party in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability.
F. EQUITY ISSUANCE. As of the Sixth Amendment Effective Date,
Company has issued the additional equity described in Section 3C of this
Amendment and has applied at least $915,000 of the proceeds thereof to repay the
Loans and reduce the Commitments as required by the Credit Agreement and has
applied the remaining proceeds thereof as described in Schedule B annexed
hereto.
G. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Amendment Effective Date to the same extent as though
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were true,
correct and complete in all material respects on and as of such earlier date.
12
<PAGE> 13
H. ABSENCE OF DEFAULT. No event has occurred and is continuing
or will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.
SECTION 5. ACKNOWLEDGEMENT AND CONSENT
Each of the Company and the Subsidiaries (each individually a
"CREDIT SUPPORT PARTY" and collectively, the "CREDIT SUPPORT PARTIES") hereby
acknowledges that it has reviewed the terms and provisions of the Credit
Agreement and this Amendment and consents to the amendments of the Credit
Agreement effected pursuant to this Amendment. The Pledge and Security
Agreement, the Collateral Account Agreement and the Subsidiary Guaranty are
collectively referred to herein as the "CREDIT SUPPORT DOCUMENTS". Each Credit
Support Party hereby confirms that each Credit Support Document to which it is a
party or otherwise bound and all Collateral encumbered thereby will continue to
guaranty or secure, as the case may be, to the fullest extent possible the
payment and performance of all "Guaranteed Obligations" and "Secured
Obligations", as the case may be (in each case as such terms are defined in the
applicable Credit Support Document), including without limitation the payment
and performance of all such "Guaranteed Obligations" and "Secured Obligations",
as the case may be, in respect of the Obligations of Company now or hereafter
existing under or in respect of the Credit Agreement and the Notes.
SECTION 6. RELEASE
Each Credit Party, hereby knowingly, voluntarily,
intentionally and irrevocably releases and discharges Agent, each Lender and
each of their respective officers, directors, agents and counsel (each a
"RELEASEE") from any and all actions, causes of action, suits , sums of money,
controversies, variances, trespasses, damages, judgements, extents, executions,
losses, liabilities, costs, expenses, debts, dues, demands, obligations or other
claims of any kind whatsoever, known or unknown, in law, admiralty or equity,
which such Credit Party ever had, now have or hereafter can, shall or may have
against any Releasee for, upon or by reason of any matter, cause or thing
whatsoever from the beginning of the world to and including the date hereof.
SECTION 7. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(i) On and after the effectiveness of this Amendment, each
reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof" "herein" or words of like import
referring to the Credit Agreement, and each reference in the
other Loan Documents to the "Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Amended
Agreement.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.
13
<PAGE> 14
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein,
constitute a waiver of any provision of, or operate as a
waiver of any right, power or remedy of Agent or any Lender
under, the Credit Agreement or any of the other Loan
Documents.
(iv) All grammatical and technical corrections required in the
Credit Agreement and the other Loan Documents in order to
effect the substance of the amendments set forth herein shall
be deemed made upon the effectiveness of this Amendment.
B. FEES AND EXPENSES. Company acknowledges that all costs,
fees and expenses as described in subsection 10.2 of the Credit Agreement
incurred by Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
C. HEADINGS. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
REGENT COMMUNICATIONS, INC.
By: /s/ Terry S. Jacobs
-------------------------
Name: Terry S. Jacobs
Title: Chairman and CEO
15
<PAGE> 16
CREDIT SUPPORT PARTIES
REGENT BROADCASTING OF LEXINGTON, INC.,
REGENT BROADCASTING OF SAN DIEGO,INC.,
REGENT BROADCASTING OF DAYTON, INC.,
REGENT BROADCASTING OF CHICO, INC.,
REGENT BROADCASTING OF FLAGSTAFF, INC.,
REGENT BROADCASTING OF KINGMAN, INC.,
REGENT BROADCASTING OF LAKE TAHOE, INC.,
REGENT BROADCASTING OF PALMDALE, INC.,
REGENT BROADCASTING OF REDDING, INC.,
REGENT BROADCASTING OF VICTORVILLE, INC.,
REGENT BROADCASTING OF SOUTH CAROLINA, INC.,
REGENT BROADCASTING MIDWEST, INC.,
REGENT BROADCASTING OF FLINT, INC.,
REGENT BROADCASTING OF MANSFIELD, INC.,
each a Delaware corporation
By: /s/ Terry S. Jacobs
----------------------------------
Name: Terry S. Jacobs
Title: Chairman and CEO
of each of the forgoing
REGENT BROADCASTING WEST COAST, INC.,
PARK LANE HIGH DESERT, INC.,
PARK LANE REGENCY RADIO, INC.,
each a California corporation
By: /s/ Terry S. Jacobs
----------------------------------
Name: Terry S. Jacobs
Title: Chairman and CEO
of each of the forgoing
16
<PAGE> 17
REGENT LICENSEE OF SAN DIEGO, INC.,
REGENT LICENSEE OF DAYTON, INC.,
REGENT LICENSEE OF KINGMAN, INC.,
REGENT LICENSEE OF VICTORVILLE, INC.,
REGENT LICENSEE OF LEXINGTON, INC.,
REGENT LICENSEE OF LAKE TAHOE, INC.,
REGENT LICENSEE OF PALMDALE, INC.,
REGENT LICENSEE OF REDDING, INC.,
REGENT LICENSEE OF CHICO, INC.,
REGENT LICENSEE OF FLAGSTAFF, INC.,
REGENT LICENSEE OF FLINT, INC.,
REGENT LICENSEE OF MANSFIELD, INC.,
REGENT LICENSEE OF SOUTH CAROLINA, INC.,
each a Delaware corporation
By: /s/ Terry S. Jacobs
----------------------------------
Name: Terry S. Jacobs
Title: Chairman and CEO
of each of the foregoing
17
<PAGE> 18
BANK OF MONTREAL, CHICAGO BRANCH,
individually and as Agent
By: /s/ Juliet Barnes
-------------------------
Name: Juliet Barnes
Title: Director
18
<PAGE> 19
GENERAL ELECTRIC CAPITAL CORPORATION,
individually and as Documentation Agent
By: /s/ Kenneth M. Gacevich
----------------------------------
Name: Kenneth M. Gacevich
Title: Duly Authorized Signatory
19
<PAGE> 20
BANK ONE, INDIANA, NA,
By: /s/ John W. Eyler
-----------------------------
Name: John W. Eyler
Title: Senior Vice President
20
<PAGE> 1
EXHIBIT 10(a)
TIME BROKERAGE AGREEMENT
Time Brokerage Agreement ("Agreement") dated as of March 4, 1999, by
and among REGENT BROADCASTING OF KINGMAN, INC., a Delaware corporation ("RBK"),
REGENT LICENSEE OF KINGMAN, INC., a Delaware corporation ("RLK") (RBK and RLK
referred to herein collectively as "Licensee"), and MAG MILE MEDIA, L.L.C., a
Delaware limited liability company ("Broker").
WHEREAS, RBK and RLK are the owner and licensee, respectively, of the
radio stations set forth on Attachment A hereto (referred to herein collectively
as the "Stations"); and
WHEREAS, RBK, RLK and Broker have entered into an Asset Purchase
Agreement dated as of March 4, 1999 (the "Purchase Agreement") for the
acquisition by Broker of all of the tangible and intangible assets of Licensee
used or held for use in the operation of the Stations, and the licenses issued
by the Federal Communications Commission for the operation of the Stations; and
WHEREAS, Licensee, while maintaining control over the Stations'
finances, personnel matters and programming desires to accept and broadcast
programming supplied by Broker on the Stations subject to the terms and
conditions set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, the parties hereto have agreed and do agree as follows:
1. Air Time and Transmission Services. Licensee agrees, beginning on
April 1, 1999 (the "Commencement Date") to make the Stations' studio and
broadcast facilities available to Broker, and to broadcast, or cause to be
broadcast, on the Stations, according to the terms hereof, programming
designated and provided by Broker (the "Programming").
2. Payments. Broker hereby agrees to pay Licensee the amounts specified
in Attachment B for the right, from and after the Commencement Date, to
broadcast the Programming on the terms and conditions herein provided. Payments
of the Monthly Fee (as defined in Attachment B), are due and payable in full on
the first day of each calendar month for which such payment is intended to be
applied and shall be prorated for any partial calendar month at the beginning or
end of the term hereof. The failure of Licensee to demand or insist upon prompt
payment in accordance herewith shall not constitute a waiver of its right to do
so. Broker shall receive a payment credit for any Programming not broadcast by
any Station (a "Credit"), such Credit to be determined by multiplying the
monthly payment by the ratio of the amount of time preempted or not accepted to
the total number of hours of Programming each month. No credit shall be due on
account of any Programming rejected for failure to comply with the standards for
Programming set forth in this Agreement.
3. Term. The term of this Agreement shall begin on the Commencement
Date and end on the earliest of (i) the Closing Date, as defined in the Purchase
Agreement, or (ii) the
<PAGE> 2
date which is ten (10) days following any termination of the Purchase Agreement
in accordance with the terms thereof (such date hereinafter referred to as the
"Termination Date," and such period of time as the "Term").
4. Programming. Broker shall furnish or cause to be furnished the
Programming, which shall be an entertainment format and may include, without
limitation, news, promotions (including on-air giveaways), contests, syndicated
programs, barter programs, paid-for programs, locally-produced programs,
advertising commercial matter, including that in both program or spot
announcement forms, and public service information; provided, however, that the
Programming on each Station shall include news, public service announcements and
other programming on issues of importance to the local community as reasonably
requested by Licensee. The Programming shall be consistent with the standards
set forth in Attachment D. All actions or activities of Broker under this
Agreement, and all Programming provided by Broker shall be in accordance with
(i) the Communications Act of 1934, as amended; (ii) Federal Communications
Commission (the "FCC") rules, requirements and policies, including, without
limitation, the FCC's rules on plugola/payola, lotteries, station
identification, minimum operating schedule, sponsorship identification,
political programming and political advertising rates; (iii) all applicable
federal, state and local regulations and policies; and (iv) generally accepted
industry quality standards. Broker agrees that, if in the sole, good faith
judgment of the Licensee or any of the Stations' General Managers, Broker does
not comply with the standards of this paragraph, Licensee may suspend or cancel
any Programming not in compliance. Broker shall not be entitled to a Credit for
Programming not broadcast over the Station on account of any Programming
rejected for failure to comply with the standards for Programming set forth in
this Section 4. The right to use the Programming and to authorize its use in any
manner and in any media whatsoever shall be, and remain, vested solely in
Broker, subject in all events to the rights, if any, of others in such
Programming.
5. Special Events. Licensee reserves the right in its discretion, and
without liability, to preempt, delay or delete any of the broadcasts of the
Programming and to substitute programming which in Licensee's judgment is of
greater local, regional or national importance. In all such cases, Licensee
shall use its best efforts to give Broker reasonable notice of its intention to
preempt such Programming, and, in the event of such preemption, Broker shall
receive a payment credit for the Programming so omitted consistent with the
intent and pursuant to the terms of Section 2 hereof.
6. Advertising and Programming Revenues. Broker shall retain all
advertising and other revenues, and all accounts receivable, with respect to
Programming broadcast during the Term, and relating to the Programming it
delivers to the Stations for broadcast during the Term, including without
limitation, promotion-related revenues. Licensee and Broker each shall have the
right, at their own expense, to seek copyright royalty payments for their own
programming. Broker may sell advertising on the Stations in combination with the
sale of
<PAGE> 3
advertising on other broadcasting stations of its choosing, subject to
compliance with applicable law.
7. Station Facilities. Subject to the qualifications set forth in this
Agreement, throughout the term of this Agreement, Licensee shall make the
facilities and equipment of the Stations in good operating condition and repair
available to Broker for operation and broadcast with the maximum authorized
facilities twenty-four (24) hours a day, seven (7) days a week, except for
downtime occasioned by either (i) emergency maintenance or (ii) routine
maintenance not to exceed two (2) hours each Sunday morning between the hours of
12 midnight and 5:00 a.m., and except for such programs and announcements
prepared by and put on the air by Licensee in order to meet local needs and
issues requirements, said programs and announcements not to exceed one (1) hour
each Sunday morning at a mutually agreed upon time between the hours of 5:00
a.m. and 7:00 a.m. Broker shall not be entitled to a Credit for Programming not
broadcast over the Stations for periods specified in this Section 7 hereof. To
the extent practicable, any maintenance work affecting the operation of the
Stations at full power shall be scheduled upon at least forty-eight (48) hours
prior notice with the agreement of Broker, such agreement not to be unreasonably
withheld.
8. Right of Access. Broker and Broker's employees or agents shall at
all times be afforded reasonable access to the Stations in order to perform
their duties in connection with the production and transmission of the
Programming over the facilities of the Stations. Broker shall have the right to
install at Licensee's and/or Broker's premises, and to maintain throughout the
term of this Agreement, at Broker's expense, any microwave studio/transmitter
relay equipment, telephone lines, transmitter remote control, monitoring devices
or any other equipment necessary for the proper transmission of the Programming
on the Stations, and Licensee and Broker shall take all steps reasonably
necessary to prepare and file any applications with the FCC to effectuate such
proper transmission.
9. Force Majeure. Any failure or impairment of facilities or any delay
or interruption in broadcasting the Programming, or failure at any time to
furnish facilities, in whole or in part, for broadcasting, due to acts of God,
strikes, or threats thereof, force majeure, or due to causes beyond the control
of Licensee, shall not constitute a breach of this Agreement, and Licensee shall
not be liable to Broker for any damages or adjustments for such failure,
impairment, delay or interruption, except to the extent of allowing in each such
case an appropriate payment credit for Programming available to Licensee but not
carried consistent with the intent and pursuant to the terms of Section 2
hereof.
10. Licensee Control of Stations. Notwithstanding anything to the
contrary in this Agreement, Licensee shall have full authority, control and
power over the operation of the Stations during the period of this Agreement.
Licensee shall retain control, said control to be reasonably exercised, over the
policies, programming and operations of the Stations, including, without
limitation, the right to decide whether to accept or reject any Programming or
advertisements, the right to preempt any Programming in order to broadcast a
program deemed
<PAGE> 4
by Licensee to be of greater national, regional, or local interest, and the
right to take any other actions necessary for compliance with the laws of the
United States; the laws of the relevant states; the rules, regulations, and
policies of the FCC (including without limitation the prohibition on
unauthorized transfers of control); and the rules, regulations and policies of
other federal governmental authorities, including without limitation the Federal
Trade Commission and the Department of Justice. Licensee shall be responsible
for ensuring that FCC requirements are met with respect to ascertainment of the
problems, needs and interests of the community, public service programming, main
studio staffing, maintenance of public inspection files and the preparation of
quarterly issues/programs lists. Broker shall, upon request by Licensee, provide
Licensee with information with respect to such of Broker's programs which are
responsive to the problems, needs and interests of the community, so as to
assist Licensee in the preparation of required quarterly issues/programs lists,
and shall provide upon request other information to enable Licensee to prepare
other records, reports and logs required by the FCC or other local, state or
federal governmental agencies. Whenever on the Stations' premises, all Broker
personnel shall be subject to the supervision and the direction of Licensee's
designated personnel.
11. Responsibility for Employees and Expenses. Licensee shall employ
two full time employees at each main studio of the Stations, one of whom shall
be a manager, both of whom shall report to and be accountable to Licensee, and
who shall be ultimately responsible for the day-to-day operation of the
Stations. Licensee shall be directly responsible for paying the salaries, taxes,
insurance and related costs for such employees (the "Licensee Employee
Expenses"). Licensee shall be responsible for paying directly (i) transmitter
site rent/mortgage for the Stations; (ii) costs for maintenance and repair of
the transmission and other technical equipment; (iii) costs for capital
improvements and replacements; and (iv) transmitter site utilities for the
Stations ("Licensee Transmitter Expenses"). Licensee shall be responsible for
paying directly all income taxes relating to Licensee's earnings from this
arrangement. Broker shall employ and be responsible for the salaries, taxes,
insurance and related costs in accordance with Brokers employment practices for
all personnel used by it, excluding Licensee's two full time employees, in the
production of the Programming (including, without limitation, salespeople,
traffic personnel, administrative and programming staff) for Broker's use of the
studio and for routine maintenance and repair thereto (as opposed to maintenance
and repair of the transmission and other technical equipment and capital
improvements and replacements which shall be Licensee's responsibility).
Excluding those expenses for which Licensee is making payments as set forth in
this Section 11, during the Term, Broker shall be responsible for paying all
other expenses reasonably and directly related to the continued operation of the
Stations subject to the covenants of the parties to this Agreement (the "Other
Expenses"), and further subject to the ultimate authority, control and power of
Licensee.
11.1 Employee Matters.
<PAGE> 5
11.1.1 Licensee shall be responsible for the payment
of all compensation and accrued employee benefits payable to all Licensee
employees through the Commencement Date.
11.1.2 Licensee acknowledges and agrees that
Licensee, and not Broker, is and shall be solely responsible for any and all
insurance, supplemental pension, deferred compensation, retirement and any other
benefits, and related costs, premiums and claims due, to become due, committed
or otherwise promised to any person who, up to the Commencement Date who is a
retiree, former employee, or current employee of Licensee, relating to the
period up to the Commencement Date. Broker shall assume no employee benefit
plans, programs or practices, whether or not set forth in writing, maintained by
Licensee at any time. Broker shall have no obligation to any employee of
Licensee employed by Broker beyond the term of this Agreement, and shall not be
responsible for any other costs or expenses relating to the compensation of any
employee not hired or employed prior to the Term of this Agreement. Each
employee of Licensee employed by Broker shall be an employee at will and shall
be entitled to compensation and benefits, as offered, only up to and including
said employees term of employment with Broker.
12. Station Agreements.
12.1 Assignment and Assumption of Station Agreements. On the
Commencement Date, Licensee shall assign to Broker and Broker shall assume,
subject to the provisions of this Section 12, the obligations of Licensee
arising or to be performed on and after the Commencement Date (except to the
extent such obligations represent liabilities for activities, events or
transactions occurring, or conditions existing, on or prior to the Commencement
Date) under (a) all of the contracts which comprise Broadcast Assets (as defined
in the Purchase Agreement), excluding (i) contracts and agreements relating to
the Licensee Employee Expenses, (ii) contracts and agreements relating to the
Licensee Transmitter Expenses, (iii) Licensee's financing agreements and (iv)
corporate level contracts and agreements, except, if any, those listed on
Attachment C (collectively, the contracts and agreements to be assigned by
Licensee and assumed by Broker are referred to as the "Station Agreements").
Licensee hereby makes and incorporates by reference the representations and
warranties of Sellers in Section 14(e) of the Purchase Agreement. Licensee
represents and warrants that the Station Agreements are freely assignable, or,
if consent of the other contracting party to the assignment is required,
Licensee will use its reasonable best efforts to obtain such consent as promptly
as practicable. As of the Commencement Date, Licensee shall have paid all
amounts due on and shall have performed all obligations due under the Station
Agreements as of that date.
12.2 Consents to Assignment. To the extent that any Station
Agreement is not capable of being assigned, transferred, delivered or subleased
without the waiver or consent of any third person (including a government or
governmental unit), or if such assignment, transfer, delivery or sublease or
attempted assignment, transfer, delivery or sublease would
<PAGE> 6
constitute a breach thereof or a violation of any law or regulation, this
Agreement and any assignment executed pursuant thereto shall not constitute an
assignment, transfer, delivery or sublease or an attempted assignment, transfer,
delivery or sublease thereof. In those cases where consents, assignments,
releases and/or waivers have not been obtained at or prior to the Commencement
Date to the transfer and assignment to Broker of any Station Agreement, this
Agreement and any assignment executed pursuant hereto, to the extent permitted
by law, shall constitute an equitable assignment by Licensee to Broker of all of
Licensee's rights, benefits, title and interest in and to the Station
Agreements, and where necessary or appropriate, Broker shall be deemed to be
Licensee's agent for the purpose of completion, fulfilling and discharging all
of Licensee's rights and liabilities arising after the Commencement Date under
such Station Agreements up to and including the date of termination of this
Agreement. Licensee shall use its reasonable best efforts to provide Broker with
the financial and business benefits of such Station Agreements (including,
without limitation, permitting Broker to enforce any rights of Licensee arising
under such Station Agreements), and Broker shall, to the extent Broker is
provided with the benefits of such Station Agreements, assume, perform and in
due course pay and discharge all debts, obligations and liabilities of Licensee
under such Station Agreements to the extent that Broker was to assume those
obligations pursuant to the terms hereof up to and including the date of
termination of this Agreement.
12.3 Retained Liabilities. Except as set forth in Sections 11
and 12 hereof, Broker expressly does not, and shall not, assume or agree to pay,
satisfy, discharge or perform and will not be deemed by virtue of the execution
and delivery of this Agreement or any agreement, instrument or document
delivered pursuant to or in connection with this Agreement or otherwise by
reason of or in connection with the consummation of the transactions
contemplated hereby or thereby, to have assumed or to have agreed to pay,
satisfy, discharge or perform, any liabilities, obligations or commitments of
Licensee of any nature whatsoever whether accrued, absolute, contingent or
otherwise and whether or not disclosed by Broker, other than the Station
Agreements. Licensee will retain and pay, satisfy, discharge and perform in
accordance with the terms thereof, all liabilities and obligations of the
Licensee, other than the Station Agreements, including but not limited to, the
obligation to assume, perform, satisfy or pay any liability, obligation,
agreement, debt, charge, claim, judgment or expense incurred by or asserted
against Licensee related to taxes, environmental matters, pension or retirement
plans or trusts, profit-sharing plans, employment contracts, employee benefits,
severance of employees, product liability or warranty, negligence, contract
breach or default, copyright, trademarks, service mark, trade name and other
intellectual property, or other obligations, claims or judgments asserted
against Broker as successor in interest to Licensee. All such liabilities,
obligations and commitments of Licensee described in this Section 12.3 shall be
referred to herein collectively as the "Retained Liabilities."
13. Accounts Receivable. Broker acknowledges that all accounts
receivable arising prior to the Commencement Date in connection with the
operation of the Stations, including but not limited to accounts receivable for
advertising revenues for programs and announcements performed prior to the
Commencement Date and other broadcast revenues for
<PAGE> 7
services performed prior to the Commencement Date, shall remain the property of
Licensee (the "Licensee Accounts Receivable") and that Broker shall not acquire
any beneficial right or interest therein or responsibility therefor. During the
term of this Agreement ("Collection Period"), Broker agrees to use reasonable
efforts to assist Licensee in collection of the Licensee Accounts Receivable in
the normal and ordinary course of business without remuneration and will apply
all such amounts collected to the debtor's oldest account receivable first,
except that any such accounts collected by Broker from persons who are also
indebted to Broker may be applied to Broker's account under circumstances in
which there is a bona fide dispute between Licensee and such account debtor with
respect to such account provided that such disputed accounts are reassigned to
Licensee. Broker's obligation and authority shall not extend to the institution
of litigation, employment of counsel or a collection agency or any other
extraordinary means of collection. Broker agrees to reasonably cooperate with
Licensee, at Licensee's expense, as to any litigation or other collection
efforts instituted by Licensee to collect any delinquent Licensee Accounts
Receivable. During the Collection Period, neither Licensee nor its agents shall
make any direct solicitation of any account debtor for collection purposes or
institute litigation for the collection of amounts due except with respect to
any accounts that may be reassigned to Licensee. Any amounts relating to the
Licensee Accounts Receivable that are paid directly to the Licensee shall be
retained by the Licensee, but Licensee shall provide Broker with prompt notice
of any such payment.. Amounts collected by Broker on account of Licensee
Accounts Receivable shall be remitted in full to RBK on a monthly basis, by the
fifteenth (15th) day of the month following the month for which remittance is
due, provided that Broker may deduct from such amounts and be responsible for
paying commissions due on the collected Licensee Accounts Receivable in
accordance with Attachment G hereto.
14. Proration of Income and Expenses: Trade Agreements Adjustment.
14.1 Except as otherwise provided herein, all deposits,
reserves and prepaid and deferred income and expenses relating to the Station
Agreements shall be prorated between Broker and Licensee in accordance with
general accepted accounting principles as of 11:59 p.m., Pacific time, on the
date immediately preceding the Commencement Date.
14.2 Schedule 14.2 will include a list of all Trade Agreements
as of the Commencement Date included in the Station Agreements and the aggregate
value of time owed ("Barter Payable") pursuant to each of the Trade Agreements
and the aggregate value of goods and services to be received ("Barter
Receivable") pursuant to each of the Trade Agreements, in each case as of the
date specified on Schedule 14.2 hereof. On the Commencement Date, Licensee shall
deliver to Broker a report, dated as of the Commencement Date (the "Commencement
Date Trade Report"), which report lists all Trade Agreements included in the
Station Agreements and the contract end date for each Trade Agreement together
with a true and correct itemized statement of the aggregate value of the Barter
Payable and Barter Receivable pursuant to each of the Trade Agreements. To the
extent that the aggregate net value as reflected on the Commencement Date Trade
Report of the Stations' Barter Payable
<PAGE> 8
exceeds the aggregate net value as reflected on the Commencement Date Trade
Report of the Barter Receivable by more than $15,000.00, Broker shall be
entitled to receive the amount of such excess over $15,000.00 as a credit
against the Purchase Price in accordance with the terms of the Purchase
Agreement. In the event that the acquisition of the Station ("Barter Amount") by
Broker from Licensee pursuant to the Purchase Agreement is not consummated for
any reason other than a default by it, Broker shall be entitled to receive cash
for any barter liability below the Barter Amount as of the date hereof and
Licensee shall be entitled to receive cash for any barter liability over the
Barter Amount, as of the date hereof.
14.3 Except as otherwise provided herein, the prorations and
adjustments contemplated by this Section 14, to the extent practicable, shall be
made on the Commencement Date. As to those prorations and adjustments not
capable of being ascertained on the Commencement Date, an adjustment and
proration shall be made within ninety (90) calendar days after the Commencement
Date.
14.4 In the event of any disputes between the parties as to
such adjustments, the amounts not in dispute shall nonetheless be paid at the
time provided in Section 14.3 hereof and such disputes shall be determined by an
independent certified public accountant mutually acceptable to the parties, and
the fees and expenses of such accountant shall be paid one-half by Licensee and
one-half by Broker.
15. Indemnification.
15.1 Indemnification. Broker shall indemnify and hold Licensee
and its stockholders, directors, partners, officers, agents, employees,
successors, and assigns harmless from and against any and all claims, expenses,
causes of action and liability resulting from or relating to (i) the broadcast
of Programming during the Term, (ii) any and all promotions, contests and on-air
"giveaways" by Broker relating to the Stations during the Term, (iii) a breach
of Broker's representations, warranties, covenants or agreements contained
herein, (iv) any liability resulting from Broker's default under the Station
Agreements, and (v) all other matters arising out of or related to Broker's
activities involving the Stations or use of the Licensee Station facilities or
relating to the obligations assumed by Broker in connection with this Agreement
including but not limited to any damage caused to Station equipment by Broker,
its employees, or agents. Licensee agrees to indemnify, defend, and hold
harmless Broker and its members, managers, officers, agents, employees,
successors and assigns from and against any and all liability that arises out of
(i) material broadcast by Licensee other than the Programming, programming the
Licensee directs to be broadcast or programming that Licensee refuses to
broadcast, (ii) liabilities (but not loss of advertising revenue) that arise as
a result of Licensee's alteration of any and/or all Programming prior to
broadcast by Licensee; and (iii) the Retained Liabilities.
15.2 Procedures: Third Party and Direct Indemnification
Claims. The indemnified party agrees to give written notice within a reasonable
time to the indemnifying
<PAGE> 9
party of any demand, suit, claim or assertion of liability by third parties or
other circumstances that could give rise to an indemnification obligation
hereunder against the indemnifying party (hereinafter collectively "Claims," and
individually a "Claim"), it being understood that the failure to give such
notice shall not affect the indemnified party's right to indemnification and the
indemnifying party's obligation to indemnify as set forth in this Agreement,
unless the indemnifying party's ability to contest, defend or settle with
respect to such Claim is thereby demonstrably and materially prejudiced.
The obligations and liabilities of the parties hereto with respect to
their respective indemnities pursuant to Section 15.1 resulting from any Claim
shall be subject to the following additional terms and conditions:
The indemnifying party shall have the right to undertake, by counsel or
other representatives of its own choosing, the defense or opposition to such
Claim.
15.2.1 In the event that the indemnifying party shall
elect not to undertake such defense or opposition, or within ten days after
notice of any such Claim from the indemnified party shall fail to defend or
oppose, the indemnified party (upon further written notice to the indemnifying
party) shall have the right to undertake the defense, opposition, compromise or
settlement of such Claim, by counsel or other representatives of its own
choosing, on behalf of and for the account and risk of the indemnifying party
(subject to the right of the indemnifying party to assume defense of or
opposition to such Claim at any time prior to a binding settlement, compromise
or final determination thereof).
15.2.2 Anything in this Section 15.2 to the
contrary notwithstanding: (a) the indemnified party shall have the right, at its
own cost and expense, to participate in the defense, opposition, compromise or
settlement of the Claim; (b) the indemnifying party shall not, without the
indemnified party's written consent, settle or compromise any Claim or consent
to entry of any judgment which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the indemnified party of a
release from all liability in respect of such Claim; and (c) in the event that
the indemnifying party undertakes defense of or opposition to any Claim, the
indemnified party, by counsel or other representative of its own choosing and at
its sole cost and expense, shall have the right to consult with the indemnifying
party and its counsel or other representatives concerning such Claim and the
indemnifying party and the indemnified party and their respective counsel or
other representatives shall cooperate in good faith with respect to such Claim.
15.2.3 No undertaking of defense or opposition to a
Claim shall be construed as an acknowledgment by such party that it is liable to
the party claiming indemnification with respect to the Claim at issue or other
similar Claims.
16. Events of Default: Cure Periods and Remedies.
<PAGE> 10
16.1 Events of Default. The following shall, after the
expiration of the applicable cure periods, constitute Events of Default under
the Agreement:
16.1.1 Non-Payment. Broker's failure to timely pay
the consideration provided for in Section 2 and Attachment B hereof which is not
cured within five (5) business days following notice in accordance with Section
16.2 hereof;
16.1.2 Default in Covenants or Adverse Legal
Action. The default by any party hereto in the material observance or
performance of any material covenant, condition or agreement contained herein
which is not cured within five (5) business days following notice in accordance
with Section 16.2 hereof, or if (a) any party shall make a general assignment
for the benefit of creditors, (b) any party shall file or have filed against it
a petition for bankruptcy, for reorganization or an arrangement, or for the
appointment of a receiver, trustee or similar creditors' representative for the
property or assets of such party under any federal or state insolvency law,
which, if filed against such party, has not been dismissed or discharged within
sixty (60) days thereof, or (c) specifically and without limitation, if
Licensee's successors and assigns, including, without limitation, any assignee
of the FCC license for the Stations, except if such successor or assign is
Broker or an affiliate of Broker, refuses to abide by or terminates this
Agreement during the term of this Agreement.
16.1.3 Breach of Representation. If any material
representation or warranty herein made by either party hereto, or in any
certificate or document furnished by either party to the other pursuant to the
provisions hereof, shall prove to have been false in any material respect as of
the time made or furnished and is not cured within thirty (30) days following
notice in accordance with Section 16.2 hereof.
16.1.4 Breach of Purchase Agreement. The breach by
any party or their affiliates in the observance or performance of any
representation, warranty, covenant, condition or agreement in the Purchase
Agreement which is not cured within any time period provided for such cure under
the Purchase Agreement and which breach gives rise to a right to a party to
terminate the Purchase Agreement pursuant to Section 28 of the Purchase
Agreement, provided that no party may use its or its Affiliate's own breach
under the Purchase Agreement as grounds to terminate this Agreement.
16.2 Cure Periods. An Event of Default shall not be deemed to
have occurred until after the nondefaulting party has provided the defaulting
party with written notice specifying the event or events that if not cured would
constitute an Event of Default and specifying the actions necessary to cure
within the relevant cure period. The Event of Default shall not be deemed to
have occurred if actions necessary to cure are completed during the relevant
cure period.
16.3 Termination Upon Default. Upon the occurrence of an Event
of Default, the non-defaulting party may terminate this Agreement provided that
it is not also in material default hereunder, and may seek such remedies at law
and/or equity as are available, including
<PAGE> 11
without limitation specific performance. If Broker has defaulted in the
performance of its obligations, Licensee shall be under no further obligation to
make available to Broker any further broadcast time or broadcast transmission
facilities and, without limitation of remedies, all amounts accrued or payable
to Licensee up to the date of termination which have not been paid, less any
payment credits, shall immediately become due and payable.
16.4 Liabilities Upon Termination. Upon termination of this
Agreement, Broker shall be responsible for all liabilities, debts and
obligations of Broker accrued from the purchase of air time and transmission
services including, without limitation, accounts payable, barter agreements and
unaired advertisements, but not for Licensee's federal, state, and local tax
liabilities associated with Broker's payments to Licensee as provided for
herein. With respect to Broker's obligations to broadcast material over the
Stations after termination hereunder, Broker may propose compensation to
Licensee for meeting these obligations, but Licensee shall be under no duty to
accept such compensation or to perform such obligations. Upon termination,
Broker shall return to Licensee any equipment or property of the Stations used
by Broker except for such equipment purchased by Broker, its employees or
agents, in substantially the same condition and location as such equipment
existed on the date of this Agreement, ordinary wear and tear excepted, and
Broker shall assign to Licensee the still outstanding Station Agreements that
were assigned to Broker pursuant to Section 12 hereof and any new contracts
entered into by Broker relating to the Stations that Licensee expressly agrees
to assume. Notwithstanding anything in the foregoing to the contrary,
termination shall not extinguish any rights of either party as may be provided
by Section 15 hereof.
17. Broker Termination Option. Broker may elect to terminate this
Agreement at any time during the term hereof in the event that Licensee preempts
or substitutes other programming for that supplied by the Broker during ten
percent (10%) or more of the total hours of operation of the Stations during any
calendar month. In the event Broker elects to terminate this Agreement pursuant
to this provision, it shall give Licensee notice of such election at least ten
(10) days prior to the termination date. Upon termination, neither party shall
have any further liability to the other except as may be provided by Sections 15
and 16.4 hereof.
18. Responsive Programming. Broker and Licensee mutually acknowledge
their interest in ensuring that the Stations serve the needs and interests of
the residents of the Stations' community of license and service areas and agree
to cooperate in doing so. Licensee shall, on a regular basis, assess the issues
of concern to residents of the Stations' community of license and service areas
and address those issues in its public service programming. Licensee shall
describe those issues and responsive programming and place issues/programs lists
in the Stations' public inspection file as required by FCC rules. The
Programming shall include material that is responsive to the issues identified
by Licensee. Licensee may request, and Broker shall provide, information
concerning such of Broker's Programming that is responsive to community issues
so as to assist Licensee in the satisfaction of its public service programming
obligations. Broker shall also provide to Licensee upon request such other
<PAGE> 12
information necessary to enable Licensee to prepare records and reports required
by the FCC or other local, state or federal government entities.
19. Time Brokerage Challenge. If this Agreement is challenged in
whole or in part at or by a governmental authority or is challenged in whole or
in part in a judicial forum, counsel for the Licensee and counsel for the Broker
shall jointly defend this Agreement and the parties' performance thereunder
throughout all such proceedings. If this Agreement is declared invalid or
illegal in whole or in substantial part by a ruling, order or decree of a
governmental authority or court, and such ruling, order or decree has become
effective, then the parties shall endeavor in good faith to reform the Agreement
as necessary. If the parties are unable to reform this Agreement within thirty
(30) days of the effective date of such ruling, order or decree, then this
Agreement shall terminate, and all sums owing to Licensee shall be paid and
neither party shall have any further liability to the other except as may be
provided by Section 15 hereof.
20. Additional Representations, Warranties and Covenants.
20.1 Mutual Representations, Warranties and Covenants.
Both Licensee and Broker represent that they are legally qualified, empowered,
and able to enter into this Agreement, and that the execution, delivery and
performance hereof shall not constitute a breach or violation of any agreement,
contract or other obligation to which either party is subject or by which it is
bound.
20.2 Additional Licensee Representations, Warranties and
Covenants. Licensee makes the following further representations, warranties and
covenants:
20.2.1 Authorizations. During the term of this
Agreement, Licensee shall own and hold all licenses and other permits and
authorizations necessary for the operation of the Stations as presently
conducted (including licenses, permits and authorizations issued by the FCC),
and such licenses, permits and authorizations shall be in full force and effect
for the entire Term hereunder, unimpaired by any acts or omissions of Licensee,
its principals, employees or agents. Licensee hereby makes and incorporates by
reference the representations, warranties and covenants of Sellers set forth in
the Purchase Agreement that pertain to Licensee, its assets or its operation of
the Stations.
20.2.2 Payment of Obligations. Licensee shall not
incur any debt, obligation or liability without the prior written consent of
Broker if such undertaking would adversely affect Licensee's performance
hereunder or the business and operations of the Broker permitted hereby. Subject
to the provisions of Sections 2 and 11 hereof, Licensee shall pay in a timely
fashion all of its debts, assessments and obligations, including without
limitation tax liabilities and payments in each case attributable to the
operations of the Stations, as they come due during the Term of this Agreement.
<PAGE> 13
20.2.3 Broadcast Obligations. Licensee has no
agreement, contract, commitment or understanding to broadcast on the Stations on
or after the Commencement Date, any programs or commercial matter other than the
Station Agreements. Licensee shall not incur any other programming obligations
without the prior written consent of Broker except in connection with
programming obligations incurred by Licensee for programming that replaces
Programming that does not meet the standards set forth in this Agreement.
20.2.4 Licensee Control. Licensee hereby verifies
that for the term of this Agreement it shall maintain ultimate control over the
Stations' facilities, including specifically control over the Stations'
finances, personnel and programming, and nothing herein shall be interpreted as
depriving Licensee of the power or right of such ultimate control.
20.2.5 Insurance. Licensee shall maintain in full
force and effect (at Broker's expense) throughout the term of this Agreement
insurance with responsible and reputable insurance companies or associations
covering such risks (including fire and other risks insured against by extended
coverage, public liability insurance, insurance for claims against personal
injury or death or property damage and such other insurance as may be
applicable) and in such amounts and on such terms as is conventionally carried
by broadcasters operating radio stations with facilities in the area comparable
to those of the Stations. Broker shall be listed as an additional insured on
such insurance policies. Any insurance proceeds received by Licensee in respect
of damaged property shall be used to repair or replace such property so that the
operations of the Stations conform with this Agreement. Licensee shall present
to Broker prior to the execution of this Agreement certificates of insurance or
binders for such insurance policies. If requested by Broker, Licensee shall
maintain, at Broker's expense, business interruption insurance for Broker's
benefit.
20.2.6 Compliance with Law. Licensee covenants that,
throughout the term of this Agreement, Licensee shall comply with all laws and
regulations applicable in the conduct of Licensee's business and Licensee
acknowledges that Broker has not urged, counseled, or advised the use of any
unfair business practice.
20.3 Additional Broker Representations, Warranties and
Covenants.
20.3.1 Compliance with 47 C.F.R. Section 73.3555(a).
Broker hereby verifies that execution and performance of this Agreement complies
with the Commission's restrictions on local radio ownership set out in Section
73.3555(a) of the FCC Rules.
20.3.2 Compliance with Applicable Law. Broker
covenants that its performance of its obligations under this Agreement and its
furnishing of Programming shall be in compliance with, and shall not violate,
any applicable laws or any applicable rules, regulations, or orders of the FCC
or any other governmental agency and Broker acknowledges that Licensee has not
urged, counseled, or advised the use of any unfair business practice.
<PAGE> 14
20.3.3 Handling of Complaints. Broker shall promptly
advise Licensee of any public or FCC complaint or inquiry that Broker receives
concerning the Programming on the Stations and shall cooperate with Licensee and
take all actions as may be reasonably requested by Licensee in responding to any
such complaint or inquiry.
20.3.4 Copyright and Licensing. Broker represents and
warrants to Licensee that Broker has and shall have throughout the term of this
Agreement the full authority to broadcast the Programming on the Stations and
that Broker shall not broadcast on the Stations any material in violation of the
Copyright Act. All music supplied by Broker shall be: (i) licensed by ASCAP,
SESAC or BMI; (ii) in the public domain; or (iii) cleared at the source by
Broker.
20.3.5 Information For FCC Reports. Upon request by
Licensee, Broker shall provide in a timely manner any such information in its
possession which shall enable Licensee to prepare, file or maintain the records
and reports required by the FCC.
20.3.6 Payola/Plugola. Broker covenants that it shall
not accept, and shall instruct its employees not to accept, any consideration,
compensation, gift or gratuity of any kind whatsoever, regardless of its value
or form, including, but not limited to, a commission, discount, bonus,
materials, supplies or other merchandise, services or labor, whether or not
pursuant to written contracts or agreements between Broker and merchants or
advertisers, unless the payer is identified in the program as having paid for or
furnished such consideration, in accordance with FCC requirements. Broker agrees
to annually, or more frequently at the request of Licensee, execute and provide
Licensee with an affidavit regarding payola/plugola compliance.
21. Intellectual Property. Effective as of the Commencement Date,
Licensee licenses to Broker the exclusive right to use all intellectual property
owned by or licensed to Licensee and used solely in the operation of the
Stations (including, but not limited to, logos, jingles, promotional materials,
call signs, goodwill, trademarks, service marks, slogans, trade names,
copyrights and any applications and registrations therefor) (the "IP License").
In the event of termination of this Agreement, the IP License shall terminate.
22. Subcarrier Rights. Licensee and Broker acknowledge and agree that
any subsidiary communications services transmitted on a subcarrier within the FM
baseband signal of any of the Stations ("Subcarrier"), and any uses of the
Subcarrier authorized by the FCC ("Subcarrier Uses"), are subject to the terms
and conditions of this Agreement. Licensee hereby agrees (a) to apply, at
Broker's expense, for any additional authorization from the FCC or any other
governmental agency or entity that may be necessary in order to make use of any
Subcarrier Uses, and (b) that Broker has the sole and exclusive right, subject
to the terms and conditions hereof, to make use of any Subcarrier Uses and
collect the revenues therefrom. Broker hereby agrees to reimburse Licensee for
Licensee's reasonable expenses incurred in
<PAGE> 15
carrying out Licensee's obligations pursuant to this Section 22, including
reasonable attorneys and engineering fees and expenses.
23. Publicity. Licensee and Broker shall not issue any press release or
otherwise make any public statement with respect to the transactions
contemplated herein except as may be required by law or regulation or as agreed
to by Licensee and Broker.
24. No Waiver; Remedies Cumulative. No failure or delay on the part of
Licensee or Broker in exercising any right or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of Licensee and Broker herein
provided are cumulative and are not exclusive of any right or remedies which it
may otherwise have.
25. Construction. This Agreement shall be construed in accordance with
the laws of the State of Arizona, without giving effect to the choice of law
provisions thereunder, and the obligations of the parties hereto are subject to
all federal, state or municipal laws or regulations now or hereafter in force
and to the regulations of the FCC and all other governmental bodies or
authorities presently or hereafter to be constituted.
26. Headings. The headings contained in this Agreement are included for
convenience only and no such heading shall in any way alter the meaning of any
provision.
27. Parties in Interest; Assignment. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties to this
Agreement shall bind and inure to the benefit of their respective successors and
assigns, whether so expressed or not. No party to this Agreement may assign its
rights or delegate its obligations under this Agreement to any other person or
entity without the express prior written consent of the other parties, which
consent shall not be unreasonably withheld.
28. Notices. All notices, demands, requests, or other communications
which may be or are required to be given or made by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered,
mailed by first-class registered or certified mail, return receipt requested,
postage prepaid, delivered by overnight air courier, or transmitted by telegram,
telex, or facsimile transmission addressed in accordance with the listing set
forth in Attachment E hereto or such other address as the addressee may indicate
by written notice to the other parties. Each notice, demand, request, or
communication which shall be given or made in the manner described above shall
be deemed sufficiently given or made for all purposes at such time as it is
delivered to the addressee (with the return receipt, the delivery receipt, the
affidavit of messenger or (with respect to a telex or facsimile) the answerback
being deemed conclusive but not exclusive evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation.
<PAGE> 16
29. Entire Agreement. This Agreement and the Purchase Agreement and
related documents embody the entire agreement between the parties and there are
no other agreements, representations, warranties, or understandings, oral or
written, between them with respect to the subject matter hereof. No alterations,
modification or change of this Agreement shall be valid unless made in writing,
and signed by like written instrument. No waiver of any provision hereof shall
be valid unless in writing and signed by the party adversely affected by the
waiver, and then such waiver shall be effective only in the specified instance
and for the purpose for which given.
30. Severability. In the event that any of the provisions contained in
this Agreement is held to be invalid, illegal or unenforceable such event shall
not affect any other provision hereof, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provisions had not been contained
herein.
31. Counterpart Signatures. This Agreement may be signed in one or more
counterparts, each of which shall be deemed a duplicate original, binding on the
parties hereto notwithstanding that the parties are not signatory to the
original or the same counterpart. This Agreement shall be binding and effective
as of the date on which the executed counterparts are exchanged by the parties.
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
REGENT BROADCASTING OF KINGMAN, INC.
By:_____________________________
Name:___________________________
Title:__________________________
REGENT LICENSEE OF KINGMAN, INC.
By: /s/_________________________
Name: /s/_______________________
Title: /s/______________________
MAG MILE MEDIA, L.L.C.
By: /s/_________________________
Name: /s/_______________________
Title: /s/______________________
<PAGE> 1
EXHIBIT 14(a)1.
Financial Statements:
Consolidated Statements of Operations for
the three years ended December 31, 1998, 1997 and 1996
Consolidated Balance Sheet for the years ended
December 31, 1998 and 1997
Consolidated Statements of Cash Flows for the
three years ended December 31, 1998, 1997 and 1996
Statement of Changes in Shareholders' Deficit
Notes to Consolidated Financial Statements
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF REGENT COMMUNICATIONS, INC.
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation
------------------ ----------------------
<S> <C>
Regent Broadcasting Midwest, Inc. Delaware
Regent Broadcasting West Coast, Inc. California
Regent Broadcasting of Chico, Inc. Delaware
Regent Broadcasting of Flagstaff, Inc. Delaware
Regent Broadcasting of Flint, Inc. Delaware
Regent Broadcasting of Kingman, Inc. Delaware
Regent Broadcasting of Lake Tahoe, Inc. Delaware
Regent Broadcasting of Lexington, Inc. Delaware
Regent Broadcasting of Mansfield, Inc. Delaware
Regent Broadcasting of Palmdale, Inc. Delaware
Regent Broadcasting of Redding, Inc. Delaware
Regent Broadcasting of San Diego, Inc. Delaware
Regent Broadcasting of South Carolina, Inc. Delaware
Regent Broadcasting of St. Cloud, Inc. Delaware
Regent Broadcasting of Victorville, Inc. Delaware
Regent Licensee of Chico, Inc. Delaware
Regent Licensee of Flagstaff, Inc. Delaware
Regent Licensee of Flint, Inc. Delaware
Regent Licensee of Kingman, Inc. Delaware
Regent Licensee of Lake Tahoe, Inc. Delaware
Regent Licensee of Lexington, Inc. Delaware
Regent Licensee of Mansfield, Inc. Delaware
Regent Licensee of Palmdale, Inc. Delaware
Regent Licensee of Redding, Inc. Delaware
Regent Licensee of San Diego, Inc. Delaware
Regent Licensee of South Carolina, Inc Delaware
Regent Licensee of St. Cloud, Inc. Delaware
Regent Licensee of Victorville, Inc. Delaware
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 478,545
<SECURITIES> 0
<RECEIVABLES> 3,707,372
<ALLOWANCES> 268,000
<INVENTORY> 0
<CURRENT-ASSETS> 11,618,745
<PP&E> 15,489,554
<DEPRECIATION> 6,185,579
<TOTAL-ASSETS> 67,617,870
<CURRENT-LIABILITIES> 13,027,306
<BONDS> 34,617,500
26,876,058
3,824,030
<COMMON> 2,400
<OTHER-SE> (13,373,003)
<TOTAL-LIABILITY-AND-EQUITY> 67,617,870
<SALES> 16,046,968
<TOTAL-REVENUES> 14,771,523
<CGS> 0
<TOTAL-COSTS> 15,204,844
<OTHER-EXPENSES> (26,648)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,883,251
<INCOME-PRETAX> (3,289,924)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,289,924)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,170,080)
<CHANGES> 0
<NET-INCOME> (4,460,004)
<EPS-PRIMARY> (47.55)
<EPS-DILUTED> (47.55)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 393,743
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<ALLOWANCES> 240,000
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<CURRENT-ASSETS> 12,143,375
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<TOTAL-ASSETS> 66,577,504
<CURRENT-LIABILITIES> 12,185,125
<BONDS> 35,048,750
24,358,753
3,857,891
<COMMON> 2,400
<OTHER-SE> (11,527,496)
<TOTAL-LIABILITY-AND-EQUITY> 66,577,504
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<TOTAL-REVENUES> 9,484,301
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<TOTAL-COSTS> 9,553,790
<OTHER-EXPENSES> (6,738)
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<INTEREST-EXPENSE> 2,029,378
<INCOME-PRETAX> (2,092,129)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,092,129)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,170,080)
<CHANGES> 0
<NET-INCOME> (3,262,209)
<EPS-PRIMARY> (38.38)
<EPS-DILUTED> (38.38)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 769,796
<SECURITIES> 0
<RECEIVABLES> 3,532,806
<ALLOWANCES> 171,000
<INVENTORY> 0
<CURRENT-ASSETS> 12,372,659
<PP&E> 14,452,095
<DEPRECIATION> 5,617,079
<TOTAL-ASSETS> 66,831,177
<CURRENT-LIABILITIES> 11,570,204
<BONDS> 35,065,000
23,868,956
3,837,891
<COMMON> 2,400
<OTHER-SE> (10,193,857)
<TOTAL-LIABILITY-AND-EQUITY> 66,831,177
<SALES> 4,479,282
<TOTAL-REVENUES> 4,063,203
<CGS> 0
<TOTAL-COSTS> 4,245,655
<OTHER-EXPENSES> (20,773)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,086,608
<INCOME-PRETAX> (1,248,287)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,248,287)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,170,080)
<CHANGES> 0
<NET-INCOME> (2,418,367)
<EPS-PRIMARY> (31.30)
<EPS-DILUTED> (31.30)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
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<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 524,181
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<RECEIVABLES> 1,118,206
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<CURRENT-ASSETS> 1,669,435
<PP&E> 7,786,383
<DEPRECIATION> 5,487,232
<TOTAL-ASSETS> 13,885,559
<CURRENT-LIABILITIES> 1,110,404
<BONDS> 22,886,652
0
0
<COMMON> 2,400
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<TOTAL-COSTS> 596,406
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 503,770
<INCOME-PRETAX> (529,628)
<INCOME-TAX> 12,000
<INCOME-CONTINUING> (541,628)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (541,628)
<EPS-PRIMARY> (3.42)
<EPS-DILUTED> (3.42)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 535,312
<SECURITIES> 0
<RECEIVABLES> 1,390,002
<ALLOWANCES> 32,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,919,232
<PP&E> 7,564,705
<DEPRECIATION> 5,408,461
<TOTAL-ASSETS> 13,010,554
<CURRENT-LIABILITIES> 859,631
<BONDS> 21,911,661
0
0
<COMMON> 2,400
<OTHER-SE> (10,184,188)
<TOTAL-LIABILITY-AND-EQUITY> 13,010,554
<SALES> 0
<TOTAL-REVENUES> 6,696,564
<CGS> 0
<TOTAL-COSTS> 2,293,804
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 34,000
<INTEREST-EXPENSE> 1,330,676
<INCOME-PRETAX> (290,995)
<INCOME-TAX> 71,542
<INCOME-CONTINUING> (362,537)
<DISCONTINUED> 0
<EXTRAORDINARY> (4,333,310)
<CHANGES> 0
<NET-INCOME> (4,695,847)
<EPS-PRIMARY> (19.57)
<EPS-DILUTED> (19.57)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 495,530
<SECURITIES> 0
<RECEIVABLES> 1,258,116
<ALLOWANCES> 20,000
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