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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] 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)
(606) 292-0030
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Series C Convertible Preferred Stock, $.01 par value
(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 10, 2000, the aggregate market value of registrant's common equity
held by non-affiliates of registrant was approximately $249,158,000 based upon
the closing sale price of $10.875 on the Nasdaq Stock Market's National Market
for that date.
The number of common shares of registrant outstanding as of March 10, 2000 was
34,515,839.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive Proxy Statement to be filed during
April 1999 in connection with the 2000 Annual Meeting of Stockholders presently
scheduled to be held on May 18, 2000 are incorporated by reference into Part III
of this Form 10-K.
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REGENT COMMUNICATIONS, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
Page
----
Part I
Item 1 Business................................................... 3
Item 2 Properties................................................. 22
Item 3 Legal Proceedings.......................................... 23
Item 4 Submission of Matters to a Vote of Security Holders........ 23
Part II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters...................................... 23
Item 6 Selected Financial Data.................................... 24
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 25
Item 7A Quantitative and Qualitative Disclosures
about Market Risk........................................ 31
Item 8 Financial Statements and Supplementary Data ............... 31
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure .................. 67
Part III
Item 10 Directors and Executive Officers of the Registrant......... 67
Item 11 Executive Compensation..................................... 67
Item 12 Security Ownership of Certain Beneficial Owners
and Management........................................... 67
Item 13 Certain Relationships and Related Transactions ............ 68
Part IV
Item 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K.............................................. 68
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PART I
ITEM 1. BUSINESS
General Development of Business
We are a radio broadcasting company focused on acquiring, developing
and operating radio stations in mid-sized and small markets. We currently own
and operate 29 FM and 15 AM radio stations in 12 markets in Arizona, California,
Michigan, Minnesota, New York, Ohio, Pennsylvania and Texas. We have entered
into written agreements to acquire a total of ten additional stations in two new
markets (Albany, New York and Grand Rapids, Michigan) and one existing market
(Chico, California) and to sell our stations in four of our existing markets
(Mansfield, Ohio; Palmdale, California; Victorville, California; and Flagstaff,
Arizona). Upon completion of these pending acquisitions and sales, we will own
and operate 28 FM and 12 AM radio stations in ten markets. Our assembled
clusters of radio stations rank first or second in terms of revenue share in all
of our markets.
Our primary strategy is to secure and maintain a leadership position in
the markets we serve and to expand into additional mid-sized and small markets
where we can achieve a leadership position. After we enter a market, we seek to
acquire stations that, when integrated with our existing operations, will allow
us to reach a wider range of demographic groups that appeal to advertisers,
increase revenue and achieve substantial cost savings. Additionally, we believe
that our advertising pricing on the basis of cost per thousand impressions,
combined with the added reach of our radio station clusters, allows us to
compete successfully for advertising revenue against non-traditional competitors
such as print media, television and outdoor advertising.
Relative to the largest radio markets in the United States, we believe
that the mid-sized and small markets represent attractive operating environments
because they are generally characterized by:
- a greater use of radio advertising compared to the national
average;
- substantial growth in advertising revenues as national and
regional retailers expand into mid-sized and small markets;
- a weaker competitive environment characterized by small
independent operators, many of whom lack the capital to produce
locally-originated programming or to employ more sophisticated
research, marketing, management and sales techniques;
- less direct format competition due to a smaller number of
stations in any given market; and
- lower overall susceptibility to fluctuations in general economic
conditions due to a lower percentage of national versus local
advertising revenues.
We believe that these operating characteristics, coupled with the
opportunity to establish or expand radio station clusters within a specific
market, create the potential for revenue growth and cost efficiencies.
Our portfolio of radio stations is diversified in terms of geographic
location, target demographics and format. We believe that this diversity helps
insulate us from downturns in specific markets and changes in format
preferences.
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Recently Completed Acquisitions and Dispositions
We completed the following acquisitions and dispositions of radio
stations during 1999 and the first quarter of 2000. The purchase prices set
forth below were paid in cash, except where otherwise indicated, and include,
where applicable, amounts paid under consulting and noncompetition agreements
but do not include transaction-related costs.
Acquisitions
------------
<TABLE>
<CAPTION>
No. of Purchase Price Date
Seller Market Stations Call Letters (in millions) Completed
------ ------ -------- ------------ ------------- ---------
<S> <C> <C> <C> <C>
WJON Broadcasting Company St. Cloud, MN 3 KMXK(FM) $12.7 5/6/99
WJON(AM)
WWJO(FM)
Media One Erie, PA 3 WXKC(FM) $13.5 9/1/99
Group-Erie, Ltd. WRIE(AM)
WXTA(FM)
Forever of NY, Inc. and Utica-Rome, NY 5 WODZ(FM) $44.7(1) 1/28/00
related entities WLZW(FM)
WFRG(FM)
WIBX(AM)
WRUN(AM)
Watertown, NY 4 WCIZ(FM)
WFRY(FM)
WTNY(AM)
WUZZ(AM)
New Wave Broadcasting, El Paso, TX 3 KLAQ(FM) $23.5 1/31/00
L.P. KSII(FM)
KROD(AM)
</TABLE>
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(1) The purchase price paid consisted of approximately $43.8 million in cash and
100,000 shares of our common stock.
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Dispositions
------------
<TABLE>
<CAPTION>
No. of Sale Price Date
Purchaser Market Stations Call Letters (in millions) Completed
--------- ------ -------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C>
Concord Media Group, Inc. Charleston, SC 1 WSSP(FM) $1.6 3/15/99
Concord Media Group of San Diego, CA 1 KCBQ(AM) $6.0 8/1/99
California, Inc.
Mag Mile Media, L.L.C. Kingman, AZ 4 KFLG(AM) $5.4 10/15/99
KFLG(FM)
KZZZ(FM)
KAAA(AM)
Commonwealth Lake Tahoe, CA 2 KRLT(FM) $1.2 11/1/99
Communications, LLC KOWL(AM)
</TABLE>
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Pending Transactions
We currently have transactions pending which, if completed, will result
in the purchase by us of ten additional radio stations and the sale by us of 14
radio stations. Closing of each of these transactions is subject to certain
conditions, including required governmental approvals.
Albany and Grand Rapids Acquisition; Sale of Mansfield, Palmdale and
Victorville Stations. On March 12, 2000, we entered into an Asset Exchange
Agreement with Clear Channel Broadcasting, Inc., Capstar Radio Operating Company
and their related entities to acquire substantially all of the assets of four FM
and two AM radio stations in Albany, New York and three FM radio stations in
Grand Rapids, Michigan in exchange for substantially all of the assets of our
seven FM and four AM radio stations in the Mansfield, Ohio; Palmdale,
California; and Victorville, California markets; and the payment by us of $67.0
million in cash. We have made a cash escrow deposit in the amount of $5.0
million and have agreed to pay liquidated damages in the amount of $28.0 million
if we fail to perform our obligations under the asset exchange agreement in
certain circumstances.
The sale to us of the Albany and Grand Rapids stations is part of a
sell-off of stations which regulatory agencies are requiring in order to allow
for the completion of the pending merger of Clear Channel Communications, Inc.
and AMFM, Inc. That merger requires the prior approvals of the shareholders of
Clear Channel and AMFM, as well as approvals from various regulatory
authorities, including the Federal Communications Commission, the Federal Trade
Commission, the U.S. Department of Justice, and state antitrust enforcement
agencies. These regulatory authorities are requiring divestiture of the Albany
and Grand Rapids stations and many other stations to comply with multiple
ownership and market concentration policies and other public interest
considerations. These approvals and the consummation of the Clear Channel and
AMFM merger are conditions precedent which must be met before the exchange of
the Albany and Grand Rapids stations for our Mansfield, Palmdale and Victorville
stations can take place. It is anticipated that these transactions could be
completed during the third quarter of 2000; but there can be no assurance the
shareholder and regulatory approvals will be obtained or, if obtained, when that
will occur.
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Chico Acquisition. On March 29, 2000, we entered into an agreement of
merger with KZAP, Inc. by which we will acquire control of radio station
KZAP(FM) located in Chico, California in consideration for 233,333 shares of our
common stock. We anticipate closing this acquisition during the second quarter
of 2000 following receipt of FCC approval. We are currently providing
programming and selling air time for KZAP(FM) under a time brokerage agreement
pending consummation of the acquisition.
Sale of Flagstaff Stations. On March 29, 2000, we entered into an asset
purchase agreement with Yavapai Broadcasting Corporation to sell substantially
all of the assets of our two FM and one AM radio stations in Flagstaff, Arizona
for a cash purchase price of $2.0 million. We anticipate closing this
acquisition during the second quarter of 2000 following receipt of FCC approval.
Earlier in March 2000, we terminated a March 1999 agreement by which we had
agreed to sell our Flagstaff assets to another party for a cash purchase price
of approximately $2.4 million. Action on the FCC application for approval of
that sale had been delayed since May 1999 due to the filing of an objection by
the owner of a competing station in the Flagstaff market based on the alleged
ownership concentration that the proposed buyer would have had following the
sale.
Acquisition Strategy
Our acquisition strategy is to expand within our existing markets and
into new mid-sized and small markets where we believe we can effectively use our
operating strategies. In considering new markets, we focus on those markets that
have a minimum of $8.0 million in gross radio advertising revenue where we
believe we can build a station cluster that will generate at least $1.0 million
in annual broadcast cash flow. Although significant competition exists among
potential purchasers for suitable radio station acquisitions throughout the
United States, we believe that there is currently less competition, particularly
from the larger radio operators, in the mid-sized and small markets. This has
afforded us relatively more attractive acquisition opportunities in these
markets. After entering a market, we seek to acquire additional stations that
will allow us to reach a wider range of demographic groups to appeal to
advertisers and increase revenue. We also integrate these stations into our
existing operations in an effort to achieve substantial cost savings. We have
sold or will sell stations in different markets that did not or do not fit
within our existing acquisition strategy.
We believe that the creation of strong station clusters in our local
markets is essential to our operating success. In evaluating an acquisition
opportunity in a new market, we assess our potential to build a leading radio
station cluster in that market over time. We will not consider entering a new
market unless we can acquire multiple stations in that market. We also analyze a
number of additional factors we believe are important to success, including the
number and quality of commercial radio signals broadcasting in the market, the
nature of the competition in the market, our ability to improve the operating
performance of the radio station or stations under consideration and the general
economic conditions of the market.
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We believe that our acquisition strategy, if properly implemented,
could have a number of benefits, including:
- greater revenue and broadcast cash flow diversity;
- improved broadcast cash flow margins through the consolidation of
facilities and the elimination of redundant expenses;
- enhanced revenue by offering advertisers a broader range of
advertising packages;
- improved negotiating leverage with various key vendors;
- enhanced appeal to top industry management talent; and
- increased overall scale, which should facilitate our capital
raising activities.
We have developed a process for integrating newly acquired properties
into our overall culture and operating philosophy, which involves the following
key elements:
- assess format quality and effectiveness so that we can refine
station formats in order to increase audience and revenue share;
- upgrade transmission, audio processing and studio facilities;
- expand and strengthen sales staff through active recruiting and
in-depth training;
- convert acquired stations to our communications network and
centralized networked accounting system; and
- establish revenue and expense budgets consistent with the
programming and sales strategy and corresponding cost
adjustments.
From time to time, in compliance with applicable law, we enter into a
time brokerage agreement (under which separately owned and licensed stations
agree to function cooperatively in terms of programming, advertising, sales and
other matters), or a similar arrangement, with a target property prior to FCC
final approval and the consummation of the acquisition, in order to gain a head
start on the integration process.
Operating Strategy
Our operating strategy focuses on maximizing our radio stations' appeal
to listeners and advertisers and, consequently, increasing our revenue and cash
flow. To achieve these goals, we have implemented the following strategies:
Ownership of Strong Radio Station Clusters. We seek to secure and
maintain a leadership position in the markets we serve by owning multiple
stations in those markets. By coordinating programming, promotional and sales
strategies within each local station cluster, we attempt to capture a wider
range of demographic listeners to appeal to advertisers. We believe that the
diversification of our programming formats and inventory of available
advertising time strengthen relationships with advertisers, increasing our
ability to maximize the value of our inventory. We believe that operating
multiple stations in a market enhances our ability to market the advantages of
advertising on radio versus other media, such as newspapers and television.
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We believe that our ability to utilize the existing programming and
sales resources of our radio station clusters enhances the growth potential of
both new and underperforming stations while reducing the risks associated with
the implementation of station performance improvements such as new format
launches. We believe that operating leading station clusters allows us to
attract and retain talented local personnel, who are essential to our operating
success. Furthermore, we seek to achieve cost savings within a market through
the consolidation of facilities, sales and administrative personnel, management
and operating resources, such as on-air talent, programming and music research,
and the reduction of other redundant expenses.
Aggressive Sales and Marketing. We seek to maximize our share of local
advertising revenue in each of our markets through aggressive sales and
marketing initiatives. We provide extensive training through in-house sales and
time management programs and independent consultants who hold frequent seminars
and are available for consultation with our sales personnel. We emphasize
regular, informal exchanges of ideas among our management and sales personnel
across our various markets. We seek to maximize our revenue by utilizing
sophisticated inventory management techniques to provide our sales personnel
with frequent price adjustments based on regional and local market conditions.
We further strengthen our relationship with some advertisers by offering the
ability to create customer traffic through an on-site event staged at, and
broadcast from, the advertiser's business location. We believe that, prior to
their acquisition, many of our newly acquired stations had underperformed in
sales, due primarily to undersized sales staffs. Accordingly, we have
significantly expanded the sales forces of many of our acquired stations.
Targeted Programming and Promotion. To maintain or improve our position
in each market, we combine extensive market research with an assessment of our
competitors' vulnerabilities in order to identify significant and sustainable
target audiences. We then tailor the programming, marketing and promotion of
each radio station to maximize its appeal to the targeted audience. We attempt
to build strong markets by:
- creating distinct, highly visible profiles for our on-air
personalities, particularly those broadcasting during morning
drive time, which traditionally airs between 6:00 a.m. and 10:00
a.m.;
- formulating recognizable brand names for select stations; and
- actively participating in community events and charities.
Decentralized Operations. We believe that radio is primarily a local
business and that much of our success will be the result of the efforts of
regional and local management and staff. Accordingly, we decentralize much of
our operations at these levels. Each of our station clusters is managed by a
team of experienced broadcasters who understand the musical tastes, demographics
and competitive opportunities of their particular market. Local managers are
responsible for preparing annual operating budgets and a portion of their
compensation is linked to meeting or surpassing their operating targets.
Corporate management approves each station cluster's annual operating budget and
imposes strict financial reporting requirements to track station performance.
Corporate management is responsible for long range planning, establishing
corporate policies and serving as a resource to local management.
Station Portfolio
When our pending acquisition and sale transactions are completed, we
will own 28 FM and 12 AM radio stations in ten mid-sized and small markets. The
following table sets forth information about the stations that we own and expect
to own after giving effect to our pending transactions.
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As you review the information in the following table, you should note
the following:
- The abbreviation "MSA" in the table means the market's rank among
the largest metropolitan statistical areas in the United States.
- The symbol "*" indicates a station that is the subject of one of
our pending acquisitions. The symbol # indicates a station that
we have agreed to sell. The completion of each of the pending
acquisition and sale transactions is subject to certain
conditions, including governmental approvals and in some cases
shareholder approvals. There can be no assurance that these
conditions will be satisfied in any particular case.
- In the Primary Demographic Target column, the letter "A"
designates adults, the letter "W" designates women and the letter
"M" designates men. The numbers following each letter designate
the range of ages included within the demographic group.
- Station Cluster Rank by Market Revenue Share in the table is the
ranking, by radio cluster market revenue, of each of our radio
clusters in its market among all other radio clusters in that
market.
- We obtained all metropolitan statistical area rank information,
market revenue information and station cluster market rank
information for all of our markets (except the Flagstaff,
Arizona; Palmdale, California; Victorville, California; and
Mansfield, Ohio markets) from Investing in Radio 1999 Market
Report (4th ed.) published by BIA Publications, Inc.
- We obtained all market revenue and station cluster market revenue
rank information for the Palmdale market from the February 2000
Miller, Kaplan Market Revenue Report, a publication of Miller,
Kaplan, Arase & Co., Certified Public Accountants.
- Market data are not available for the Flagstaff, Victorville and
Mansfield markets.
- We obtained all audience share information from the Fall 1999
Radio Market Report published by The Arbitron Company. We derived
station cluster audience share based on persons ages 12 and over,
listening Monday through Sunday, 6:00 a.m. to 12:00 midnight.
<TABLE>
<CAPTION>
Station
Station Primary Station Cluster Cluster
Radio Market/ Programming Demographic Rank by Market 12+ Audience
Station Call Letters MSA Rank Format Target Revenue Share Share
-------------------- -------- ------------------ ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Albany, NY...................59 2 19.9
WQBJ(FM)* Rock M 18-49
WQBK(FM)* Rock M 18-49
WABT(FM)* Oldies A 35+
WGNA(FM)* Country A 25-54
WGNA(AM)* Country A 25-54
WTMM(AM)* Sports M 35+
</TABLE>
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<TABLE>
<CAPTION>
Station
Station Primary Station Cluster Cluster
Radio Market/ Programming Demographic Rank by Market 12+ Audience
Station Call Letters MSA Rank Format Target Revenue Share Share
-------------------- -------- ------------------ ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Chico, CA.................. 192 1 13.6
KFMF(FM) Rock M 18-49
KALF(FM) Country A 25-54
KQPT(FM) Alternative A 18-34
KZAP(FM)* Adult Contemporary A 25-54
El Paso, TX................ 70 2 20.9
KSII(FM) Hot Adult Contemporary W 25-54
KLAQ(FM) Rock M 18-49
KROD(AM) News/Talk A 35+
Erie, PA................... 155 1 26.4
WXKC(FM) Adult Contemporary W 25-54
WXTA(FM) Country A 25-54
WRIE(AM) Nostalgia A 35+
Flagstaff, AZ.............. N/A N/A N/A
KZGL(FM)# Rock M 18-34
KVNA(FM)# Adult Contemporary A 25-54
KVNA(AM)# News/Talk A 35+
Flint, MI.................. 116 2 16.3
WCRZ(FM) Adult Contemporary W 25-54
WWBN(FM) Rock M 18-49
WFNT(AM) Nostalgia A 35+
Grand Rapids, MI........... 66 2 14.4
WLHT(FM)* Adult Contemporary W 25-54
WGRD(FM)* Rock M 18-49
WTRV(FM)* Soft Adult Contemporary W 35+
Mansfield, OH.............. N/A N/A N/A
WYHT(FM)# Adult Contemporary W 25-54
WSWR(FM)# Oldies A 35-54
WMAN(AM)# News/Talk/Sports A 35+
Palmdale, CA............... N/A 1 N/A
KTIP(FM)# Country A 25-54
KOSS(FM)# Adult Contemporary W 25-54
KAVC(AM)# Religion A 35+
</TABLE>
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<TABLE>
<CAPTION>
Station
Station Primary Station Cluster Cluster
Radio Market/ Programming Demographic Rank by Market 12+ Audience
Station Call Letters MSA Rank Format Target Revenue Share Share
-------------------- -------- ------------------ ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Redding, CA.................. 218 1 40.6
KSHA(FM) Soft Adult Contemporary W 25-54
KNNN(FM) Current Hit Radio A 18-34
KRDG(FM) Oldies A 35-54
KRRX(FM) Rock M 18-49
KNRO(AM) Classic Country M 35+
KQMS(AM) News/Talk/Sports A 35+
St. Cloud, MN................ 216 1 29.2
KMXK(FM) Adult Contemporary W 25-54
WWJO(FM) Country A 25-54
KKSR(FM)* Lite Rock W 25-54
KLZZ(FM)* Classic Rock M 25-54
KXSS(AM)* Nostalgia A 35+
WJON(AM) News/Talk A 35+
Utica-Rome, NY............... 150 1 39.2
WODZ(FM) Oldies A 35-54
WLZW(FM) Adult Contemporary W 25-54
WFRG(FM) Country A 25-54
WRUN(AM) Sports A 35+
WIBX(AM) News/Talk M 35+
Victorville, CA.............. N/A N/A N/A
KZXY(FM)# Adult Contemporary A 18-49
KATJ(FM)# Country A 25-54
KIXA(FM)# Rock M 18-49
KROY(AM)# News/Talk A 35+
KIXW(AM)# Nostalgia A 35+
Watertown, NY................ 252 1 43.2
WCIZ(FM) Classic Hits A 25-54
WFRY(FM) Country A 25-54
WTNY(AM) Talk A 35+
WUZZ(AM) R&B Oldies A 35+
</TABLE>
Advertising Sales
Virtually all of our revenue is generated from the sale of local,
regional and national advertising for broadcast on our radio stations. In 1999,
approximately 84.9% of our net broadcast revenue was generated from the sale of
local and regional advertising. Additional broadcast revenue is generated from
the sale of national advertising, network compensation payments and other
miscellaneous transactions. The major categories of our advertisers include
telephone companies, restaurants, fast food chains, automotive companies and
grocery stores.
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Each station's local sales staff solicits advertising either directly
from the local advertiser or indirectly through an advertising agency. We pay a
higher commission rate to our sales staff for direct advertising sales. Through
direct advertiser relationships, we can better understand the advertiser's
business needs and more effectively design advertising campaigns to sell the
advertiser's products. We employ personnel in each of our markets to produce
commercials for the advertiser. In-house production combined with effectively
designed advertising establishes a stronger relationship between the advertiser
and the station cluster. National sales are made by a firm specializing in radio
advertising sales on the national level in exchange for a commission based on
gross revenue. Regional sales, which we define as sales in regions surrounding
our markets to companies that advertise in our markets, are generally made by
our local sales staff.
Depending on the programming format of a particular station, we
estimate the optimum number of advertising spots available. The number of
advertisements that can be broadcast without jeopardizing listening levels is
limited in part by the format of a particular station. Our stations strive to
maximize revenue by managing advertising inventory. Our stations adjust pricing
based on local market conditions and the ability to provide advertisers with an
effective means of reaching a targeted demographic group. Each of our stations
has a general target level of on-air inventory. This target level of inventory
may be different at different times of the day but tends to remain stable over
time. Much of our selling activity is based on demand for our radio stations'
on-air inventory and, in general, we respond to this demand by varying prices
rather than our target inventory level for a particular station. Therefore, most
changes in revenue can be explained by demand-driven pricing changes.
A station's listenership is reflected in ratings surveys that estimate
the number of listeners tuned to the station and the time they spend listening.
Each station's ratings are used by its advertisers and advertising
representatives to consider advertising with the station and are used by us to
chart audience levels, set advertising rates and adjust programming. The radio
broadcast industry's principal ratings service is The Arbitron Company, which
publishes periodic ratings surveys for significant domestic radio markets. These
surveys are our primary source of audience ratings data.
We believe that radio is one of the most efficient and cost-effective
means for advertisers to reach specific demographic groups. Advertising rates
charged by radio stations are based primarily on:
- the supply of, and demand for, radio advertising time;
- a station's share of audiences in the demographic groups targeted
by advertisers, as measured by ratings surveys estimating the
number of listeners tuned to the station at various times; and
- the number of stations in the market competing for the same
demographic groups.
Rates are generally highest during morning and afternoon commuting
hours.
Competition
The radio broadcasting industry is highly competitive. The success of
each station depends largely upon audience ratings and its share of the overall
advertising revenue within its market. Stations compete for listeners and
advertising revenue directly with other radio stations within their respective
markets. Radio stations compete for listeners primarily on the basis of program
content that appeals to a particular demographic group. Building a strong
listener base consisting of a specific demographic group in a market enables an
operator to attract advertisers seeking to reach those listeners. Companies that
operate radio stations must be alert to the possibility of another station
changing format to compete
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directly for listeners and advertisers. A station's decision to convert to a
format similar to that of another radio station in the same geographic area may
result in lower ratings and advertising revenue, increased promotion and other
expenses and, consequently, lower broadcast cash flow.
Factors that are material to a radio station's competitive position
include management experience, the station's local audience rank in its market,
transmitter power, assigned frequency, audience characteristics, local program
acceptance and the number and characteristics of other radio stations in the
market area. Recent changes in FCC policies and rules permit increased ownership
and operation of multiple local radio stations. Management believes that radio
stations that elect to take advantage of joint arrangements such as local
marketing agreements or joint sales agreements may in certain circumstances have
lower operating costs and may be able to offer advertisers more attractive rates
and services.
Although the radio broadcasting industry is highly competitive, some
barriers to entry exist. The operation of a radio broadcast station requires a
license from the FCC, and the number of radio stations that can operate in a
given market is limited by the availability of FM and AM radio frequencies
allotted by the FCC to communities in that market, as well as by the FCC's
multiple ownership rules regulating the number of stations that may be owned and
controlled by a single entity. The FCC's multiple ownership rules have changed
significantly as a result of the Telecommunications Act of 1996.
Stations compete for advertising revenue with other media, including
newspapers, broadcast television, cable television, magazines, direct mail,
coupons and outdoor advertising. In addition, the radio broadcasting industry is
subject to competition from new media technologies that are being developed or
introduced, such as the delivery of audio programming by cable television
systems, by satellite and by digital audio broadcasting. Digital audio
broadcasting may deliver by satellite to nationwide and regional audiences,
multi-channel, multi-format, digital radio services with sound quality
equivalent to compact discs. The delivery of information through the Internet
also could create a new form of competition.
The FCC has recently authorized spectrum for the use of a new
technology, satellite digital audio radio services, to deliver audio
programming. Digital audio radio services 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 also may be used in the future by existing radio broadcast stations
either on existing or alternate broadcasting frequencies. The FCC has adopted
rules creating a new low power radio service that will open up opportunities for
new FM radio stations. The radio broadcasting industry historically has grown
despite the introduction of new technologies for the delivery of entertainment
and information. A growing population and greater availability of radios,
particularly car and portable radios, have contributed to this growth.
Employees
At March 10, 2000, we employed 531 persons. Thirteen of our employees
in Watertown, New York are covered by a collective bargaining agreement. None of
our other employees is covered by collective bargaining agreements. We consider
our relations with our employees to be good.
Federal Regulation of Radio Broadcasting
Introduction. Our ownership, operation, purchase and sale of radio
stations is regulated by the FCC, which acts under authority derived from the
Communications Act of 1934, as amended. The Telecommunications Act of 1996 made
changes in several broadcast laws. Among other things, the FCC:
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- assigns frequency bands for broadcasting;
- issues, renews, revokes and modifies station licenses;
- determines whether to approve changes in ownership or control of
station licenses;
- regulates equipment used by stations; and
- adopts and implements regulations and policies that directly or
indirectly affect the ownership, operation and employment
practices of stations.
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 fines, the grant of abbreviated license renewal
terms 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 radio stations.
License Grant and Renewal. Radio stations operate under renewable
broadcasting licenses that are ordinarily granted by the FCC for maximum terms
of eight years. Licenses are renewed through an application to the FCC.
Petitions to deny license renewals can be filed by interested parties, including
members of the public. These 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 inconsistent with the public interest, convenience and necessity. If,
as a result of an evidentiary hearing, the FCC determines that the licensee has
failed to meet certain requirements and that no mitigating factors justify the
imposition of a lesser sanction, then the FCC may deny a license renewal
application. Historically, FCC licenses have generally been renewed. We are not
currently aware of any facts that would prevent the timely renewal of our
licenses to operate our radio stations, although we cannot assure you that all
of our licenses will be renewed.
The FCC classifies each AM and FM station. An AM station operates on
either a clear channel, regional channel or local channel. A clear channel is
one on which AM stations are assigned to serve wide areas. Clear channel AM
stations are classified as either: Class A stations, which operate on an
unlimited time basis and are designated to render primary and secondary service
over an extended area; Class B stations, which operate on an unlimited time
basis and are designed to render service only over a primary service area; or
Class D stations, which operate either during daytime hours only, during limited
times only or on an unlimited time basis with low nighttime power. A regional
channel is one on which Class B and Class D AM stations may operate and serve
primarily a principal center of population and the rural areas contiguous to it.
A local channel is one on which AM stations operate on an unlimited time basis
and serve primarily a community and the suburban and rural areas immediately
contiguous thereto. Class C AM stations operate on a local channel and are
designed to render service only over a primary service area that may be reduced
as a consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1 and C.
The following table sets forth the market, call letters, FCC license
classification, antenna height above average terrain (HAAT), power and frequency
of each of the stations that are owned and operated by us or that are the
subject of a pending acquisition, and the date on which each station's FCC
license expires.
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<TABLE>
<CAPTION>
Expiration
Station Call FCC HAAT in Power in Date of
Market Letters Class Meters Kilowatts Frequency FCC License
------ ------- ----- ------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Albany, NY............ WQBJ(FM)* B 150.0 50.0 103.5 MHz 6/1/06
WQBK(FM)* A 92.0 6.0 103.9 MHz 6/1/06
WABT(FM)* A 107.0 5.0 104.5 MHz 6/1/06
WGNA(FM)* B 300.0 12.50 107.7 MHz 6/1/06
WGNA(AM)* B N/A 5.0 1460 kHz 6/1/06
WTMM(AM)* B N/A 5.0 1300 kHz 6/1/06
Chico, CA............. KFMF(FM) B1 344 2.0 93.9 MHz 12/1/05
KPPL(FM) B 193 28.0 107.5 MHz 12/1/05
KALF(FM) B 386 7.0 95.7 MHz 12/1/05
KZAP(FM)* B1 393 1.5 96.7 MHz 12/1/05
El Paso, TX........... KSII(FM) C 433 98.0 93.1 MHz 8/1/05
KLAQ(FM) C 424 88.0 95.5 MHz 8/1/05
KROD(AM) B N/A 5.0 600 kHz 8/1/05
Erie, PA.............. WXKC(FM) B 150 50.0 99.9 MHz 8/1/06
WRIE(AM) B N/A 5.0 1260 kHz 8/1/06
WXTA(FM) B1 154 10.0 97.9 MHz 8/1/06
Flagstaff. AZ......... KZGL(FM)# C1 760.0 9.0 95.9 MHz 10/1/05
KVNA(FM)# C 460.0 100.0 horizontal+ 97.5 MHz 10/1/05
43.0 vertical+
KVNA(AM)# D N/A .04800 600 kHz 10/1/05
Flint, MI............. WCRZ(FM) B 331 50.0 107.9 MHz 10/1/04
WFNT(AM) B N/A 5.0 daytime 1470 kHz 10/1/04
1.0 night
WWBN(FM) A 328 6.0 101.7 MHz 10/1/04
Grand Rapids, MI...... WLHT(FM)* B 168.0 40.0 95.7 MHz 10/1/04
WGRD(FM)* B 180.0 13.0 97.9 MHz 10/1/04
WTRV(FM)* A 92.0 3.50 100.5 MHz 10/1/04
Mansfield, OH......... WYHT(FM)# B 67 17.5 105.3 MHz 10/1/04
WMAN(AM)# C N/A 0.92 1400 kHz 10/1/04
WSWR(FM)# A 91 3.0 100.1 MHz 10/1/04
Palmdale, CA.......... KAVC(AM)# C N/A 1.0 1340 kHz 12/1/05
KOSS(FM)# A 94 2.9 105.5 MHz 12/1/05
KTPI(FM)# A 176 1.9 103.1 MHz 12/1/05
Redding, CA........... KRRX(FM) C 600 100.0 106.1 MHz 12/1/05
KNNN(FM) A 100 5.3 99.3 MHz 12/1/05
KNRO(AM) B N/A 1.0 600 kHz 12/1/05
KQMS(AM) C N/A 1.0 1400 kHz 12/1/05
KSHA(FM) C 475 100.0 104.3 MHz 12/1/05
KRDG(FM) C2 325 9.9 105.3 MHz 12/1/05
</TABLE>
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<PAGE> 16
<TABLE>
<CAPTION>
Expiration
Station Call FCC HAAT in Power in Date of
Market Letters Class Meters Kilowatts Frequency FCC License
------ ------- ----- ------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
St. Cloud, MN......... KMXK(FM) C2 150 50.0 94.9 MHz 4/1/05
WJON(AM) C N/A 1.0 1240 kHz 4/1/05
WWJO(FM) C 305 97.0 98.1 MHz 4/1/05
Utica-Rome, NY........ WODZ(FM) B1 184 7.4 96.1 MHz 6/1/06
WLZW(FM) B 201 25.0 98.7 MHz 6/1/06
WFRG(FM) B 151 100.0 104.3 MHz 6/1/06
WIBX(AM) B N/A 5.0 950 kHz 6/1/06
WRUN(AM) B N/A 5.0 daytime 1150 kHz 6/1/06
1.0 night
Victorville, CA....... KZXY(FM)# A 100 6.0 102.3 MHz 12/1/05
KIXW(AM)# D N/A 5.0 daytime 960 kHz 12/1/05
0.029 night
KATJ(FM)# A 472 0.26 100.7 MHz 12/1/05
KIXA(FM)# A 325 0.56 106.5 MHz 12/1/05
KROY(AM)# D N/A 0.5 daytime 1590 kHz 12/1/05
0.131 night
Watertown, NY......... WCIZ(FM) A 100 6.0 93.3 MHz 6/1/06
WFRY(FM) C1 145 97.0 97.5 MHz 6/1/06
WTNY(AM) B N/A 1.0 790 kHz 6/1/06
WUZZ(AM) B N/A 5.0 daytime 1410 kHz 6/1/06
1.0 night
</TABLE>
______________
* Stations indicated with an asterisk (*) are subject to acquisition by us under
an existing agreement.
# We have agreed to sell those stations indicated with a pound sign (#).
+ Due to the polarity of this station's transmission antennae and the licensed
parameters of its operation, the power level for this station is different
for horizontally and vertically oriented reception antennae.
Transfers or Assignment of Licenses. The Communications Act prohibits
the assignment or transfer of a broadcast license without the prior approval of
the FCC. In determining whether to grant approval, the FCC considers a number of
factors pertaining to the licensee (and proposed licensee), including:
- compliance with the various rules limiting common ownership of
media properties in a given market;
- the "character" of the licensee and those persons holding
"attributable" interests in the licensee; and
- compliance with the Communications Act's limitations on alien
ownership as well as compliance with other FCC regulations and
policies.
To obtain FCC consent to assign or transfer control of a broadcast
license, appropriate applications must be filed with the FCC. If the application
involves a "substantial change" in ownership
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or control, the application must be placed on public notice for not less than 30
days during which time period petitions to deny or other objections against the
application may be filed by interested parties, including members of the public.
If the application does not involve a "substantial change" in ownership or
control, it is a "pro forma" application. The "pro forma" application is
nevertheless subject to having informal objections filed against it. When
passing on an assignment or transfer application, the FCC is prohibited from
considering whether the public interest might be served by an assignment or
transfer of the broadcast license to any party other than the assignee or
transferee specified in the application.
Multiple Ownership Rules. The Communications Act, the
Telecommunications Act of 1996 and FCC rules impose specific limits on the
number of commercial radio stations an entity can own in a single market. These
rules preclude us from acquiring certain stations we might otherwise seek to
acquire. The rules also effectively prevent us from selling stations in a market
to a buyer that has reached its ownership limit in the market. The local radio
ownership rules are as follows:
- in markets with 45 or more commercial radio stations, ownership
is limited to eight commercial stations, no more than five of
which can be either AM or FM;
- in markets with 30 to 44 commercial radio stations, ownership is
limited to seven commercial stations, no more than four of which
can be either AM or FM;
- in markets with 15 to 29 commercial radio stations, ownership is
limited to six commercial stations, no more than four of which
can be either AM or FM; and
- in markets with 14 or fewer commercial radio stations, ownership
is limited to five commercial stations or no more than 50.0% of
the market's total, whichever is lower, and no more than three of
which can be either AM or FM.
The FCC is also reportedly considering proposing a policy that would
review a proposed transaction if it would enable a single owner to attain a high
degree of revenue concentration in a market. The FCC has also periodically
invited comment on the impact of concentration in public notices concerning
specific proposed transactions, and has delayed or refused its consent in some
cases because of revenue concentrations.
In addition to the limits on the number of radio stations that a single
owner may own in a particular geographic market, the FCC also has
cross-ownership rules which limit or prohibit radio station ownership by the
owner of television stations or a newspaper in the same market. The FCC recently
revised its radio/television cross-ownership rule to allow for greater common
ownership of radio and television stations. The revised radio/television
cross-ownership rule permits a single owner to own up to two television
stations, consistent with the FCC's rules on common ownership of television
stations, and one radio station in all markets. In addition, an owner can own
additional radio stations, subject to local ownership limits for the market, as
follows:
- in markets where 20 media voices will remain, an owner may own an
additional five radio stations, or, if the owner only has one
television station, an additional six radio stations; and
- in markets where ten media voices will remain, an owner may own
an additional three radio stations.
A "media voice" includes each independently-owned, full power television and
radio station and each newspaper, plus one voice for all cable television
systems operating in the market. The FCC's
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broadcast/newspaper cross-ownership rule prohibits the same owner from owning a
broadcast station and a daily newspaper in the same geographic market.
The FCC generally applies its ownership limits to "attributable"
interests held by an individual, corporation, partnership or other association.
In the case of corporations directly or indirectly controlling broadcast
licenses, the interests of officers, directors and those who, directly or
indirectly, have the right to vote 5.0% or more of the corporation's voting
stock are generally attributable. In addition, certain passive investors are
attributable if they hold 20.0% or more of the corporation's voting stock. If a
single individual or entity controls more than 50.0% of a corporation's voting
stock, however, the interests of other shareholders are generally not
attributable unless the shareholders are also officers or directors of the
corporation.
The FCC recently adopted a new rule, known as the equity-debt-plus
rule, that causes certain creditors or investors to be attributable owners of a
station, regardless of whether there is a single majority shareholder. Under
this new rule, a major programming supplier or a same-market owner will be an
attributable owner of a station if the supplier or owner holds debt or equity,
or both, in the station that is greater than 33.0% of the value of the station's
total debt plus equity. A major programming supplier includes any programming
supplier that provides more than 15.0% of the station's weekly programming
hours. A same-market owner includes any attributable owner of a media company,
including broadcast stations, cable television, and newspapers, located in the
same market as the station, but only if the owner is attributable under an FCC
attribution rule other than the equity-debt-plus rule. If attribution under the
equity-debt-plus rule results in a violation of the FCC's multiple ownership
rules, each affected party must come into compliance with those rules, by
reducing or eliminating the party's interest in the affected media outlets or
obtaining a waiver from the FCC, no later than August 5, 2000. The attribution
rules limit the number of radio stations we may acquire or own in any market and
may also limit the ability of certain potential buyers of stations owned by us
from being able to purchase some or all of the stations which they might
otherwise wish to purchase from us
Alien Ownership Rules: The Communications Act prohibits the issuance or
holding of broadcast licenses by aliens, including any corporation if more than
20.0% of its capital stock is owned or voted by aliens. In addition, the FCC may
prohibit any corporation from holding a broadcast license if the corporation is
directly or indirectly controlled by any other corporation of which more than
25.0% of the capital stock is owned of record or voted by aliens, if the FCC
finds that the prohibition is in the public interest. Our charter provides that
our capital stock is subject to redemption by us by action of the Board of
Directors to the extent necessary to prevent the loss of any license held by us,
including any FCC license.
Time Brokerage. Over the past few years, a number of radio stations
have entered into what have commonly been referred to as time brokerage
agreements or local marketing agreements. While these agreements may take
varying forms, under a typical time brokerage agreement, separately owned and
licensed radio stations agree to enter into cooperative arrangements of varying
sorts, subject to compliance with the requirements of antitrust laws and with
the FCC's rules and policies. Under these arrangements, separately-owned
stations could agree to function cooperatively in programming, advertising sales
and similar matters, subject to the requirement that the licensee of each
station maintain independent control over the programming and operations of its
own station. One typical type of time brokerage agreement is a programming
agreement between two separately-owned radio stations serving a common service
area, whereby the licensee of one station provides substantial portions of the
broadcast programming for airing on the other licensee's station, subject to
ultimate editorial and other controls being exercised by the latter licensee,
and sells advertising time during those program segments.
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<PAGE> 19
The FCC's rules provide that a radio station that brokers more than
15.0% of its weekly broadcast time on another station serving the same market
will be considered to have an attributable ownership interest in the brokered
station for purposes of the FCC's multiple ownership rules. As a result, in a
market where we own a radio station, we would not be permitted to enter into a
time brokerage agreement with another local radio station in the same market
that we could not own under the local ownership rules, unless our programming on
the brokered station constituted 15.0% or less of the other local station's
programming time on a weekly basis. FCC rules also prohibit a radio station from
duplicating more than 25.0% of its programming on another station in the same
broadcast service (i.e., AM-AM or FM-FM) through a time brokerage agreement
where the brokered and brokering stations which it owns or programs serve
substantially the same area.
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 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 records demonstrating such responsiveness. Complaints from listeners
concerning a station's programming will be considered by the FCC when it
evaluates the licensee's renewal application, although listener complaints may
be filed and considered at any time and must be maintained in the station's
public file.
Stations also must pay regulatory and application fees and follow
various FCC rules that regulate, among other things, political advertising, the
broadcast of obscene or indecent programming, the advertisement of casinos and
lotteries, sponsorship identification and technical operations, including limits
on radio frequency radiation.
On January 20, 2000, the FCC adopted new rules prohibiting employment
discrimination by broadcast stations on the basis of race, religion, color,
national origin, and gender; and requiring broadcasters to implement programs to
promote equal employment opportunities at their stations. The rules generally
require broadcast stations to disseminate information about job openings widely
so that all qualified applicants, including minorities and women, have an
adequate opportunity to compete for the job. Broadcasters may fulfill this
requirement by sending the station's job vacancy information to organizations
that request it, participating in community outreach programs or designing an
alternative recruitment program. Broadcasters with five or more full-time
employees must place in their public files annually a report detailing their
recruitment efforts and must file a statement with the FCC certifying compliance
with the rules every two years. Broadcasters with ten or more full-time
employees must file their annual reports with the FCC midway through their
license term. Broadcasters also must file employment information with the FCC
annually for statistical purposes.
The FCC recently issued a decision holding that a broadcast station may
not deny a candidate for federal political office a request for broadcast
advertising time solely on the grounds that the amount of time requested is not
the standard length of time which the station offers to its commercial
advertisers. This decision is currently being reconsidered by the FCC. The
effect that this FCC decision will have on our programming and commercial
advertising is uncertain.
In 1985, the FCC adopted rules regarding human exposures to levels of
radio frequency 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 radio frequency radiation in
excess of FCC 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. We anticipate that such regulations will not
have a material effect on our business.
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Periodically, we may be required to obtain special temporary authority
from the FCC to operate the one or more of the stations in a manner different
from the licensed parameters so that we can complete scheduled construction or
maintenance or so that we may repair damaged or broken equipment without
interrupting service.
Proposed and Recent Changes: Congress and the FCC from time to time
have 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 our
radio stations, result in the loss of audience share and advertising revenue for
our radio stations, and affect our ability to acquire additional radio stations
or finance such acquisitions. Such matters include:
- proposals to impose spectrum use or other fees on FCC licensees;
- technical and frequency allocation matters;
- proposals to restrict or prohibit the advertising of beer, wine
and other alcoholic beverages;
- changes in the FCC's attribution and multiple 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, cable television or other communication lines; and
- proposals to limit the tax deductibility of advertising expenses
by advertisers.
In January 1995, the FCC adopted rules to allocate spectrum for
satellite digital audio radio service. Satellite digital audio radio service
systems potentially could provide for regional or nationwide distribution of
radio programming with fidelity comparable to compact discs. The FCC has issued
two authorizations to launch and operate satellite digital audio radio service.
The FCC currently is considering standards for evaluating, authorizing,
and implementing terrestrial digital audio broadcasting technology, including
In-Band On-Channel(TM) technology, for FM radio stations. Digital audio
broadcasting's advantages over traditional analog broadcasting technology
include improved sound quality and the ability to offer a greater variety of
auxiliary services. In-Band On-Channel(TM) technology would permit an FM station
to transmit radio programming in both analog and digital formats, or in digital
only formats, using the bandwidth that the radio station is currently licensed
to use. It is unclear what regulations the FCC will adopt regarding digital
audio broadcasting or In-Band On-Channel(TM) technology and what effect such
regulations would have on our business or the operations of our radio stations.
The FCC has authorized an additional 100 kHz of bandwidth for the AM
band and on March 17, 1997, adopted an allotment plan for the expanded band,
which identified the 88 AM radio stations selected to move into the band. At the
end of a five-year transition period, those licensees will be required to return
to the FCC either the license for their existing AM band station or the license
for the expanded AM band station.
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On January 20, 2000, the FCC voted to adopt rules creating a new low
power FM radio service. The new low power stations will operate at a maximum
power of between 10 and 100 watts in the existing FM commercial and
non-commercial band. Low power stations may be used by governmental and
non-profit organizations to provide noncommercial educational programming or
public safety and transportation radio services. No existing broadcaster or
other media entity, including Regent, will be permitted to have an ownership
interest or enter into any program or operating agreement with any low power FM
station. During the first two years of the new service, applicants must be based
in the area that they propose to serve. Applicants will not be permitted to own
more than one station nationwide during the initial two year period. After the
initial two year period, entities will be allowed to own up to five stations
nationwide, and after three years, the limit will be raised to ten stations
nationwide. A single person or entity may not own two low power stations whose
transmitters are less than seven miles from each other. The authorizations for
the new stations will not be transferable. The FCC has stated that it intends to
begin accepting applications for new stations in the next several months.
At this time it is difficult to assess the competitive impact of these
new stations. Although the new low power stations must comply with certain
technical requirements aimed at protecting existing FM radio stations from
interference, we cannot be certain of the level of interference that low power
stations will cause after they begin operating. Moreover, if low power FM
stations are licensed in the markets in which we operate, the low power stations
may compete for listeners and advertisers. The low power stations may also limit
our ability to obtain new licenses or to modify our existing facilities, or
cause interference to areas of existing service that are not protected by the
FCC's rules, any of which may have a material adverse affect on our business.
Finally, the FCC has adopted procedures for the auction of broadcast
spectrum in circumstances where two or more parties have filed for new or major
change applications which are mutually exclusive. Such procedures may limit our
efforts to modify or expand the broadcast signals of our stations.
We cannot predict what other matters might be considered in the future
by the FCC or Congress, nor can we judge in advance what impact, if any, the
implementation of any of these proposals or changes might have on our business.
Federal Antitrust Considerations. The Federal Trade Commission and the
United States Department of Justice, which evaluate transactions to determine
whether those transactions should be challenged under the federal antitrust
laws, have been increasingly active recently in their review of radio station
acquisitions, particularly where an operator proposes to acquire additional
stations in its existing markets.
For an acquisition meeting certain size thresholds, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
promulgated thereunder, require the parties to file Notification and Report
Forms with the Federal Trade Commission and the Department of Justice and to
observe specified waiting period requirements before consummating the
acquisition. During the initial 30-day period after the filing, the agencies
decide which of them will investigate the transaction. If the investigating
agency determines that the transaction does not raise significant antitrust
issues, then it will either terminate the waiting period or allow it to expire
after the initial 30 days. On the other hand, if the agency determines that the
transaction requires a more detailed investigation, then, at the conclusion of
the initial 30-day period, it will issue a formal request for additional
information. The issuance of a formal request extends the waiting period until
the 20th calendar day after the date of substantial compliance by all parties to
the acquisition. Thereafter, the waiting period may only be extended by court
order or with the consent of the parties. In practice, complying with a formal
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 persuading the agency that the proposed acquisition
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would not violate the antitrust laws, restructuring the proposed acquisition,
divestiture of other assets of one or more parties, or abandonment of the
transaction. These discussions and negotiations can be time consuming, and the
parties may agree to delay completion of the acquisition during their pendency.
At any time before or after the completion of a proposed acquisition,
the Federal Trade Commission or the Department of Justice could take such action
under the antitrust laws as it considers necessary or desirable in the public
interest, including seeking to enjoin the acquisition or seeking divestiture of
the business or other assets acquired. Acquisitions that are not required to be
reported under the Hart-Scott-Rodino Act may be investigated by the Federal
Trade Commission or the Department of Justice under the antitrust laws before or
after completion. In addition, private parties may under certain circumstances
bring legal action to challenge an acquisition under the antitrust laws.
In June 1998, we received a civil investigative demand from the
Antitrust Division of the Department of Justice requesting certain information
regarding our acquisition of radio stations in Redding, California to enable the
DOJ to determine, among other things, whether our Redding acquisitions resulted
in excessive concentration in the market. We have responded to the information
request and the matter is still pending. Even if the Department of Justice were
to proceed with and successfully challenge the Redding acquisitions and we were
required to divest one or more radio stations in Redding, the result would not
have a material adverse effect on our financial condition or results of
operations.
As part of its increased scrutiny of radio station acquisitions, the
Department of Justice has stated publicly that it believes that commencement of
operations under time brokerage agreements, local marketing agreements, joint
sales agreements and other similar agreements customarily entered into in
connection with radio station transfers prior to the expiration of the waiting
period under the Hart-Scott-Rodino Act could violate the Hart-Scott-Rodino Act.
In connection with acquisitions subject to the waiting period under the
Hart-Scott-Rodino Act, so long as the Department of Justice policy on the issue
remains unchanged, we would not expect to commence operation of any affected
station to be acquired under time brokerage agreement, local marketing agreement
or similar agreement until the waiting period has expired or been terminated.
ITEM 2. PROPERTIES
The types of properties required to support each of our radio stations
include offices, studios, transmitter sites and antenna sites. A station's
studios are generally housed with its offices in business districts. The
transmitter sites and antenna sites are generally located so as to provide
maximum market coverage.
We currently own studio facilities in Redding, California; Burton
(Flint), Michigan; St. Cloud, Minnesota; Mansfield, Ohio; Whitestown
(Utica-Rome), New York; and Watertown, New York. We own transmitter and antenna
sites in Mojave (Palmdale), California; Redding, California; Victorville,
California; Burton (Flint), Michigan; St. Cloud, Stearns County and Graham
Township (St. Cloud), Minnesota; Mansfield, Ohio; Whitestown, Deerfield and
Kirkland (Utica-Rome), New York; Watertown and Rutland (Watertown), New York;
and El Paso, Texas. We expect to acquire additional real estate and to dispose
of certain real estate in connection with our pending transactions. We lease our
remaining studio and office facilities, including corporate office space in
Covington, Kentucky and Old Brookville, New York, and our remaining transmitter
and antenna sites. We do not anticipate any difficulties in renewing any
facility leases or in leasing alternative or additional space, if required. We
own substantially all of our other equipment, consisting principally of
transmitting antennae, towers, transmitters, studio equipment and general office
equipment.
We believe that our properties are generally in good condition and
suitable for our operations. However, we continually look for opportunities to
upgrade our properties and intend to upgrade studios, office space and
transmission facilities in several markets.
The two AM stations we acquired in the Watertown, New York market and
one of the AM stations we acquired in the Utica-Rome, New York market have been
operating under special temporary authorities granted by the FCC since January
1998. Two of these authorities will
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<PAGE> 23
expire in May 2000 and one will expire in August 2000. We expect that we will be
able to complete our evaluation of these facilities and complete any necessary
repairs before these dates or that the FCC will grant further extensions of
these special temporary authorities to allow us time to repair those
transmission facilities to return the stations to licensed operations. However,
due to the long period of time prior to our acquisition of these stations during
which they have been operating under temporary authorizations, there can be no
guarantee that the FCC will grant further extensions, in which event we might be
required to interrupt service on these stations. An interruption in service at
these stations would not have a material adverse effect on our financial
condition or results of operations, as these stations represent less than 2% of
our net revenue in the Watertown and Utica-Rome markets.
Substantially all of our personal property and equipment serve as
collateral for our obligations under our existing credit facility.
ITEM 3. LEGAL PROCEEDINGS
We currently and from time to time are involved in litigation
incidental to the conduct of our business, but we are not a party to any lawsuit
or proceeding that, in our opinion, is likely to have a material adverse effect
on us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There was no matter submitted to our security holders during the fourth
quarter of the fiscal year ended December 31, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Shares of our common stock have been quoted on The Nasdaq Stock Market
under the symbol RGCI since January 25, 2000 following effectiveness of the
registration statement for the initial public offering of our common stock. The
following table sets forth, for the period from January 25, 2000 through March
10, 2000, the high and low closing sale prices of our common stock as reported
in the Nasdaq National Market.
High Low
-------- --------
January 25 through March 10, 2000 $14.0000 $10.3125
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<PAGE> 24
As of March 10, 2000, there were 311 holders of record of our common
stock. The number of record holders was determined from the records of our
transfer agent and does not include beneficial owners of common stock whose
shares are held in the names of securities brokers, dealers and registered
clearing agencies.
We have never declared or paid cash dividends on our common stock and
do not intend to do so in the foreseeable future. In addition, our credit
agreement with our lenders prohibits the payment of cash dividends on our common
stock.
On December 14, 1999, we issued a total of 3,545,453 shares of our
Series K convertible preferred stock at $5.50 per share for an aggregate
purchase price of $19,499,992 to Blue Chip Capital Fund III Limited Partnership,
WPG Corporate Development Associates V, L.L.C., WPG Corporate Development
Associates V (Overseas), L.P., PNC Bank, N.A., Custodian, Mesirow Capital
Partners VII and The Prudential Insurance Company of America. The terms of the
Series K convertible preferred stock provided that the shares could be converted
at any time at the option of the holder into shares of our common stock on a
one-for-one basis. Subsequently, on January 28, 2000, 3,270,301 of these Series
K shares were converted to shares of our common stock. The remaining 275,152
shares of Series K convertible preferred stock were sold back to us by an
affiliate of one of the underwriters in our public offering consummated on
January 28, 2000 in order to comply with rules of the National Association of
Securities Dealers Inc.
Under our 1998 Management Stock Option Plan we granted to certain key
employees on April 29, 1999 options to purchase a total of 287,678 shares of our
common stock at $5.00 per share and on October 28, 1999 options to purchase a
total of 30,000 shares of our common stock at $5.50 per share. All of the
options granted in October 1999 and 37,500 of the options granted in April 1999
are exercisable in five annual increments (up to one-fifth each year) beginning
on the first anniversary of the date of grant. Of the remaining 250,178 options
granted in April 1999, 25,018 options will vest on April 29, 2008, and the
balance is exercisable in equal one-third increments at the end of each of the
first three years following the grant.
The Series K convertible preferred stock and the employee stock options
were issued in private transactions to a limited number of select persons based
upon exemptions from the registration requirements of the Securities Act of
1933, as amended, provided under Section 4(2) of that Act and the rules and
regulations promulgated thereunder.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1999 1998 (1) 1997 1996 1995
------------ ------------ ------------ ----------- -----------
Operating results:
<S> <C> <C> <C> <C> <C>
Net broadcasting revenues $ 23,853,809 $ 14,771,523 $ 5,993,291 $ 4,873,954 $ 5,113,582
Income (loss) from operations (612,398) (433,321) 1,015,144 1,222,829 1,511,481
Income (loss)
Before extraordinary items (6,299,521) (3,289,924) (362,537) 278,840 244,816
Extraordinary items (471,216) (1,170,080) (4,333,310) -- --
Net income (loss) (6,770,737) (4,460,004) (4,695,847) 278,840 244,816
Preferred stock dividend requirements (5,205,526) (2,165,471) -- -- --
Preferred stock accretion (17,221,154) (4,787,311) -- -- --
Basic and diluted net income (loss)
Per common share:
Income (loss)
Before extraordinary items $ (119.69) $ (42.67) $ (1.51) $ 1.16 $ 1.02
Extraordinary items (1.96) (4.88) (18.06) -- --
------------ ------------ ------------ ----------- -----------
Basic net income (loss)
Per common share $ (121.65) $ (47.55) $ (19.57) $ 1.16 $ 1.02
Weighted average number of common
shares used in basic and diluted
calculation 240,000 240,000 240,000 240,000 240,000
Balance sheet data:
Current assets $ 10,329,208 $ 11,618,745 $ 1,919,232 $ 1,305,585 $ 1,311,916
Total assets 83,727,155 67,617,870 13,010,554 4,326,453 4,546,508
Current liabilities 3,114,586 13,027,306 859,631 1,068,021 1,037,239
Long-term debt 25,331,307 34,617,500 21,911,661 7,276,884 7,828,883
Redeemable preferred stock 89,265,352 27,406,152 -- -- --
Total stockholders deficit (37,809,315) (10,076,667) (10,181,788) (5,485,941) (5,764,781)
</TABLE>
- -------------
(1) - See Item 7., "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of comparability
between years.
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<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
Our company was formed in November 1996 to acquire, own and operate
clusters of radio stations in small and mid-sized markets. During 1997, we
acquired our first radio station and entered into agreements to acquire 32
additional stations in ten additional markets. Also during 1997, we provided
programming and other services to 24 of the radio stations we had agreed to
acquire.
Effective June 15, 1998, we consummated a number of mergers,
acquisitions, borrowings and issuances of additional equity. One of these June
15, 1998 transactions was a merger with Faircom Inc. in which Faircom merged
into one of our subsidiaries. Even though our subsidiary was the surviving
entity in the merger, Faircom was deemed to be the "accounting acquirer," and
the historical financial statements of Faircom became our historical financial
statements. Accordingly, our results of operations and those of the other
entities that merged with or were acquired by us as part of the transactions
completed June 15, 1998 have been included in our consolidated financial
statements only from June 15, 1998. This affects the comparability of the
different periods.
The principal source of our revenue is the sale of broadcasting time on
our radio stations for advertising. As a result, our revenue is affected
primarily by the advertising rates our radio stations charge. Correspondingly,
the rates are based upon the station's ability to attract audiences in the
demographic groups targeted by its advertisers, as measured principally by
periodic Arbitron Radio Market Reports. The number of advertisements that can be
broadcast without jeopardizing listening levels, and the resulting ratings, are
limited in part by the format of a particular station. Each of our stations has
a general pre-determined level of on-air inventory that it makes available for
advertising. Available inventory may vary at different times of the day but
tends to remain stable over time. Much of our selling activity is based on
demand for our radio stations' on-air inventory and, in general, we respond to
this demand by varying prices rather than by changing the available inventory.
In the broadcasting industry, radio stations often utilize trade, or
barter, agreements to exchange advertising time for goods or services, such as
other media advertising, travel or lodging, in lieu of cash. In order to
preserve most of our on-air inventory for cash advertising, we generally enter
into trade agreements only if the goods or services bartered to us will be used
in our business. We have minimized our use of trade agreements and have
generally sold over 90.0% of our advertising time for cash. In addition, we
generally do not preempt advertising spots paid for in cash with advertising
spots paid for in trade.
Historically, our broadcast revenues have varied through the year. As
is typical in the radio broadcasting industry, our first calendar quarter will
be expected to produce the lowest revenues for the year, and the fourth calendar
quarter will be expected to produce the highest revenues for the year. Our
operating results in any period may be affected by the incurrence of advertising
and promotion expenses that do not necessarily produce commensurate revenues
until the impact of the advertising and promotion is realized in future periods.
The primary operating expenses incurred in the ownership and operation
of radio stations include employee salaries and commissions, programming
expenses and advertising and promotional expenses. We strive to control these
expenses by working closely with local station management. We also incur and
will continue to incur significant depreciation and amortization expense as a
result of completed and future acquisitions of stations.
In 1999, our radio stations derived approximately 84.9% of their net
broadcast revenues from local and regional advertising in the markets in which
they operated, and the remainder resulted principally from the sale of national
advertising. Local and regional advertising is sold primarily by each station's
sales staff. To generate national advertising sales, we engage national
advertising representative firms. We believe that the volume of national
advertising revenue tends to adjust to shifts in a station's audience share
position more rapidly than does the volume of local and regional advertising
revenue. Therefore, we focus on sales of local and regional advertising. During
the year ended December 31, 1999, no single advertiser accounted for as much as
1.0% of our net broadcasting revenue.
Our advertising revenue is typically collected within 120 days of the
date on which the related advertisement is aired. Most accrued expenses,
however, are paid within 45 to 60 days. As a result of this time lag, working
capital requirements have increased as we have grown and will likely increase in
the future.
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<PAGE> 26
Historically, we have generated net losses primarily as a result of
significant charges for depreciation and amortization relating to the
acquisition of radio stations and interest charges on outstanding debt. We have
historically amortized the FCC licenses and goodwill attributable to
substantially all of our radio station acquisitions made prior to 2000 over a
15- to 40-year period. Based upon the large number of acquisitions we
consummated within the last two years, we anticipate that depreciation and
amortization charges will continue to be significant for several years. To the
extent that we complete additional acquisitions, our interest expense and
depreciation and amortization charges are likely to increase. Based upon
new standards proposed by the Financial Accounting Standards Board related to
business combinations and intangible assets, goodwill and other intangible
assets will be amortized over their economic life, which is not to exceed twenty
years. Accordingly, we expect to amortize the FCC licenses and goodwill
attributable to our acquisitions in 2000 and beyond over a useful life not to
exceed twenty years. If this occurs, we would expect to continue to incur net
losses.
Our financial results are dependent on a number of factors, including
the general strength of the local and national economies, population growth, the
ability to provide popular programming, local market and regional competition,
relative efficiency of radio broadcasting compared to other advertising media,
signal strength and government regulation and policies. From time to time the
markets in which we operate experience weak economic conditions that may
negatively affect our revenue. We believe, however, that this impact is somewhat
mitigated by our diverse geographical presence.
The performance of a radio station group, such as ours, is customarily
measured by its ability to generate broadcast cash flow. The term "broadcast
cash flow" means operating income (loss) before depreciation and amortization
and corporate general and administrative expenses, excluding barter activity.
Although broadcast cash flow is not a measure of performance calculated in
accordance with generally accepted accounting principles, we believe that
broadcast cash flow is accepted by the broadcasting industry as a generally
recognized measure of performance and is used by analysts who report publicly on
the performance of broadcasting companies. Nevertheless, this measure should not
be considered in isolation or as a substitute for operating income, net income,
net cash provided by operating activities or any other measure for determining
our operating performance or liquidity that is calculated in accordance with
generally accepted accounting principles.
Results of Operations
1999 Compared to 1998
As a result of the transactions completed on June 15, 1998, we expanded
from a small broadcaster (represented, from an accounting standpoint, by
Faircom's six stations in two markets) to a group broadcaster operating 33
stations in ten different markets. Because of our June 1998 acquisitions and, to
a lesser extent, our acquisitions of stations in St. Cloud, Minnesota and Erie,
Pennsylvania in 1999, we experienced substantial increases in net broadcast
revenues, station operating expenses, depreciation and amortization, corporate
general and administrative expenses, and interest expense in 1999 compared to
1998. Accordingly, the results of our operations in 1999 are not comparable to
those of the prior period, nor are they necessarily indicative of results in the
future.
For 1999 compared to 1998, net broadcast revenues increased 61.5% from
$14,772,000 to $23,854,000, station operating expenses increased 65.8% from
$11,051,000 to $18,325,000, and depreciation and amortization increased 48.0%
from $2,281,000 to $3,368,000. We experienced a 48.0% increase from $1,872,000
to $2,773,000 in corporate general and administrative expenses in 1999 compared
to 1998. This increase was comparatively less than the increase in net
broadcasting revenues and station operating expenses because these expenses in
1998 included $530,000 in additional compensation expense resulting from our
issuance of stock options in the Faircom merger to two officers of Faircom, as
provided in the merger agreement. Interest expense increased 82.0% from
$2,883,000 to $5,249,000 as a result of increased borrowings used to finance the
various acquisitions and a $1,136,000 charge to interest expense due to an
increase in our warrant liability, along with a $162,000 charge related to the
write-off of deferred financing fees in connection with the modification of our
former bank credit facility.
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<PAGE> 27
While acquisitions have affected the comparability of our 1999
operating results to those of 1998, we believe meaningful quarter-to-quarter
comparisons can be made for results of operations for those markets in which we
have been operating for five full quarters, exclusive of any markets held for
sale. This group of comparable markets is currently represented by six markets
and 24 stations. In these comparable markets, for the six months ended December
31, 1999 as compared to the same period in 1998, our net broadcast revenues,
excluding barter revenues, increased 3.2% and broadcast cash flow increased by
1.1%.
These comparative results were adversely affected by circumstances in
our Flint, Michigan market. The competitive environment in Flint changed in late
1997 with the addition of a new commercial FM radio station. The Flint school
system previously owned this station and operated it as a non-commercial
facility. The school board sold the station at auction to an experienced
commercial broadcaster. In 1998, and shortly before we took control of Faircom's
cluster of three stations in the Flint market, the new commercial station
changed format and in 18 months became the top station in the marketplace in
terms of adult listenership. Its success impacted advertising market rates and
the distribution of advertising dollars to stations in the market, adversely
affecting our market share of revenues, along with that of other competitors. It
was estimated by an industry source that in 1999, its first full year of
commercial operation, the new station would capture approximately 17% of the
market revenue. In January 1999, we made significant changes in the management
structure and personnel at our Flint stations, which had been delayed due to
certain contractual arrangements. The acclimation of the new management team and
related operational changes took most of 1999 to have effect. For these reasons,
we do not believe the results of our Flint stations will be comparable to those
of the prior year until the end of the first quarter of 2000.
For the 21 stations in our other five comparable markets, net broadcast
revenues, excluding barter revenues, increased 7.3% and broadcast cash flow
increased 12.9% for the six months ended December 31, 1999 as compared to the
same period in 1998.
1998 Compared to 1997
As a result of the significant change in the size of our operations
brought about by the acquisitions made by us on June 15, 1998, our net broadcast
revenues grew from $5,993,000 to $14,771,000. Our key focus in 1998 was
developing the platform from which we could carry out our operating strategies
as a much larger radio company. Development of the platform required significant
expenditures. We viewed these costs as investment costs that would provide
returns to us in future years. Operationally, we replaced general managers in
eight of our markets and added or replaced general sales managers in six markets
in order to implement aggressive sales programs. We invested significantly in
the hiring and training of sales personnel and in increased promotional spending
in all markets. Finally, we developed a corporate staff designed to support a
much larger operation. In 1997, the Faircom corporate office was a very small
operation. While that facility and expense have been maintained, our primary
administrative offices are now located in Covington, Kentucky. The cost of
additional executive personnel and administrative expense amounted to $940,000
from June 16, 1998 through December 31, 1998 as a result of the Faircom merger.
Additionally, the issuance of stock options granted as of June 15, 1998 to two
officers of Faircom under the terms of the merger agreement with 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, our 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 the debt incurred in connection with the transactions we
completed on June 15, 1998 and, to a lesser extent, to debt incurred in
connection with Faircom's acquisition of the stations in Mansfield and Shelby,
Ohio.
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<PAGE> 28
There were no federal, state or local income taxes in 1998 as a result
of a net 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
being offset by lower net extraordinary losses from debt extinguishment.
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 1999, we used net cash in operating activities of $2,378,000
compared with $385,000 for 1998. In 1999, proceeds of $41,754,000 from the
issuance of convertible preferred stock and $16,500,000 from long-term
borrowings, together with $13,999,000 of proceeds from the sale of radio
stations, provided substantially all of the funds used in operating activities,
and for acquisitions, capital expenditures, principal payments on long-term debt
and other investing and financing activity cash requirements. We experienced a
net increase in cash of $2,932,000 in 1999 compared with a net decrease of
$57,000 in 1998.
Our borrowings were made under our former bank credit facility, which
provided for a senior reducing revolving credit facility with an original
commitment of up to $55,000,000 expiring March 31, 2005 (the commitment was
$32,425,000 at December 31, 1999). This facility permitted the borrowing of
available credit for working capital and acquisitions, including related
acquisition expenses. In addition, subject to available credit, we could request
from time to time that our lenders issue letters of credit on the same terms as
the credit facility. At December 31, 1999, we had borrowed $24,761,000 under
this facility. The remaining unused portion of this facility of $7,664,000 was
available to finance other acquisitions, subject to restrictions contained in
the facility. During the fourth quarter, we used the $6,400,000 in net proceeds
from the sales of our stations in Kingman, Arizona and Lake Tahoe, California to
reduce borrowings under our former bank credit facility. Additionally, on
December 14, 1999, we issued 3,545,453 shares of Series K convertible preferred
stock at $5.50 per share. From the net proceeds, we reduced borrowings under our
former bank credit facility by $15,775,000. In conjunction with these reductions
of our borrowings, we took an interest charge of $162,000 along with an
extraordinary charge of $471,000 to reflect the write-off of a portion of the
deferred financing fees. The remaining $1,036,000 of deferred financing fees
relating to the former bank credit facility will be written off in the first
fiscal quarter of 2000.
On January 28, 2000, we entered into a new $125,000,000 senior secured
seven-year reducing revolving bank credit facility. This facility also provides
for an additional $50,000,000 on substantially the same terms to fund future
acquisitions, which would be available for 24 months and thereafter would
convert to a term loan maturing December 31, 2006. This new bank credit facility
permits the borrowing of available credit for working capital requirements and
general corporate purposes, including transaction fees and expenses, to repay
our existing bank credit facility and to fund pending and permitted future
acquisitions. The new facility permits us to request from time to time that the
lenders issue letters of credit in an amount up to $25,000,000 in accordance
with the same lending provisions. The commitment, and our maximum borrowings,
will reduce over five years beginning in 2002 as follows:
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<PAGE> 29
December 31, Commitment Amount
2001............................... $125,000,000
2002............................... 106,250,000
2003............................... 87,500,000
2004............................... 62,500,000
2005............................... 37,500,000
2006............................... 0
The $25,000,000 letter of credit sub-limit also reduces proportionately but not
below $15,000,000. Mandatory prepayments and commitment reductions will also be
required from certain asset sales, subordinated debt proceeds, excess cash flow
amounts and sales of equity securities.
Under the new bank credit facility, we are required to maintain a
minimum interest rate coverage ratio, minimum fixed charge coverage ratio,
maximum corporate overhead and maximum financial leverage ratio and to observe
negative covenants customary for facilities of this type. Borrowings under the
new credit facility bear interest at a rate equal to (a) the higher of the rate
announced or published publicly from time to time by the agent as its corporate
base rate of interest or the Overnight Federal Funds Rate plus 0.5%, in either
case plus the applicable margin determined under the credit facility, or (b) the
reserve-adjusted Eurodollar Rate plus the applicable margin. We are required to
pay certain fees to the agent and the lenders for the underwriting commitment,
administration and use of the credit facility. Our indebtedness under the new
bank credit facility is collateralized by liens on substantially all of our
assets and by a pledge of our operating and license subsidiaries' stock and
is guaranteed by those subsidiaries.
On January 28, 2000, we closed on an offering of 16,000,000 shares of
our common stock. On February 7, 2000 the underwriters exercised their
overallotment of an additional 2,400,000 shares. All shares were sold at $8.50
per share, resulting in gross proceeds of $156,400,000. Net proceeds were
approximately $143,836,000. Approximately $26,761,000 of the proceeds were used
to repay all borrowings under our former bank credit facility along with the
fees associated with entering into the new bank credit facility. Approximately
$67,325,000 of the proceeds were used to fund our acquisitions in Utica-Rome and
Watertown, New York which closed on January 28, 2000 and our acquisition in El
Paso, Texas, which closed on January 31, 2000. Approximately $5,900,000 of the
proceeds were used to redeem our Series B convertible preferred stock and pay
accrued dividends. Approximately $7,300,000 were used to pay accrued dividends
on all other series of convertible preferred stock and those shares were
converted to common stock on an one-for-one basis. Finally, approximately
$1,500,000 were used to repurchase 275,152 shares of common stock from an
affiliate of one of the underwriters in order to comply with the NASD's rules.
These expenditures have left us with proceeds remaining from the offering of
approximately $35,000,000, with virtually no debt.
Over the next six months, we anticipate the need to direct
approximately $67,000,000 toward the completion of our pending acquisitions.
These funds will be provided by the remaining net proceeds from our offering and
by borrowings under our new credit facility. We also expect over the next 12
months to incur up to $2,800,000 of capital expenditures to upgrade our
equipment and facilities, primarily at stations recently acquired and at those
in the process of being acquired, in order to remain competitive and to create
cost savings over the long term. This is expected to include upgrades necessary
to return two of the stations we are acquiring, which are operating under
special temporary authorities, to licensed operations. We expect to have
sufficient cash from operations to fund these anticipated capital expenditures
in 2000.
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<PAGE> 30
After borrowings necessary to complete our pending acquisitions in
Grand Rapids and Albany, we expect to have approximately $93,000,000 in
remaining borrowing capability under our new credit agreement for working
capital and future acquisitions, together with the additional $50,000,000 of
available borrowing reserved for future acquisitions, subject in all cases to
specified borrowing limitations.
We believe that cash generated from operations, proceeds from the
sale of our Flagstaff, Arizona stations and available borrowings under our new
bank credit facility will be sufficient to meet our requirements for corporate
expenses and capital expenditures for the foreseeable future, based on our
projected operations and indebtedness.
Year 2000 System Compliance
Beginning in 1998, we developed and have worked through a Year 2000
compliance plan to address the material risks of noncompliance to our business
operations and assets as a result of the calendar year rollover to the Year
2000. By the end of the fourth quarter of 1999, we had completed all
assessments, upgrades, replacements and testing of our information technology
and non-information technology systems, identified and polled significant
suppliers and key business partners as to their Year 2000 readiness and
developed contingency plans to address the greatest areas of risk of Year 2000
noncompliance. As of December 31, 1999, expenditures to address potential Year
2000 problems totaled $53,000. As of March 30, 2000, we have experienced no
material disruptions in our business processes or operations related to the Year
2000 issue. To our knowledge, none of our material suppliers or key business
partners has suffered material problems related to Year 2000 compliance that we
believe would be likely to materially adversely affect our business. Despite the
fact that we have not been adversely affected in any material respect by Year
2000 problems to date, we cannot be sure that we will not experience unexpected
costs or be exposed to unexpected threats to our operations or assets from Year
2000 issues in the future. The impact of these uncertainties on our results of
operations, liquidity and financial condition is not determinable.
Market Risk
We were exposed to the impact of interest rate changes because of
borrowings under our former bank credit facility. It is our policy to enter into
interest rate transactions only to the extent considered necessary to meet our
objectives and to comply with the requirements of this facility. We have not
entered into interest rate transactions for trading purposes.
To satisfy the requirements imposed under the terms of our former
credit facility, we entered into a two-year collar agreement with the Bank of
Montreal effective August 17, 1998 for a notional amount of $34.4 million to
mitigate the risk of interest rates increasing under this facility. On February
9, 2000 we terminated the collar agreement due to the fact that we no longer had
any borrowings outstanding under a credit facility. In the event that we have
material borrowing under our new credit agreement at some time in the future, we
would consider entering into a new collar agreement.
Cautionary Statement Concerning Forward-Looking Statements
This Form 10-K includes certain forward-looking statements with respect
to our company and its business that involve risks and uncertainties. These
statements are influenced by our financial position, business strategy, budgets,
projected costs and the plans and objectives of management for future
operations. They use words such as "anticipate," "believe," "plan," "estimate,"
"expect," "intend," "project" and other similar expressions. Although we believe
our expectations reflected in these forward-looking statements are based on
reasonable assumptions, we cannot assure you that our expectations will prove
correct. Actual results and developments may differ materially from those
conveyed in the
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<PAGE> 31
forward-looking statements. For these statements, we claim 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 made in this
Form 10-K 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 we operate, 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. The forward-looking
statements speak only as of the date on which they are made, and we undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date of this Form 10-K. If we do update or correct one
or more forward-looking statements, you should not conclude that we will make
additional updates or corrections with respect to those or any 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.
Regent Communications, Inc.
Index to Financial Statements
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Page
Reports of Independent Accountants.................................... 32
Financial Statements:
Consolidated Statements of Operations for
the three years ended December 31, 1999, 1998 and 1997....... 34
Consolidated Balance Sheets at December 31, 1999 and 1998.... 35
Consolidated Statements of Cash Flows for the
three years ended December 31, 1999, 1998 and 1997........... 37
Statement of Changes in Stockholders' Deficit................ 38
Notes to Consolidated Financial Statements................... 39
Financial Statement Schedules:
II - Valuation and Qualifying Accounts....................... 66
31
<PAGE> 32
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Regent Communications, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows, and of changes in
stockholders' deficit present fairly, in all material respects, the financial
position of Regent Communications, Inc. (the "Company") at December 31, 1999 and
1998, and the results of its operations and its cash flows for the two years
ended December 31, 1999 and 1998, in conformity with accounting principles
generally accepted in the United States. In addition, in our opinion, the
financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States, 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, for the period ended December 31, 1997 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
financial statements. In our opinion, such adjustments are appropriate and have
been properly applied.
/s/ PricewaterhouseCoopers LLP
Cincinnati, Ohio
March 28, 2000
32
<PAGE> 33
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Faircom Inc.
We have audited the consolidated statements of operations, changes in
stockholders' deficit, and cash flows of Faircom Inc. for the year ended
December 31, 1997 (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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Faircom Inc. for the year ended December 31, 1997 in
conformity with generally accepted accounting principles.
BDO Seidman, LLP
Melville, New York
January 21, 1998
33
<PAGE> 34
<TABLE>
<CAPTION>
REGENT COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Gross broadcast revenues $ 25,612,933 $ 16,046,968 $ 6,696,564
Less agency commissions (1,759,124) (1,275,445) (703,273)
------------ ------------ -----------
Net broadcast revenues 23,853,809 14,771,523 5,993,291
Station operating expenses 18,324,729 11,051,165 3,860,331
Depreciation and amortization 3,368,416 2,281,497 726,564
Corporate general and administrative expenses 2,773,062 1,872,182 391,252
------------ ------------ -----------
Operating income (loss) (612,398) (433,321) 1,015,144
Interest expense (5,248,546) (2,883,251) (1,330,676)
Write-down of carrying value of assets held for sale (602,226) -- --
Other income, net 163,649 26,648 24,537
------------ ------------ -----------
Loss before income taxes and
extraordinary items (6,299,521) (3,289,924) (290,995)
Income tax expense -- -- (71,542)
------------ ------------ -----------
Loss before extraordinary items (6,299,521) (3,289,924) (362,537)
Extraordinary net loss from debt
extinguishments, net of taxes (471,216) (1,170,080) (4,333,310)
------------ ------------ -----------
Net loss $ (6,770,737) $ (4,460,004) $(4,695,847)
============ ============ ===========
Loss applicable to common shares:
Net loss $ (6,770,737) $ (4,460,004) $(4,695,847)
Preferred stock dividend requirements (5,205,526) (2,165,471) --
Preferred stock accretion (17,221,154) (4,787,311) --
------------ ------------ -----------
Loss applicable to common shares $(29,197,417) $(11,412,786) $(4,695,847)
============ ============ ===========
Basic and diluted net loss per common share:
Loss before extraordinary items $ (119.69) $ (42.67) $ (1.51)
Extraordinary items (1.96) (4.88) (18.06)
------------ ------------ -----------
Net loss per common share $ (121.65) $ (47.55) $ (19.57)
============ ============ ===========
Weighted average number of common shares
used in basic and diluted calculation 240,000 240,000 240,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE> 35
<TABLE>
<CAPTION>
REGENT COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31,
----------------------------------
1999 1998
----------- -----------
ASSETS
Current assets:
<S> <C> <C>
Cash $ 3,410,410 $ 478,545
Accounts receivable, less allowance of $231,000 and
$268,000 at December 31, 1999 and 1998, respectively 4,681,802 3,439,372
Other current assets 236,996 200,828
Assets held for sale 2,000,000 7,500,000
----------- -----------
Total current assets 10,329,208 11,618,745
Property and equipment, net 12,373,274 9,303,975
Intangible assets, net 58,869,287 45,023,940
Other assets, net 2,155,386 1,671,210
----------- -----------
Total assets $83,727,155 $67,617,870
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 1,061,757 $ 1,005,327
Accrued expenses 1,879,135 2,772,612
Interest payable 111,194 769,367
Current portion of long-term debt 62,500 980,000
Notes payable -- 7,500,000
----------- -----------
Total current liabilities 3,114,586 13,027,306
----------- -----------
Long-term debt, less current portion 25,331,307 34,617,500
Other long-term liabilities 3,825,225 2,643,579
----------- -----------
Total liabilities $32,271,118 $50,288,385
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE> 36
<TABLE>
<CAPTION>
REGENT COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Redeemable preferred stock:
Series A convertible preferred stock, $5.00 stated value, 620,000 shares
authorized; 620,000 shares issued and outstanding-liquidation value:
$3,650,109 and $3,433,109 at December 31, 1999 and 1998, respectively $ 4,580,109 $ 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: $5,822,054 and $5,372,054 at December 31, 1999 and 1998,
respectively 7,322,054 5,372,054
Series C convertible preferred stock, $5.00 stated value, 400,640 shares issued and
outstanding-liquidation value: $2,220,259 and $2,079,459 at December 31, 1999 and
1998, respectively 670,318 530,094
Series D convertible preferred stock, $5.00 stated value, 1,000,000 shares
authorized; 1,000,000 shares issued and outstanding-liquidation value:
$5,581,441 and $5,231,441 at December 31, 1999 and 1998, respectively 7,081,441 5,231,441
Series F convertible preferred stock, $5.00 stated value, 4,100,000 shares
authorized; 4,100,000 and 2,450,000 shares issued and outstanding at
December 31, 1999 and 1998, respectively-liquidation value: $23,052,566
and $12,839,454 at December 31, 1999 and 1998, respectively 29,202,566 12,839,454
Series G convertible preferred stock, $5.00 stated value, 1,800,000 shares authorized;
372,406 shares issued and outstanding-liquidation value: $2,049,837 2,608,446 --
Series H convertible preferred stock, $5.50 stated value, 2,200,000 shares authorized
2,181,817 shares issued and outstanding-liquidation value: $12,476,988 14,658,805 --
Series K convertible preferred stock, $5.50 stated value, 4,100,000 shares authorized
3,545,453 shares issued and outstanding-liquidation value: $19,596,160 23,141,613 --
------------ ------------
Total redeemable preferred stock 89,265,352 27,406,152
Stockholders' deficit:
Preferred stock:
Series C convertible preferred stock, $5.00 stated value, 4,000,000 shares
authorized; 3,382,693 and 3,319,980 shares issued and outstanding at
December 31, 1999 and 1998, respectively-liquidation value: $18,718,925
and $17,231,832 at December 31, 1999 and 1998, respectively 1,445,126 1,131,561
Series E convertible preferred stock, $5.00 stated value, 5,000,000 shares
authorized; 447,842 shares issued and outstanding-liquidation value:
$2,481,842 and $2,324,453 at December 31, 1999 and 1998, respectively 2,239,210 2,239,210
Common stock, $.01 par value, 60,000,000 shares authorized;
240,000 shares issued and outstanding (Note 1) 2,400 2,400
Additional paid-in capital -- 3,871,549
Retained deficit (41,496,051) (17,321,387)
------------ ------------
Total stockholders' deficit (37,809,315) (10,076,667)
------------ ------------
Total liabilities and stockholders' deficit $ 83,727,155 $ 67,617,870
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE> 37
<TABLE>
<CAPTION>
REGENT COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997
------------ ------------ ------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $ (6,770,737) $ (4,460,004) $ (4,695,847)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 3,368,416 2,281,497 726,564
Amortization of deferred rental income (33,979) (34,008) (34,008)
Provision for doubtful accounts 389,615 174,051 46,308
Noncash interest expense 1,575,758 234,897 --
Noncash charge for debt extinguishments 471,216 804,580 4,333,310
Noncash charge for compensation -- 530,264 --
Gain on sale of radio stations (124,696) -- --
Write-down of carrying value of assets held for sale 602,226 -- --
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (1,481,379) (344,209) (234,538)
Other assets (36,168) 335,644 (13,326)
Accounts payable (339,255) (401,283) 10,427
Accrued expenses 659,505 (167,344) 24,751
Interest payable (658,173) 660,976 254,603
------------ ------------ ------------
Net cash (used in) provided by operating activities (2,377,651) (384,939) 418,244
Cash flows from investing activities:
Acquisitions of radio stations, net of cash acquired (27,532,988) (31,440,795) (7,831,180)
Capital expenditures (1,977,466) (818,919) (131,701)
Proceeds from sale of radio stations 13,998,693 -- --
------------ ------------ ------------
Net cash used in investing activities (15,511,761) (32,259,714) (7,962,881)
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible
preferred stock 41,753,668 20,150,000 --
Proceeds from long-term debt 16,500,000 36,000,000 23,000,000
Principal payments on long-term debt (26,703,693) (20,749,410) (13,194,135)
Payment of notes payable (7,500,000) -- --
Payment for deferred financing costs (426,649) (1,292,042) (834,137)
Payment of issuance costs (2,802,049) (1,520,662) --
Payment of appraisal right liability -- -- (1,015,000)
------------ ------------ ------------
Net cash provided by financing activities 20,821,277 32,587,886 7,956,728
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 2,931,865 (56,767) 412,091
Cash and cash equivalents at beginning of period 478,545 535,312 123,221
------------ ------------ ------------
Cash and cash equivalents at end of period $ 3,410,410 $ 478,545 $ 535,312
============ ============ ============
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.
37
<PAGE> 38
<TABLE>
<CAPTION>
REGENT COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES C SERIES E
Convertible Convertible Additional Total
Preferred Preferred Common Paid-In Retained Stockholders
Stock Stock Stock Capital Deficit Deficit
----------- ----------- ------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
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 (see Note 1) 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)
Reclassification of Series C convertible preferred
stock to outside of stockholders' deficit due to
such shares being redeemable (453,259) (453,259)
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 mandatorily
redeemable convertible preferred stock (6,495,910) (6,495,910)
Net loss (4,460,004) (4,460,004)
----------- ---------- ------ ---------- ------------ ------------
Balance, December 31, 1998 1,131,561 2,239,210 2,400 3,871,549 (17,321,387) (10,076,667)
Exercise of stock options on 62,713 shares of
Series C convertible preferred stock 313,565 (171,918) 141,647
Dividends and accretion on mandatorily
redeemable convertible preferred stock (3,699,631) (13,858,474) (17,558,105)
Beneficial conversion feature related to issuance
of redeemable convertible preferred stocks (3,545,453) (3,545,453)
Net loss (6,770,737) (6,770,737)
---------- ---------- ------ ---------- ------------ ------------
Balance, December 31, 1999 $1,445,126 $2,239,210 $2,400 $ -- $(41,496,051) $(37,809,315)
========== ========== ====== ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE> 39
REGENT COMMUNICATIONS, INC.
NOTES TO 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. On June 15, 1998,
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 stockholders' deficit prior to the merger
has 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. ACQUISITIONS AND DISPOSITIONS
1999 Acquisitions and Dispositions
----------------------------------
On March 1, 1999, the Company sold the FCC licenses and related assets
used in the operations of WSSP (FM) in Charleston, South Carolina for
approximately $1,600,000 in cash. The Company had previously issued a
note for $1,500,000 to a third party which was collateralized by the
assets of the station (See Note 10). Upon consummation of the sale, the
note was repaid. The sale resulted in a $100,000 gain to the Company
which has been included in other income in the accompanying
consolidated Statement of Operations for the year ended December 31,
1999.
On May 6, 1999, the Company consummated the acquisition of the FCC
licenses and related assets of WJON (AM), WWJO (FM) and KMXK (FM) in
St. Cloud, Minnesota (the "St. Cloud Stations") for approximately
$12,700,000 in cash. The purchase was financed by approximately
$5,082,000 in proceeds from the issuance of Series F Convertible
Preferred Stock and borrowings under the Company's senior reducing
credit facility. Approximately $9,093,000 of the purchase price was
allocated to the FCC licenses and goodwill and is being amortized over
a 40-year period, and the remaining $3,607,000 was allocated to
property and equipment.
On August 1, 1999, the Company sold the FCC licenses and related assets
used in the operations of KCBQ (AM) in San Diego, California for
approximately $6,000,000 in cash (See Note 10).
39
<PAGE> 40
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
On September 1, 1999, the Company purchased the FCC licenses and
related assets used in the operations of radio stations WXKC (FM) and
WRIE (AM) licensed to Erie, Pennsylvania and WXTA (FM) licensed to
Edinboro, Pennsylvania (the "Erie Stations") for approximately
$13,500,000 in cash. The purchase was financed by approximately
$6,300,000 in proceeds from the issuance of Series H Convertible
Preferred Stock and borrowings under the Company's senior reducing
credit facility. Approximately $12,400,000 of the purchase price has
been allocated to the FCC licenses and goodwill and is being amortized
over a 40-year period. The remaining $1,100,000 was allocated to
property and equipment and to a non-compete agreement.
On October 15, 1999, the Company consummated the sale of the FCC
licenses and related assets of KZGL (FM), KVNA (FM) and KVNA (AM) (the
"Kingman Stations") for approximately $5,400,000.
On November 5, 1999, the Company sold the FCC licenses and related
assets used in the operations of radio stations KRLT (FM) and KOWL (AM)
in Lake Tahoe, California (the "Lake Tahoe Stations") for approximately
$1,250,000.
On November 8, 1999 the Company signed a letter of intent to purchase
all of the outstanding capital stock of KZAP, Inc., owner of radio
station KZAP (FM) located in Chico, California for a purchase price of
$1.4 million. The purchase price for the stock will be payable, in
whole or in part, at the option of the seller, in cash or in shares of
common stock at a stated value of $6.00 per share. On December 1, 1999,
the Company began operating the Station under a time brokerage
agreement ("TBA").
1998 Acquisitions:
------------------
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. 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. Goodwill and FCC licenses related to the June 15
Acquisitions are being amortized over a 40-year period.
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.
40
<PAGE> 41
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 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 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 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.
41
<PAGE> 42
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company allocated the aggregate purchase price from all
acquisitions in 1999 and 1998 as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Accounts receivable $ -- $ 143,000
Broadcasting equipment and furniture and equipment 4,675,000 6,503,000
FCC license 21,310,000 30,328,000
Goodwill 65,000 1,853,000
Other 150,000 360,000
----------- -----------
$26,200,000 $39,187,000
----------- -----------
</TABLE>
The fair values of the assets acquired were determined by an
independent valuation. 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, KOSS (FM), the St. Cloud Stations, the Erie Stations
and the dispositions of the Lake Tahoe Stations, Kingman Stations, KCBQ
(AM) and WSSP (FM) as though the acquisitions and dispositions had
occurred at the beginning of each year.
<TABLE>
<CAPTION>
PRO FORMA (UNAUDITED)
-------------------------------------
1999 1998
----------------- ------------------
<S> <C> <C>
Net broadcast revenues $24,633,000 $24,489,000
Net loss before extraordinary items (7,121,000) (5,534,000)
Net loss (7,592,000) (6,704,080)
Net loss per common share before extraordinary items:
Basic and diluted $ (125.96) $ (54.87)
Net loss per common share:
Basic and diluted $ (127.92) $ (59.75)
</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 nor is it indicative of future
results of operations. 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.
42
<PAGE> 43
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1997 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
Communication Commission ("FCC") licenses. 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.
3. SUMMARY OF ACCOUNTING POLICIES
a. CONSOLIDATION:
The consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly-owned. 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. 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 classified in other income, net in the
Statement of Operations.
43
<PAGE> 44
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
d. INTANGIBLE ASSETS:
Intangible assets consist principally of the value of FCC
licenses and the excess of the purchase price over the fair value
of net assets of acquired radio stations (goodwill). These assets
are amortized on a straight-line basis over lives ranging from 15
to 40 years. The periods of amortization are evaluated annually
to determine whether they warrant revision.
e. LONG-LIVED ASSETS:
Long-lived assets (including related goodwill and other
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 generally 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.
g. 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. The Company also maintains cash in bank accounts at
financial institutions where the balance, at times, exceeds
federally insured limits.
h. REVENUE RECOGNITION:
BROADCAST REVENUE
Broadcast revenue for commercial broadcasting advertisements is
recognized when the commercial is broadcast.
44
<PAGE> 45
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
Barter revenue was approximately $2,157,800 and $731,000, and
barter expense was approximately $2,001,900 and $800,000 for the
years ended December 31, 1999 and 1998, respectively.
i. FAIR VALUE OF FINANCIAL INSTRUMENTS:
SHORT-TERM INVESTMENTS
Due to their short term maturity, the carrying amount of accounts
receivable, accounts payable, accrued expenses and notes payable
approximated their fair value at December 31, 1999 and 1998.
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, 1999.
REDEEMABLE PREFERRED STOCK
The carrying amounts of the Company's Series A, B, D, F, G, H and
K redeemable convertible preferred stock represent the fair
market value of the shares at December 31, 1999 plus accrued
dividends.
The Series C redeemable convertible preferred stock carrying
value is based on an allocated amount of the total Series C basis
from the June 15, 1998 merger (see Note 1) plus accrued
dividends. The fair value of these shares is approximately
$2,604,000 at December 31, 1999.
j. RECLASSIFICATION:
Certain balances in the December 31, 1998 and 1997 statements
have been reclassified to conform with the December 31, 1999
presentation. These changes had no impact on previously reported
results of operations.
45
<PAGE> 46
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. LONG-TERM DEBT
Long-term debt consists of the following as of December 31:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Senior reducing revolving credit facility (a) $ 24,761,307 $ 34,900,000
Subordinated promissory note (b) 600,000 600,000
Non-compete agreements (c) 32,500 97,500
------------ ------------
25,393,807 35,597,500
Less: current portion of long-term debt (62,500) (980,000)
------------ ------------
$ 25,331,307 $ 34,617,500
============ ============
</TABLE>
Repayment of long-term debt required over each of the years following
December 31, 1999 consists of:
2000 $ 62,500
2001 4,562,056
2002 5,312,398
2003 5,312,398
2004 6,062,741
Thereafter 4,081,714
-----------
$25,393,807
===========
a. SENIOR REDUCING REVOLVING CREDIT FACILITY:
On June 15, 1998, the Company extinguished its existing loan
facility 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 approximately $804,000 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 carryforward position.
46
<PAGE> 47
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 ended 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 (6.50%
at December 31, 1999) plus 1.25% to 3.50% or the base rate
announced by the Bank of Montreal (8.50% at December 31, 1999)
plus 0% 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 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.
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 stipulated 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 agreed to sell its properties located in Lake Tahoe,
California, Flagstaff and Kingman, Arizona (see Note 2), and make
certain capital expenditures according to an agreed-upon
timetable. In addition, the amended Credit Agreement increased 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%.
47
<PAGE> 48
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
On November 11, 1999, the Company and its senior lenders amended
the Credit Agreement again in order to cure non-compliance by the
Company as of September 30, 1999 with certain restrictive
covenants. Under the amendment, the Company agreed that it would
(a) borrow no additional funds during the balance of 1999, (b)
obtain by no later than November 30, 1999, written commitments in
form and substance satisfactory to the lenders for the issuance of
at least $10,000,000 of additional net equity and (c) issue such
equity no later than December 30, 1999. Of the net proceeds
raised, subject to the provisions of the Credit agreement, the
first $10,000,000 must be applied to reduce permanently the senior
debt. To the extent the Company raised more than $10,000,000, a
substantial portion of the additional proceeds had to be applied
to reduce permanently the senior revolving credit facility.
On December 14, 1999, the Company issued 3,545,453 shares of
Series K Convertible Preferred Stock at $5.50 per share. From the
net proceeds of approximately $19,100,000, $15,775,000 was used to
permanently reduce the senior revolving credit facility. An
additional $6,398,600 from the net proceeds of the sale of the
Kingman Stations and the Lake Tahoe Stations was used to
permanently reduce the outstanding borrowings under the credit
facility.
As a result of the debt facility paydown in accordance with the
original terms of the credit facility, the Company recognized an
extraordinary loss of $471,000, net of income tax, from the
write-off of related deferred financing costs. The effective tax
rate applied to the extraordinary loss was zero due to the
Company's cumulative loss carryforward position. In addition, as a
result of the modification to the credit facility in November
1999, which permanently reduced the overall availability, the
Company wrote-off a portion of deferred financing costs and
recognized a charge to interest expense of approximately $162,000.
At December 31, 1999, the Company had related unamortized deferred
financing fees totaling approximately $1,187,661 which are
classified as other assets in the accompanying Consolidated
Balance Sheet.
On January 27, 2000, Regent Broadcasting, Inc., a wholly owned
subsidiary of the Company, as the borrower, and the Company, as a
guarantor, entered into a new credit agreement with a group of
lenders which provides for a senior secured reducing revolving
credit facility expiring December 31, 2006 with an initial
aggregate revolving commitment of up to $125,000,000 (including a
commitment to issue letters of credit of up to $25,000,000 in
aggregate face amount, subject to the maximum revolving commitment
amount available). This revolving credit facility is available for
working capital and acquisitions, including related acquisition
expenses.
On January 28, 2000 the Company paid off the outstanding amount of
debt and related fees totaling approximately $25,096,000 to the
Bank of Montreal. The pay off was completed using proceeds from an
initial public offering of Common stock which also occurred on
January 28, 2000 (See Note 15). This final paydown resulted in an
extraordinary loss of approximately $1,036,000, net of income tax
from the write-off of the remaining deferred financing costs in
January 2000.
48
<PAGE> 49
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
b. 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%.
c. 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 require quarterly payments of $16,250
through May 2000.
5. CAPITAL STOCK AND REDEEMABLE PREFERRED STOCK
The Company's authorized capital stock consists of 60,000,000 shares of
common stock and 40,000,000 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 are Series E Convertible Preferred Stock
("Series E"), 4,100,000 as Series F Convertible Preferred Stock
("Series F"), 4,000,000 shares as Series G Convertible Preferred Stock
("Series G"), 2,200,000 shares as Series H Convertible Preferred Stock
("Series H") and 4,100,000 shares of Series K Convertible Preferred
Stock ("Series K"). The stated value of Series A through Series G
preferred stock is $5.00 per share and the stated value of Series H and
Series K is $5.50 per share.
Series A, Series C, Series E, Series F, Series G, Series H and Series K
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, G, H and K upon the occurrence of certain
events. Series A, Series C, Series D, Series E, Series F, Series G,
Series H and Series K have equal rights for the payment of dividends
and the distribution of assets and rights upon liquidation, dissolution
or winding up of the Company.
49
<PAGE> 50
REGENT COMMUNICATIONS, INC.
NOTES TO 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, Series G, Series H
and Series K 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 Series H and Series K at an annual rate of $0.55 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
$7,532,000 and $2,327,000 at December 31, 1999 and 1998, respectively.
Dividends on a per share basis are as follows:
<TABLE>
<CAPTION>
PREFERRED SERIES
----------------------------
DECEMBER 31, A B C D E F G H K
- - - - - - - - -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $ 0.89 $ 0.82 $ 0.53 $ 0.58 $ 0.54 $ 0.62 $ 0.50 $ 0.22 $ 0.03
1998 $ 0.54 $ 0.37 $ 0.19 $ 0.23 $ 0.19 $ 0.24 - - -
</TABLE>
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, WPG 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 $3,539,000 and $2,459,000 at December 31, 1999
and 1998, respectively and have been classified under other long-term
liability due to the associated "put" rights. During 1999, $1,080,000
was charged to interest expense to account for the increase in the fair
value of the warrants.
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
50
<PAGE> 51
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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, certain Series C,
Series D, Series G, Series H and Series K would have similar "put"
rights only if the holders of the Series F were to exercise their "put"
rights. Series A, Series B, a portion of Series C, Series D and Series
F, Series G, Series H and Series K (but not the remaining Series C and
Series E) have been excluded from the equity to reflect such
anticipated "put" rights. Issuance costs of approximately $2,925,000
for these shares have been netted against the proceeds.
The Company adjusted the carrying values of Series A, Series B, Series
D, Series F, Series G, and Series H to fair value at December 31, 1999.
This adjustment was recognized as a charge to retained deficit (since
there was no additional paid in capital) resulting in an adjustment to
loss from continuing operations attributable to common stockholders.
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 $205,800 and $150,000 at December 31,
1999 and 1998, respectively 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. During
1999, $55,800 was charged to interest expense to account for the
increase in the warrants fair value.
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.
51
<PAGE> 52
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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, 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.
In April 1999, the Company issued 1,016,348 shares of Series F
Convertible Preferred Stock at $5.00 per share to fund its purchase of
the St. Cloud Stations.
In June 1999, the Company issued 636,363 shares of Series H Convertible
Preferred Stock at $5.50 per share to certain existing preferred
stockholders to fund a reduction in bank debt and working capital
requirements. The Series H Convertible Preferred Stock was issued with
similar terms as the Series G Convertible Preferred Stock. In addition,
holders of the Series H Convertible Preferred Stock were granted the
right to elect one individual to the Company's Board of Directors upon
and subject to certain conditions.
In August 1999, the Company issued an additional 1,545,454 of Series H
Convertible Preferred Stock at $5.50 per share to certain existing
preferred stockholders and two new investors to fund in part the
purchase of the Erie Stations as well as working capital requirements.
On December 14, 1999, the Company issued 3,545,453 shares of Series K
Convertible Preferred Stock (new series of convertible preferred stock
with terms substantially similar to the terms of the Series H
Convertible Preferred Stock) at $5.50 per share. The net proceeds of
$19,113,000 were used to reduce debt by $15,775,000, and the remaining
proceeds were used to fund a portion of the purchase price of the
Company's pending acquisitions consummated in February 2000. The
redeemable Series K convertible preferred shares were deemed to have an
embedded beneficial conversion feature valued in aggregate at
$3,545,000. The beneficial conversion feature was recognized
immediately as a charge to retained deficit (since there was no
additional paid-in capital) resulting in an adjustment to loss from
continuing operations attributable to common stockholders and an
increase in the carrying value of the preferred stock.
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
52
<PAGE> 53
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
expire no later than ten years from the date of grant in 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.
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").
In addition, two officers of Faircom, pursuant to the terms of the
merger agreement between the Company and Faircom, were granted stock
options as of June 15, 1998 resulting in the recognition of
approximately $530,000 in compensation expense.
53
<PAGE> 54
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company applies the provisions of APB Opinion 25, "Accounting for
Stock Issued to Employees" ("APB 25"), in accounting for the 1998 Stock
Option Plan. Under APB 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,
"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 123. Such pro forma information is as follows for the year ended
December 31:
<TABLE>
<CAPTION>
Net loss: 1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
As reported $(6,770,737) $(4,460,004) $(4,695,847)
Pro forma compensation expense, net of tax benefit (543,817) (599,736) (169,841)
----------- ----------- -----------
Pro forma $(7,314,544) $(5,059,740) $(4,865,688)
=========== =========== ===========
Basic and diluted net loss per common share:
As reported $ (121.65) $ (47.55) $ (19.57)
Pro forma $ (123.92) $ (50.05) $ (20.27)
</TABLE>
54
<PAGE> 55
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The weighted-average fair value per share for options granted under the
1998 Stock Option Plan was $2.88 for ISOs in both 1999 and 1998, and
$2.69 and $2.00 for NQSOs in 1999 and 1998, respectively. 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 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>
1999 1998 1997
-------------------- ----------------------------- -------
Converted
ISOs NQSOs ISOs NQSOs Options NQSOs
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Dividends None None None None None None
Volatility 35% 35% 35.0% 35.0% 35.0% 46.5%
Risk-free interest rate 5.56% 5.58% 5.55% 5.43% 5.38% 6.28%
Expected term 10 years 5 years 10 years 5 years 2 years 5 years
</TABLE>
55
<PAGE> 56
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Presented below is a summary of the status of outstanding Company stock
options issued to employees:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Company options converted
on June 15, 1998 274,045 $2.73
Granted 1,321,488 $5.00
Exercised -- --
Forfeited/expired -- --
--------- -----
Company options held by
employees at December 31, 1998 1,595,533 $4.61
Granted 317,678 $5.05
Exercised (62,713) $2.73
Forfeited/expired (10,000) $2.73
--------- -----
Company options held by
employees at December 31, 1999 1,840,498 $4.76
</TABLE>
The following table summarizes the status of Company options
outstanding and exercisable at December 31, 1999, 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>
$5.50 30,000 4.8 $ 5.50 -- $ 5.50
$5.00 1,599,166 8.3 $ 5.00 371,162 $ 5.00
$0.88 - $3.73 211,332 2.5 211,332 $ 2.86
--------- --------
1,840,498 582,494
========= =======
</TABLE>
Of the options outstanding at December 31, 1999, it is anticipated that
no more than 1,252,980 will be treated as NQSOs and at least 587,518
will be treated as ISOs.
(1) As of December 31, 1999, the stock options granted under the 1998
Stock Option Plan entitle the holders to purchase 1,629,166 shares of
the Company's common stock. Stock options granted under the Conversion
Stock Option Plan entitle the holders to purchase 211,332 shares of the
Company's Series C Convertible Preferred Stock.
7. EARNINGS PER SHARE
The Company has adopted the provisions of SFAS 128, "Earnings Per
Share" ("SFAS 128"). 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 anti-dilutive. All Series of the Company's
convertible preferred stocks (convertible into 16,442,347 shares at
December 31, 1999), the Company's options outstanding at December 31,
1999 to purchase 1,840,498 shares of common stock and 910,000
outstanding warrants to purchase the Company's common stock were not
included in the computation of diluted EPS because they are
anti-dilutive. 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).
56
<PAGE> 57
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. INCOME TAXES
The Company's provision for income taxes consists of the following for
the year ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Current federal $ -- $ -- $ --
Current state -- -- 71,542
------- ------- -------
Total $ -- $ -- $71,542
------- ------- -------
</TABLE>
The components of the Company's deferred tax assets and liabilities are
as follows as of December 31:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 9,765,000 $ 4,528,000
Miscellaneous accruals and credits -- 79,000
Accounts receivable reserve 92,000 107,000
----------- -----------
Total deferred tax assets 9,857,000 4,714,000
Deferred tax liabilities:
Property and equipment (248,000) (296,000)
Intangible assets (325,000) (170,000)
----------- -----------
Total deferred tax liabilities $ 573,000 $ (466,000)
=========== ===========
Valuation allowance (9,284,000) (4,248,000)
----------- -----------
Net deferred tax assets $ -- $ --
=========== ===========
</TABLE>
57
<PAGE> 58
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company has cumulative federal and state tax loss carryforwards of
approximately $24,412,000 at December 31, 1999. These loss
carryforwards will expire in years 2000 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.
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>
1999 1998 1997
=----- ------ ------
<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 (9.0) (12.0) (1.0)
Benefit of net operating losses -- -- --
Establishment of valuation allowance (31.0) (28.0) 1.1
State tax, net of federal tax benefit 6.0 6.0 (1.0)
====== ====== ======
Effective tax rate 0% 0% (1.5)%
====== ====== ======
</TABLE>
9. SAVINGS PLANS
The Company sponsors defined contribution plans covering substantially
all employees. Both the employee and the Company can make voluntary
contributions to the plan. The Company did not make contributions to
the defined contribution plan during the years ended December 31, 1999
and 1998.
10. NOTES PAYABLE
Notes payable consists of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
---------- -----------
<S> <C> <C>
Promissory note $ -- $6,000,000
Promissory note -- 1,500,000
---------- ----------
$ -- $7,500,000
========== ==========
</TABLE>
58
<PAGE> 59
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In connection with the acquisition of radio station KCBQ (AM), the
Company issued to the seller a promissory note for $6,000,000, which
was collateralized by the assets of the station. The terms of the
promissory note obligated 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 did not bear interest prior to the maturity date, as
defined. Interest on the unpaid principal of the note after maturity
was at the rate of 10.0% per annum. In August 1999, the Company sold
KCBQ (AM) for $6,000,000 and paid the promissory note in full. Because
the Company intended to sell this property during 1999, the unpaid
principal balance of $6,000,000 was 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
obligated 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 was 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 matured on the earlier of
December 3, 2002 or upon the sale of the WSSP (FM) assets to an
unrelated third party. The note did not bear interest prior to the
maturity date, as defined. Interest on the unpaid principal of the note
after maturity was at the rate of 10.0% 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 was classified as a current
liability at December 31, 1998 in the accompanying Consolidated Balance
Sheet.
11. OTHER FINANCIAL INFORMATION
Property and equipment consists of the following as of December 31:
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
Equipment $ 14,653,009 $ 11,626,277
Furniture and fixtures 736,762 1,659,136
Building and improvements 2,526,969 1,442,799
Land 1,716,309 761,342
------------ ------------
19,633,049 15,489,554
Less accumulated depreciation (7,259,775) (6,185,579)
------------ ------------
Net property and equipment $ 12,373,274 $ 9,303,975
============ ============
</TABLE>
Depreciation expense was $1,392,370 and $777,118 for the years ended
December 31, 1999 and 1998.
59
<PAGE> 60
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Intangible assets consists of the following as of December 31:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
FCC broadcast licenses $ 55,679,824 $ 40,768,013
Goodwill 7,220,103 6,545,097
------------ ------------
62,899,927 47,313,110
Less accumulated amortization (4,030,640) (2,289,170)
------------ ------------
Net intangible assets $ 58,869,287 $ 45,023,940
------------ ------------
</TABLE>
Amortization expense was $1,976,046 and $1,504,379 for the years ended
December 31, 1999 and 1998.
Accrued liabilities consist of the following as of December 31:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Balance Sheet:
Accrued compensation $ 602,504 $ 154,812
Accrued offering costs 590,444 --
Accrued professional fees 277,817 602,785
Accrued acquisition costs -- 1,531,985
Accrued other 408,370 483,030
---------- ----------
$1,879,135 $2,772,612
========== ==========
</TABLE>
Supplemental cash flow information for the year ended December 31,:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ----------- ----------
<S> <C> <C> <C>
Cash paid for interest $4,272,429 $ 2,974,000 $1,076,073
Income taxes paid, net of refunds -- -- 71,542
</TABLE>
12. 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. In the opinion of the Company's management,
the eventual resolution of such matters for amounts above those
reflected in the consolidated financial statements would not likely
have a materially adverse effect on the financial condition of the
Company.
The Company leases certain facilities and equipment used in its
operations. Total rental expenses were approximately $594,000, $502,000
and $56,000 in 1999, 1998 and 1997, respectively.
At December 31, 1999, the total minimum annual rental commitments under
noncancelable leases are as follows:
2000 $ 1,357,684
2001 813,660
2002 452,888
2003 393,646
2004 247,888
Thereafter 1,573,507
-------------------
Total $ 4,839,273
-------------------
13. RELATED PARTY TRANSACTIONS
The Company obtains all of its property and casualty insurance and
director and officer liability insurance coverages through a firm 90%
owned by the Company's Chief Executive Officer and members of his
immediate family. In 1999, the Company paid approximately $369,000 in
insurance premiums. In January 2000, the members sold their interest in
the insurance firm to an unrelated third party.
60
<PAGE> 61
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
14. OTHER SUBSEQUENT EVENTS
a. INITIAL PUBLIC OFFERING OF COMMON STOCK
On January 28, 2000, the Company consummated an initial public
offering of 16,000,000 shares of its common stock at a public
offering price of $8.50 per share. On February 7, 2000, the
underwriters' purchased an additional 2,400,000 shares of the
Company's common stock upon exercise of their over-allotment
option. The Company received total proceeds from completion of the
offering, net of underwriting discounts, commissions and estimated
expenses related to the offering, of $143,836,000. Of these
proceeds, the Company used $67,325,000 to fund the acquisitions of
stations in Utica-Rome, New York and Watertown, New York on
January 28, 2000 and in El Paso, Texas on January 31, 2000;
$26,761,000 to pay in full amounts borrowed under its prior bank
credit facility on January 28, 2000 and fees related to the new
bank credit facility; $7,296,000 to pay or reserve for payment of
accumulated, unpaid dividends on all series of convertible stock
converted into common stock on January 28, 2000; $5,857,000 to
redeem all outstanding shares of its Series B convertible
preferred stock on January 28, 2000, including accumulated unpaid
dividends; and $1,513,000 to repurchase shares of the Company's
common stock from an affiliate of one of the underwriters in order
to comply with NASD rules. The Company intends to use the balance
of the proceeds for working capital needs and future acquisitions.
61
<PAGE> 62
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
b. CONVERSION AND REDEMPTION OF PREFERRED STOCK
In connection with the initial public offering of common stock,
the Company redeemed 1,000,000 shares of its Series B convertible
preferred stock, which constituted all outstanding shares of that
series, for a redemption price of $5,857,000, being the original
price paid for those shares of $5.00 per share plus accumulated,
unpaid dividends on those shares. In addition, the Company
converted 15,775,699 shares of convertible preferred stock,
constituting all outstanding shares of the Company's other series
of convertible preferred stock, into common stock on a
one-for-one basis. The Company has paid or set aside for payment
of accumulated, unpaid dividends on those shares in the total
amount of $7,296,000.
c. CONSUMMATED AND PENDING TRANSACTIONS AND DIVESTITURES:
On January 28, 2000, the Company purchased the FCC licenses and
related assets used in the operations of radio stations WOFDZ
(FM), WLZW (FM), WFRG (FM), WIBX (AM) and WRUN (AM) licensed in
Utica/Rome, New York and WCIZ (FM), WFRY (FM), WTNY (AM), and
WUZZ (AM) licensed in Watertown, New York (the "Forever
Stations") for approximately $43,825,000 in cash and 100,000
shares of the Company's Common Stock.
On January 31, 2000, the Company purchased the FCC licenses and
related assets used in the operations of radio stations KLAQ
(FM), KSII (FM) and KROD (AM) licensed to El Paso, Texas (the "El
Paso Stations") for approximately $23,500,000 in cash.
On March 13, 2000, the Company entered into a definitive
agreement with Clear Channel Communications, Inc. to exchange the
Company's eleven stations serving the Mansfield, Ohio (2 FM/1
AM), Victorville, California (3 FM/2 AM) and Palmdale, California
(2 FM/1 AM) markets plus $67 million in cash for Clear Channel's
nine stations serving the Grand Rapids, Michigan (3 FM) and
Albany, New York (4 FM/2 AM) markets. The Company has made an
escrow deposit in the amount of $5,000,000 and have agreed to pay
liquidated damages in the amount of $28,000,000 if the Company
fails to perform their obligations under the agreement. The
Company anticipates closing this transaction during the second
half of 2000 following customary regulatory approvals.
On March 29, 2000, the Company entered into an agreement of
merger with KZAP, Inc. by which the Company will acquire control
of radio station KZAP (FM) located in Chico, California in
consideration for 233,333 shares of the Company's Common Stock.
The Company anticipates the closing will occur during the second
quarter 2000 following receipt of FCC approval. The Company is
currently providing programming and selling air time for KZAP
(FM) under a time brokerage agreement pending consummation of the
acquisition.
62
<PAGE> 63
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
d. ASSETS HELD FOR SALE:
On March 29, 2000, the Company entered into an Asset Purchase
Agreement with Yavapai Broadcasting Corporation to sell
substantially all the assets used in the operations of radio
stations KZGL (FM), KVNA (AM) and KVNA (FM), in Flagstaff,
Arizona (the "Flagstaff Stations") for a cash purchase price of
$2,000,000. The Company anticipates closing the disposition
during the second quarter of 2000 following the receipt of FCC
approval. Earlier in March 2000, in accordance with its terms,
the Company terminated a March 1999 agreement by which the
Company agreed to sell the Flagstaff Stations to another party
for a cash purchase price of approximately $2,425,000 and
withdrew the pending FCC application. Action on that FCC
application had been delayed since May 1999 due to the filing of
an objection made by the owner of a competing station in the
Flagstaff market based on the alleged ownership concentration
that the proposed buyer would have had following the sale.
The assets classified as assets held for sale as of December 31,
1999 were recorded at the lower of their carrying value or
estimated fair market value less anticipated disposition costs.
As such, the Company recorded a loss of approximately $600,000
classified as a write-down of carrying value of assets held for
sale in the accompanying Statement of Operations.
63
<PAGE> 64
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
All adjustments necessary for a fair statement of income for each
period have been included:
<TABLE>
<CAPTION>
1ST 2ND(*) 3RD 4TH TOTAL
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1999
Net broadcasting revenues $ 4,519,990 $ 6,315,303 $ 6,630,377 $ 6,388,139 $ 23,853,809
Operating income (loss) (655,205) 515,369 151,140 (623,702) (612,398)
Loss before extraordinary items (1,434,535) (256,610) (790,222) (3,818,154) (6,299,521)
Extraordinary item -- -- -- (471,216) (471,216)
Net loss (1,434,535) (256,610) (790,222) (4,289,370) (6,770,737)
Preferred stock dividend and
accretion requirements (1,000,060) (1,521,808) (1,415,844) (18,488,968) (22,426,680)
----------- ----------- ----------- ------------ ------------
Loss applicable to common shares (2,434,595) (1,778,418) (2,206,066) (22,778,338) (29,197,417)
Basic and diluted earnings per share:
Before extraordinary item $ (10.14) $ (7.41) $ (9.19) $ (92.95) $ (119.69)
Extraordinary item -- -- -- (1.96) (1.96)
----------- ----------- ----------- ------------ ------------
$ (10.14) $ (7.41) $ (9.19) $ (94.91) $ (121.65)
1998
Net broadcasting revenues $ 1,465,077 $ 2,598,126 $ 5,421,098 $ 5,287,222 $ 14,771,523
Operating income (loss) (38,010) (132,542) 112,963 (375,732) (433,321)
Loss before extraordinary items (541,628) (706,758) (843,842) (1,197,696) (3,289,924)
Extraordinary item -- (1,170,080) -- -- (1,170,080)
Net loss (541,628) (1,876,838) (843,842) (1,197,696) (4,460,004)
Preferred stock dividend and
accretion requirements -- (4,814,846) (854,231) (1,283,705) (6,952,782)
----------- ----------- ----------- ------------ ------------
Loss applicable to common shares (541,628) (6,691,684) (1,698,073) (2,481,401) (11,412,786)
Basic and diluted earnings per share:
Before extraordinary item (2.25) (23.00) (7.08) (10.34) (42.67)
Extraordinary item -- (4.88) -- -- (4.88)
----------- ----------- ----------- ------------ ------------
$ (2.25) $ (27.88) $ (7.08) $ (10.34) $ (47.55)
</TABLE>
(*) Approximately $149,000 was reclassed from depreciation expense to
write-down of carrying value of assets held for sale in the second
quarter of 1999.
64
<PAGE> 65
REGENT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
17. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). 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 amended, in the year 2001, and does not expect that the
impact of adoption will have a material impact on the Company's results of
operations and statement of financial position.
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) 101, Revenue Recognition in Financial
Statements," and is effective the first quarter of 2000. In SAB 101, the
SEC staff expresses its views regarding the appropriate recognition of
revenue with regard to a variety of circumstances, some of which are of
particular relevance to the Company. The Company is currently evaluating
SAB 101 to determine its impact on the financial statements.
65
<PAGE> 66
<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
--------- -------- ----------- --------------- ---------
Allowance for doubtful accounts:
Years ended December 31,
<S> <C> <C> <C> <C> <C> <C>
1999 $ 268,000 389,615 -- 426,615 $ 231,000
1998 $ 32,000 174,051 173,960 112,011 $ 268,000
1997 $ 20,000 46,308 -- 34,308 $ 32,000
Deferred tax asset valuation allowance:
Years ended December 31,
1999 $4,248,000 5,036,000 $9,284,000
1998 $2,483,000 1,765,000 $4,248,000
1997 $2,532,000 (49,000) $2,483,000
</TABLE>
* Recorded in conjunction with acquisitions consummated on June 15, 1998.
** Represents accounts written off to the reserve.
66
<PAGE> 67
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 our definitive Proxy Statement, and specifically from the
portions thereof captioned "Election of Directors" and "Executive Officers," to
be filed in April 2000 in connection with the 2000 Annual Meeting of
Stockholders presently scheduled to be held on May 18, 2000.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item 11 is hereby incorporated by
reference from our definitive Proxy Statement, and specifically from the portion
thereof captioned "Executive Compensation," to be filed in April 2000 in
connection with the 2000 Annual Meeting of Stockholders presently scheduled to
be held on May 18, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item 12 is hereby incorporated by
reference from our definitive Proxy Statement, and specifically from the portion
thereof captioned "Security Ownership of Certain
67
<PAGE> 68
Beneficial Owners and Management," to be filed in April 2000 in connection with
the 2000 Annual Meeting of Stockholders presently scheduled to be held on May
18, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item 13 is hereby incorporated by
reference from our definitive Proxy Statement, and specifically from the portion
thereof captioned "Certain Relationships and Related Transactions," to be filed
in April 2000 in connection with the 2000 Annual Meeting of Stockholders
presently scheduled to be held on May 18, 2000.
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.
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.
We filed no reports on Form 8-K during the fourth quarter of
the fiscal year ended December 31, 1999.
68
<PAGE> 69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Regent Communications, Inc. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
REGENT COMMUNICATIONS, INC.
Date: March 30, 2000 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.
Signature Title Date
/s/ Terry S. Jacobs Chairman of the Board, Chief March 30, 2000
- --------------------------- Executive Officer, Treasurer and
Terry S. Jacobs Director (Principal Executive
Officer)
/s/ William L. Stakelin President, Chief Operating
- --------------------------- Officer,
William L. Stakelin Secretary and Director March 30, 2000
/s/ Anthony A. Vasconcellos Vice President and Chief Financial March 30, 2000
- --------------------------- Officer (Principal Financial and
Anthony A. Vasconcellos Principal Accounting Officer)
/s/ Joel M. Fairman Vice Chairman of the Board and March 30, 2000
- --------------------------- Director
Joel M. Fairman
/s/ Kenneth J. Hanau Director March 30, 2000
- ---------------------------
Kenneth J. Hanau
/s/ William H. Ingram Director March 30, 2000
- ---------------------------
William H. Ingram
/s/ R. Glen Mayfield Director March 30, 2000
- ---------------------------
R. Glen Mayfield
/s/ Richard H. Patterson Director March 30, 2000
- ---------------------------
Richard H. Patterson
Director March 30, 2000
- ---------------------------
William P. Sutter, Jr.
Director March 30, 2000
- ---------------------------
John H. Wyant
S-1
<PAGE> 70
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 as of 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. (excluding exhibits not deemed material
or filed separately in executed form) (previously filed as
Exhibit 2(a) to the Registrant's Form 10-K for the year ended
December 31, 1998 and incorporated herein by this reference)
2(b)* Asset Purchase Agreement dated as of March 4, 1999 by and
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)
(previously filed as Exhibit 2(b) to the Registrant's Form
10-K for the year ended December 31, 1998 and incorporated
herein by this reference)
2(c)* Asset Purchase Agreement dated as of May 18, 1999 by and among
Media One Group-Erie, Ltd., Cisco LLC, James T. Embrescia,
Thomas J. Embrescia, Regent Broadcasting of Erie, Inc. and
Regent Licensee of Erie, Inc. (excluding exhibits not deemed
material or filed separately in executed form) (previously
filed as Exhibit 2(a) to the Registrant's Form 10-Q for the
quarter ended June 30, 1999 and incorporated herein by this
reference)
2(d)* Asset Purchase Agreement dated as of July 29, 1999 by and
among Forever of NY, Inc., Forever of NY, LLC, Forever
Broadcasting, LLC, and Regent Broadcasting of Utica/Rome,
Inc., Regent Licensee of Utica/Rome, Inc., Regent Broadcasting
of Watertown, Inc., Regent Licensee of Watertown, Inc. and
Regent Communications, Inc. (excluding exhibits not deemed
material or filed separately in executed form) (previously
E-1
<PAGE> 71
filed as Exhibit 2(b) to the Registrant's Form 10-Q for the
quarter ended June 30, 1999 and incorporated herein by this
reference)
2(e)* Asset Purchase Agreement dated as of September 13, 1999 by and
among New Wave Broadcasting, L.P., Regent Broadcasting of El
Paso, Inc. and Regent Licensee of El Paso, Inc. (excluding
exhibits not deemed material or filed separately in executed
form) (previously filed as Exhibit 2(b) to the Registrant's
Form 10-Q for the quarter ended September 30, 1999 and
incorporated herein by this reference)
2(f)* Agreement of Merger dated as of December 5, 1997 by and among
Faircom, Inc., Regent Merger Corp., Regent Communications,
Inc., Blue Chip Capital Fund II Limited Partnership and Miami
Valley Venture Fund L.P. (excluding exhibits not deemed
material or filed separately in executed form) (previously
filed as Exhibit 2(a) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998 and
incorporated herein by this reference)
2(g) Asset Exchange Agreement dated as of March 12, 2000 by and
among Clear Channel Broadcasting, Inc., Clear Channel
Broadcasting Licenses, Inc., Capstar Radio Operating Company,
Capstar TX Limited Partnership, Regent Broadcasting of
Victorville, Inc., Regent Licensee of Victorville, Inc.,
Regent Broadcasting of Palmdale, Inc., Regent Licensee of
Palmdale, Inc., Regent Broadcasting of Mansfield, Inc. and
Regent Licensee of Mansfield, 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:
Clear Channel Schedules
-----------------------
1.1(a) FCC Licenses
1.1(b) Tangible Personal Property
1.1(c) Station contracts
1.1(d) Intangible Property
1.1(f) Real Property
1.2(h) Excluded Assets
Regent Schedules
----------------
1.3(a) FFC Licenses
1.3(b) Tangible Personal Property
1.3(c) Station Contracts
1.3(d) Intangible Property
1.3(f) Real Property
1.4(h) Excluded Assets
E-2
<PAGE> 72
2(h) Agreement of Merger dated March 29, 2000 by and among Regent
Communications, Inc., Regent Broadcasting, Inc., KZAP, Inc.
and Rob Cheal
The following exhibits and schedules to the foregoing
Agreement of Merger are omitted as not material; however,
copies will be provided to the Securities and Exchange
Commission upon request:
Exhibits
--------
A Deposit Escrow Agreement
B Indemnification Escrow Agreement
C Opinion of Counsel for Seller and the
Company
D Non-Competition Agreement
E Opinion of Counsel for Regent
Broadcasting, Inc.
F Consulting Agreement
Schedules
---------
3.04 Conflicting Agreements
4.02 Investment Securities
4.04 Officer, Director, Employee and Banking
Information
4.05 Legends
4.07 Required Consents
4.08 Station Licenses
4.10 Taxes
4.11 Tangible Personal Property
4.12 Real Property Interests
4.13 Contracts
4.15 Intellectual Property
4.22 Non-Compliance with Laws
4.23 Employee Benefit Plans
4.26 Insurance
2(i) Asset Purchase Agreement dated March 29, 2000 by and between
Yavapai Broadcasting 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:
Exhibits
--------
A Indemnity Escrow Agreement
B Deposit Escrow Agreement
C Allocation of Purchase Price
D Time Brokerage Agreement
E General Conveyance, Bill Of Sale,
Assignment and Assumption Agreement
F Opinion of Seller's Counsel
G Form of FCC Opinion
H Opinion of Buyer's Counsel
Schedules
---------
1.2.9 Miscellaneous Excluded Assets
6.3 Buyer Qualifications
7.4 Licenses
7.7 Tangible Personal Property
7.8 Leased Real Estate
7.9 Contracts
7.11 Environmental Matters
7.12 Intellectual Property
7.13 Financials
7.14 Compliance with Labor Laws
7.17 Employee Benefit Plans
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
(previously filed as Exhibit 3(a) to Amendment No. 1 to the
Registrant's Form S-1 Registration Statement No. 333-91703
filed December 29, 1999 and incorporated herein by this
reference)
3(b)* Certificate of Decrease of Shares Designated as Series G
Convertible Preferred Stock of Regent Communications, Inc.,
filed with the Delaware Secretary of State on June 21, 1999
amending the Amended and Restated Certificate of Incorporation
of Regent Communications, Inc., as amended (previously filed
as Exhibit 3(c) to the Registrant's Form 10-Q Fourth Quarter
Ended June 30, 1999 and incorporated herein by this reference)
3(c)* 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 H Preferred Stock
of Regent Communications, Inc., filed with the Delaware
Secretary of State on June 21, 1999 amending the Amended and
Restated Certificate of Incorporation of Regent
Communications, Inc., as amended (previously filed as
Exhibit 3(d) to the Registrant's Form 10-Q for the Quarter
Ended June 30, 1999 and incorporated herein by this
reference)
3(d)* Certificate of Decrease of Shares Designated as Series G
Convertible Preferred Stock of Regent Communications, Inc.,
filed with the Delaware Secretary of State on August 23, 1999
amending the Amended and Restated Certificate of Incorporation
of Regent Communications, Inc., as amended (previously filed
as Exhibit 3(e) to the Registrant's Form 10-Q for the Quarter
Ended on September 30, 1999 and incorporated herein by this
reference)
3(e)* Certificate of Increase of Shares Designated as Series H
Convertible Preferred Stock of Regent Communications, Inc.,
filed with the Delaware Secretary of State on August 23, 1999
amending the Amended and Restated Certificate of Incorporation
of Regent Communications, Inc., as amended (previously filed
as Exhibit 3(f) to the Registrant's Form 10-Q for the Quarter
Ended on September 30, 1999 and incorporated herein by this
reference)
3(f)* 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 K Preferred Stock
of Regent Communications, Inc., filed with the Delaware
Secretary of State on December 13, 1999 amending the Amended
and Restated Certificate of Incorporation of Regent
Communications, Inc., as amended (previously filed as
Exhibit 3(g) to Amendment No. 1 to the Registrants Form S-1
Registration Statement No. 333-91703 filed December 29, 1994
and incorporated herein by this reference)
E-3
<PAGE> 73
3(g)* 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).
3(h)* Amendments to By-Laws of Regent Communications, Inc. adopted
December 13, 1999 (previously filed as Exhibit 3(h) to
Amendment No. 1 to the Registrant's Form S-1 Registration
Statement No. 333-91703 filed December 29, 1999 and
incorporated herein by this reference)
4(a)* Credit Agreement dated as of January 27, 2000 among Regent
Broadcasting, Inc., Regent Communications, Inc., Fleet
National Bank, as administrative agent, Fleet National Bank,
as issuing lender, General Electric Capital Corporation, as
syndication agent, Dresdner Bank AG, New York and Grand Cayman
Branches, as document agent, and the several lenders party
thereto (excluding exhibits not deemed material or filed
separately in executed form) (previously filed as Exhibit
4(a) to the Registrant's Form 8-K filed February 10, 2000 and
incorporated herein by this reference)
4(b)* Omnibus Amendment No. 1 and Amendment No. 1 to Credit
Agreement dated as of February 4, 2000 among Regent
Broadcasting, Inc., Regent Communications, Inc., Fleet
National Bank, as administrative agent, Fleet National Bank,
as issuing lender, General Electric Capital Corporation, as
syndication agent, Dresdner Bank AG, New York and Grand Cayman
Branches, as document agent, and the several lenders party
thereto (previously filed as Exhibit 4(e) to the Registrant's
Form 8-K filed February 10, 2000 and incorporated herein by
this reference)
4(c)* Revolving Credit Note dated as of February 7, 2000 made by
Regent Broadcasting, Inc. in favor of Fleet National Bank in
the original principal amount of $25 million (previously filed
as Exhibit 4(f) to the Registrant's Form 8-K filed February
10, 2000 and incorporated herein by this reference) (See
Note 1 below)
4(d)* Subsidiary Guaranty Agreement dated as of January 27, 2000
among Regent Broadcasting, Inc., Regent Communications, Inc.
and each of their subsidiaries and Fleet National Bank, as
collateral agent (previously filed as Exhibit 4(c) to the
Registrant's Form 8-K filed February 10, 2000 and incorporated
herein by this reference)
4(e)* Pledge Agreement dated as of January 27, 2000 among Regent
Broadcasting, Inc., Regent Communications, Inc. and each of
their subsidiaries and Fleet National Bank, as collateral
agent (previously filed as Exhibit 4(d) to the Registrant's
Form 8-K filed February 10, 2000 and incorporated herein by
this reference)
4(f)* Security Agreement dated as of January 27, 2000 among Regent
Broadcasting, Inc., Regent Communications, Inc. and each of
their subsidiaries and Fleet National Bank, as collateral
agent (previously filed as Exhibit 4(b) to the Registrant's
Form 8-K filed February 10, 2000 and incorporated herein by
this reference)
10(a) Escrow Agreement dated as of March 12, 2000 by and among
Regent Broadcasting of Victorville, Inc., Regent Licensee of
Victorville, Inc., Regent Broadcasting of Palmdale, Inc.,
Regent Licensee of Palmdale, Inc., Regent Broadcasting of
Mansfield, Inc., Regent Licensee of Mansfield, Inc., Clear
Channel Broadcasting, Inc., Clear Channel Broadcasting
Licenses, Inc., Capstar Radio Operating Company, Capstar TX
Limited Partnership and Bank of America
E-4
<PAGE> 74
10(b) Letter agreement dated March 12, 2000 from Clear Channel
Communications, Inc. addressed to Regent Broadcasting of
Victorville, Inc., Regent Licensee of Victorville, Inc.,
Regent Broadcasting of Palmdale, Inc., Regent Licensee of
Palmdale, Inc., Regent Broadcasting of Mansfield, Inc., Regent
Licensee of Mansfield, Inc.
10(c) Liquidated Damages Agreement made as of March 12, 2000 by
Regent Broadcasting of Victorville, Inc., Regent Licensee of
Victorville, Inc., Regent Broadcasting of Palmdale, Inc.,
Regent Licensee of Palmdale, Inc., Regent Broadcasting of
Mansfield, Inc., Regent Licensee of Mansfield, Inc. for the
benefit of Clear Channel Broadcasting, Inc., Clear Channel
Broadcasting Licenses, Inc., Capstar Radio Operating Company
and Capstar TX Limited Partnership
10(d)* Regent Communications, Inc. Faircom Conversion Stock Option
Plan (previously filed as Exhibit 10(f) to the Registrant's
S-4 filed on February 17, 1998 and incorporated herein by this
reference)
10(e)* Regent Communications, Inc. 1998 Management Stock Option Plan
(previously filed as Exhibit 10(g) to the Registrant's S-4
filed on February 17, 1998 and incorporated herein by this
reference)
10(f)* Employment Agreement between Regent Communications, Inc. and
Terry S. Jacobs (previously filed as Exhibit 10(h) to the
Registrant's S-4 filed on February 17, 1998 and incorporated
herein by this reference)
10(g)* Employment Agreement between Regent Communications, Inc. and
William L. Stakelin (previously filed as Exhibit 10(i) to the
Registrant's S-4 filed on February 17, 1998 and incorporated
herein by this reference)
10(h)* Employment Agreement between Regent Communications, Inc. and
Joel M. Fairman (previously filed as Exhibit 10(j) to the
Registrant's S-4 filed on February 17, 1998 and incorporated
herein by this reference)
10(i)* Lease Agreement dated January 17, 1994 between CPX--
RiverCenter Development Corporation and Regent Communications,
Inc. (previously filed as Exhibit 10(z) to the Registrant's
S-4 filed on February 17, 1998 and incorporated herein by this
reference)
10(j)* 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
E-5
<PAGE> 75
filed as Exhibit 4(d) to the Registrant's Form 8-K filed June
30, 1998 and incorporated herein by this reference)
10(k)* 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)
10(l)* 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 2 below)
(previously filed as Exhibit 4(f) to the Registrant's Form 8-K
filed June 30, 1998 and incorporated herein by this
reference)
10(m)* 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)
10(n)* 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)
10(o)* 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)
E-6
<PAGE> 76
10(p)* 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)
10(q)* 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 3 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)
10(r)* 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)
10(s)* 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 this
reference)
10(t)* 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
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 this reference)
10(u)* 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)
E-7
<PAGE> 77
10(v)* 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) (previously filed as Exhibit 4u
to Amendment No. 1 to the Registrant's Form S-1 10K for the
year ended December 31, 1998 and incorporated herein by this
reference)
10(w)* 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 4) (excluding
exhibits not deemed material or filed separately in executed
form) (previously filed as Exhibit 4(v) to the Registrant's
Form S-1 10-K for the year ended December 31, 1998 and
incorporated herein by this reference)
10(x)* 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 (previously filed as
Exhibit 4(w) to the Registrant's Form 10-K for the year ended
December 31, 1998 and incorporated herein by this reference)
10(y)* 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 (previously filed as
Exhibit 4(x) to the Registrant's Form 10-K for the year ended
December 31, 1998 and incorporated herein by this reference)
10(z)* 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 (previously filed as
Exhibit 4(y) to the Registrant's Form 10-K for the year ended
December 31, 1998 and incorporated herein by this reference)
E-8
<PAGE> 78
10(aa)* Stock Purchase Agreement dated June 21, 1999 between Regent
Communications, Inc. and Waller-Sutton Media Partners, L.P.
relating to the purchase of 90,909 shares of Regent
Communications, Inc. Series H convertible preferred stock (See
Note 5 below) (excluding exhibits not deemed material or filed
separately in executed form) (previously filed as Exhibit
4(aa) to the Registrant's Form 10-Q for the quarter ended June
30,1999 and incorporated herein by this reference)
10(bb)* Stock Purchase Agreement dated June 21, 1999, among Regent
Communications, Inc., WPG Corporate Development Associates V,
L.L.C. and WPG Corporate Development Associates V (Overseas),
L.P. relating to the purchase of 1,180,909 and 182,727 shares,
respectively, of Regent Communications, Inc. Series H
convertible preferred stock (excluding exhibits not deemed
material or filed separately in executed form)(previously
filed as Exhibit 4(bb) to the Registrant's Form 10-Q for the
quarter ended June 30, 1999 and incorporated herein by this
reference)
10(cc)* Seventh Amendment to Credit Agreement, dated as of June 30,
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(previously filed as Exhibit
4(cc) to the Registrant's Form 10-Q for the quarter ended June
30, 1999 and incorporated herein by this reference)
10(dd)* Eighth Amendment, Limited Consent and Limited Waiver to Credit
Agreement, dated as of November 11, 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 (previously filed as Exhibit 4(dd) to the Registrant's
Form 10-Q for the quarter ended on September 30, 1999 and
incorporated herein by this reference)
10(ee)* Stock Purchase Agreement dated as of August 31, 1999 among
Regent Communications, Inc., The Roman Arch Fund L.P. and The
Roman Arch Fund II L.P. relating to the purchase of 109,091
and 72,727 shares, respectively, of Regent Communications,
Inc. Series H convertible preferred stock(excluding exhibits
not deemed material or filed separately in executed form)
(previously filed as Exhibit 4(ee) to the Registrant's Form
10-Q for the quarter ended on September 30, 1999 and
incorporated herein by this reference)
10(ff)* First Amendment to Registration Rights Agreement dated as of
August 31, 1999 among Regent Communications, Inc., PNC Bank,
N.A., as trustee, Waller-Sutton Media Partners, L.P., WPG
Corporate
E-9
<PAGE> 79
Development Associates V, L.L.C., WPG Corporate Development
Associates (Overseas) V, L.P., BMO Financial, Inc., General
Electric Capital Corporation, River Cities 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 P.
Gammon (excluding exhibits not deemed material or filed
separately in executed form) (previously filed as Exhibit
4(gg) to the Registrant's Form 10-Q for the quarter ended on
September 30, 1999 and incorporated herein by this reference)
10(gg)* Second Amendment to Registration Rights Agreement dated as of
December 13, 1999, among Regent Communications, Inc., Terry S.
Jacobs, William L. Stakelin, Blue Chip Capital Fund II Limited
Partnership, Blue Chip Capital Fund III Limited Partnership,
Miami Valley Venture Fund, L.P., PNC Bank, N.A., as trustee,
PNC Bank, N.A., Custodian, Waller-Sutton Media Partners, L.P.,
River Cities Capital Fund Limited Partnership, Mesirow Capital
Partners VII, WPG Corporate Development Associates V, L.L.C.,
WPG Corporate Development Associates V (Overseas) L.P.,
General Electric Capital Corporation, William H. Ingram, The
Roman Arch Fund L.P., The Roman Arch Fund II L.P. and The
Prudential Insurance Company of America (previously filed as
Exhibit 4(hh) to Amendment No. 1 to the Registrant's Form S-1
Registration Statement No. 333-91703 filed December 29, 1999
and incorporated herein by this reference)
10(hh)* Third Amended and Restated Stockholders' Agreement dated as of
December 13, 1999, among Regent Communications, Inc., Terry S.
Jacobs, William L. Stakelin, Blue Chip Capital Fund II Limited
Partnership, Blue Chip Capital Fund III Limited Partnership,
Miami Valley Venture Fund, L.P., PNC Bank, N.A., as trustee,
PNC Bank, N.A., Custodian, Waller-Sutton Media Partners, L.P.,
River Cities Capital Fund Limited Partnership, Mesirow Capital
Partners VII, WPG Corporate Development Associates V, L.L.C.,
WPG Corporate Development Associates V (Overseas) L.P.,
General Electric Capital Corporation, William H. Ingram, Joel
M. Fairman, The Roman Arch Fund L.P., The Roman Arch Fund II
L.P. and the Prudential Insurance Company of America
(previously filed as Exhibit 4(gg) to Amendment No. 1 to the
Registrant's Form S-1 Registration Statement No. 333-91703
filed December 29, 1999 and incorporated herein by this
reference)
10(ii)* Stock Purchase Agreement dated as of November 24, 1999,
between Regent Communications, Inc. and Blue Chip Capital Fund
III Limited Partnership (see Note 6 below) (previously filed
as Exhibit (jj) to Amendment No. 1 to the Registrant's Form
S-1 Registration Statement filed December 29, 1999 and
incorporated herein by this reference)
21 Subsidiaries of Registrant
27 Financial Data Schedule
- -----------------
* Incorporated by reference.
NOTES:
1. Seven substantially identical notes were made by Regent
Broadcasting, Inc. as follows:
E-10
<PAGE> 80
<TABLE>
<CAPTION>
Original
Holder Principal Amount
------ ----------------
<S> <C>
General Electric Capital Corporation $22,000,000
Dresdner Bank AG, New York and Cayman
Islands Branches $22,000,000
Mercantile Bank National Association $16,000,000
U.S. Bank National Association $10,000,000
Summit Bank $10,000,000
Michigan National Bank $10,000,000
The CIT Group Equipment Financing, Inc. $10,000,000
2. Six substantially identical warrants for the purchase of shares of Registrant's common stock
were issued as follows:
Shares
------
Waller-Sutton Media Partners, L.P. 650,000
WPG Corporate Development Associates V, L.L.C. 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
3. Two substantially identical notes were issued to Bank of Montreal, Chicago Branch, in the
principal amounts of $15,000,000 and $20,000,000.
4. 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
5. Two substantially identical stock purchase agreements were
entered into for the purchase of Series H convertible
preferred stock as follows:
Blue Chip Capital Fund II Limited Partnership 363,636 shares
PNC Bank, N.A., as trustee 181,818 shares
6. Four substantially identical stock purchase agreements were
entered into for the purchase of Series K convertible
preferred stock as follows:
WPG Corporate Development Associates V, L.L.C. and
WPG Corporate Development Associates V (Overseas), L.P. 181,818 shares
PNC Bank, N.A., Custodian 181,818 shares
Mesirow Capital Partners VII1 1,818,181 shares
The Prudential Insurance Company of America 1,000,000 shares
</TABLE>
E-11
<PAGE> 1
Exhibit 2(g)
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT (this "Agreement") is made as of March
12, 2000 among the company or companies designated as Clear Channel on the
signature page hereto (collectively, "Clear Channel") and the company or
companies designated as Exchange Party on the signature page hereto
(collectively, "Exchange Party").
Recitals
A. Clear Channel owns and operates the following radio broadcast
stations (collectively, the "Clear Channel Stations") pursuant to certain
authorizations issued by the Federal Communications Commission (the "FCC"):
WABT-FM, WGNA-AM, WGNA-FM, WQBJ-FM, WQBK-FM and WTMM-AM licensed to
Albany, New York; and
WGRD-FM, WLHT-FM and WTRV-FM licensed to Grand Rapids, Michigan.
B. Exchange Party owns and operates the following radio broadcast
stations (collectively, the "Exchange Party Stations") pursuant to certain
authorizations issued by the FCC:
WYHT-FM, WSWR-FM and WMAN-AM, licensed to Mansfield/Shelby, Ohio; and
KTPI-FM and KAVC-AM licensed to Mojave and Tehachapi (i.e.: Palmdale),
California; and
KATJ-FM, KZXY-FM, KIXA-FM, KROY-AM and KIXW-AM licensed to Victorville,
California; and
KOSS-FM, licensed to Lancaster, California.
C. Subject to the terms and conditions set forth herein, the parties
desire to exchange the Clear Channel Station Assets (defined below) and the
Exchange Party Station Assets (defined below). The parties intend the
transaction contemplated by this Agreement to be a like-kind exchange in
accordance with the provisions of Section 1031 of the Internal Revenue Code of
1986, as amended (the "Code").
D. Clear Channel Communications, Inc. and AMFM Inc. (Clear Channel's
parent) and CCU Merger Sub, Inc. are parties to an Agreement and Plan of Merger
dated October 2, 1999 (the "AMFM Agreement").
<PAGE> 2
Agreement
NOW, THEREFORE, taking the foregoing into account, and in consideration
of the mutual covenants and agreements set forth herein, the parties, intending
to be legally bound, hereby agree as follows:
ARTICLE 1: EXCHANGE OF ASSETS
1.1. Clear Channel Station Assets. On the terms and subject to the
conditions hereof, on the Closing Date (defined below), Clear Channel shall
assign, transfer, convey and deliver to Exchange Party, and Exchange Party shall
acquire from Clear Channel, all of the right, title and interest of Clear
Channel in and to all of the assets, properties, interests and rights of Clear
Channel of whatsoever kind and nature, real and personal, tangible and
intangible, which are used in the operation of the Clear Channel Stations and
described in this Section 1.1, but excluding the Clear Channel Excluded Assets
as hereafter defined (the "Clear Channel Station Assets"):
(1)1 all licenses, permits and other authorizations which are
issued to Clear Channel by the FCC with respect to the Clear Channel Stations
(the "Clear Channel FCC Licenses") and described on Schedule 1.1(a), including
any renewals or modifications thereof between the date hereof and Closing;
(1)2 all equipment, electrical devices, towers, antennae,
cables, tools, hardware, office furniture and fixtures, office materials and
supplies, inventory, motor vehicles, spare parts and other tangible personal
property of every kind and description which are used in the operation of the
Clear Channel Stations including but not limited to those listed on Schedule
1.1(b), except any retirements or dispositions thereof made between the date
hereof and Closing in the ordinary course of business and consistent with past
practices of Clear Channel (the "Clear Channel Tangible Personal Property");
(1)3 all Clear Channel Time Sales Agreements and Clear Channel
Trade Agreements (both defined in Section 2.3), Clear Channel Real Property
Leases (defined in Section 6.7), and other contracts, agreements, and leases
which are used in the operation of the Clear Channel Stations and listed on
Schedule 1.1(c), together with all contracts, agreements, and leases made
between the date hereof and Closing in the ordinary course of business that are
used in the operation of the Clear Channel Stations (the "Clear Channel Station
Contracts");
(1)4 all of Clear Channel's rights in and to the Clear Channel
Stations' call letters and Clear Channel's rights in and to the trademarks,
trade names, service marks, franchises, copyrights, computer software, programs
and programming material, jingles, slogans, logos, and other intangible property
which are used in the operation of the Clear Channel Stations and listed on
Schedule 1.1(d) (the "Clear Channel Intangible Property");
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(1)5 Clear Channel's rights in and to all the files,
documents, records, and books of account (or copies thereof) relating to the
operation of the Clear Channel Stations, including the Clear Channel Stations'
local public files, programming information and studies, blueprints, technical
information and engineering data, advertising studies, marketing and demographic
data, sales correspondence, lists of advertisers, credit and sales reports, and
logs, but excluding records relating to the Clear Channel Excluded Assets
(defined below); and
(1)6 any real property which is used in the operation of the
Clear Channel Stations (including any of Clear Channel's appurtenant easements
and improvements located thereon) and described on Schedule 1.1(f) (the "Clear
Channel Real Property").
The Clear Channel Station Assets shall be transferred to Exchange Party
free and clear of all liens, claims and encumbrances ("Liens") except for (i)
Exchange Party Assumed Obligations (defined below), (ii) liens for taxes not yet
due and payable and for which Exchange Party receives a credit pursuant to
Section 3.3, (iii) such liens (not related to Clear Channel indebtedness),
easements, rights of way, building and use restrictions, exceptions,
reservations and limitations common for properties of such nature that do not,
and are unlikely to, in any material respect detract from the value of the
property subject thereto or impair the use thereof in the ordinary course of the
business of the Clear Channel Stations, and (iv) any items listed on Schedule
1.1(b) (collectively, "Clear Channel Permitted Liens").
1.2. Clear Channel Excluded Assets. Notwithstanding anything to the
contrary contained herein, the Clear Channel Station Assets shall not include
the following assets along with all rights, title and interest therein (the
"Clear Channel Excluded Assets"):
(2)1 all cash and cash equivalents of Clear Channel, including
without limitation certificates of deposit, commercial paper, treasury bills,
marketable securities, asset or money market accounts and all such similar
accounts or investments;
(2)2 all accounts receivable or notes receivable arising in
the operation of the Clear Channel Stations prior to Closing;
(2)3 all tangible and intangible personal property of Clear
Channel disposed of or consumed in the ordinary course of business of Clear
Channel between the date of this Agreement and Closing;
(2)4 all Clear Channel Station Contracts that terminate or
expire prior to Closing in the ordinary course of business of Clear Channel;
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(2)5 Clear Channel's name, corporate minute books, charter
documents, corporate stock record books and such other books and records as
pertain to the organization, existence or share capitalization of Clear Channel,
duplicate copies of the records of the Clear Channel Stations, and all records
not relating exclusively to the operation of the Clear Channel Stations;
(2)6 contracts of insurance, and all insurance proceeds or
claims made thereunder;
(2)7 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 Clear Channel;
(2)8 all assets of Clear Channel of the nature described in
Section 1.1 above which are used exclusively in the operation of radio station
WNWZ-AM ("Retained Michigan Station");
(2)9 all assets of Clear Channel of the nature described in
Section 1.1 above which are used primarily in the operation of radio station
WXCR-FM ("Retained Albany Station").
(2)10 all rights, properties and assets described on Schedule
1.2(h) which schedule shall include any Clear Channel FM tower and FM tower site
not used exclusively by any of the Clear Channel Stations, and all rights,
properties and assets not specifically described in Section 1.1.
1.3. Exchange Party Station Assets. On the terms and subject to the
conditions hereof, on the Closing Date (defined below), Exchange Party shall
assign, transfer, convey and deliver to Clear Channel, and Clear Channel shall
acquire from Exchange Party, all of the right, title and interest of Exchange
Party in and to all of the assets, properties, interests and rights of Exchange
Party of whatsoever kind and nature, real and personal, tangible and intangible,
which are used in the operation of the Exchange Party Stations and described in
this Section 1.3, but excluding the Exchange Party Excluded Assets as hereafter
defined (the "Exchange Party Station Assets") (the parties acknowledge that the
schedules referred to in this Section and Section 1.4 ("Exchange Party
Schedules") are not attached to this Agreement. Exchange Party agrees to deliver
to Clear Channel all of the Exchange Party Schedules within ten (10) days of the
execution of this Agreement in form comparable to the schedules provided by
Clear Channel and attached to this Agreement and reasonably acceptable to Clear
Channel):
(3)1 all licenses, permits and other authorizations which are
issued to Exchange Party by the FCC with respect to the Exchange Party Stations
(the "Exchange Party FCC Licenses") including but not limited to those described
on Schedule 1.3(a), including any renewals or modifications thereof between the
date hereof and Closing;
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(3)2 all equipment, electrical devices, towers, antennae,
cables, tools, hardware, office furniture and fixtures, office materials and
supplies, inventory, motor vehicles, spare parts and other tangible personal
property of every kind and description which are used in the operation of the
Exchange Party Stations including but not limited to those listed on Schedule
1.3(b), except any retirements or dispositions thereof made between the date
hereof and Closing in the ordinary course of business and consistent with past
practices of Exchange Party (the "Exchange Party Tangible Personal Property");
(3)3 all Exchange Party Time Sales Agreements and Exchange
Party Trade Agreements (both defined in Section 2.1), Exchange Party Real
Property Leases (defined in Section 7.7), and other contracts, agreements, and
leases which are used in the operation of the Exchange Party Stations and listed
on Schedule 1.3(c), together with all contracts, agreements, and leases made
between the date hereof and Closing in the ordinary course of business that are
used in the operation of the Exchange Party Stations (the "Exchange Party
Station Contracts");
(3)4 all of Exchange Party's rights in and to the Exchange
Party Stations' call letters and Exchange Party's rights in and to the
trademarks, trade names, service marks, franchises, copyrights, computer
software, programs and programming material, jingles, slogans, logos, and other
intangible property which are used in the operation of the Exchange Party
Stations including but not limited to those listed on Schedule 1.3(d) (the
"Exchange Party Intangible Property");
(3)5 Exchange Party's rights in and to all the files,
documents, records, and books of account (or copies thereof) relating to the
operation of the Exchange Party Stations, including but not limited to the
Exchange Party Stations' local public files, programming information and
studies, blueprints, technical information and engineering data, advertising
studies, marketing and demographic data, sales correspondence, lists of
advertisers, credit and sales reports, and logs, but excluding records relating
to the Exchange Party Excluded Assets (defined below); and
(3)6 any real property which is used in the operation of the
Exchange Party Stations (including any of Exchange Party's appurtenant easements
and improvements located thereon) including but not limited to those described
on Schedule 1.3(f) (the "Exchange Party Real Property").
The Exchange Party Station Assets shall be transferred to Clear Channel
free and clear of all Liens except for (i) Clear Channel Assumed Obligations
(defined below), (ii) liens for taxes not yet due and payable and for which
Clear Channel receives a credit pursuant to Section 3.3,
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(iii) such liens (not related to Exchange Party indebtedness), easements, rights
of way, building and use restrictions, exceptions, reservations and limitations
common for properties of such nature that do not, and are unlikely to, in any
material respect detract from the value of the property subject thereto or
impair the use thereof in the ordinary course of the business of the Exchange
Party Stations, and (iv) any items listed on Schedule 1.3(b) (collectively,
"Exchange Party Permitted Liens").
1.4. Exchange Party Excluded Assets Notwithstanding anything to the
contrary contained herein, the Exchange Party Station Assets shall not include
the following assets along with all rights, title and interest therein (the
"Exchange Party Excluded Assets"):
(4)1 all cash and cash equivalents of Exchange Party,
including without limitation certificates of deposit, commercial paper, treasury
bills, marketable securities, asset or money market accounts and all such
similar accounts or investments;
(4)2 all accounts receivable or notes receivable arising in
the operation of the Exchange Party Stations prior to Closing;
(4)3 all tangible and intangible personal property of Exchange
Party disposed of or consumed in the ordinary course of business of Exchange
Party between the date of this Agreement and Closing;
(4)4 all Exchange Party Station Contracts that terminate or
expire prior to Closing in the ordinary course of business of Exchange Party;
(4)5 Exchange Party's name, corporate minute books, charter
documents, corporate stock record books and such other books and records as
pertain to the organization, existence or share capitalization of Exchange
Party, duplicate copies of the records of the Exchange Party Stations, and all
records not relating exclusively to the operation of the Exchange Party
Stations;
(4)6 contracts of insurance, and all insurance proceeds or
claims made thereunder;
(4)7 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 Exchange
Party; and
(4)8 any rights, properties or assets described on Schedule
1.4(h), and all rights, properties and assets not specifically described in
Section 1.3.
1.5. Shared Assets. The parties acknowledge and agree that a portion of
the Clear Channel Assets with respect to the stations licensed to Albany, New
York and Grand Rapids,
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Michigan are shared with the Retained Albany Station and Retained Michigan,
respectively ("Shared Assets"). Clear Channel and Exchange Party shall review
the equipment list for all of these stations and agree in good faith to make an
equitable division of the Shared Assets in each asset category between the
parties. Provided however, that this division shall be made such that the value
of the Shared Assets that each party receives shall be equal.
ARTICLE 2: ASSUMPTION OF OBLIGATIONS
2.1. Clear Channel Assumed Obligations. On the Closing Date, Clear
Channel shall assume the obligations of Exchange Party (the "Clear Channel
Assumed Obligations") arising after Closing under the Exchange Party Station
Contracts which have been referenced in writing to or delivered to Clear Channel
or were entered into in the ordinary course of business and which (i) do not
have a term of more than one (1) year, (ii) represent an obligation to the
Exchange Party of not more than fifty thousand dollars ($50,000.00), and (iii)
can be terminated by Exchange Party with no more than ninety (90) days notice,
including without limitation all agreements for the sale of advertising time on
the Exchange Party Stations for cash in the ordinary course of business
("Exchange Party Time Sales Agreements") and all agreements for the sale of
advertising time on the Exchange Party Stations for non-cash consideration
("Exchange Party Trade Agreements").
2.2. Exchange Party Retained Obligations. Clear Channel does not assume
or agree to discharge or perform and will not be deemed by reason 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 the consummation of the transactions contemplated hereby, to have
assumed or to have agreed to discharge or perform, any liabilities, obligations
or commitments of Exchange Party of any nature whatsoever whether accrued,
absolute, contingent or otherwise and whether or not disclosed to Clear Channel,
other than the Clear Channel Assumed Obligations (the "Exchange Party Retained
Obligations").
2.3. Exchange Party Assumed Obligations. On the Closing Date, Exchange
Party shall assume the obligations of Clear Channel (the "Exchange Party Assumed
Obligations") arising after Closing under the Clear Channel Station Contracts,
including without limitation all agreements for the sale of advertising time on
the Clear Channel Stations for cash in the ordinary course of business ("Clear
Channel Time Sales Agreements") and all agreements for the sale of advertising
time on the Clear Channel Stations for non-cash consideration ("Clear Channel
Trade Agreements").
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2.4. Clear Channel Retained Obligations. Exchange Party does not assume
or agree to discharge or perform and will not be deemed by reason 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 the consummation of the transactions contemplated hereby, to have
assumed or to have agreed to discharge or perform, any liabilities, obligations
or commitments of Clear Channel of any nature whatsoever whether accrued,
absolute, contingent or otherwise and whether or not disclosed to Exchange
Party, other than the Exchange Party Assumed Obligations (the "Clear Channel
Retained Obligations").
ARTICLE 3: CASH PAYMENT
3.1. Cash Payment. Exchange Party shall at Closing (defined below)
deliver to Clear Channel by wire transfer of immediately available funds
$67,000,000, subject to adjustment pursuant to Sections 3.3 (the "Cash
Payment").
3.2. Deposit. On the date of this Agreement, Exchange Party shall
deposit $5,000,000 (the "Deposit") with NationsBank/Bank of America (the "Escrow
Agent") pursuant to the Escrow Agreement (the "Escrow Agreement") of even date
herewith among Clear Channel, Exchange Party and the Escrow Agent. At Closing,
the Deposit shall be applied to the Cash Payment and any interest accrued on the
Deposit thereon shall be disbursed to Exchange Party. If this Agreement is
terminated by Clear Channel pursuant to Section 16.1(b) and Clear Channel is
entitled to liquidated damages pursuant to Section 16.3, the Exchange Deposit
and any interest accrued thereon shall be disbursed to Clear Channel as partial
payment of liquidated damages pursuant to Section 16.3. If this Agreement is
terminated for any other reason, the Deposit and any interest accrued thereon
shall be disbursed to Exchange Party.
3.3. Prorations and Adjustments. Except as otherwise provided herein,
all deposits, reserves and prepaid and deferred income and expenses arising from
the conduct of the business and operations of the Clear Channel Stations and
Exchange Party Stations shall be prorated in accordance with generally accepted
accounting principles as of 11:59 p.m. on the date immediately preceding the
Closing Date. Such prorations shall include, without limitation, all ad valorem,
real estate and other property taxes (but excluding transfer taxes which shall
be paid as set forth in Section 13.1), business and license fees, music and
other license fees (including any retroactive adjustments thereof), utility
expenses, amounts due or to become due under contracts, rents, lease payments
and similar prepaid and deferred items. Real estate taxes shall be apportioned
on the basis of taxes assessed for the preceding year, with a reapportionment,
if any, as soon as the new tax rate and valuation can be ascertained. 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 ninety (90) calendar days
of the Closing Date. 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 herein and such disputes shall be determined by an independent
certified public accountant mutually
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acceptable to the parties, and the fees and expenses of such accountant shall be
paid one-half by Clear Channel and one-half by Exchange Party.
3.4. Allocation.
(4)1 Subject to Section 3.1, the values of the assets
comprising the Clear Channel Station Assets and the Exchange Party Station
Assets shall be determined by an appraisal (the "Appraisal") prepared by Bond &
Pecaro (whose fees shall be paid one-half by Clear Channel and one-half by
Exchange Party). Prior to Closing, Clear Channel shall prepare and provide to
Exchange Party schedules which, for each party to this Agreement, show the
respective Clear Channel Station Assets and Exchange Party Station Assets to be
conveyed and acquired and Cash Payment to be made and received at Closing under
this Agreement.
(4)2 Before or after Closing, Clear Channel shall prepare
schedules (the "Exchange Group Schedules") which (i) divide the Exchange Party
Station Assets and the Clear Channel Station Assets into both "exchange groups"
(in accordance with the like-kind exchange rules covering exchanges of multiple
properties under Treas. Reg. section 1.1031(j)-1) and residual groups and (ii)
set forth the total value of the assets making up each such exchange group and
residual group (based upon the Appraisal). For tax purposes, the parties shall
report the exchange of assets under this Agreement consistently with the
Exchange Group Schedules and the Appraisal, including without limitation filing
when due IRS Form 8594 and (if applicable) IRS Form 8824 on the basis of the
Exchange Group Schedules and the Appraisal.
ARTICLE 4: CLOSING
4.1. Closing. The consummation of the exchange of assets under this
Agreement (the "Closing") shall occur on a date (the "Closing Date") and at a
time and place designated solely by Clear Channel after FCC Consent (defined
below) (which date may be before, but shall be not later than, five business
days after the Closing under the AMFM Agreement), subject to satisfaction or
waiver of the conditions to Closing contained herein (other than those to be
satisfied at Closing). Clear Channel shall provide Exchange Party with notice of
the Closing Date at least three (3) business days prior to the Closing, however,
Clear Channel reserves the right to extend the Closing Date without penalty,
provided, however, the Closing Date shall not be extended beyond a date which is
ninety (90) days after the satisfaction or waiver of all of the conditions to
Closing contained herein, including without limitation that the closing under
the AMFM Agreement shall have been consummated (other than those to be satisfied
at Closing). If requested by Clear Channel, prior to Closing the parties shall
hold a pre-closing conference at a time and place designated by Clear Channel,
at which the parties shall provide (for review only) all documents to be
delivered at Closing under this Agreement, each duly executed but undated,
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and otherwise confirm their ability to timely consummate the Closing. If Closing
occurs prior to the FCC Consent becoming a final order (i.e., no longer subject
to appeal), and prior to such finality the FCC Consent is reversed or otherwise
set aside pursuant to a final order of the FCC (or court of competent
jurisdiction), then the parties shall comply with such order in a manner that
otherwise complies with applicable law and returns the parties to the status quo
ante in all material respects (it being understood that in such event Exchange
Party may designate one or more third parties as the transferees of the Clear
Channel Stations).
ARTICLE 5: GOVERNMENTAL CONSENTS
Closing is subject to and conditioned upon (i) prior FCC consent (the
"FCC Consent") to the assignment of the Clear Channel FCC Licenses to Exchange
Party and the Exchange Party FCC Licenses to Clear Channel, (ii) United States
Department of Justice ("DOJ") prior approval (the "DOJ Consent") of the
transactions contemplated hereby, including without limitation any such approval
as may be necessary to enable Clear Channel to consummate the merger under the
AMFM Agreement, and (iii) expiration or termination of any applicable waiting
period ("HSR Clearance") under the HSR Act (defined below).
5.1. FCC. On a date designated by Clear Channel, Clear Channel and
Exchange Party shall file applications with the FCC (the "FCC Application")
requesting the FCC Consent. Clear Channel and Exchange Party shall diligently
prosecute the FCC Application and otherwise use their best efforts to obtain the
FCC Consent as soon as possible. If the FCC Consent imposes upon Exchange Party
any condition (including without limitation in any divestiture condition),
Exchange Party shall timely comply therewith. If the FCC Consent imposes upon
Clear Channel any condition that Clear Channel can satisfy by the payment of
$100,000.00 or less, Clear Channel shall comply therewith, but only if such
condition can be satisfied by the payment by Clear Channel of $100,000 or less.
5.2. HSR. If not previously filed, then within five (5) business days
after the execution of this Agreement, Clear Channel and Exchange Party shall
make any required filings with the Federal Trade Commission and the DOJ pursuant
to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") with respect to the transactions contemplated hereby (including a
request for early termination of the waiting period thereunder), and shall
thereafter promptly respond to all requests received from such agencies for
additional information or documentation.
5.3. General. Clear Channel and Exchange Party shall notify each other
of all documents filed with or received from any governmental agency with
respect to this Agreement or the transactions contemplated hereby. Clear Channel
and Exchange Party shall furnish each other with such information and assistance
as the other may reasonably request in connection with their preparation of any
governmental filing hereunder. If Exchange Party becomes aware of any fact
relating to it which would prevent or delay the FCC Consent, the DOJ Consent or
HSR Clearance, Exchange Party shall promptly notify Clear Channel thereof and
take such steps
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as necessary to remove such impediment, including but not limited to divesting
any stations and terminating any agreements to acquire or program or market any
stations.
ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF CLEAR CHANNEL
Clear Channel makes the following representations and warranties to
Exchange Party:
6.1. Organization. Clear Channel is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, and
is qualified to do business in each jurisdiction in which the Clear Channel
Station Assets and the Exchange Party Station Assets are located. Clear Channel
has the requisite power and authority to execute and deliver this Agreement and
all of the other agreements and instruments to be executed and delivered by
Clear Channel pursuant hereto (collectively, the "Clear Channel Ancillary
Agreements"), to consummate the transactions contemplated hereby and thereby and
to comply with the terms, conditions and provisions hereof and thereof.
6.2. Authorization. The execution, delivery and performance of this
Agreement and the Clear Channel Ancillary Agreements by Clear Channel have been
duly authorized and approved by all necessary action of Clear Channel and do not
require any further authorization or consent of Clear Channel. This Agreement
is, and each Clear Channel Ancillary Agreement when executed and delivered by
Clear Channel and the other parties thereto will be, a legal, valid and binding
agreement of Clear Channel enforceable in accordance with its respective terms,
except in each case as such enforceability may be limited by bankruptcy,
moratorium, insolvency, reorganization or other similar laws affecting or
limiting the enforcement of creditors' rights generally and except as such
enforceability is subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
6.3. No Conflicts. Neither the execution and delivery by Clear Channel
of this Agreement and the Clear Channel Ancillary Agreements or the consummation
by Clear Channel of any of the transactions contemplated hereby or thereby nor
compliance by Clear Channel with or fulfillment by Clear Channel of the terms,
conditions and provisions hereof or thereof will: (i) conflict with any
organizational documents of Clear Channel or any law, judgment, order, or decree
to which Clear Channel is subject or, except as set forth on Schedule 1.1(c),
any Clear Channel Station Contract; or (ii) require the approval, consent,
authorization or act of, or the making by Clear Channel of any declaration,
filing or registration with, any third party or any foreign, federal, state or
local court, governmental or regulatory authority or body, except the FCC
Consent and DOJ Consent, and, if applicable, HSR Clearance.
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6.4. FCC Licenses. Clear Channel (or one of the companies comprising
Clear Channel) is the holder of the Clear Channel FCC Licenses described on
Schedule 1.1(a) which lists all of the material Clear Channel FCC Licenses for
the Clear Channel Stations. The Clear Channel FCC Licenses are in full force and
effect and have not been revoked, suspended, canceled, rescinded or terminated
and have not expired. Except as described on Schedule 1.1(a), to the actual
knowledge of the station general managers of any of the Clear Channel Stations,
(i) each Clear Channel Station is operating with maximum power and facilities
specified in the respective Clear Channel License, (ii) none of the Clear
Channel Stations is causing objectionable interference to the transmissions of
any other broadcast station or communications facility and (iii) no other
broadcast station or communications facility is causing objectionable
interference to the transmissions of any Clear Channel Station. There is not
pending any action by or before the FCC to revoke, suspend, cancel, rescind or
materially adversely modify any of the Clear Channel FCC Licenses (other than
proceedings to amend FCC rules of general applicability), and there is not now
issued or outstanding, by or before the FCC, any order to show cause, notice of
violation, notice of apparent liability, or notice of forfeiture against Clear
Channel with respect to the Clear Channel Stations. The Clear Channel Stations
are operating in compliance in all material respects with the Clear Channel FCC
Licenses, the Communications Act of 1934, as amended (the "Communications Act"),
and the rules, regulations and policies of the FCC.
6.5. Taxes. Clear Channel has, in respect of the Clear Channel
Stations' business, filed all foreign, federal, state, county and local income,
excise, property, sales, use, franchise and other tax returns and reports which
are required to have been filed by it under applicable law and has paid all
taxes which have become due pursuant to such returns or pursuant to any
assessments which have become payable.
6.6. Personal Property. Schedule 1.1(b) contains a list of all material
items of Clear Channel Tangible Personal Property included in the Clear Channel
Station Assets. Clear Channel has title to the Clear Channel Tangible Personal
Property free and clear of Liens other than Clear Channel Permitted Liens. The
items of Clear Channel Tangible Personal Property listed on Schedule 1.1(b) are
in all material respects in good working condition, ordinary wear and tear
excepted.
6.7. Real Property. Schedule 1.1(f) contains a description of all
material real property used by Clear Channel in the operation of the Clear
Channel Stations. Clear Channel has fee simple title to the owned Clear Channel
Real Property ("Clear Channel Owned Real Property") free and clear of Liens
other than Clear Channel Permitted Liens. Schedule 1.1(f) includes a description
of each material real property lease or similar agreement included in the Clear
Channel Station Assets (the "Clear Channel Real Property Leases"). The Clear
Channel Owned Real Property includes, and the Clear Channel Real Property Leases
provide, access to the Clear Channel Stations' facilities. To Clear Channel's
knowledge, the Clear Channel Real Property is not subject to any suit for
condemnation or other taking by any public authority. Except as described on
Schedule 1.1(f), to the actual knowledge of the station general managers of any
of the Clear Channel Stations, none of the buildings, structures, improvements
or fixtures constructed on any of
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the Clear Channel Owned Real Property encroach upon adjoining real property
("Clear Channel Encroachment Representation").
6.8. Contracts. Schedule 1.1(c) contains a description of all material
Clear Channel Station Contracts. Each of the Clear Channel Station Contracts
(including without limitation each of the Clear Channel Real Property Leases) is
in effect and is binding upon Clear Channel and, to Clear Channel's knowledge,
the other parties thereto (subject to bankruptcy, insolvency, reorganization or
other similar laws relating to or affecting the enforcement of creditors' rights
generally). Clear Channel has performed its obligations under each of the Clear
Channel Station Contracts in all material respects, and is not in material
default thereunder, and to Clear Channel's knowledge, no other party to any of
the Clear Channel Station Contracts is in default thereunder in any material
respect.
6.9. Environmental. Except as set forth in any environmental report
delivered by Clear Channel to Exchange Party prior to the date of this Agreement
and except as set forth on Schedule 1.1(f), to Clear Channel's knowledge, no
hazardous or toxic substance or waste regulated under any applicable
environmental, health or safety law has been generated, stored, transported or
released on, in, from or to the Clear Channel Real Property included in the
Clear Channel Station Assets. Except as set forth in any environmental report
delivered by Clear Channel to Exchange Party prior to the date of this Agreement
and except as set forth on Schedule 1.1(f), to Clear Channel's knowledge, Clear
Channel has complied in all material respects with all environmental, health and
safety laws applicable to the Clear Channel Stations.
6.10. Intangible Property. Schedule 1.1(d) contains a description of
the material Clear Channel Intangible Property included in the Clear Channel
Station Assets. Except as set forth on Schedule 1.1(d), Clear Channel has
received no notice of any claim that its use of the Clear Channel Intangible
Property infringes upon any third party rights. . Except as set forth on
Schedule 1.1(d), Clear Channel owns or has the right to use the Clear Channel
Intangible Property free and clear of Liens other than Clear Channel Permitted
Liens.
6.11. Compliance with Law. Clear Channel has complied in all material
respects with all laws, regulations, rules, writs, injunctions, ordinances,
franchises, decrees or orders of any court or of any foreign, federal, state,
municipal or other governmental authority which are applicable to the operation
of the Clear Channel Stations. There is no action, suit or proceeding pending or
threatened against Clear Channel in respect of the Clear Channel Stations that
will subject Exchange Party to liability or which questions the legality or
propriety of the transactions contemplated by this Agreement. To Clear Channel's
knowledge, there are no governmental
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claims or investigations pending or threatened against Clear Channel in respect
of the Clear Channel Stations (except those affecting the industry generally).
6.12. No Finder. No broker, finder or other person is entitled to a
commission, brokerage fee or other similar payment in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or action of Clear Channel or any party acting on Clear Channel's behalf.
6.13. Qualification. Clear Channel is legally, financially and
otherwise qualified to be the licensee of, acquire, own and operate the Exchange
Party Stations under the Communications Act and the rules, regulations and
policies of the FCC. There are no facts that would, under existing law and the
existing rules, regulations, policies and procedures of the FCC, disqualify
Clear Channel as an assignee of the Exchange Party FCC Licenses or as the owner
and operator of the Exchange Party Stations. No request by Clear Channel for
waiver of any FCC rule or policy is necessary for the FCC Consent to be
obtained. There is no action, suit or proceeding pending or threatened against
Clear Channel which could materially adversely affect Clear Channel's ability to
perform its obligations hereunder.
6.14. Financial Statements. Clear Channel has delivered to Exchange
Party copies of the unaudited results of operations of the Clear Channel
Stations for the twelve months ended December 31, 1999. Such financial
statements (and the monthly income statements to be supplied pursuant to Section
9.1(c)) were or will be prepared in accordance with the books and records of the
Clear Channel Stations and present (or will present) fairly the results of
operations for the period indicated.
ARTICLE 7: REPRESENTATIONS AND WARRANTIES OF EXCHANGE PARTY
Exchange Party makes the following representations and warranties to
Clear Channel:
7.1. Organization. Exchange Party is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, and
is qualified to do business in each jurisdiction in which the Exchange Party
Station Assets and the Clear Channel Station Assets are located. Exchange Party
has the requisite power and authority to execute and deliver this Agreement and
all of the other agreements and instruments to be executed and delivered by
Exchange Party pursuant hereto (collectively, the "Exchange Party Ancillary
Agreements"), to consummate the transactions contemplated hereby and thereby and
to comply with the terms, conditions and provisions hereof and thereof.
7.2. Authorization. The execution, delivery and performance of this
Agreement and the Exchange Party Ancillary Agreements by Exchange Party have
been duly authorized and approved by all necessary action of Exchange Party and
do not require any further authorization or consent of Exchange Party. This
Agreement is, and each Exchange Party Ancillary Agreement when executed and
delivered by Exchange Party and the other parties thereto will be,
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a legal, valid and binding agreement of Exchange Party enforceable in accordance
with its respective terms, except in each case as such enforceability may be
limited by bankruptcy, moratorium, insolvency, reorganization or other similar
laws affecting or limiting the enforcement of creditors' rights generally and
except as such enforceability is subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
7.3. No Conflicts. Neither the execution and delivery by Exchange Party
of this Agreement and the Exchange Party Ancillary Agreements or the
consummation by Exchange Party of any of the transactions contemplated hereby or
thereby nor compliance by Exchange Party with or fulfillment by Exchange Party
of the terms, conditions and provisions hereof or thereof will: (i) conflict
with any organizational documents of Exchange Party or any law, judgment, order,
or decree to which Exchange Party is subject or, except as set forth on Schedule
1.3(c), any Exchange Party Station Contract; or (ii) require the approval,
consent, authorization or act of, or the making by Exchange Party of any
declaration, filing or registration with, any third party or any foreign,
federal, state or local court, governmental or regulatory authority or body,
except the FCC Consent and DOJ Consent and, if applicable, HSR Clearance.
7.4.
7.5. FCC Licenses. Exchange Party is the holder of the Exchange Party
FCC Licenses described on Schedule 1.3(a) which lists all of the material
Exchange Party FCC Licenses for the Exchange Party Stations. The Exchange Party
FCC Licenses are in full force and effect and have not been revoked, suspended,
canceled, rescinded or terminated and have not expired. Except as described on
Schedule 1.3(a), to the actual knowledge of the station general managers of any
of the Exchange Party Stations, (i) each Exchange Party Station is operating
with maximum power and facilities specified in the respective Exchange Party
License, (ii) none of the Exchange Party Stations is causing objectionable
interference to the transmissions of any other broadcast station or
communications facility and (iii) no other broadcast station or communications
facility is causing objectionable interference to the transmissions of any
Exchange Party Station. There is not pending any action by or before the FCC to
revoke, suspend, cancel, rescind or materially adversely modify any of the
Exchange Party FCC Licenses (other than proceedings to amend FCC rules of
general applicability), and there is not now issued or outstanding, by or before
the FCC, any order to show cause, notice of violation, notice of apparent
liability, or notice of forfeiture against Exchange Party with respect to the
Exchange Party Stations. The Exchange Party Stations are operating in compliance
in all material respects with the Exchange Party FCC Licenses, the
Communications Act, and the rules, regulations and policies of the FCC.
7.6. Taxes. Exchange Party has, in respect of the Exchange Party
Stations' business, filed all foreign, federal, state, county and local income,
excise, property, sales, use, franchise
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and other tax returns and reports which are required to have been filed by it
under applicable law and has paid all taxes which have become due pursuant to
such returns or pursuant to any assessments which have become payable.
7.7. Personal Property. Schedule 1.3(b) contains a list of all material
items of Exchange Party Tangible Personal Property included in the Exchange
Party Station Assets. Exchange Party has title to the Exchange Party Tangible
Personal Property free and clear of Liens other than Exchange Party Permitted
Liens. The items of Exchange Party Tangible Personal Property listed on Schedule
1.3(b) are in all material respects in good working condition, ordinary wear and
tear excepted.
7.8. Real Property. Schedule 1.3(f) contains a description of all
material real property used by Exchange Party in the operation of the Exchange
Party Stations. Exchange Party has fee simple title to the owned Exchange Party
Real Property ("Exchange Party Owned Real Property") free and clear of Liens
other than Exchange Party Permitted Liens. Schedule 1.3(f) includes a
description of each material real property lease or similar agreement included
in the Exchange Party Station Assets (the "Exchange Party Real Property
Leases"). The Exchange Party Owned Real Property includes, and the Exchange
Party Real Property Leases provide, access to the Exchange Party Stations'
facilities. To Exchange Party's knowledge, the Exchange Party Real Property is
not subject to any suit for condemnation or other taking by any public
authority. Except as described in Schedule 1.3(f), to the actual knowledge of
the station general managers of any of the Exchange Party Stations, none of the
buildings, structures, improvements or fixtures constructed on any of the Clear
Channel Owned Real Property encroach upon adjoining real property ("Exchange
Party Encroachment Representation").
7.9. Contracts. Schedule 1.3(c) contains a description of all material
Exchange Party Station Contracts. Each of the Exchange Party Station Contracts
(including without limitation each of the Exchange Party Real Property Leases)
is in effect and is binding upon Exchange Party and, to Exchange Party's
knowledge, the other parties thereto (subject to bankruptcy, insolvency,
reorganization or other similar laws relating to or affecting the enforcement of
creditors' rights generally). Exchange Party has performed its obligations under
each of the Exchange Party Station Contracts in all material respects, and is
not in material default thereunder, and to Exchange Party's knowledge, no other
party to any of the Exchange Party Station Contracts is in default thereunder in
any material respect.
7.10. Environmental. Except as set forth in any environmental report
delivered by Exchange Party to Clear Channel prior to the date of this Agreement
and except as set forth on Schedule 1.3(f), to Exchange Party's knowledge, no
hazardous or toxic substance or waste regulated under any applicable
environmental, health or safety law has been generated, stored, transported or
released on, in, from or to the Exchange Party Real Property included in the
Exchange Party Station Assets. Except as set forth in any environmental report
delivered by Exchange Party to Clear Channel prior to the date of this Agreement
and except as set forth on Schedule 1.3(f), to Exchange Party's knowledge,
Exchange Party has complied in all material
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respects with all environmental, health and safety laws applicable to the
Exchange Party Stations.
7.11. Intangible Property. Schedule 1.3(d) contains a description of
the material Exchange Party Intangible Property included in the Exchange Party
Station Assets. Except as set forth on Schedule 1.3(d), Exchange Party has
received no notice of any claim that its use of the Exchange Party Intangible
Property infringes upon any third party rights. . Except as set forth on
Schedule 1.3(d), Exchange Party owns or has the right to use the Exchange Party
Intangible Property free and clear of Liens other than Exchange Party Permitted
Liens.
7.12. Compliance with Law. Exchange Party has complied in all material
respects with all laws, regulations, rules, writs, injunctions, ordinances,
franchises, decrees or orders of any court or of any foreign, federal, state,
municipal or other governmental authority which are applicable to the operation
of the Exchange Party Stations. There is no action, suit or proceeding pending
or threatened against Exchange Party in respect of the Exchange Party Stations
that will subject Clear Channel to liability or which questions the legality or
propriety of the transactions contemplated by this Agreement. To Exchange
Party's knowledge, there are no governmental claims or investigations pending or
threatened against Exchange Party in respect of the Exchange Party Stations
(except those affecting the industry generally).
7.13. No Finder. No broker, finder or other person is entitled to a
commission, brokerage fee or other similar payment in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or action of Exchange Party or any party acting on Exchange Party's behalf.
7.14. Qualification. Exchange Party is legally, financially and
otherwise qualified to be the licensee of, acquire, own and operate the Clear
Channel Stations under the Communications Act and the rules, regulations and
policies of the FCC. There are no facts that would, under existing law and the
existing rules, regulations, policies and procedures of the FCC, disqualify
Exchange Party as an assignee of the Clear Channel FCC Licenses or as the owner
and operator of the Clear Channel Stations. No request by Exchange Party for
waiver of any FCC rule or policy is necessary for the FCC Consent to be
obtained. There is no action, suit or proceeding pending or threatened against
Exchange Party which could materially adversely affect Exchange Party's ability
to perform its obligations hereunder. Exchange Party has and will have available
on the Closing Date sufficient funds to enable it to consummate the transactions
contemplated hereby.
7.15. Financial Statements. Exchange Party has delivered to Clear
Channel copies of the unaudited results of operations of the Exchange Party
Stations for the twelve months ended December 31, 1999. Such financial
statements (and the monthly income statements to be
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supplied pursuant to Section 9.2(c)) prepared in accordance with the books and
records of the Exchange Party Stations and present (or will present) fairly the
results of operations for the period indicated.
ARTICLE 8: ACCOUNTS RECEIVABLE
8.1. Clear Channel Accounts Receivable. All accounts receivable arising
prior to the Closing Date in connection with the operation of the Clear Channel
Stations, including but not limited to accounts receivable for advertising
revenues for programs and announcements performed prior to the Closing Date and
other broadcast revenues for services performed prior to the Closing Date, shall
remain the property of Clear Channel (the "Clear Channel Accounts Receivable")
and Exchange Party shall not acquire any right or interest therein. For a period
of six months from Closing (the "Collection Period"), Exchange Party shall
collect the Clear Channel Accounts Receivable in the normal and ordinary course
of Exchange Party's business and shall apply all such amounts collected to the
debtor's oldest account receivable first. Exchange Party's obligation shall not
extend to the institution of litigation, employment of counsel or a collection
agency or any other extraordinary means of collection. During the Collection
Period, neither Clear Channel nor its agents shall make any direct solicitation
of any such account debtor for collection purposes or institute litigation for
the collection of amounts due. Any amounts relating to the Clear Channel
Accounts Receivable that are paid directly to Clear Channel shall be retained by
Clear Channel (and it shall inform Exchange Party thereof). Within ten calendar
days after the end of each month, Exchange Party shall make a payment to Clear
Channel equal to the amount of all collections of Clear Channel Accounts
Receivable during the preceding month. At the end of the Collection Period, any
remaining Clear Channel Accounts Receivable shall be returned to Clear Channel
for collection.
8.2. Exchange Party Accounts Receivable. All accounts receivable
arising prior to the Closing Date in connection with the operation of the
Exchange Party Stations, including but not limited to accounts receivable for
advertising revenues for programs and announcements performed prior to the
Closing Date and other broadcast revenues for services performed prior to the
Closing Date, shall remain the property of Exchange Party (the "Exchange Party
Accounts Receivable") and Clear Channel shall not acquire any right or interest
therein. During the Collection Period, Clear Channel shall collect the Exchange
Party Accounts Receivable in the normal and ordinary course of Clear Channel's
business and shall apply all such amounts collected to the debtor's oldest
account receivable first. Clear Channel's obligation shall not extend to the
institution of litigation, employment of counsel or a collection agency or any
other extraordinary means of collection. During the Collection Period, neither
Exchange Party nor its agents shall make any direct solicitation of any such
account debtor for collection purposes or institute litigation for the
collection of amounts due. Any amounts relating to the Exchange Party Accounts
Receivable that are paid directly to Exchange Party shall be retained by
Exchange Party (and it shall inform Clear Channel thereof). Within ten calendar
days after the end of each month, Clear Channel shall make a payment to Exchange
Party equal to the amount
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of all collections of Exchange Party Accounts Receivable during the preceding
month. At the end of the Collection Period, any remaining Exchange Party
Accounts Receivable shall be returned to Exchange Party for collection.
ARTICLE 9: COVENANTS
9.1. Clear Channel's Covenants. Clear Channel covenants and agrees with
respect to the Clear Channel Stations that, between the date hereof and Closing,
except as permitted by this Agreement or with the prior written consent of
Exchange Party, which shall not be unreasonably withheld, Clear Channel shall:
(1)1 operate the Clear Channel Stations in the ordinary course
of business consistent with past practice, including retaining the current
format and programming (including the content thereof) and spending for
promotions, advertising and research at levels shown on budgets delivered to
Exchange Party and in all material respects in accordance with FCC rules and
regulations and with all other applicable laws, regulations, rules and orders;
(1)2 not, other than in the ordinary course of business in
accordance with past practice, (i) sell, lease or dispose of or agree to sell,
lease or dispose of any of the Clear Channel Station Assets, (ii) create, assume
or permit to exist any Liens upon the Clear Channel Station Assets, except for
Clear Channel Permitted Liens, (iii) amend or terminate any Clear Channel
Station Contract or enter into any new contracts (except for Clear Channel Time
Sales Agreements) which (x) have a term of more than one (1) year, (y) represent
an obligation to Clear Channel of more than fifty thousand dollars ($50,000.00),
and (z) can't be terminated by Clear Channel with no more than ninety (90) days
notice, or (iv) except as provided for by the Clear Channel budgets delivered to
Exchange Party, grant any increases in the compensation of its employees;
(1)3 furnish Exchange Party with such information relating to
the Clear Channel Station Assets as Exchange Party may reasonably request
(including weekly sales projections and monthly income statements), at Exchange
Party's expense and provided such request does not interfere unreasonably with
the business of the Clear Channel Stations, and provide Exchange Party access to
the Clear Channel Stations, Station Assets and personnel upon reasonable request
and notice to Clear Channel.
9.2. Exchange Party's Covenants. Exchange Party covenants and agrees
with respect to the Exchange Party Stations that, between the date hereof and
Closing, except as permitted by this Agreement or with the prior written consent
of Clear Channel, which shall not be unreasonably withheld, Exchange Party
shall:
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(2)1 operate the Exchange Party Stations in the ordinary
course of business consistent with past practice, including retaining the
current format and programming (including the content thereof) and spending for
promotions, advertising and research at levels shown on budgets delivered to
Clear Channel and in all material respects in accordance with FCC rules and
regulations and with all other applicable laws, regulations, rules and orders;
(2)2 not, other than in the ordinary course of business in
accordance with past practice, (i) sell, lease or dispose of or agree to sell,
lease or dispose of any of the Exchange Party Station Assets, (ii) create,
assume or permit to exist any Liens upon the Exchange Party Station Assets,
except for Exchange Party Permitted Liens, (iii) amend or terminate any Exchange
Party Station Contract or enter into any new contracts (except for Exchange
Party Time Sales Agreements) which (x) have a term of more than one (1) year,
(y) represent an obligation to Exchange Party of more than fifty thousand
dollars ($50,000.00), and (z) can't be terminated by Exchange Party with no more
than ninety (90) days notice, or (iv) except as provided for by the Exchange
Party budgets delivered to Clear Channel, grant any increases in the
compensation of its employees;
(2)3 furnish Clear Channel with such information relating to
the Exchange Party Station Assets as Clear Channel may reasonably request
including weekly sales projections and monthly income statements, at Clear
Channel's expense and provided such request does not interfere unreasonably with
the business of the Exchange Party Stations, and provide Clear Channel access to
the Exchange Party Stations, Station Assets and personnel upon reasonable
request and notice to Exchange Party.
ARTICLE 10: JOINT COVENANTS
Clear Channel and Exchange Party hereby covenant and agree that between
the date hereof and Closing:
10.1. Cooperation. Subject to express limitations contained elsewhere
herein, each party (i) shall 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 prompt satisfaction of any condition
to Closing set forth herein, and (ii) shall not take any action that conflicts
with its obligations hereunder or that causes its representations and warranties
to become untrue in any material respect.
10.2. Control of Stations. Neither party shall, directly or indirectly,
control, supervise or direct the operations of the other party's stations prior
to Closing. Such operations, including complete control and supervision of all
programs, employees and policies, shall be the sole responsibility of the FCC
licensee thereof.
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10.3. Consents to Assignment. The parties shall use commercially
reasonable efforts to obtain any third party consents necessary for the
assignment of any Clear Channel Station Contract or Exchange Party Station
Contract (which shall not require any payment to any such third party). To the
extent that any such contract may not be assigned without the consent of any
third party, and such consent is not obtained prior to Closing, this Agreement
and any assignment executed pursuant hereto shall not constitute an assignment
thereof, but to the extent permitted by law shall constitute an equitable
assignment and assumption of rights and obligations thereunder, with the
conveying party making available to the acquiring party the benefits thereof and
the acquiring party performing the obligations thereunder on the conveying
party's behalf; provided, however, the conveying party shall indemnify (pursuant
to Article 15 of this Agreement) the acquiring party for Damages (as hereafter
defined) as a result of the conveying party's failure to have obtained a consent
to assignment with respect to any of the leases for the main transmitter sites
and studio sites listed on Schedule 1.1(f) and included in Section 1.3(f)
including but not limited to those listed on Schedule 1.3(f) respectively.
10.4. Employee Matters. Clear Channel has provided, and Exchange Party
shall provide within three (3) days of the execution of this Agreement to the
other party a list (with name, position and base salary) of all of their
respective employees employed at the Clear Channel Stations and the Exchange
Party Stations and who work primarily for those stations. Exchange Party may
interview and elect to hire any or all of the Clear Channel employees on the
list (i) employed at the Clear Channel Stations licensed to Grand Rapids,
Michigan and (ii) employed at the Clear Channel Stations licensed to Albany, New
York who work primarily for those Clear Channel Stations (including without
limitation any member of the sales staff who primarily sells for or represents
radio station WQBJ-FM or WQBK-FM). Clear Channel may interview and elect to hire
any or all of the Exchange Party employees on the list. The acquiring party is
obligated to hire only those employees that are under employment contracts (and
assume the obligations and liabilities under such employment contracts) which
are included in the Clear Channel Station Contracts or Exchange Party Station
Contracts. With respect to employees hired by the acquiring party ("Transferred
Employees"), to the extent permitted by law the conveying party shall provide
access to its personnel records and such other information as may be reasonably
requested prior to Closing. For a period of twelve (12) months after Closing,
neither party will hire, solicit or induce for hire or make any offer or attempt
to hire, any of the Transferred Employees hired by the other party. Provided,
however, either party may six (6) months after Closing (but not before) hire or
solicit for hire any of its former employees who are not Transferred Employees.
With respect to such hired employees, the conveying party shall be responsible
for the payment of all compensation and accrued employee benefits payable by it
until Closing and thereafter the acquiring party shall be responsible for all
such obligations payable by it. The acquiring party shall cause all employees it
hires to be eligible to participate
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in its "employee welfare benefit plans" and "employee pension benefit plans" (as
defined in Section 3(1) and 3(2) of ERISA, respectively) in which similarly
situated employees are generally eligible to participate; provided, however,
that all such employees and their spouses and dependents shall be eligible for
coverage immediately after Closing (and shall not be excluded from coverage on
account of any pre-existing condition) to the extent provided under such
employee welfare benefit plans. For purposes of any length of service
requirements, waiting periods, vesting periods or differential benefits based on
length of service in any such employee welfare benefit plans for which such
employees may be eligible after Closing, the acquiring party shall ensure that
service with the conveying party shall be deemed to have been service with the
acquiring party. No such service credit must be granted with respect to
participation or eligibility in any employee pension benefit plan. In addition,
the acquiring party shall ensure that each such employee receives credit under
any welfare benefit plan of the acquiring party for any deductibles or
co-payments paid by such employees and dependents for the current plan year
under a plan maintained by the conveying party. Notwithstanding any other
provision contained herein, the acquiring party shall grant credit to each such
employee for all unused sick leave accrued as of Closing as an employee of the
conveying party. Notwithstanding any other provision contained herein, the
acquiring party shall assume and discharge the conveying party's liabilities for
the payment of all unused vacation leave accrued by such employees as of
Closing. From and after the Closing, Exchange Party shall cooperate with the
reasonable requests of Clear Channel to continue to withhold from the pay checks
of Transferred Employees who have outstanding loan balances in Clear Channel's
401(k) Savings Plan, and Exchange Party shall remit such withheld amounts to
Clear Channel in a timely fashion such that the outstanding loans do not go into
default.
10.5. 1031 Exchange. At or prior to Closing, Clear Channel may assign
its rights under this Agreement (in whole or in part) to a qualified
intermediary (as defined in Treasury regulation section 1.1031(k)-1(g)(4)) or
similar entity or arrangement ("Qualified Intermediary"). Upon any such
assignment, Clear Channel shall promptly give written notice thereof to Exchange
Party and Exchange Party shall cooperate with the reasonable requests of Clear
Channel and any Qualified Intermediary in connection therewith. Without limiting
the generality of the foregoing, if Clear Channel gives notice of such
agreement, Exchange Party shall (i) promptly provide Clear Channel with written
acknowledgment of such notice and (ii) at Closing, convey all or part of the
Exchange Party Station Assets and make all or part of the Cash Payment (each as
designated in writing by the Qualified Intermediary) to or on behalf of the
Qualified Intermediary (which payment and conveyance shall, to the extent
thereof, satisfy the obligation of Exchange Party to make such conveyance and
payment hereunder). Clear Channel's assignment to a Qualified Intermediary will
not relieve Clear Channel of any of its duties or obligations herein. Except for
the obligations of Exchange Party set forth in this Section, Exchange Party
shall not have any liability or obligation to Clear Channel for the failure of
such other exchange to qualify as a like kind exchange under Section 1031 of the
Code unless such failure is the result of the material breach or default by
Exchange Party under this Agreement.
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10.6. Trust. Notwithstanding anything in this Agreement to the
contrary, Clear Channel may at it option assign this Agreement (in whole or
part) and assign and transfer the Clear Channel Station Assets (in whole or in
part) to a trustee to hold and operate pursuant to a trust agreement, provided
such trustee assumes Clear Channel's duties and obligations hereunder with
respect to the Clear Channel Station Assets held in such trust.
ARTICLE 11: CONDITIONS OF CLOSING BY CLEAR CHANNEL
The obligations of Clear Channel hereunder are, at its option, subject
to satisfaction, at or prior to Closing, of each of the following conditions:
11.1. Representations, Warranties and Covenants. The representations
and warranties of Exchange Party made in this Agreement shall be true and
correct in all material respects as of the Closing Date except for changes
permitted or contemplated by the terms of this Agreement, and the covenants and
agreements to be complied with and performed by Exchange Party at or prior to
Closing shall have been complied with or performed in all material respects.
Clear Channel shall have received a certificate dated as of the Closing Date
from Exchange Party, executed by an authorized officer of Exchange Party to the
effect that the conditions set forth in this Section have been satisfied.
11.2. Governmental Consents. The FCC Consent and DOJ Consent, and, if
applicable, HSR Clearance, shall have been obtained, and no court or
governmental order prohibiting Closing shall be in effect.
11.3. AMFM Closing. The closing under the AMFM Agreement shall have
been consummated.
ARTICLE 12: CONDITIONS OF CLOSING BY EXCHANGE PARTY
The obligations of Exchange Party hereunder are, at its option, subject
to satisfaction, at or prior to Closing, of each of the following conditions:
12.1. Representations, Warranties and Covenants. The representations
and warranties of Clear Channel made in this Agreement shall be true and correct
in all material respects as of the Closing Date except for changes permitted or
contemplated by the terms of this Agreement, and the covenants and agreements to
be complied with and performed by Clear Channel at or prior to Closing shall
have been complied with or performed in all material respects. Exchange Party
shall have received a certificate dated as of the Closing Date from Clear
Channel, executed
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by an authorized officer of Clear Channel, to the effect that the conditions set
forth in this Section have been satisfied.
12.2. Governmental Consents. The FCC Consent and DOJ Consent, and, if
applicable, HSR Clearance, shall have been obtained, and no court or
governmental order prohibiting Closing shall be in effect.
ARTICLE 13: EXPENSES
13.1. Expenses. Each party 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, except that (i)
all recordation, transfer and documentary taxes, fees and charges, and any
excise, sales or use taxes, applicable to the transfer of the Clear Channel
Station Assets and Exchange Party Station Assets shall be paid by the
transferring party, (ii) all FCC filing fees shall be paid equally by Clear
Channel and Exchange Party, and (iii) all HSR Act filing fees and expenses shall
be paid equally by Exchange Party and Clear Channel.
ARTICLE 14: DOCUMENTS TO BE DELIVERED AT CLOSING
14.1. Clear Channel's Documents. At Closing, Clear Channel shall
deliver or cause to be delivered to Exchange Party:
14.2.
(i) certified copies of resolutions authorizing its execution,
delivery and performance of this Agreement, including the consummation of the
transactions contemplated hereby;
(ii) the certificate described in Section 12.1;
(iii) such bills of sale, assignments, special warranty deeds,
documents of title and other instruments of conveyance, assignment and transfer
as may be necessary to convey, transfer and assign the Clear Channel Station
Assets to Exchange Party, free and clear of Liens, except for Clear Channel
Permitted Liens; and
(iv) such documents and instruments of assumption as may be
necessary to assume the Exchange Party Assumed Obligations.
14.3. Exchange Party's Documents. At Closing, Exchange Party shall
deliver or cause to be delivered to Clear Channel:
(i) the certified copies of resolutions authorizing its
execution, delivery and performance of this Agreement, including the
consummation of the transactions contemplated hereby;
(ii) the certificate described in Section 11.1;
(iii) such bills of sale, assignments, special warranty deeds,
documents of title and other instruments of conveyance, assignment and transfer
as may be necessary to convey, transfer and assign the Exchange Party Station
Assets to Clear Channel, free and clear of Liens, except for Exchange Party
Permitted Liens;
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(iv) such documents and instruments of assumption as may be
necessary to assume the Clear Channel Assumed Obligations; and
(v) the Cash Payment in accordance with Section 3.1 hereof.
ARTICLE 15: SURVIVAL; INDEMNIFICATION.
15.1. Survival. The covenants, agreements, representations and
warranties in this Agreement shall survive Closing for a period of six (6)
months from the Closing Date whereupon they shall expire and be of no further
force or effect, except those under (i) this Article 15 that relate to Damages
(defined below) for which written notice is given by the indemnified party to
the indemnifying party prior to the expiration, which shall survive until
resolved and (ii) Sections 2.1 and 2.3 (Assumed Obligations), 2.2 and 2.4
(Retained Obligations), 3.3 (Adjustments), 3.4 (Allocation), 8.1 and 8.2
(Accounts Receivable) and 13.1 (Expenses) (collectively, the "Payment
Provisions"), and indemnification obligations with respect to such provisions,
which shall survive until performed.
15.2. Indemnification.
(2)1 From and after the Closing, Clear Channel shall defend,
indemnify and hold harmless Exchange Party from and against any and all losses,
costs, damages, liabilities and expenses, including reasonable attorneys' fees
and expenses ("Damages") incurred by Exchange Party arising out of or resulting
from: (i) any breach or default by Clear Channel under this Agreement; (ii) the
Clear Channel Retained Obligations or the business or operation of the Clear
Channel Stations before Closing; or (iii) the Clear Channel Assumed Obligations
or the business or operation of the Exchange Party Stations after Closing;
provided, however, that for matters other than the Payment Provisions, Clear
Channel shall have no liability to Exchange Party hereunder until, and only to
the extent that, Exchange Party's aggregate Damages exceed $100,000, (except for
Damages (x) for any Liens not in compliance with subsection (iii) of the last
paragraph of 1.1 ("Clear Channel Lien Default") or (y) for breach of the Clear
Channel Encroachment Representation ("Clear Channel Encroachment Default") for
which Clear Channel shall have liability for all such Damages under $500,000 and
in excess of $600,000) and the maximum liability of Clear Channel in all cases
of indemnification hereunder shall be $7,000,000.
(2)2 From and after the Closing, Exchange Party shall defend,
indemnify and hold harmless Clear Channel from and against any and all Damages
incurred by Clear Channel arising out of or resulting from: (i) any breach or
default by Exchange Party under this Agreement; (ii) the Exchange Party Retained
Obligations or the business or operation of the Exchange Party Stations before
Closing or (iii) the Exchange Party Assumed Obligations or the
25
<PAGE> 26
business or operation of the Clear Channel Stations after Closing; provided,
however, that for matters other than the Payment Provisions and the Cash
Payment, Exchange Party shall have no liability to Clear Channel hereunder
until, and only to the extent that, Clear Channel's aggregate Damages exceed
$100,000 (except for Damages (x) for any Liens not in compliance with subsection
(iii) of the last paragraph of 1.3 ("Exchange Party Lien Default") or (y) for
breach of the Exchange Party Encroachment Representation ("Exchange Party
Encroachment Default") for which the Exchange Party shall have liability for all
such Damages under $500,000 and in excess of $600,000) and (ii) the maximum
liability of Exchange Party in all cases of indemnification hereunder shall be
$7,000,000.
Provided, however, the parties agree that before making a claim for
Damages for Clear Channel Lien Default, Clear Channel Encroachment Default,
Exchange Party Lien Default or Exchange Party Encroachment Default,
respectively, they both shall use their reasonable best efforts to allow the
breaching party to avoid or cure any such default and Damages through the use of
lease, contract or any other reasonable arrangements.
15.3. Procedures. The indemnified party shall give prompt written
notice 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 (a "Claim"),
but a failure to give such notice or delaying 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, except to the extent the
indemnifying party's ability to remedy, contest, defend or settle with respect
to such Claim is thereby prejudiced. The obligations and liabilities of the
parties with respect to any Claim shall be subject to the following additional
terms and conditions:
(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.
(3)2 In the event that the indemnifying party shall elect not
to undertake such defense or opposition, or, within twenty (20) days after
written notice (which shall include sufficient description of background
information explaining the basis for such Claim) of any such Claim from the
indemnified party, the indemnifying party shall fail to undertake 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).
(3)3 Anything herein to the contrary notwithstanding: (i) 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;
(ii) the indemnifying party shall not, without the
26
<PAGE> 27
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 (iii) 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.
(3)4 All claims not disputed shall be paid by the indemnifying
party within thirty (30) days after receiving notice of the Claim. "Disputed
Claims" shall mean claims for Damages by an indemnified party which the
indemnifying party objects to in writing within thirty (30) days after receiving
notice of the Claim. In the event there is a Disputed Claim with respect to any
Damages, the indemnifying party shall be required to pay the indemnified party
the amount of such Damages for which the indemnifying party has, pursuant to a
final determination, been found liable within ten (10) days after there is a
final determination with respect to such Disputed Claim. A final determination
of a Disputed Claim shall be (i) a judgment of any court determining the
validity of a Disputed Claim, if no appeal is pending from such judgment and if
the time to appeal therefrom has elapsed; (ii) an award of any arbitration
determining the validity of such disputed claim, if there is not pending any
motion to set aside such award and if the time within which to move to set aside
such award has elapsed; (iii) a written termination of the dispute with respect
to such claim signed by the parties thereto or their attorneys; (iv) a written
acknowledgment of the indemnifying party that it no longer disputes the validity
of such claim; or (v) such other evidence of final determination of a disputed
claim as shall be acceptable to the parties. 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.
ARTICLE 16: TERMINATION
16.1. Termination. This Agreement may be terminated at any time prior
to Closing as follows:
(1)1 by mutual written consent of Clear Channel and Exchange
Party;
(1)2 by written notice of Clear Channel to Exchange Party if
Exchange Party (i) does not satisfy the conditions or perform the obligations to
be satisfied or performed by it on the Closing Date, including without
limitation, the consummation of the Closing in accordance with
27
<PAGE> 28
the Agreement; or (ii) otherwise breaches in any material respect any of its
representations or warranties or defaults in any material respect in the
performance of any of its covenants or agreements herein contained and such
breach or default is not cured within the Cure Period (defined below)
(1)3 by written notice of Exchange Party to Clear Channel if
Clear Channel (i) does not satisfy the conditions or perform the obligations to
be satisfied or performed by it on the Closing Date, including without
limitation, the consummation of the Closing in accordance with the Agreement; or
(ii) otherwise breaches in any material respect any of its representations or
warranties or defaults in any material respect in the performance of any of its
covenants or agreements herein contained and such breach or default is not cured
within the Cure Period (defined below)
(1)4 by written notice of either party to the other if the FCC
denies the FCC Application;
(1)5 by written notice of Clear Channel to Exchange Party if
the FCC Consent, DOJ Consent and HSR Clearance have not been obtained before the
date four months after the date of this Agreement;
(1)6 by written notice of Clear Channel to Exchange Party or
Exchange Party to Clear Channel if the Closing shall not have been consummated
by March 31, 2001.
(1)7 by written notice of Clear Channel to Exchange Party if
the AMFM Agreement is terminated or expires.
The term "Cure Period" as used herein means a period commencing the
date a party receives from the other written notice of breach or default
hereunder and continuing until the earlier of (i) thirty (30) days thereafter or
(ii) the Closing Date; provided, however, that if the breach or default cannot
reasonably be cured within such period but can be cured before the Closing Date,
and if diligent efforts to cure promptly commence, then the Cure Period shall
continue as long as such diligent efforts to cure continue, but not beyond the
Closing Date. Except as set forth below, the termination of this Agreement shall
not relieve any party of any liability for breach or default under this
Agreement prior to the date of termination. Notwithstanding anything contained
herein to the contrary, Section 13.1 shall survive any termination of this
Agreement.
16.2. Remedies. The parties recognize that if either party refuses to
consummate the Closing pursuant to the provisions of this Agreement or either
party otherwise breaches or defaults such that the Closing has not occurred
("Breaching Party"), monetary damages alone will not be adequate to compensate
the non-breaching party ("Non-Breaching Party") for its injury. Such
Non-Breaching Party shall therefore be entitled to obtain specific performance
of the terms of this Agreement in lieu of, and not in addition to, any other
remedies, including but
28
<PAGE> 29
not limited to monetary damages, that may be available to it; provided however,
that Clear Channel may elect to recover liquidated damages in lieu of obtaining
specific performance. If any action is brought by the Non-Breaching Party to
enforce this Agreement, the Breaching Party shall waive the defense that there
is an adequate remedy at law. In the event of a default by the Breaching Party
which results in the filing of a lawsuit for damages, specific performance, or
other remedy, the Non-Breaching Party shall be entitled to reimbursement by the
Breaching Party of reasonable legal fees and expenses incurred by the
Non-Breaching Party, provided that the Non-Breaching Party is successful in such
lawsuit.
16.3. Liquidated Damages. If Clear Channel terminates this Agreement
pursuant to Section 16.1(b), then Exchange Party shall pay Clear Channel as
liquidated damages an amount equal to $28,000,000; provided however, Clear
Channel shall not be entitled to liquidated damages in the event Clear Channel
terminates this Agreement because of a failure of a condition to be satisfied if
such failure is not caused by a failure of the Exchange Party to perform the
obligations to be satisfied or performed by it under this Agreement. Provided
further, Clear Channel shall not be entitled to liquidated damages unless all of
the Exchange Party's conditions precedent to its obligation to close as provided
for in Article 12 have been satisfied and Exchange Party fails to consummate the
Closing on the Closing Date and Clear Channel is not in material default or
breach of any of its obligations under the Agreement and has otherwise satisfied
the conditions and has performed the obligations to be satisfied or performed by
it pursuant to the Agreement in all material respects. It is understood and
agreed that such liquidated damages amount represents Clear Channel's and
Exchange Party's reasonable estimate of actual damages and does not constitute a
penalty. On the date of this Agreement, Exchange Party shall execute and deliver
to Clear Channel the liquidated damages agreement attached hereto as Exhibit C.
ARTICLE 17: MISCELLANEOUS PROVISIONS
17.1. Casualty Loss. In the event any loss or damage of the Clear
Channel Station Assets or the Exchange Party Station Assets exists on the
Closing Date, the parties shall consummate the Closing and assign as appropriate
the proceeds of any insurance payable on account of such damage or loss.
17.2. Further Assurances. After the Closing, each party shall from time
to time, at the request of and without further cost or expense to the other,
execute and deliver such other instruments and take such other actions as may
reasonably be requested in order to more effectively consummate the transactions
contemplated hereby to exchange assets and assume obligations as contemplated by
this Agreement.
29
<PAGE> 30
17.3. Assignment. Except as set forth in Sections 10.5 (1031 Exchange)
and 10.6 (Trust), neither party may assign this Agreement without the prior
written consent of the other party hereto, provided that any party may assign
its right to acquire one or more of the radio stations covered by this Agreement
to one or more 100% owned affiliates of such party if such assignment does not
delay the governmental consents contemplated by Article 5 (or otherwise delay
Closing), the representations made by it under this Agreement are true with
respect to the assignee(s), and the assigning party gives the other party prior
written notice thereof. No such assignment shall relieve the assigning party of
any obligation or liability under this Agreement. With respect to any permitted
assignment, the parties shall take all such actions as are reasonably necessary
to effectuate such assignment, including but not limited to cooperating in any
appropriate filings with the FCC or other governmental authorities. 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.
17.4. 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.
17.5. 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.
17.6. Governing Law. The construction and performance of this Agreement
shall be governed by the laws of the State of Texas without giving effect to the
choice of law provisions thereof.
17.7. 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 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
delivered by facsimile transmission, and shall be addressed as follows (or to
such other address as any party may request by written notice):
if to Clear Channel: c/o Clear Channel Broadcasting, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: President
Facsimile: (210) 822-2299
30
<PAGE> 31
with a copy (which shall not
constitute notice) to: Graydon, Head & Ritchey
1900 Fifth Third Center
511 Walnut Street
Cincinnati, OH 45202
Attention: John J. Kropp, Esq.
Facsimile: (513) 651-3836
if to Exchange Party: c/o Regent Communications, Inc.
50 East River Center Blvd., Suite 180
Covington, KY 41011
Attention: Terry S. Jacobs
Facsimile: (606) 292-0352
with a copy (which shall not
constitute notice) to:
Strauss & Troy
The Federal Reserve Building
150 East Fourth Street
Cincinnati, Ohio 45202
Attention: Alan C. Rosser, Esq.
Facsimile: 513-241-8259
17.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
17.9. 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.
17.10. 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.
17.11. Entire Agreement. This Agreement, and any other document
executed by the parties pursuant or in connection with this Agreement of even
date embody the entire agreement
31
<PAGE> 32
and understanding of the parties hereto and supersede any and all prior
agreements, arrangements and understandings relating to the matters provided for
herein. This Agreement does not supersede any confidentiality agreement relating
to the Clear Channel Stations or Exchange Party Stations.
[SIGNATURE PAGE FOLLOWS]
32
<PAGE> 33
SIGNATURE PAGE TO ASSET EXCHANGE AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
CLEAR CHANNEL: CLEAR CHANNEL BROADCASTING, INC.
By: /s/ Jerome L. Kersting
--------------------------------------
Name: Jerome L. Kersting
---------------------------------
Title: Senior Vice President
--------------------------------
CLEAR CHANNEL BROADCASTING LICENSES, INC.
By: /s/ Jerome L. Kersting
--------------------------------------
Name: Jerome L. Kersting
---------------------------------
Title: Senior Vice President
--------------------------------
CAPSTAR RADIO OPERATING COMPANY
By: /s/ William S. Banowsky, Jr.
--------------------------------------
Name: William S. Banowsky, Jr.
---------------------------------
Title: Executive Vice President
--------------------------------
CAPSTAR TX LIMITED PARTNERSHIP
By: /s/ William S. Banowsky, Jr.
--------------------------------------
Name: William S. Banowsky, Jr.
---------------------------------
Title: Executive Vice President
--------------------------------
33
<PAGE> 34
EXCHANGE PARTY: REGENT BROADCASTING OF VICTORVILLE, INC.
By: /s/ Terry S. Jacobs
--------------------------------------
Name: Terry S. Jacobs
---------------------------------
Title: Chairman
--------------------------------
REGENT LICENSEE OF VICTORVILLE, INC.
By: /s/ Terry S. Jacobs
--------------------------------------
Name: Terry S. Jacobs
---------------------------------
Title: Chairman
--------------------------------
REGENT BROADCASTING OF PALMDALE, INC.
By: /s/ Terry S. Jacobs
--------------------------------------
Name: Terry S. Jacobs
---------------------------------
Title: Chairman
--------------------------------
REGENT LICENSEE OF PALMDALE, INC.
By: /s/ Terry S. Jacobs
--------------------------------------
Name: Terry S. Jacobs
---------------------------------
Title: Chairman
--------------------------------
REGENT BROADCASTING OF MANSFIELD, INC.
By: /s/ Terry S. Jacobs
--------------------------------------
Name: Terry S. Jacobs
---------------------------------
Title: Chairman
--------------------------------
REGENT LICENSEE OF MANSFIELD, INC.
By: /s/ Terry S. Jacobs
--------------------------------------
Name: Terry S. Jacobs
---------------------------------
Title: Chairman
--------------------------------
34
<PAGE> 35
Clear Channel Schedules
- -----------------------
1.1(a) - FCC Licenses
1.1(b) - Tangible Personal Property
1.1(c) - Station Contracts
1.1(d) - Intangible Property
1.1(f) - Real Property
1.2(h) - Excluded Assets
Exchange Party Schedules
- ------------------------
1.3(a) - FCC Licenses
1.3(b) - Tangible Personal Property
1.3(c) - Station Contracts
1.3(d) - Intangible Property
1.3(f) - Real Property
1.4(h) - Excluded Assets
35
<PAGE> 1
Exhibit 2(h)
AGREEMENT OF MERGER
AMONG
KZAP, INC.,
ROBB CHEAL,
REGENT BROADCASTING, INC.,
AND
REGENT COMMUNICATIONS, INC.
MARCH 29, 2000
<PAGE> 2
AGREEMENT OF MERGER
This Agreement of Merger made and entered into this 29th day of March,
2000, by and among REGENT COMMUNICATIONS, INC., a Delaware corporation
("Regent"); REGENT BROADCASTING, INC., a Delaware corporation and wholly-owned
subsidiary of Regent ("RBI"); and KZAP, INC., a California corporation (the
"Company"); and ROBB CHEAL ("Seller"), who is the sole shareholder of the
Company.
WHEREAS, Seller is the owner and holder of all of the issued and
outstanding shares of capital stock of the Company; and
WHEREAS, the Company, pursuant to authorizations duly granted and
issued by the Federal Communications Commission (hereinafter called the "FCC"),
owns and operates the radio station KZAP, Chico, California (the "Station"); and
WHEREAS, Seller and the Board of Directors of the Company and the Board
of Directors of RBI deem it advisable that the Company (sometimes referred to as
"the Disappearing Corporation") be merged into RBI (sometimes referred to as
"the Surviving Corporation") under the laws of the State of Delaware and the
State of California in the manner provided therefor pursuant to Section 252 and
related sections of Title 8 of the Delaware Code and Section 1100 et seq. of the
California Corporations Code; and
WHEREAS, as a result of such merger, control of the Company will be
transferred to Regent; and
WHEREAS, control of the Company may not be transferred without prior
written consent of the Federal Communications Commission; and
WHEREAS, Regent, RBI, and the Company have negotiated the terms and
conditions of such merger, including the consideration to be paid to Seller.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, it is hereby agreed as follows:
ARTICLE I
Agreement to Merge
1.01 Agreement. RBI and the Company hereby agree that, in accordance
with and subject to the terms and conditions set forth herein, upon
Effectiveness, the Company shall be merged with and into RBI, the separate
corporate existence of the Company shall cease, RBI shall continue in existence
and such merger shall in all respects have the effect provided for in Section
259 of the General Corporation Law of the State of Delaware and Section 1100 et
seq. of the California Corporations Code.
<PAGE> 3
1.02 Action to Effect Merger. Prior to, from and after Effectiveness,
the Company, RBI and Regent shall take all such action as shall be necessary or
appropriate, in order to effectuate this merger in accordance with and subject
to the terms of this Agreement of Merger and the laws of the State of Delaware
and State of California.
1.03. Certificate of Incorporation and By-Laws. From and after
Effectiveness and until thereafter amended as provided by law, the Certificate
of Incorporation and the By-Laws of RBI as in effect immediately prior to
Effectiveness shall be and continue to be the Certificate of Incorporation and
By-Laws of the Surviving Corporation.
1.04. Directors. The following shall be the directors of the Surviving
Corporation as of and after Effectiveness to hold office as provided in the
Certificate of Incorporation and By-Laws of the Surviving Corporation:
Terry S. Jacobs
William L. Stakelin
1.05. Officers. The following shall be the officers of the Surviving
Corporation as of and after Effectiveness to hold office as provided in the
Certificate of Incorporation and By-Laws of the Surviving Corporation:
Chairman of the Board,
Chief Executive Officer,
Treasurer ..............................................Terry S. Jacobs
President, Chief Operating
Officer, Secretary .................................William L. Stakelin
Vice President-Finance,
Assistant Secretary .....................................Matthew Yeoman
Assistant Secretary ..............................Christina Tenhundfeld
Assistant Secretary .....................................Alan C. Rosser
1.06 Stockholder Approval; Effectiveness of Merger. This Agreement of
Merger has been approved by Seller and Regent as provided by the applicable laws
of the State of Delaware and State of California. If this Agreement is not
terminated or abandoned in accordance with its terms, this Agreement of Merger
shall be certified by the Company and RBI pursuant to Section 252(c) of the
General Corporation Law of the State of Delaware and Section 1103 of the
California Corporations Code, and the Surviving Corporation shall prepare, file
and record a Certificate of Merger in the form provided under such Sections as
soon as practicable after the Closing. The merger shall become effective upon
the due and proper filing of the Certificate of Merger, herein sometimes called
the "Effectiveness."
1.07. Authorized Shares of Disappearing Corporation. The Company
presently has authorized capital stock of no par value (the "Company Stock"),
all of which are issued and outstanding to Seller.
-2-
<PAGE> 4
1.08 Authorized Shares of Surviving Corporation. RBI presently has
authorized capital stock of 1,000 common shares, $1.00 per share par value, of
which 100 shares are issued and outstanding. Upon Effectiveness, the authorized
capital stock of the Surviving Corporation will consist of 1,000 shares of
common stock, $1.00 per share par value.
1.09 Cancellation of Shares. At Effectiveness, all outstanding shares
of Company Stock shall be transferred to RBI and cancelled, and each share held
in the Company's treasury shall, by virtue of the merger and without any action
on the part of the holder thereof, cease to be outstanding, shall be cancelled
and retired without payment of any consideration therefor and shall cease to
exist. At the Closing, Seller shall surrender for cancellation his certificate
or certificates evidencing all of the Company Stock.
1.10 Funding of Consideration for Company Stock. On or before the
Closing Date, Regent shall have issued and delivered to RBI 233,333 shares of
Common Stock of Regent.
1.11 Basic Merger Consideration. The consideration to be paid for the
Company Stock shall be 233,333 of fully-paid and nonassessable unregistered
shares of the Common Stock of Regent (the "Basic Merger Consideration"), subject
to adjustment as provided in Section 1.12.
1.12 Adjustment of Basic Merger Consideration. At the Closing, a
computation shall be compiled by the Company setting forth as of the Closing
Date the amount of the Company's Cash (as hereinafter defined) and all known
Liabilities of Company as set forth below ("Closing Statement"). The Basic
Merger Consideration shall be adjusted by (a) an increase by the amount of Cash
and (b) a decrease by the amount of Liabilities shown on the Closing Statement,
with a corresponding adjustment in the number of shares of Regent Common Stock
to be issued, determined by using a value of $6.00 per share. The number of
shares of the Common Stock of Regent determined after making the foregoing
adjustments to the Basic Merger Consideration is herein referred to as the
"Closing Merger Consideration."
As used herein, the term "Cash" shall mean cash on hand and in banks,
certificates of deposit, treasury bills and marketable securities and other cash
equivalents, but excluding accounts and notes receivable and any other current
asset listed on the Company's balance sheet.
As used herein, the term "Liabilities" shall mean at the Closing Date
the amount of all the liabilities of the Company that would be recorded on a
balance sheet or disclosed in the notes to the financial statements at that date
computed in accordance with generally accepted accounting principles applied on
a basis consistent with those followed in the preparation of the financial
statements described in Section 4.16 and shall include (i) accounts payable,
(ii) all indebtedness, (iii) any unpaid bonuses, severance or vacation pay
accrued to employees for the period ending on the day prior to the Closing Date,
(iv) trade and barter obligations, and (v) all other items which in accordance
with generally accepted accounting principles consistently applied would be
included as Liabilities of the Company. For purposes of the determination of
Liabilities, all expenses relating to the Company and arising from the conduct
of the Company's business and operation of the Station (including without
limitation such items as taxes, license fees, utilities, and rents) shall be
prorated between RBI and Seller in accordance with generally accepted accounting
principles as of 11:59 p.m. Pacific time, on the date immediately preceding the
Closing Date.
-3-
<PAGE> 5
Within ninety (90) days after the Closing Date, representatives of
RBI's auditors shall examine the computation of the Closing Merger Consideration
in accordance with this Section 1.12, including an examination of such of the
Company's books and records as are deemed necessary or appropriate, to verify
the Company's Cash and Liabilities as of the Closing Date in accordance with
auditing standards approved and adopted by the American Institute of Certified
Public Accountants and otherwise in accordance with generally accepted
accounting principles. Based upon such examination, they shall prepare a report
setting forth their computation of the Merger Consideration pursuant to this
Section 1.12 ("Closing Report"), and upon completion of such Closing Report,
they shall deliver same to Seller and RBI. If either RBI or Seller shall
disagree with the Closing Report, such parties shall, within fifteen (15) days
after receipt of such Closing Report, give written notice to the other and RBI's
auditors of its objection to the Closing Report, specifying each item or
computation to which objection is taken and the reason for such objection. In
such event, Seller and RBI shall use their best efforts to resolve such
objections and to agree upon the Closing Report through negotiation. If Seller
and RBI are unable to reconcile their differences and to mutually agree upon the
Closing Report, within thirty (30) days after such written notice shall have
been given as aforesaid, Seller and RBI shall designate a mutually agreeable
independent national accounting firm, or if such firm cannot act, another
national accounting firm (which has not been retained by either Seller, the
Company or RBI within the past ten (10) years) mutually acceptable to such
parties to act as arbitrator ("Arbitrator"). The Arbitrator shall determine all
issues in disagreement and shall make such adjustments, if any, to the items and
computations in the Closing Report as are necessitated by such determinations,
and shall within thirty (30) days after their designation as Arbitrator deliver
to Seller and RBI a written statement setting forth all adjustments made by the
Arbitrator to the Closing Report. Such Closing Report shall be employed to
determine any further adjustments to the number of shares, at $6.00 per share,
required to the Merger Consideration pursuant to this Section 1.12 ("Final
Merger Consideration"), and such Final Merger Consideration shall be final,
conclusive and binding upon all parties to this Agreement. The fees and expenses
of RBI's auditor and the Arbitrator in connection with the making of the Closing
Report and the determinations herein provided for to resolve any differences
over the Closing Report shall be paid one-half by Seller and one-half by RBI.
Within five (5) business days after the determination of the Final
Merger Consideration, any adjustment to the Closing Report required thereby and
the number of shares of Regent Common Stock to be issued in this transaction
shall be made by Seller to RBI or by RBI to Seller, as the case may be, in
shares of Regent Common Stock.
1.13 Escrow Deposit. Within ten (10) days following the execution of
this Agreement, RBI shall deliver to Mid Valley Title and Escrow ("Escrow
Agent") cash or an irrevocable, stand-by letter of credit in the amount of Fifty
Thousand Dollars ($50,000.00) (the "Escrow Deposit"). The Escrow Deposit shall
be held and applied by the Escrow Agent in accordance with the terms of a
Deposit Escrow Agreement in the form of Exhibit A attached hereto (the "Deposit
Escrow Agreement"), executed by the parties thereto contemporaneously with the
execution of this Agreement. As more fully described in the Deposit Escrow
Agreement:
(a) in the event this Agreement is terminated solely because
of RBI's material breach of this Agreement and all other conditions to Closing
are at such time satisfied or waived
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<PAGE> 6
(other than such conditions as can readily be satisfied by the Closing), the
Escrow Deposit shall be delivered to Seller (who may exercise his right to draw
on the letter of credit) as his sole remedy and as liquidated damages as
provided in Section 13.04 hereof for RBI's material breach of this Agreement;
and
(b) in the event this Agreement is terminated under any
circumstances other than those set forth in Section 1.13(a) above, the Escrow
Deposit shall be delivered to RBI.
1.14 Payment of Merger Consideration. At the Closing, the Escrow
Deposit shall be delivered to RBI. The Closing Merger Consideration shall be
paid as follows:
(a) Eight Thousand Three Hundred Thirty-Three (8,333) shares
of Common Stock of Regent delivered to the Escrow Agent, to be held,
administered and released in accordance with the terms of an Indemnification
Escrow Agreement to be executed by Seller, RBI, Regent, and the Escrow Agent at
the Closing in the form of Exhibit B attached hereto (the "Indemnification
Escrow Agreement"), which funds shall be held in escrow until the expiration of
twelve (12) months after the Closing Date, and will be used to satisfy
indemnification claims of RBI and Regent pursuant to Section 12.02 hereof; and
(b) Two Hundred Twenty-Five Thousand (225,000) shares of
Regent's Common Stock to Seller, subject to adjustment thereafter in accordance
with Section 1.12.
1.15 Closing. Except as otherwise mutually agreed upon by the parties,
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 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 agreed by the parties hereto (the
"Closing Date"); provided, however, that RBI, and Regent may in their 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 five (5) business days'
notice to Seller) after the release of initial FCC approval on public notice
that it has consented to the transactions contemplated hereby (the "Initial
Approval"). For purposes of the Agreement, "Final Order" (and "Final") means an
order or grant by the FCC which is no longer subject to timely 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 transactions contemplated by this
Agreement, such order or grant being without the imposition of any conditions
adverse to RBI and Regent or any Affiliate (as hereinafter defined) of RBI and
Regent with respect to the transfer of control of the FCC Licenses to Regent or
the continued operation by RBI of the Station. In the event that 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
preferably by exchange of closing documents by overnight deliveries, or
otherwise in the offices of Strauss & Troy in Cincinnati, Ohio, or at such place
and in such manner as the parties hereto may agree.
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<PAGE> 7
ARTICLE II
Governmental Consents
2.01 FCC Consent. It is specifically understood and agreed by the
parties that the Closing and the transfer of control of the Station Licenses and
the transfer of the Company Stock are expressly conditioned on and are subject
to the prior consent and approval of the FCC without the imposition of any
conditions adverse to RBI and Regent or any Affiliate of RBI and Regent (the
"FCC Consent").
2.02 FCC Application. Within ten (10) business days after the execution
of this Agreement, Regent and Seller shall file an application with the FCC for
the FCC Consent (the "FCC Application"). Regent and Seller 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
Regent nor Seller shall have any obligation to satisfy complainants or the FCC
by taking any steps which would have a material adverse effect upon Regent or
Seller or upon any of their respective Affiliates). If the FCC Consent imposes
any condition on Regent or Seller or any of their respective Affiliates, such
party shall use its best efforts to comply with such condition; provided,
however, that neither Regent 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 13.01 hereof.
ARTICLE III
Representations and Warranties of RBI and Regent
RBI and Regent hereby make the following representations and
warranties, 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 Seller:
3.01 Standing. RBI and Regent are duly organized, validly existing and
in good standing under the laws of the State of Delaware, and have all requisite
corporate power and authority to own and lease their properties and carry on
their business as now being conducted by them.
3.02 Authority. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of RBI and Regent and this
Agreement is a valid and binding obligation of RBI and Regent.
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<PAGE> 8
3.03 Qualification. RBI and Regent have no knowledge of any facts which
would, under present law (including the Communications Act of 1934, as amended),
and present rules, regulations, practices and policies of the FCC, disqualify
RBI and Regent as the transferee of the licenses, permits and authorizations
listed on Schedule 4.08 hereto, or as an owner and/or operator of the Station,
and RBI and Regent will not take, or unreasonably fail to take, any action which
RBI and Regent know or have reason to know would cause such disqualification.
Should RBI and Regent become aware of any such facts, they will promptly notify
Seller in writing thereof and use their best efforts to prevent any such
disqualification.
3.04 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article II hereof with respect to governmental consents or on
Schedule 3.04 hereto, the execution, delivery and performance of this Agreement
by RBI and Regent: (a) do not conflict with the provisions of the articles of
incorporation or by-laws of RBI and Regent; (b) do not require the consent of
any third party not affiliated with RBI and Regent; (c) will not violate any
applicable law, judgment, order, injunction, decree, rule, regulation or ruling
of any governmental authority to which RBI and Regent are 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 RBI and Regent are now
subject.
3.05 Common Stock. The Common Stock, when delivered to Seller pursuant
to the terms of this Agreement, will be validly issued, fully paid and
non-assessable.
ARTICLE IV
Representations and Warranties of Seller and the Company
Seller and the Company make the following representations and
warranties, 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 RBI and Regent:
4.01 Corporate Standing. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has all requisite corporate power and authority to own or lease its
properties and to carry on its business as now being conducted. Company is not
qualified or required to be qualified in any other jurisdiction in order to own
or lease its properties or to carry on its business as now being conducted.
4.02 No Subsidiaries and Investments. The Company has no Subsidiaries
or Affiliates. The Company does not own, directly or indirectly, any capital
stock or other equity or ownership or proprietary interest in any other
corporation, partnership, association, trust, joint venture or other entity.
Since the Financial Statement Date, as defined below, except as set forth in
Schedule 4.02 no investment securities of any kind have been acquired or
disposed of by the Company. The businesses carried on by the Company have not
been conducted through any other direct or indirect subsidiary or entity related
to the Company or Seller.
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<PAGE> 9
4.03 Charter and By-Laws. Seller has delivered to RBI true and complete
copies of the Articles of Incorporation and By-Laws of Company as in effect on
the date of delivery thereof. There has been no change in the Articles of
Incorporation or By-Laws of the Company since the delivery of copies thereof to
RBI. No provision of the Articles of Incorporation or the By-Laws of the Company
or of any agreement, instrument or undertaking to which the Company is a party
or by which the Company is bound, has been or will be violated by the execution
and delivery by Seller and the Company of this Agreement or the performance or
satisfaction of any obligation or condition herein contained on their part to be
performed or satisfied. The Company is not now nor on the Closing Date will it
be in default in the performance, observance or fulfillment of any of the terms
or conditions of its Articles of Incorporation or By-Laws. Seller has delivered
to RBI true and complete copies of the stock records and the minute book of the
Company for inspection and the stock records truly, accurately and fully account
for all transactions in the Company's capital stock, and the minute book
contains the up-to-date, complete, and accurate minutes of the actions of the
Company's Board of Directors and stockholders from its inception.
4.04 Directors and Officers; Compensation; Banks. Schedule 4.04
represents a true and complete list showing as of the date of delivery thereof
the following:
(a) The names of all of the directors and officers of the
Company;
(b) A payroll roster of the Company for the most recent
payroll period ended prior to the date of delivery thereof showing the names,
titles, and annualized current rate of pay for each person entitled to receive
compensation from the Company;
(c) Each bank account and safety deposit box of the Company,
all authorized signatories to such account and all persons having access to such
safety deposit box; and
(d) The names of all persons, if any, holding a power of
attorney from the Company. The information set forth in each such list is true
and accurate on the date hereof. Each officer and director or any other person
holding authorized signatory powers of the Company will submit his or her
written resignation as such to RBI on the Closing Date, effective with the
delivery thereof.
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<PAGE> 10
4.05 Capitalization; Company Stock.
(a) The authorized capital stock of the Company (the "Capital
Stock") consists of 1,000 shares of authorized Common Stock, no par value, of
which 1,000 shares are issued and outstanding. All issued and outstanding shares
of Capital Stock constitute the Company Stock. All shares of Company Stock are
duly authorized, validly issued in compliance with all applicable laws, fully
paid and non-assessable and not subject to preemptive rights created by statute,
the Articles of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound. The Company Stock is owned by
Seller, free and clear of all security interests, liens, pledges, encumbrances,
agreements, charges, rights of rescission or claims of any kind (including
without limitation any restrictions on the use, voting, transfer, receipt of
income or other exercise of any attributes of ownership ("Encumbrances")) by or
on the part of any person, firm or corporation. Seller has good and marketable
title to the stock owned by him with full right to enter into this Agreement and
to sell, assign, transfer and deliver the same to RBI. Seller is the record and
beneficial owner of all shares of Company Stock and the transfer thereof from
the Seller to RBI will vest RBI with good and marketable title, free and clear
of all Encumbrances to all of the issued and outstanding shares of capital stock
of Company.
(b) There are no options, warrants, calls, rights, commitments
or agreements of any character, written or oral, to which the Company is a party
or by which it is bound obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There is outstanding no vote, plan, or pending proposal for any
redemption of stock of Company or merger or consolidation of Company with or
into any other corporation. Except for legends disclosed on Schedule 4.05, no
legend or other reference to any purported Encumbrances appears upon any
certificate representing shares of Company Stock. The delivery of the
certificates to RBI provided in Section 1.09 of this Agreement and the payment
to Seller provided in Section 1.14 of this Agreement will result in RBI's
immediate acquisition of record and sole beneficial ownership of all the shares
of Company Stock and rights to acquire or receive Capital Stock, free and clear
of all Encumbrances.
4.06 Authorization and Binding Obligation. Seller and the Company have
the power and authority, and have taken all necessary and proper action to enter
into and perform this Agreement and to consummate the actions contemplated
hereby. This Agreement constitutes the legal, valid and binding obligation of
Seller and the Company.
4.07 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article II with respect to governmental consents and in Schedule
4.07 with respect to compliance with Sections 1103 and 25151 of the California
Corporations Code and consents required in connection with the assignment of
certain material Contracts, the execution, delivery and performance of this
Agreement by Seller and the Company: (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 the Company's articles of incorporation or bylaws
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<PAGE> 11
(or other charter or organizational documents), or any applicable law, judgment,
order, injunction, decree, rule, regulation or ruling of any governmental
authority to which the Company or Seller is a party or by which the Company or
Seller is 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
the Company is now subject; and (d) will not result in the creation of any lien,
charge or encumbrance on any of the Company Stock or Station Assets.
4.08 Government Authorizations.
(a) Schedule 4.08 hereto contains a true and complete list of
the Station Licenses and other licenses, permits or other authorizations from
governmental and regulatory authorities which are required for the lawful
conduct of the business and operations of the Station in the manner and to the
full extent they are presently conducted (including, without limitation,
auxiliary licenses associated with the Station). Seller has delivered to RBI
true and complete copies of the Station Licenses and the other licenses, permits
and authorizations listed in Schedule 4.08, including any and all amendments and
other modifications thereto.
(b) As specified in Schedule 4.08, the Company is the
authorized legal holder of the Station Licenses and other licenses, permits and
authorizations listed in Schedule 4.08. None of the Station Licenses and other
licenses, permits and authorizations listed in Schedule 4.08 is subject to any
restrictions or conditions which would materially limit the full operation of
the Station as now operated.
(c) Except for matters affecting the radio broadcast industry
generally, there are no complaints, petitions to deny, informal objections, or
adjudication 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 Station. The
Station Licenses and the other licenses, permits and authorizations listed in
Schedule 4.08 are in good standing, are in full force and effect and are
unimpaired by any act or omission of the Company or its shareholders, officers,
directors or employees. The operations of the Station are in accordance with the
Station Licenses and the underlying construction permits and the other licenses,
permits and authorizations listed in Schedule 4.08. No proceedings are pending
or, to the best of Seller's knowledge, threatened, and there has not been any
act or omission of the Company or any of its officers, directors, shareholders
or employees, which reasonably may result in the revocation, modification,
non-renewal or suspension of any of the Station Licenses or the other licenses,
permits and authorizations listed in Schedule 4.08, the denial of any pending
applications, the issuance of any cease and desist order, the imposition of any
administrative sanctions by the FCC or any other governmental or regulatory
authority with respect to the Station Licenses or the other licenses, permits
and authorizations listed in Schedule 4.08 or which may affect RBI's ability to
continue to operate the Station as it is currently operated.
(d) The Station is operating with the maximum facilities
specified in its Station License.
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<PAGE> 12
(e) To the best of Seller's knowledge: (i) the Station is not
causing objectionable interference to the transmissions of any other broadcast
station or communications facility nor has the Station received any complaints
with respect thereto; and (ii) no other broadcast station or communications
facility is causing objectionable interference to respective transmissions of
the Station or the public's reception of such transmissions.
(f) Seller has no reason to believe that the Station Licenses
and the other licenses, permits, or authorizations listed in Schedule 4.08 will
not be renewed in their ordinary course.
(g) All reports, forms, and statements required to be filed by
the Company with the FCC with respect to the Station since the grant of the last
renewal of the Station Licenses have been filed and are substantially complete
and accurate.
(h) The operation of the Station and all of the Station Assets
is in compliance in all respects with ANSI Radiation Standards C95.1 - 1992.
4.09 Compliance with FCC Regulations. The operation of the Station and
all of the Station Assets is in compliance in all 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.
4.10 Taxes. The Company 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. Seller has delivered to RBI true and complete
copies of all federal, state and local tax returns of the Company as filed for
the years ended December 31, 1996, 1997, and 1998, and promptly upon filing will
deliver to RBI true and complete copies of all federal, state and local tax
returns of the Company as filed for the year ended December 31, 1999. The
Company has duly paid or accrued all taxes required to be paid by it in respect
of the periods covered by all such returns, whether or not shown on such
returns, and all interest and penalties thereon, whether disputed or not, and
the Company has no liability for taxes in excess of the amounts so paid. All of
the tax liabilities of the Company for the current year to date and all prior
years, whether or not they have become due and payable, have been paid in full
or adequately reserved for, and to the extent tax liabilities have accrued but
not become payable, they are reflected on the books of the Company or in the
Financial Statements. The Company has not requested any extension of time within
which to file any tax returns which have not since been filed, and no
deficiencies for any tax, assessment or governmental charge have been claimed,
proposed or assessed by any taxing authority and there is no basis for any such
deficiency or claim. The federal income tax returns of the Company have been
examined by the federal tax authorities or closed by applicable statute and
satisfied for all periods to and including fiscal year 1993; all deficiencies
asserted as a result of such examinations have been paid or finally settled; and
no state of facts exists or has existed which might constitute grounds for the
assessment of any further tax liability with respect to the periods which have
been audited by the federal, state, local or foreign taxing authorities. There
are no present disputes as to
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<PAGE> 13
taxes of any nature payable by the Company which in any event could adversely
affect any of the Station Assets or the operation of the Station. Except as set
forth on Schedule 4.10, the Company has not been advised that any of its tax
returns, federal, state, local or foreign, have been or are being audited. The
Company does not have as of the date hereof 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).
As used herein, the term "tax" includes, without limitation, all federal, state,
local and foreign income, profits, sales, use, occupancy, excise, added value,
employees' income withholding, social security, franchise, property, and all
other governmental taxes, license fees and other changes of every kind and
description and related governmental charges imposed by the laws and regulations
of any governmental jurisdiction, whether such taxes are due or claimed to be
due from them by federal, state, local or foreign taxing authorities.
4.11 Personal Property. Schedule 4.11 hereto contains a list of all
material items of tangible personal property owned by the Company and used in
the conduct of the business and operations of the Station. Schedule 4.11 also
separately lists any material tangible personal property leased by the Company
pursuant to leases included within the Contracts. The Company has good and
marketable title to all of the items of tangible personal property which are
included in the Station Assets (other than those subject to lease) and none of
such Station 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 liens or
encumbrances described in Schedule 4.11. The properties listed in Schedule 4.11,
along with those properties subject to leases which are included among the
Contracts, constitute all material tangible personal property necessary to
operate the Station as the same is now being operated. Except as set forth in
Schedule 4.11, all items of tangible personal property included in the Station
Assets 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 with generally accepted standards of good
engineering practice.
4.12 Real Property.
(a) Schedule 4.12 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
Station) used by the Company in connection with the operations of the Station
(the "Real Estate") and includes the name of the record title holder(s) thereof
and a list of all indebtedness secured by a lien, mortgage or deed of trust
thereon. The Company has good and marketable title in fee simple to all the Real
Estate specified as owned by it in Schedule 4.12, free and clear of all liens,
charges, security interests, physical and financial encumbrances, leases,
covenants, restrictions, rights of way, easements, encroachments, other matters
affecting title, and adverse claims of any kind, direct or indirect, whether
accrued, absolute, contingent or otherwise, except for those set forth in
Schedule 4.11 or 4.12. With respect to each of the buildings, structures and
appurtenances situated on the Real Estate, the Company has adequate rights of
ingress and egress for operation of the business of the Company in the ordinary
course. None of the buildings, structures, improvements, or fixtures constructed
on the Real Estate, including without limitation towers, guy wires and guy
anchors, and ground radials, nor the operation or maintenance thereto,
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<PAGE> 14
violates any restrictive covenant or any provision of any federal, state or
local law, ordinance, rule or regulation, or encroaches on any property owned by
others. No condemnation proceeding is pending or threatened which would preclude
or impair the continued use of any such property by the Company for the purposes
for which it is currently used.
(b) Except as described in Schedule 4.12, 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, 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 Station as
presently conducted.
4.13 Contracts. Schedule 4.13 lists all material Contracts to which the
Company is a party, or which are binding on the Company, as of the date of this
Agreement, including a listing of all barter and trade agreements (contracts for
the sale of broadcast time or advertising on the Station in exchange for
merchandise or services) involving a barter payable or barter receivable in
excess of $1,000 as of the date of this Agreement, specifying for each the
amount of the barter payable or barter receivable, whichever is applicable. All
of such barter and trade agreements are preemptible for cash sales and none is
subject to fixed positions (except for those contracts which provide for the
delivery of programming to the Station in return for barter advertising). The
Company has delivered to RBI true and complete copies of all written material
Contracts and true and complete memoranda of all oral material Contracts,
including any and all amendments and other modifications thereto. 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. The Company has
complied in all respects with all material Contracts and is not in default
beyond any applicable grace periods, and, to the best of Seller's knowledge, no
other contracting party is in default under any of the terms thereof. For
purposes of this Agreement, a Contract shall be deemed material if its remaining
term is more than one year in length, it involves cash expenditures in excess of
$10,000, if it is a capitalized lease, or if its non-existence would adversely
affect rights of occupancy or access to leased or owned real estate or building
space. Except as designated by the reference to particular Contracts listed on
Schedule 4.13 by a letter in parenthesis which corresponds to the applicable
subpart below, the Company is not a party (in its own name or as successor in
interest) to any written or oral:
(a) contracts or commitments involving employment, profit
sharing, pension, bonus, percentage compensation, incentive compensation,
deferred compensation, employee benefits, stock options or warrants or employee
stock purchase;
(b) leases or licenses with respect to any property, real or
personal, as lessor, lessee, licensor, or licensee, except leases of personal
property with the Company as lessee having a value of less than $5,000 per annum
in the aggregate;
(c) agreement, contract or commitment for any capital
expenditures;
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<PAGE> 15
(d) agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other distribution in
respect of its capital stock;
(e) agreement, contract or commitment limiting the freedom of
the Company to engage in any line of business or to compete with any other
person or entity;
(f) contract or option for the purchase of any real or
personal property other than in the ordinary course of business;
(g) letter of credit or guarantee agreement in respect of any
indebtedness or obligation of any other person or entity (other than the
endorsement of negotiable instruments for collection in the ordinary course of
business);
(h) contract or commitment to acquire investment securities or
to extend credit;
(i) agreement, contract or commitment which might reasonably
be expected to have a potential adverse impact on the business or operations or
the Company; or
(j) any other contract for borrowed money either as borrower
or lender.
4.14 Environmental. The Company 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 the Station 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. sections 9601 et seq., Toxic
Substances Control Act. 15 U.S.C. sections 2601 et seq., the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. sections 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, have been released, emitted or
discharged (in violation of applicable laws or regulations), or are currently
located (in violation of applicable laws and regulations) in, on, under, or
about the real property on which the Station Assets are situated, including
without limitation the transmitter sites, or contained in the tangible personal
property included in the Station Assets. The Station Assets and the Company'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.
4.15 Intellectual Property. Schedule 4.15 hereto is a true and complete
list of all material Intellectual Property applied for, registered or issued to,
and owned by the Company or under which the Company is a licensee and which is
used in the conduct of the Company's business and operations. Except as set
forth on Schedule 4.15, to the best of Seller's knowledge: (a) the Company'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 is licensed to the Company, such interest is valid and
uncontested by the licensor thereof or any third party; (b) all computer
software located at the
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<PAGE> 16
Station's facilities or used in the Station's business or operations is properly
licensed to the Company, and all of the Company's uses of such computer software
are authorized under such licenses; and (c) there are no infringements or
unlawful use of such Intellectual Property by the Company in connection with the
Company's business or operations.
4.16 Financial Statements. The Company or Seller has delivered to RBI
copies of the Company's financial statements for the fiscal year ended December
31, 1999 (the "Financial Statement Date"), and for the fiscal years ended on
December 31 of each of the years 1997 and 1998, and notes thereto (the
"Financial Statements"), all of which are true, complete and correct, have been
prepared from the books and records of the Company in accordance with generally
accepted accounting principles consistently applied and maintained throughout
the periods indicated, and which present fairly the financial position and
results of operations of the Company as of the dates thereof and for the periods
covered thereby. The Financial Statements include:
(a) the balance sheets of the Company as of the Financial
Statement Date; and
(b) the related statements of earnings, source and application
of funds, shareholders' equity and changes in financial position or cash flows
(as the case may be) for the years ended as indicated on each of the Financial
Statements.
In such Financial Statements, the statements of earnings do not contain
any items of special or nonrecurring income or any other income not earned in
the ordinary course of business except as expressly specified therein, and the
Interim Financial Statements include all adjustments, which consist only of
normal recurring accruals, necessary for such fair presentation. There are no
facts known to Seller or the Company which would alter the information contained
in the Financial Statements in any way whatever.
4.17 Absence of Certain Payments. Neither the Company, Seller, nor any
director, officer, agent, employee or other person associated with or acting on
behalf of the Company, has, directly or indirectly, within the past five years,
used any funds of the Company for unlawful contributions, gifts, entertainment
or other unlawful expenses relating to political activity, or made any direct or
indirect unlawful payments to government officials or employees from corporate
funds, or made or received any payment, whether direct or indirect, to or from
any supplier or customer of the Company, for purposes other than the
satisfaction of lawful obligations, or established or maintained any unlawful or
unrecorded funds, where any of the foregoing would have a material adverse
affect on the financial condition, results of operations, business or prospects
of the Company.
4.18 Receivables. All receivables of the Company (including accounts
receivable, loans receivable and advances) which are reflected in the Financial
Statements, and all such receivables which will have arisen since the date
thereof, shall have arisen only from bona fide transactions in the ordinary
course of the Company's business.
4.19 Liabilities. Except to the extent reflected, reserved against, or
noted on the Financial Statements, the Company had, as of the Financial
Statement Date, no debts, liabilities or obligations of any nature whatsoever,
whether accrued, absolute, contingent, or otherwise, and
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whether due or to become due, for any period or arising out of any transaction
entered into or any set of facts existing prior thereto, whether or not then
known due or payable. There exists no basis for the assertion against the
Company of any material liability of any nature or in any amount not fully
reflected, reserved against, or noted in Financial Statements as of the
Financial Statement Date. All deposits, accounts and notes payable, and other
liabilities of the Company are current and not in default.
4.20 Labor Matters. The Company is not a party to any contract or
agreement with any labor organization, nor has the Company 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 the
Company at the Station. The Company has no knowledge of any organizational
effort currently being made or threatened by or on behalf of any labor union
with respect to employees at the Station. The Company has not consented to any
final decree involving any claim of unfair labor practice and has not been held
in any final judicial proceeding to have committed any unfair labor practice and
there are no material controversies pending or threatened between the Company
and any of its employees or any labor union or collective bargaining agent
representing or purporting to represent employees of the Company. Since December
31, 1998, there has been no unusual increase in compensation payable by the
Company to any of its officers, employees or agents or any bonus payment or
similar arrangements made to or with them. The Company has complied in all
material respects with all federal and state 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,
discrimination in employment practices or benefits, family and medical leave,
employment of handicapped or disabled individuals, sexual harassment, equal
employment opportunity, employment of protected minorities (including women and
persons over 40 years of age), and payment and withholding of taxes.
4.21 Litigation. The Company 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 Station or any of the Station Assets,
and there is no litigation, administrative action, arbitration, proceeding or
investigation pending or, to the best knowledge of Seller, threatened against
the Company 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 Station Licenses), or
before any other tribunal duly authorized to resolve disputes. In particular,
but without limiting the generality of the foregoing, there are no complaints,
petitions to deny, informal objections, or adjudication proceedings pending or,
to the best knowledge of Seller, threatened before the FCC or any other
governmental organization with respect to the business or operations of the
Station.
4.22 Compliance With Laws. Except as set forth in Schedule 4.22, the
Company is not in material violation of, nor has Seller or the Company received
any notice asserting any non-compliance by the Company with, any statute, rule
or regulation, whether federal, state or local. The Company 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. The Company is in compliance in all material respects with all laws,
regulations and governmental orders applicable to
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<PAGE> 18
the conduct of the business and operations of the Station, and its present use
of the Station Assets does not violate any of such laws, regulations or orders.
4.23 Personnel; Employee Benefit Plans.
(a) Schedule 4.04 contains a true and complete list of all
persons employed at the Station, including date of hire, a description of
material compensation arrangements and a list of other material terms of any and
all agreements affecting such persons and their employment by the Company.
(b) Schedule 4.23 contains a true and complete list as of the
date of this Agreement of all employee benefit plans applicable to the employees
of the Company, and a brief description thereof. Except as set forth on Schedule
4.23, the Company does not maintain or have any present or future obligation or
liability with respect to, any bonus, deferred compensation, pension,
profit-sharing, retirement, severance pay, insurance, stock purchase, stock
option, welfare benefit, or other fringe benefit plan, arrangement or practice,
or any other employee benefit plan, as defined in Section 3 of the ERISA,
whether qualified or unqualified, formal or informal (collectively, the
"Plans"). The Company has delivered to RBI true and complete copies of: (i) all
documents which comprise each of the Plans, including any related trust
agreements or insurance contracts (or any other funding instruments), (ii) the
most current summary plan description (and any summary of material
modifications) for each Plan for which one is required, (iii) the most recent
Internal Revenue Service ("IRS") determination letter relating to each Plan
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986 (the "Code) (and none of such Plans has been amended or modified since the
date of the latest determination letter relating thereto), (iv) the most recent
annual reports (Form 5500 Series) and accompanying schedules filed for each of
the Plans for which one is required, and (v) the most recent actuarial report
for each of the Plans for which required (which report fairly presents the
assets and liabilities of the Plans as of the date thereof). Except as set forth
in Schedule 4.23, there have been no material changes in the terms of the Plans,
or in the assets or liabilities associated with such Plans, as reflected in the
foregoing documents. Each of the Plans has been administered in accordance with
its terms, and to the extent applicable, complies with and has been administered
in accordance with ERISA and the Code.
(c) The Company has not engaged in, and Seller does not have
knowledge of any person that has engaged in, any transaction in violation of
Section 406(a) or (b) of ERISA for which no exemption exists under Section 408
of ERISA, or any "prohibited transaction" as defined in Section 4975(c)(1) of
the Code for which no exemption exists under Section 4975(c)(2) or (d) of the
Code, with respect to any Plan.
(d) Neither the Company nor any corporation or other trade or
business under common control with the Company (as determined under Section
414(b), (c), or (m) of the Code) has taken any action, and Seller does not have
any knowledge of any action or event that could cause the Company to incur
liability under Title IV of ERISA.
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<PAGE> 19
(e) The Company has never been and is not now a party to, nor
is Company bound by and required to contribute to, a multiemployer plan within
the meaning of Section 4001(a)(3) of ERISA.
(f) The Company has no obligation to provide health benefits
to former employees of the Company, except as specifically required by law.
(g) The Company has complied with all requirements of Part 6
of Title I, Subtitle B of ERISA regarding continuation coverage for group health
plans.
(h) To Seller's knowledge, there is no pending or threatened
claim which alleges any violations of ERISA or any other law, nor any basis for
such a claim by any person, against the Company arising out of Company's
maintenance of any Plan.
4.24 Conduct of Business in Ordinary Course; Adverse Change. Since
December 31, 1998, except for matters caused by the Time Brokerage Agreement:
(a) the Company has conducted the business of the Station only in the ordinary
course consistent with past practices; (b) there has not been any material
adverse change in the business, assets, properties, prospects or condition
(financial or otherwise) of the Company or the Station, or any damage,
destruction, or loss affecting any of the Station Assets; (c) the Company has
not created, assumed, or suffered any mortgage, pledge, lien or encumbrance on
any of the Station Assets, and (d) the Company has not sold, leased, or disposed
or agreed to sell, lease, or dispose of any of its assets or properties other
than in the ordinary course of business, and (e) the Company has not issued any
bonds, notes or other securities or declared any dividends or made any
distribution to its shareholders with respect to the Company Stock.
4.25 Instruments of Conveyance; Good Title. The instruments to be
executed by Seller and delivered to RBI at the Closing, surrendering the Company
Stock to RBI for cancellation, will transfer good and marketable title to the
Company Stock free and clear of all liabilities (absolute or contingent),
security interests, mortgages, pledges, liens, obligations and encumbrances of
any nature.
4.26 Insurance. All of the real and tangible personal property and
other assets of the Company which are of an insurable character are insured by
financially sound and responsible insurance companies against fire and other
risks usually insured against by persons operating similar businesses. A true
and complete list showing all policies of insurance maintained by the Company,
including types of coverage, policy expiration dates, and policy limits, is set
forth in Schedule 4.26 hereto. There has been no change in the information set
forth in such Schedule since the delivery thereof to RBI. If any of the
Company's property is damaged or destroyed prior to Closing, the proceeds of the
insurance therefor will be sufficient to replace, restore or repair the same to
its former condition and utility, except for applicable deductible amounts. The
Company will maintain the insurance set forth in Schedule 4.26 in full force and
effect until Closing.
4.27 Transactions with Certain Persons. The Company does not owe any
amount to, or have any contract with or commitment to, Seller, any of the
Company's directors, officers, employees or consultants, and none of such
persons owes any amount to the Company. No part of
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the property or assets of Seller, or any affiliate of Seller within the meaning
of the federal securities laws, is used by the Company.
4.28 Non-Registration.
(a) Seller understands that the issuance of the Common Stock
of Regent in this transaction is intended to be exempt from registration under
the Securities Act of 1933, as amended (the "1933 Act"), by virtue of Section
4(2) and/or 4(6) of the 1933 Act and the provisions of Regulation D promulgated
thereunder, that the Common Stock of Regent has not been registered under the
1933 Act or under the securities laws of any state, and that Regent will be
under no obligation to effect any such registration.
(b) Seller is acquiring the Common Stock of Regent for his own
account, for investment and not with a view to resale, distribution, or other
disposition, and Seller has no present plans to enter into any contract,
undertaking, agreement or arrangement for any such resale, distribution or other
disposition. Seller understands that the shares of Regent Common Stock to be
issued in this transaction have not been, and will not be, registered under the
1933 Act by reason of a specific exemption from the registration provisions of
the 1933 Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of Seller's
representations as expressed herein. Seller will not sell or otherwise transfer
the shares of Regent Common Stock to be issued in this transaction 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 Regent, is available for the
transaction.
(c) Seller acknowledges that the shares of Regent Common Stock
to be issued in this transaction must be held indefinitely unless subsequently
registered under the 1933 Act or unless an exemption from such registration is
available. Seller is aware of the provisions of Rule 144 promulgated under the
1933 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 Regent, 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) Seller is an "accredited investor," as that term is
defined in Rule 501(a) of Regulation D promulgated under the 1933 Act, inasmuch
as Seller meets the requirements of subparagraph (a)(5) of Rule 501.
(e) Seller has had a reasonable opportunity to inspect all
documents, books and records pertaining to Regent and the shares of Regent
Common Stock and confirms that the Common Stock of Regent is being acquired
without Seller's receipt of any offering literature, although Seller confirms he
has received a copy of Regent's Prospectus, dated January 24, 2000, and a list
of exhibits filed with the SEC in connection therewith, all of which will be
supplied to Seller on request.
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<PAGE> 21
(f) Seller has had a reasonable opportunity to ask questions
of and receive answers from a person or persons acting on behalf of Regent
concerning Regent, its business and proposed operations, the terms of the Common
Stock of Regent and all other aspects of investment in Regent, and all such
questions have been answered to the full satisfaction of Seller.
(g) Seller is not acquiring the Common Stock of Regent 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
Regent.
(h) Seller has not incurred, and will not incur, directly or
indirectly, as a result of any action taken by Regent or RBI, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement.
(i) Seller understands that the certificate(s) representing
the Common Stock of Regent issued to him shall bear legends in substantially the
following forms, and Seller shall not transfer any of such shares of Common
Stock of Regent, 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."
4.29 Full Disclosure. No representation or warranty made by Seller and
the Company contained in this Agreement nor any certificate, document or other
instrument furnished or to be furnished by Seller or the Company 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. Seller 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.
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* * * * * * *
Whenever in this Article IV a warranty or representation is qualified
by a word or phrase referring to Seller's knowledge or awareness, it shall mean
to the actual knowledge of Seller after he has made due inquiry of the
employees, representatives and agents of the Company who would be expected to
have knowledge of the matter, and with respect to the condition of any Station
Assets, records or other object, after he has inspected it.
ARTICLE V
Covenants of RBI and Regent
5.01 Notification. RBI will provide Seller prompt written notice of any
change in any of the information contained in the representations and warranties
made in Article III. RBI shall also notify Seller of any litigation, arbitration
or administrative proceeding pending or, to its knowledge, threatened against
RBI or Regent which challenges the transactions contemplated hereby.
5.02 No Inconsistent Action. RBI and Regent shall not take any action
which is materially inconsistent with their obligations under this Agreement or
take any action which would cause any representation or warranty of RBI and
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.
ARTICLE VI
Covenants of Seller and Company
Seller and the Company covenant and agree with respect to the Company
and the Station 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 RBI,
Seller and the Company shall act in accordance with the following:
6.01 Conduct of Business. Subject to time brokering of the Station
pursuant to the Time Brokerage Agreement, the Company shall conduct the business
and operations of the Station only in the ordinary and prudent course of
business consistent with past practice and with the intent of maintaining the
condition of the Station Assets and preserving the ongoing operations and assets
of the Station, including using its reasonable best efforts to retain at the
Station the services of the key employees, consultants and agents of the
Station.
6.02 Compliance with Laws. The Company shall operate the Station in all
respects in accordance with FCC rules and regulations and the Station 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 Station Licenses or other
licenses, permits or authorizations listed in Schedule 4.08 to expire, be
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surrendered, adversely modified, or otherwise terminated, or cause the FCC to
institute any proceedings for the suspension, revocation or adverse modification
of any of the Station Licenses, or fail to prosecute with due diligence any
pending applications to the FCC. Should any fact relating to the Company or
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 RBC thereof and will use his 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.
6.03 Station Operations. Subject to time brokering of the Station
pursuant to the Time Brokerage Agreement (which provisions shall control over
any inconsistent provision in this Section 6.03) and except for changes or
actions in the ordinary course of business consistent with past practices, the
Company shall not: (a) sell broadcast time on a prepaid basis (other than in the
course of existing credit practices); (b) 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 Company (provided that no such increases to any employee shall in the
aggregate exceed 6% of such employee's compensation as set forth on Schedule
4.04 hereto); (c) provide for any new pension, retirement or other employment
benefits for employees of the Company or any increases in any existing benefits;
(d) modify, change or terminate any Contract; or (e) change the advertising
rates in effect as of the date hereof.
6.04 Access. The Company shall give or cause the Station to give RBI
and RBI's counsel, accountants, engineers and other representatives, at RBI's
reasonable request and upon reasonable notice, full and reasonable access during
normal business hours to all of the Company's personnel, properties, books,
Contracts, reports and records (including, without limitation, financial
information and environmental audits in existence with respect to the Station
Assets), Real Estate, and buildings and equipment, and to furnish RBI with
information and copies of all documents and agreements relating to the Station
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 Company or the Station) that RBI may reasonably
request. The rights of RBI under this Section 6.04 shall not be exercised in
such a manner as to interfere unreasonably with the business of the Station.
6.05 Consents. Seller and the Company shall give all consents and take
all other actions, and Seller and the Company shall use their reasonable best
efforts to obtain any third party consents, necessary for the merger or the
assignment of any Contract.
6.06 Notification. Seller and the Company will provide RBI prompt
written notice of any change in any of the information contained in the
representations and warranties made in Article IV or any Schedule. Seller and
the Company agree to notify RBI of any litigation, arbitration or administrative
proceeding pending or, to the best of their knowledge, threatened, which
challenges the transactions contemplated hereby. Seller and the Company shall
promptly notify RBI if any of the normal broadcast transmissions of the Station
are interrupted, interfered with or in any way impaired, and shall provide RBI
with prompt written notice of the problem and the measures being taken to
correct such problem. If the Station is not restored so that operation is
resumed to full licensed power and antenna height within five (5) days of such
event, or if more
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than five (5) such events occur within any thirty (30) day period, or if the
Station shall be off the air for more than ninety-six (96) consecutive hours,
then RBI shall have the right to terminate this Agreement.
6.07 No Inconsistent Action. Seller and the Company shall not take any
action which is materially inconsistent with their obligations under this
Agreement nor take any action which would cause any representation or warranty
of Seller and the Company contained herein to be or become false or invalid or
which could hinder or delay the consummation of the transactions contemplated by
this Agreement.
6.08 Closing. Subject to Article IX hereof, on the Closing Date, Seller
shall transfer, convey, assign and deliver to RBI the Company Stock as provided
in Article I of this Agreement.
6.09 Negative Covenants. Except as otherwise specifically contemplated
by this Agreement and subject to time brokering of the Station pursuant to the
Time Brokerage Agreement, until the Closing Date or the earlier termination of
this Agreement in accordance with the terms hereof, neither Seller nor the
Company shall: (a) waive or release any right relating to the business or
operations of the Station, except for adjustments or settlements made in the
ordinary course of business consistent with past practices; (b) transfer or
grant any rights under any of the Station Licenses; (c) enter into any
commitment for capital expenditures; (d) introduce any material changes in the
broadcast hours or in the format of the Station or any other material change in
the Station's programming policies; (e) change the call letters of the Station;
(f) dispose of, lease, sell or encumber, or agree to dispose of, lease, sell or
encumber, any of the Station Assets, except in the ordinary course of business,
or any shares of Company Stock except as contemplated hereby; (g) suffer or
permit the creation of any lien, mortgage, pledge, encumbrance or charge of any
kind on the Company Stock or Station Assets except as specifically referred to
on Schedules 4.11 or 4.12 hereto, except liens for taxes not yet due and
payable; (h) fail to repair, maintain or replace the Company's transmitting,
studio and other technical equipment or fail to maintain reasonable and
customary inventory of equipment, supplies and other tangible personal property
used or useful in the operation of the Station; (i) enter into, extend or renew
any trade deals or sales of broadcast time on the Station except as same are
approved by RBI and except for time sales for cash at the Station's prevailing
rates; (j) assume, guarantee, endorse or otherwise become responsible for the
indebtedness of any other person, firm or corporation except endorsement of
negotiable instruments in the ordinary course of collection; (k) incur any
indebtedness for borrowed money, or make any loans except in the ordinary course
of business, or make any advances; (l) issue, sell, or contract to sell any of
its securities or sell, contract to sell or grant any right or option to
purchase or otherwise acquire, directly or indirectly, any securities, or
redeem, purchase or otherwise acquire any outstanding shares of capital stock;
(m) change, amend or modify the Articles of Incorporation or By-Laws of the
Company; (n) allow to occur or exist any event of default by the Company under
any contract, agreement, arrangement, license, permit, commitment or
understanding, which event of default would have a material adverse affect upon
the business, operations or financial position of the Company; (o) enter into
any transaction or make or enter into any contract or commitment with respect to
the Station or the Station Assets which involves an expenditure after the
Closing Date of in excess of $10,000.00 or otherwise by reason of its size or
otherwise is not in the ordinary course of business consistent with past
practices; (p) cancel, modify, amend or in any manner impair any of the material
Contracts; (q) consolidate with or merge into any other person or entity
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<PAGE> 25
or permit any person or entity to merge or consolidate with it; or (r) declare,
make or incur any liability to make any dividends or other distributions on the
Company Stock.
6.10 Exclusivity. Seller and the Company agree that, commencing on the
date hereof through the Closing or earlier termination of this Agreement, RBI
shall have the exclusive right to consummate the merger contemplated herein, and
during such exclusive period, Seller and the Company agree that neither Seller,
nor any director, officer, employee or other representative of the Company: (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 Company Stock or Station 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 6.10. Notwithstanding the foregoing, in the
event that RBI and Regent 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 thirty (30) days of notice
of default served by Seller, Seller's and the Company's obligations under this
Section 6.10 shall be null and void.
ARTICLE VII
Joint Covenants
The parties hereto covenant and agree that between the date hereof and
the Closing Date, they shall act in accordance with the following:
7.01 Confidentiality. Subject to the requirements of applicable law,
RBI, Regent, and Seller shall each keep confidential all information obtained by
them 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
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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, 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.
7.02 Cooperation. Subject to express limitations contained elsewhere
herein, RBI, Regent, and Seller agree to cooperate fully 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.
7.03 Control of Station. Subject to time brokering of the Station
pursuant to the Time Brokerage Agreement, RBI and Regent shall not, directly or
indirectly, control, supervise or direct the operations of the Station 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 and the Company.
ARTICLE VIII
Conditions of Closing by RBI and Regent
The obligations of RBI and Regent hereunder are, at their option,
subject to satisfaction, at or prior to the Closing Date, of each of the
following conditions:
8.01 Representations, Warranties and Covenants.
(a) All representations and warranties of Seller and the
Company made in this Agreement or in any Exhibit, Schedule or document delivered
pursuant hereto, shall be true and complete in all 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, (b) caused by the acts of RBI during the term of the Time Brokerage
Agreement, or (c) in the ordinary course of business which are not, either in
individually or in the aggregate, material and adverse.
(b) All of the terms, covenants, agreements, and conditions to
be complied with and performed by Seller or the Company on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
(c) RBI shall have received a certificate, dated as of the
Closing Date, from Seller and the Company, executed by the President of the
Company to the effect that: (a) except for changes occurring as a result of
actions by Regent Broadcasting of Chico, Inc. under the Time Brokerage
Agreement, the representations and warranties of Seller and the Company
contained in this Agreement are true and complete in all material respects on
and as of the Closing Date as if
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made on and as of that date; and (b) Seller and the Company have complied with
or performed in all material respects all terms, covenants, agreements, and
conditions to be complied with or performed by them on or prior to the Closing
Date.
8.02 Governmental Consents. The FCC Consent shall have been obtained
and, subject to the provisions of Section 1.15 hereof, shall have become a Final
Order.
8.03 Governmental Authorizations. The Company shall be the holder of
the Station Licenses and all other licenses, permits and other authorizations
listed in Schedule 4.08, and there shall not have been any modification of any
of such licenses, permits and other authorizations which has a material adverse
effect on the Station or the operations thereof. 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 Station Licenses or any other
licenses, permits or other authorizations listed in Schedule 4.08. The Station
shall not be operating under any special temporary authority from the FCC.
8.04 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 the Company, an assignment by the Company for the
benefit of its creditors, or other similar proceeding.
8.05 Third-Party Consents. All material Contracts shall be in full
force and effect on the Closing Date, and Seller and the Company shall have
obtained and shall have delivered to RBI all appropriate third-party consents in
form and substance acceptable to RBI (including estoppel certificates reasonably
requested by RBI) in connection with any material Contracts, compliance with
requirements of Regent's senior lender, the surrender of the Company Stock to
RBI, or the delivery of the Common Stock of Regent to Seller.
8.06 Closing Documents. Seller shall have delivered or caused to be
delivered to RBI, on the Closing Date, all stock powers, endorsements,
assignments and other instruments of conveyance reasonably satisfactory in form
and substance to RBI, effecting the sale, transfer, assignment and conveyance
of, and release of all claims to dividends or other distributions, whether
declared or undeclared, on the Company Stock to RBI, including, without
limitation, each of the documents required to be delivered by them pursuant to
Article XI.
8.07 Time Brokerage Agreement Compliance. The Time Brokerage Agreement
shall not have been terminated by Regent Broadcasting of Chico, Inc. as
permitted by the Time Brokerage Agreement as a result of the Company's material
noncompliance with its obligations under the Time Brokerage Agreement.
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8.08 No Adverse Change. No material adverse change in condition or,
status of the Company or the Station Assets, which change is not caused by or
does not arise out of, any breach by RBI of any of its representations,
warranties, covenants or agreements hereunder or by Regent Broadcasting of
Chico, Inc. under the Time Brokerage Agreement, shall have occurred since
December 31, 1998, be threatened or be reasonably likely to occur.
8.09 Satisfactory Investigation of Station Facilities. RBI shall have
conducted such examination and investigation of the Real Estate and title
thereto, studios, transmitter facilities, and other Station Assets and personnel
on matters covered by or generally within the scope of Seller's and the
Company's warranties and representations as RBI deems advisable or appropriate
pursuant to Section 6.04 and shall have determined that the findings and results
of such examination and investigation are satisfactory in its sole discretion.
If RBI does not advise Seller and the Company in writing within twenty-one (21)
days after the date of this Agreement of any unsatisfactory findings or results,
this condition shall be deemed waived. If RBI does advise Seller and the Company
of any unsatisfactory findings or results, and such are capable of being cured
by Seller or the Company to RBI's reasonable satisfaction, Seller and the
Company shall have the right to cause the same to be cured to RBI's reasonable
satisfaction prior to Initial Approval.
8.10 Environmental Studies. RBI shall have obtained within sixty (60)
days following the date of this Agreement Phase I environmental assessment
reports on the Real Estate confirming the representations and warranties of
Seller and the Company on environmental matters; provided, however, if RBI
elects not to obtain such environmental reports, RBI shall be deemed to have
waived the condition of Closing contained in this Section 8.10.
ARTICLE IX
Conditions of Closing by Seller
The obligations of Seller and the Company hereunder are, at their
option, subject to satisfaction, at or prior to the Closing Date, of each of the
following conditions:
9.01 Representations, Warranties and Covenants.
(a) All representations and warranties of RBI 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.
(b) All the terms, covenants, agreements, and conditions to be
complied with and performed by RBI and Regent on or prior to the Closing Date
shall have been complied with or performed in all material respects.
(c) Seller shall have received a certificate, dated as of the
Closing Date, executed by the President of RBI and Regent to the effect that:
(i) the representations and
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warranties of RBI 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 (ii) RBI and Regent have complied with or performed in all
material respects all terms, covenants, agreements and conditions to be complied
with or performed by it on or prior to the Closing Date.
9.02 Governmental Consents. The FCC Consent shall have been obtained
and, subject to the provisions of Section 1.15 hereof, shall have become a Final
Order.
9.03 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; or (d) seeks material damages on account of
the consummation of any transaction contemplated hereby.
9.04 Closing Documents. RBI shall have delivered or caused to be
delivered to Seller, on the Closing Date, the Merger Consideration and each of
the documents required to be delivered by it pursuant to Article XI.
ARTICLE X
Transfer Taxes: Fees and Expenses
10.01 Expenses. Except as set forth in Section 10.02 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 II hereof and the fees and disbursements of counsel and
other advisors.
10.02 Specific Charges. All costs of transferring the Company Stock in
accordance with this Agreement, including any income, transfer and documentary
taxes and fees, shall be paid by Seller. Any filing or grant fees imposed 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
by RBI and Regent.
ARTICLE XI
Documents To Be Delivered At Closing
11.01 Documents of Seller and the Company. At the Closing, Seller and
the Company shall deliver or cause to be delivered to RBI the following:
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(a) Resignation of all directors and officers of the Company
effective on the Closing Date;
(b) A certificate of Seller and the Company, dated the Closing
Date, in the form described in Section 8.01(c);
(c) Governmental certificates showing that the Company: (i) is
duly incorporated and in good standing in the state of its incorporation; and
(ii) has filed all returns, paid all taxes due thereon and is currently subject
to no assessment and is in good standing as a foreign corporation in each state
where such qualification is necessary, each certified as of a date not more than
thirty (30) days before the Closing Date;
(d) Such certificates, stock powers (executed in blank with
signatures guaranteed), assignments, documents of title and other instruments of
conveyance, assignment and transfer (including without limitation any necessary
consents to conveyance, assignment or transfer), and lien releases, if any, all
in form satisfactory to RBI and RBI's counsel, as shall be effective to vest in
RBI title in and to the Company Stock, free, clear and unencumbered in
accordance with the terms of this Agreement.
(e) The Indemnification Escrow Agreement;
(f) A written opinion of Robert Harp, Esq., Marshall,
Burghardt, Mieske & Harp, counsel for the Seller and the Company, on which
Regent's lenders and affiliates shall be entitled to rely, in the form of
Exhibit C, dated as of the Closing Date;
(g) Updating title insurance endorsements on all title
insurance policies on the Real Estate held by the Company in form and substance
reasonably satisfactory to RBI; and
(h) the Non-Competition Agreement in the form of Exhibit D,
executed by Seller;
(i) the Consulting Agreement in the form of Exhibit F,
executed by Seller; and
(j) Such additional information, materials, agreements,
documents and instruments as RBI, its counsel, or its senior lender may
reasonably request in order to consummate the Closing.
11.02 RBI's Documents. At the Closing, RBI shall deliver or cause to be
delivered
(a) Certified resolutions of the Board of Directors of RBI and
Regent approving the execution and delivery of this Agreement and authorizing
the consummation of the transactions contemplated hereby;
(b) A certificate of RBI and Regent, dated the Closing Date,
in the form described in Section 9.01(c);
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(c) The Indemnification Escrow Agreement;
(d) A written opinion of RBI's counsel in the form of Exhibit
E, dated as of the Closing Date;
(e) The Merger Consideration in accordance with Section 1.14
hereof;
(f) All necessary consents to the issuance by Regent of the
Common Stock of Regent;
(g) The Non-Competition Agreement in the form of Exhibit D,
executed by RBI;
(h) The Consulting Agreement in the form of Exhibit F,
executed by RBI; and
(i) Such additional information, materials, agreements,
documents and instruments as Seller and its counsel may reasonably request in
order to consummate the Closing.
ARTICLE XII
Survival; Indemnification: Etc.
12.01 Survival of Representations, Etc. It is the express intention and
agreement of the parties to this Agreement that all covenants in Articles V, VI,
and VII ("Covenants") and all representations and warranties (together,
"Warranties") made in this Agreement shall survive the Closing (regardless of
any knowledge, investigation, audit or inspection at any time made by or on
behalf of any of the parties) as follows:
(a) The Covenants in Sections 6.08, 7.01 and 7.02 and any
other agreements not specifically addressed in this Section 12.01 shall survive
the Closing for a period from the Closing Date equal to the statute of
limitations for written contracts in California.
(b) The Warranties in Sections 3.02, 4.01, 4.02, 4.05, 4.06
shall survive the Closing without limitation.
(c) The Warranties in Section 4.10 or otherwise relating to
the federal, state, local or foreign tax obligations of Seller or the Company
and in Section 4.14 shall survive the Closing for the period of the applicable
statute of limitations plus any extensions or waivers granted or imposed with
respect thereto.
(d) All other Covenants and Warranties shall survive until
June 30, 2001 or until thirty (30) days after such time as Regent's outside
public accounting firm has released its annual audit of the financial statements
applicable to the Station for the period ending December 31, 2000, whichever is
earlier.
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(e) The right of any party to recover Damages (as defined in
Section 12.02(a))pursuant to Section 12.02 shall not be affected by the
expiration of any Covenants or 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. The survival of a Covenant shall not extend the
period to which the Covenant applies, but merely establishes the time by which
notice of a claim of breach may be given.
(f) All claims for monetary damages in connection with this
Agreement and the transactions contemplated hereby shall be brought pursuant to,
and subject to the limitations of, this Article XII, and no such claim may be
brought except pursuant to, and subject to the limitations of, this Article XII.
(g) Notwithstanding any provision hereof to the contrary,
there shall be no contractual time limit in which any party may bring any action
for actual fraud (a "Fraud Action'), regardless of whether such actual fraud
also included a breach of any Covenant 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.
12.02 Indemnification.
(a) Seller shall defend, indemnify and hold harmless RBI and
its Affiliates from and against any and all losses, costs, damages, liabilities
and expenses, including reasonable attorneys' fees and expenses ('Damages')
incurred by RBI and its Affiliates and Regent arising out of or related to: (i)
any breach of the Warranties given or made by Seller or the Company in this
Agreement; (ii) any breach of the Covenants or other agreements made by Seller
or the Company in the Agreement; (iii) Liabilities of the Company incurred as a
result of the operation of the Company and the Station for the period ended on
the day preceding the Closing Date; and (iv) income taxes of the Company for the
period ended on the day prior to the Closing Date except to the extent such
taxes are offset by existing net loss carryovers.
Notwithstanding the foregoing provisions of this Section 12.02(a),
Seller shall have no obligation to defend, indemnify and hold harmless RBI and
Regent for Damages arising out of any matter described in clause (a)(i) of the
immediately preceding paragraph unless the aggregate Damages on account thereof
exceed $15,000, and the maximum liability of Seller hereunder for Damages shall
be equal to the Final Merger Consideration.
(b) RBI and Regent shall defend, indemnify and hold harmless
Seller from and against any and all Damages incurred by Seller arising out of or
related to: (i) any breach of the Covenants, other agreements, and Warranties
given or made by RBI and Regent in this Agreement; (ii) all federal, state and
local tax liabilities of the Company arising and relating to operation of the
Station on and after the Closing Date; and (iii) any loss or damage arising out
of any Liability of Company incurred or the result of the operation of the
Company and Station on and after the Closing Date or which have been included in
the Closing Report and as to which RBI and Regent have received an adjustment of
the Merger Consideration in their favor hereunder in accordance with Section
1.12.
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(c) 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, providing a description of
the nature and amount of the claim (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 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 12.01, and that the only notice required
with respect thereto shall be as specified in Section 12.01(c). Seller and RBI
each irrevocably submits to the nonexclusive jurisdiction of any state or
federal court sitting in San Francisco, California over any suit, action or
proceeding arising out of or relating to this Agreement and irrevocably agrees
that all claims in respect of such action or proceeding may be heard and
determined in such court. Each party to this Agreement hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding.
The obligations and liabilities of the parties hereto with respect to
their respective indemnities pursuant to this Section 12.02 resulting from any
Claim shall be subject to the following additional terms and conditions:
(i) 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.
(ii) In the event that the indemnifying party shall
elect not to undertake such defense or opposition, or within ten (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 thereto).
(d) Anything this Section 12.02 to the contrary
notwithstanding: (i) 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; (ii) 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 (iii) 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
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their respective counsel or other representatives, shall cooperate in good faith
with respect to such Claim.
(e) 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.
ARTICLE XIII
Termination Rights
13.01 Termination. This Agreement may be terminated at any time prior
to Closing as follows:
(a) Upon the mutual written consent of RBI and Seller, this
Agreement may be terminated on such terms and conditions as so agreed; or
(b) By written notice of RBI to Seller if Seller or the
Company breaches in any material respect any of his/its representations or
warranties or defaults in any material respect in the observance or in the due
and timely performance of any of his 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 RBI; or
(c) By written notice of Seller or the Company to RBI if RBI
and Regent breach in any material respect any of their representations or
warranties or default in any material respect in the observance or in the due
and timely performance of any of 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 the Company; or
(d) By written notice of any party if any condition to the
obligation to perform this Agreement of the party seeking to terminate has not
been satisfied or complied with by the Closing Date or the date specified herein
for such satisfaction or compliance, and such inaccuracy, failure of performance
or non-satisfaction of or compliance with a condition, if capable of being
cured, has not been cured within thirty (30) days after written demand therefor,
or has not been waived by the party seeking to terminate this Agreement; or
(e) By written notice of RBI to Seller if the FCC denies the
FCC Application; and by written notice of Seller to RBI if the FCC denies the
FCC Application under circumstances in which Seller is not entitled to delivery
of the Escrow Deposit; or
(f) By written notice of RBI to Seller, or by Seller to RBI,
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 RBI, if any court, legislative body or governmental or
regulatory authority has taken, or is reasonably expected to take, action that
would prohibit the consummation of the
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transactions contemplated hereby in accordance with the terms of the this
Agreement, as determined by RBI in its sole discretion reasonably exercised; or
(g) By written notice of RBI to Seller, or by Seller to RBI,
if the Closing shall not have been consummated on or before October 31, 2000; or
(h) By written notice of RBI to Seller if it shall become
apparent in the judgment of RBI and Seller reasonably exercised that any
condition to RBI's obligation to close as set forth in Article VIII hereof will
not be satisfied on or before October 31, 2000; or
(i) By written notice of RBI to Seller under the conditions
set forth in Sections 6.06 or 14.13 hereof; or
(j) By written notice of RBI to Seller in the event Regent
Broadcasting of Chico, Inc. has terminated the Time Brokerage Agreement pursuant
to Section 17 thereof; or
(k) By written notice of RBI to Seller, or by Seller to RBI,
in the event of (i) a termination of the Time Brokerage Agreement by the
notifying party pursuant to Section 16.3 thereof or (ii) a termination of the
Time Brokerage Agreement pursuant to Section 19 thereof if such termination of
the Time Brokerage Agreement has a material adverse effect on such party's
ability to complete the transactions contemplated hereunder.
Notwithstanding the foregoing, no party hereto may effect a termination
hereof if such party is in material default or breach of this Agreement. If this
Agreement is terminated, RBI and its Affiliates shall not, except as
contemplated by the Time Brokerage Agreement, solicit or attempt to employ any
person who is an officer or employee of the Company as of the date of this
Agreement for a period of six (6) months after the effective date of such
termination.
13.02 Liability. Except as set forth in Section 13.04 below, the
termination of this Agreement under Section 13.01 shall not relieve any party of
any liability for breach of this Agreement prior to the date of termination.
13.03 Monetary Damages, Specific Performance and Other Remedies. The
parties recognize that if the Company or Seller refuses to perform under the
provisions of this Agreement, monetary damages alone will not be adequate to
compensate RBI for its injury. RBI 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 (which would include an
amount equal to at least the amount of the Escrow Deposit), that may be
available to it. If any action is brought by RBI to enforce this Agreement,
Seller and the Company shall waive the defense that there is an adequate remedy
at law. In the event of a default by Seller or the Company, which results in the
filing of a lawsuit for damages, specific performance, or other remedy, the
prevailing party in such action shall be entitled to reimbursement by the other
of reasonable legal fees and expenses incurred by the prevailing party.
13.04 SELLER'S AND COMPANY'S LIQUIDATED DAMAGES. AS MORE FULLY
DESCRIBED IN THE DEPOSIT ESCROW AGREEMENT, IN
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THE EVENT THIS AGREEMENT IS TERMINATED PURSUANT TO SECTION 13.01(C) BECAUSE OF A
MATERIAL BREACH OF THIS AGREEMENT BY RBI AND ALL OTHER CONDITIONS TO CLOSING ARE
AT SUCH TIME SATISFIED OR WAIVED (OTHER THAN SUCH CONDITIONS AS CAN READILY BE
SATISFIED BY CLOSING), THEN THE ESCROW DEPOSIT SHALL BE DELIVERED TO SELLER AND
THE COMPANY, AND THE CASH OR PROCEEDS FROM A DRAW ON THE LETTER OF CREDIT SHALL
CONSTITUTE LIQUIDATED DAMAGES. IT IS UNDERSTOOD AND AGREED THAT SUCH LIQUIDATED
DAMAGES AMOUNT REPRESENTS THE 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 RBI AND REGENT AND ANY OF THEIR AFFILIATES
FOR FAILING TO CONSUMMATE THIS AGREEMENT AS A RESULT OF A MATERIAL BREACH
HEREOF, AND SHALL BE APPLICABLE REGARDLESS OF THE ACTUAL AMOUNT OF DAMAGES
SUSTAINED AND ALL OTHER REMEDIES ARE DEEMED WAIVED BY SELLER AND THE COMPANY.
ARTICLE XIV
Miscellaneous Provisions
14.01 Brokerage. The parties represent and warrant that no broker or
finder was employed, appointed or authorized by any of them in connection with
the transactions contemplated by this Agreement. Each hereby agree to indemnify
and hold the others harmless from and against any and all other liabilities with
respect thereto.
14.02 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
Regulations 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.
14.03 Further Assurances. After the Closing, Seller shall from time to
time, at the request of and without further cost or expense to RBI, 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 RBI good title to the Company
Stock being transferred hereunder in accordance with the terms hereof, and RBI
and Regent shall from time to time, at the request of and without further cost
or expense to Seller,
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execute and deliver such other instruments and take such other actions as may
reasonably be requested in order to more effectively consummate the transaction
contemplated hereby for the benefit of Seller.
14.04 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective, heirs,
executors, administrators, successors and permitted assigns. Seller may not
voluntarily or involuntarily assign his interest under this Agreement without
the prior written consent of RBI. RBI 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 no such
assignment and/or delegation shall relieve RBI 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 RBI finds it necessary or is required to provide to
a third party a collateral assignment of the RBI's interest in this Agreement
and/or any related documents, Seller and the Company shall cooperate with the
RBI and any third party requesting such assignment including but not limited to
signing or delivering a consent and acknowledgment of such assignment.
14.05 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.
14.06 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.
14.07 Governing Law. The construction and performance of this Agreement
shall be governed by the laws of the State of California without giving effect
to the choice of law provisions thereof.
14.08 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
party may request, in the case of Seller or the Company, by notifying RBI, and
in the case of RBI and Regent, by notifying Seller:
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<PAGE> 38
To Seller or the Company: Robb Cheal
KZAP Radio
407 West Ninth Street
Chico, California 95928
Fax: (530) 895-3740
Copy to: Robert Harp, Esq.
Marshall, Burghardt, Mieske & Harp
Suite 2
1350 E. Lassen Avenue
Chico, California 95973
Fax: (530) 895-0844
To RBI and Regent: Terry S. Jacobs, Chairman
Regent Communications, Inc.
50 East RiverCenter Blvd. Suite 180
Covington, KY 41011
Fax: (606) 292-0352
Copy to: STRAUSS & TROY
The Federal Reserve Building
150 East Fourth Street
Cincinnati, OH 45202
Attn: Alan C. Rosser, Esq.
Fax: (513) 241-8259
14.09 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.
14.10 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.
14.11 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
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<PAGE> 39
provision deleted, and the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected or impaired thereby.
4.12 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.
14.13 Risk of Loss. The risk of any loss, damage or destruction to any
of the Station Assets from fire or other casualty or cause shall be borne by the
Seller and the Company at all times prior to the Closing hereunder. Upon the
occurrence of any loss or damage to any material property or assets of the
Company as a result of fire, casualty or other causes prior to Closing, Seller
shall notify RBI of same in writing immediately stating with particularity the
extent of such loss or damage incurred, the cause thereof if known and the
extent to which restoration, replacement and repair of the Station Assets lost
or destroyed will be reimbursed under and insurance policy with respect thereto.
In the event that the loss or damage exceeds One Hundred Thousand Dollars
($100,000.00) and the property is not substantially repaired, replaced or
restored prior to the Closing Date, the Closing Date shall be extended for a
period of up to ninety (90) days to permit the repair, replacement or
restoration of the property by Seller and Company, and in the further event that
it is not so repaired, replaced or restored within such sixty (60) day period,
RBI, at its option, may, upon written notice to Seller:
(a) terminate this Agreement; or
(b) postpone the Closing Date for an additional period of up
to sixty (60) days until such time that the property has been substantially
repaired, replaced or restored; or
(c) elect to consummate the Closing and accept the property in
its "then" condition, and Seller shall reimburse RBI for any deductible portion
of the insurance coverage of Company. In the event of postponement of Closing
hereunder, Seller, Company and Regent shall join in any necessary requests of
the FCC to extend the time of the effective period of the FCC's consent. RBI may
also at its option elect to consummate the Closing pursuant to this Subsection
(c) prior to the initial sixty (60) day extension of the Closing Date.
14.14 Time Brokerage Agreement. Prior to the execution hereof, the
Company has entered into with Regent Broadcasting of Chico, Inc. a Time
Brokerage Agreement pursuant to which the Company is making available to Regent
Broadcasting of Chico, Inc. the broadcasting transmission facilities to the
Station and/or causing to be broadcast on the Station programming provided by
Regent Broadcasting of Chico, Inc. from the Commencement Date (as defined in the
Time Brokerage Agreement) 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 of this Agreement.
14.15 Definitions. The following capitalized terms used in this
Agreement shall have the following meanings:
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<PAGE> 40
(a) "Contracts" means all contracts, agreements, leases and
legally binding contractual rights of the Company of any kind, written or oral,
relating to the Company or the operations of the Station and which are listed on
Schedule 4.13.
(b) "Station Licenses" means all licenses, permits and other
authorizations issued to the Company by any governmental or regulatory authority
including without limitation those issued by the FCC used or useful in
connection with the operation of the Station, including but not limited to those
described in Schedule 4.08, along with renewals, modifications, or applications
relating to such items between the date hereof and the Closing Date;
(c) "Station Assets" means all of the assets, properties,
interests and rights of the Company of whatsoever kind and nature, real and
personal, tangible and intangible, owned or leased (to the extent of the
Company's leasehold interest) by the Company as the case may be, wherever
situated, which are used or held for use in the operation of the Station,
including but not limited to all of the Company's right, title and interest in
and to:
(i) the Station Licenses;
(ii) 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 the Company's rights therein, owned,
leased (to the extent of the Company's leasehold interest) or held by the
Company and used or useful in connection with the operations of the Station,
including but not limited to those items described or listed in Schedule 4.11,
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 the Company; provided,
however, the Company 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 RBI which shall not be unreasonably withheld;
(iii) the Contracts and all Time Sales Agreements (as
defined in the Time Brokerage Agreement);
(iv) all of the Company's rights in and to the call
letters listed on Schedule 4.15, and any variation thereof, as well as all of
the Company'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, jingles, slogans, the Station's logos and all other
logos or licenses to use same and all other intangible property rights of the
Company, which are used or useful in connection with the operation of the
Station, including but not limited to those listed in Schedule 4.15
(collectively, the "Intellectual Property") together with any associated
goodwill and any additions thereto between the date hereof and the Closing Date;
(v) all programming materials and elements of whatever
form or nature owned by the Company, whether recorded on tape or other medium or
intended for live
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<PAGE> 41
performance, and all copyrights owned by or licensed to the Company that are
used or useful in connection with the operation of the Station, including all
such programs, materials, elements and copyrights acquired by the Company
between the date hereof and the Closing Date;
(vi) all of the Company's rights in and to all the
files, documents, records, and books of account relating to the operation of the
Station or to the Station Assets, including, without limitation, the Station's
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, logs, software programs and books and records relating to employees,
financial, accounting and operation matters.
(vii) the Company'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 of the Company;
(viii) all claims and causes of action, including all
contracts of insurance, and insurance process or claims made by, the Company
relating to property or equipment repaired, replaced or restored by the Company
prior to the Closing Date; and
(ix) all accounts receivable and notes receivable of the
Company.
(d) "Common Stock" means the Common Stock of Regent.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
REGENT BROADCASTING, INC. KZAP, INC.
By: /s/ Terry S. Jacobs By: /s/ Robb Cheal
----------------------------- -------------------------------
Name: Terry S. Jacobs Name: Robb Cheal
--------------------------- -----------------------------
Title: Chairman Title: President
-------------------------- ----------------------------
REGENT COMMUNICATIONS, INC. SELLER:
By: /s/ Terry S. Jacobs /s/ Robb Cheal
----------------------------- ------------------------------------
Robb Cheal
Name: Terry S. Jacobs
---------------------------
Title: Chairman
--------------------------
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<PAGE> 1
Exhibit 2(i)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
this 29th day of March, 2000 by and between YAVAPAI BROADCASTING CORPORATION, an
Arizona corporation (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;
<PAGE> 2
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 $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 and Trade Agreements (time
sales agreements for consideration other than cash), and (i) 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 (ii) all contracts,
agreements, leases and legal binding contractual rights entered into or acquired
by Seller between the date hereof and the Closing Date which the Buyer
specifically agrees at Closing to assume (collectively (i) and (ii) 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 without adversely affecting Seller's rights thereto),
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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<PAGE> 3
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 7.7 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 (which shall not include accounts receivable generated by Buyer under the
Time Brokerage Agreement identified below);
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
3
<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."
4
<PAGE> 5
ARTICLE 3
CONSIDERATION; ACCOUNTS RECEIVABLE
3.1 Delivery of Consideration. In consideration for 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 Dollars ($2,000,000) 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 National
City Bank, in Cambridge, Ohio, 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) Within two (2) business days after the
execution and delivery of this Agreement, Buyer, Seller and National City Bank,
in Cambridge, Ohio, as Escrow Agent, or an alternative 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
5
<PAGE> 6
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. 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, 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, a copy of which is
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 Time Brokerage Agreement. Upon the lapse of the right of Buyer to
terminate this Agreement under Section 17.10 hereof, Buyer and RBF will enter
into a Time Brokerage Agreement, in the form of Exhibit D hereto (the "Time
Brokerage Agreement"), pursuant to which RBF will 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.
3.6 Accounts Receivable. Buyer acknowledges that Seller's accounts
receivable arising 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
other than for Buyer under the Time Brokerage Agreement, 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 the period of thirty (30) days following the Closing Date or
ninety (90) days following the
6
<PAGE> 7
Commencement Date under the Time Brokerage Agreement, whichever is shorter (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 from persons 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 except with respect to any accounts
that may be reassigned to RBF. 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 at the end of the
Collection Period, accompanied by an accounting showing the amount it received
on each account, provided that Buyer may deduct from such amounts, and be
responsible for payment of, commissions due on the collected Seller Accounts
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 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 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, except to the extent previously paid by Buyer as provided
herein.
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 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
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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 Seller's counsel in
Cincinnati, Ohio, 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 effective
date 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 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:
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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. Except as set forth on Schedule 6.6, 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 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
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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 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
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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.
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.
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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 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.
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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").
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 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.
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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. 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. sections 9601 et seq., Toxic Substances Control Act.
15 U. S. C. sections 2601 et seq., the Resource Conservation and Recovery Act of
1976, 42 U.S.C. sections 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, to the best of Seller's knowledge, any predecessor
of Seller, in violation of applicable laws or regulations, or, to the best of
Seller's knowledge, 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 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 (to the extent transferable without adversely affecting
Seller's rights thereto) shall be assignable to Buyer at Closing, and upon such
assignment, Buyer shall
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receive sufficient 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. Schedule 7.13 lists the income statements of
RBF relating to the Stations which have been supplied to Buyer (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 Seller has provided to Buyer a 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.
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
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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 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 which will not be satisfied at Closing.
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 7.7 and Schedule 7.8 hereto and
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
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imposition whatsoever or otherwise affect the full, free and unencumbered use of
the Stations Assets by Buyer.
7.22 Termination of Prior Contract. On March 20, 2000, Seller sent
written notice to The Guyann Corporation of Seller's decision to terminate the
Asset Purchase Agreement between it and Seller, dated March 30, 1999, pursuant
to Section 16.1.6 thereof for reason that the Closing thereunder was not
consummated on or before September 15, 1999.
7.23 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 receipt
of FCC Consent or 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 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
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transactions contemplated by this Agreement; provided, however, nothing in this
Section 8.4 shall require Buyer to dispose of or commit to dispose of any
existing ownership interest of Buyer in any other radio broadcast station.
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 required by or provided otherwise by the Time
Brokerage 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 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
increases in the rates of salaries or compensation payable to employees of the
Stations (provided
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that no such increase to any employee shall exceed the amount budgeted therefor
in RBF's 2000 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 2000 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 Without limiting Buyer's rights with respect to
Fundamental Contracts, 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. Subject to the terms of the Time Brokerage Agreement, 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 any representation or warranty of Seller contained
herein to be or become false or invalid
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or which could hinder or delay receipt of FCC Consent or 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 or pursuant to the terms of the Time Brokerage Agreement, 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 effective date
hereof, subject to limitations of applicable law and the effective termination
of an Asset Purchase Agreement between Seller and The Guyann Corporation, dated
March 30, 1999, 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.
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ARTICLE 10
JOINT COVENANTS
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, request or the
rules 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, including without limitation Sections 8.4 and 9.1.7 hereof, 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) 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; provided, that neither Buyer nor Seller shall be required to waive any
material right or consent to any materially adverse provision or condition to
obtain any such consent.
10.3 Control of Stations. Buyer shall not, directly or indirectly,
control, supervise or direct the operations of the Stations prior to the
Closing. Except as provided in the Time Brokerage Agreement, 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, transfer,
delivery or sublease or attempted sale, assignment, transfer, delivery
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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; provided, that the foregoing shall not affect or modify the parties'
obligations with respect to the Assumed Liabilities and Retained Liabilities as
provided in Article 2 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
Commencement Date of the Time Brokerage Agreement. 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 Commencement Date of the Time
Brokerage Agreement, is a retiree, former employee, or current employee of RBF,
relating to the period up to the Commencement Date of the Time Brokerage
Agreement. 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. Between the date of this Agreement
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and the Commencement Date of the Time Brokerage Agreement, Seller shall use
reasonable efforts to retain those employees of the Station who Buyer has
notified in writing that it intends to hire. RBF, or any of its Affiliates, may
employ any person who rejects Buyer's offer of employment.
ARTICLE 11
CONDITIONS OF CLOSING BY BUYER
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 the Time Brokerage Agreement; (b) resulting from the errors, acts
or omissions of Buyer under the Time Brokerage Agreement, or (c) 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 the Time Brokerage
Agreement; (ii) resulting from the errors, acts or omissions of Buyer under the
Time Brokerage Agreement, or (iii) 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.
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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.
11.5 Third-Party Consents. All Fundamental 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
Fundamental 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 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
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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, 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.
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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 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 in the
form attached as Exhibit F, dated as of the Closing Date;
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; and
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14.1.10 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:
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; and
14.2.7 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.
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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) 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, (c)
the Assumed Liabilities, (d) the activities of Buyer under the Time Brokerage
Agreement, and (e) the operation of the Stations on and after the Closing Date.
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.
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<PAGE> 29
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, 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.
29
<PAGE> 30
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 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 Initial Approval has not been granted on or before March 30, 2001.
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 March 30, 2001.
16.1.8 By written notice of Buyer to Seller under the
conditions set forth in Section 9.2 hereof.
16.1.9 By written notice of Buyer to Seller, or by Seller to
Buyer, if the party giving such notice has terminated the Time Brokerage
Agreement.
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<PAGE> 31
16.1.10 By written notice of Buyer to Seller within fourteen
(14) business days after the effective date of this Agreement as provided in
Section 17.10 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 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.
The provision for liquidated damages contained herein, however, shall not limit
the damages which Seller may be entitled to recover from Buyer for Buyer's
breach of the Time Brokerage Agreement.
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
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<PAGE> 32
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 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.
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<PAGE> 33
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
party may request, in the case of Seller, by notifying Buyer, and in the case of
Buyer, by notifying Seller:
To Buyer: W. Grant Hafley
Yavapai Broadcasting Corporation
2405 East Highway 89A
Cottonwood, AZ 86326
Fax: (520) 634-2295 or (740) 432-5565
Copy to: IRWIN, CAMPBELL & TANNENWALD, P.C.
1730 Rhode Island Avenue, N.W., Suite 200
Washington, D.C. 20036
Attn: Alan C. Campbell, Esq.
Fax: (202) 728-0354
33
<PAGE> 34
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
The Federal Reserve Building
150 East Fourth Street
Cincinnati, OH 45202
Attn: Alan C. Rosser, Esq.
Fax: (513) 241-8259
17.10 Effectiveness. Buyer acknowledges that Seller has been a party to
an Asset Purchase Agreement, dated March 30, 1999, with The Guyann Corporation
("Guyann") under which Seller agreed to sell the Stations to Guyann, granted to
Guyann the exclusive right to purchase the Stations while such agreement was in
effect, and agreed not to initiate, solicit, encourage or negotiate any
proposals or offers for a sale of the Stations to any other party during such
period of exclusivity. Buyer confirms (a) that its offer to purchase the
Stations was presented to Seller at Buyer's own initiative, without solicitation
or encouragement from Seller, (b) that prior to March 21, 2000 the parties had
not engaged in any negotiations concerning Buyer's offer, that no confidential
information or data had been provided by Seller to Buyer, and that Seller had
taken no action to facilitate any effort or attempt by Buyer to make or
implement its proposal or offer to acquire the Stations, and (c) that Seller has
executed this Agreement in recognition of the fiduciary duties of its Board of
Directors. Because of the absence of information supplied by Seller to Buyer,
immediately upon the execution of this Agreement Buyer shall have the right to
conduct such investigation of the Stations as Buyer may desire pursuant to the
provisions of Section 9.1.6 hereof and to terminate this Agreement at its option
on the basis of its investigation within fourteen (14) business days after the
date of this Agreement without any liability or further obligation by either
party to the other party, except to return any confidential material. In the
event Buyer fails to give notice of termination to Seller within said 14-day
period, such right of termination shall lapse and be of no further force and
effect. In the event this Agreement, or Seller's activities in connection with
it, are determined by a court, arbitrator or by an opinion of independent legal
counsel selected by Seller to be in violation of the Guyann Agreement, then this
Agreement shall be null and void, and neither party shall have any rights or
obligations hereunder.
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.
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<PAGE> 35
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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<PAGE> 36
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/ Terry S. Jacobs
----------------------------------
Name: Terry S. Jacobs
----------------------------------
Title: Chairman
----------------------------------
REGENT BROADCASTING OF FLAGSTAFF, INC.
By: /s/ Terry S. Jacobs
----------------------------------
Name: Terry S. Jacobs
----------------------------------
Title: Chairman
----------------------------------
YAVAPAI BROADCASTING CORPORATION
By: /s/ W. Grant Hafley
----------------------------------
Name: W. Grant Hafley
----------------------------------
Title: President
----------------------------------
36
<PAGE> 1
Exhibit 10(a)
ESCROW AGREEMENT
REGENT BROADCASTING OF VICTORVILLE, INC., REGENT LICENSEE OF
VICTORVILLE, INC., REGENT BROADCASTING OF PALMDALE, INC., REGENT
LICENSEE OF PALMDALE, INC., REGENT BROADCASTING OF MANSFIELD, INC.,
REGENT LICENSEE OF MANSFIELD, INC./CLEAR CHANNEL BROADCASTING, INC.,
CLEAR CHANNEL BROADCASTING LICENSES, INC., CAPSTAR RADIO OPERATING
COMPANY, CAPSTAR TX LIMITED PARTNERSHIP
$5,000,000.00
THIS ESCROW AGREEMENT (the "Agreement") is made as of March 12, 2000
among the company or companies designated as Clear Channel on the signature page
hereto (collectively, "Clear Channel"), the company or companies designated as
Exchange Party on the signature page hereto (collectively, "Exchange Party"),
and Bank of America, a national banking association ("Escrow Agent").
W I T N E S S E T H:
- - - - - - - - - - -
WHEREAS, Clear Channel and Exchange Party are parties to an Asset
Exchange Agreement (the "Exchange Agreement") of even date herewith pursuant to
which Exchange Party is to deposit funds with the Escrow Agent in connection
with the exchange of certain radio broadcast stations.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound, Clear
Channel, Exchange Party and Escrow Agent hereby agree as follows:
Section 1. Escrow Account and Deposit. The Escrow Agent has
established, or simultaneously with the execution hereof will establish, an
account (the "Escrow Account") into which Exchange Party has deposited, or
simultaneously with the execution hereof will deposit, FIVE MILLION DOLLARS
($5,000,000.00). Upon receipt thereof, the Escrow Agent shall provide Exchange
Party and Clear Channel confirmation thereof, and shall hold and disburse such
deposit as set forth in this Agreement. Such deposit shall be invested in the
Bank of America Business Investment Account or a money market fund investing
solely in securities issued by the United States, as directed by Exchange Party
and Clear Channel. Such deposit, as increased or decreased based upon such
investment results, is referred to herein as the "Deposit." For tax purposes,
interest and other income earned on the Deposit shall be reported as income of
Exchange Party, the Escrow Agent shall file a Form 1099 consistent with such
treatment, and Exchange Party shall provide Escrow Agent with executed Forms W-8
and W-9, as requested by Escrow Agent.
<PAGE> 2
Section 2. Release of Deposit by Escrow Agent. The Escrow Agent shall
promptly release all or a portion of the Deposit to Exchange Party or Clear
Channel, as the case may be, upon the first to occur of the following
circumstances:
(a) if the Escrow Agent receives written instructions from
Clear Channel stating that Clear Channel is entitled to the Deposit pursuant to
the Exchange Agreement and that Clear Channel has delivered to Exchange Party a
copy of such notice, and directing the Escrow Agent to disburse the Deposit,
then the Escrow Agent shall disburse the Deposit in accordance with such
instructions; provided, however, that prior to the release of any portion of the
Deposit in accordance with such written instructions from Clear Channel, Escrow
Agent shall send to Exchange Party a copy of Clear Channel's written
instructions and Escrow Agent shall not release the Deposit to Clear Channel if
Escrow Agent receives, within fifteen (15) days after it has delivered a copy of
Clear Channel's instructions to Exchange Party, written notice from Exchange
Party objecting to release of the Deposit to Clear Channel ("Exchange Party's
Rebuttal Notice"). After timely receipt by Escrow Agent of Exchange Party's
Rebuttal Notice, Escrow Agent shall not deliver the Deposit until such time as
Escrow Agent receives: (i) a written agreement signed by Clear Channel and
Exchange Party providing instructions as to the disposition of the Deposit, or
(ii) a certified copy of an order or judgment from an arbitrator or court which
has become final (meaning that the order or judgment is no longer subject to
appeal or review by a court of competent jurisdiction) with respect to the
disposition of the Deposit, at which time Escrow Agent shall deliver the Deposit
(along with interest accrued thereon) in accordance with said agreement, order
or judgment. Notwithstanding the foregoing, after receipt by Escrow Agent of
Exchange Party's Rebuttal Notice, Escrow Agent may: (i) deposit the Deposit
(along with interest accrued thereon) with any court which has properly assumed
jurisdiction of any dispute hereunder, or (ii) commence an action in
interpleader in any court of competent jurisdiction in the District of Columbia
and deposit the Deposit (along with interest accrued thereon) with such court;
or
(b) if the Escrow Agent receives joint written instructions
from Clear Channel and Exchange Party directing the Escrow Agent to disburse the
Deposit, then the Escrow Agent shall disburse the Deposit in accordance with
such instructions.
Section 3. Reliance by Escrow Agent. The Escrow Agent shall be entitled
to rely upon and act in accordance with any of: (a) written notice of Clear
Channel pursuant to Section 2(a) hereof in the absence of an Exchange Party's
Rebuttal, (b) written notice of Exchange Party pursuant to Section 2(a) hereof,
(c) the joint written instructions of Clear Channel and Exchange Party, and (d)
a final order of an arbitrator or a court of competent jurisdiction authorizing
the Escrow Agent to release the Deposit, or any portion thereof, to Exchange
Party or Clear Channel.
Section 4. Conflicting Demands. If conflicting demands are made upon
the Escrow Agent, the Escrow Agent shall not be required to resolve such
controversy or take any action, but shall await resolution of the controversy by
joint instructions from Clear Channel and Exchange Party or by appropriate
judicial or arbitration proceedings..
- 2 -
<PAGE> 3
Section 5. Indemnification; Fees of Escrow Agent. Exchange Party and
Clear Channel shall jointly and severally pay, and hold the Escrow Agent
harmless against, all costs, charges, damages and attorneys' fees which the
Escrow Agent in good faith may incur or suffer in connection with or arising out
of this Agreement. The Escrow Agent shall be entitled to a fee for services it
renders hereunder in the amount set forth on Schedule A attached hereto, which
shall be paid one-half by the Clear Channel and one-half by Exchange Party.
Section 6. Rights and Duties of Escrow Agent.
(a) No assignment of the interest of any of the parties hereto
shall be binding upon the Escrow Agent unless and until written evidence of such
assignment in a form satisfactory to the Escrow Agent shall be filed with and
accepted by the Escrow Agent.
(b) The Escrow Agent may rely or act upon orders or directions
signed by the proper parties, or bearing a signature or signatures reasonably
believed by the Escrow Agent to be genuine.
(c) The Escrow Agent shall have no duties other than those
expressly imposed on it herein and shall not be liable for any act or omission
except for its own gross negligence or willful misconduct.
(d) In the event that the Deposit or any proceeds thereof
shall be attached, garnished, or levied upon by an order of any court, or the
delivery thereof shall be stayed or enjoined by an order of court, or any order,
judgment or decree shall be made or entered by any court affecting the property
deposited under this Agreement, or any part thereof, the Escrow Agent is hereby
expressly authorized in its sole discretion to obey and comply with all writs,
orders or decrees so entered or issued, which it is advised by legal counsel of
its own choosing is binding upon it, whether with or without jurisdiction, and
in case the Escrow Agent obeys or complies with any such writ, order or decree
it shall not be liable to any of the parties hereto or to any other person, firm
or corporation, by reason of such compliance notwithstanding that such writ,
order or decree be subsequently reversed, modified, annulled, set aside or
vacated.
(e) The Escrow Agent may resign by giving sixty (60) days
written notice of resignation, specifying the effective date thereof. Within
thirty (30) days after receiving the aforesaid notice, the Clear Channel and
Exchange Party agree to appoint a successor escrow agent to which the Escrow
Agent shall transfer the Deposit or any proceeds thereof then held in escrow
under this Agreement. If a successor escrow agent has not been appointed and/or
has not accepted such appointment by the end of the 30-day period, the Escrow
Agent may at its sole option: (i) apply to a court of competent jurisdiction for
the appointment of a successor escrow agent, and the costs, expenses and
reasonable attorneys' fees which are incurred in connection with such a
proceeding shall be paid one-half by the Clear Channel and one-half by Exchange
Party, or (ii) continue to hold the Deposit until it receives an order from a
court of competent jurisdiction or joint written instructions of Clear Channel
and Exchange Party directing the Escrow Agent to release the Deposit.
- 3 -
<PAGE> 4
Section 7. Disputes. Except as provided in Section 4, in the event of
any disagreement between any of the parties resulting in conflicting or adverse
claims or demands being made to the Deposit, the Escrow Agent shall be entitled,
at its sole option, to refuse to comply with or recognize any such claims or
demands as long as the disagreement shall continue, and in doing so, Escrow
Agent shall not become liable in any way to any person for failure or refusal to
comply with such conflicting or adverse claims or demands, and its duties
hereunder with regard to such disputed Deposit shall be suspended until the
rights of the claimants have been fully adjudicated or the differences adjusted
between the parties and the Escrow Agent shall have been notified thereof in
writing signed by all parties interested. In the event the differences between
the parties with regard to the disputed Deposit have not been adjusted, and the
Escrow Agent has been so notified, within ten (10) days following receipt of
notice by Escrow Agent of conflicting or adverse claims or demands, Escrow Agent
may, but shall not be obligated to, interplead the disputed Deposit in court,
and thereupon Escrow Agent shall be fully and completely discharged of its
duties as Escrow Agent with regard to the Deposit. The parties shall be jointly
and severally liable to Escrow Agent for all fees and expenses, including legal
fees, incurred by Escrow Agent in exercising its rights.
Section 8. Notices. Any notice or other communication required or
permitted hereunder shall be deemed to have been sufficiently given when
delivered personally, by facsimile, recognized air courier, or registered or
certified mail, return receipt requested, addressed as follows:
if to Clear Channel: c/o Clear Channel Broadcasting, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: President
Facsimile: (210) 822-2299
with a copy (which shall not
constitute notice) to: Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, D.C. 20006
Attention: Richard J. Bodorff, Esq.
Facsimile: (202) 719-7049
if to Exchange Party: c/o Regent Communications, Inc.
50 East River Center Blvd., Suite 180
Covington, KY 41011
Attention: Terry S. Jacobs
Facsimile: (606) 292-0352
with a copy (which shall not
constitute notice) to:
Strauss & Troy
The Federal Reserve Building
- 4 -
<PAGE> 5
150 East Fourth Street
Cincinnati, Ohio 45202
Attention: Alan C. Rosser, Esq.
Facsimile: 513-241-8259
if to Escrow Agent: Bank of America
Private Banking
8300 Greensboro Drive
Third Floor
McLean, Virginia 22102
Attention: Susan B. Poliquin,
Vice President
Facsimile No.: (703) 761-9203
or to such other address as may be specified by any party in a written notice to
the other parties.
Section 9. Governing Law. This Agreement shall be construed under the
laws of the District of Columbia.
Section 10. Waiver. This Agreement may be amended or modified, and any
term may be waived, only if such amendment, modification or waiver is in writing
and signed by all parties.
Section 11. No Third Party Beneficiaries. This Agreement is a personal
one, the duty of the Escrow Agent being only to the parties hereto, their
successors or assigns, and to no other person whatsoever.
Section 12. Counterparts. This Agreement may be executed in separate
counterparts.
[SIGNATURE PAGE FOLLOWS]
- 5 -
<PAGE> 6
SIGNATURE PAGE TO ESCROW AGREEMENT
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective duly authorized officers all as of the day and year
first above written.
CLEAR CHANNEL: CLEAR CHANNEL BROADCASTING, INC.
By: /s/ Jerome L. Kersting
-----------------------------------------
Jerome L. Kersting, Senior Vice President
CLEAR CHANNEL BROADCASTING LICENSES, INC.
By: /s/ Jerome L. Kersting
-----------------------------------------
Jerome L. Kersting, Senior Vice President
CAPSTAR RADIO OPERATING COMPANY
By: /s/ William S. Banowsky, Jr.
--------------------------------------
Name: William S. Banowsky, Jr.
---------------------------------
Title: Executive Vice President
--------------------------------
CAPSTAR TX LIMITED PARTNERSHIP
By: /s/ William S. Banowsky, Jr.
--------------------------------------
Name: William S. Banowsky, Jr.
---------------------------------
Title: Executive Vice President
--------------------------------
<PAGE> 7
EXCHANGE PARTY: REGENT BROADCASTING OF VICTORVILLE, INC.
By: /s/ Terry S. Jacobs
--------------------------------------
Name: Terry S. Jacobs
---------------------------------
Title: Chairman
--------------------------------
REGENT LICENSEE OF VICTORVILLE, INC.
By: /s/ Terry S. Jacobs
--------------------------------------
Name: Terry S. Jacobs
---------------------------------
Title: Chairman
--------------------------------
REGENT BROADCASTING OF PALMDALE, INC.
By: /s/ Terry S. Jacobs
--------------------------------------
Name: Terry S. Jacobs
---------------------------------
Title: Chairman
--------------------------------
REGENT LICENSEE OF PALMDALE, INC.
By: /s/ Terry S. Jacobs
--------------------------------------
Name: Terry S. Jacobs
---------------------------------
Title: Chairman
--------------------------------
REGENT BROADCASTING OF MANSFIELD, INC.
By: /s/ Terry S. Jacobs
--------------------------------------
Name: Terry S. Jacobs
---------------------------------
Title: Chairman
--------------------------------
REGENT LICENSEE OF MANSFIELD, INC.
By: /s/ Terry S. Jacobs
--------------------------------------
Name: Terry S. Jacobs
---------------------------------
Title: Chairman
--------------------------------
<PAGE> 8
ESCROW AGENT: BANK OF AMERICA
By: /s/ Susan B. Poliquin
-----------------------------------------
Name: Susan B. Poliquin
Title: Vice President
<PAGE> 1
Exhibit 10(b)
March 12, 2000
Regent Broadcasting of Victorville, Inc.
Regent Licensee of Victorville, Inc.
Regent Broadcasting of Palmdale, Inc.
Regent Licensee of Palmdale, Inc.
Regent Broadcasting of Mansfield, Inc.
Regent Licensee of Mansfield, Inc.
c/o Regent Communications, Inc.
50 East RiverCenter Blvd., Suite 180
Covington, KY 41011
Attention: Mr. Terry S. Jacobs
RE: ASSET EXCHANGE AGREEMENT OF EVEN DATE HEREWITH (THE "EXCHANGE
AGREEMENT") BY AND AMONG CLEAR CHANNEL BROADCASTING, INC.
(TOGETHER WITH CLEAR CHANNEL COMMUNICATIONS, INC., "CLEAR
CHANNEL"), CLEAR CHANNEL BROADCASTING LICENSES, INC., CAPSTAR
RADIO OPERATING COMPANY AND CAPSTAR TX LIMITED PARTNERSHIP, AND
REGENT BROADCASTING OF VICTORVILLE, INC., REGENT LICENSEE OF
VICTORVILLE, INC., REGENT BROADCASTING OF PALMDALE, INC., REGENT
LICENSEE OF PALMDALE, INC., REGENT BROADCASTING OF MANSFIELD,
INC. AND REGENT LICENSEE OF MANSFIELD, INC. (COLLECTIVELY
"EXCHANGE PARTY")
Ladies and Gentlemen:
This letter will clarify certain aspects relating to the subject
Exchange Agreement (capitalized terms not otherwise defined herein shall have
the meaning ascribed to them in the Exchange Agreement):
1. CLOSING. Clear Channel agrees that if Clear Channel fails to
consummate the Closing on the Closing Date, provided that all of Clear Channel's
conditions precedent to its obligation to close as provided for in Article 11 of
the Exchange Agreement have been satisfied and provided further that the
Exchange Party is not in material default or breach of any of its obligations
under the Exchange Agreement and has otherwise satisfied the conditions and has
performed the obligations to be satisfied or performed by it pursuant to the
Exchange Agreement in all material respects, then, at Exchange Party's option
and in lieu of the remedies provided for in the Exchange Agreement pursuant to
Section 16.2, the Exchange Party shall be paid by Clear Channel the sum of
$6,000,000 payable in cash upon such failure by Clear Channel to consummate the
Closing within seven (7) days following a demand for payment by the Exchange
Party.
<PAGE> 2
2. COVENANT NOT TO COMPETE
(a) In consideration of and as an inducement for the acquisition by
Regent of WABT-FM, WQBJ-FM, WQBK-FM, WTMM-FM, WGNA-AM and WGNA-FM (the "Clear
Channel Albany Stations"), in accordance with and as provided in the Exchange
Agreement, and in order that Regent may realize the full economic value of the
intellectual property used in connection with the entertainment programing
(excluding news and public affairs) currently being broadcast by the Clear
Channel Albany Stations (the "Entertainment Programming") to be transferred to
Regent pursuant to the terms of the Exchange Agreement, Clear Channel agrees, on
behalf of itself and its affiliates and successors, that commencing on the
Closing Date and continuing for a period of three (3) years, it and each of its
affiliates and successors (each, a "Restricted Party"), will cause any radio
station owned, controlled, time brokered, or operated by any Restricted Party
which has a primary service contour (the 1.0 mV/m contour) that intersects with
the primary service contour of any of the Clear Channel Albany Stations not to
broadcast in a format of entertainment programming (excluding news and public
affairs programming) that consists primarily of music which presently, in the
future, or in the past, appears, or has appeared, on the "Country" (or any
future analogous variations or off-shoots thereof) music charts published or
compiled by Radio & Records newspaper or Billboard Newspaper, or if no longer
published or compiled by those publications, then by any similar broadcast
industry publication.
(b) In the event any aspect of the restrictions agreed to by Clear
Channel in Paragraph 2.(a) is declared illegal or unenforceable by the FCC or
any court of competent jurisdiction, such aspect which is determined to be
illegal or unenforceable shall be amended by the FCC or such court (if either
will do so) to the extent possible to make such aspect legal and enforceable. In
the event no amendment is or can be made by the FCC or such court to make such
aspect legal and enforceable but guidance has been given as to the nature of any
modification to that aspect that would make the covenant legal and enforceable,
then at Regent's request, Clear Channel agrees to enter into an amendment of
this covenant consistent with such guidance to make the covenant legal and
enforceable, provided that such amendment does not expand the scope of Clear
Channel's obligations under this letter agreement, including but not limited to,
the obligations under Paragraph 2.(a). If the restriction as amended by the FCC
or the court or as would be amended by the parties consistent with guidance
given by the FCC or the court, in Regent's and Clear Channel's reasonable
judgment, materially and adversely alter the benefits to Regent for which it has
bargained, then Regent shall have the right to terminate this covenant. In the
event this covenant is so terminated by Regent and thereafter, within three (3)
years from the Closing Date, any Restricted Party causes any station which has a
primary service contour (the 1.0 mV/m contour) that intersects with the primary
service contour of any of the Clear Channel Albany Stations and which is owned,
controlled, time brokered or operated by it to broadcast in the "Country" format
of entertainment programming described above, then Regent shall concurrently
receive, irrespective of any ruling of illegality or unenforceability of the
covenant not to compete, a pro-rata payment from Clear Channel of $6,000,000 as
its sole remedy, equal to the percentage of the three (3) year period since the
Closing Date which is unexpired, as of the date the broadcast of such
programming is commenced. Clear Channel acknowledges and agrees
<PAGE> 3
that in the absence of such payment under these circumstances Regent will have
been damaged and Clear Channel will have been unjustly enriched because the
consideration to be paid by Regent for the Clear Channel Albany Stations
pursuant to the Exchange Agreement was arrived at upon the understanding and
agreement that Clear Channel, for a period of three years from the Closing Date,
would not be utilizing in Albany, New York the "Country" Entertainment
Programming being sold to Regent at any of Clear Channel's other Albany, New
York stations which has a primary service contour (the 1.0 mV/m contour) that
intersects with the primary service contour of any of the Clear Channel Albany
Stations.
3. LIABILITIES ON TERMINATION OR BREACH. Clear Channel acknowledges
that the intellectual property and the rights inuring to the benefit of Regent
from the ownership thereof are of a special, unique and extraordinary character
and that damages are inadequate to compensate any breach of this Agreement.
Accordingly, in the event of a material breach by Clear Channel of its
representations, warranties, covenants and agreements under this letter with
respect to Paragraphs 2 above, Regent, provided that is not otherwise in default
hereunder, shall be entitled to, in lieu of the cash payment set forth in
Paragraph 2.(b) above, an injunction restraining any such breach or threatened
breach or to enforcement of this Agreement by a decree of specific performance
requiring Clear Channel to fulfill its obligations under this letter agreement,
in each case without the necessity of showing economic loss or other actual
damage and without bond or other security being required.
Sincerely,
CLEAR CHANNEL COMMUNICATIONS, INC.
By: /s/ Jerome L. Kersting
-------------------------------
Jerome L. Kersting
<PAGE> 1
Exhibit 10(c)
LIQUIDATED DAMAGES AGREEMENT
THIS AGREEMENT (this "Agreement") is made as of March 12, 2000 by the
Exchange Party set forth below ("Exchange Party") to and for the benefit of
Clear Channel Broadcasting, Inc., Clear Channel Broadcasting Licenses, Inc.,
Capstar Radio Operating Company, and Capstar TX Limited Partnership (together,
"Clear Channel").
Recitals
A. This is the liquidated damages agreement contemplated by Section
16.3 of the Asset Exchange Agreement (the "Exchange Agreement") of even date
herewith between Exchange Party and Clear Channel. Capitalized terms used herein
and not defined have the respective meanings set forth in the Exchange
Agreement.
B. Section 16.3 of the Exchange Agreement provides that if Clear
Channel terminates the Exchange Agreement pursuant to Section 16.1(b) thereof
under certain circumstances entitling Clear Channel to the payment to it of
liquidated damages by Exchange Party ("LD Event"), then Exchange Party shall
pay Clear Channel as liquidated damages an amount equal to TWENTY EIGHT MILLION
DOLLARS ($28,000,000) (the "LD Amount").
C. Section 3.2 of the Exchange Agreement provides for a Deposit to be
made by Exchange Party on the date hereof. By agreement, the Deposit is less
than the LD Amount (the amount of such difference is referred to herein as the
"Deficiency"), and Exchange Party is executing and delivering this Agreement
with respect to the Deficiency as a material condition without which Clear
Channel would not enter into the Exchange Agreement (from which Exchange Party
derives substantial benefit).
Agreement
NOW, THEREFORE, taking the foregoing into account, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confirmed, Exchange Party, intending to be legally bound,
hereby consents and agrees as follows for the benefit of Clear Channel:
1. Pre-Judgment Attachment.
(a) In the event that the Exchange Party has failed after
demand by Clear Channel upon the occurrence of an LD event to pay all or part of
the LD Amount, Clear Channel shall have the right, subject to, to the extent
permitted by, and in accordance with applicable law in any legal proceeding in a
court of competent jurisdiction in which Clear Channel asserts the occurrence of
an LD Event and the non-payment of all or any part of the LD Amount (whether
<PAGE> 2
by complaint, counterclaim or otherwise), to secure such payment, to file for
and request an immediate judicial order of attachment before judgment against
Exchange Party in the amount of the Deficiency, together with any writs of
execution and other orders necessary to enforce such order (the "Pre-Judgment
Attachment").
(b) To the fullest extent permitted by applicable law,
Exchange Party hereby agrees that any court may rely upon its equitable or
common law powers (in addition to any authority granted by statute or rule) to
issue the Pre-Judgment Attachment. Without limiting the foregoing, Clear Channel
shall not be required to post any bond or provide any security as a condition of
obtaining or maintaining the Pre-Judgment Attachment, and Exchange Party waives
all such requirements to the fullest extent permitted by applicable law.
2. Miscellaneous. The agreement of Exchange Party set forth in this
Agreement is binding and enforceable against Exchange Party subject to any
claim, counterclaim or defense which may be asserted by Exchange Party. Nothing
contained in this Agreement shall limit Clear Channel's rights with respect to
the Deposit or any other right or remedy of Seller. The provisions of Sections
17.4 (Amendments), 17.6 (Governing Law), 17.7 (Notices) and 17.10 (Severability)
are incorporated herein by this reference as if fully set forth herein.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 3
SIGNATURE PAGE TO LIQUIDATED DAMAGES AGREEMENT
IN WITNESS WHEREOF, Exchange Party has duly executed this Agreement as
of the date first above written.
EXCHANGE PARTY: REGENT BROADCASTING OF VICTORVILLE, INC.
By: /s/ Terry S. Jacobs
-------------------------------------
Name: Terry S. Jacobs
--------------------------------
Title: Chairman
-------------------------------
REGENT LICENSEE OF VICTORVILLE, INC.
By: /s/ Terry S. Jacobs
-------------------------------------
Name: Terry S. Jacobs
--------------------------------
Title: Chairman
-------------------------------
REGENT BROADCASTING OF PALMDALE, INC.
By: /s/ Terry S. Jacobs
-------------------------------------
Name: Terry S. Jacobs
--------------------------------
Title: Chairman
-------------------------------
REGENT LICENSEE OF PALMDALE, INC.
By: /s/ Terry S. Jacobs
-------------------------------------
Name: Terry S. Jacobs
--------------------------------
Title: Chairman
-------------------------------
REGENT BROADCASTING OF MANSFIELD, INC.
By: /s/ Terry S. Jacobs
-------------------------------------
Name: Terry S. Jacobs
--------------------------------
Title: Chairman
-------------------------------
REGENT LICENSEE OF MANSFIELD, INC.
By: /s/ Terry S. Jacobs
-------------------------------------
Name: Terry S. Jacobs
--------------------------------
Title: Chairman
-------------------------------
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following is a list of the names of each subsidiary of Regent
Communications, Inc. and each subsidiary of a subsidiary of Regent
Communications, Inc., the jurisdiction of incorporation of each such subsidiary,
and any other name or names under which such subsidiary does business.
<TABLE>
<CAPTION>
Jurisdiction of Other
Name of Subsidiary Incorporation Business Names
- ------------------ ------------- --------------
<S> <C> <C>
Regent Broadcasting of Chico, Inc. Delaware KFMF(FM), KPPL(FM), KALF(FM)
Regent Broadcasting of Erie, Inc. Delaware WXKC(FM), WRIE(AM), WXTA(FM)
Regent Broadcasting of Flagstaff, Inc. Delaware KVNA(AM), KVNA(FM), KZGL(FM)
Regent Broadcasting of Flint, Inc. Delaware WCRZ(FM), WFNT(AM), WWBN(FM)
Regent Broadcasting of Mansfield, Inc. Delaware WYHT(FM), WMAN(AM), WSWR(FM)
Regent Broadcasting of Palmdale, Inc. Delaware KAVC(AM), KOSS(FM), KTPI(FM)
Regent Broadcasting of Redding, Inc. Delaware KQMS(AM), KSHA(FM), KNNN(FM),
KRDG(FM), KRRX(FM), KNRO(AM)
Regent Broadcasting of St. Cloud, Inc. Delaware KMXK(FM), WJON(AM), WWJO(FM)
Regent Broadcasting of Victorville, Inc. Delaware KROY(AM), KATJ(FM), KIXW(AM),
KZXY(FM), KIXA(FM)
Regent Broadcasting West Coast, Inc. California --
Regent Broadcasting Midwest, Inc. Delaware --
Regent Broadcasting of El Paso, Inc. Delaware KSII(FM), KLAQ(FM), KROD(AM)
Regent Broadcasting of Utica/Rome, Inc. Delaware WODZ(FM), WLZW(FM), WFRG(FM),
WIBX(AM), WRUN(AM)
Regent Broadcasting of Watertown, Inc. Delaware WCIZ(FM), WFRY(FM), WTNY(AM),
WUZZ(AM)
Regent Broadcasting of Kingman, Inc. Delaware --
Regent Broadcasting of Lake Tahoe, Inc. Delaware --
Regent Broadcasting of San Diego, Inc. Delaware --
Regent Broadcasting of Lexington, Inc. Delaware --
Regent Broadcasting of South Carolina, Inc. Delaware --
Regent Licensee of Chico, Inc. Delaware --
Regent Licensee of Erie, Inc. Delaware --
Regent Licensee of Flagstaff, Inc. Delaware --
Regent Licensee of Flint, Inc. Delaware --
Regent Licensee of Mansfield, Inc. Delaware --
Regent Licensee of Palmdale, Inc. Delaware --
Regent Licensee of Redding, Inc. Delaware --
Regent Licensee of St. Cloud, Inc. Delaware --
Regent Licensee of Victorville, Inc. Delaware --
Regent Licensee of El Paso, Inc. Delaware --
Regent Licensee of Utica/Rome, Inc. Delaware --
Regent Licensee of Watertown, Inc. Delaware --
Regent Licensee of Kingman, Inc. Delaware --
Regent Licensee of Lake Tahoe, Inc. Delaware --
Regent Licensee of San Diego, Inc. Delaware --
Regent Licensee of Lexington, Inc. Delaware --
Regent Licensee of South Carolina, Inc. Delaware --
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,410,410
<SECURITIES> 0
<RECEIVABLES> 4,912,802
<ALLOWANCES> 231,000
<INVENTORY> 0
<CURRENT-ASSETS> 10,329,208
<PP&E> 19,633,049
<DEPRECIATION> 7,259,775
<TOTAL-ASSETS> 83,727,155
<CURRENT-LIABILITIES> 3,114,586
<BONDS> 25,331,307
89,265,352
3,684,336
<COMMON> 2,400
<OTHER-SE> (41,496,051)
<TOTAL-LIABILITY-AND-EQUITY> 83,727,155
<SALES> 25,612,933
<TOTAL-REVENUES> 23,853,809
<CGS> 0
<TOTAL-COSTS> 24,466,207
<OTHER-EXPENSES> (163,649)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,248,546
<INCOME-PRETAX> (6,299,521)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,299,521)
<DISCONTINUED> 0
<EXTRAORDINARY> (471,216)
<CHANGES> 0
<NET-INCOME> (6,770,737)
<EPS-BASIC> (121.65)
<EPS-DILUTED> (121.65)
</TABLE>
