<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission file number: 000-24515
CITADEL COMMUNICATIONS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 86-0748219
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(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
City Center West, Suite 400,
7201 West Lake Mead Blvd.,
Las Vegas, Nevada 89128
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 804-5200
----------------
- --------------------------------------------------------------------------------
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 __
- --------------------------------------------------------------------------------
As of November 8, 1999 there were 31,319,738 shares of common stock,
$.001 par value per share, outstanding.
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Citadel Communications Corporation
Form 10-Q
September 30, 1999
Index
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Page
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Part I
Item 1 - Financial Statements........................................................................3
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations......10
Item 3 - Qualitative and Quantitative Disclosures about Market Risk.................................21
Part II
Item 1 - Legal Proceedings..........................................................................21
Item 4 - Submission of Matters to a Vote of Security Holders........................................22
Item 5 - Other Information..........................................................................22
Item 6 - Exhibits and Reports on Form 8-K...........................................................24
</TABLE>
2
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PART I
ITEM 1. FINANCIAL STATEMENTS
CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
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(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,798 $102,842
Accounts receivable, less allowance for doubtful
accounts of $2,513 in 1999 and $1,187 in 1998 48,004 34,197
Due from related parties 204 215
Prepaid expenses 3,808 1,956
Assets held for sale 25,991 25,938
-------- --------
Total current assets 86,805 165,148
Property and equipment, net 68,088 34,085
Intangible assets, net 480,431 268,790
Other assets 4,205 4,238
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$639,529 $472,261
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,345 $ 4,360
Accrued liabilities 11,676 10,900
Current maturities of other long-term obligations 994 287
-------- --------
Total current liabilities 16,015 15,547
Notes payable, less current maturities 57,500 --
Senior subordinated notes payable, net of discount 210,401 210,091
Other long-term obligations, less current maturities 2,685 1,041
Deferred tax liability 46,964 24,844
Exchangeable preferred stock 82,526 116,775
Shareholders' equity:
Common stock, $.001 par value; authorized
200,000,000 shares, issued and outstanding;
31,317,338 and 25,728,771 shares as of September
30, 1999 and December 31, 1998, respectively 31 26
Additional paid-in capital 263,483 137,899
Deferred compensation (3,329) (1,044)
Unrealized loss on hedging contract (12) (236)
Accumulated deficit (36,735) (32,682)
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Total shareholders' equity 223,438 103,963
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$639,529 $472,261
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE DATA)
<TABLE>
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ -----------------------------
1999 1998 1999 1998
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Gross broadcasting revenue $56,343 $39,551 $139,090 $109,240
Less agency commissions (4,899) (3,653) (12,569) (10,419)
---------- ---------- ---------- ---------
Net broadcasting revenue 51,444 35,898 126,521 98,821
Operating expenses:
Station operating expenses 33,418 23,972 85,124 69,412
Depreciation and amortization 10,465 7,042 25,589 20,005
Corporate general and administrative 2,035 1,083 4,921 3,351
---------- ---------- ---------- ---------
Operating expenses 45,918 32,097 115,634 92,768
Operating income 5,526 3,801 10,887 6,053
Nonoperating expenses (income):
Interest expense 6,021 3,548 17,502 13,590
Other (income) expense, net (478) (14) (1,187) (94)
---------- ---------- ---------- ---------
Nonoperating expenses, net 5,543 3,534 16,315 13,496
Income (loss) before income taxes (17) 267 (5,428) (7,443)
Income tax (benefit) (472) (280) (1,376) (1,163)
---------- ---------- ---------- ---------
Net income (loss) 455 547 (4,052) (6,280)
Dividend requirement for exchangeable
preferred stock 3,296 3,763 11,322 10,823
---------- ---------- ---------- ---------
Net loss applicable to common shares $(2,841) $(3,216) $(15,374) $(17,103)
========== ========== ========== =========
Basic and diluted net loss per
common share $ (0.09) $ (0.20) $ (0.55) $ (2.22)
========== ========== ========== =========
Weighted average common shares
outstanding 31,299,962 16,468,645 27,871,316 7,690,114
========== ========== ========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Net income (loss) $455 $ 547 $(4,052) $(6,280)
Other comprehensive income (loss):
Unrealized gain (loss) on hedging
contract, net of tax 40 (596) 224 (596)
---- ----- ------- -------
Comprehensive income (loss) $495 $ (49) $(3,828) $(6,876)
==== ===== ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net loss $(4,052) $(6,280)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 25,589 20,005
Amortization of debt issuance costs and
debt discounts 761 480
Bad debt expense 2,796 887
Deferred tax benefit (1,737) (1,341)
Deferred compensation 252 --
Recognition of deferred revenue (25) --
Changes in assets and liabilities, net of acquisitions:
Increase in accounts receivable and
notes receivable from related parties (12,302) (6,941)
Increase in prepaid expenses (1,663) (1,751)
(Increase) decrease in other assets (18) 1,293
Decrease in accounts payable (2,355) (969)
Increase (decrease) in accrued liabilities 91 (1,437)
--------- ---------
Net cash provided by operating activities 7,337 3,946
Cash flows from investing activities:
Capital expenditures (15,938) (1,747)
Capitalized acquisition costs (2,879) (1,963)
Cash paid to acquire stations (228,014) (36,290)
Deposits for pending acquisitions -- 650
--------- ---------
Net cash used in investing activities (246,831) (39,350)
Cash flows from financing activities:
Proceeds received from stock offering 140,400 116,514
Payment of costs related to stock offering (1,310) (9,643)
Proceeds from exercise of stock options 1,425 48
Proceeds from notes payable 57,500 35,000
Redemption of exchangeable preferred stock
including cash dividend (51,712) --
Principal payments on notes payable -- (106,358)
Principal payments on other long-term obligations (309) (346)
Payment of debt issuance costs (544) (89)
--------- ---------
Net cash provided by financing activities 145,450 35,126
Net decrease in cash and cash equivalents (94,044) (278)
Cash and cash equivalents, beginning of period 102,842 7,685
--------- ---------
Cash and cash equivalents, end of period $ 8,798 $ 7,407
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
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CITADEL COMMUNICATIONS CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) General
Citadel Communications Corporation ("Citadel Communications") was formed
March 24, 1993 as a Nevada corporation and is a holding company which owns all
of the issued and outstanding common stock of Citadel Broadcasting Company
("Citadel Broadcasting"). Citadel License, Inc. ("Citadel License") is a
wholly-owned subsidiary of Citadel Broadcasting. Citadel Broadcasting and
Citadel License own and operate radio stations and hold Federal Communication
Commission licenses in Arkansas, California, Colorado, Idaho, Indiana,
Louisiana, Maine, Michigan, Nevada, New Hampshire, New Mexico, New York,
Pennsylvania, Rhode Island, South Carolina, Utah and Washington. In addition,
Citadel Broadcasting owns and operates an internet service provider, offering
its subscribers a variety of services, including electronic mail and access to
the internet.
(2) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Citadel Communications Corporation and Subsidiary (the "Company") have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended September
30, 1999 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1999. For further information, refer to the
consolidated financial statements and notes thereto included in Citadel
Communications Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998.
(3) Recent Transactions
On January 4, 1999, Citadel Broadcasting acquired radio station WBHT-FM in
Wilkes-Barre, Pennsylvania for a purchase price of approximately $1.3 million.
The acquisition was accounted for using the purchase method of accounting. Prior
to the acquisition, Citadel Broadcasting operated WBHT-FM under a local
marketing agreement since July 3, 1997.
On January 11, 1999, Citadel Broadcasting exercised its options to purchase
WKQV-FM and WKQV-AM in Wilkes-Barre/Scranton, Pennsylvania and on May 3, 1999,
Citadel Broadcasting purchased WKQV-FM for approximately $1.0 million.
Subsequently, Citadel Broadcasting terminated its agreement to acquire WKQV-AM,
but will continue operating this station under a joint sales agreement through
December 31, 1999. Citadel Broadcasting had operated WKQV-FM under a local
marketing agreement and has operated WKQV-AM under a joint sales agreement,
since July 3, 1997. The acquisition of WKQV-FM was accounted for using the
purchase method of accounting.
On February 9, 1999, Citadel Broadcasting acquired the assets of 62nd Street
Broadcasting of Saginaw, LLC for approximately $35.0 million. The acquisition of
these assets included 5 FM radio stations and 1 AM radio station in Saginaw/Bay
City, Michigan. The acquisition was accounted for using the purchase method of
accounting.
On February 17, 1999, Citadel Broadcasting acquired radio stations WHYL-AM/FM in
Carlisle, Pennsylvania for approximately $4.5 million. The acquisition was
accounted for using the purchase method of accounting. In conjunction with this
acquisition, Citadel Broadcasting acquired real estate used in the operation of
WHYL-AM/FM for a purchase price of approximately $0.3 million.
On March 2, 1999, Citadel Broadcasting acquired Brainiac Services, Inc., an
internet service provider, in Riverside, Rhode Island for approximately
$0.3 million. The acquisition was accounted for using the purchase method of
accounting.
On March 17, 1999, Citadel Broadcasting acquired all of the outstanding shares
of capital stock of Citywide Communications, Inc. and all of the outstanding
warrants to acquire shares of capital stock of Citywide. The aggregate purchase
price was approximately $31.5 million. In connection with the acquisition,
Citadel Broadcasting acquired 6 FM and 3 AM radio stations in the Baton Rouge
and Lafayette, Louisiana markets. The acquisition was accounted for using the
purchase method of accounting.
7
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On April 30, 1999, Citadel Broadcasting purchased radio stations KVOR-AM and
KTWK-AM in Colorado Springs and radio stations KEYF-AM/FM in Spokane from
Capstar Acquisition Company, Inc. ("Capstar") for an aggregate purchase price of
approximately $10.0 million. In addition, Citadel Broadcasting exchanged radio
station KKLI-FM in Colorado Springs for Capstar's radio station KSPZ-FM in
Colorado Springs. The acquisitions were accounted for using the purchase method
of accounting.
On May 3, 1999, Citadel Broadcasting purchased KNJY-FM in Spokane, Washington
for approximately $4.2 million. The acquisition was accounted for using the
purchase method of accounting.
On June 30, 1999, Citadel Broadcasting acquired substantially all of the assets
of Wicks Broadcasting Group Limited Partnership and related entities for
approximately $77.0 million. The acquisition of these assets included 10 FM and
6 AM radio stations serving the Charleston, South Carolina; Binghamton, New
York; Muncie, Indiana and Kokomo, Indiana markets. The acquisition was accounted
for using the purchase method of accounting.
On August 24, 1999, Citadel Broadcasting entered into a definitive agreement to
acquire all of the partnership interests in Caribou Communications Co., which
owns 4 FM stations and 1 AM station in Oklahoma City, Oklahoma. The aggregate
purchase price is approximately $60.0 million and the acquisition will be
accounted for using the purchase method of accounting.
On August 31, 1999, Citadel Broadcasting acquired all of the outstanding shares
of capital stock of Fuller-Jeffrey Broadcasting Companies, Inc. The aggregate
purchase price was approximately $65.3 million, which amount includes the
repayment of certain outstanding indebtedness of Fuller-Jeffrey and
approximately $1.8 million payable over a seven-year period relating to a
consulting and non-competition agreement. In connection with the acquisition,
Citadel Broadcasting acquired 10 FM radio stations in Portsmouth, New Hampshire
and Portland, Maine. The acquisition was accounted for using the purchase method
of accounting.
(4) Stock Offering
On June 25, 1999, Citadel Communications completed a stock offering of
11,500,000 shares of its common stock at $29.25 per share. Of such shares,
5,000,000 shares were sold by Citadel Communications and 6,500,000 shares were
sold by certain stockholders of Citadel Communications. Total proceeds of the
offering, net of underwriting discounts and commissions, were $322.9 million of
which proceeds to Citadel Communications were $140.4 million and proceeds to the
selling stockholders were $182.5 million. Total underwriting discounts and
commissions were $13.5 million.
On the same date as the stock offering, Citadel Communications purchased 5,000
shares of common stock of Citadel Broadcasting for an aggregate purchase price
of approximately $51.7 million and contributed approximately $88.7 million of
additional paid in capital to Citadel Broadcasting. The purchase of stock and
additional capital contributions were funded by the net proceeds from Citadel
Communications' stock offering.
(5) Redemption of Exchangeable Preferred Stock
On August 2, 1999, Citadel Broadcasting redeemed approximately 35% of its
issued and outstanding 13 1/4% exchangeable preferred stock. Total shares
redeemed were approximately 452,000 at a redemption price of $113.25 per share
for a total of approximately $51.2 million. In addition, Citadel Broadcasting
paid approximately $0.5 million of accrued dividends on the redeemed shares.
Proceeds from Citadel Broadcasting's sale of 5,000 shares of common stock to
Citadel Communications were utilized to complete the redemption.
(6) Deferred Compensation
On July 27, 1999, the shareholders of Citadel Communications approved the 1999
Long-Term Incentive Plan (the "Plan"), which is intended to be the primary
long-term incentive vehicle for senior management. The Plan provides for the
granting of options, which options are earned in one-fifth increments for each
required increase in the average stock price (with the average calculated over
20 consecutive trading days) of Citadel Communication's common stock. The
required increase is equal to one-fifth of the difference between the option's
doubled exercise price and the option's exercise price. Options to purchase
1,750,000 shares of common stock were granted under the Plan effective as of
June 25, 1999.
On July 23, 1999, one fifth of the options granted under the plan (350,000
shares) were earned. The difference between the exercise price and the fair
market value of Citadel Communications stock at the date the options were earned
has been recorded as deferred compensation of approximately $2.5 million. The
compensation will be amortized over 5 years, the period over which the earned
portion of the options vest.
8
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(7) Subsequent Events
On October 1, 1999, Citadel Broadcasting acquired certain assets and subscriber
agreements of Connect Communications Corporation, an internet service provider
in Arkansas, in exchange for extinguishment of approximately $0.1 million in
accounts receivable and certain equipment owned by Citadel Broadcasting. The
acquisition will be accounted for using the purchase method of accounting. Ted
Snider, Jr., the son of Ted Snider, Sr., a director of Citadel Communications
and Citadel Broadcasting, is a director and shareholder of Connect
Communications Corporation, which continues to provide services to Citadel
Broadcasting.
On October 5, 1999, Citadel Broadcasting entered into a purchase and sale
agreement with Kenneth A. Rushton, as Trustee of the Chapter 7 Bankruptcy Estate
of Venture Broadcasting, Inc., to acquire an AM radio station serving the Salt
Lake City, Utah market. The purchase price for the station and a related tower
site is approximately $0.6 million. The acquisition will be accounted for using
the purchase method of accounting.
On October 8, 1999, Citadel Broadcasting entered into an exchange agreement with
Titus Broadcasting Systems, Inc. to acquire one AM radio station in Binghamton,
New York in exchange for one AM station in Binghamton owned by Citadel
Broadcasting and approximately $0.6 million in cash. The acquisition will be
accounted for using the purchase method of accounting.
On October 28, 1999, Citadel Broadcasting entered into a definitive agreement to
acquire from Broadcasting Partners Holdings, L.P. and it's affiliates the assets
of 36 radio stations in 11 markets for approximately $190.0 million. Upon
consummation of the agreement, including the completion of pending acquisitions
by the selling entities, Citadel Broadcasting will acquire 5 stations in
Buffalo, New York; 4 stations in Syracuse, New York; 3 stations in Atlantic
City, New Jersey; 5 stations in Tyler-Longview, Texas; 3 stations in New London,
Connecticut; 2 stations in New Bedford, Massachusetts; 4 stations in Monroe,
Louisiana; 4 stations in Augusta-Waterville, Maine; 2 stations in Ithaca, New
York; 3 stations in Presque Isle-Caribou, Maine; 1 station in
Dennysville-Calais, Maine and the right to operate one additional station in
Atlantic City, New Jersey. The acquisition will be accounted for using the
purchase method of accounting.
On November 1, 1999, Citadel Broadcasting purchased KOOJ-FM in Baton Rouge,
Louisiana from KTBT Radio Broadcasting Company, Inc. for approximately $9.5
million. The acquisition will be accounted for using the purchase method of
accounting. Prior to completion of the acquisition, Citadel Broadcasting began
operating KOOJ-FM under a local marketing agreement on August 1, 1999.
On November 9, 1999, Citadel Broadcasting sold substantially all of the assets
of its 18 FM and 7 AM radio stations in Eugene and Medford, Oregon, Tri-Cities,
Washington, Billings, Montana and Johnstown and State College, Pennsylvania for
an approximate sale price of $26.0 million.
(8) Additional Borrowings and Acquisition Financing
On August 31, 1999, Citadel Broadcasting borrowed $57.5 million under its credit
facility, which allows for revolving loan borrowings up to a maximum of $128.1
million as of September 30, 1999. Interest on the credit facility is due
quarterly based on the LIBOR rate plus a maximum of 2.75% based on Citadel
Broadcasting's leverage ratio. The interest rate for the quarter ended September
30, 1999 was approximately 6.9%.
As previously described, Citadel Broadcasting has entered into definitive
agreements to acquire additional radio stations for a total aggregate purchase
price of approximately $251.2 million. The borrowing capacity of the current
credit facility will be exceeded and therefore the Company will require
additional funds to complete the acquisitions.
The Company has decided to replace its current credit facility with a new
facility. The new credit facility is expected to provide approximately $400.0
million in availability which would provide the Company with the required funds
to complete the acquisitions. The Company anticipates finalizing the new credit
facility prior to December 31, 1999. However, there can be no assurances that
the Company will be able to replace its current facility with a new facility in
an amount sufficient to complete all of the pending acquisitions. In addition,
the Company may consider other financing alternatives, such as selling
additional equity or debt securities. Again, there can be no assurances that the
Company could obtain such financing on terms favorable to the Company or at all.
Any sale of additional common or convertible equity or convertible debt
securities would result in additional dilution to the Company's stockholders.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain matters in this Form 10-Q, including, without limitation, certain
matters discussed in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, and in Quantitative and Qualitative
Disclosures about Market Risk, constitute "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Those statements
include statements regarding the intent, belief or current expectations of
Citadel Communications Corporation and its subsidiary (collectively the
"Company"), its directors or its officers with respect to, among other things,
future events and financial trends affecting the Company.
Forward-looking statements are typically identified by the words "believes,"
"expects," "anticipates," "intends," "estimates," and similar expressions. In
addition, any statements that refer to expectations or other characterizations
of future events or circumstances are forward-looking statements. Readers are
cautioned that any such forward-looking statements are not guarantees of future
performance and that matters referred to in such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, the impact of current or pending legislation and regulation, antitrust
considerations and other risks and uncertainties, as well as those matters
discussed under the captions "Year 2000 Matters" and "Risk Factors" in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations. The Company undertakes no obligation to publicly update or revise
these forward-looking statements because of new information, future events or
otherwise.
GENERAL
Citadel Communications Corporation ("Citadel Communications") was formed
March 24, 1993 as a Nevada corporation and is a holding company which owns all
of the issued and outstanding common stock of Citadel Broadcasting Company
("Citadel Broadcasting"). Citadel License, Inc. ("Citadel License") is a
wholly-owned subsidiary of Citadel Broadcasting. Citadel Communications
Corporation, Citadel Broadcasting and Citadel License are collectively referred
to as the "Company." Citadel Broadcasting and Citadel License own and operate
radio stations and hold Federal Communication Commission licenses in Arkansas,
California, Colorado, Idaho, Indiana, Louisiana, Maine, Michigan, Nevada, New
Hampshire, New Mexico, New York, Pennsylvania, Rhode Island, South Carolina,
Utah and Washington. In addition, Citadel Broadcasting owns and operates an
internet service provider, offering its subscribers a variety of services,
including electronic mail and access to the internet.
General economic conditions have an impact on the Company's business and
financial results. From time to time the markets in which the Company operates
experience weak economic conditions that may negatively affect the revenue of
the Company. However, management believes that this impact is somewhat mitigated
by the Company's diverse geographical presence. In addition, the Company's
financial results are also 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.
In the following analysis, management discusses the Company's broadcast cash
flow. The performance of a radio station group is customarily measured by its
ability to generate broadcast cash flow. The two components of broadcast cash
flow are gross revenue, net of agency commissions, and operating expenses,
excluding depreciation and amortization, corporate general and administrative
expenses and non-cash and non-recurring charges. Broadcast cash flow assists in
comparing performance on a consistent basis across companies without regard to
depreciation and amortization, which can vary significantly depending on
accounting methods, particularly when acquisitions are involved. Earnings before
interest, taxes, depreciation and amortization, or EBITDA, consists of operating
income (loss) before depreciation and amortization. Although broadcast cash flow
and EBITDA are not measures of performance calculated in accordance with
generally accepted accounting principles, management believes that they are
useful to an investor in evaluating the Company because they are measures widely
used in the broadcasting industry to evaluate a radio company's operating
performance. However, broadcast cash flow and EBITDA should not be considered in
isolation or as substitutes for net income, cash flows from operating activities
and other income or cash flow statement data prepared in accordance with
generally accepted accounting principles as a measure of liquidity or
profitability.
10
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The principal source of the Company's revenue is the sale of broadcasting
time on its radio stations for advertising. As a result, the Company's revenue
is affected primarily by the advertising rates its radio stations charge.
Correspondingly, the rates are based upon a 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, is limited in part by the format of a particular station.
Each of the Company's stations has a general pre-determined level of on-air
inventory that it makes available for advertising, which may be different at
different times of the day and tends to remain stable over time.
The Company's revenue varies throughout the year. As is typical in the radio
broadcasting industry, the Company's first calendar quarter generally produces
the lowest revenue, and the fourth quarter generally produces the highest
revenue.
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. The Company strives to control these
expenses by working closely with local station management. The Company also
incurs and will continue to incur significant depreciation, amortization and
interest expense as a result of completed and anticipated future acquisitions of
stations and existing and future borrowings.
The Company's internet service provider recorded gross revenue and net loss
of $0.9 million and $(1.4) million, respectively, for the three months ended
September 30, 1999 and $3.5 million and $(1.9) million, respectively, for the
nine months ended September 30, 1999. The revenue generated from the internet
service provider has been included in broadcasting revenue as the amount is not
considered material to understanding the changes in the results of operations
for the three months and nine months ended September 30, 1999 as compared to the
three months and nine months ended September 30, 1998.
RESULTS OF OPERATIONS
The Company's unaudited condensed consolidated financial statements tend not
to be directly comparable from period to period due to acquisition activity. The
Company's acquisitions in the first through third quarter of 1999 and during the
year ended 1998, all of which have been accounted for using the purchase method
of accounting, and the results of operations of which have been included since
the date of acquisition, were as follows:
1998 Acquisitions and Dispositions: WEMR-AM and WEMR-FM in
Wilkes-Barre/Scranton, Pennsylvania were acquired on January 2, 1998. KQFC-FM,
KKGL-FM and KBOI-AM in Boise, Idaho were acquired on February 12, 1998. WCTP-FM,
WCTD-FM and WCDL-AM in Wilkes-Barre/Scranton, Pennsylvania were acquired on
March 26, 1998. KIZN-FM and KZMG-FM in Boise, Idaho were acquired on April 21,
1998. On July 7, 1998, the Company disposed of WEST-AM in Allentown,
Pennsylvania, in connection with a prior acquisition. The Company also disposed
of all of the stations in the Quincy, Illinois market on October 8, 1998.
KAAY-AM in Little Rock, Arkansas was acquired on November 17, 1998. In
conjunction with this acquisition, the Company sold KRNN-AM in Little Rock,
Arkansas. Digital Planet in Salt Lake City, Utah was acquired on September 18,
1998. Internet Technology Systems, Inc. in Salt Lake City, Utah was acquired on
September 30, 1998. In Quo, The Johnson Connection, LLC and the Friendly Net,
LLC in Salt Lake City, Utah were acquired on October 15, 1998, October 26, 1998
and December 8, 1998, respectively.
1999 First Through Third Quarter Acquisitions: WBHT-FM in Wilkes-Barre,
Pennsylvania was acquired on January 4, 1999. Prior to the acquisition, the
Company had operated WBHT-FM under a local marketing agreement since July 3,
1997. On February 9, 1999 the Company acquired the assets of 62nd Street
Broadcasting of Saginaw, LLC. The acquisition of these assets included 5 FM
radio stations and 1 AM radio station in Saginaw/Bay City, Michigan. WHYL-AM/FM
in Carlisle, Pennsylvania were acquired on February 17, 1999. On March 17, 1999,
the Company acquired all of the outstanding shares of capital stock of Citywide
Communications, Inc. and all of the outstanding warrants to acquire shares of
capital stock of Citywide. In connection with the acquisition, the Company
acquired 6 FM and 3 AM radio stations in the Baton Rouge and Lafayette,
Louisiana markets. On April 30, 1999, the Company purchased KVOR-AM and KTWK-AM
in Colorado Springs, Colorado and KEYF-AM/FM in Spokane, Washington. In
addition, the Company exchanged KKLI-FM for KSPZ-FM in Colorado Springs. On May
3, 1999, the Company acquired WKQV-FM in Wilkes-Barre/Scranton, Pennsylvania and
KNJY-FM in Spokane. On June 30, 1999, the Company acquired substantially all of
the assets of Wicks Broadcast Group Limited Partnership and related entities.
The acquisition of these assets included 10 FM and 6 AM radio stations serving
the Charleston, South Carolina; Binghamton, New York; Muncie, Indiana and
Kokomo, Indiana markets. On August 31, 1999, the Company acquired all of the
outstanding shares of capital stock of Fuller-Jeffrey Broadcasting Companies,
Inc. In connection with the acquisition, the Company acquired 10 FM radio
stations in Portsmouth, New Hampshire and Portland, Maine. Brainiac Services,
Inc., an internet service provider, in Riverside, Rhode Island was acquired on
March 2, 1999.
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THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
NET BROADCASTING REVENUE. Net broadcasting revenue increased $15.5 million
or 43.2% to $51.4 million for the three months ended September 30, 1999 from
$35.9 million for the three months ended September 30, 1998, primarily due to
the acquisition of radio stations in 1999. For stations owned and operated over
the comparable periods in 1999 and 1998 (excluding the 25 stations sold on
November 9, 1999), net broadcasting revenue improved $5.3 million or 17.4% to
$35.8 million in 1999 from $30.5 million in 1998, primarily due to increased
ratings and improved selling efforts.
STATION OPERATING EXPENSES. Station operating expenses increased $9.4
million or 39.2% to $33.4 million for the three months ended September 30, 1999
from $24.0 million for the three months ended September 30, 1998. The increase
was primarily attributable to the inclusion of station operating expenses of the
radio stations acquired after September 30, 1998.
BROADCAST CASH FLOW. As a result of the factors described above, broadcast
cash flow increased $6.1 million or 51.3% to $18.0 million for the three months
ended September 30, 1999 from $11.9 million for the three months ended September
30, 1998. For stations owned and operated over the comparable periods in 1999
and 1998 (excluding the 25 stations sold on November 9, 1999 and a charge of
approximately $0.7 million related to the write-off of barter receivables in the
third quarter of 1999), broadcast cash flow increased $2.7 million or 26.5% to
$12.9 million in 1999 from $10.2 million in 1998. As a percentage of net
broadcasting revenue, broadcast cash flow improved to 35.0% for the three months
ended September 30, 1999 compared to 33.2% for the three months ended September
30, 1998.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and
administrative expenses increased $0.9 million or 81.8% to $2.0 million for the
three months ended September 30, 1999 from $1.1 million for the three months
ended September 30, 1998. The increase was due primarily to an increase in
staffing levels and associated costs needed to support the Company's growth,
increased professional fees and expenses due to public company reporting
requirements, non-cash compensation related to stock options and costs incurred
in unsuccessful acquisitions.
EBITDA. As a result of the factors described above, EBITDA increased $5.2
million or 48.1% to $16.0 million for the three months ended September 30, 1999
from $10.8 million for the three months ended September 30, 1998.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased $3.5 million or 50.0% to $10.5 million for the three months ended
September 30, 1999 from $7.0 million for the three months ended September 30,
1998, primarily due to radio station acquisitions completed during 1998 and in
the first through third quarters of 1999.
INTEREST EXPENSE. Interest expense increased $2.5 million or 71.4% to $6.0
million for the three months ended September 30, 1999 from $3.5 million for the
three months ended September 30, 1998, primarily due to interest expense
associated with Citadel Broadcasting's 9-1/4% Senior Subordinated Notes issued
on November 19, 1998.
INCOME TAX BENEFIT. The income tax benefit for the three months ended
September 30, 1999 and 1998 represents the reversal of deferred tax liabilities
established at the date of acquisition due to differences in tax bases and the
financial statement carrying amounts of intangibles and fixed assets acquired in
stock-based acquisitions, offset by state tax expense.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
NET BROADCASTING REVENUE. Net broadcasting revenue increased $27.7 million
or 28.0% to $126.5 million for the nine months ended September 30, 1999 from
$98.8 million for the nine months ended September 30, 1998, primarily due to
the acquisition of radio stations in 1999. For stations owned and operated
over the comparable period in 1999 and 1998 (excluding the 25 stations sold
on November 9, 1999), net broadcasting revenue improved $12.7 million or
15.1% to $96.7 million in 1999 from $84.0 million in 1998, primarily due to
increased ratings and improved selling efforts.
STATION OPERATING EXPENSES. Station operating expenses increased $15.7
million or 22.6% to $85.1 million for the nine months ended September 30, 1999
from $69.4 million for the nine months ended September 30, 1998. The increase
was primarily attributable to the inclusion of station operating expenses of
the radio stations acquired after September 30, 1998.
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BROADCAST CASH FLOW. As a result of the factors described above, broadcast
cash flow increased $12.0 million or 40.8% to $41.4 million for the nine months
ended September 30, 1999 from $29.4 million for the nine months ended September
30, 1998. For stations owned and operated over comparable periods in 1999 and
1998 (excluding the 25 stations sold on November 9, 1999 and a charge of
approximately $0.7 million related to the write-off of barter receivables in the
third quarter of 1999), broadcast cash flow increased $6.6 million or 25.1% to
$32.9 million in 1999 from $26.3 million in 1998. As a percentage of net
broadcasting revenue, broadcast cash flow improved to 32.7% for the nine months
ended September 30, 1999 compared to 29.8% for the nine months ended September
30, 1998.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and
administrative expenses increased $1.5 million or 44.1% to $4.9 million for the
nine months ended September 30, 1999 from $3.4 million for the nine months ended
September 30, 1998. The increase was due primarily to non-recurring costs to
relocate the corporate offices to Nevada, an increase in staffing levels and
associated costs needed to support the Company's growth, increased professional
fees and expenses due to public company reporting requirements, non-cash
compensation related to stock options and costs incurred in unsuccessful
acquisitions.
EBITDA. As a result of the factors described above, EBITDA increased $10.4
million or 39.8% to $36.5 million for the nine months ended September 30, 1999
from $26.1 million for the nine months ended September 30, 1998.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased $5.6 million or 28.0% to $25.6 million for the nine months ended
September 30, 1999 from $20.0 million for the nine months ended September 30,
1998, primarily due to radio station acquisitions consummated during 1999 and
1998.
INTEREST EXPENSE. Interest expense increased approximately $3.9 million or
28.7% to $17.5 million for the nine months ended September 30, 1999 from $13.6
million for the nine months ended September 30, 1998, primarily due to interest
expense associated with Citadel Broadcasting's 9-1/4% Senior Subordinated Notes
issued on November 19, 1998 offset by a reduction in interest payments under
Citadel Broadcasting's credit facility resulting from the repayment of the
credit facility in the third quarter of 1998 from the net proceeds of Citadel
Communications' initial public offering of its common stock in July 1998.
INCOME TAX BENEFIT. The income tax benefit for the nine months ended
September 30, 1999 and 1998 represents the reversal of deferred tax liabilities
established at the date of acquisition due to differences in tax bases and the
financial statement carrying amounts of intangibles and fixed assets acquired in
stock-based acquisitions, offset by state tax expense.
NET LOSS. As a result of the factors described above, net loss decreased
$2.2 million or 34.9% to $4.1 million for the nine months ended September 30,
1999 from $6.3 million for the nine months ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity requirements are for acquisition
financing, debt service, working capital and general corporate purposes,
including capital expenditures. The Company's acquisition strategy has required,
and is expected to continue in the foreseeable future to require, a significant
portion of the Company's capital resources. The Company expects that its debt
service within the next twelve months, without regard to further acquisitions,
will include approximately $21.0 million for interest on Citadel Broadcasting's
10-1/4% Senior Subordinated Notes and Citadel Broadcasting's 9-1/4% Senior
Subordinated Notes and approximately $4.7 million for interest on Citadel
Broadcasting's credit facility. Citadel Broadcasting's 13-1/4% Exchangeable
Preferred Stock does not require cash dividends through July 1, 2002. Citadel
Broadcasting did redeem approximately 35% of the exchangeable preferred stock in
August 1999. See the discussion below under the heading "Exchangeable Preferred
Stock".
At September 30, 1999, the Company held approximately $8.8 million in cash
and cash equivalents and had approximately $70.6 million in unborrowed
availability under Citadel Broadcasting's credit facility. This amount of
unborrowed funds has been further reduced by $9.5 due to the Company's
acquisition of radio station KOOJ-FM in Baton Rouge, Louisiana on November 1,
1999. For the nine months ended September 30, 1999, net cash provided by
operations increased to $7.3 million from $3.9 million for the comparable 1998
period. This increase is primarily due to the acquisition of radio stations
completed in 1999.
For the nine months ended September 30, 1999, net cash used in investing
activities, primarily for station acquisitions, increased to $246.8 million from
$39.4 million in the comparable 1998 period.
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For the nine months ended September 30, 1999, net cash provided by financing
activities was $145.5 million compared to $35.1 million in the comparable 1998
period. This increase is primarily the result of Citadel Communications' stock
offering completed on June 25, 1999 and additional borrowings of $57.5 million
under the credit facility offset by the partial redemption of exchangeable
preferred stock of approximately $51.7 million. Citadel Communications sold
5,000,000 shares of common stock at $29.25 per share. The proceeds to Citadel
Communications, net of underwriting discounts and commissions, from the offering
were approximately $140.4 million.
On the same date as the stock offering, Citadel Communications purchased
5,000 shares of common stock of Citadel Broadcasting for an aggregate purchase
price of approximately $51.7 million and contributed approximately $88.7 million
of additional paid in capital to Citadel Broadcasting. The purchase of stock and
additional capital contributions were funded by the net proceeds from Citadel
Communications' stock offering. Citadel Broadcasting used the proceeds from the
sale of the 5,000 shares of its common stock to redeem a portion of its
exchangeable preferred stock and to fund radio station acquisitions completed in
the second and third quarter of 1999.
CREDIT FACILITY. On July 3, 1997, Citadel Broadcasting and Citadel License
entered into an amended and restated financing agreement which originally
allowed for revolving loan borrowings up to a maximum of $150.0 million.
Pursuant to the agreement, this amount began to reduce quarterly on December 31,
1997. The maximum available loan commitment at September 30, 1999 was $128.1
million. At September 30, 1999, $57.5 million was outstanding under the credit
facility and an additional $9.5 million was borrowed on November 1, 1999.
Interest on the credit facility is due quarterly based on the LIBOR rate plus
a maximum of 2.75% based on Citadel Broadcasting's leverage ratio. The interest
rate for the quarter ended September 30, 1999 was approximately 6.9%. Citadel
Broadcasting must also pay, on a quarterly basis, an unused commitment fee equal
to the maximum revolving loan commitment less the average outstanding principal
balance for the preceding quarter, multiplied by .125% or, if the total leverage
ratio, determined in accordance with the agreement, calculated as of the last
day of the preceding quarter was less than 4.5, the multiplier for the
commitment fee is reduced to .09375%.
The credit facility prohibits Citadel Broadcasting from paying cash
dividends on its capital stock. Similarly, the credit facility restricts the
ability of Citadel License, to pay cash dividends or make other distributions in
respect of its capital stock. Citadel Broadcasting is not dependent in any
material respect on the receipt of dividends or other payments from Citadel
License. The credit facility also contains other customary restrictive
covenants, which, among other things, and with certain exceptions, limit the
ability of Citadel Broadcasting and Citadel License to incur additional
indebtedness and liens, enter into transactions with affiliates, consolidate,
merge or effect asset sales, issue additional stock, make capital or overhead
expenditures, make investments, loans or prepayments or change the nature of
their business. Citadel Broadcasting and Citadel License are also required to
satisfy financial covenants, which require Citadel Broadcasting and Citadel
License to maintain specified financial ratios and to comply with financial
tests, such as ratios for maximum leverage, senior debt leverage, minimum
interest coverage and minimum fixed charges. Citadel Broadcasting and Citadel
License are in compliance with the financial ratios and financial condition
tests in their debt obligations.
Citadel Broadcasting has entered into definitive agreements to acquire
additional radio stations for a total aggregate purchase price of approximately
$251.2 million. See the discussion below under the heading "Pending
Acquisitions and Recently Completed Disposition." Based on the amount of the
aggregate purchase price for the acquisitions, the borrowing capacity of the
credit facility will be exceeded and, therefore, the Company will require
additional funds to complete the acquisitions.
The Company has decided to replace its current credit facility with a new
facility. The new credit facility is expected to provide approximately $400.0
million in availability which would provide the Company with the required funds
to complete the acquisitions. The Company anticipates finalizing the new credit
facility prior to year end. However, there can be no assurances that the Company
will be able to replace its current facility with a new credit facility in an
amount sufficient to complete all of the pending acquisitions. In addition, the
Company may consider other financing alternatives, such as selling additional
equity or debt securities. Again, there can be no assurances that the Company
could obtain such financing on terms favorable to the Company or at all. Any
sale of additional common or convertible equity or convertible debt securities
would result in additional dilution to the Company's stockholders.
SENIOR SUBORDINATED NOTES. On July 3, 1997, Citadel Broadcasting completed
the issuance of $101.0 million of 10 1/4% Senior Subordinated Notes due 2007
(the "10-1/4% notes"). Interest is payable semi-annually. The 10 1/4% notes may
be redeemed at the option of Citadel Broadcasting, in whole or in part, at any
time on or after July 1, 2002 at the redemption prices set forth in the
indenture governing the 10 1/4% notes. In addition, at any time prior to July 1,
2000, Citadel Broadcasting may, at its option, redeem a portion of the 10 1/4%
notes with the net proceeds of one or more Public Equity Offerings (as defined
in the indenture governing the 10 1/4% notes), at a redemption price equal to
110.25% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of redemption.
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<PAGE> 15
On November 19, 1998, Citadel Broadcasting completed the issuance of $115.0
million of 9 1/4% Senior Subordinated Notes due 2008 (the "9-1/4% notes").
Interest is payable semi-annually. The 9 1/4% notes may be redeemed at the
option of Citadel Broadcasting, in whole or in part, at any time on or after
November 15, 2003 at the redemption prices set forth in the indenture governing
the 9 1/4% notes. In addition, at any time prior to November 15, 2001, Citadel
Broadcasting may, at its option, redeem a portion of the 9 1/4% notes with the
net proceeds of one or more Public Equity Offerings (as defined in the indenture
governing the 9 1/4% notes), at a redemption price equal to 109.25% of the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date of redemption.
The indentures governing the 10 1/4% notes and the 9 1/4% notes contain
certain restrictive covenants, including limitations which restrict the ability
of Citadel Broadcasting to incur additional debt, incur liens, pay cash
dividends, or make certain other restricted payments, consummate certain asset
sales, enter into certain transactions with affiliates, merge or consolidate
with any other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets. At September 30, 1999,
Citadel Broadcasting was in compliance with all covenants under the indentures.
EXCHANGEABLE PREFERRED STOCK. On July 3, 1997, Citadel Broadcasting sold an
aggregate of 1,000,000 shares of its 13 1/4% Exchangeable Preferred Stock.
Dividends on the exchangeable preferred stock accrue at the rate of 13 1/4% per
annum and are payable semi-annually. On or prior to July 1, 2002, dividends are
payable in additional shares of exchangeable preferred stock having an aggregate
liquidation preference equal to the amount of such dividends, or, at the option
of Citadel Broadcasting, in cash. Thereafter, all dividends will be payable only
in cash. To date, Citadel Broadcasting has paid all dividends in additional
shares of exchangeable preferred stock. Citadel Broadcasting will be required to
redeem the exchangeable preferred stock on July 1, 2009, subject to the legal
availability of funds therefor, at a redemption price equal to the liquidation
preference thereof, plus accumulated and unpaid dividends, if any, to the date
of redemption.
Citadel Broadcasting may redeem the exchangeable preferred stock, in whole
or in part, at the option of Citadel Broadcasting, at any time on or after July
1, 2002, at the redemption prices set forth in the Certificate of Designation
governing the exchangeable preferred stock (ranging from 107.729% to 101.104%),
plus accumulated and unpaid dividends, if any, to the date of redemption.
On August 2, 1999, Citadel Broadcasting redeemed approximately 35% of its
issued and outstanding 13 1/4% exchangeable preferred stock. Total shares
redeemed were approximately 452,000 at a redemption price of $113.25 per share
for a total of approximately $51.2 million. In addition, Citadel Broadcasting
paid approximately $0.5 million of accrued dividends on the redeemed shares.
Proceeds from Citadel Broadcasting's sale of 5,000 shares of common stock to
Citadel Communications were utilized to complete the redemption.
The Certificate of Designation governing the exchangeable preferred stock
also contains covenants that restrict Citadel Broadcasting from taking various
actions, including, subject to specified exceptions, the incurrence of
additional indebtedness, the granting of additional liens, the making of
investments, the payment of dividends and other restricted payments, mergers,
acquisitions and other fundamental corporate changes, capital expenditures and
transactions with affiliates. At September 30, 1999, Citadel Broadcasting was in
compliance with all covenants under the Certificate of Designation.
PENDING ACQUISITIONS AND RECENTLY COMPLETED DISPOSITION. There are several
transactions currently pending which, if completed, would result in the Company
purchasing 27 FM and 16 AM radio stations and selling one AM radio station. In
addition, the Company sold 18 FM and 7 AM radio stations on November 9, 1999.
The total cash required to fund the pending acquisitions is expected to be
approximately $251.2 million. The Company received approximately $26.0 million
in cash from the completed disposition. The consummation of each of the pending
acquisitions is subject to certain conditions, including the approval of the
Federal Communication Commission. Although the Company believes these closing
conditions will be satisfied in each case, there can be no assurance thereof.
The pending acquisitions are expected to be funded from funds borrowed under a
new credit facility (see the previous discussion under the heading "Credit
Facility") and the funds received from the completed disposition. However, there
can be no assurances that the Company will be able to complete a new credit
facility in order to fund the pending acquisitions.
CAPITAL EXPENDITURES. The Company had capital expenditures of approximately
$15.9 million for the nine months ended September 30, 1999 compared to $1.7
million for the same period in 1998. This increase is due primarily to the
acquisition of a corporate jet, furniture and fixtures related to the relocation
of the corporate offices, the purchase of new digital automation systems for
certain markets and the construction of a new building in Little Rock, Arkansas.
The Company's other equipment purchases consist primarily of broadcasting
equipment and transmission tower upgrades.
In addition to acquisitions and debt service, the Company's principal
liquidity requirements will be for working capital and general corporate
purposes, including capital expenditures, which are not expected to be material
in amount. Management believes that cash from operating activities, revolving
loans under Citadel Broadcasting's credit facility and any new credit facility,
if completed, and proceeds from the November 9, 1999 disposition should be
sufficient to permit the Company to meet its financial obligations and to fund
its operations for at least the next 12 months, although additional capital
resources may be required in connection with the further implementation of the
Company's acquisition strategy.
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YEAR 2000 MATTERS
The Year 2000 computer issue primarily results from the fact that
information technology hardware and software systems and other non-information
technology products containing embedded microchip processors were originally
programmed using a two digit format, as opposed to four digits, to indicate the
year. Such programming will be unable to interpret dates beyond the year 1999,
which could cause a system or product failure or other computer errors and a
disruption in the operation of such systems and products.
The Company's project team has identified traffic/accounting systems,
satellite delivered programming, digital automation systems and internet service
provider systems as the mission critical systems to evaluate for Year 2000
compliance. In addition, although several software programs used throughout the
Company were not Year 2000 compliant, the vendors of this software committed to
provide Year 2000 compliant updates to the Company. The Company has received the
updates and has either tested the software for Year 2000 compliance or has
reviewed the documentation provided with the upgrade. In certain cases, the
Company is relying on the representations of the vendors regarding Year 2000
compliance as testing the software would disrupt the operations of the Company,
and the Company believes its contingency plans should mitigate the need for
further testing.
The Company has identified five phases for the project team to address for
each of the Company's risk areas. These phases are (1) an inventory of the
Company's systems described above, (2) assessment of the systems to determine
the risk and apparent extent of Year 2000 problems, (3) remediation of
identified problems, (4) testing of systems for Year 2000 readiness and (5)
contingency planning for the worst-case scenarios.
Inventories have been completed for all mission critical Company software
applications and hardware systems for all radio stations acquired prior to
September 30, 1999. The project team has also completed its assessment of the
systems, remediation of identified problems and testing, where appropriate, of
systems for Year 2000 readiness for all radio stations except for those located
in Muncie, Indiana. The Company expects the radio stations in Muncie, Indiana to
complete the assessment of their systems, remediation of identified problems and
testing, where appropriate, of systems for Year 2000 readiness by the end of the
fourth quarter of 1999. For radio stations acquired after September 30, 1999,
the Company will use its best efforts to complete inventories of the mission
critical systems, assessment of the systems, remediation of identified problems
and testing, where appropriate, of systems for Year 2000 readiness prior to year
end. However, there can be no assurance that the Company will be able to
complete these tasks prior to December 31, 1999.
In each of its markets, the Company employs centralized accounting and
traffic (advertising scheduling) systems for all of its stations in the market.
In September 1998, the Company completed the replacement and upgrading of
software certified as Year 2000 compliant by the software vendor. The total cost
of the software upgrade was $0.3 million. In connection with the software
upgrade, much of the accounting and traffic hardware systems were also upgraded
or replaced. The total cost of the hardware upgrade was $0.1 million. The
Company completed its testing for Year 2000 compliance of the hardware and the
new software used in its accounting and traffic systems during the second
quarter of 1999. The Company has also converted all acquired radio stations to
its centralized accounting and traffic systems except for the stations in
Muncie, Indiana. The Company expects the stations in Muncie, Indiana to be
converted to the accounting and traffic systems by the end of the fourth quarter
of 1999. For radio stations acquired after September 30, 1999, the Company will
use its best efforts to convert the stations to its accounting and traffic
systems prior to year end, however; there can be no assurance that the Company
will be able to complete the conversion by December 31, 1999.
Satellite delivered programs, which are delivered to the Company's radio
stations from outside sources, represent a third party risk to the Company
arising from the Year 2000 issue. The Company has contacted the significant
vendors of these programs. In many cases, the same vendor will provide the same
programming to a number of the Company's stations as the programming is
nationally syndicated. The vendors have responded that they anticipate being
Year 2000 compliant. However, there can be no assurance regarding Year 2000
compliance from any vendor of these programs and, therefore, the Company has
developed a contingency plan for alternative programming.
The Company has elected to expand the digital automation systems used in the
Company's operations. Although not directly related to the Year 2000 problem,
the expansion and replacement of these systems, which the Company anticipates
will be completed in the first quarter of 2000, is expected to minimize or
eliminate Year 2000 problems associated with these systems. Each system in
stations acquired prior to September 30, 1999, not scheduled for replacement
prior to year end, has already been upgraded except for stations in Muncie,
Indiana and Harrisburg, Pennsylvania, which upgrades are expected to be
completed prior to year end. The cost of upgrading the systems was not or will
not be material. The cost of the new digital automation systems is estimated at
$2.1 million. For radio stations acquired after September 30, 1999, the Company
will use its best efforts to upgrade the digital automation systems prior to
year end, however; there can be no assurance that the upgrades will be completed
by December 31, 1999.
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The Company recently completed an expansion of its internet service provider
division. All mission critical elements of such division are certified Year 2000
compliant by the software and hardware vendors. No material expansion is
scheduled for this division prior to the year 2000. In addition, the Company
completed an upgrade of its billing system in the third quarter of 1999 and the
software is certified Year 2000 compliant by the vendor.
In addition to identification of these mission critical systems, the Company
has identified the top 10 advertisers on each of its radio stations owned or
operated at December 31, 1998. Questionnaires were sent to each of these
advertisers during the fourth quarter of 1998 asking them to update the Company
on the status of their Year 2000 compliance. The Company also sent such
questionnaires to the top 10 advertisers on each of the radio stations it
acquired in 1999, except for the recent FM station purchase in Baton Rouge,
Louisiana. To date, the Company has received responses from approximately 29%
of the advertisers to whom questionnaires were sent, and of the returned
questionnaires, 96% of the advertisers have responded that they anticipate being
Year 2000 compliant. Based on the responses received to date, there can be no
assurance regarding Year 2000 compliance by the Company's significant
advertisers, which may result in lost revenue if any such advertisers experience
year 2000 difficulties.
In addition, questionnaires were also sent to various equipment vendors,
utility and telephone companies, banks and other lending institutions that
provide substantial products and services to the Company. The Company has
received responses from approximately 51% of the vendors to whom questionnaires
were sent, and of the returned responses 100% of the vendors have responded that
they anticipate being Year 2000 compliant. However, there can be no assurance
regarding Year 2000 compliance from the Company's suppliers and service
providers. There can also be no assurance that the Company will be successful in
finding alternative Year 2000 compliant suppliers and service providers, if
required. One of the Company's greatest risks relates to the utility service
providers as a loss in electricity would have a material impact on the
operations of the Company. The Company does have back-up generators at certain
stations, but does not intend to purchase generators for all of its stations.
However, for those stations with generators, the Company plans to ensure, to the
extent possible, that the equipment is in working order and available in case
of any loss of power.
The Company has also solicited information regarding its critical internal
non-information technology systems such as telephones and HVAC. The Company has
determined that its telephone systems are Year 2000 compliant based on
information provided by the telephone manufacturers. The Company does not
consider the HVAC systems as mission critical and therefore any interruption in
the HVAC systems should not have a material effect on the operations of the
Company. The Company intends to extend this inquiry to stations it acquires in
1999 and has already made such inquiries for all completed acquisitions.
Based on the items discussed above, the Company has identified what it
believes to be at this time the most reasonably likely worst-case scenarios that
could impact the Company related to Year 2000 non-compliance. The Company
believes that the most reasonably likely sources of risk to the Company include
(i) disruptions in the supply of satellite delivered programs, (ii) disruptions
in local programming due to unanticipated software or hardware failures and
(iii) diminished demand for advertising time arising from Year 2000 problems
both specific to the Company's advertisers or more generally related to the
potential for economic disruptions related to Year 2000 issues.
The Company's contingency plans for these most reasonably likely worst-case
scenarios include (i) requiring each station to maintain a back log of local
programming that can be aired if the satellite delivered programming is
disrupted, (ii) requiring each station to have an adequate number of employees
at the radio station or on call starting from mid December 1999 through mid
January 2000, including engineers, program directors, radio personalities and
all other essential personnel in order to handle any disruptions in programming
or hardware and software systems, (iii) requiring each market to have an
engineer on site from 10:00 p.m. to 2:00 a.m. on December 31, 1999 and (iv)
informing each station of the possibility of diminished demand for advertising
due to Year 2000 problems and the need to identify, in advance, potential
replacement advertisers. The Company intends to continue to develop and refine
its contingency plans during the remainder of the year.
Based on its current assessment efforts, the Company does not believe that
Year 2000 issues related to its internal systems will have a material adverse
effect on the Company's financial condition or results of operations. However,
as described above, the failure by third parties to be Year 2000 ready could
have a material adverse effect on the Company.
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RISK FACTORS
Unless the context otherwise requires, the words "we," "our," and "us" in
this section refer to the Company. Any of the following risks could have a
material adverse effect on our business, financial condition or results of
operations or on the value of our common stock. These risks and uncertainties
are not the only ones facing us or which may adversely affect our business.
SUBSTANTIAL INDEBTEDNESS--Our debt service consumes a substantial portion of the
cash we generate and reduces the cash available to invest in our operations.
We have a significant amount of indebtedness. Our large amount of debt could
significantly impact our business because, among other things, it:
o requires us to dedicate a substantial portion of our operating cash
flow to pay interest expense, which reduces funds available for
operations, future business opportunities and other purposes,
o limits our ability to obtain additional financing, if we need it, for
working capital, capital expenditures, acquisitions, debt service
requirements or other purposes,
o inhibits our ability to compete with competitors who are less
leveraged than we are, and
o restrains our ability to react to changing market conditions, changes
in our industry and economic downturns.
As of September 30, 1999, we had:
o outstanding total debt of approximately $277.2 million, excluding the
discount on Citadel Broadcasting's 10 1/4% notes and its 9 1/4% notes,
o Citadel Broadcasting's exchangeable preferred stock with an aggregate
liquidation preference of approximately $82.5 million, and
o shareholders' equity of approximately $223.4 million.
We anticipate that we will incur a substantial amount of additional
indebtedness in connection with our pending acquisitions.
ABILITY TO SERVICE DEBT--In order to service our debt, we require a significant
amount of cash. However, our ability to generate cash depends on many factors
which are beyond our control.
Prevailing economic conditions and financial, business and other factors,
many of which are beyond our control, will affect our ability to satisfy our
debt obligations. If in the future we cannot generate sufficient cash flow from
operations to meet our obligations, we may need to refinance our debt, obtain
additional financing, delay planned acquisitions and capital expenditures or
sell assets. Any of these actions could adversely affect the value of our common
stock. We cannot assure you that we will generate sufficient cash flow or be
able to obtain sufficient funding to satisfy our debt service requirements.
RESTRICTIONS IMPOSED ON US BY OUR DEBT INSTRUMENTS--Our existing debt
instruments and anticipated future debt instruments contain, or will contain,
restrictions and limitations which could significantly impact our ability to
operate our business and the value of our common stock.
The covenants in Citadel Broadcasting's credit facility and the agreements
governing its other outstanding debt and preferred stock restrict, among other
things, Citadel Broadcasting's ability to incur additional debt, make particular
types of investments or other restricted payments, swap or sell assets or merge
or consolidate. A breach of any of the covenants contained in the credit
facility could allow the lenders to declare all amounts outstanding under the
credit facility to be immediately due and payable. In addition, the lenders
under the credit facility could proceed against the collateral granted to them
to secure that indebtedness. We have pledged the outstanding shares of common
stock of Citadel Broadcasting owned by us to secure our guarantee of the credit
facility. If the amounts outstanding under the credit facility are accelerated,
we cannot assure you that our assets will be sufficient to repay amounts due
under the credit facility and other outstanding debt obligations.
The credit facility requires Citadel Broadcasting to obtain its banks'
consent before making acquisitions or capital expenditures that exceed the
amount permitted by the credit facility. Consequently, we may experience
difficulties in pursuing our acquisition strategy. The credit facility also
requires Citadel Broadcasting to maintain specific financial ratios and satisfy
financial condition tests. Events beyond our control could affect Citadel
Broadcasting's ability to meet those financial ratios and condition tests, and
we cannot assure you that it will do so.
18
<PAGE> 19
The Company is also in the process of replacing Citadel Broadcasting's
credit facility with a new credit facility with a much larger borrowing
capacity. The Company expects the new facility will contain restrictions similar
to those already discussed. However, the extent of the restrictions cannot be
determined until the new facility is fully negotiated. There can be no
assurances that the new facility will be completed or if completed, the
covenants will not be materially different than those previously discussed.
The indentures governing Citadel Broadcasting's 9 1/4% notes and 10 1/4%
notes and its credit facility restrict, with certain exceptions, Citadel
Broadcasting's ability to pay dividends on or to repurchase, redeem or otherwise
acquire any shares of its capital stock. In the event that, after July 1, 2002,
cash dividends on Citadel Broadcasting's exchangeable preferred stock are in
arrears and unpaid for two or more semi-annual dividend periods, whether or not
consecutive, holders of the exchangeable preferred stock will be entitled to
elect two directors of Citadel Broadcasting. This right to elect directors could
limit our control over Citadel Broadcasting, and could adversely affect the
value of our common stock.
HISTORY OF NET LOSSES--We have a history of net losses which we expect to
continue through at least 2000.
We had a net loss of $3.9 million for the year ended December 31, 1998 and
$4.1 million for the nine months ended September 30, 1999. The primary reasons
for these losses are significant charges for depreciation and amortization
relating to the acquisition of radio stations and interest charges on our
outstanding debt. If we acquire additional stations, these charges will probably
increase. We expect to continue to experience net losses through at least 2000.
LIMITATIONS ON ACQUISITION STRATEGY--Our strategy to expand our business and
increase revenue through acquisitions may fail due to a number of risks involved
in implementing this strategy.
We intend to grow by acquiring radio stations in mid-sized markets. However,
our acquisition strategy may not increase our cash flow or yield other
anticipated benefits because this strategy is subject to a number of other
risks, including:
o failure or unanticipated delays in completing acquisitions due to
difficulties in obtaining regulatory approval,
o difficulty in integrating the operations, systems and management of
our acquired stations,
o diversion of management's attention from other business concerns,
o loss of key employees of acquired stations, and
o increases in prices for radio stations due to increased competition
for acquisition opportunities.
We compete and expect to continue to compete with other buyers for the
acquisition of radio stations. Some of those competitors have greater financial
and other resources than we do. In addition, we may find fewer acceptable
acquisition opportunities in the future.
POTENTIAL DIFFICULTIES IN COMPLETING PENDING AND FUTURE TRANSACTIONS DUE TO
GOVERNMENTAL REVIEW--Antitrust law and other regulatory considerations could
prevent or delay our strategy to expand our business and increase revenue.
The completion of certain of our pending transactions is, and future
transactions we may consider will likely be, subject to the notification filing
requirements, applicable waiting periods and possible review by the United
States Department of Justice or the Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. All of our
pending and future radio station acquisitions and dispositions will be subject
to the license transfer approval process of the Federal Communications
Commission. Review by the Department of Justice or the Federal Trade Commission
may cause delays in completing transactions and, in some cases, result in
attempts by these agencies to prevent completion of transactions or negotiate
modifications to the proposed terms. Review by the FCC, particularly review of
concentration of market revenue share, may also cause delays in completing
transactions. Any delay, prohibition or modification could adversely affect the
terms of a proposed transaction or could require us to abandon an otherwise
attractive opportunity.
19
<PAGE> 20
IMPORTANCE OF CERTAIN MARKETS--A downturn in any of our significant markets
could adversely affect our revenue and cash flow.
Our Albuquerque, Providence, Salt Lake City, Little Rock and Modesto markets
are particularly important for our financial well-being. A significant decline
in net broadcasting revenue from our stations in these markets could have a
material adverse effect on our operations and financial condition. To
illustrate, our radio stations in these markets generated the following
percentages of our total net broadcasting revenue and broadcast cash flow for
the nine months ended September 30, 1999:
<TABLE>
<CAPTION>
% OF NET % OF BROADCAST
MARKET BROADCASTING REVENUE CASH FLOW
---------------- -------------------- --------------
<S> <C> <C>
Albuquerque 11.2% 12.8%
Providence 10.1% 11.0%
Salt Lake City 9.5% 9.3%
Little Rock 6.5% 6.9%
Modesto 6.1% 9.3%
</TABLE>
We received a civil investigative demand from the Department of Justice
concerning our acquisition of all of the assets of KRST-FM in Albuquerque, New
Mexico on October 9, 1996. The demand requested written answers to
interrogatories and the production of documents concerning the radio station
market in Albuquerque, in general, and the KRST acquisition, in particular, to
enable the Department of Justice to determine, among other things, whether the
KRST acquisition would result in excessive concentration in the market. We
responded to the demand. The Department of Justice requested supplemental
information in 1997, to which we also responded. This matter remains open. If
the Department of Justice were to proceed with and successfully challenge the
KRST acquisition, we may be required to divest one or more radio stations in
Albuquerque.
IMPACT OF THE YEAR 2000 PROBLEM--The Year 2000 problem could significantly
disrupt our operations, causing a decline in cash flow and revenue and other
difficulties.
We are in the process of assessing and remediating potential risks to our
business related to the Year 2000 problem. Although we believe that, as a result
of these efforts, our critical systems are or will be substantially Year 2000
ready, we cannot assure you that this will be the case. If we experience
significant problems as a result of the Year 2000 problem, our operations,
revenue, cash flow and other important aspects of our business and financial
well-being may be adversely affected.
We believe that our greatest potential Year 2000 risk is that third parties
with whom we deal will fail to be Year 2000 ready. For example, our operations
and revenue may be adversely affected if our programming suppliers or key
advertisers experience significant disruptions in their businesses because of
the Year 2000 problem.
For more information concerning the Year 2000 problem and its potential
impact on our business, see "Year 2000 Matters" above.
SIGNIFICANT COMPETITION IN OUR INDUSTRY--Because the radio broadcasting industry
is highly competitive, we may lose audience share and advertising revenue.
Our radio stations face heavy competition from other radio stations in each
market for audience share and advertising revenue. We also compete with other
media such as television, newspapers, direct mail and outdoor advertising for
advertising revenue. A decrease in either audience share or advertising revenue
could result in decreased cash flow, which could impair our ability to, among
other things, service our debt obligations, and which could adversely affect the
value of our common stock. The radio broadcasting industry is also facing
competition from new media technologies that are being developed such as the
following:
o audio programming by cable television systems, direct broadcasting
satellite systems and other digital audio broadcasting formats,
o satellite-delivered digital audio radio service, which could result in
the introduction of several new satellite radio services with sound
quality equivalent to that of compact discs, and
o in-band-on-channel digital radio, which could provide digital radio
services in the same frequency range currently occupied by traditional
AM and FM radio services.
We cannot predict either the extent to which such competition will
materialize or, if such competition materializes, the extent of its effect on
our business.
20
<PAGE> 21
EXTENSIVE REGULATION OF OUR INDUSTRY--The Federal Communications Commission's
extensive regulation of the radio broadcasting industry limits our ability to
own and operate radio stations and other media outlets.
LICENSES. The radio broadcasting industry is subject to extensive regulation
by the FCC under the Communications Act of 1934, as amended. Issuance, renewal
or transfer of radio broadcast station operating licenses requires FCC approval,
and we cannot operate our radio stations without FCC licenses. The failure to
renew our licenses could prevent us from operating the affected stations and
generating revenue from them. If the FCC decides to include conditions or
qualifications in any of our licenses, we may be limited in the manner in which
we may operate the affected station.
OWNERSHIP. The Communications Act and FCC rules impose specific limits on
the number of stations and other media outlets an entity can own in a single
market. The FCC attributes interests held by, among others, an entity's
officers, directors and stockholders to that entity for purposes of applying
these ownership limitations. The existing ownership rules or proposed new rules
could affect our acquisition strategy because they may prevent us from acquiring
additional stations in a particular market. We may also be prevented from
engaging in a swap transaction if the swap would cause the other company to
violate these rules.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market rates
and prices such as interest rates, foreign currency exchange rates and commodity
prices. The Company's primary exposure to market risk is interest rate risk
associated with its credit facility. Amounts borrowed under the credit facility
incur interest at the London Interbank Offered Rate, LIBOR, plus additional
basis points depending on the outstanding principal balance under the credit
facility. As of September 30, 1999, $57.5 million was outstanding under the
credit facility. The Company evaluates its exposure to interest rate risk by
monitoring changes in interest rates in the market place.
To assist in the management of interest rate risk, the Company entered into
an interest rate swap agreement on December 10, 1996. The notional amount
outstanding as of September 30, 1999 and the expected notional amount to be
outstanding as of December 10, 1999, the maturity date of the agreement, is
approximately $63.5 million. Notional amounts are used to calculate the
contractual payments to be exchanged under the contract. The Company receives a
variable rate on the notional amount and pays a fixed rate of 5.615% on the
notional amount. The variable rate is based on LIBOR and is adjusted quarterly
based on the original agreement dated December 10, 1996. LIBOR in effect under
the swap agreement as of September 10, 1999 was 5.2%.
The fair market value of the Company's interest rate swap was a net
liability of approximately $20,000 as of September 30, 1999.
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business, but the Company is not a party to any
lawsuit or proceeding which, in the opinion of the Company, is likely to have a
material adverse effect on the Company.
As previously reported, on April 28, 1999, the Department of Justice filed a
lawsuit in the United States District Court for the District of Columbia against
the Company and Triathlon Broadcasting Company alleging that they, as a result
of a joint sales agreement, eliminated price competition between their radio
stations in Spokane, Washington and Colorado Springs, Colorado. A proposed Final
Judgement, the terms of which were stipulated by the parties, was also filed
with the court on April 28, 1999. The Final Judgement was filed by the Court on
August 26, 1999. The Final Judgement:
o Orders the Company to terminate the joint sales agreement referenced
above, which was terminated on April 30, 1999,
o Prohibits the Company from acquiring any other radio stations that
sell radio advertising time in either Colorado Springs or Spokane,
unless the Company complies with the notice, additional information
and waiting requirements in the Final Judgment, and
o Prohibits the Company from entering into any joint sales agreement or
any other cooperative selling arrangement with any other operator of
radio stations that sells or helps to sell advertising time in either
Colorado Springs or Spokane unless the Company complies with the
notice, additional information and waiting requirements in the
Final Judgement.
21
<PAGE> 22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's annual meeting of shareholders was held on July 27, 1999.
(b) Not applicable.
(c) Matters voted upon at the meeting:
(i) Election of five directors for a one-year term until the next annual
meeting and until their successors are duly elected and qualified:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld Abstain
- ------- ----------- -------------- -------
<S> <C> <C> <C>
Lawrence R. Wilson 23,145,745 93,621 0
Patricia Diaz Dennis 23,144,745 94,621 0
Ike Kalangis 23,144,645 94,721 0
Ted L. Snider, Sr. 23,145,505 93,861 0
John E. von Schlegall 23,145,745 93,621 0
</TABLE>
(ii) Approval of the Citadel Communications Corporation 1999 Long-Term
Incentive Plan:
Votes For Votes Against Abstain/Broker Non-Votes
- --------- ------------- ------------------------
16,670,292 5,461,665 1,107,389
(iii) Approval of the amendment to the Citadel Communications Corporation 1996
Equity Incentive Plan to increase the number of shares of common stock
available under the plan:
Votes For Votes Against Abstain/Broker Non-Votes
- --------- ------------- ------------------------
19,478,344 2,675,574 1,085,448
(iv) Ratification of the appointment of KPMG LLP as independent public
accountants for the year ended December 31, 1999:
Votes For Votes Against Abstain/Broker Non-Votes
- --------- ------------- ------------------------
22,375,149 863,217 1,000
(d) Not applicable
ITEM 5. OTHER INFORMATION
NEW YORK, NEW JERSEY, TEXAS, LOUISIANA, CONNECTICUT, MASSACHUSETTS AND MAINE
ACQUISITION
On October 27, 1999, the Company entered into an asset purchase agreement
with Broadcasting Partners Holdings, L.P. to acquire 23 FM and 13 AM radio
stations in Buffalo, Syracuse and Ithaca, New York, Atlantic City, New Jersey,
Tyler-Longview, Texas, Monroe, Louisiana, New London, Connecticut, New Bedford,
Massachusetts and Augusta-Waterville, Presque Isle-Caribou and
Dennysville-Calais, Maine, as well as the right to operate an additional FM
radio station in Atlantic City under a program service and time brokerage
agreement. The aggregate purchase price is approximately $190.0 million in cash.
The stations indicated include one AM radio station in Buffalo and one FM radio
station in New London which affiliates of Broadcasting Partners Holdings have
entered into agreements to purchase. If either of these two transactions has not
been completed prior to completion of the Company's acquisition, the Company
will be assigned the rights under the relevant purchase agreement. The Company
has delivered an irrevocable letter of credit in favor of Broadcasting Partners
Holdings, issued by BankBoston, N.A., in the amount of $12.0 million to secure
the Company's obligations under the asset purchase agreement.
The asset purchase agreement contains customary representations and
warranties of the parties, and completion of the acquisition of the stations is
subject to conditions including (1) the receipt of FCC consent to the assignment
of the station licenses to the Company, (2) the expiration or termination of the
applicable waiting periods under the Hart-Scott-Rodino Antitrust Act of 1976, as
amended, and (3) the receipt of consents to the assignment to the Company of
certain contracts relating to the stations. An application seeking FCC approval
was filed with the FCC on November 9, 1999.
22
<PAGE> 23
OKLAHOMA ACQUISITION
On August 23, 1999, the Company entered into a purchase agreement with Cat
Communications, Inc and Desert Communications III, Inc. to acquire all of the
equity interests of Caribou Communications Co. for the aggregate purchase price
of approximately $60.0 million in cash. Caribou Communications owns four
FM radio stations and one AM radio station in Oklahoma City, Oklahoma.
The Company has delivered an irrevocable letter of credit in favor of Cat
Communications and Desert Communications, issued by BankBoston, N.A., in the
amount of $3.0 million to secure the Company's obligations under the purchase
agreement.
The agreement contains customary representations and warranties of the
parties, and consummation of the transaction is subject to conditions including
(1) the receipt of FCC consent to the transfer of control of the station
licenses to the Company, (2) the expiration or termination of the applicable
waiting periods under the Hart-Scott-Rodino Act and (3) the receipt of consents
to the change of control under certain contracts relating to the radio stations.
An application seeking FCC approval was filed with the FCC on September 2, 1999
and a grant of the application was received on October 28, 1999. The Company
received early termination of the applicable Hart-Scott-Rodino Act waiting
period on October 4, 1999.
OTHER PENDING TRANSACTIONS
In addition to the transactions described, on October 5, 1999, the Company
entered into a purchase and sale agreement to acquire an AM radio station
serving the Salt Lake City, Utah market, including a related tower site, for
approximately $0.6 million in cash, and on October 8, 1999, the Company entered
into an exchange agreement to acquire one AM radio station in Binghamton, New
York in exchange for one AM radio station in Binghamton owned by the Company and
approximately $0.6 million in cash. The closing of each of these transactions is
also subject to various conditions.
CLOSING MATTERS
Although the Company believes that the conditions to closing for each of
its pending transactions are customary for transactions of this type, there can
be no assurance that such conditions will be satisfied.
For a discussion of financing for these transactions, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" under
the heading "Liquidity and Capital Resources."
23
<PAGE> 24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- ----------------------
2.1 Asset Purchase Agreement dated October 27, 1999 by and
between Citadel Broadcasting Company and Broadcasting
Partners Holdings, L.P.
10.1 Nineteenth Amendment to Loan Instruments dated as of
August 31, 1999 among Citadel Broadcasting Company,
Citadel License, Inc., Citadel Communications Corporation,
FINOVA Capital Corporation and the Lenders party thereto.
27 Financial Data Schedule.
(b) Reports on Form 8-K
On September 14, 1999, Citadel Communications filed with the Securities and
Exchange Commission a current report on Form 8-K reporting the August 31,
1999 acquisition of all the issued and outstanding shares of capital stock
of Fuller-Jeffrey Broadcasting Companies, Inc. The following financial
statements of Fuller-Jeffrey Broadcasting Companies, Inc. and Subsidiaries
were filed:
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1998 and June 30, 1999
(unaudited)
Consolidated Statements of Operations for the year ended December 31,
1998 and the six months ended June 30, 1998 and 1999 (unaudited)
Consolidated Statements of Stockholders' Deficiency for the year ended
December 31, 1998
Consolidated Statements of Cash Flows for the year ended December 31,
1998 and the six months ended June 30, 1998 and 1999 (unaudited)
Notes to Consolidated Financial Statements
The following pro forma financial information of Citadel Communications
Corporation and Subsidiary was filed:
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June
30, 1999
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the six months ended June 30, 1999
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the twelve months ended December 31, 1998
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITADEL COMMUNICATIONS CORPORATION
Date: November 12, 1999 By: /s/ Lawrence R. Wilson
-----------------------------------------
Lawrence R. Wilson
Chairman of the Board
Chief Executive Officer and President
(Principal Executive Officer)
Date: November 12, 1999 By: /s/ Donna L. Heffner
-----------------------------------------
Donna L. Heffner
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
25
<PAGE> 26
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- ----------------------
2.1 Asset Purchase Agreement dated October 27, 1999 by and
between Citadel Broadcasting Company and Broadcasting
Partners Holdings, L.P.
10.1 Nineteenth Amendment to Loan Instruments dated as of
August 31, 1999 among Citadel Broadcasting Company,
Citadel License, Inc., Citadel Communications Corporation,
FINOVA Capital Corporation and the Lenders party thereto.
27 Financial Data Schedule.
26
<PAGE> 1
Exhibit 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CITADEL BROADCASTING COMPANY
AND
BROADCASTING PARTNERS HOLDINGS, L.P.
October 27, 1999
<PAGE> 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into on
October 27, 1999, by and between CITADEL BROADCASTING COMPANY, a Nevada
corporation (the "Buyer"), and BROADCASTING PARTNERS HOLDINGS, L.P., a Delaware
limited partnership ("BPH").
Recitals
The entities listed on Schedule 7.4 (the "Subsidiaries") own and
operate the radio stations (collectively, the "Stations") set forth below their
respective names on Schedule 7.4. BPH holds either or both of (a) a majority of
the equity interests in each of the Subsidiaries and (b) the right to cause each
of the Subsidiaries to sell its stations to a third party or to cause a
"roll-up" of the Stations into BPH or one or more Affiliates of BPH.
Certain of the Subsidiaries are parties to pending agreements to
acquire additional radio stations as set forth on Schedule 7.4 (the "Acquisition
Stations"). From and after the completion of any such acquisition prior to the
closing under this Agreement, the terms "Stations" and "Assets" as used in this
Agreement (except as provided in the first sentence of Article 7) shall include,
respectively, each Acquisition Station so acquired and all of the assets
relating thereto.
BPH desires to sell to the Buyer, and to cause any Affiliate of BPH
that owns and operates any of the Stations at the time of the closing under this
Agreement to sell to the Buyer, substantially all of the assets relating to the
Stations (other than the Excluded Assets specified in Section 1.3), and the
Buyer desires to purchase those assets, as going concerns, subject to the terms
and conditions set forth in this Agreement.
All references in this Agreement to the "Sellers" means BPH and any
Affiliate of BPH that owns any of the Stations or Assets at the time of the
closing. Certain other capitalized terms used in this Agreement are defined in
Article 19.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
ASSETS TO BE CONVEYED
1.1 Closing. Subject to the terms and conditions of this Agreement, the
closing of the sale and purchase contemplated by this Agreement (the "Closing")
shall take place at the offices of Proskauer Rose LLP, 1585 Broadway, New York,
New York, or at such other place as may be agreed upon by the parties, at 10:00
a.m., local time, on the tenth business day after the later of (i) the date on
which the FCC Consent becomes a Final Order and (ii) the date on which all
waiting periods expire under the HSRA.
<PAGE> 3
1.2 Assets. At the Closing, the Sellers shall sell, assign, transfer
and convey to the Buyer, and the Buyer shall purchase from the Sellers, all of
the Sellers' right, title and interest in the assets, real, personal and mixed,
tangible and intangible (including the business of the Stations as a going
concern), owned or held by the Sellers and used primarily in the conduct of the
business and operation of the Stations, including all such property acquired by
the Sellers (or the Subsidiaries) between the date hereof and the Closing Date
relating to the Acquisition Stations or otherwise (but excluding the Excluded
Assets specified in Section 1.3), including, but not limited to, the following:
(a) all of the Sellers' rights in and to the licenses, permits
and other authorizations issued to the Sellers by any governmental authority and
used in the conduct of the business and operation of the Stations (including the
Station Licenses), together with any additions thereto (including renewals or
modifications of such licenses, permits and authorizations and applications
therefor) made between the date hereof and the Closing Date, and all of the
Sellers' rights in and to the call letters of the Stations;
(b) all of the Owned Real Property and the Leases listed on
Schedule 7.5;
(c) all equipment, office furniture and fixtures, office
materials and supplies, inventory, spare parts, motor vehicles and other
tangible personal property of every kind and description, owned, leased or held
by the Sellers and used in the conduct of the business and operation of the
Stations, including the items listed in Schedule 7.6, together with any
replacements thereof and additions thereto made between the date hereof and the
Closing Date;
(d) subject to the provisions of Article 3 and exclusive of
all of the Excluded Contracts, all of the Sellers' rights under and interest in
(i) the Contracts listed in Schedule 7.7, (ii) any Contract not required to be
listed on Schedule 7.7 but which was entered into in the ordinary course of
business of the Stations and is in effect as of the date of this Agreement,
(iii) purchase orders for goods and services (including the sale of airtime on
the Stations) entered into in the ordinary course of business of the Stations,
and (iv) all Contracts related to the operation of the Stations entered into or
assumed by the Sellers between the date hereof and the Closing Date in
accordance with this Agreement (including Sections 9.1 and 9.13) (collectively,
the "Assumed Contracts");
(e) all programs and programming materials of whatever form or
nature owned by the Sellers and used by any Station;
(f) all of the Sellers' rights in and to the trademarks, trade
names, service marks, franchises, copyrights, including registrations and
applications for registration of any of them, jingles, logos, slogans, and
non-governmental licenses, permits and privileges owned or held by the Sellers
and used in the conduct of the business and operation of the Stations and listed
in Schedule 7.9, together with any additions thereto made between the date
hereof and the Closing Date;
2
<PAGE> 4
(g) all files, records, books of account, computer programs
and software and logos owned or held by the Sellers relating to the operation of
the Stations, including, without limitation, programming information and
studies, technical information and engineering data, news and advertising
studies and consultants' reports, ratings reports, marketing and demographic
data, promotional materials, budgets, financial reports, and projections, sales,
operating and business plans, filings with the FCC and original executed copies,
if available, and otherwise true and correct copies of all Assumed Contracts and
receivable records, invoices, statements, traffic material, sales
correspondence, lists of advertisers and credit and sales reports; and
(h) all of the Sellers' rights under manufacturers' and
vendors' warranties relating to items included in the Assets (as defined below)
and all similar rights against third parties relating to items included in the
Assets, including claims arising under the Pending Purchase Agreements, to the
extent contractually assignable.
The assets to be transferred to the Buyer pursuant to this Section 1.2
are hereinafter collectively referred to as the "Assets." The Assets shall be
transferred to the Buyer free and clear of all Liens (except for Permitted
Liens).
1.3 Excluded Assets. The Assets shall not include the following assets
(the "Excluded Assets"):
(a) the Sellers' books and records that pertain to the
organization, existence or capitalization of the Sellers and duplicate copies of
such records included in the Assets as are necessary to enable the Sellers to
file tax returns and reports, to collect their accounts receivable, and to
discharge their liabilities;
(b) all cash, cash equivalents or similar type investments of
the Sellers, such as certificates of deposit, commercial paper, Treasury bills
and notes, and all other marketable securities on hand and/or in banks;
(c) all accounts receivable relating to or arising out of the
operations of the Stations prior to the Effective Time (the "Accounts
Receivable");
(d) any assets not used in connection with the Stations;
(e) any and all claims of the Sellers with respect to
transactions or events occurring or otherwise arising prior to the Closing Date
(including, without limitation, claims for tax refunds) other than claims
arising under the Pending Purchase Agreements;
(f) any and all policies of insurance, including, without
limitation, any and all rights thereunder;
(g) all rights of any of the Sellers to enforce (i) the
obligations of Buyer to pay, perform or discharge the Assumed Liabilities and
(ii) all other obligations of Buyer under or in connection with, as well as all
other rights of any of the Sellers under or in connection with, this Agreement;
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(h) any and all claims or causes of action against third
parties which may have accrued in favor of any of the Sellers prior to the
Closing Date, other than any claim or cause of action arising under the Pending
Purchase Agreements;
(i) any assets of any Employee Plan (as defined in Section
7.8) of any of the Sellers in effect as of the Closing Date (other than any
assets specifically assumed by Buyer pursuant to Section 10.4(f) hereof);
(j) all partner interests and member interests, and all other
equity interests and securities, of or in any of the Sellers;
(k) any Consent-Denied Contract (as defined in Section 4.4),
any Employee Plan (except to the extent stated in clause (i) of this Section
1.3) and all of the agreements referred to in Schedule 1.3 (the "Excluded
Contracts"); and
(l) the rights to the name "Broadcasting Partners" and
derivations of that name and the rights to the names of each of the entities
listed on Schedule 1.3 and derivations of those names.
1.4 Transactions Prior to the Closing. Prior to the Closing, BPH may
effect such transactions relating to ownership of the Stations as it may
determine in its discretion, provided that (a) at all times from the date of
this Agreement to the Closing Date BPH retains direct or indirect control of the
Stations and the Assets are owned or held by BPH or an Affiliate of BPH and (b)
no such transaction prevents, delays or otherwise interferes with consummation
of the sale of all of the Assets to the Buyer in accordance with the terms of
this Agreement.
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price. The total consideration to be paid by the Buyer for
the Assets (the "Purchase Price") shall be, subject to any adjustments made
pursuant to this Section 2.1 and Sections 5.1 and 5.2, the sum of $185,000,000
payable by the Buyer to BPH (on its own behalf or as agent for the respective
Sellers) at the Closing by wire transfer of immediately available federal funds
to an account at a domestic U.S. bank or other financial institution pursuant to
wire instructions that BPH shall deliver to the Buyer. If the acquisition of
WVVE-FM or WHLD-AM (as further described in Schedule 7.4) or both shall have
been completed prior to the Closing Date (a "Completed Acquisition"), the
Purchase Price shall be increased by an amount equal to the amount actually
expended by the Sellers in respect of the items set forth in part 3B of Schedule
7.4 in respect of each Completed Acquisition, up to an aggregate maximum amount
of $3,850,000 in respect of the Completed Acquisition of WVVE-FM and $750,000 in
respect of the Completed Acquisition of WHLD-AM.
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2.2 Letter of Credit.
(a) Simultaneously with the execution of this Agreement, Buyer
shall deliver, or cause to be delivered, to BPH an irrevocable letter of credit
in favor of BPH, issued by BankBoston, N.A., in the amount of $12,000,000, which
shall be in substantially the form of Exhibit A (such letter of credit, together
with any extension or replacement thereof pursuant to Section 2.2(b), the
"Letter of Credit"). The Letter of Credit shall provide that the issuing bank
shall make payment on the Letter of Credit upon such bank's receipt of (i) a
joint certificate from a duly authorized representative of the general partner
of BPH and the Chief Executive Officer of Buyer certifying that a Draw Condition
(as defined in Section 16.2) has occurred or (ii) a final non-appealable order
of a court of competent jurisdiction to the effect that a Draw Condition has
occurred. At the Closing, BPH shall return the original Letter of Credit to
Buyer for cancellation.
(b) If, at a time when the Letter of Credit would, by its
terms, expire within 30 days, a bona fide dispute exists as to whether a Draw
Condition has occurred, Buyer shall take such action as is necessary to either,
in Buyer's discretion, (i) extend the expiration date of the Letter of Credit,
(ii) deliver to BPH a replacement letter of credit in like amount and
substantially the same form from another financial institution with a net worth
at least equal to that as of the date of this Agreement of BankBoston, N.A. or
(iii) deposit $12,000,000 in escrow (pursuant to an escrow agreement reasonably
satisfactory to Buyer and BPH), until such time as such dispute is resolved.
Buyer agrees that BPH may, at its option, have Buyer's obligations under this
Section 2.2(b) specifically enforced by a court of competent jurisdiction and
that, if there is then pending litigation as to whether a Draw Condition has
occurred, Buyer will not oppose specific enforcement of its obligations under
this Section 2.2(b).
ARTICLE 3
ASSUMPTION OF LIABILITIES
3.1 Assumption of Liabilities. Subject to the conditions specified in
this Agreement, the Buyer shall not assume or in any way be responsible for any
of the Excluded Contracts or for any liabilities or obligations of the Sellers
or any other liabilities or obligations whatsoever arising out of the operation
of the Stations as conducted by the Sellers or the Subsidiaries at any time
prior to the Closing Date (the "Excluded Liabilities"). The Buyer shall assume
and agree to pay, defend, discharge and perform as and when due all liabilities
and obligations arising after the Effective Time under the Assumed Contracts
(the "Assumed Liabilities"), and the Buyer shall not assume any other
obligations of the Sellers.
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ARTICLE 4
REQUIRED CONSENTS
4.1 FCC Application. The assignment of the Station Licenses as
contemplated by this Agreement is subject to the prior consent and approval of
the FCC. The FCC Application shall be filed by the Buyer and the Sellers with
the FCC within ten days after the signing of this Agreement. The Sellers and the
Buyer shall prosecute the FCC Application with all reasonable diligence and
otherwise use their reasonable best efforts to obtain the grant of the FCC
Application as expeditiously as practicable. If the FCC Consent imposes any
condition on any party hereto, such party shall use its reasonable best efforts
to comply with such condition, including, but not limited to, any FCC Consent
conditioned upon the outcome of a pending FCC rulemaking proceeding. The Buyer
shall provide the Sellers, and the Sellers shall provide the Buyer, with a copy
of any pleading, order or other document served on it relating to the FCC
Application. Neither the Buyer nor the Sellers shall, and each of them shall use
its reasonable best efforts not to cause or permit any of its officers,
directors, partners or other Affiliates to, take any action which could
reasonably be expected to adversely affect the likelihood of the grant of the
FCC Consent. 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. In the event that the FCC denies the FCC Application and
such denial becomes a Final Order, this Agreement shall be terminated in
accordance with the express terms and conditions of Article 16.
4.2 HSRA. Each party shall use reasonable best efforts to prepare and,
no later than 20 business days after the signing of this Agreement, file with
the United States Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Department of Justice (the "DOJ") any materials
and information required to be filed with or provided to the FTC or the DOJ
pursuant to the HSRA with respect to the sale and purchase contemplated by this
Agreement. The Buyer and BPH shall share equally the payment of the filing fees
associated with any such filing. The Buyer and BPH shall promptly supply any
additional information which reasonably may be required or requested by the FTC
or the DOJ. The Buyer and BPH shall take all such actions, and shall file and
use reasonable best efforts to have declared effective or approved, all
documents and notifications with any governmental or regulatory bodies, as may
be necessary or may reasonably be requested under federal antitrust laws for the
consummation of the transactions contemplated by this Agreement, including
expiration of the waiting period under the HSRA.
4.3 Other Governmental Consents. Promptly following the execution of
this Agreement, the parties shall prepare and file with the appropriate
Governmental Entities any other requests for approval or waiver that are
required from such Governmental Entities in connection with the transactions
contemplated hereby and shall diligently and expeditiously prosecute, and shall
cooperate fully with each other in the prosecution of, such requests for
approval or waiver and all proceedings necessary to secure such approvals and
waivers.
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4.4 Consent-Pending Contracts. An Assumed Contract is a
"Consent-Pending Contract" at any time after the Closing when any required
consent relating to such Assumed Contract has not been obtained or is not in
effect. As an accommodation in order to permit the purchase and sale of the
Assets to be consummated in a timely manner, and based upon the parties' mutual
belief that no other party to a Consent-Pending Contract will be materially
harmed by the Buyer's enjoyment or use of the Sellers' rights or performance of
the Sellers' obligations under any Consent-Pending Contract and that each such
third party will grant any required consent, the Closing Transactions will be
consummated notwithstanding the fact that any required consent (other than the
Mandatory Consents as defined in Section 11.5) has not been obtained under one
or more Consent-Pending Contracts. In that event, the Buyer and BPH agree as
follows with respect to each Consent-Pending Contract:
(a) Following the Closing, the Sellers shall continue to
attempt to obtain all consents with respect to such Contract in accordance with
Section 9.4.
(b) From and after the Effective Time, the Buyer and the
Sellers shall cooperate with one another to provide the Buyer with the benefits
of each Consent-Pending Contract (and the Buyer may utilize such benefits), and
the Buyer shall assume and agree to timely pay, satisfy, perform, and discharge
the Sellers' liabilities which arise under such Contract, unless and until such
Contract is a Consent-Denied Contract (as defined below). If such Contract
becomes a Consent-Denied Contract, then the Buyer may thereafter suspend its
performance of the Sellers' obligations arising thereafter under such Contract
until such time as such Consent-Pending Contract is no longer a Consent-Denied
Contract, and the Sellers shall perform or otherwise satisfy such obligations.
If the Buyer is denied the benefits of any Consent-Pending Contract while it is
a Consent-Pending Contract, then the Sellers shall be responsible for the
obligations of the Sellers pursuant to such Contract to the extent that they
relate to the period during which it is a Consent-Pending Contract or a
Consent-Denied Contract; provided, that to the extent that the Buyer actually
receives or received the benefit of any Consent-Pending Contract or
Consent-Denied Contract while it is or was a Consent-Pending Contract or a
Consent-Denied Contract, the Buyer shall be responsible for the performance of
the Sellers' obligations arising thereunder to the extent they relate to the
benefit received by the Buyer while such Consent-Pending Contract or
Consent-Denied Contract is or was a Consent-Pending Contract or a Consent-Denied
Contract. In addition, at the Buyer's request, the Sellers shall cooperate with
the Buyer to the extent reasonably necessary to enforce all rights under each
Consent-Pending Contract.
(c) A Consent-Pending Contract becomes a "Consent-Denied
Contract" if (i) such Contract terminates according to its terms by reason of a
breach of such Contract which occurred prior to the Closing or (ii) any party to
such Contract other than the Sellers or the Buyer expressly terminates the
Buyer's enjoyment of the rights and benefits pursuant to such Contract on the
ground that such party's consent to the assignment of the Sellers' rights under
such Contract pursuant to this Agreement has not been obtained.
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ARTICLE 5
PRORATIONS; ACCOUNTS RECEIVABLE
5.1 Proration of Income and Expenses. All income and expenses arising
from the conduct of the business and operation of the Stations shall be prorated
between the Buyer and the Sellers as of the Effective Time in accordance with
GAAP. Such prorations shall be based upon the principle that the Sellers shall
be entitled to all income earned and shall be responsible for all liabilities
and obligations incurred or accruing in connection with the operation of the
Stations until the Effective Time, and the Buyer shall be entitled to all income
earned and be responsible for such liabilities and obligations incurred or
accruing in connection with the operation of the Stations thereafter. Such
prorations shall include, without limitation, all ad valorem, real estate and
other property Taxes (but excluding taxes arising by reason of the transfer of
the Assets as contemplated hereby, which shall be paid as set forth in Article
14), business and license fees, music and other license fees, wages and salaries
of employees, utility expenses, liabilities and obligations under all Assumed
Contracts (other than Trade Agreements), rents, security deposits and similar
prepaid and deferred items, and all other expenses attributable to the ownership
and operation of the Stations. Trade Agreements shall be prorated only to the
extent provided in Section 5.2. To the extent not known, real estate Taxes shall
be apportioned on the basis of Taxes assessed for the preceding year, with a
reapportionment as soon as the new tax rate and valuation can be ascertained,
which covenant shall survive the Closing.
5.2 Trade Agreements. In the event that liabilities and obligations
under Trade Agreements exceed by more than $10,000 the total value (as of the
date of each Trade Agreement) of the property to be received by the Buyer under
such agreements after the Effective Time, the Purchase Price shall be reduced by
the amount in excess of $10,000. The liability of any Station for unperformed
time under a Trade Agreement as of the Effective Time shall be valued according
to such Station's prevailing rate as of the date of such Trade Agreement.
5.3 Payment of Proration Items. Within five days prior to the Closing
Date, the Sellers shall deliver to the Buyer a schedule setting forth their
reasonable good faith estimates of all proration items, including all estimated
accrued income and liabilities, and of the amounts described in Section 5.2
regarding Trade Agreements (including a then-current listing of all Trade
Agreements) (the "Estimated Proration Schedule"), based upon the principles
described in Sections 5.1 and 5.2 above. The Purchase Price payable at Closing
shall be adjusted in accordance with the Estimated Proration Schedule.
5.4 Further Adjustments. Within 60 days after the Closing Date, the
Buyer shall prepare and deliver to the Sellers an itemized list (the "Adjustment
List") of its determination of all proration items based upon the proration
principles described in Section 5.1 and of the amounts described in Section 5.2
regarding Trade Agreements. Such list shall show the net amount of the increase
or decrease, as applicable, to the Purchase Price (the "Adjustment Amount"). The
Adjustment List shall be conclusive and binding upon the Sellers unless the
Sellers provide the Buyer with written notice of objection (the "Notice of
Disagreement") within 30 days after the Sellers' receipt of the Adjustment List,
which notice shall state the adjustments
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proposed by the Sellers (the "Sellers' Adjustment Amount"). The Buyer shall have
15 days from receipt of a Notice of Disagreement to accept or reject the
Sellers' Adjustment Amount. If the Buyer rejects the Sellers' Adjustment Amount
and the amount in dispute exceeds $5,000, within 10 days thereafter the dispute
shall be submitted for determination by an independent "Big Five" public
accounting firm mutually agreed upon by the Buyer and the Sellers (the
"Referee"), with instructions that such determination shall be made within 30
days after submission to the Referee, and the Referee's determination shall be
final, conclusive and binding on the Sellers and the Buyer. In the event the
Buyer and the Sellers fail to select a Referee within 10 days after the Buyer's
rejection of the Sellers' Adjustment Amount, the Referee will be selected at
random from the "Big Five" public accounting firms through a lottery drawing;
provided, that KPMG Peat Marwick shall be excluded from such lottery drawing.
The Buyer and the Sellers agree to share equally the cost and expenses of the
Referee, but each party shall bear its own legal and other expenses, if any. If
the amount in dispute is equal to or less than $5,000, such amount shall be
divided equally between the Buyer and the Sellers. Payment by the Buyer or the
Sellers, as the case may be, of the Adjustment Amount determined pursuant to
this Section 5.4 shall be made by wire transfer within 15 days after the last to
occur of (i) the Sellers' acceptance of the Adjustment List or failure to give
the Buyer a timely Notice of Disagreement; (ii) the Buyer's acceptance of the
Sellers' Adjustment Amount or failure to reject the Sellers' Adjustment Amount
within 15 days of receipt of a Notice of Disagreement; (iii) the Sellers'
rejection of the Adjustment Amount in the event the amount in dispute equals or
is less than $5,000; and (iv) notice to the Sellers and the Buyer of the
resolution of the disputed amount by the Referee in the event that the amount in
dispute exceeds $5,000.
5.5 Collection of Accounts Receivable. At or within five days after the
Closing, the Sellers shall deliver to the Buyer a schedule of Accounts
Receivable. During the 120 day period commencing on the Closing Date (the
"Collection Period"), the Buyer shall use commercially reasonable efforts to
collect the Accounts Receivable as agent for, and on behalf of, the Sellers. In
determining the amounts collected by the Buyer with respect to the Accounts
Receivable (the "Collections") any amount collected by the Buyer from an account
debtor that has an amount due with respect to the Accounts Receivable
(regardless of whether the Buyer also has an account receivable from that
account debtor) shall be credited against the Accounts Receivable except to the
extent that a legitimate dispute exists with respect to a particular item
included in the Accounts Receivable and the Buyer promptly notifies the Sellers
of such dispute. Within 15 days after the end of each broadcast month during the
Collection Period, the Buyer shall deliver to BPH, on behalf of the Sellers, (i)
a statement or report (the "Monthly Collection Report") showing all Collections
during such broadcast month, (ii) a wire transfer in an amount equal to the
aggregate amount of the Collections during such broadcast month, and (iii) all
records of uncollected Accounts Receivable. Within 15 days after the end of the
Collection Period, the Buyer shall deliver to BPH on behalf of the Sellers, (i)
a final statement or report showing all Collections made during the Collection
Period, (ii) a wire transfer in an amount equal to any remaining Collections
which had not been previously remitted to the Sellers, and (iii) all records of
uncollected Accounts Receivable, and Buyer shall have no further obligations
with respect thereto. The Buyer shall not agree to any settlement, discount or
reduction of any Account Receivable without the prior written consent of the
Sellers. The Buyer shall also promptly remit to BPH on a monthly basis all
Collections received after the Collection Period. The Buyer's collection
obligation under this Section 5.5 shall not include any obligation to bring suit
or take
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other legal action for the collection of the Accounts Receivable. The Buyer
shall not assign, pledge or grant a security interest in any of the Accounts
Receivable to any third party or claim a security interest or right in and to
any of the Accounts Receivable and payment of the Collections shall not be
subject to set-off.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to BPH as follows:
6.1 Organization and Standing. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada.
6.2 Authorization and Binding Obligation. The Buyer has the full power
and authority to own and operate its properties, to carry on its business as now
conducted, to execute and deliver this Agreement and the other Transaction
Documents to be executed and delivered by it and to perform its obligations
under and to consummate the transactions contemplated by this Agreement and
those Transaction Documents. The execution, delivery and performance by Buyer of
this Agreement and the other Transaction Documents to which it is a party have
been duly and validly authorized by all necessary corporate action of the Buyer.
This Agreement has been duly executed and delivered by the Buyer and constitutes
the valid and binding obligation of the Buyer, enforceable against it in
accordance with its terms, except as limited by laws affecting creditors' rights
generally or the application of equitable principles.
6.3 FCC and HSRA Qualifications. The Buyer and its subsidiary, Citadel
License, Inc., are qualified as, and are not presently taking action or
contemplating taking action which might disqualify either of them from being,
under present or pending law (including the Communications Act) and present or
pending rules, regulations, policies and practices of the FCC, DOJ or FTC, the
holder of the Station Licenses or an owner or operator of the Stations.
6.4 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article 4 with respect to the FCC, the HSRA and other governmental
consents, or as disclosed on Schedule 6.4, neither the execution, delivery and
performance of this Agreement or any other Transaction Document to which the
Buyer is a party, nor the consummation of the transactions contemplated hereby
or thereby by the Buyer: (a) does or will require the consent of any third
party; (b) does or will violate any provisions of the Buyer's Certificate of
Incorporation or By-Laws; (c) does or will violate any applicable law, judgment,
order, injunction, decree, rule, regulation or ruling of any Governmental Entity
to which the Buyer is a party or by which the Buyer is bound; and (d) does or
will, 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 or other instrument to which the Buyer is a party or by
which it is bound. Without limiting the generality of the preceding sentence,
except as set forth on Schedule 6.4, neither the execution and delivery nor the
performance of this Agreement by Buyer will violate any covenant or other
restriction in any loan agreement, indenture, note or other agreement or
instrument relating to any indebtedness of Buyer.
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6.5 Litigation. As of the date of this Agreement, there is no claim,
litigation or proceeding pending or, to Buyer's Knowledge, threatened against
the Buyer which seeks to enjoin or prohibit, or which otherwise questions the
validity of, any action taken or to be taken in connection with this Agreement
or any Transaction Document to which the Buyer is a party.
6.6 Brokerage. Other than the fees described on Schedule 6.6, which
fees will be paid by the Buyer, there are no, and there will not be any, claims
for brokerage commissions, finders' fees or similar compensation in connection
with the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Buyer.
6.7 Available Funds. The Buyer has, or will have on the date on which
the Closing is to take place as provided in Section 1.1, sufficient funds
available to pay the Purchase Price on such date.
6.8 Disclosure. To Buyer's Knowledge, no representation or warranty
contained in this Article 6 contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements in this Article
6 not misleading.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BPH
BPH represents and warrants to the Buyer as follows, which
representations and warranties, other than those set forth in Sections 7.1, 7.2,
7.3 and 7.17, are not made with respect to any asset, liability or obligation of
any Acquisition Station:
7.1 Organization and Standing.
(a) BPH is a limited partnership duly formed, validly existing
and in good standing under the laws of the State of Delaware.
(b) As of the date of this Agreement, each of the Subsidiaries
is, and on the Closing Date each of the Sellers will be, a limited liability
company or limited partnership duly formed, validly existing and in good
standing under the laws of the jurisdiction of its organization, and qualified
to do business in every jurisdiction in which the nature of its business or its
ownership of property requires it to be qualified, except where the failure to
so qualify could not reasonably be expected to have a Material Adverse Effect.
(c) As of the date of this Agreement each of the Subsidiaries
has, and on the Closing Date each of the Sellers will have, the full power and
authority to own, lease and operate the Stations and the Assets, to carry on the
business of each Station as such business is now being conducted and to
consummate the transactions contemplated hereby.
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(d) BPH has shown to Buyer's counsel true and complete copies
of the limited partnership agreement, limited liability company agreement or
other similar organizational documents for BPH and each of the Subsidiaries.
7.2 Authorization and Binding Obligation. BPH has the full power and
authority to enter into and perform its obligations under this Agreement and the
other Transaction Documents to which it is a party and to consummate, and to
cause the Sellers to consummate, the transactions contemplated hereby and
thereby, and BPH's execution, delivery and performance of each of this Agreement
and the other Transaction Documents to which it is a party have been duly and
validly authorized by all necessary action of the general partner of BPH. This
Agreement has been duly executed and delivered by BPH and constitutes its valid
and binding obligation, enforceable against BPH in accordance with its terms,
except as limited by laws affecting the enforcement of creditors' rights
generally or the application of equitable principles.
7.3 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Article 4 with respect to the FCC, the HSRA and other governmental
consents, and except as disclosed on Schedule 7.3, neither the execution,
delivery and performance of this Agreement, or any other Transaction Documents
to which BPH or any Seller is or will be a party, nor the consummation of the
transactions contemplated hereby and thereby by BPH and the Sellers: (a) does or
will require the consent of any third party (except as disclosed on Schedule 7.7
and except for consents to the assignment of Contracts to be assumed pursuant to
the Pending Purchase Agreements); (b) does or will violate any provisions of
BPH's or any Subsidiary's or Seller's organizational documents; (c) does or will
violate any applicable law, judgment, order, injunction, decree, rule,
regulation or ruling of any Governmental Entity to which BPH, any Subsidiary or
any Seller is a party or by which any of them or the Assets are bound; (d)
except due to the failure to obtain required consent to the assignment of any
Contract, does or will, 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 or other instrument to which BPH or any
Subsidiary or Seller is a party or by which any of them is bound; and (e) except
due to the failure to obtain required consent to the assignment of any Contract,
does result in or will result in the termination of, or the creation or
imposition of any Lien pursuant to the terms of, any contract, commitment,
agreement, understanding or arrangement of any kind to which BPH or any
Subsidiary or Seller is a party or by which any of them or their respective
assets are bound. Without limiting the generality of the foregoing, except as
set forth in Schedule 7.3, neither the execution and delivery nor the
performance of this Agreement by BPH or any Subsidiary or Seller will violate
any covenant or other restriction in any loan agreement, indenture, note or
other agreement or instrument relating to any indebtedness of BPH or of any
Subsidiary or Seller.
7.4 Licenses. Schedule 7.4 includes a true and complete list of the
Station Licenses as of the date of this Agreement. The Station Licenses were
validly issued with the holder designated on Schedule 7.4 being the authorized
legal holder thereof and are in compliance with the Communications Act and the
rules, regulations and policies of the FCC. The Station Licenses comprise all of
the licenses, permits and other authorizations required from the FCC for
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the lawful conduct of the operation of the Stations as presently operated and
are in full force and effect. BPH has no reason to believe that the Station
Licenses will not be renewed by the FCC in the ordinary course when such Station
Licenses are due for renewal. The Stations are operating in accordance with the
Communications Act and the rules and regulations of the FCC.
7.5 Real Property.
(a) Schedule 7.5 lists all of the Owned Real Property. With
respect to each parcel of Owned Real Property: (i) as of the date of this
Agreement, the respective Subsidiary owning the related Station has, and as of
the Closing Date the Seller owning the related Station will have, good and
marketable fee simple title to such parcel, which as of Closing shall be free
and clear of all Liens (other than any Permitted Lien); (ii) except as set forth
on Schedule 7.5, there are no leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any Person the right of use or
occupancy of any portion of such parcel; and (iii) there are no outstanding
options or rights of first refusal to purchase such parcel or any portion
thereof or interest therein. The use for which the Owned Real Property is zoned
permits the use thereof for the business of the Stations consistent with past
practices. As of the date of this Agreement, the use and occupancy of the Owned
Real Property by the Subsidiaries are, and as of the Closing Date the use and
occupancy of the Owned Real Property by the Sellers will be, in compliance in
all material respects with all regulations, codes, ordinances and statutes
applicable to the Subsidiaries or the Sellers and the business of the Stations.
There are no condemnation proceedings or eminent domain proceedings of any kind
pending or, to BPH's Knowledge, threatened against the Owned Real Property.
(b) The licenses, leases and subleases listed on Schedule 7.5
constitute, as of the date of this Agreement, all of the agreements for the use
or occupancy of real property to which any of the Subsidiaries is a party
(collectively, the "Leases"). With respect to each Lease: (i) such Lease is
legal, valid, binding, enforceable and in full force and effect and (ii) to
BPH's Knowledge, no party to such Lease is in breach or default under such
Lease, and no event has occurred which, with notice or lapse of time, would
constitute such a breach or default under such Lease. None of the Subsidiaries
has assigned, transferred, conveyed, mortgaged, deeded in trust or caused any
Lien (other than any Permitted Lien) to exist with respect to its interest in
any such Lease. The use for which the premises subject to the Leases are zoned
permits the use thereof for the business of the Stations consistent with past
practices. As of the date of this Agreement, the use and occupancy of the
premises subject to the Leases by the Subsidiaries are, and as of the Closing
Date the use and occupancy of the premises subject to the Leases by the Sellers
will be, in compliance in all material respects with all regulations, codes,
ordinances and statutes applicable to the Subsidiaries or Sellers and the
business of the Stations.
(c) The Owned Real Property and the Leases listed on Schedule
7.5 include all real property necessary to conduct the business and operation of
the Stations as now conducted.
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7.6 Personal Property.
(a) Schedule 7.6 includes a list of the material items of
tangible personal property owned, leased or held by the Subsidiaries as of the
date of this Agreement and used in the conduct of the business and operation of
the Stations ("Personal Property"). For this purpose, the term "material" refers
to items that, if purchased as of the date of this Agreement, would have a cost
in excess of $5,000. Except as set forth on Schedule 7.6, as of the date of this
Agreement the Subsidiaries have, and as of the Closing Date the Sellers will
have, good and marketable title or valid leasehold interest in all Personal
Property, free and clear of all Liens (other than any Permitted Lien).
(b) Except as set forth on Schedule 7.6, the Personal Property
is in reasonably good condition, ordinary wear and tear excepted, adequate and
suitable for the operation of the Stations as they are currently being operated,
and in proper condition and repair so that the Stations can operate according to
the Station Licenses, the rules, regulations and policies of the FCC and in all
other respects in compliance with the Communications Act and all other
applicable federal and state laws.
7.7 Contracts.
(a) Except for (i) the Transaction Documents, the Excluded
Contracts and any Contract described on Schedule 7.7 and (ii) any purchase order
for goods or services (including the sale of airtime on the Stations) entered
into in the ordinary course of business, as of the date of this Agreement none
of the Subsidiaries is a party to or bound by, and none of the Subsidiaries or
any Station is subject to, any of the following Contracts:
(i) collective bargaining agreement or contract with
any labor union;
(ii) contract for the employment or engagement of any
individual employee or other Person (including as an independent contractor or
on a consulting basis) other than at the will of the Subsidiaries, or any
agreement to provide severance benefits upon any termination of employment or
other engagement;
(iii) agreement, indenture or other contract placing
a Lien (other than any Permitted Lien) on any Asset;
(iv) agreement with respect to the lending or
investing of funds by the Subsidiaries;
(v) network affiliation, license or royalty
agreement;
(vi) sales representation agreement;
(vii) agreement with any rating service or
intellectual property licensing organization;
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(viii) lease or agreement under which it is lessee
of, or holds or operates, any personal property owned by any other party which
either (A) cannot be terminated without penalty or premium on notice of 30 or
fewer days, (B) can reasonably be anticipated to require payments in excess of
$5,000 annually or (C) was entered into outside of the ordinary course of
business;
(ix) lease or agreement under which it is lessor of
or permits any third party to hold or operate any personal property owned or
controlled by it;
(x) agreement, contract or understanding pursuant to
which the Subsidiaries subcontract work to third parties;
(xi) any Trade Agreement under which the liabilities
or obligations of a Station exceeds $5,000; or
(xii) other agreement material to the business or
operation of any of the Stations, whether or not entered into in the ordinary
course of business. For purposes of this clause (xii), the term "material" means
any agreement (A) entered into in the ordinary course of business under which
either (I) the term extends for more than five years following the date of this
Agreement or (II) payments or other forms of consideration due from any party
can reasonably be anticipated to exceed $5,000 annually or (B) entered into
other than in the ordinary course of business or (C) which would otherwise
reasonably be considered material to the business or operation of any of the
Stations.
(b) Except as set forth on Schedule 7.7, (i) no consent of any
third party is required under any of the Contracts as a result of or in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby; (ii) each of the Contracts
is valid, binding and enforceable in accordance with its terms against each
Subsidiary which is a party thereto and, to BPH's Knowledge, against each other
party thereto, and none of the Subsidiaries is in default and, to BPH's
Knowledge, no other party is in default under any of the Contracts that has not
been heretofore cured; and (iii) to BPH's Knowledge, no event has occurred which
with the giving of notice or the lapse of time would constitute such a default
under any covenant or condition under any Contract. Originals or true, correct
and complete copies of all of the Contracts in effect as of the date of this
Agreement have been provided to the Buyer and as of the date of this Agreement
all such Contracts are legal, valid, binding, enforceable and in full force and
effect.
7.8 Employee Benefits.
(a) Schedule 7.8 contains a true and complete list of all
persons employed at each Station as of the date of this Agreement, each such
person's job title or the capacity in which employed, and each such person's
salary as of the date hereof. Except as described on Schedule 7.8, BPH has no
Knowledge that any employee identified on Schedule 7.8 currently plans to
terminate employment, whether by reason of the transactions contemplated by this
Agreement or otherwise.
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(b) Schedule 7.8 contains a list of all employee benefit plans
and policies maintained by the Subsidiaries for the employees of the Stations
(the "Employee Plans"). For purposes of this Agreement, the term "employee
benefit plan" includes all pension, retirement, disability, medical, dental or
other health insurance plans, life insurance or other death benefit plans,
profit sharing, deferred compensation, stock option, bonus or other incentive
plans, vacation benefit plans, severance plans, any employee pension benefit
plan as defined in Section 3(2) of ERISA, and any employee welfare benefit plan
as defined in Section 3(1) of ERISA, whether or not funded, and any plan which
is a multiemployer plan as defined in Section 3(37) of ERISA ("Multiemployer
Plan").
(c) The Subsidiaries have not incurred any liability to the
Pension Benefit Guaranty Corporation ("PBGC"), the IRS or any Multiemployer Plan
with respect to any Employee Plan that has not been satisfied in full.
(d) With respect to the Employee Plans, all of the following
are true: (i) all amounts due as contributions, insurance premiums and benefits
to the date hereof have been fully paid by the Subsidiaries; (ii) all applicable
material requirements of law have been observed with respect to the operation
thereof, and all applicable material reporting and disclosure requirements have
been timely satisfied; and (iii) BPH is not aware of any claim or demand by any
employee (or beneficiary or dependent of any employee) for benefits (other than
routine claims for benefits), or by any taxing authority for taxes or penalties
which has not been satisfied in full or which may be or become subject to
litigation or arbitration.
7.9 Intellectual Property. Schedule 7.9 lists all copyrights,
trademarks, trade names, service marks, patents, permits, jingles, privileges
and other similar intangible property rights and interests (exclusive of those
required to be listed in the other Disclosure Schedules hereto) applied for by,
or issued to, the Subsidiaries, or under which the Subsidiaries are licensed or
franchised, and used in the conduct of the business and operation of the
Stations ("Intellectual Property"), all of which rights and interests, except as
set forth on Schedule 7.9, are issued to or owned by the Subsidiaries, or if
licensed or franchised to the Subsidiaries (as indicated on Schedule 7.9), are
subject to valid and uncontested licenses or franchises. There is no pending or,
to BPH's Knowledge, threatened proceeding or litigation affecting or with
respect to the Intellectual Property. To BPH's Knowledge, the use of the
Intellectual Property in connection with the operation of the Stations and in a
manner consistent with past practices does not infringe upon the proprietary
rights of any other Person. BPH has no Knowledge of any infringement by any
Person upon the rights of the Subsidiaries with respect to the Intellectual
Property. The Subsidiaries have not granted any outstanding licenses or other
rights to any of the call letters, copyrights, trademarks, trade names or other
similar rights with regard to any of the Intellectual Property.
7.10 Litigation. As of the date of this Agreement, there is no claim,
litigation or proceeding pending or, to BPH's Knowledge, threatened against BPH
or any of the Subsidiaries which seeks to enjoin or prohibit, or which otherwise
questions the validity of, any action taken or to be taken in connection with
this Agreement or any Transaction Document to which BPH is a party. Except as
disclosed on Schedule 7.10, there is no other claim, litigation or proceeding
pending or, to BPH's Knowledge, threatened against any of the Subsidiaries or
the Stations in
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any federal, state or local court, or before any administrative agency,
arbitrator or other tribunal authorized to resolve disputes. None of the
Subsidiaries is in default of any judgment, order, writ, injunction or decree of
any Governmental Entity with respect to the operation of the Stations.
7.11 Compliance With Laws. None of the Subsidiaries is in default
under, and each of them has complied with, all statutes, ordinances,
regulations, orders, judgments and decrees of any Governmental Entity applicable
to it or to its business, assets and properties, other than defaults or failures
to comply that would not result in a Material Adverse Effect. BPH has no
Knowledge of any basis for assertion of any violation of the foregoing or for
any claim for compensation or damages or otherwise arising out of any violation
of the foregoing which might result in a Material Adverse Effect. None of the
Subsidiaries has received any notification of any asserted failure to comply
with any of the foregoing which has not been satisfactorily responded to in the
time period required thereunder. The Subsidiaries hold all Governmental
Approvals necessary for the conduct of their business as currently conducted,
except where the failure to have obtained such Governmental Approval could not
reasonably be expected to have a Material Adverse Effect. All such Governmental
Approvals are in full force and effect, and the Subsidiaries are in material
compliance with each such Governmental Approval.
7.12 Financial Statements. BPH has supplied the Buyer with copies of
(a) the audited balance sheets of BPH and each of the Subsidiaries as of
December 31, 1998 and the related audited income statements for the year then
ended and (b) the unaudited balance sheets of BPH and each of the Subsidiaries
as of August 31, 1999 and the related unaudited income statements for the eight
months then ended (collectively, the "Financial Statements"). The Financial
Statements present fairly in all material respects the financial position and
the results of operations of the Stations, taken as a whole, as of the dates
and/or the periods indicated and have been prepared in accordance with GAAP
consistently applied, except as noted in Schedule 7.12. The books, records and
accounts of BPH and each of the Subsidiaries accurately and fairly reflect, in
reasonable detail, the transactions and dispositions of the assets of such
entities.
7.13 Taxes. Except as set forth on Schedule 7.13:
(a) the Subsidiaries have timely filed all Tax Returns
required to be filed by them with respect to their business (taking into account
all extensions of due dates) and all Taxes shown as due thereon have been paid;
(b) no deficiency or proposed adjustment which has not been
settled or otherwise resolved for any amount of Tax has been proposed, asserted
or assessed against the Subsidiaries and the Subsidiaries have not consented to
extend the time in which any Tax may be assessed or collected by any taxing
authority;
(c) the Subsidiaries have not requested or been granted an
extension of time for filing any Tax Return to a date later than the Closing
Date and the Subsidiaries have not received any written notification of any
action, suit, taxing authority proceeding or audit now in progress, pending or
threatened against the Subsidiaries;
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(d) the Subsidiaries have withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party
with respect to their business;
(e) no claim has been made in writing by a taxing authority in
a jurisdiction where the Subsidiaries do not file Tax Returns that the
Subsidiaries are or may be subject to Taxes assessed by such jurisdiction; and
(f) there are no Liens for Taxes (other than for current Taxes
either not yet due and payable or being contested in good faith) upon the assets
of the Subsidiaries.
7.14 Insurance. Schedule 7.14 contains a true and complete list of all
insurance policies of the Subsidiaries pertaining to the Stations which are in
force as of the date of this Agreement. All policies of insurance listed on
Schedule 7.14 are in full force and effect. From January 1, 1999 through the
date of this Agreement, no insurance policy of the Subsidiaries with respect to
the Stations has been canceled by the insurer. The Subsidiaries maintain
insurance policies covering all of their tangible properties and assets
pertaining to the Stations and various occurrences which may be reasonably
anticipated to arise in connection with the operation of the Stations.
7.15 Environmental Matters. Except as set forth on Schedule 7.15, as
relates to the Stations:
(a) the Subsidiaries have complied in all material respects
and are in compliance in all material respects with all Environmental
Requirements;
(b) without limiting the generality of the foregoing, the
Subsidiaries have obtained and complied in all material respects, and are in
material compliance, with all permits, licenses and other authorizations that
are required pursuant to Environmental Requirements;
(c) the Subsidiaries have not received any written notice,
report or other written information regarding any liabilities or potential
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations, arising under
Environmental Requirements;
(d) the Subsidiaries have not treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled or released any
toxic or otherwise hazardous material, substance or waste, nor has any toxic or
otherwise hazardous material, substance or waste been released at the Owned Real
Property or real property under the Leases, so as to give rise to liabilities of
the Subsidiaries, whether for response costs, natural resource damages,
attorneys fees or otherwise, pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Solid Waste Disposal Act, as amended ("SWDA"), or any other Environmental
Requirements; and
(e) neither this Agreement nor the consummation of the
transactions contemplated hereby will result in any obligations for site
investigation or cleanup, or
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notification to or consent of government agencies or third parties, pursuant to
any of the so-called "transaction-triggered" or "responsible property transfer"
Environmental Requirements.
Notwithstanding anything to the contrary contained in this Agreement, this
Section 7.15 contains the sole representations and warranties of BPH with
respect to environmental matters.
7.16 Conduct of the Business in the Ordinary Course.
(a) Except as set forth on Schedule 7.16, since December 31,
1998, (i) the operations of the Stations have been conducted only in the
ordinary course and there has been no material loss or casualty with respect to
the assets of the Stations, (ii) there has not been any material adverse change
in the business or the results of operations of the Stations taken as a whole,
(iii) there has not been any material adverse change in the customary methods of
operations of the Stations, and (iv) except in the ordinary course of business
or to the extent not material to the business or financial condition of the
Stations, there has not been any sale or transfer of any tangible or intangible
asset used or useful in the operation of the Stations.
(b) In the event the Buyer enters into a definitive agreement
relating to a change of control of Buyer or a sale of all or substantially all
of the assets of the Buyer, clause (a)(ii) above shall be deemed to be restated
as follows: "There has not been any material adverse change in the business or
the results of operations of the Stations taken as a whole (other than due to
changes in general economic conditions which affect the radio broadcasting
industry as a whole in the Stations' markets)."
7.17 Brokerage. Other than the fees described on Schedule 7.17, which
fees will be paid by BPH, there are no, and there will not be any, claims for
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of BPH or any of the Subsidiaries.
7.18 Related Party Obligations. Except as set forth on Schedule 7.18,
no officer, director, shareholder or Affiliate of BPH or the Subsidiaries, or
any individual related by blood or marriage to any such Person, or any entity in
which any such Person or individual owns any beneficial interest, is a party to
any agreement, contract, commitment, promissory note, loan, any other actual or
proposed transaction with the Subsidiaries or has any material interest in any
material property used by the Subsidiaries which is material to the operation of
the Stations.
7.19 Labor Relations.
(a) Except as set forth on Schedule 7.19, the Subsidiaries are
not a party to any collective bargaining agreement covering any of their
employees at the Stations. The Subsidiaries are not a party to any contract with
any labor organization, nor have the Subsidiaries agreed to recognize any union
or other collective bargaining unit, nor has any union or other collective
bargaining unit been certified as representing any of the Subsidiaries'
employees at the Stations. BPH has no Knowledge of any organizational effort
currently being made or threatened by or on behalf of any labor union with
respect to any employees of the Subsidiaries at the Stations.
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(b) Except as set forth in Schedule 7.19, there have been no
material violations of any federal, state or local statutes, laws, ordinances,
rules, regulations, orders or directives with respect to the employment of
individuals by, or the employment practices or work conditions of, the
Subsidiaries with respect to the Stations, or the terms and conditions of
employment, wages (including overtime compensation) and hours. The Stations are
not engaged in any unfair labor practice or other unlawful employment practice
and there are no charges of unfair labor practices or other employee-related
complaints pending or, to BPH's Knowledge, threatened against the Stations
before the National Labor Relations Board, the Equal Employment Opportunity
Commission, the Occupational Safety and Health Review Commission, the Department
of Labor or any other Governmental Entity.
7.20 Disclosure. To BPH's Knowledge, no representation or warranty
contained in this Article 7, and none of the information set forth in the
Schedules referred to in this Article 7, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
in this Article 7 or in those Schedules not misleading.
ARTICLE 8
COVENANTS OF THE BUYER
8.1 Notification. The Buyer shall promptly notify BPH of (i) any
material adverse change in any information contained in the representations and
warranties of Buyer made in this Agreement or (ii) any litigation, arbitration
or administrative proceeding pending or, to its Knowledge, threatened against
the Buyer which challenges the transactions contemplated hereby, including any
challenges to the FCC Application, and shall use its reasonable best efforts to
take such steps as may be necessary to remove any such impediment to the
transactions contemplated by this Agreement.
8.2 No Inconsistent Action. The Buyer shall not take any action (i)
inconsistent with its obligations or representations and warranties under this
Agreement, including, without limitation, Section 6.3, or (ii) that would hinder
or delay the consummation of the transactions contemplated by this Agreement.
8.3 Non-Solicitation. If this Agreement is terminated, the Buyer will
not, beginning on the date hereof and continuing for a period of two years
thereafter, without the prior written approval of BPH, directly or indirectly,
hire, solicit, encourage, entice or induce any Person who is employed by the
Subsidiaries at the date hereof or at any time hereafter that precedes such
termination, to terminate his or her employment with the Subsidiaries (or any
other Affiliate of BPH). The Buyer agrees that any remedy at law for any breach
by it of this Section 8.3 would be inadequate, and BPH would be entitled to
injunctive relief in such a case. If it is ever held that the restrictions
placed on the Buyer by this Section 8.3 are too onerous and are not necessary
for the protection of BPH, the parties hereto agree that any court of competent
jurisdiction may reduce the duration or scope hereof, or delete specific words
or phrases, and in its reduced form such provision will then be enforceable and
will be enforced.
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ARTICLE 9
COVENANTS OF BPH
9.1 Interim Operation. BPH covenants and agrees that, between the date
of this Agreement and the Closing Date (or any earlier date upon which this
Agreement is terminated), except as expressly permitted by this Agreement or
with the prior written consent of Larry Wilson, on behalf of the Buyer, such
consent not to be unreasonably withheld:
(a) the business and operations of the Stations, including
Contracts entered into or assumed with respect to the Stations, will be
conducted solely in the ordinary course of business and consistent with past
practices (except for performance of the Pending Purchase Agreements in
accordance with Section 9.13), with the intent of preserving the ongoing
operations and assets of the Stations;
(b) neither the Subsidiaries nor BPH nor any Affiliate of BPH
to which any of the Assets is transferred shall sell, assign, lease or otherwise
transfer or dispose of any of the Assets, except for assets consumed or disposed
of in the ordinary course of business and assets no longer used or useful in the
business or operation of the Stations (but nothing in this provision shall limit
the rights of BPH or any Affiliate of BPH to transfer assets to BPH or an
Affiliate of BPH);
(c) neither the Subsidiaries nor BPH nor any Affiliate of BPH
to which any of the Assets is transferred shall increase or agree to increase
the compensation, bonuses or other benefits for employees of the Stations,
except as may be required under Assumed Contracts disclosed in Schedule 7.7 or
for changes or promotions in the ordinary course of business, and each of them
shall pay all commissions due with respect to accounts receivable arising in the
ordinary course of business; and
(d) BPH shall promptly inform the Buyer in writing of any
material adverse change in any information contained in the representations and
warranties of BPH made in this Agreement or any breach by BPH in any material
respect of any material covenant of BPH contained in this Agreement.
9.2 Access to Stations. Upon reasonable prior notice from the Buyer to
BPH, between the date of this Agreement and the Closing Date BPH shall cause the
Subsidiaries to give the Buyer and the Buyer's counsel, accountants, financing
parties, engineers and other representatives and each of their respective
agents, reasonable access during normal business hours to all of the
Subsidiaries' properties, records, employees, sales representatives, and current
and former independent accountants, in each case relating to the Stations,
including for the purpose of performing appraisals of the Assets, and shall
furnish the Buyer with all information related to the Stations and the
Acquisition Stations that the Buyer reasonably requests. The Buyer's access
under this Section 9.2 shall be exercised in such a manner as to not interfere
unreasonably with the business of the Stations.
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9.3 Notification. BPH shall promptly notify the Buyer of any
litigation, arbitration or administrative proceeding pending or, to its
Knowledge, threatened against the Subsidiaries or the Stations which challenges
the transactions contemplated hereby, including any challenges to the FCC
Application, and shall use its reasonable best efforts to take such steps as may
be necessary to remove any such impediment to the transactions contemplated by
this Agreement.
9.4 Third-Party Consents. BPH shall use reasonable best efforts to
obtain the consent of any third parties necessary for the assignment to the
Buyer of any Assumed Contract.
9.5 Payment of Indebtedness. BPH shall secure the release of all Liens
(other than Permitted Liens) on the Assets, which Liens secure the payment of
any indebtedness or otherwise.
9.6 No Inconsistent Action. BPH shall not, and shall not permit any of
the Subsidiaries to, take any action (i) inconsistent with its obligations or
representations and warranties under this Agreement or (ii) that would hinder or
delay the consummation of the transactions contemplated by this Agreement.
9.7 Supplemental Financial Statements. BPH shall provide the Buyer with
copies of the monthly unaudited income statements applicable to the Stations
prepared by the Subsidiaries in the ordinary course of business commencing with
the month ending September 30, 1999 until Closing (collectively, the
"Supplemental Financial Statements"). BPH shall provide such Supplemental
Financial Statements to the Buyer promptly upon such Supplemental Financial
Statements becoming available to BPH. BPH shall use its diligent efforts to
assure that the Supplemental Financial Statements present fairly in all material
respects the financial position and the results of operations of the Stations,
taken as a whole, as of the dates and/or the periods indicated and are prepared
in accordance with GAAP consistently applied, except as noted in Schedule 7.12
with respect to the Financial Statements described in Section 7.12(b).
9.8 Compliance With Law. BPH shall cause the Subsidiaries to comply in
all material respects with all laws applicable to the business of the
Subsidiaries, except for the Communications Act and the rules and regulations of
the FCC which BPH will cause the Subsidiaries to comply with in all respects.
9.9 Non-Solicitation. BPH shall not, and shall not permit any of its
Affiliates to, beginning on the Closing Date and continuing for a period of two
years thereafter, without the prior written approval of the Buyer, directly or
indirectly, hire, solicit, encourage, entice or induce any Transferred Employee
(as defined in Section 10.4(a)) to terminate his or her employment with the
Buyer. BPH agrees that any remedy at law for any breach by it of this Section
9.9 would be inadequate, and the Buyer would be entitled to injunctive relief in
such a case. If it is ever held that the restrictions placed on BPH and its
Affiliates by this Section 9.9 are too onerous and are not necessary for the
protection of the Buyer, the parties hereto agree that any court of competent
jurisdiction may reduce the duration or scope hereof, or delete specific words
or phrases, and in its reduced form such provision will then be enforceable and
will be enforced.
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9.10 Environmental Reports; Surveys. Immediately after the execution of
this Agreement, the Buyer shall arrange for Phase I environmental reports to be
prepared (by an environmental consulting firm reasonably acceptable to BPH) with
respect to (i) each of the Owned Real Properties and (ii) such of the premises
subject to the Leases (to the extent permitted under the Lease) as are
reasonably required by Buyer. The cost of such reports shall be borne equally by
the Buyer and BPH. In addition, prior to the Closing, Buyer and BPH shall cause
the Owned Real Property to be surveyed by a registered professional surveyor
selected by Buyer. Such surveys shall be in ALTA form and shall conform to such
additional standards and requirements as Buyer may reasonably request, and shall
be certified to Buyer, its lender and the title company selected by Buyer. The
costs and expense of such surveys shall be shared equally by Buyer and BPH.
9.11 No Shop. BPH agrees that during the term of this Agreement it will
not enter into discussions with any Person regarding the sale of any of the
Stations or the Acquisition Stations or the sale of the Subsidiaries to any
Person.
9.12 Contracts. BPH agrees to deliver to the Buyer, as soon as
practicable after the date of execution thereof, complete and accurate copies of
any material contracts, leases or other agreements related to the Stations
entered into in the ordinary course of business from and after the date hereof
until the Closing Date.
9.13 Acquisition Stations. BPH shall use commercially reasonable
efforts (a) to consummate, or cause the Subsidiaries who are parties to the
Pending Purchase Agreements to consummate, each of the transactions contemplated
by the Pending Purchase Agreements in accordance with and subject to the terms
and conditions of the Pending Purchase Agreements as in effect on the date of
this Agreement, without waiving any material rights or materially increasing any
of their obligations thereunder (but none of the Subsidiaries shall be obligated
to waive any of the conditions to performance of its obligations under any of
the Pending Purchase Agreements) and (b) to take all actions as may be
reasonably requested by Buyer to facilitate and assist the enforcement by Buyer,
from and after the Closing Date, of all rights of the Subsidiaries under or
pursuant to the Pending Purchase Agreements.
9.14 Certain Actions. BPH shall, or shall cause the Subsidiaries, to
take the actions described on Schedule 9.14.
ARTICLE 10
JOINT COVENANTS
10.1 Best Efforts. Between the date of this Agreement and the Closing,
each party shall use its commercially reasonable best efforts to cause the
fulfillment at the earliest practicable date of all of the conditions to the
obligations of the other party to consummate the sale and purchase under this
Agreement. The covenants, obligations and agreements contained in this Section
10.1 shall expire at Closing and thereafter no party shall have any liability or
obligation to any other party under or by virtue of this Section 10.1.
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10.2 Control of Stations. Between the date of this Agreement and the
Closing, the Buyer shall not, directly or indirectly, control, supervise or
direct the operations of the Stations. Such operations shall be the sole
responsibility of the Subsidiaries, BPH or any Affiliate of BPH to which any of
the Assets is transferred prior to Closing, and, subject to the provisions of
Article 9, shall be in their complete discretion.
10.3 Confidentiality. The Buyer and BPH shall each keep confidential
all information obtained by them with respect to the other in connection with
this Agreement, and if the transactions contemplated hereby are not consummated
for any reason, each shall return to the other without retaining a copy thereof,
any schedules, documents or other written information, including all financial
information, obtained from the other in connection with this Agreement and the
transactions contemplated hereby, except where such information is known or
available through other lawful sources or where such party is advised by counsel
that its disclosure is required in accordance with applicable law.
10.4 Continued Employment of Station Employees.
(a) On the Closing Date, all active employees of the Sellers
at the Stations who are either identified on Schedule 7.8 (other than those who
are parties to any employment agreement which is an Excluded Contract listed on
Schedule 1.3) or are employed following the date hereof by the Sellers (or any
transferor of the Assets to the Sellers) in the ordinary course of business for
the Stations consistent with past practice shall be offered employment by the
Buyer ("Transferred Employees"). The terms and conditions of the Buyer's
employment of the Transferred Employees shall be at will employment with such
benefits as the Buyer deems appropriate; provided, that the Buyer shall comply
with the terms of any Assumed Contract relating to any Transferred Employee
listed on Schedule 7.7 and assumed by the Buyer pursuant to Section 3.1.
(b) Except for the amount of accrued but unused vacation
expense of Transferred Employees as of the Closing Date allocated against
Sellers pursuant to Section 5.1 and for any severance payments due to
Transferred Employees whose employment is terminated by the Buyer after the
Closing Date and for which the Buyer will assume responsibility as of the
Closing Date, the Sellers shall be solely responsible for all wages, salaries
and benefits (including all accrued vacation and sick days) which will or may
become payable to any Transferred Employee in respect of any period of
employment by the Sellers prior to the Effective Time, and, subject to Section
5.1, the Buyer shall be solely responsible for any wages, salaries and benefits
(including all accrued vacation and sick days) which will or may become payable
to any Transferred Employee in respect of any period on and after the Effective
Time.
(c) Subject to Section 5.1, for purposes of determining the
amount of any entitlement of any Transferred Employee under the Buyer's vacation
policy, the Buyer will take into account and credit such Transferred Employee's
length of service with the Sellers and its predecessor, as well as with the
Buyer. With respect to all Transferred Employees, to the extent
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required by law, the Buyer shall cause to be waived all limitations on benefits
relating to any pre-existing conditions and recognize, for purposes of annual
deductible and out-of-pocket limits under its medical and dental plans,
deductible and out-of-pocket expenses paid by such Transferred Employees and
their dependents under the medical and dental plans in which they participate in
the calendar year in which the Closing occurs.
(d) No provisions of this Agreement shall create any third
party beneficiary rights of any employee or former employee (including any
beneficiary or dependent thereof) of the Sellers in respect of continued
employment (or resumed employment) with the Sellers or with the Buyer.
(e) BPH shall cause the Sellers to cooperate with the Buyer in
all reasonable respects in connection with the Buyer's employment of the
Transferred Employees.
(f) Prior to the Closing Date, Sellers shall cause the
Employee Plans which contain a cash or deferred arrangement under Section 401(k)
of the Code (the "Sellers' 401(k) Plans") to be terminated prior to the Closing
Date, contingent upon the occurrence of the Closing. On the Closing Date or as
soon as practicable thereafter, Sellers shall distribute the account balances of
all participants under the Sellers' 401(k) Plans ("Participants") in accordance
with the terms of the Sellers' 401(k) Plans and Section 401(k)(10) of the Code
and Buyer shall permit any Transferred Employee who has an account balance under
the Sellers' 401(k) Plans to rollover (whether by direct or indirect rollover,
as selected by any such Participant) his or her "eligible rollover distribution"
(as defined under Section 402(c)(4) of the Code) from the Sellers' 401(k) Plan
to a retirement plan maintained by Buyer or its affiliates that contains a cash
or deferred arrangement under Section 401(k) of the Code ("Buyer 401(k) Plan").
The Sellers and the Sellers' 401(k) Plan shall not place any Participant's plan
loan into default or declare a default with respect to any plan loan so long as
such Participant transfers his or her account balance under the Sellers' 401(k)
Plan, together with the note evidencing the plan loan, to the Buyer 401(k) Plan
through a direct rollover on or as soon as administratively practicable
following the Closing Date. Buyer shall amend the Buyer 401(k) Plan and Sellers
shall amend the Sellers' 401(k) Plans to the extent necessary in order to
effectuate the transactions contemplated under this Section 10.4(f). The Sellers
and Buyer shall cooperate with each other (and cause the trustees of the
Sellers' 401(k) Plan and the Buyer 401(k) Plan to cooperate with each other)
with respect to the rollover of the distributions to the Participants.
ARTICLE 11
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATION TO CLOSE
The obligation of the Buyer to consummate the purchase of Assets under
this Agreement is, at its option, subject to satisfaction, at or prior to the
Closing Date, of each of the following conditions:
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11.1 Representations, Warranties and Covenants.
(a) All representations and warranties of BPH made in this
Agreement, other than those stated to be made as of a specified date, shall be
true and correct as of the Closing Date as if made on and as of that date and as
though the Closing Date were substituted for the date of this Agreement, and all
representations and warranties of BPH made in this Agreement that are stated to
be made as of a specified date shall be true and correct as of the specified
date, in each case with such exceptions (determined without regard to
materiality qualifications within all such representations and warranties) as do
not individually or in the aggregate result in, or could not reasonably be
expected to result in, a Material Adverse Effect.
(b) All of the material covenants to be complied with or
performed by BPH on or prior to the Closing Date shall have been complied with
or performed in all material respects.
11.2 Governmental Consents. The FCC Consent shall have been granted
(and shall have become a Final Order), all conditions of Section 4.2 shall have
been satisfied, and any other governmental consents required to consummate the
transactions hereunder shall have been obtained.
11.3 Adverse Proceedings. No order, decree or judgment of any court,
agency or other governmental authority shall have been rendered against any
party hereto prohibiting or restricting the consummation of the transactions
contemplated by this Agreement in accordance with its terms.
11.4 Deliveries. The Sellers shall have made or stand willing to make
all the deliveries required under Section 13.1.
11.5 Mandatory Consents. The Sellers shall have received consent to the
assignment of each of the Contracts listed on Schedule 11.5 (the "Mandatory
Consents") or, as to any such Contract with respect to which consent has not
been obtained, shall have notified the Buyer (a "Consent Indemnity Notice") that
it will indemnify the Buyer and hold it harmless against any Buyer Loss (as
defined in Section 15.1) as a result of the failure to obtain that consent.
ARTICLE 12
CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATION TO CLOSE
The obligation of BPH to cause the Sellers to consummate the sale of
Assets under this Agreement is, at its option, subject to satisfaction, at or
prior to the Closing Date, of each of the following conditions:
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12.1 Representations, Warranties and Covenants.
(a) All representations and warranties of the Buyer made in
this Agreement, other than those stated to be made as of a specified date, shall
be true and correct as of the Closing Date as if made on and as of that date and
as though the Closing Date were substituted for the date of this Agreement, and
all representations and warranties of Buyer made in this Agreement that are
stated to be made as of a specified date shall be true and correct as of the
specified date, in each case with such exceptions (determined without regard to
materiality qualifications within all such representations and warranties) as do
not individually or in the aggregate result in, or could not reasonably be
expected to result in, a material adverse effect on Buyer's ability to
consummate the transactions contemplated hereby.
(b) All of the material covenants to be complied with or
performed by the Buyer on or prior to the Closing Date shall have been complied
with or performed in all material respects.
12.2 Governmental Consents. The FCC Consent shall have been granted
(and shall have become a Final Order), all conditions of Section 4.2 shall have
been satisfied, and any other governmental consents required to consummate the
transactions hereunder shall have been obtained.
12.3 Adverse Proceedings. No order, decree or judgment of any court,
agency or other governmental authority shall have been rendered against any
party hereto prohibiting or restricting the consummation of the transactions
contemplated by this Agreement in accordance with its terms.
12.4 Deliveries. The Buyer shall have made or stand willing to make all
the deliveries required under Section 13.2.
ARTICLE 13
DOCUMENTS TO BE DELIVERED AT THE CLOSING
13.1 Documents to be Delivered by the Sellers. At the Closing, the
Sellers shall deliver to the Buyer the following (the "Buyer's Closing
Transactions"):
(a) instruments of conveyance and transfer, in form and
substance reasonably satisfactory to the Buyer and its counsel, effecting the
sale, transfer, assignment and conveyance of the Assets to the Buyer, including,
but not limited to, the following:
(i) assignments of the Station Licenses;
(ii) bills of sale for all Assets other than the
Owned Real Property;
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(iii) warranty deeds for all Owned Real Property;
(iv) assignments of the Assumed Contracts; and
(v) assignments of all intangible personal property
including all books, records, logs and similar assets;
(b) resolutions of the Sellers, authorizing the execution,
delivery and performance of this Agreement and the Transaction Documents,
certified by the Sellers;
(c) good standing certificates of each of the Sellers from
their respective states of formation and from the States of Connecticut,
Louisiana, Maine, Massachusetts, New Jersey, New York and Texas, as applicable,
in each case dated not more than 10 days prior to the Closing;
(d) an officer's certificate of each of the Sellers certifying
that the conditions set forth in Section 11.1 have been met;
(e) an opinion of Proskauer Rose LLP, dated the Closing Date,
in substantially the form of Exhibit B; and
(f) such other documents as may reasonably be requested by the
Buyer's counsel in connection with the Closing of the transactions contemplated
by this Agreement.
13.2 Documents to be Delivered by the Buyer. At the Closing, the Buyer
shall deliver to the Sellers the following (the "Sellers' Closing Transactions"
and together with the Buyer's Closing Transactions, the "Closing Transactions"):
(a) immediately available wire-transferred federal funds as
provided in Section 2.1;
(b) instruments, in form and substance reasonably satisfactory
to the Sellers and their counsel, pursuant to which the Buyer assumes the
Assumed Liabilities;
(c) good standing certificates of the Buyer from the States of
Connecticut, Louisiana, Maine, Massachusetts, New Jersey, New York and Texas, in
each case dated not more than 10 days prior to the Closing;
(d) an officer's certificate of the Buyer certifying that the
conditions set forth in Section 12.1 have been met;
(e) an opinion of Eckert Seamans Cherin & Mellott, LLC, dated
the Closing Date, in substantially the form of Exhibit C; and
(f) such other documents as may reasonably be requested by the
Sellers' counsel in connection with the Closing of the transactions contemplated
by this Agreement.
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ARTICLE 14
TRANSFER TAXES; FEES AND EXPENSES
14.1 Transfer Taxes and Similar Charges. Except as set forth in Section
14.3, all costs of transferring the Assets in accordance with this Agreement,
including recordation, transfer and documentary taxes and fees, and any excise,
sales or use taxes, shall be borne equally by the Buyer, on the one hand, and
the Sellers, on the other hand.
14.2 Governmental Filing or Grant Fees. Any filing or grant fees
imposed by any governmental authority, the consent of which is required for the
transactions contemplated hereby, including all filing fees incurred pursuant to
Article 4, shall be borne equally by the Buyer, on the one hand, and the
Sellers, on the other hand.
14.3 Expenses. Each party hereto shall be solely responsible for and
shall pay all costs and expenses incurred by it in connection with the
negotiation, preparation and performance of and compliance with the terms of
this Agreement; provided, that (i) any HSRA filing fees and (ii) any FCC filing
fees with regard to the FCC Application shall be borne equally by the Buyer, on
the one hand, and the Sellers, on the other hand.
ARTICLE 15
INDEMNIFICATION
15.1 Indemnification.
(a) By BPH. After the Closing occurs, and subject to the terms
and provisions of this Agreement, BPH shall, or shall cause the Sellers jointly
and severally to, indemnify the Buyer and hold it harmless against any loss,
liability, deficiency, damage or expense (including reasonable legal fees and
expenses) which the Buyer may suffer, sustain or become subject to (a "Buyer
Loss") as a result of (i) any breach of any warranty or misrepresentation made
by BPH in this Agreement; (ii) any failure of BPH to perform any covenant or
agreement of BPH in this Agreement; (iii) any liability of BPH or the other
Sellers not expressly required to be assumed by the Buyer hereunder, including
but not limited to any and all liability arising under the Station Licenses or
the Assumed Contracts (other than liabilities arising under the Station Licenses
or the Assumed Contracts of any of the Acquisition Stations prior to the date of
the assumption of such liabilities by a Subsidiary) which accrue or relate to
events prior to the Effective Time or arising at any time under the Excluded
Contracts; and (iv) the failure of BPH or the other Sellers to obtain a
Mandatory Consent as to which the Sellers shall have given a Consent Indemnity
Notice. Subject to the other limitations contained in this Agreement, including
this Article 15, Sellers shall not be required to indemnify the Buyer with
respect to any breach of warranty or misrepresentation: (i) unless the Buyer
gives the Sellers written notice of such Buyer Loss in accordance with (and
within the time periods provided in) Article 17, and in case of any claim made
by the Buyer by reason of a third party
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claim, such notice shall be accompanied by a copy of such written notice of the
third party claimant, and in the case of any claim made by the Buyer other than
by reason of a third party claim, some damages or loss shall have been incurred
in good faith at or prior to the date of such notice, and (ii) unless and until
the aggregate amount of all Buyer Losses for which BPH (or the Sellers) are
liable under this Article 15 exceeds $500,000, and in that event BPH (or the
Sellers) shall be liable for all Buyer Losses (subject to the limitations
provided for in this Agreement); provided, that the foregoing threshold shall
not apply to Buyer Losses arising out of breach of any warranty or
misrepresentation in Sections 7.1, 7.2, 7.5(a)(i) or the third sentence of
7.6(a). The aggregate liability of BPH and the Sellers for Buyer Losses arising
from the breach of any warranty or nonfraudulent misrepresentation by BPH in
this Agreement shall be limited to $40,000,000, except that the aggregate
liability of BPH and the Sellers for Buyer Losses arising from the breach of any
warranty or nonfraudulent misrepresentation in Sections 7.1, 7.2, 7.5(a)(i),
7.8, 7.13 or 7.15 or in the third sentence of Section 7.6(a) shall be limited to
an amount equal to the Purchase Price.
(b) By the Buyer. After the Closing occurs, and subject to the
terms and provisions of this Agreement, the Buyer shall indemnify the Sellers
and hold each of them harmless against any loss, liability, deficiency, damage
or expense (including reasonable legal fees and expenses) which the Sellers may
suffer, sustain or become subject to (a "Seller Loss" and together with a Buyer
Loss, a "Loss") as a result of (i) any breach of any warranty or
misrepresentation made by the Buyer in this Agreement; (ii) any failure of the
Buyer to perform any covenant or agreement of the Buyer in this Agreement; (iii)
any of the Assumed Liabilities, including but not limited to any and all
liability arising under the Station Licenses or the Assumed Contracts which
accrue or relate to events occurring after the Effective Time. Subject to the
other limitations contained in this Agreement, including this Article 15, the
Buyer shall not be required to indemnify the Sellers with respect to any breach
of warranty or misrepresentation: (i) unless the Sellers give the Buyer written
notice of such Seller Loss in accordance with (and within the time periods
provided in) Article 17, and in case of any claim made by the Sellers by reason
of a third party claim, such notice shall be accompanied by a copy of such
written notice of the third party claimant, and in the case of any claim made by
the Sellers other than by reason of a third party claim, some damages or loss
shall have been incurred in good faith at or prior to the date of such notice,
and (ii) unless and until the aggregate amount of all Seller Losses for which
the Buyer is liable under this Article 15 exceeds $500,000, and in that event
the Buyer shall be liable for all Seller Losses (subject to the limitations
provided for in this Agreement); provided, that the foregoing threshold shall
not apply to Seller Losses arising out of breach of any warranty or
misrepresentation in Sections 6.1 or 6.2. The aggregate liability of the Buyer
for Seller Losses arising from the breach of any warranty or nonfraudulent
misrepresentation by the Buyer in this Agreement shall be limited to
$40,000,000, except that the aggregate liability of the Buyer for Seller Losses
arising from the breach of any warranty or nonfraudulent misrepresentation in
Sections 6.1 or 6.2 shall be limited to an amount equal to the Purchase Price.
(c) Third Party Claims. In the case of third party claims, the
notice described in Section 15.1(a) or 15.1(b), as the case may be, from the
party or parties seeking indemnification thereunder (the "Indemnitee") shall in
any event be given within ten days of the filing or assertion of any claim
against the Indemnitee stating the nature and basis of such claim;
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provided, however, that any delay or failure to notify the party or parties from
whom indemnification is sought hereunder (the "Indemnitor") of any claim shall
not relieve the Indemnitor from any liability except to the extent that the
Indemnitor demonstrates that the defense of such action has been materially
prejudiced by such delay or failure to notify. In the case of third party
claims, the Indemnitor shall, within a reasonable period under the circumstances
but in any event not more than 20 days after receipt by the Indemnitor of notice
of such claim, notify the Indemnitee of its intention to assume the defense of
such claim. If the Indemnitor assumes the defense of the claim, the Indemnitor
shall have the right and obligation (a) to conduct and control any proceedings
or negotiations in connection therewith and necessary or appropriate to defend
the Indemnitee, (b) to take all other required steps or proceedings to settle or
defend any such claims, and (c) to employ counsel to contest any such claim or
liability in the name of the Indemnitee or otherwise. In the event an Indemnitor
shall be actively defending any claim, the Indemnitee shall not make any
settlement of such claim without the written consent of the Indemnitor and shall
accept any settlement thereof recommended by the Indemnitor so long as the
amount of the claim and all costs and expenses of the Indemnitee in connection
therewith are paid or discharged in full by the Indemnitor and the settlement
imposes no other burden on the Indemnitee. If the Indemnitor shall not assume
the defense of any such claim or litigation resulting therefrom, the Indemnitee
may defend against any such claim or litigation in such manner as it may deem
appropriate but the Indemnitee may only settle such claim or litigation with the
consent of Indemnitor, which consent cannot be unreasonably withheld.
(d) Adjustment to Indemnification Payments.
(i) In calculating the amount of any Buyer Loss or
Seller Loss resulting from breach of warranty or misrepresentation by BPH or the
Buyer, the indemnifying party shall receive credit for any Tax benefits actually
recognized by the indemnified party as a result of the Buyer Loss or Seller
Loss, as the case may be.
(ii) Any amount payable by an indemnifying party to
an indemnified party pursuant to this Section 15.1 shall be reduced by an amount
equal to any insurance coverage actually received by the indemnified party with
respect to the Loss that gave rise to the indemnification claim. The parties
hereto shall be obligated to prosecute, or to cause its appropriate Affiliate to
prosecute, diligently and in good faith any claim for Losses with any applicable
insurer. In any case where an indemnified party or any of its Affiliates
recovers from third parties any amount in respect of a matter with respect to
which an indemnifying party has indemnified and paid to it pursuant to this
Article 15, such indemnified party shall promptly pay over to the indemnifying
party the amount so recovered (after deducting therefrom the full amount of the
expenses reasonably incurred by it in procuring such recovery), but not in
excess of the sum of (i) any amount previously so paid by the indemnifying party
to or on behalf of the indemnified party in respect of such matter and (ii) any
reasonable amount expended by the indemnifying party and its Affiliates in
pursuing or defending any claim arising out of such matter.
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15.2 Limitations on Indemnification Provisions; Exclusive Remedy.
(a) Waiver of Non-Compensatory Damages. No indemnified party
shall be entitled to recover from an indemnifying party for any Losses as to
which indemnification is provided under this Agreement any amount in excess of
the actual compensatory damages, court costs and reasonable attorney fees
suffered by such party; and the Buyer and BPH waive any right to recover
punitive, special, exemplary and consequential damages arising in connection
with or with respect to Losses under the indemnification provisions hereof.
(b) Exclusive Remedy. Notwithstanding anything to the contrary
contained in this Agreement, after the Closing, except in the case of fraud, the
indemnification provided under this Article 15 shall be the Buyer's and BPH's
and the Sellers' sole and exclusive remedy for claims for money damages, against
the other, with respect to matters arising under this Agreement, of any kind or
nature, or relating to the business of the Subsidiaries and/or the ownership,
operation, management, use or control of the Stations.
ARTICLE 16
TERMINATION RIGHTS
16.1 Termination. This Agreement may be terminated at any time prior to
the Closing only as follows:
(a) automatically, without the need for any further action on
the part of any party hereto, upon the first date on which the denial of the FCC
Consent becomes a Final Order;
(b) by mutual written agreement of the Buyer and BPH;
(c) by the Buyer or BPH, by notice to the other, if at any
time prior to the Closing Date any event shall have occurred or any state of
facts shall exist that renders any of the conditions to its obligations as
provided in Section 11.1, in the case of Buyer, or Section 12.1, in the case of
BPH, incapable of fulfillment;
(d) by the Buyer or BPH, by notice to the other at any time
after nine months have elapsed since the date on which the FCC accepts the
filing of the FCC Application; or
(e) by BPH by notice to the Buyer within 30 days after receipt
by BPH of the last of the Phase I environmental reports referred to in Section
9.10 if but only if the aggregate of the contingent liabilities disclosed in
such Phase I environmental reports, based upon reasonable cost estimates
prepared by the environmental consulting firm which prepared such reports,
exceeds the sum of $5,000,000.
Notwithstanding the foregoing, no party hereto may effect a termination hereof
if such party is in material default or breach of this Agreement.
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16.2 Effect of Termination. If this Agreement is terminated by BPH
pursuant to Section 16.1(c) hereof (a "Draw Condition"), BPH shall be entitled
to draw upon and receive the proceeds of the Letter of Credit; and provided
further, that if this Agreement is terminated pursuant to any other provision of
Section 16.1, Buyer shall be entitled to a return of, and BPH shall return to
Buyer, the original Letter of Credit. BPH'S RIGHTS TO DRAW UPON THE LETTER OF
CREDIT AS DESCRIBED ABOVE SHALL NOT BE CONSTRUED AS LIQUIDATED DAMAGES OR IN ANY
WAY LIMIT BPH's RIGHTS TO SEEK MONETARY DAMAGES. Notwithstanding any termination
of this Agreement pursuant to Section 16.1, the obligations of the parties
hereto described in Section 14.3 (Expenses) and Section 10.3 (Confidentiality)
will survive any such termination. Notwithstanding any termination of this
Agreement pursuant to Section 16.1, no such termination of this Agreement will
relieve any party from liability for any misrepresentation or breach of any
representation, warranty, covenant or agreement set forth in this Agreement
prior to such termination.
16.3 Waiver of Right to Terminate. Each of the parties hereto shall be
deemed to have waived their respective rights to terminate this Agreement upon
consummation of the Closing.
16.4 Specific Performance. The parties recognize and agree that the
Buyer and BPH have both relied on this Agreement and expended considerable
effort and resources related to the transactions contemplated hereunder, that
the right and benefits conferred upon both the Buyer and BPH herein are unique,
and that damages may not be adequate to compensate either the Buyer or BPH in
the event the other party improperly refuses to consummate the transactions
contemplated hereunder. The parties therefore agree that the Buyer and BPH shall
be entitled, at their option and in lieu of terminating this Agreement pursuant
to Section 16.1, to have this Agreement specifically enforced by a court of
competent jurisdiction.
ARTICLE 17
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Subject to the provisions of Section 15, the representations and
warranties contained in this Agreement are and will be deemed and construed to
be continuing representations and warranties and shall survive the Closing for a
period of 12 months; provided, that (i) the representations and warranties
contained in Sections 7.8 and 7.13 shall survive until the end of the statutory
limitation period applicable to such claim, (ii) the representations and
warranties contained in Section 7.15 shall survive until the fifth anniversary
of the Closing Date, and (iii) there shall be no limit on the survival of the
representations and warranties contained in Sections 6.1, 6.2, 7.1, 7.2,
7.5(a)(i) and the third sentence of 7.6(a). No claim for breach of warranty or
misrepresentation may be brought under this Agreement unless written notice
describing in reasonable detail the nature and basis of such claim is given on
or prior to the last day of the applicable survival period. In the event such a
notice is given, the right to indemnification with respect thereto shall survive
the applicable survival period until such claim is finally resolved and any
obligations thereto are fully satisfied. Any investigation by or on behalf of
any party hereto shall not constitute a waiver as to enforcement of any
representation and warranty.
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ARTICLE 18
OTHER PROVISIONS
18.1 Benefit and Assignment. This Agreement shall be binding and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. BPH may not assign this Agreement without the prior written
consent of the Buyer except that BPH may assign its rights (but not its
obligations) under this Agreement to an Affiliate of BPH after the Closing, and
to its financing sources as collateral security at any time. Any assignment of
this Agreement by the Buyer shall not relieve the Buyer of its obligations
hereunder unless BPH consents in writing to such assignment, such consent not to
be delayed or withheld unreasonably in light of the financial condition of the
assignee and its ability to perform the obligations of the Buyer hereunder.
18.2 Entire Agreement. This Agreement and the Exhibits and Schedules
hereto and 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. 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.
18.3 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.
18.4 Time of the Essence; Computation of Time. Time is of the essence
with respect to all dates and time periods contained in the covenants in this
Agreement. If after making computations of time provided for in this Agreement,
a time for action or notice falls on Saturday, Sunday or a Federal holiday, then
such time shall be extended to the next business day.
18.5 Governing Law. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
18.6 Press Releases and Announcements. Except for any public disclosure
which any party in good faith believes is required by applicable law (in which
case with respect to matters arising prior to the Closing, if practicable, the
disclosing party will give the other party an opportunity to review and comment
upon such disclosure before it is made):
(a) prior to the Closing, no press releases related to this
Agreement or any Closing Transaction or other announcements generally to the
employees, customers or other Persons having business relationships with the
Subsidiaries (it being understood that the Buyer will have the right to contact
such Persons in connection with its investigation of the business of the
Subsidiaries and the Stations as provided in Section 9.2 and as BPH may
otherwise consent (which consent BPH will not unreasonably withhold)) will be
issued or made without the mutual approval of BPH and the Buyer;
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(b) after the Closing, neither BPH nor the Sellers will make
any press release or other public announcement of or with respect to the
Stations, this Agreement or any Closing Transaction without the Buyer's consent
(which consent the Buyer will not unreasonably withhold); and
(c) after the Closing, the Buyer will not make any press
release or other public announcement of or with respect to this Agreement or any
Closing Transaction without BPH's consent (which consent BPH will not
unreasonably withhold).
18.7 Parties in Interest. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the parties and their
respective successors and permitted assigns any rights or remedies under or by
virtue of this Agreement.
18.8 Notices. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing, addressed to
the following addresses, or to such other address as any party may request in
writing.
If to BPH: c/o Veronis, Suhler and Associates Inc.
350 Park Avenue
New York, New York 10022
Attn: Jeffrey T. Stevenson
Fax: (212) 935-0877
with a copy to: Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attn: Bertram A. Abrams, Esq.
Fax: (212) 969-2900
If to Buyer: c/o Citadel Broadcasting Company
City Center West
7201 West Lake Mead Boulevard
Suite 400
Las Vegas, Nevada 89128
Attn: Lawrence R. Wilson
Fax: (702) 804-5936
with a copy to: Eckert Seamans Cherin & Mellott, LLC
600 Grant Street, 44th Floor
Pittsburgh, Pennsylvania 15219
Attn: Bryan D. Rosenberger, Esq.
Fax: (412) 566-6099
35
<PAGE> 37
Any such notice, demand or request shall be deemed to have been duly delivered
and received (i) on the date of personal delivery, or (ii) on the date of
receipt, if mailed by registered or certified mail, postage prepaid and return
receipt requested, or (iii) on the date of a signed receipt, if sent by an
overnight delivery service, but only if sent in the same manner to all persons
entitled to receive notice or a copy.
18.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
18.10 Further Assurances. BPH and the Buyer shall at any time and from
time to time after the Closing execute and deliver to the other such further
conveyances, assignments, assumptions of Assumed Liabilities and other written
assurances as the other may reasonably request in order to vest and confirm in
the Buyer (or its assignees) the title and rights to and in all of the Assets to
be and intended to be transferred, assigned and conveyed hereunder and to
confirm the assumption by the Buyer of the Assumed Liabilities.
18.11 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
18.12 No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent. In the event an ambiguity or question of intent or interpretation
arises, this Agreement will be construed as if drafted jointly by the parties,
and no presumption or burden of proof will arise favoring or disfavoring any
Person by virtue of the authorship of any of the provisions of this Agreement.
18.13 LIMITATION OF WARRANTIES. THE EXPRESS REPRESENTATIONS OF THE
SELLERS CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE. EXCEPT AS SET FORTH IN THIS
AGREEMENT, BPH DOES NOT MAKE OR PROVIDE, AND THE BUYER HEREBY WAIVES, ANY
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE ASSETS AND THE
BUSINESS OF THE STATIONS AND AS TO THE QUALITY, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, CONFORMITY TO SAMPLES, OR CONDITION OF ANY OF THE ASSETS
COMPRISING THE BUSINESS OF THE STATIONS OR ANY PART THEREOF. BPH DISCLAIMS AND
NEGATES, AND THE BUYER HEREBY WAIVES, ALL OTHER REPRESENTATIONS AND WARRANTIES,
EXPRESS, IMPLIED OR STATUTORY. THERE ARE NO WARRANTIES THAT EXTEND BEYOND THE
FACE OF THIS AGREEMENT.
36
<PAGE> 38
ARTICLE 19
DEFINITIONS
Unless otherwise stated in this Agreement, the following terms when
used herein shall have the meanings assigned to them below (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
"Affiliate" shall mean any person or entity that is directly or
indirectly controlling, controlled by or under common control with the named
person or entity.
"Applicable Law" shall mean all applicable provisions of all (i)
constitutions, treaties, statutes, laws (including the common law), rules,
regulations, ordinances, codes or orders of any Governmental Entity and (ii)
Governmental Approvals.
"Business Day" whether or not capitalized, shall mean every day of the
week excluding Saturdays, Sundays and Federal holidays.
"Closing Date" shall mean the date on which the Closing is completed.
"Communications Act" shall mean the Communications Act of 1934, as
amended, as in effect from time to time.
"Contracts" shall mean any oral or written agreement, instrument,
document, lease, times sales agreement or Trade Agreement (in each case,
including any extension, renewal, amendment or other modification thereof) to
which any of the Sellers is a party or is subject or by which any of the Sellers
is bound which pertains to the business or properties of the Stations or the
Acquisition Stations, including any of the foregoing entered into between the
date of this Agreement and the Closing Date as permitted by the terms of this
Agreement.
"Effective Time" shall mean 12:01 a.m., New York, New York time, on the
Closing Date.
"Environmental Requirements" shall mean all federal, state, local and
foreign statutes, regulations, ordinances and other provisions having the force
or effect of law, and all judicial and administrative orders and determinations
which are binding upon the Sellers concerning pollution or protection of the
environment, including without limitation all those relating to the generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
discharge, release, threatened release, control or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation as such of the foregoing
are promulgated and in effect on or prior to the date hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
37
<PAGE> 39
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"FCC" shall mean the Federal Communications Commission.
"FCC Application" shall mean the application or applications that the
Sellers and the Buyer must file with the FCC requesting its consent to the
assignment to Buyer or its designee of the Station Licenses and on a conditional
basis, of the FCC licenses, permits and other authorizations for the Acquisition
Stations.
"FCC Consent" shall mean the action by the FCC granting the FCC
Application.
"FCC Regulations" shall mean all regulations and policies promulgated
by the FCC, under the Communications Act or otherwise, as in effect from time to
time.
"Final Order" shall mean action by the FCC (i) which has not been
vacated, reversed, stayed, set aside, annulled or suspended (whether under
Section 402 or 405 of the Communications Act or otherwise), (ii) with respect to
which no timely appeal, request for stay or petition for rehearing,
reconsideration or review by any party or by the FCC on its own motion, is
pending, and (iii) as to which the time for filing any such appeal, request,
petition, or similar document or for the reconsideration or review by the FCC on
its own motion under the Communications Act and the rules and regulations of the
FCC has expired.
"GAAP" shall mean generally accepted accounting principles,
consistently applied, as in effect on the date hereof.
"Governmental Approval" shall mean any consent, approval,
authorization, waiver, permit, grant, franchise, concession, agreement, license,
exemption or order of registration, certificate, declaration or filing with, or
report or notice with or to any Governmental Entity.
"Governmental Entity" shall mean any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, any government authority, agency,
department, board, commission or instrumentality of the United States, any State
of the United States or any political subdivision thereof, any tribunal or
arbitrators of competent jurisdiction and any self-regulatory organization.
"HSRA" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the regulations adopted thereunder.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean with respect to any statement the absence of
actual present knowledge of any fact that would render the statement inaccurate.
38
<PAGE> 40
"Legal Requirements" shall mean any of the Communications Act, the FCC
Regulations, and all other federal, state, foreign and local laws, statutes,
codes, rules, regulations, ordinances, judgments, orders, decrees and the like
of any Governmental Entity, including common law.
"Liens" shall mean any mortgage, pledge, hypothecation, lien (statutory
or otherwise), security interest or other encumbrance of any kind or nature
whatsoever.
"Material Adverse Effect" shall mean a material adverse effect on the
business or operating results of the Stations taken as a whole or on BPH's
ability to consummate or cause the consummation of the transactions contemplated
hereby.
"Owned Real Property" shall mean all land, together with all buildings
and any improvements located thereon, and all easements and other rights with
respect thereto either (i) owned by the Subsidiaries as of the date of this
Agreement and used primarily in the conduct of the business and operation of the
Stations or (ii) except for purposes of Article 7, acquired by a Subsidiary
prior to the Closing Date as part of the assets of an Acquisition Station.
"Pending Purchase Agreements" means the asset purchase agreements
described on Schedule 7.7 relating to the Acquisition Stations.
"Permitted Liens" shall mean (i) Liens for Taxes not yet due and
payable or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books and records of the Sellers in accordance with GAAP, (ii) liens of
carriers, warehousemen, mechanics and materialmen incurred in the ordinary
course of business, that individually and in the aggregate do not have a
Material Adverse Effect, (iii) zoning, entitlements, land use restrictions and
other legal requirements with respect to Owned Real Property that, individually
or in the aggregate, do not materially detract from or materially interfere with
the present use of the Asset or Assets affected thereby, (iv) easements, rights
of way, covenants, conditions, restrictions and other similar charges and
encumbrances with respect to the Owned Real Property that are of record and
that, individually or in the aggregate, do not materially detract from or
materially interfere with the present use of the Asset or Assets affected
thereby, and (v) Liens included on Schedule 7.5 or 7.6 that, individually or in
the aggregate, do not materially detract from or materially interfere with the
present use of the Asset or Assets affected thereby.
"Person" shall mean an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or any Governmental Entity.
"Station Licenses" shall mean the licenses, permits and other
authorizations, including any temporary waiver or special temporary
authorization, issued by the FCC to the Sellers in connection with the conduct
of the business and operation of the Stations.
"Tax" (and, with correlative meaning, "Taxes", "Taxable" and "Taxing")
means any (A) federal, state, local or foreign income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, natural resources,
39
<PAGE> 41
severance, stamp, occupation, premium, windfall profits, environmental
(including under Section 59A of the Tax Code), customs, duties, real property,
real property gains, personal property, capital stock, social security,
unemployment, disability, payroll, license, employee or other withholding, or
other tax of any kind whatsoever, including any interest, penalties or additions
to tax or additional amounts in respect of the foregoing; (B) liability of any
corporation for the payment of any amounts of the type described in clause (A)
arising as a result of being (or ceasing to be) a member of any affiliated
group" (as that term is defined in Section 1504(a) of the Tax Code) (or being
included in any Tax Return relating thereto); and (C) liability for the payment
of any amounts of the type described in clause (A) or (B) as a result of any
express or implied obligation to indemnify or otherwise assume or succeed to the
liability of any other Person.
"Tax Code" shall mean the Internal Revenue Code of 1986, as amended.
"Tax Return" shall mean any return, declaration, report, claim for
refund, information return or other document (including any related or
supporting schedules, statements or information) filed or required to be filed
in connection with the determination, assessment or collection of Taxes of any
Person or the administration of any Legal Requirement relating to any Taxes.
"Trade Agreements" mean all trade, barter or similar arrangements for
the sale of advertising time other than for cash on the Stations.
"Transaction Documents" shall mean this Agreement and the Exhibits and
Schedules hereto and all other documents to be delivered pursuant to Section
13.1 and 13.2.
[End of Text; Signature Pages Follow]
40
<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
CITADEL BROADCASTING COMPANY
By: /s/ Lawrence R. Wilson
-----------------------------------------
Lawrence R. Wilson
Chairman and Chief Executive officer
BROADCASTING PARTNERS HOLDINGS, L.P.
By: VS&A-BP, LLC, its general partner
-----------------------------------------
By: /s/ Jeffrey T. Stevenson
-----------------------------------------
Jeffrey T. Stevenson
President
[Signature Page to Asset Purchase Agreement]
41
<PAGE> 43
SCHEDULES
Schedule 1.3 - Excluded Assets
Schedule 6.4 - Conflicts - Buyer
Schedule 6.6 - Brokerage - Buyer
Schedule 7.3 - Conflicts
Schedule 7.4 - Licenses
Schedule 7.5 - Real Property
Schedule 7.6 - Personal Property
Schedule 7.7 - Contracts
Schedule 7.8 - Employee Benefits
Schedule 7.9 - Intellectual Property
Schedule 7.10 - Litigation
Schedule 7.12 - Financial Statements
Schedule 7.13 - Taxes
Schedule 7.14 - Insurance
Schedule 7.15 - Environmental Matters
Schedule 7.16 - Conduct of the Business in the Ordinary Course
Schedule 7.17 - Brokerage - Seller
Schedule 7.18 - Related Party Transactions
Schedule 7.19 - Labor Relations
Schedule 9.14 - Certain Actions
Schedule 11.5 - Mandatory Consents
EXHIBITS
Exhibit A - Form of Letter of Credit
Exhibit B - Form of Opinion of Proskauer Rose LLP
Exhibit C - Form of Opinion of Eckert Seamans Cherin & Mellott, LLC
[Pursuant to Regulation S-K, Item 601(b)(2), Registrant agrees to furnish
supplementally a copy of these schedules and exhibits to the Securities and
Exchange Commission upon request.]
<PAGE> 1
Exhibit 10.1
NINETEENTH AMENDMENT TO LOAN INSTRUMENTS
THIS NINETEENTH AMENDMENT TO LOAN INSTRUMENTS (this "Nineteenth
Amendment"), dated as of August 31, 1999, is among CITADEL BROADCASTING COMPANY,
CITADEL LICENSE, INC., CITADEL COMMUNICATIONS CORPORATION, each a Nevada
corporation, FINOVA CAPITAL CORPORATION, a Delaware corporation, in its
individual capacity and as Agent for all Lenders (this and all other capitalized
terms used but not elsewhere defined herein shall have the respective meanings
ascribed to such terms in the Loan Agreement described below, as amended), and
the Lenders which are parties hereto.
R E C I T A L S
A. Borrowers, Agent and Lenders entered into an Amended and Restated
Loan Agreement dated as of July 3, 1997 (as amended to the date hereof, the
"Loan Agreement").
B. Borrowers have requested the consent of Lenders to the acquisition
by CBC of the capital stock of Fuller-Jeffrey Broadcasting Companies, Inc., a
Maine corporation, which company owns the Property and FCC Licenses relating to
radio stations WBLM (FM), licensed to Portland, Maine, WCCY (FM), licensed to
Biddeford, Maine, WCYI (FM), licensed to Lewiston, Maine, WOKQ (FM), licensed to
Dover, New Hampshire, WPKQ (FM), licensed to Berlin, New Hampshire, WXBB (FM),
licensed to Kittery, Maine, WXBP (FM), licensed to Hampton, New Hampshire, WHOM
(FM), licensed to Mt. Washington, New Hampshire, WJBQ (FM), licensed to
Portland, Maine, WCLZ (FM), licensed to Brunswick, Maine (the "Nineteenth
Amendment Acquisition").
C. Lenders have agreed to give such consent, subject to the execution
of this Nineteenth Amendment and the performance of the terms and conditions set
forth below.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. CONSENT TO ACQUISITION AND TRANSFER OF FCC LICENSES. Borrowers
represent and warrant that (i) attached hereto as Schedule 1 is a true and
correct calculation of the Adjusted Leverage Ratio after giving effect to the
Nineteenth Amendment Acquisition, (ii) after giving effect to the Nineteenth
Amendment Acquisition, Borrowers shall be in compliance with the requirements
set forth in subsection 4.3.4 of the Loan Agreement and (iii) the FCC has issued
initial orders approving the transfer of all FCC Licenses to be transferred to
CLI in connection with the Nineteenth Amendment Acquisition. Lenders hereby
consent to the Nineteenth Amendment Acquisition, notwithstanding that such
initial orders are not final as of the closing of the Nineteenth Amendment
Acquisition, provided that (i) the conditions contained in Section 4.3 of the
Loan Agreement are satisfied, (ii) as of the closing of the Nineteenth Amendment
Acquisition, such initial orders are in full force and effect and no objections
have been filed against such initial orders and (iii) the execution and delivery
to Agent of an Unwind Agreement in a form reasonably satisfactory to the Agent.
<PAGE> 2
2. AMENDMENT TO LOAN INSTRUMENTS. The Loan Agreement and other Loan
Instruments are amended as follows:
2.1 EXHIBITS TO LOAN INSTRUMENTS. Upon the consummation of the
Nineteenth Amendment Acquisition (i) Borrowers shall deliver to Agent
amendments to the Exhibits attached to each Loan Instrument (the
"Exhibit Amendments") which require modification due to the Nineteenth
Amendment Acquisition and (ii) the Exhibit Amendments applicable to the
Nineteenth Amendment Acquisition shall be deemed to be part of the
applicable Loan Instrument.
2.2 USE AGREEMENT. Upon the consummation of the Nineteenth
Amendment Acquisition, Borrowers shall deliver to Agent a Use
Agreement, in a form substantially similar to the Amended and Restated
Use Agreement, reflecting the use by CBC of the FCC Licenses acquired
in the Nineteenth Amendment Acquisition.
3. CONDITIONS TO EFFECTIVENESS. This Nineteenth Amendment shall not
become effective with respect to the Nineteenth Amendment Acquisition unless and
until all of the conditions set forth in Section 4.3 of the Loan Agreement are
satisfied with respect to the Nineteenth Amendment Acquisition in a manner
satisfactory to Agent.
4. CONSENT. The Nineteenth Amendment Acquisition provides that the
parties thereto will consummate the transactions contemplated thereby upon
initial orders issued by the FCC, without the need for such orders to become
"final." Agent and Lenders hereby consent to the consummation by Borrowers of
the Nineteenth Amendment Acquisition notwithstanding that the applicable FCC
orders are not "final" as of the date hereof.
5. FEES AND EXPENSES. Borrowers hereby agree to reimburse Lenders for
all reasonable fees and expenses incurred in connection with the consummation of
the transactions contemplated by this Nineteenth Amendment.
6. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to
execute this Nineteenth Amendment, each Obligor represents and warrants to
Lenders that the representations and warranties made by each such Person in each
of the Loan Instruments to which such Person is a party, as such Loan
Instruments have been amended, are true and correct in all material respects as
of the date hereof, except to the extent such representations and warranties by
their nature relate to an earlier date.
7. CONFIRMATION OF EFFECTIVENESS. Guarantor hereby consents to the
execution of this Nineteenth Amendment. Each Obligor hereby agrees that each
Loan Instrument executed by such Person remains in full force and effect in
accordance with the original terms thereof as amended.
8. COUNTERPARTS. This Nineteenth Amendment may be executed in one or
more counterparts, each of which counterparts shall be deemed to be an original,
but all such counterparts when taken together shall constitute one and the same
instrument.
2
<PAGE> 3
IN WITNESS WHEREOF, this amendment has been executed and delivered by
each of the parties hereto by a duly authorized officer of each such party on
the date first set forth above.
CITADEL BROADCASTING COMPANY,
CITADEL LICENSE, INC. and
CITADEL COMMUNICATIONS CORPORATION,
each a Nevada corporation
By: /s/ Lawrence R. Wilson
------------------------------------------
Name: Lawrence R. Wilson
----------------------------------------
Title: CEO of CBC, CLI and CCC
---------------------------------------
FINOVA CAPITAL CORPORATION,
a Delaware corporation,
individually and as Agent
By: /s/ Andrew J. Pluta
------------------------------------------
Name: Andrew J. Pluta
----------------------------------------
Title: Vice President
---------------------------------------
BANKBOSTON, N.A.
By: /s/ Robert F. Milordi
------------------------------------------
Name: Robert F. Milordi
----------------------------------------
Title: Managing Director
---------------------------------------
BANK OF AMERICA, N.A.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
THE BANK OF NEW YORK
By: /s/ Geoffrey C. Brooks
------------------------------------------
Name: Geoffrey C. Brooks
----------------------------------------
Title: Vice President
---------------------------------------
(Signatures continued on next page)
3
<PAGE> 4
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Lena M. Bryant
------------------------------------------
Name: Lena M. Bryant
----------------------------------------
Title: Vice President
---------------------------------------
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS IN CITADEL COMMUNICATIONS CORPORATION'S FORM 10-Q FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 8,798
<SECURITIES> 0
<RECEIVABLES> 50,517
<ALLOWANCES> (2,513)
<INVENTORY> 0
<CURRENT-ASSETS> 86,805
<PP&E> 85,021
<DEPRECIATION> (16,933)
<TOTAL-ASSETS> 639,529
<CURRENT-LIABILITIES> 16,015
<BONDS> 270,586
82,526
0
<COMMON> 31
<OTHER-SE> 223,407
<TOTAL-LIABILITY-AND-EQUITY> 639,529
<SALES> 0
<TOTAL-REVENUES> 126,521
<CGS> 0
<TOTAL-COSTS> 87,249
<OTHER-EXPENSES> 25,589
<LOSS-PROVISION> 2,796
<INTEREST-EXPENSE> 17,502
<INCOME-PRETAX> (5,428)
<INCOME-TAX> (1,376)
<INCOME-CONTINUING> (4,052)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,052)
<EPS-BASIC> (.55)
<EPS-DILUTED> (.55)
</TABLE>
